REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, by and between National Diversified
Services, Inc., a Delaware corporation (the "Company" or "NADS"), and the
persons whose names appear on the signature page attached hereto (individually a
"Holder" and collectively, the "Holders").
WHEREAS, an agreement and plan of merger was entered into contemporaneously
with this Registration Rights Agreement by and among National Diversified
Services, Inc., its wholly owned subsidiary, NADS Acquisition Corp., The Certo
Group, Inc. ("Certo") and its sole stockholder, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Merger
Agreement"), pursuant to which the Company will acquire Certo through a merger
of Certo into NADS Acquisition Corp.; and
WHEREAS, the Company has agreed to prepare and file with the Securities and
Exchange Commission, a Registration Statement to register the resale of
3,403,000 pre-split shares of common stock of NADS owned by ▇▇▇▇▇ ▇▇▇▇▇,
3,383,000 pre-split shares of common stock owned by ▇▇▇▇▇▇ ▇▇▇▇▇, 100,000
pre-split shares of common stock owned by then estate of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (or her
legal heirs), 95,000 pre-split shares of common stock owned by ▇▇▇▇▇▇ ▇▇▇▇▇,
95,000 pre-split shares of common stock owned by ▇▇▇▇▇▇ ▇▇▇▇▇ and 10,000
pre-split shares of common stock owned by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, subject to adjustment
in accordance with a reverse stock split contemplated by the Merger Agreement;
and
WHEREAS, pursuant to the terms of and in order to induce various parties to
enter into the Merger Agreement dated the date hereof, the Company and ▇▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ (collectively herein referred to as the "Consultants")
have entered into Consulting Agreements dated as of the date hereof pursuant to
which the Company has agreed, upon the terms and subject to the conditions of
the respective consulting agreements, offer the Consultants one or more options
to purchase additional shares of the Company's common stock pursuant to the
anti-dilution rights contained in Section 4 of the Consulting Agreements (the
"Option"); and
WHEREAS, said Registration Statement shall also pertain to an estimate of
the maximum number of shares of common stock to be issued in accordance with the
Option; and
WHEREAS, pursuant to the terms of and in order to induce various parties to
enter into the Merger Agreement dated the date hereof and the Consulting
Agreements, the Company and the Holders have agreed to enter into this
Agreement; and
WHEREAS, it is intended by the Company and the Holders (including the
Consultants as Holders) that this Agreement shall become effective immediately
upon the closing of the transaction contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company hereby agrees as follows:
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1. Mandatory Registration. The Company shall prepare and file with the
Securities and Exchange Commission, no later than thirty (30) days from the date
hereof, a registration statement under the Securities Act of 1933, as amended
(the "1933 Act") on Form ▇-▇, ▇▇-▇ or on such other form as is available. The
Company shall include in said Registration Statement the shares of common stock
held by the Holders on the date hereof which are referenced in the second
WHEREAS of this Agreement and an estimate of the maximum number of shares of
common stock issuable to the Holders upon exercise of any Option (collectively
referred to as the "Registerable Securities") in such registration statement.
The Company shall be obligated to keep the foregoing registration statement
effective for a period of at least one (1) year beyond the effective date
thereof. In the event that the Company does not keep the foregoing registration
statement effective for a period of at least one (1) year beyond the effective
date thereof, the Company shall continue to be obligated to file an additional
registration statement pursuant to this Section 1 to register the Registrable
Securities for any period less then the one (1) year in which the registration
was not effective.
2. Piggyback Registration. From time to time, whenever the Company proposes
to register any of its equity securities under the Securities Act (other than a
registration effected in connection with a Company stock option or other
employee benefit plan (such as a Registration Statement on Form S-8), the
Company will give notice to all Holders of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein, subject to any restrictions imposed by any individual or entity which
obligated the Company to file such registration statement. Such requests for
inclusion shall be in writing and delivered to the Company within three (3)
business days after the Holder's receipt of the notice from the Company and
shall specify the number of Registrable Securities intended to be disposed of
and the intended method of distribution thereof. The Company may withdraw a
piggyback registration at any time prior to the time it becomes effective.
Notwithstanding anything contained herein to the contrary, the Holders shall
collectively have the right to have the Registrable Securities registered in one
(1) registration statement in accordance with this Section 2.
3. Cooperation with Company. Holders will cooperate with the Company in all
respects in connection with this Agreement, including, timely supplying all
information reasonably requested by the Company and executing and returning all
documents reasonably requested in connection with the registration and sale of
the Registerable Securities.
4. Registration Procedures. If and whenever the Company is required by any
of the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registerable Securities under the 1933 Act, the
Company shall (except as otherwise provided in this Agreement), as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement and shall use its best efforts to cause
such registration statement to become effective and remain effective until all
the Registerable Securities are sold or become capable of being publicly sold
without registration under the 1933 Act.
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(b) 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 1933 Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder or Holders of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities from time to time in connection with a registration statement
pursuant to Rule 415 of the Commission);
(c) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the 1933 Act, and such other documents, as such Holder may reasonably request
in order to facilitate the public sale or other disposition of the securities
owned by such Holder;
(d) use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or blue sky laws of
such jurisdictions as each Holder shall reasonably request, and do any and all
other acts and things which may be necessary or advisable to enable such Holder
to consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Holder, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(e) use its best efforts to list such securities on any securities
exchange on which any securities of the Company is then listed, if the listing
of such securities is then permitted under the rules of such exchange;
(f) notify each Holder of Registerable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the 1933 Act,
of the happening of any event of which it has knowledge 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; and
(g) furnish, at the request of any Holder on the date the registration
statement with respect to such Registerable Securities becomes effective, an
opinion, dated such date, of the counsel representing the Company for the
purpose of such registration, addressed to the Holder making such request,
covering such legal matters with respect to the registration in respect of which
such opinion is being given as the Holder of such Registerable Securities may
reasonably request and are customarily included in such an opinion.
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5. Expenses. All expenses incurred in any registration of the Holders'
Registerable Securities under this Agreement shall be paid by the Company,
including, without limitation, printing expenses, fees and disbursements of
counsel for the Company, expenses of any audits to which the Company shall agree
or which shall be necessary to comply with governmental requirements in
connection with any such registration, all registration and filing fees for the
Holders' Registerable Securities under federal and State securities laws, and
expenses of complying with the securities or blue sky laws of any jurisdictions
pursuant to Section 3(d); provided, however, the Company shall not be liable for
(a) any discounts or commissions to any underwriter; (b) any stock transfer
taxes incurred with respect to Registerable Securities sold in the Offering or
(c) the fees and expenses of counsel for any Holder, provided that the Company
will pay the costs and expenses of Company counsel when the Company's counsel is
representing any or all selling security holders.
6. Indemnification. In the event any Registerable Securities are included in a
registration statement pursuant to this Agreement:
(a) Company Indemnity. Without limitation of any other indemnity
provided to any Holder, either in connection with the Offering or otherwise, to
the extent permitted by law, the Company shall indemnify and hold harmless each
Holder, the affiliates, officers, directors and partners of each Holder, any
underwriter (as defined in the ▇▇▇▇ ▇▇▇) for such Holder, and each person, if
any, who controls such Holder or underwriter (within the meaning of the 1933 Act
or the Securities Exchange Act of 1934 (the "Exchange Act"), against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the 1933 Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any 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 alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein, (iii) any violation or alleged violation by the Company of the 1933
Act, the Exchange Act, or (iv) any state securities law or any rule or
regulation promulgated under the 1933 Act, the Exchange Act or any state
securities law, and the Company shall reimburse each such Holder, affiliate,
officer or director or partner, underwriter or controlling person for any legal
or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable to any Holder in any such case for any such loss,
claim, damage, liability or action 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 such Holder or any other officer, director or controlling
person thereof.
(b) Holder Indemnity. Each Holder shall indemnify and hold harmless the
Company, its affiliates, its counsel, officers, directors and representatives,
any underwriter (as defined in the ▇▇▇▇ ▇▇▇) and each person, if any, who
controls the Company or the underwriter (within the meaning of the 1933 Act or
liabilities (joint or several) to which they may become subject under the 1933
Act, the Exchange Act or any state securities law, and the Company shall
reimburse each such Holder, affiliate, officer or director or partner,
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underwriter or controlling person for any legal or other expenses incurred by
them in connection with investigating or defending any loss, claim, damage,
liability or action; insofar as such losses, claims, damages or liabilities (or
actions and respect thereof) arise out of or are based upon any statements or
information provided by such Holder to the Company in connection with the offer
or sale of Registerable Securities.
(c) Notice; Right to Defend. Promptly after receipt by an indemnified
party under this Section 5 of notice of the commencement of any action
(including any governmental action), such indemnified party shall, if a claim in
respect thereof is to be made against any indemnifying party under this Section
5 deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in and if the
indemnifying party agrees in writing that it will be responsible for any costs,
expenses, judgments, damages and losses incurred by the indemnified party with
respect to such claim, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Agreement only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Agreement.
(d) Contribution. If the indemnification provided for in this Agreement
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the indemnified party on the
other hand in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relevant fault of the indemnifying party and the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount any Holder
shall be obligated to contribute pursuant to the Agreement shall be limited to
an amount equal to the proceeds to such Holder of the Registerable Securities
sold pursuant to the registration statement which gives rise to such obligation
to contribute (less the aggregate amount of any damages which the Holder has
otherwise been required to pay in respect of such loss, claim, damage, liability
or action or any substantially similar loss, claim, damage, liability or action
arising from the sale of such Registerable Securities).
(e) Survival of Indemnity. The indemnification provided by this Agreement shall
be a continuing right to indemnification and shall survive the registration and
sale of any Registerable Securities by any person entitled to indemnification
hereunder and the expiration or termination of this Agreement.
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7. Remedies.
(a) Time is of Essence. The Company agrees that time is of the essence
of each of the covenants contained herein and that, in the event of a dispute
hereunder, this Agreement is to be interpreted and construed in a manner that
will enable the Holders to sell their Registerable Securities as quickly as
possible after such Holders have indicated to the Company that they desire their
Registerable Securities to be registered. Any delay on the part of the Company
not expressly permitted under this Agreement, whether material or not, shall be
deemed a material breach of this Agreement.
(b) Remedies Upon Default or Delay. The Company acknowledges the breach
of any part of this Agreement may cause irreparable harm to a Holder and that
monetary damages alone may be inadequate. The Company therefore agrees that the
Holder shall be entitled to injunctive relief or such other applicable remedy as
a court of competent jurisdiction may provide. Nothing contained herein will be
construed to limit a Holder's right to any remedies at law, including recovery
of damages for breach of any part of this Agreement.
8. Notices.
(a) All communications under this Agreement shall be in writing and
shall be mailed by first class mail, postage prepaid, or telegraphed or telexed
with confirmation of receipt or delivered by hand or by overnight delivery
service,
(b) If to the Company, at:
c/o The Certo Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as it may have furnished in writing to the Holders of
Registerable Securities at the time outstanding, or
(c) if to any Holder of any Registerable Securities, to the address of
such Holder as it appears in the stock ledger of the Company.
(d) Any notice so addressed, when mailed by registered or certified mail
shall be deemed to be given three days after so mailed, when telegraphed or
telexed shall be deemed to be given when transmitted, or when delivered by hand
or overnight shall be deemed to be given when delivered.
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9. Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the Company and each of the Holders.
10. Amendment and Waiver. This Agreement supersedes all prior verbal and
oral agreements entered into prior to the date of this Agreement, except that it
shall be read in Section 4 of the Consulting Agreements. This Agreement may be
amended, and the observance of any term of this Agreement may be waived, but
only with the written consent of the Company and the Holders of securities
representing a majority of the Registerable Securities; provided, however, that
no such amendment or waiver shall take away any registration right of any Holder
of Registerable Securities or reduce the amount of reimbursable costs to any
Holder of Registerable Securities in connection with any registration hereunder
without the consent of such Holder; further provided, however, that without the
consent of any other Holder of Registerable Securities, any Holder may from time
to time enter into one or more agreements amending, modifying or waiving the
provisions of this Agreement if such action does not adversely affect the rights
or interest of any other Holder of Registerable Securities. No delay on the part
of any party in the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise by any party of any
right, power or remedy preclude any other or further exercise thereof, or the
exercise of any other right, power or remedy.
11. Counterparts. One or more counterparts of this Agreement may be signed
by the parties, each of which shall be an original but all of which together
shall constitute one and same instrument.
12. Governing Law. This Agreement shall be construed in accordance with and
governed by the internal laws of the State of New York, without giving effect to
conflicts of law principles.
13. Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
14. Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
4th day of August, 2005.
NATIONAL DIVERSIFIED SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CEO
HOLDERS:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇, as the Personal
Representative of his deceased wife,
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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