REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September
29, 2005, by and among Gift Liquidators, Inc., an Oklahoma corporation (the
"Company"), and David Mladen, an individual, with an address at c/o White Knight
Management, Inc., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ Office #A15, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(the "Buyer").
WHEREAS:
A. In connection with the Preferred Stock Purchase Agreement, by and
between the parties hereto, of even date herewith (the "Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Buyer 11,000 shares of the Company's Series A
Convertible Preferred Stock, $0.01 par value (the "Series A Preferred Stock"),
convertible into shares of common stock, $0.01 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the limitations and
conditions set forth in the Purchase Agreement, and the Certificate of
Designation of Series A Convertible Preferred Stock of the Company dated
September 29, 2005 (the "Certificate of Designation");
B. To induce the Buyer to execute and deliver the Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 Act"), and applicable
state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants 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.
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a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Buyer" refers to the Buyer, including any
transferees or assignees of the Buyer who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means one hundred and
fifteen percent (115%) of the shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Stock (such shares of Common Stock being
referred to herein as the "Conversion Shares") including, without limitation
such additional shares of Common Stock, if any, as are issuable as a result of
events described in Section 6(b) of the Certificate of Designation and Section
2(b) of this Agreement, and any shares of Common Stock issued or issuable as a
dividend on or in exchange for or otherwise with respect to any of the
foregoing.
(iv) "Registration Statement" means a registration
statement of the Company under the 1933 Act.
(v) "Resale Registration Statement" means a
Registration Statement covering the resale of all, or any portion of, the
Registrable Securities.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Purchase Agreement.
2. REGISTRATION.
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a. Mandatory Registration. The Company shall prepare, and, on
or prior to the sixtieth (60th) day following the date hereof (the "Filing
Date"), file with the SEC a Resale Registration Statement on Form SB-2 (or, if
Form SB-2 is not then available, on such form of Registration Statement as is
then available to effect a registration of the Registrable Securities, subject
to the consent of the Buyer, which consent will not be unreasonably withheld),
which such Resale Registration Statement, to the extent allowable under the 1933
Act and the rules and regulations promulgated thereunder (including Rule 416),
shall state that such Resale Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Series A Preferred Stock (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions, or (ii) by
reason of changes in the Conversion Price of the Purchase Agreement in
accordance with the terms thereof.
b. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Resale Registration Statement as soon as
practicable. If (i) the Company fails to use its best efforts to file the Resale
Registration Statement by the Filing Date, (ii) the Company fails to use its
best efforts to respond promptly to any comments from the SEC, or (iii) the
Company fails to use its best efforts to have the SEC declare the Resale
Registration Statement effective within ninety (90) days after filing the Resale
Registration Statement with the SEC (or one hundred and twenty (120) days if the
Company receives any comments on the Registration Statement from the SEC), then
the Company will make payments to the Buyer in such amounts and at such times as
shall be determined pursuant to this Section 2(b) as partial relief for the
damages to the Buyer by reason of any such delay in their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to the Buyer, pro
rata, an aggregate amount equal to two percent (2%) per month of $9,000,000,
assuming sale of $9,000,000 of the aggregate fair market value of the Conversion
Shares ("Outstanding Principal Amount") multiplied by the number of months
(prorated for partial months) after the Filing Date for which the Company has
failed to use its best efforts to file the Resale Registration Statement or the
end of the aforementioned ninety (90) day (or one hundred and twenty (120) days,
as applicable) period and prior to the date the Resale Registration Statement is
declared effective by the SEC, provided, however, that there shall be excluded
from such period any delays which are solely attributable to changes required by
the Buyer in the Resale Registration Statement with respect to information
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relating to the Buyer, including, without limitation, changes to the plan of
distribution, or to the failure of the Buyer to conduct their review of the
Registration Statement pursuant to Section 3(g) below in a reasonably prompt
manner. Any payments due pursuant to this Section 2(b) may be paid by the
Company in cash or shares of the Company's Common Stock at the option of the
Buyer. If the Buyer elect to receive payment in shares of Common Stock, such
shares shall be issued at the Conversion Price.
3. OBLIGATIONS OF THE COMPANY.
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In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC
not later than the Filing Date, a Resale Registration Statement with respect to
the number of Registrable Securities provided in Section 2(a), and thereafter
use its best efforts to cause such Resale Registration Statement relating to
Registrable Securities to become effective within ninety (90) days (or one
hundred and twenty (120) days, as applicable) after filing the Resale
Registration Statement with the SEC, and keep the Resale Registration Statement
effective pursuant to Rule 415 until September 30, 2007 (the "Registration
Period"), which Resale Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
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.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the Resale
Registration Statement and the prospectus used in connection with the Resale
Registration Statement as may be necessary to keep the Resale Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the Resale
Registration Statement until such time as all of such Registrable Securities are
eleigible to be sold by the Buyer under Rule 144(k) of the 1933 Act. In the
event the number of shares available under the Resale Registration Statement
filed pursuant to this Agreement is insufficient to cover all of the Registrable
Securities, the Company shall amend the Resale Registration Statement, or file a
new Registration Statement (on the short form available therefore, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within thirty (30) business days
after the necessity therefor arises (based on the market price of the Common
Stock and other relevant factors on which the Company reasonably elects to
rely). The Company shall use its best efforts to cause any amendment to the
Resale Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within ninety (90) days after the
date on which the Company reasonably first determines (or reasonably should have
determined) the need therefor. The Company shall use its best efforts to cause
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any new Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within one hundred and twenty
(120) days after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor. The provisions of Section
2(b) above shall be applicable with respect to such obligation.
c. The Company shall furnish to a single firm or counsel
designated by the Buyer (i) promptly (but in no event more than two (2) business
days) after the same is prepared and publicly distributed, filed with the SEC,
or received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Resale Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Resale Registration
Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment), and (ii) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as the Buyer may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by the Buyer. The Company will immediately notify the Buyer by facsimile
of the effectiveness of each Registration Statement or any post-effective
amendment. The Company will promptly respond (but in no event more than fifteen
(15) business days) to any and all comments received from the SEC (which
comments shall promptly be made available to the Buyer upon request), with a
view towards causing each Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable, shall promptly file an
acceleration request as soon as practicable (but in no event more than five (5)
business days) following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that any such Registration
Statement or any amendment thereto will not be subject to review and shall
promptly file with the SEC a final prospectus as soon as practicable (but in no
event more than five (5) business days) following receipt by the Company from
the SEC of an order declaring the Registration Statement effective. In the event
of a breach by the Company of the provisions of this Section 3(c), the Company
will be required to make payments pursuant to Section 2(b) hereof.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by any Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Buyer reasonably requests, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
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cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
e. As promptly as practicable after becoming aware of such
event, the Company shall notify the Buyer of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
any Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to the Buyer as he may reasonably
request; provided that, for not more than thirty (30) consecutive trading days
(or a total of not more than forty-five (45) trading days in any twelve (12)
month period), the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration
Statement updating) the disclosure of which at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an "Allowed
Delay"); provided, further, that the Company shall promptly (i) notify the Buyer
in writing of the existence of (but in no event, without the prior written
consent of the Buyer, shall the Company disclose to the Buyer any of the facts
or circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Buyer in writing to cease all sales under such
Registration Statement until the end of the Allowed Delay. Upon expiration of
the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3(e) with respect to the information giving rise thereto.
f. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of any
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify the Buyer
who holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof.
g. The Company shall permit a single firm or counsel
designated by the Buyer to review such Resale Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects and will not request acceleration of such Resale Registration Statement
without prior notice to such counsel. The sections of such Resale Registration
Statement covering information with respect to the Buyer, the Buyer's beneficial
ownership of securities of the Company or the Buyer's intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by the Buyer.
h. At the request of the Buyer, the Company shall make
available for inspection by (i) the Buyer, and (ii) the Buyer's legal counsel,
(collectively, the "Inspectors") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the
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Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; provided,
however, that each Inspector shall hold in confidence and shall not make any
disclosure (except to the Buyer) of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement.
i. The Company shall hold in confidence and not make any
disclosure of information concerning the Buyer provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning the Buyer
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Buyer prior to making such
disclosure, and allow the Buyer, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such information.
j. The Company shall (i) cause all the Registrable Securities
covered by any Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) to the extent the securities
of the same class or series are not then listed on a national securities
exchange, secure the designation and quotation, of all the Registrable
Securities covered by any Registration Statement on the OTC BB and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
k. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of any Registration Statement.
l. The Company shall cooperate with the Buyer to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be offered pursuant to any Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, or the
Buyer may reasonably request and registered in such names as the Buyer may
request, and, within three (3) business days after any Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
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the Buyer whose Registrable Securities are included in such Registration
Statement) an instruction and an opinion of such counsel.
m. At the request of the Buyer, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and any prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Buyer of Registrable
Securities pursuant to a Registration Statement.
4. OBLIGATIONS OF THE BUYER.
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In connection with the registration of the Registrable Securities, the
Buyer shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of the Buyer that the Buyer shall furnish to the
Company, in writing, such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least seven (7)
business days prior to the first anticipated filing date of a Registration
Statement, the Company shall notify the Buyer of the information the Company
requires from the Buyer.
b. The Buyer, by his acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder, unless the Buyer has notified the Company in writing of his election
to exclude all of such his Registrable Securities from the Registration
Statements.
c. In the event the Buyer determines to engage the services of
an underwriter, the Buyer agrees to enter into and perform such Buyer's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Buyer has notified the
Company in writing of such Buyer's election to exclude all of such Buyer's
Registrable Securities from such Registration Statement.
d. The Buyer agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), the Buyer will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
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Securities until the Buyer's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, the Buyer shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Buyer's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION.
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All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company shall be borne by the Company.
6. INDEMNIFICATION.
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In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) the Buyer who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls the Buyer within the meaning of the 1933 Act or the Securities Exchange
Act of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter (as
defined in the ▇▇▇▇ ▇▇▇) for the Buyer, and (iv) the directors, officers,
partners, employees and each person who controls any such underwriter within the
meaning of the 1933 Act or the 1934 Act, if any (each, an "Indemnified Person"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
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agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Buyer pursuant to Section 9.
b. In connection with any Registration Statement in which the
Buyer is participating, the Buyer agrees to indemnify, hold harmless and defend,
to the same extent and in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation by the Buyer, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by the Buyer expressly for use in connection with such Registration
Statement; and subject to Section 6(c) the Buyer will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Buyer, which
consent shall not be unreasonably withheld; provided, further, however, that the
Buyer shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds to the Buyer
as a result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Buyer pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
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c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected the Buyer of the
Registrable Securities included in the Registration Statement to which the Claim
relates, if the Buyer are entitled to indemnification hereunder, or the Company,
if the Company is entitled to indemnification hereunder, as applicable. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is actually
prejudiced in its ability to defend such action. The indemnification required by
this Section 6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION.
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To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
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With a view to making available to the Buyer the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Buyer to sell securities of the Company to
the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to the Buyer so long as the Buyer owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (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 to permit the Buyer to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
----------------------------------
The rights under this Agreement shall be automatically assignable by
the Buyer to any transferee of all or any portion of Registrable Securities if:
(i) the Buyer 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 assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Preferred Stock Purchase
Agreement and the Certificate of Designation, and (vi) such transferee shall be
an "accredited investor" as that term defined in Rule 501 of Regulation D
promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
---------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
the Buyer (to the extent such Buyer still owns Registrable Securities). Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon the Buyer and the Company.
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11. MISCELLANEOUS.
--------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Notices. Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient if contained in a written
instrument delivered in person or duly sent by first class certified mail,
postage prepaid, by reputable overnight courier or such other address as may
hereafter be designated in writing by the addressee to the other parties:
if to the Company, to:
Gift Liquidators, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
if to the Buyer, to:
White Knight Management, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
1st Floor Office #A15
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: David Mladen
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or, in any case, at such other address or addresses as shall
have been furnished in writing by such party to the other parties hereto. All
such notices, requests, consents and other communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of mailing, on the fifth business day following the
date of such mailing and (iii) in the case of overnight courier, on the second
next business day.
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c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
e. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
f. This Agreement, the Purchase Agreement (including all
schedules and exhibits thereto), and all other documents relating to this
transaction (collectively, the "Transaction Documents") constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. The Transaction
Documents supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
g. Subject to the requirements of Section 9 hereof, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
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h. The headings in this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
i. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
j. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. Except as otherwise provided herein, all consents and other
determinations to be made by the Buyer pursuant to this Agreement shall be made
by the holders of a majority of the Registerable Securities.
l. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for breach of its obligations under
this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of any of the provisions under this Agreement,
that the Buyer shall be entitled, in addition to all other available remedies in
law or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Agreement and to enforce specifically the terms and provisions hereof, without
the necessity of showing economic loss and without any bond or other security
being required.
m. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party
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IN WITNESS WHEREOF, the Company and the undersigned Buyer have caused
this Agreement to be duly executed as of the date first above written.
GIFT LIQUIDATORS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
BUYER:
By: /s/ David Mladen
----------------
David Mladen
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