REGISTRATION RIGHTS AGREEMENT
Exhibit 99.2
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of August 1, 2007, among Imperial
Petroleum, Inc.., a Nevada corporation (the “Company”), and Apollo Resources International, Inc. (
the “Security Holder”)
1. Introduction.
(a) Purchase and Sales Agreement. The Company and the Security Holder have executed that
certain Purchase and Sales Agreement (the “Purchase Agreement”), pursuant to which the Company has
agreed to issue a total of five million (5,000,000) shares of the restricted common stock of the
Company, par value $.006 per share, (the “Common Stock”) to the Security Holder or their
successors, assigns or transferees (collectively, the “Holders”).
(b) Definition of Securities. The Common Stock issued as a result of the Purchase Agreement
are collectively herein referred to as the “Securities.”
(c) National Market Representation. The Company represents and warrants that the Company’s
Common Stock is currently eligible for listing on the National Association of Security Dealers’
Over-the-Counter Bulletin Board (“OTC-BB”) under the symbol “IPMN.” Certain capitalized terms used
in this Agreement are defined in Section 3 hereof; references to sections shall be to sections of
this Agreement.
2. Registration under Securities Act, etc.
2.1 Registration Upon Demand.
(a) Registration of Registrable Securities. At any time after three (3) months from the date
of this Agreement and before the termination of this Agreement, and after the delivery of the
Common Stock, the Holders of twenty percent (20%) of the Registrable Securities currently
outstanding and/or exercisable may deliver to the Company a written request that the Registrable
Securities be registered pursuant to the terms of this Agreement (a “Registration Request”).
Within thirty (30) days after a Registration Request, the Company shall prepare and file a
registration statement to effect the registration under the Securities Act and in compliance with
Rule 415 therein, such amount of the Registrable Securities that relate to the Securities as
allowed under Rule 415; all to the extent requisite to permit the public disposition of such
Registrable Securities so to be registered. Any Registrable Securities that are not eligible to be
registered under Rule 415 shall be subject to a new Registration Rights Agreement to be entered
into amongst the parties on substantially the same terms as provided herein. The Company shall use
its best efforts to cause the Registration Statement which is the subject of this Section 2.1(a)
(the “Registration Statement”) to be declared effective by the Commission upon the earlier to occur
of (i) 120 days after the date of the Registration Request, (ii) ninety (90) days following the
filing of the Registration Statement contemplated by this Section 2.1, or (iii) ten (10) business
days after receipt of a “no review” or similar letter from the Commission (the “Required
Effectiveness Date”). with the possible exception of Rule 415 of the Securities Act of 1933 as
amended, nothing contained herein shall be deemed to limit the
number of Registrable Securities to be registered by the Company hereunder. The Company shall
not be required to file more than two (2) registration statements pursuant to this Section 2.1.
(b) Registration Statement Form. Registrations under this Section 2.1 shall be on Form S-1,
Form S-3 or such other appropriate registration form of the Commission as shall permit the
disposition of such Registrable Securities in accordance with the intended method or methods of
disposition specified by the Security Holder; provided, however, such intended method of
disposition shall not include an underwritten offering of the Registrable Securities.
(c) Expenses. The Company and Security Holder shall each pay fifty (50%) percent of all
Registration Expenses in connection with any registration required by this Section 2.1.
(d) Effective Registration Statement. A registration requested pursuant to this Section 2.1
shall not be deemed to have been effected (i) unless a registration statement with respect thereto
has become effective within the time period specified herein, provided that a registration which
does not become effective after the Company has filed a registration statement with respect thereto
solely by reason of the refusal to proceed of any holder of Registrable Securities (other than a
refusal to proceed based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such holder) shall be
deemed to have been effected by the Company unless the holders of the Registrable Securities shall
have elected to pay all Registration Expenses in connection with such registration, (ii) if, after
it has become effective, such registration becomes subject to any stop order, injunction or other
order or extraordinary requirement of the Commission or other governmental agency or court for any
reason or (iii) if, after it has become effective, such registration ceases to be effective for
more than an aggregate of ninety (90) days.
(e) Plan of Distribution. The Company hereby agrees that the Registration Statement shall
include a plan of distribution section reasonably acceptable to the Security Holder and
substantially in the form annexed hereto; provided, however, such plan of distribution section
shall be modified by the Company so as to not provide for the disposition of the Registrable
Securities on the basis of an underwritten offering.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If at any time after the date hereof but before
the second anniversary of the date hereof, the Company proposes to register any of its securities
under the Securities Act (other than by a registration in connection with an acquisition in a
manner which would not permit registration of Registrable Securities for sale to the public, on
Form S-8, or any successor form thereto, on Form S-4, or any successor form thereto and other than
pursuant to Section 2.1), on an underwritten basis (either best-efforts or firm-commitment), then,
the Company will each such time give prompt written notice to all Holders of its intention to do so
and of such Holders’ rights under this Section 2.2. Upon the written request of any such Holder
made within ten (10) days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the intended method of
disposition thereof), the Company will, subject to the terms of this Agreement, effect the
registration under the Securities Act of the Registrable Securities, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as aforesaid) of such
Registrable Securities so to be registered, by inclusion of such Registrable Securities in the
registration statement which covers the securities which the Company proposes to register, provided
that if, at any time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written notice
of such determination to each Holder and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or holders of Registrable
Securities entitled to do so to request that such registration be effected as a registration under
Section 2.1, and (ii) in the case of a determination to delay registering, shall be permitted to
delay
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registering any Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon a Registration Request under Section 2.1, nor shall any
such registration hereunder be deemed to have been effected pursuant to Section 2.1. The Company
will pay all Registration Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 2.2. The right provided the holders of the Registrable
Securities pursuant to this Section shall be exercisable at their sole discretion.
(b) Priority in Incidental Registrations. If the managing underwriter of the underwritten
offering contemplated by this Section 2.2 shall inform the Company and holders of the Registrable
Securities requesting such registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which can be sold in such
offering, then the Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first securities proposed by the Company to
be sold for its own account, and (ii) second Registrable Securities and securities of other selling
security holders requested to be included in such registration pro rata on the basis of the number
of shares of such securities so proposed to be sold and so requested to be included; provided,
however, the holders of Registrable Securities shall have priority to all shares sought to be
included by officers and directors of the Company as well as holders of ten percent (10%) or more
of the Company’s Common Stock unless the holders of such shares are exercising their own
registration rights.
2.3 Registration Procedures. If and whenever the Company is required to effect the
registration of any Registrable Securities under the Securities Act as provided in Section 2.1 and,
as applicable, 2.2, the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission the Registration Statement to effect such
registration (including such audited financial statements as may be required by the
Securities Act or the rules and regulations promulgated thereunder) and thereafter use
its best efforts to cause such registration statement to be declared effective by the
Commission, as soon as practicable, but in any event no later than the Required
Effectiveness Date (with respect to a registration pursuant to Section 2.1); provided,
however, that before filing such registration statement or any amendments thereto, the
Company will furnish to the counsel selected by the holders of Registrable Securities
which are to be included in such registration, copies of all such documents proposed to
be filed;
(b) with respect to any Registration Statement pursuant to Section 2.1, prepare
and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the provisions of the
Securities Act in order to permit the disposition of all Registrable Securities covered
by such registration statement, until the earlier to occur of two (2) years after the
date of this Agreement (subject to the right of the Company to suspend the
effectiveness thereof for not more than 30 consecutive days or an aggregate of 90 days
in such two (2) year period) or such time as all
of the Securities which are the subject of such registration statement cease to be
Registrable Securities (such period, in each case, the “Registration Maintenance
Period”);
(c) furnish to each holder of Registrable Securities covered by such registration
statement such number of conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other prospectus filed
under Rule 424
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under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such holder and underwriter, if any, may
reasonably request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such holder;
(d) use its reasonable efforts to register or qualify all Registrable Securities
and other securities covered by such registration statement under such other securities
laws or blue sky laws as any holder thereof shall reasonably request, to keep such
registrations or qualifications in effect for so long as such registration statement
remains in effect, and take any other action which may be reasonably necessary to
enable such holder to consummate the disposition in such jurisdictions of the
securities owned by such holder, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subdivision (d) be
obligated to be so qualified or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered by such
registration statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the holder or holders thereof to
consummate the disposition of such Registrable Securities;
(f) in connection with an underwritten offering, furnish to each holder of
Registrable Securities a signed counterpart, addressed to such holder, and the
underwriters of:
(i) an opinion of counsel for the Company, dated the effective date of
such registration statement (or, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance to such
holder) including that the prospectus and any prospectus supplement forming a
part of the Registration Statement does not contain an untrue statement of a
material fact or omits a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and
(ii) a “comfort” letter (or, in the case of any such Person which does not
satisfy the conditions for receipt of a “comfort” letter specified in Statement
on Auditing Standards No. 72, an “agreed upon procedures” letter), dated the
effective date of such registration statement (or, if such registration
includes an underwritten public offering, a “comfort” letter dated the date of
the closing under the underwriting agreement), signed by the independent public
accountants who have certified the Company’s financial statements included in
such registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of the accountants’ letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in accountants’ letters delivered to the underwriters in
underwritten public offerings of securities (with, in the case of an “agreed
upon procedures” letter, such modifications or deletions as may be required
under Statement on Auditing Standards No. 35) and, in the case of the
accountants’ letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such holder (or the underwriters)
may reasonably request;
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(g) notify holders of the Registrable Securities and their respective counsel
promptly and confirm such advice in writing promptly after the Company has knowledge
thereof:
(i) when the Registration Statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the Registration
Statement has been filed, and, with respect to the Registration Statement or
any post-effective amendment thereto, when the same has become effective;
(ii) of any request by the Commission for amendments or supplements to the
Registration Statement or the prospectus or for additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings by any Person for that purpose; and
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the initiation or threat
of any proceeding for such purpose;
(h) notify each holder of Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon 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 any material
fact required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request of any
such holder promptly prepare and furnish to such holder a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(i) use its best efforts to obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible moment;
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full calendar month
after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) enter into such agreements and take such other actions as the Security Holder
shall reasonably request in writing in order to expedite or facilitate the disposition
of such Registrable Securities; and
(l) use its best efforts to list all Registrable Securities covered by such
registration statement on any securities exchange on which any of the Registrable
Securities are then listed.
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The Company may require each holder of Registrable Securities as to which any registration is
being effected to furnish the Company such information regarding such holder and the distribution
of such securities as the Company may from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to Section 2.1, or amendment
thereto or any prospectus or any supplement thereto (including such documents incorporated by
reference and proposed to be filed after the initial filing of the Registration Statement) to which
the Security Holder shall reasonably object, provided that the Company may file such document in a
form required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable Securities that it has
obtained all necessary waivers, consents and authorizations necessary to execute this Agreement and
consummate the transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Exchange Agreement.
The Security Holder agrees that, upon receipt of any notice from the Company of the occurrence
of any event of the kind described in subdivision (h) of this Section 2.3, the Security Holder will
forthwith discontinue its disposition of Registrable Securities pursuant to the Registration
Statement relating to such Registrable Securities until its receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (h) of this Section 2.3 and, if so
directed by the Company, will deliver to the Company (at the Company’s expense) all copies, other
than permanent file copies, then in its possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.4 Underwritten Offerings.
(a) Incidental Underwritten Offerings. If the Company at any time proposes to register any of
its securities under the Securities Act as contemplated by Section 2.2 and such securities are to
be distributed by or through one or more underwriters, the Company will, if requested by the
Security Holder as provided in Section 2.2 and subject to the provisions of Section 2.2(a), use its
reasonable efforts to arrange for such underwriters to include all the Registrable Securities to be
offered and sold by such holder among the securities to be distributed by such underwriters.
(b) Holdback Agreements. Subject to such other reasonable requirements as may be imposed by
the underwriter as a condition of inclusion of a holder’s Registrable Securities in the
registration statement, each such holder agrees by acquisition of Registrable Securities, if so
required by the managing underwriter, not to sell, make any short sale of, loan, grant any option
for the purchase of, effect any public sale or distribution of or otherwise dispose of, except as
part of such underwritten
registration, any equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not exceed the 120 day period
commencing 30 days prior to the commencement of such underwritten offering and ending 90 days
following the completion of such underwritten offering.
(c) Participation in Underwritten Offerings. No holder of Registrable Securities may
participate in any underwritten offering under Section 2.2 unless such holder of Registrable
Securities (i) agrees to sell such Person’s securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii) completes and executes
all questionnaires, indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements. Notwithstanding the
foregoing, no underwriting agreement (or other agreement in connection with such offering) shall
require any holder of Registrable Securities to make
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any representations or warranties to or
agreements with the Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related registration statement or
representations, warranties or agreements regarding such holder, such holder’s Registrable
Securities and such holder’s intended method of distribution and any other representation required
by law.
2.5 Preparation; Reasonable Investigation. In connection with the preparation and filing of
each registration statement under the Securities Act pursuant to this Agreement, the Company will
give the holders of Registrable Securities registered under such registration statement, and their
respective counsel and accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders’ and such underwriters’ respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. In the event of any registration of any securities of the
Company under the Securities Act, the Company will, and hereby does agree to, indemnify and hold
harmless the holder of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls such holder or any such
underwriter within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or officer or underwriter
or controlling person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened,
in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse such holder and each such
director, officer, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the Company by such holder or
underwriter stating that it is for use in the preparation thereof and, provided further that the
Company shall not be liable to any Person who participates as an underwriter in the offering or
sale of Registrable Securities or to any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises out of such
Person’s failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus or an amendment or supplement thereto.
Such indemnity shall remain in full force and effect regardless of any investigation
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made by or on
behalf of such holder or any such director, officer, underwriter or controlling person and shall
survive the transfer of such securities by such holder.
(b) Indemnification by the Holders. The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to this Agreement, that the
Company shall have received an undertaking satisfactory to it from the holder of such Registrable
Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 2.6) the Company, each director of the Company, each officer of
the Company and each other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such holder
specifically stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such
indemnity shall remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and shall survive the
transfer of such securities by such holder.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the preceding
subdivisions of this Section 2.6, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the preceding subdivisions of
this Section 2.6, except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an indemnified party, unless in
such indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled
to participate in and to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement of any
such action which does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability, or a covenant not to xxx,
in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified in the preceding
subdivisions of this Section 2.6 (with appropriate modifications) shall be given by the Company and
each holder of Registrable Securities (but only if and to the extent required pursuant to the terms
of 2.6(b)) with respect to any required registration or other qualification of securities under any
Federal or state law or regulation of any governmental authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this Section 2.6 shall be made
by periodic payments of the amount thereof during the course of the investigation or defense, as
and when bills are received or expense, loss, damage or liability is incurred.
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(f) Contribution. If the indemnification provided for in the preceding subdivisions of this
Section 2.6 is unavailable to an indemnified party in respect of any expense, loss, claim, damage
or liability referred to therein, then each 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 expense, loss, claim, damage or liability (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and the holder or
underwriter, as the case may be, on the other from the distribution of the Registrable Securities
or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the holder or underwriter,
as the case may be, on the other in connection with the statements or omissions which resulted in
such expense, loss, damage or liability, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the holder or underwriter, as the
case may be, on the other in connection with the distribution of the Registrable Securities shall
be deemed to be in the same proportion as the total net proceeds received by the Company from the
initial sale of the Registrable Securities by the Company to the purchasers bear to the total net
proceeds received by all selling holders participating in such offering or the underwriting
discounts and commissions received by the underwriter, as the case may be. The relative fault of
the Company on the one hand and of the Holder or underwriter, as the case may be, on the other
shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates to information supplied
by the Company, by the Holder or by the underwriter and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or omission, provided
that the foregoing contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of the provisions
contained in the first sentence of subdivision (a) of this Section 2.6, and in no event shall the
obligation of any indemnifying party to contribute under this subdivision (f) exceed the amount
that such indemnifying party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (b) of this Section 2.6 had been available under
the circumstances.
The Company and the holders of Registrable Securities agree that it would not be just and
equitable if contribution pursuant to this subdivision (f) were determined by pro rata allocation
(even if the holders and any underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable considerations referred to
in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth in the preceding sentence and subdivision (c) of this
Section 2.6, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of Registrable Securities or
underwriter shall be required to contribute any amount in excess of the amount by which (i) in the
case of any such holder, the net proceeds received by such holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the public exceeds, in any
such case, the amount of any damages that such holder or underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
3. Definitions. 4. As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
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“Agreement”: As defined in Section 1.
“Commission”: The Securities and Exchange Commission or any other Federal agency at the time
administering the Securities Act.
“Common Stock”: As defined in Section 1.
“Company”: As defined in the introductory paragraph of this Agreement.
“Exchange Act”: The Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder.
“Holder”: As defined in Section 1..
“OTC-BB”: As defined in Section 1.
“Person”: A corporation, association, partnership, organization, business, individual,
governmental or political subdivision thereof or a governmental agency.
“Purchase Agreement”: As defined in Section 1.
“Registrable Securities”: The Securities and any securities issued or issuable with respect
to such Securities by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. Once issued 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 distributed in accordance with such registration statement, (b) they
shall be have been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they 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 disposition of them shall not require registration or qualification of them under
the Securities Act or any similar state law then in force, (d) they shall have ceased to be
outstanding, (e) on the expiration of the applicable Registration Maintenance Period or (f) any and
all legends restricting transfer thereof have been removed in accordance with the provisions of
Rule 144(k) (or any successor provision) under the Securities Act. The Securities shall constitute
Registrable Securities while owned by (a) the Purchaser or any Affiliate (as defined in the
Exchange Agreement) or (b) a transferee of at least 100,000 of the Initial Shares.
“Registration Expenses”: All expenses incident to the Company’s performance of or compliance
with this Agreement, including, without limitation, all registration, filing and NASD fees; all
stock exchange and any other listing fees; all fees and expenses of complying with securities or
blue sky laws; all word processing, duplicating and printing expenses, messenger and delivery
expenses; the fees and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or “cold comfort” letters required by or
incident to such performance and compliance; in connection with an underwritten offering, the
reasonable fees and disbursements of not more than one law firm (not to exceed $25,000) retained by
the holder or holders of more than 50% of the Registrable Securities; premiums and other costs of
policies of insurance of the Company against liabilities arising out of the public offering of the
Registrable Securities being registered and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and
transfer taxes, if any; provided that, in any case where Registration Expenses are not to be borne
by the Company, such expenses shall not include salaries of Company personnel or general overhead
expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance
required by underwriters of the Company or other expenses for the
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preparation of financial
statements or other data normally prepared by the Company in the ordinary course of its business or
which the Company would have incurred in any event.
“Registration Maintenance Period”: As defined in Section 2.3.
“Registration Request”: As defined in Section 2.1
“Required Effectiveness Date”: As defined in Section 2.1.
“Securities”: As defined in Section 1(b).
“Securities Act”: The Securities Act of 1933, as amended, and the rules and regulations of
the Commission thereunder.
“Security Holder”: As defined in the Introductory paragraph to this Agreement.
5. Rule 144. The Company shall timely file the reports required to be filed by it under the
Securities Act and the Exchange Act (including but not limited to the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the Commission
under the Securities Act) and the rules and regulations adopted by the Commission thereunder (or,
if the Company is not required to file such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other information) and will take such further
action as any holder of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable
Securities,
the Company will deliver to such holder a written statement as to whether it has complied with
the requirements of this Section 4.
6. Amendments and Waivers. This Agreement may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or omission to act, of
the holder or holders of the sum of the 51% or more of the shares of (i) Registrable Securities
issued at such time, plus (ii) Registrable Securities issuable upon exercise or conversion of the
Securities then constituting derivative securities (if such Securities were not fully exchanged or
converted in full as of the date such consent is sought). Each holder of any Registrable Securities
at the time or thereafter outstanding shall be bound by any consent authorized by this Section 5,
whether or not such Registrable Securities shall have been marked to indicate such consent.
7. Nominees for Beneficial Owners. In the event that any 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 any request or other action by
any holder or holders of Registrable Securities pursuant to this Agreement or any determination of
any number or percentage of shares of Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory to it of such
owner’s beneficial ownership of such Registrable Securities.
8. Notices. Except as otherwise provided in this Agreement, all notices, requests and other
communications to any Person provided for hereunder shall be in writing and shall be given to such
Person (a) in the case of a party hereto other than the Company, addressed to such party in the
manner set forth in the Purchase Agreement or at such other address as such party shall have
furnished to the
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Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company in writing, or,
until any such other holder so furnishes to the Company an address, then to and at the address of
the last holder of such Registrable Securities who has furnished an address to the Company, or (c)
in the case of the Company, at the address set forth on the signature page hereto, to the attention
of its Chief Executive Officer, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to each holder of Registrable Securities at the time
outstanding. Each such notice, request or other communication shall be effective (i) if given by
mail, 72 hours after such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without limitation, by fax
or air courier), when delivered at the address specified above, provided that any such notice,
request or communication shall not be effective until received.
9. Assignment. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto. In addition, and whether or not any express assignment shall
have been made, the provisions of this Agreement which are for the benefit of the parties hereto
other than the Company shall also be for the benefit of and enforceable by any subsequent holder of
any Registrable Securities. Each of the Holders of the Registrable Securities agrees, by accepting
any portion of the Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation, appointment of a
representative to act on behalf of such Holder pursuant to the terms hereof which such actions
shall be made in the good faith discretion of the Holder’s representative and be binding on all
persons for all purposes.
10. Descriptive Headings. The descriptive headings of the several sections and paragraphs of
this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning
hereof.
11. Nevada Law; Submission to Jurisdiction; Waiver of Jury Trial; Appointment of Agent. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEVADA.
EACH PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS AND OF ANY TEXAS STATE COURT SITTING IN DALLAS FOR PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12. Counterparts. This Agreement may be executed by facsimile and may be signed
simultaneously in any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
13. Entire Agreement. This Agreement embodies the entire agreement and understanding between
the Company and each other party hereto relating to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter.
14. Severability. If any provision of this Agreement, or the application of such provisions
to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the
application of
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such provision to Persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their
respective officers thereunto duly authorized as of the date first above written.
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