REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (the “Agreement”)
is made as of the date set forth on the signature page hereto, by and between
LOTO, INC., a Nevada corporation (the “Company”)
and the undersigned, a stockholder of the Company (the “Stockholder”).
WHEREAS, the Company and the
Stockholder have entered into that certain Stock Purchase Agreement (the “Stock Purchase
Agreement”) pursuant to which the Company shall sell to the Stockholder,
and the Stockholder shall purchase from the Company, the shares set forth
therein (the “Shares”)
of the Common Stock, par value $0.001 per share, of the Company (the “Common
Stock”); and
WHEREAS, in connection
therewith the parties wish to enter into this Agreement to provide the
Stockholder the right to register the number of Shares set forth on the
signature page hereto, pursuant to the terms and conditions below;
NOW, THEREFORE, it is agreed
between the parties as follows:
1. Registration
Rights. The Company shall file a registration statement under
the Securities Act of 1933, as amended (the “Act”)
covering the registration of the Shares within ninety (90) days of the date
hereof.
2. Obligations of the
Company. Whenever required hereunder to effect the
registration of the Shares, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare
and file with the Securities and Exchange Commission (the “SEC”) a
registration statement with respect to the Shares and use its commercially
reasonable efforts to cause such registration statement to become effective and
remain effective for a period of up to twelve (12) months or until the
distribution contemplated in the registration statement has been completed;
provided, however, that (such period shall be extended for a period of time
equal to the number of days that the registration statement may be suspended
pursuant to Section 8 below.
(b) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration
statement.
(c) Furnish
to the Stockholder such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of the Shares.
(d) Notify
the Stockholder at any time when a prospectus relating thereto is required to be
delivered under the Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(e) Any
determination to register and qualify the securities covered by such
registration statement under the blue sky laws of those states of the United
States shall be made at the sole discretion of the Company and the Company shall
not be required in connection therewith, or as a condition thereto, to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions.
3. Furnish Information. It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to the registration of the Shares hereunder that the Stockholder
shall furnish to the Company such information required to effect the
registration of the Shares.
4. Sale Price. The
Company’s common stock is not traded on any exchange or quoted for trading on
any quotation system. Following effectiveness of registration, none
of the Shares may be sold for a sales price other than US$1.25 per share until
the Company’s common stock is quoted on the OTC Bulletin Board (the “Restricted
Period”), at which time the Shares may be sold at prevailing market
prices or privately negotiated prices. The Stockholder hereby acknowledges that
can be no assurance that a market maker will agree to file the necessary
documents with the Financial Industry Regulatory Authority (FINRA), which
operates the OTC Electronic Bulletin Board, nor can there be any assurance that
such an application for quotation will be approved.
5. Short Selling Not
Permitted. The Stockholder will not sell short any security of
the Company, and will not allow any security of the Company which they own to be
loaned for the purpose of short selling, or to be located for short
selling.
6. Other Restrictions on
Stockholders. The Stockholder hereby represents and warrants
as follows:
(a) The
Stockholder will comply with any and all rules and regulations of the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”) concerning the sale and distribution of the Shares, including but
not limited to Regulation M thereunder.
(b) The
Stockholder is aware that the Exchange Act may limit the timing of purchases and
sales of the Shares, and will comply with such restriction.
(c) The
Stockholder is aware that under Regulation M, persons engaged in a distribution
of securities are prohibited from simultaneously engaging in market making and
other activities with respect to those securities for a specified period of time
prior to the commencement of such distributions, subject to specified exceptions
or exemptions.
(d) The
Stockholder is aware that if the Shares are transferred other than pursuant to a
sale under a valid registration statement, then subsequent holders will not be
permitted to use any current prospectus until a post-effective amendment or
prospectus supplement is filed by the Company, naming such holders.
2
(e) The
Stockholder is aware that the limitations set forth in this Section 6 may affect
the marketability of the Shares.
7. Expenses of
Registration. All expenses incurred in connection with
registrations, filings or qualifications herein, including all registration,
filing and qualification fees, printers’ and accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company;
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1 if the
registration is subsequently withdrawn at the request of the
Stockholder.
8. Suspension of Registration.
Notwithstanding anything to the contrary contained herein, for not more than
twenty (20) consecutive days or for a total of not more than forty (40) days in
any twelve (12) month period, the Company may temporarily suspend the use of any
registration statement or prospectus if, in the reasonable opinion of counsel to
the Company, the Company is required (under federal or state securities laws or
any other rules or regulations of any government authority) to update any
information contained in the registration statement or prospectus.
9. Indemnification. In
the event the Shares are included in a registration statement
hereunder:
(a) To
the extent permitted by law, the Company will indemnify and hold harmless the
Stockholder, its director and officers, any underwriter and each person, if any,
who controls the Stockholder (together, the “the Stockholder
Indemnified Persons”) against any losses, claims, damages, or
liabilities, joint or several, or actions in respect thereof (cumulatively, the
“Losses”)
to which they may become subject under the Act or the Exchange Act or other
federal or state law, insofar as such Losses arise out of or are based upon any
of the following (each, a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Act or the Exchange Act or any state securities law; and
the Company will pay to each Stockholder Indemnified Person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss; provided, however, that the indemnity obligation
contained in this Section 9(a) shall not apply to amounts paid in
settlement of any such Loss if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such Loss to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any Stockholder Indemnified Person.
3
(b) To
the extent permitted by law, the Stockholder will indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed the
registration statement, any underwriter and each person, if any, who controls
the Company within the meaning of the Act (together, the “Company
Indemnified Persons”), against any Losses to which any Company
Indemnified Person may become subject under the Act or the Exchange Act or other
federal or state law, insofar as such Losses arise out of or are based upon any
Violation, in each case to the extent that such Violation occurs in reliance
upon and in conformity with written information furnished by any Stockholder
Indemnified Person expressly for use in connection with such registration; and
the Stockholder will pay to each Company Indemnified Person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss; provided, however, that the indemnity obligation
contained in this Section 9(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Stockholder (which consent shall not be unreasonably
withheld).
(c) Promptly
after receipt by an indemnified party under this Section 9 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 9, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
to assume the defense thereof with counsel mutually satisfactory to the
parties.
(d) If
the indemnification provided for in this Section 9 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any Loss or expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such Loss or expense in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the
other.
10. Rule 144. The
Company will use its best efforts to file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder on a timely basis and will use its best efforts to
take such further action as the Stockholder may reasonably request, all to the
extent required from time to time to enable the Stockholder to sell the Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the Securities Act and any similar rule or
regulation under the federal securities laws.
11. Assignment of Registration
Rights. The rights to cause the Company to register the Shares
hereunder may be assigned by the Stockholder to (a) a purchaser of all of the
Shares or (b) any affiliate of the Stockholder, provided that, in each
case: (i) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of the transferee, and
(ii) such transferee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement.
4
12. Expiration of Registration
Rights. The Stockholder’s registration rights hereunder shall
expire at such time as the Stockholder can sell all of the Shares in a single
transaction without limitation under Rule 144.
13. Miscellaneous.
a. Notices. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b) when sent by confirmed facsimile if sent during normal business hours
of the recipient, and if not during normal business hours of the recipient, then
on the next business day, (c) three (3) calendar days after having been
sent by registered or certified mail, return receipt requested, postage prepaid
or (d) one (1) business day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the other party hereto
at such party’s address hereinafter set forth on the signature page hereof, or
at such other address as such party may designate by written notice to the other
party hereto.
b. Successors and
Assigns. This Agreement shall inure to the benefit of the
successors and assigns of the Company and the Stockholder.
c. Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to conflict of laws provisions
thereof.
d. Further
Assurances. The parties agree to take all such further
commercially reasonable action(s) as may reasonably be necessary to carry out
and consummate the transactions contemplated by this Agreement as soon as
practicable, and to take whatever commercially reasonable steps may be necessary
to obtain any governmental approval in connection with or otherwise qualify the
issuance of the Shares.
e. Entire Agreement;
Amendment. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements or understandings, whether written or oral. This
Agreement may not be amended, modified or revoked, in whole or in part, except
by an agreement in writing signed by each of the parties hereto.
f. Severability. If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision in good
faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of this
Agreement shall be interpreted as if such provision were so excluded and such
that the objectives contemplated by the parties when entering into this
Agreement may be realized and (c) the balance of this Agreement shall be
enforceable in accordance with its terms.
5
14. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one
instrument. Signatures hereto may be facsimiles or electronically
scanned copies which shall be deemed to have the same full force and effect as a
manually signed original.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date written
below.
NUMBER
OF SHARES SUBJECT TO
REGISTRATION
RIGHTS:
DATED:
_____________________
|
LOTO,
INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
STOCKHOLDER:
|
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
6
Series
A Investors
|
Name
of Investor
|
Shares
to be
Registered
|
|
NAC
Investments Ltd.
|
1,833,334
|
|
2207496
Ontario Inc.
|
1,833,333
|
|
Ananindeau
S.A.
|
1,833,333
|
|
1476448
Ontario Inc.
|
1,833,333
|
|
2207846
Ontario Limited
|
1,833,334
|
|
2208155
Ontario Inc.
|
1,833,333
|
