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REGISTRATION RIGHTS AGREEMENT
by and between
CONSUMER DIRECT OF AMERICA
and
CRUSADER CAPITAL PARTNERS II, LLC
July 29, 2005
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REGISTRATION RIGHTS AGREEMENT, dated as of this 29 day of July, 2005
(this "Agreement"), by and between Consumer Direct of America, a Nevada
corporation (the "Company"), and Crusader Capital Partners II, LLC, a New York
limited liability company ("Crusader").
W I T N E S S E T H:
WHEREAS, the Company and Crusader are entering into a Common Stock
Purchase Agreement (the "Purchase Agreement") of even date herewith, pursuant to
which the Company is selling to Crusader Four Million One Hundred Sixty-Six
Thousand Six Hundred Sixty-Seven (4,166,667) shares of Common Stock and pursuant
to which Crusader has the right to purchase additional shares; and
WHEREAS, a condition to Crusader's obligations under the Purchase
Agreement is that the Company enter into this Agreement to provide, among other
things, certain registration rights with respect to shares of Common Stock held
by Crusader;
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Registration Rights.
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The Company and Crusader covenant and agree as follows:
1.1 Definitions. For purposes of this Section 1:
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(a) The term "Common Stock" means the Company's common stock,
par value $.001 per share.
(b) The term "Effectiveness Date" means: (a) with respect to
the Registration Statement required to be filed pursuant to Section 1.2(a), the
earlier of: (i) the ninetieth (90th) day following the Execution Date and (ii)
the fifth (5th) trading day following the date on which the Company is notified
by the SEC that such Registration Statement will not be reviewed or is no longer
subject to further review and comments, and (b) with respect to any additional
Registration Statements that may be required pursuant to Section 1.2(c) or 1.2
(d) hereof, the earlier of: (i) the ninetieth (90th) day following the date on
which the Company first knows, or reasonably should have known, that such
additional Registration Statement is required under Section 1.2(c) or 1.2 (d)
and (ii) the fifth (5th) trading day following the date on which the Company is
notified by the Commission that such additional Registration Statement will not
be reviewed or is no longer subject to further review and comments.
(c) The term "Effectiveness Period" shall have the meaning set
forth in Section 1.7(b).
(d) The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(e) The term "Execution Date" means the Closing Date or
Subsequent Closing Date under the Purchase Agreement.
(f) The term "Filing Date" means: (a) with respect to the
Registration Statement required to be filed pursuant to section 1.2(a), the
thirtieth (30th) day following the Execution Date, and (b) with respect to any
additional Registration Statements that may be required pursuant to Section
1.2(c) or 1.2 (d) hereof, the thirtieth (30th) day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under Section 1.2(c) or 1.2 (d).
(g) The terms "Form S-3" and "Form SB-2" mean such forms under
the Securities Act as in effect on the date hereof or any successor form under
the Securities Act.
(h) The term "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 promulgated 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 the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
(i) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "Securities Act"), and the declaration or ordering of effectiveness
of such registration statement or document.
(j) The term "Registrable Securities" means (i) the shares of
Common Stock owned by Crusader and any other shares purchased after the date
hereof by Crusader under the Purchase Agreement, and (ii) any other shares of
Common Stock of the Company issued as a dividend or other distribution with
respect to, or in exchange for or in replacement of, the shares listed in clause
(i); provided, however, that the foregoing definition shall exclude in all cases
any Registrable Securities sold by Crusader in a transaction in which its rights
under this Agreement are not assigned. Notwithstanding the foregoing, Common
Stock or other securities shall only be treated as Registrable Securities if and
so long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (B)
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale.
(k) The number of shares of "Registrab1e Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are Registrable Securities.
(l) The term "Registration Statement" or "registration
statement" means, collectively, the initial Registration Statement required to
be filed pursuant to Section 1.2(a) and any additional Registration Statements
contemplated by Section 1.2(c) or 1.2(d), or any other
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registration statement referred to in this Agreement, including (in each case)
the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
(m) The term "SEC" means the Securities and Exchange
Commission.
1.2 Request for Registration by Crusader or "Demand Registration"
(a) If the Company shall receive at any time after the Closing
or Subsequent Closing (as such terms are defined in the Purchase Agreement) a
written request from Crusader that the Company file a Registration Statement
under the Securities Act with respect to the Registrable Securities then
outstanding, then the Company shall, subject to the limitations of subsection
1.2(b), use its best efforts to effect as soon as practicable, and in any event
no later than the Filing Date, the filing of a registration under the Securities
Act of all Registrable Securities which Crusader requests to be registered.
Crusader may make three (3) registration demands of the Company pursuant to this
Section 1.2(a)
(b) If: (a) a Registration Statement is not filed on or prior
to its Filing Date (if the Company files a Registration Statement without
affording Crusader the opportunity to review and comment on the same as required
by Section 1.7(i), the Company shall not be deemed to have satisfied clause
(a)), or (b) the Company fails to file with SEC a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five (5)
trading days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the SEC that the Registration Statement will not be
"reviewed," or not subject to further review, or (c) the Company fails to
respond to any comments made by the SEC within ten (10) trading days after the
receipt of such comments, or (d) a Registration Statement filed hereunder is not
declared effective by the SEC by the thirtieth (30th) day following its
Effectiveness Date, or (e) after its Effective Date, the Registration Statement
ceases to be effective as to all Registrable Securities to which it is required
to relate, or Crusader is not permitted to utilize the Prospectus thereunder to
resell Registrable Securities, for an aggregate of twenty (20) trading days for
all such events, or (f) an amendment to the Registration Statement is not filed
by the Company with the SEC within ten trading days of the SEC's notifying the
Company that such amendment is required in order for the Registration Statement
to be declared effective (any such failure or breach being referred to as an
"Event", and for purposes of clauses (a) and (d), the date on which such Event
occurs, or for purposes of clause (b) the date on which such five trading day
period is exceeded, or for purposes of clauses (c) and (f) the date which such
ten trading day period is exceeded, or, for purposes of clause (e) the date on
which such twenty trading day period is exceeded, being referred to as "Event
Date"), then: (x) on each such Event Date and on the first monthly anniversary
of each such Event Date, the Company shall pay to Crusader an amount in cash, as
liquidated damages and not as a penalty, equal to one percent (1%) of the
aggregate amounts paid by Crusader pursuant to the Purchase Agreement; and (y)
on each subsequent monthly anniversary of each such Event Date (if the
applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to Crusader an amount in cash, as
liquidated damages and not as a penalty, equal to two percent (2%) of the
aggregate amounts paid by Crusader pursuant to the Purchase Agreement. Such
liquidated damages shall be in
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addition to any rights and remedies available to Crusader under the Transaction
Documents and applicable law. If the Company fails to pay any liquidated damages
pursuant to this Section in full within seven (7) days after the date payable,
the Company will pay interest thereon at a rate of twelve percent (12%) per
annum (or such lesser maximum amount that is permitted to be paid by applicable
law) to Crusader, until such liquidated damages are paid in full. The liquidated
damages pursuant to the terms hereof shall apply on a pro-rata basis for any
portion of a month prior to the cure of an Event.
(c) If for any reason the SEC does not permit all of the
Registrable Securities to be included in the Registration Statement filed
pursuant to Section 1.2(a), then the Company shall prepare and file as soon as
possible after the date on which the SEC shall indicate as being the first date
or time that such filing may be made, but in any event by the Filing Date for
such Registration Statement, an additional Registration Statement covering the
resale of all Registrable Securities not already covered by an existing and
effective Registration Statement. The Company shall cause each such Registration
Statement to be declared effective under the Securities Act as soon as possible
but, in any event, no later than the Effectiveness Date for such Registration
Statement, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act during the entire Effectiveness
Period for such Registration Statement.
(d) If the Company consummates the Spin Off (as defined in the
Purchase Agreement) of the shares of Common Stock of its subsidiary Consumer
Direct Lending (to be called Shearson Home Loans), a Nevada corporation ("CDL"),
the Company will cause CDL to enter into a registration rights agreement with
Crusader containing the same provisions of this Agreement for the shares of CDL
to be received by Crusader in the Spin Off.
1.3 Procedures. If Crusader intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to Section 1.2 and the
Company shall include such information in the written notice referred to in
Section 1.2. The underwriter will be selected by Crusader and shall be
reasonably acceptable to the Company. Crusader shall (together with the Company
as provided in subsection 1.7(h)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by Crusader.
1.4 Company or "Piggy Back" Registration. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than
Crusader) any of its stock under the Securities Act in connection with the
public offering of such securities solely for cash, either on its own behalf or
on behalf of itself and selling stockholders, the Company shall, at such time,
promptly give Crusader written notice of such registration. Upon the written
request of Crusader given within thirty (30) days after mailing of such notice
by the Company in accordance with Section 2.3, the Company shall, subject to the
provisions of Section 1.5, cause the filing of a registration under the
Securities Act of all the Registrable Securities that Crusader has requested to
be registered. The Company may withdraw any registration initiated by the
Company pursuant to this Section 1.4 upon notice to Crusader.
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1.5 Requirements for Registration. Crusader may not participate in
any registration statement hereunder unless it completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements, including an opinion of its counsel; provided, however, that
Crusader shall not be required to make any representations or warranties in
connection with any such registration other than representations and warranties
as to (i) Crusader's ownership of its Registrable Securities to be sold or
transferred free and clear of all liens, claims, and encumbrances, (ii)
Crusader's power and authority to effect such transfer, and (iii) such matters
pertaining to compliance with securities laws as may be reasonably requested.
1.6 Form S-3 and SB-2 Registration. In case the Company shall
receive from Crusader a written request or requests that the Company effect a
registration on Form S-3 or SB-2 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by Crusader,
the Company will:
(a) as soon as practicable, use its best efforts to effect
such registration and all such qualifications and compliance as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of Crusader's Registrable Securities as are specified in such
request; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
1.6: (i) if Form S-3 is not available for such offering by Crusader (in such
case, the registration shall be on Form SB-2); (ii) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance; or (iii) during the period ending one
hundred eighty (180) days after the effective date of a registration statement
subject to Section 1.4.
(b) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of Crusader. Registrations effected pursuant to this Section
1.6 shall not be counted as demands for registration or registrations effected
pursuant to Sections 1.2 or Section 1.4.
1.7 Registration Procedures. Whenever Crusader has requested that
any Registrable Securities be registered pursuant to the provisions of this
Section 1, the Company will use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof as set forth in the written request, and pursuant thereto
the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC registration statement(s)
with respect to such securities on the appropriate forms, and use its best
efforts to cause such registration statement(s) to become and remain effective
in accordance with Section 1.7(b) hereof and in accordance with all laws, rules
and regulations applicable thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement(s) and the prospectus(es) used in
connection therewith as may be necessary to keep such registration statement(s)
effective until the earlier of (i) the sale of all Registrable Securities
covered thereby, (ii) the date required therefor by the underwriters in the
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underwriting agreement, or (iii) 120 days following the effectiveness of such
registration statement (except in the case of a registration effected pursuant
to Section 1.6, in which case, the Company will take such actions as are
necessary to cause the registration statement to remain effective until the sale
of all Registrable Securities covered thereby) (the "Effectiveness Period"), and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Registrable Securities covered by such registration
statement(s);
(c) furnish to Crusader such number of copies of any summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as Crusader may reasonably request in order to facilitate the public sale or
other disposition of such Registrable Securities;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement(s) under the
securities or blue sky laws of such jurisdictions as Crusader shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable Crusader to consummate the public sale or other disposition
in such jurisdictions of such Registrable Securities; provided, however, that
the Company shall not be required to consent to general service of process for
all purposes in any jurisdiction where it is not then subject to process,
qualify to do business as a foreign corporation where it would not be otherwise
required to qualify or submit to liability for state or local taxes where it is
not otherwise liable for such taxes;
(e) at any time when a prospectus relating thereto covered by
such registration statement(s) is required to be delivered under the Securities
Act within the appropriate period mentioned in Section 1.7(b) hereof, promptly
notify Crusader and each underwriter and (if requested by Crusader) confirm such
notice in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed and, with respect to a registration
statement or any post-effective amendment, when the same has become effective,
(ii) of the issuance by any state securities or other regulatory authority of
any order suspending the qualification or exemption from qualification of any of
the Registrable Securities under state securities or blue sky laws or the
initiation of any proceedings for that purpose, and (iii) of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing and, at the request of Crusader, prepare, file and furnish to Crusader
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 shares, 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;
(f) if the Company has delivered preliminary or final
prospectuses to Crusader and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, promptly notify Crusader
and, if requested, Crusader shall immediately cease making offers of Registrable
Securities and return all prospectuses in Crusader's possession to the Company,
other than permanent file copies retained by Crusader. The Company shall
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promptly provide Crusader with revised prospectuses and, following receipt of
the revised prospectuses, Crusader shall be free to resume making offers of the
Registrable Securities;
(g) furnish, at the request of Crusader on the date such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such Registrable Securities
are being sold through underwriters, or, if such Registrable Securities are not
being sold through underwriters, on the date that the registration statement
with respect to such Registrable Securities becomes effective, (i) an opinion,
dated such date, of outside counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to Crusader and (ii) a letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and Crusader;
(h) if any proposed registration effected pursuant to Section
1 involves an underwritten public offering, (i) subject to Section 1.2 select a
reputable managing underwriter to underwrite such public offering, (ii) cause
all Registrable Securities to be listed for trading on the principal national
securities exchange (including, without limitation, the NASDAQ National Market
System) (as defined in the Exchange Act) where the Company's stock is listed for
trading, or the NASD Over the Counter Bulletin Board, and (iii) enter into an
underwriting agreement with the underwriter providing for such representations,
warranties, covenants, conditions and indemnities as may reasonably be requested
by the underwriter;
(i) before filing a registration statement or amendment
thereto, furnish to Crusader and its counsel and other representatives and the
underwriters, if any, copies of each such registration statement or amendment
proposed to be filed, which documents shall be made available on a timely basis
for review and comment by Crusader, the underwriters (if any) and their
respective representatives;
(j) make generally available to the Company's security holders
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, as promptly as practicable, but in any event no later than
ninety (90) days after the end of the 12-month period beginning with the first
day of the Company's first fiscal quarter commencing after the effective date of
a registration statement, which earnings statement shall cover said 12-month
period, and which requirement will be deemed to be satisfied if the Company
timely files complete and accurate information on Forms 10-KSB and 8-K under the
Exchange Act and otherwise complies with Rule 158 under the Securities Act;
(k) if requested by the managing underwriter or Crusader,
promptly incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or Crusader reasonably requests to be
included therein, including, without limitation, with respect to the Registrable
Securities being sold by Crusader, the purchase price being paid therefor by the
underwriters and with respect to any other terms of the underwritten offering of
the Registrable Securities to be sold in such offering, and promptly make all
required filings of such prospectus supplement or post-effective amendment;
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(l) as promptly as practicable after filing with the SEC any
document which is incorporated by reference into a registration statement (in
the form in which it was incorporated), deliver a copy of each such document to
Crusader, if requested by Crusader;
(m) cooperate with Crusader and the managing underwriter to
facilitate the timely preparation and delivery of certificates (which shall not
bear any restrictive legends unless required under applicable law) representing
securities sold under any registration statement (if any), and enable such
securities to be in such denominations and registered in such names as the
managing underwriter or Crusader may request and keep available and make
available to the Company's transfer agent prior to the effectiveness of such
registration statement a supply of such certificates;
(n) promptly make available for inspection by Crusader, any
underwriter participating in any disposition pursuant to any registration
statement, and any attorney, accountant or other agent or representative
retained by Crusader or any such underwriter (collectively, the "Inspectors"),
upon reasonable advance notice and during normal business hours, all financial
and other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information requested by any
such Inspector in connection with such registration statement, provided that
unless the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, the Company shall not be required to provide any
information under this subparagraph (n) if (A) the Company believes, after
consultation with counsel for the Company, that to do so would cause the Company
to forfeit an attorney-client privilege that was applicable to such information
or (B) if either (i) the Company has requested and been granted from the SEC
confidential treatment of such information contained in any filing with the SEC
of documents provided supplementally or otherwise or has filed an application
for SEC confidential treatment of such information which is pending or (ii) the
Company reasonably determines in good faith that such Records are confidential
and so notifies the Inspectors in writing unless prior to furnishing any such
information with respect to (A) or (B) each party requesting such information
agrees to enter into a confidentiality agreement in customary form and subject
to customary exceptions; and; provided further, that each party agrees that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company at its
expense, to undertake appropriate action and to prevent disclosure of the
Records deemed confidential;
(o) provide a CUSIP number for the Registrable Securities
included in any registration statement not later than the effective date of such
registration statement;
(p) cooperate with Crusader and each underwriter participating
in the disposition of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the National Association
of Securities Dealers, Inc. ("NASD");
(q) promptly file all documents required to be filed with the
SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;
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(r) notify Crusader promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(s) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Company or the managing underwriter, is required in
connection with the distribution of the Registrable Securities;
(t) advise Crusader, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for such purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued; and
(u) if Crusader so requests, request acceleration of
effectiveness of the registration statement from the SEC, provided that at the
time of such request, the Company does not, in good faith, believe it is
necessary to amend further the registration statement in order to comply with
the provisions of this Section 1.7. If the Company wishes to further amend the
registration statement prior to requesting acceleration, it shall have five (5)
business days to so amend prior to requesting acceleration.
(v) if NASDR Rule 2710 requires any broker-dealer to make a
filing prior to executing a sale by Crusader, make an issuer filing with the
NASDR, Inc. Corporate Financing Department pursuant to NASDR Rule
2710(b)(10)(A)(i) and respond within five (5) trading days to any comments
received from NASDR in connection therewith, and pay the filing fee required in
connection therewith.
1.8 Suspension of Dispositions. Crusader agrees that upon receipt of
any notice (a "Suspension Notice") from the Company of the happening of any
event of the kind described in Section l.7(e)(ii), Section l.7(e)(iii) and
Section 1.7(t), Crusader will forthwith discontinue disposition of Registrable
Securities until Crusader's receipt of the copies of the supplemented or amended
prospectus, or until it is advised in writing (the "Advice") by the Company that
the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
prospectus, and, if so directed by the Company, Crusader will deliver to the
Company all copies, other than permanent file copies then in Crusader's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of registration statements
set forth in Section 1.7(b) hereof shall be extended by the number of days
during the period from and including the date of the giving of the Suspension
Notice to and including the date when each seller of Registrable Securities
covered by such registration statement shall have received the copies of the
supplemented or amended prospectus or the Advice. The Company shall use its
commercially reasonable efforts and take such actions as are reasonably
necessary to render the Advice as promptly as practicable.
1.9 Cooperation upon a Registration. Crusader and the Company agree
that, in connection with any exercise of registration rights pursuant to this
Section 1, Crusader will
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authorize, and will authorize and direct the Board of Directors of the Company
to take, such actions as are necessary and appropriate to effectuate such
registration. In addition, Crusader agrees to cooperate with the Company and the
underwriters of any underwritten public offering in the preparation of all
documentation necessary or desirable to effectuate any registration of any
Registrable Securities under the Securities Act pursuant to this Section 1, or
registration or qualification of any Registrable Securities pursuant to Section
1.7(d) hereof. In addition, the Company agrees to cooperate fully with Crusader
in connection with any such registration or qualification.
1.10 Expenses.
(a) The Company shall pay all expenses incurred by the Company
in complying with the terms hereof, including, without limitation, all
registration and filing fees (including all expenses incident to filing with the
NASD), fees and expenses of complying with the securities or blue sky laws of
all such jurisdictions in which the Registrable Securities are proposed to be
offered and sold (including reasonable fees and disbursements of counsel in
connection with blue sky qualification of Registrable Securities), rating agency
fees, printing expenses, messenger and delivery expenses, the Company's internal
expenses (including without limitation all salaries and expenses of its officers
and employees performing legal or accounting duties), fees and expenses incurred
in connection with any listing of the Registrable Securities, fees and expenses
of counsel for the Company and its independent certified public accountants
(including the expenses of any special audit or cold comfort letters required by
or incident to such performance), Securities Act liability insurance (if the
Company elects to obtain such insurance) and fees and disbursements of
underwriters (to the extent the Company is liable therefor under the terms of
any underwriting agreement), whether or not any registration statement becomes
effective; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Securities covered by registrations
effected pursuant to Sections 1.2 or 1.4 hereof shall be borne by Crusader in
proportion to the number of Registrable Securities sold by Crusader, and except
as expressly provided in this Section 1.10, in no event shall the Company pay
any fees or expenses attributable to any counsel, accountants or other persons
retained or employed by Crusader. Further to the foregoing, the Company shall
pay all reasonable and customary expenses incurred by Crusader, including,
without limitation, all reasonable expenses and fees (at the usual and customary
levels charged to Crusader) of counsel for Crusader, plus, to the extent
reasonably necessary, one (1) firm of local counsel for Crusader in each state
or country where reasonably necessary.
(b) At any time before the registration statement covering
Registrable Securities becomes effective, Crusader may request that the Company
withdraw or not file the registration statement.
1.11 Indemnification.
(a) In the event of any registration of any Registrable
Securities under the Securities Act pursuant to this Section 1 or registration
or qualification of any Registrable Securities pursuant to this Agreement, the
Company shall indemnify and hold harmless Crusader, each underwriter of such
shares, if any, each broker or any other person acting on behalf of Crusader,
each director, officer, stockholder, employee, member, manager and partner
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of any of the foregoing and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act (each, an
"Indemnified Person") against any losses, claims, damages, liabilities or
expenses, joint or several, to which any of the foregoing persons may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of, are related to, result from or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such Registrable Securities were registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or any document incident to registration or
qualification of any Registrable Securities pursuant to this Agreement, or arise
out of, are related to, result from or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or any violation by
the Company of the state securities or blue sky laws applicable to the Company
and relating to action or inaction required of the Company in connection with
such registration or qualification under such state securities or blue sky laws
and the Company shall reimburse on demand each Indemnified Person for any legal
or any other costs and expenses reasonably incurred by any of them in connection
with investigating, preparing for, defending or settling any such loss, claim,
damage, liability or action by any governmental agency or body; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, preliminary or final
prospectus or amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Securities pursuant to this
Agreement, in reliance upon and in conformity with written information furnished
to the Company by Crusader or any underwriter, broker, other person or
controlling person specifically for use in the preparation thereof or arises out
of or is based upon the Indemnified Person's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such Indemnified Person with a sufficient number
of copies of the same; provided further, that the Company shall not be liable
for any settlement made without its prior written consent, such consent not to
be unreasonably withheld or delayed.
(b) Before Registrable Securities shall be included in any
registration pursuant to this Section 1, Crusader will furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with any registration statement and prospectus, and Crusader
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in paragraph
(a) above) the Company, each director of the Company, each officer of the
Company who signs such registration statement, and any person who controls the
Company within the meaning of the Securities Act, with respect to any untrue
statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such untrue statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by Crusader or such
underwriter for use in the preparation of such registration statement,
preliminary prospectus, final prospectus or amendment or supplement; provided,
however, that the maximum amount of liability in respect of such indemnification
shall be limited to an amount equal to the net
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proceeds actually received by Crusader from the sale of Registrable Securities
effected pursuant to such registration; provided further, that Crusader shall
not be liable for any settlement made without its prior written consent, such
consent not to be unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in Sections
1.11(a) or (b) hereof, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 1.11,
give prompt written notice to the latter of the commencement of such action
(provided that the failure to give such notice shall not limit the rights of
such indemnified party unless and to the extent such failure is prejudicial to
its ability to defend such action). In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and, after notice to such indemnified
party from the indemnifying party of its election to assume the defense thereof;
provided, however, that, if any indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to such
indemnified party which are different from, in conflict with or additional to
those available to the indemnifying party, or that such claim or litigation
involves or could reasonably be expected to have an effect upon matters beyond
the scope of the indemnity agreement provided in this Section 1.11, or if the
indemnifying party fails to take diligent action to defend such claim within
twenty (20) days following notice thereof from the indemnified party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, and such indemnifying party shall reimburse
such indemnified party and any person controlling such indemnified party for the
fees and expenses of counsel retained by the indemnified party which are
reasonably related to the matters covered by the indemnity agreement provided in
this Section 1.11. If the indemnifying party does assume its own defense, from
such time the indemnified party shall bear the expenses of its own separate
counsel. If such defense is not assumed by the indemnifying party as permitted
hereunder, the indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without its written consent, which
consent shall not be unreasonably withheld or delayed. If such defense is
assumed by the indemnifying party pursuant to the provisions hereof, such
indemnifying party shall not make any settlement of the applicable claim
indemnified against hereunder without the written consent of the indemnified
party or parties, which consent shall not be unreasonably withheld or delayed.
An indemnifying party that is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party and any
other such indemnified party with respect to such claim, unless in the
reasonable judgment of any indemnified party, a conflict of interest may exist
between such indemnified party with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and
disbursements of such additional counsel or counsels.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which an Indemnified
Person makes a claim for indemnification pursuant to this Section 1.11, but it
is judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced
notwithstanding the fact that this Section 1.11 provides for indemnification in
such case, then the
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Company and Crusader will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject as is appropriate to reflect, as
between the indemnifying party, on the one hand, and the indemnified party on
the other hand, the relative fault of the indemnifying party, on the one hand,
and the indemnified party, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, it
being understood that the parties acknowledge that the overriding equitable
consideration to be given effect in connection with this provision is the
ability of one party or the other to correct the statement or omission which
resulted in such losses, claims, damages or liabilities, and that it would not
be just and equitable if contribution pursuant hereto were to be determined by
pro rata allocation or by any other method of allocation which does not take
into consideration the foregoing equitable considerations. Notwithstanding the
foregoing, (i) Crusader will not be required to contribute any amount in excess
of the net proceeds to it of all Registrable Securities sold by it pursuant to
such registration statement, (ii) no underwriter shall be required to contribute
any amount in excess of the proceeds to it from the offering pursuant to such
registration statement, and (iii) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation. If indemnification is available under this
Section 1.11, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in Sections 1.11(a) and 1.11(b) without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 1.13(d).
(e) Notwithstanding any of the foregoing, if in connection
with an underwritten public offering of any Registrable Securities, the Company,
Crusader and the underwriters enter into an underwriting or purchase agreement
relating to such offering which contains provisions covering indemnification
among the parties, the indemnification provided thereunder shall be in addition
to (and not in lieu of) the indemnification provided to Crusader and the Company
hereunder.
(f) The indemnification and contribution required by this
Section 1.11 shall be made by periodic payment 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, provided that if a court of
competent jurisdiction finally determines that any Indemnified Person which has
received payments hereunder does not have an indemnification right under Section
1.11 for any reason, then such Indemnified Person shall within five (5) days of
such final determination, refund all amounts received hereunder to the Company.
(g) The indemnification and contribution provided for
hereunder will remain in full force and effect regardless of any investigation
made by or on behalf of any Indemnified Person and will survive the transfer of
securities.
1.12 Reports Under The Securities Exchange Act of 1934. With a
view to making available to Crusader the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit Crusader to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
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(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the Exchange Act, as is necessary to enable
Crusader to utilize Form S-3 for the sale of its Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act:
and
(d) furnish to Crusader, so long as Crusader owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing Crusader of any rule or regulation of the SEC which permits the selling
of any such securities without registration or pursuant to such form.
1.13 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of Crusader, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder (a) to include such securities in any registration filed
under Section 1.2 hereof, to make a demand registration which could result in
such registration statement being declared effective within one hundred twenty
(120) days of the effective date of any registration effected pursuant to
Section 1.2 or (c) grant any other registration rights to any person,
corporation, partnership, limited partnership, limited liability company, other
business organization, trust, association or entity superior to or in conflict
with the rights granted pursuant to this Agreement other than rights granted to
any holder or prospective holder in connection with a commercial transaction
entered into by the Company or one of its subsidiaries which is approved by the
Company's Board of Directors.
2. Miscellaneous.
2.1 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
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2.2 Amendments and Waivers. Any term of this Agreement may be
amended or waived in writing and only with the written consent of the Company
and Crusader.
2.3 Notices. Unless otherwise provided, any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail as certified or registered mail, with postage prepaid, and addressed to the
party to be notified at such party's address or fax number as set forth on the
signature pages hereto, or as subsequently modified by written notice.
2.4 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded, and (c)
the balance of the Agreement shall be enforceable in accordance with its terms.
2.5 Specific Performance. Each party to this Agreement
acknowledges that the other parties will suffer irreparable injury in the event
of any breach of any provision of this Agreement and that therefore the remedy
at law for any breach or threatened breach of any such provision of this
Agreement will be inadequate. Accordingly, upon a breach or threatened breach of
any such provision of this Agreement by any party hereto, the other parties
shall, in addition and without prejudice to any of the rights and remedies they
may have, be entitled as a matter of right, without proof of actual damages, to
seek specific performance of such provisions of this Agreement and to such other
injunctive or equitable relief to enforce, or prevent any violations (whether
anticipatory, continuing or future) of, such provisions of this Agreement.
2.6 Governing Law. This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of New York, without giving effect to principles of
conflict of laws.
2.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.8 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.9 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute.
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Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of Section 2.3
hereof.
2.10 Complete Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous arrangements or understandings, whether
written or oral, between or among any of the parties hereto, with respect to the
subject matter hereof.
2.11 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, cost and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.12 Further Assurances. Each of the parties to this Agreement
agrees to execute such other documents and take such other action as may be
reasonably necessary to implement and carry out the intent of this agreement.
2.13 Failure to Execute. Failure of any party to execute this
Agreement renders this Agreement void as to the non-executing party, but such
Agreement shall be valid and binding as to all other parties that execute such
Agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Common
Stock Purchase Agreement, as of the date first set forth above.
Notice Address: The Company:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇ CONSUMER DIRECT ▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇ ------------------------------
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
Notice Address: The Purchaser:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ CRUSADER CAPITAL PARTNERS II, LLC
New York, New York
Attention: Chairman By its Manager: Crusader Capital, LLC
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Manager
With copies to:
▇▇▇▇▇▇▇, Del Deo, Dolan, Griffinger & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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