REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into on December 1, 2004, by and between Rapidtron, Inc., a corporation
organized under the laws of the State of Nevada, with its principal place of
business located at 0000 Xxxxxx Xxxxxx, Xxxxxxxx X, Xxxxx Xxxx, Xxxxxxxxxx (the
"Company"), and Oceanus Value Fund, L.P. (the "Buyer").
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. Definitions. Capitalized terms used and not otherwise defined
-----------
herein shall have the meanings given such terms in the Securities Purchase
Agreement entered into between the Company and the Buyer dated concurrently
herewith (the "Securities Purchase Agreement"). As used in this Agreement, the
following terms shall have the specified meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section 2(c).
"Board" shall have the meaning set forth in Section 2(c).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the City of
New York or the State of New York are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's $0.001 par value common stock.
"Effectiveness Date" means the date which is ninety (90) days after the
Filing Date.
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Event" shall have the meaning set forth in Section 8(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the date which is thirty (30) days after the date of
this Agreement.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time-to-time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 6(c).
"Indemnifying Party" shall have the meaning set forth in Section 6(c).
"Losses" shall have the meaning set forth in Section 6(a).
"OTC Bulletin Board" shall mean the over-the-counter electronic bulletin
board market.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
"Registrable Securities" means (i) the Warrant Shares, (ii) any shares
issuable upon any stock split, stock dividend, recapitalization or similar event
with respect to the Warrant Shares and (iii) any other dividend or other
distribution with respect to, conversion or exchange of, or in replacement of,
the Warrant Shares.
"Registration Statement" means each registration statement provided for in
Section 2 hereof, including (in each case) the Prospectus, any amendments and
supplements to such registration statement or Prospectus (including pre- and
post-effective amendments), all exhibits thereto, and all material incorporated
by reference in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such Rule.
"Rule 158" means Rule 158 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such Rule.
"Rule 415" means Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration.
------------
(a) Required Registration. As promptly as possible, but in any event no
---------------------
later than the Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The Company
shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date (except where the Company's audited financial statements are stale, in
which case by the earlier of 90 days after the Effectiveness Date or the date
that current audited financial statements have been filed by the Company as part
of a Form 10-KSB), and, subject to Section 2(c) below, to keep such Registration
Statement continuously effective under the Securities Act until such date as is
the earlier of (i) the date when all Registrable Securities covered by such
Registration Statement have been sold or (ii) two (2) years after the date of
the issuance of the Warrant under the Securities Purchase Agreement (the
"Effectiveness Period"). If at any time during the Effectiveness Period (i) the
maximum number of Warrant Shares exceeds (A) the number of shares of Common
Stock initially registered in respect of the Warrant Shares minus (B) the number
of Warrant Shares, if any, already sold pursuant to the Registration Statement
and (ii) such excess exists for a period of more than ten (10) Business Days in
any thirty (30) day period, the Company shall be required to file an amendment
to the Registration Statement or an additional Registration Statement with
respect to such excess shares within ten (10) Business Days after such
conditions have been met (except where the Company's audited financial
statements are stale, in which case within 100 calendar days after such
conditions have been met), and the Company shall thereafter use its commercially
reasonable efforts to cause such amendment or additional Registration Statement
to be declared effective by the Commission as soon as possible, but in no event
later than ninety (90) days after filing.
(b) Shelf Registration. No later than thirty (30) days after becoming
------------------
eligible to file a registration statement for a secondary or resale offering of
the Registrable Securities on Form S-3, the Company shall prepare and file with
the Commission such documentation as is necessary to allow all remaining
Registrable Securities to thereafter be sold on a continuous basis under Rule
415 pursuant to a "shelf" Registration Statement on Form S-3. Notwithstanding
anything to the contrary contained herein, at no time during the Effectiveness
Period shall any of the Registrable Securities cease being registered.
(c) Delay in Filing, Effectiveness or Use. Anything in this Agreement
-------------------------------------
to the contrary notwithstanding, if (i) there is material non-public information
regarding the Company which the Company's Board of Directors (the "Board")
reasonably determines not to be in the Company's best interest to disclose and
which the Company is not otherwise required to disclose or (ii) there is a
significant business opportunity (including, but not limited to, the acquisition
or disposition
of assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction, available to the
Company which the Board reasonably determines not to be in the Company's best
interest to disclose and which the Company would be required to disclose in the
Registration Statement, then, upon written notice to each Holder, the Company
may postpone or suspend the filing, effectiveness or use of a Registration
Statement for a period not to exceed 10 consecutive days; provided, however,
that the Company may not postpone or suspend its obligations under Section 2(a)
for more than 30 days in the aggregate during any 12 month period (each, a
"Blackout Period").
(d) Piggy-Back Registrations.
------------------------
(i) If at any time when there is not an effective Registration
Statement covering the Registrable Securities, the Company shall decide to
prepare and file with the Commission a Registration Statement relating to an
offering for its own account of any of its equity securities or the account of
other holders of any of its equity securities, other than on Form S-4 or Form
S-8 (or their then equivalents relating to equity securities to be issued solely
in connection with the acquisition of an entity or business, or equity
securities issuable in connection with stock option or other employee benefit
plans), the Company shall send to each Holder written notice of such decision.
If, within thirty (30) days after receipt of such notice, a Holder does not
request in writing to the Company that some or all of such Holder's Registrable
Securities be removed from such Registration Statement, then the Company shall
cause the registration under the Securities Act of all Registrable Securities
which are held by each Holder subject to the Company's right to exclude a Holder
as set forth below; provided, however, 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 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 expenses in accordance with Section 5 hereof) and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities being registered pursuant to this Section
2(d) for the same period as the delay in registering such other securities. The
foregoing notwithstanding, the Company shall not be required to register any
Registrable Securities pursuant to this Section 2(d) that are eligible for sale
pursuant to Rule 144(k).
(ii) In the case of an underwritten public offering, if the
managing underwriter(s) should reasonably object to the inclusion of the
Registrable Securities in such Registration Statement, then if the Company,
after consultation with the managing underwriter(s), should reasonably determine
that the inclusion of the Registrable Securities would materially adversely
affect the offering contemplated in such Registration Statement, and based on
such determination recommends inclusion in such Registration Statement of fewer
or none of the Registrable Securities of a Holder, then (A) if the Company after
consultation with the underwriter(s) recommends the inclusion of fewer
Registrable Securities, the number of Registrable Securities of the Holders
included in such Registration Statement shall be reduced pro-rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration), or (B) none of the Registrable Securities of the
Holders shall be included in such Registration Statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other Persons as well as the Company, such reduction shall
not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other Persons (other than the Company).
3. Registration Procedures. In connection with the Company's
------------------------
registration obligations under Section 2 above, the Company shall:
(a) Initial Filing. With respect to its obligations under Section
--------------
2(a), prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form SB-2 (or, if the Company is not then eligible to
register for resale the Registrable Securities on that Form, such registration
shall be on another appropriate form in accordance herewith) in accordance with
the method or methods of distribution thereof specified by the Holders in
writing (unless otherwise directed by the Holders in writing), and use its
commercially reasonable efforts to cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by reference), the
Company shall (i) furnish to each Holder copies of all such documents proposed
to be filed, which documents (other than those incorporated by reference) will
be subject to the review of each Holder and (ii) at the request of a Holder,
cause the Company's officers, directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which a Holder or any counsel therefor shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
(b) Amendments. With respect to its obligations under Section 2(a),
----------
use its commercially reasonable efforts to (i) prepare and file with the
Commission such amendments, including post-effective amendments, as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period, and prepare and
file with the Commission such amendments to the Registration Statement and/or
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities, (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended, to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act, (iii) respond as
promptly as possible to any comments received from the Commission with respect
to a Registration Statement or any amendment thereto and as promptly as possible
provide to each Holder true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement or amendment and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by each Holder thereof set forth in
such
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Related Matters. Notify each Holder of Registrable Securities to
---------------
be sold and any counsel therefor as promptly as possible (and, in the case of
clause (i)(A) below, not less than five (5) Business Days prior to such filing)
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed, (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose, (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose and (v) of the occurrence of any
event that makes any statement made in a Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to a Registration
Statement, Prospectus or other documents so that, in the case of such
Registration Statement or the Prospectus, as the case may be, it will not
contain any 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,
in the light of the circumstances under which they were made, not misleading.
(d) Withdrawal and Suspension. With respect to its obligations under
-------------------------
Section 2(a), use its commercially reasonable efforts to avoid the issuance of,
or, if issued, at the earliest practicable time obtain the withdrawal of, (i)
any order suspending the effectiveness of the Registration Statement or (ii) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction.
(e) Incorporation of Certain Matters. If requested by the Holders of a
--------------------------------
majority in interest of the Registrable Securities, (i) promptly incorporate in
a Prospectus supplement or post-effective amendment to a Registration Statement
such information as the Company reasonably agrees should be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated therein.
(f) Copies. To the extent requested by any Holder, provide to each
------
Holder and any counsel therefor, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto (including financial
statements and schedules, documents incorporated or deemed to be incorporated
therein by reference, and all exhibits), such documents to be provided promptly
after their filing with the Commission.
(g) Delivery. Promptly deliver to each Holder and any counsel
--------
therefor, without
charge, as many copies of the Prospectus or Prospectuses and each amendment or
supplement thereto as they may reasonably request; and the Company hereby
consents to the use of each such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offer and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Blue Sky Matters. (A) Prior to any public offering of Registrable
----------------
Securities, use its commercially reasonable efforts to register or qualify or
cooperate with the selling Holders and any counsel therefor in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder reasonably requests in writing and (B) keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
(if applicable) and perform or do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of those Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Preparation of Certificates. Cooperate with each Holder to
---------------------------
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and cause such
certificates to be in such denominations and registered in such names as each
Holder may request at least two (2) Business Days prior to any sale of
Registrable Securities.
(j) Misrepresentation. Subject to Section 2(c) above, upon the
-----------------
occurrence of any event contemplated by Section 3(c)(v), as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither such Registration Statement nor such Prospectus will contain
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, in the light
of the circumstances under which they were made, not misleading.
(k) Listing and Quotation. Use its commercially reasonable efforts to
---------------------
cause all Registrable Securities relating to a Registration Statement to be
quoted on the OTC Bulletin Board and any securities exchange, quotation system
or other market on which similar securities issued by the Company are then
listed or quoted as and when required pursuant to the Securities Purchase
Agreement.
(l) Rule 158. Comply in all material respects with all applicable
--------
rules and regulations of the Commission and make generally available to its
security holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 not later than 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) commencing on the first day of the first
fiscal quarter of the Company after the effective date of the Registration
Statement.
4. Additional Matters.
-------------------
(a) Holder Information. In connection with a Registration Statement,
-------------------
each selling Holder shall be required to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement, and the Company
may exclude from such registration the Registrable Securities of any such Holder
who fails to furnish such information within a reasonable time prior to the
filing of such Registration Statement or any supplemented Prospectus and/or
amended Registration Statement.
(b) Reference to Holder. If a Registration Statement refers to any
---------------------
Holder by name as the holder of any securities of the Company, then such Holder
shall have the right to require the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement that is filed
subsequent to the time that such reference ceases to be required by the
Securities Act or any similar federal statute then in force.
(c) Holder Covenants. Each Holder covenants and agrees that (i) it
-----------------
will not sell any Registrable Securities under a Registration Statement until it
has received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) it and its officers, directors and
Affiliates, if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to them in connection with the sale of Registrable
Securities pursuant to such Registration Statement.
(d) Discontinuance. Each Holder agrees by its acquisition of
--------------
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in clauses (ii) through (v) of
Section 3(c) or suspension of the use of the Registration Statement pursuant to
Section 2(c) hereof, such Holder will immediately discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
5. Registration Expenses All fees and expenses incident to the
----------------------
performance of or compliance with this Agreement by the Company shall be borne
by the Company, whether or not a Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to a
Registration Statement. Such fees and expenses shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made by or with the
OTC Bulletin Board and each securities exchange, quotation system or other
market on which Registrable Securities are
required hereby to be listed or quoted, (B) with respect to filings required to
be made with the Commission and (C) in compliance with state securities or Blue
Sky laws (including, without limitation, reasonable fees and disbursements of
counsel for each Holder in connection with Blue Sky qualifications of the
Registrable Securities and any determination of the eligibility of the
Registrable Securities for investment under the laws of such jurisdictions as
the Holders of a majority of Registrable Securities may designate)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for the Registrable Securities and of printing Prospectuses, if the
printing of Prospectuses is requested by the Holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and a single counsel for the Holders, (v) Securities Act liability
insurance, if the Company so desires such insurance and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement, including, without
limitation, the Company's independent public accountants (including any costs
associated with the delivery by independent public accountants of a comfort
letter or comfort letters). In addition, the Company shall be responsible for
all of its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing or quoting of the Registrable Securities
on the OTC Bulletin Board or any securities exchange, quotation system or other
market on which Registrable Securities are required to be listed or quoted.
6. Indemnification.
---------------
(a) Indemnification by the Company. The Company shall, notwithstanding
------------------------------
any termination of this Agreement, defend, indemnify and hold harmless each
Holder, each officer, director, manager, owner, agent and employee of each
Holder, each Person who controls any Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and each officer,
director, manager, owner, agent and employee of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, reasonable costs (including, without
limitation, costs of investigation, preparation and attorneys' fees actually
incurred) and expenses (collectively, "Losses"), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in a Registration Statement or any Prospectus or any amendment or supplement
thereto, or arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or supplement thereto, in the light of
the circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (i) such untrue statements or omissions are
based solely upon information regarding such Holder which was furnished in
writing to the Company by such Holder expressly for use therein, (ii) such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder for use in the Registration Statement or such
Prospectus or in any amendment or supplement thereto or (iii) the use by such
Holder of an outdated or defective prospectus (without any Company provided
supplement correcting such outdated or defective prospectus) after the Company
has notified such Holder in writing that
such prospectus is suspended from use, outdated or defective. The Company
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of an Indemnified
Party and shall survive the transfer of Registrable Securities by a Holder.
(b) Indemnification by Holders. Each Holder shall, severally and not
----------------------------
jointly, defend, indemnify and hold harmless the Company, the Company's
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising solely out of or based solely upon any
untrue statement of a material fact contained in a Registration Statement, any
Prospectus or any amendment or supplement thereto, or arising solely out of or
based solely upon any omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of any Prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that (i) such
untrue statement or omission is contained in or omitted from any information so
furnished in writing by such Holder to the Company specifically for inclusion in
such Registration Statement or such Prospectus or an amendment or supplement
thereto, (ii) such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in such Registration
Statement or such Prospectus or any amendment or supplement thereto or (iii) the
use by such Holder of an outdated or defective prospectus (without any Company
provided supplement correcting such outdated or defective prospectus) after the
Company has notified such Holder in writing that such prospectus is suspended
from use, outdated or defective. Notwithstanding anything to the contrary
contained herein, a Holder shall be liable under this Section 6(b) for only that
amount which does not exceed the net proceeds to such Holder as a result of the
sale of Registrable Securities pursuant to such Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
--------------------------------------
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the
right to employ separate counsel in any such Proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party
has agreed in writing to pay such fees and expenses, (ii) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding following
receipt of notice and to employ counsel reasonably satisfactory to such
Indemnified
Party in any such Proceeding or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were to
represent both the Indemnified Party and the Indemnifying Party (in which case,
if the Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding. All fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within thirty (30) Business Days of written notice thereof
to the Indemnifying Party (regardless of whether it is ultimately determined
that the Indemnified Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require the Indemnified Party to
undertake to reimburse all such fees and expenses to the extent it is finally
judicially determined that the Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6(a) or
------------
6(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), 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 Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses, as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying, Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section 6(c), any reasonable
attorneys' or other reasonable fees or expenses incurred in connection with any
Proceeding to the extent there would have been indemnification for such fees or
expenses if the indemnification provided in this Section was available in
accordance with its terms. Notwithstanding anything to the contrary contained
herein, a Holder shall be liable or required to contribute under this Section
6(d) for only such amount as does not exceed the net proceeds to such Holder as
a result of the sale of Registrable Securities pursuant to the Registration
Statement. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
misrepresentation (within the meaning provided in the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. The indemnity and contribution agreements contained in this
Section are in addition to any liability that an Indemnifying Party may have to
an Indemnified Party.
7. Rule 144. As long as any Holder owns the Warrant or any Warrant
---------
Shares, the Company agrees to timely file (or obtain extensions in respect
thereof and file within the applicable extension period) all reports required to
be filed by the Company pursuant to Section 13 or 15(d) of the Exchange Act. In
addition, as long as any Holder owns any Warrant Shares, if the Company is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, it
will prepare and furnish to each Holder and make publicly available in a timely
fashion the information specified in Rule 144(c)(2). The Company further agrees
that it will take such further action as any Holder may reasonably request to
the extent required from time to time to enable each Holder to sell Warrant
Shares without registration under the Securities Act within the limitation of
the exemption provided by Rule 144, including providing any legal opinions of
counsel to the Company referred to in the Securities Purchase Agreement. Upon
the request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
the foregoing requirements.
8. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company or any Holder of
--------
any of their obligations under this Agreement, each non-breaching party, in
addition to being entitled to exercise all rights granted by law or under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate. The Company and the Buyer also acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement or the Securities Purchase Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement or
the Securities Purchase Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(b) No Inconsistent Agreements. Neither the Company nor any of its
----------------------------
Affiliates has, as of the date hereof, entered into and currently in effect, nor
shall the Company or any of its Affiliates on or after the date of this
Agreement enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to each Holder in this Agreement or
otherwise conflicts with the provisions hereof, except for registration rights
provisions disclosed in a Schedule to the Securities Purchase Agreement or in
the SEC Documents (as defined in the Securities Purchase Agreement). Except for
registration rights provisions disclosed in a Schedule to the Securities
Purchase Agreement or in the SEC Documents, neither the Company nor any of its
Affiliates has previously entered into any agreement currently in effect
granting
any registration rights with respect to any of its securities to any Person.
Without limiting the generality of the foregoing, without the written consent of
the Buyer and the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of each Holder and are not otherwise in conflict with the provisions of
this Agreement. The foregoing notwithstanding, this Section 8(b) shall not
prohibit the Company from entering into any agreements concerning the
registration of securities on Form S-8 or Form S-4.
(c) Failure to File Registration Statement and Other Events. The
--------------------------------------------------------------
Company and the Buyer agree that the Holders will suffer damages if the
Registration Statement required by Section 2(a) above is not filed on or prior
to the Filing Date and not declared effective by the Commission on or prior to
the Effectiveness Date and maintained in the manner contemplated herein during
the Effectiveness Period, or if certain other events occur. The Company and the
Buyer further agree that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, subject to the Company's suspension
rights as set forth in Section 2(c) hereof, if (i) a required Registration
Statement is not filed on or prior to the Filing Date, or is not declared
effective by the Commission on or prior to the Effectiveness Date (or in the
event an additional Registration Statement is filed because the actual number of
Warrant Shares exceeds the number of shares of Common Stock initially registered
is not filed and declared effective within the time periods set forth in Section
2(a)), (ii) a required Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities at any time prior to the expiration of the Effectiveness
Period, without being succeeded immediately by a subsequent Registration
Statement filed with and declared effective by the Commission, (iii) trading in
the Common Stock shall be suspended or if the Common Stock ceases to be quoted
on the OTC Bulletin Board for any reason for more than sixty (60) days in the
aggregate or (iv) the exercise rights of a Holder with respect to the Warrant
are suspended by the Company (any such circumstance, failure or breach being
referred to as an "Event"), the Company shall pay to the Holders in cash as
liquidated damages for such failure, and not as a penalty, an aggregate amount
equal to 2% of the original principal amount of the Note issued to the Buyer for
each thirty (30) day period until the applicable Event has been cured, which
shall be pro rated for periods of less than thirty (30) days (the "Periodic
Amount"). Subject to the Buyer's right to add such Periodic Amount on to the
principal amount of the Note (as provided in the Note), payments to be made
pursuant to this Section 8(c) shall be due and payable three (3) Business Days
after the end of each month in which a Periodic Amount accrues, such payments to
be made in immediately available funds and allocated among the Holders according
to their interests in the Warrant and Warrant Shares. The parties agree that the
Periodic Amount represents a reasonable estimate on the part of the parties, as
of the date of this Agreement, of the amount of damages that may be incurred by
a Holder if a Registration Statement is not filed on or prior to the Filing Date
or has not been declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Period or if any other Event as described herein has occurred.
(d) Amendments and Waivers. The provisions of this Agreement,
------------------------
including the provisions of this sentence, shall not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
shall not be given, unless the same shall be in
writing and signed by the Company and the applicable Holder. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates generally to the rights of the Holders may be
given by Holders of at least a majority of the Registrable Securities to which
such waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, waived, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(e) Notices. Any and all communications required or permitted to be
-------
provided hereunder shall be in writing and shall be deemed given and effective
as provided in Section 8(f) of the Securities Purchase Agreement. The addresses
for such communications shall be as provided in Section 8(f) of the Securities
Purchase Agreement or such other address or addresses as any party may most
recently have designated in writing to the other parties hereto.
(f) Successors and Assigns. This Agreement shall be binding upon and
------------------------
inure to the benefit of the parties and their respective successors and
permitted assigns. The Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the
Holders. The Buyer may assign its rights hereunder in the manner and to the
Persons as permitted herein or in the Securities Purchase Agreement.
(g) Assignment of Registration Rights. The rights of each Holder
------------------------------------
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Warrant and/or the Registrable Securities if: (i) the
Holder agrees in writing with the transferee or assignee to assign such rights
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment, (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (A) the name and
address of such transferee or assignee and (B) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees is restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement. In addition, each Holder shall have the right to assign its rights
hereunder to any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld. The rights to assignment
shall apply to the Holders and to their subsequent successors and assigns.
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) such document with the same force and
effect as if such facsimile signature were the original thereof.
(i) Governing Law. This Agreement shall be governed by and interpreted
-------------
in
accordance with the laws of the State of California without regard to the
principles of conflict of laws. The parties hereto agree that a final,
non-appealable judgment in any suit or proceeding with respect to this Agreement
shall be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
(j) Cumulative Remedies. No provision of this Agreement providing for
--------------------
any specific remedy to a party shall be construed to limit such party to the
specific remedy described, and that any other remedy that would otherwise be
available to such party at law or in equity shall also be available. The
parties also intend that the rights and remedies hereunder be cumulative, so
that exercise of any one or more of such rights or remedies shall not preclude
the later or concurrent exercise of any other rights or remedies.
(k) Severability. If any provision of this Agreement shall be invalid
------------
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(l) Headings; Interpretation. The headings of this Agreement are for
-------------------------
convenience of reference and shall not form a part of, or affect the
interpretation of, this Agreement. As used herein, (i) the neuter gender
includes the masculine or feminine and the singular number includes the plural,
and vice versa, as the context may require and (ii) unless the context clearly
requires otherwise, the words "herein," "hereunder" and "hereby," shall refer to
this entire Agreement and not only to the Section or paragraph in which such
word appears. If any date specified herein falls upon a Saturday, Sunday or
public or legal holidays, the date shall be construed to mean the next Business
Day following such Saturday, Sunday or public or legal holiday. Each party
intends that this Agreement be deemed and construed to have been jointly
prepared by the parties. As a result, the parties agree that any uncertainty or
ambiguity existing herein shall not be interpreted against either of them.
(m) Attorney's Fees. If any party to this Agreement shall bring any
----------------
action for relief against the other arising out of or in connection with this
Agreement, in addition to all other remedies to which the prevailing party may
be entitled, the losing party shall be required to pay to the prevailing party a
reasonable sum for attorney's fees and costs incurred in bringing such action
and/or enforcing any judgment granted therein, all of which shall be deemed to
have accrued upon the commencement of such action and shall be paid whether or
not such action is prosecuted to judgment. Any judgment or order entered in
such action shall contain a specific provision providing for the recovery of
attorney's fees and costs incurred in enforcing such judgment. For the purposes
of this Section, attorney's fees shall include, without limitation, fees
incurred with respect to the following: (i) post-judgment motions, (ii)
contempt proceedings, (iii) garnishment, levy and debtor and third party debtor
and third party examinations, (iv) discovery and (v) bankruptcy litigation.
(n) No Third Party Beneficiaries. This Agreement is intended for the
------------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized persons on the date first written
above.
RAPIDTRON, INC.
By:
--------------------
President
By:
--------------------
Secretary
OCEANUS VALUE FUND, L.P.
By: Oceanus Asset Management, L.L.C.,
General Partner
By:
--------------------
Name: Xxxx X. Xxxxxxx
Title: Member
