REGISTRATION RIGHTS AGREEMENT by and between CONSUMER DIRECT OF AMERICA and CRUSADER CAPITAL PARTNERS II, LLC July 29, 2005
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
by and between
CONSUMER DIRECT OF AMERICA
and
CRUSADER CAPITAL PARTNERS II, LLC
July 29, 2005
by and between
CONSUMER DIRECT OF AMERICA
and
CRUSADER CAPITAL PARTNERS II, LLC
July 29, 2005
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:
Registration Rights.
The Company and Crusader covenant and agree as follows:
Definitions. For purposes of this Section 1:
(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
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.
Request for Registration by Crusader or “Demand Registration”
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 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.
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.
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.
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 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 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;
(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;
(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
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.
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 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 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 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:
(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.
Miscellaneous.
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.
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.
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.
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.
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.
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.
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.
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.
Submission to Jurisdiction; Consent to Service of Process.
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. 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.
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.
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.
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.
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.
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.
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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 OF AMERICA | ||||||||
| By: | ||||||||
Tel:
|
Name: | |||||||
Fax:
|
Title: | |||||||
| Notice Address: | The Purchaser: | |||||||
| New York, New York | CRUSADER CAPITAL PARTNERS II, LLC | |||||||
| Attention: Chairman | ||||||||
| Tel: (▇▇▇) ▇▇▇-▇▇▇▇ | By its Manager: Crusader Capital, LLC | |||||||
| Fax: (▇▇▇) ▇▇▇-▇▇▇▇ | ||||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
With copies to:
▇▇▇▇▇▇▇, Del Deo, Dolan, Griffinger & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, Del Deo, Dolan, Griffinger & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇