REGISTRATION RIGHTS AGREEMENT
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THIS REGISTRATION RIGHTS AGREEMENT, dated as of , 2003 by and
between CI Sell Cars, Inc., a Texas corporation (the "Company"), and the person
whose name appears on the signature page attached hereto (individually a
"Holder" and collectively, with the holders of other Shares issued in the
Offering, the "Holders").
WHEREAS, pursuant to a Confidential Private Placement
Memorandum dated April 1, 2003 (the "Confidential Memorandum"), the Company has
offered (the "Offering") a minimum of 100,000 Shares and a maximum of 250,000
Shares (collectively, the "Shares"), at $.10 per Shares.
WHEREAS, pursuant to the terms of and in order to induce the
Holders to enter into a certain subscription agreement dated the date hereof
between the Company and the Holders (the "Subscription Agreement") to purchase
the Shares, the Company and the Holders have agreed to enter into this
Agreement;
WHEREAS, it is intended by the Company and the Holders that
this Agreement shall become effective immediately upon the acquisition by the
Holders of the Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and in the Confidential Memorandum, the
Company hereby agrees as follows:
A. REGISTRATION RIGHTS.
1. Registration Rights
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(a) "Piggyback Registration". If the Company at any time
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proposes to register any of its securities under the Securities Act of 1933, as
amended (the "1933 Act") (other than in connection with a merger, in connection
with the proposed warrant registration to be undertaken by the Company or
pursuant to Form S-8 or other comparable form), the Company shall request that
the managing underwriter (if any) of such underwritten offering include any
Common Shares (the "Registerable Securities") in such registration. If such
managing underwriter agrees to include any of the Registerable Securities in the
underwritten offering, the Company shall at such time give prompt written notice
to all Holders of its intention to effect such registration and of such Holders'
rights under such proposed registration, and upon the request of any Holder
delivered to the Company within twenty (20) days after giving of such notice
(which request shall specify the Registerable Securities intended to be disposed
of by such Holder and the intended method of disposition thereof), the Company
shall include such Registerable Securities held by each such Holder requested to
be included in such registration; provided, however, that:
(i) If, at any time after giving such written notice
of the Company's intention to register any of the Holder's Registerable
Securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay the registration of such Registerable Securities, at
its sole election, the Company may give written notice of such determination to
each Holder and thereupon shall be relieved of its obligation to register any
Registerable Securities issued or issuable in connection with such registration
(but not from its obligation to pay registration expenses in connection
therewith or to register the Registerable Securities in a subsequent
registration); and in the case of a determination to delay a registration shall
thereupon be permitted to delay registering any Registerable Securities for the
same period as the delay in respect of securities being registered for the
Company's own account.
(ii) If the managing underwriter in such underwritten
offering shall advise the Company that it declines to include a portion or all
of the Registerable Securities requested by the Holders to be included in the
registration statement, then (A) registration of all of the Registerable
Securities shall be excluded from such registration statement on the condition
that all securities to be registered by other selling security holders, if any,
are also excluded and (B) registration of a portion of such Registerable
Securities shall be excluded if, such portion is allocated among the Holders and
any other selling security holders in proportion to the respective numbers of
securities to be registered by each such Holder and other selling security
holder. In such event the Company shall give the Holder prompt notice of the
number of Registerable Securities excluded.
(b) Demand Registration. In the event that the Holders have
not had all of their Registerable Securities registered in a registration
statement pursuant to Section 1(a) within one (1) year from the date hereof, the
Holders of the Registerable Securities Shares representing at least a Majority
(as hereinafter defined) of such securities shall have the right, exercisable by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), on one (1) occasion, a
registration or offering statement on Form SB-1 or such other form, and such
other documents, including a prospectus, as may be necessary in the opinion of
both counsel for the Company, in order to comply with the provisions of the Act,
so as to permit a public offering and sale, for a period of nine (9) months, by
such Holders and any other Holders of Registerable Securities who notify the
Company within fifteen (15) business days after receipt of the notice described
in this section. The demand rights of this Section 1(c) shall not be available
to any Holder that has been offered an opportunity to include Registerable
Securities in a registration statement under Section 1(a) who has either
declined an opportunity to include such Shares in a registration or requested
that such Shares which were included in such filing be withdrawn.
The Company covenants and agrees to give written notice of any
registration request under this Section 1(b) to any Holder(s) to all other
registered Holders of the Registerable Securities within ten (10) days from the
date of the receipt of any such registration request.
(c) Cooperation with Company. Holders will cooperate with the
Company in all respects in connection with this Agreement, including, timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registerable Securities. In addition, Holders will comply with
all applicable provisions of State and Federal Securities Law, including rule
10b-6 and will not, during the course of a distribution purchase any of the
securities being distributed.
(d) Majority. For purposes of this Agreement, the term
"Majority" in reference to the Holders of the Registerable Securities, shall
mean in excess of fifty percent (50%) of the then outstanding Registerable
Securities that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith,
or (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the 1933 Act.
2. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to use its best efforts to
file a registration statement within 60 days of any demand therefor and to
effect the registration of any of the Registerable Securities under the 1933
Act, the Company shall (except as otherwise provided in this Agreement), as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement and shall use its best
efforts to cause such registration statement to become effective and remain
effective until all the Registerable Securities are sold or become capable of
being publicly sold without registration under the 1933 Act.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the 1933 Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder or Holders of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities or the exercise of Warrants from time to time in connection with a
registration statement pursuant to Rule 415 of the Commission);
(c) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the 1933 Act, and such other documents, as such Holder may reasonably request
in order to facilitate the public sale or other disposition of the securities
owned by such Holder;
(d) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each Holder shall request, and do any and
all other acts and things which may be necessary or advisable to enable such
Holder to consummate the public sale or other disposition in such jurisdictions
of the securities owned by such Holder, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein any
general consent to service of process;
(e) use its best efforts to list such securities on any
securities exchange on which any securities of the Company is then listed, if
the listing of such securities is then permitted under the rules of such
exchange;
(f) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
(g) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; and
(h) furnish, at the request of any Holder on the date such
Registerable Securities are delivered to the underwriters for sale pursuant to
such registration or, if such Registerable Securities are not being sold through
underwriters, on the date the registration statement with respect to such
Registerable Securities becomes effective, (i) an opinion, dated such date, of
the counsel representing the Company for the purpose of such registration,
addressed to the underwriters, if any, and to the Holder making such request,
covering such legal matters with respect to the registration in respect of which
such opinion is being given as the Holder of such Registerable Securities may
reasonably request and are customarily included in such an opinion and (ii)
letters, dated, respectively, (1) the effective date of the registration
statement and (2) the date such Registerable Securities are delivered to the
underwriters, if any, for sale pursuant to such registration, from a firm of
independent certified public accountants of recognized standing selected by the
Company, addressed to the underwriters, if any, and to the Holder making such
request, covering such financial, statistical and accounting matters with
respect to the registration in respect of which such letters are being given as
the Holder of such Registerable Securities may reasonably request and are
customarily included in such letters; and
(j) take such other actions as shall be reasonably requested
by any Holder to facilitate the registration and sale of the Registerable
Securities; provided, however, that the Company shall not be obligated to take
any actions not specifically required elsewhere herein which in the aggregate
would cost in excess of $5,000.
(k) furnish each Holder participating in an offering
requesting the correspondence, copies of all correspondence between the
Commission and the Company, its counsel or auditors with respect to the
registration statement and permit each Holder to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
3. Restrictions on Transfer of Registerable Securities. The
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Holder agrees that he will not sell or transfer any of the Conversion Shares for
a period of twelve (12) months from the effective date of the registration
statement on Form SB-2 filed with the Commission (the "Registration Statement")
by which such securities are registered without the prior written consent of
Royal Hutton Securities Corp.
4. Expenses. All expenses incurred in any registration of the
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Holders' Registerable Securities under this Agreement shall be paid by the
Company, including, without limitation, printing expenses, fees and
disbursements of counsel for the Company and each participating Holder, expenses
of any audits to which the Company shall agree or which shall be necessary to
comply with governmental requirements in connection with any such registration,
all registration and filing fees for the Holders' Registerable Securities under
federal and State securities laws, and expenses of complying with the securities
or blue sky laws of any jurisdictions pursuant to Section 2(h)(i); provided,
however, the Company shall not be liable for (a) any discounts or commissions to
any underwriter; (b) any stock transfer taxes incurred with respect to
Registerable Securities sold in the offering or (c) the fees and expenses of
counsel for any Holder, provided that the Company will pay the costs and
expenses of Company counsel when the Company's counsel is representing any or
all selling security holders.
If the Company shall fail to use its best efforts to
file a registration statement and to effect the registration of any of the
Registerable Securities under the 1933 Act (except as otherwise provided in this
Agreement) pursuant to Section 1, in addition to any other equitable or other
relief available to the Holders, the Company shall be liable for any or all
incidental, special and consequential damages and damages due to loss of profit
sustained by the Holder(s) requesting registration of their Registerable
Securities.
5. Indemnification. In the event any Registerable Securities
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are included in a registration statement pursuant to this Agreement:
(a) Company Indemnity. Without limitation of any other
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indemnity provided to any Holder, either in connection with the Offering or
otherwise, to the extent permitted by law, the Company shall indemnify and hold
harmless each Holder, the affiliates, officers, directors and partners of each
Holder, any underwriter (as defined in the 1933 Act) for such Holder, and each
person, if any, who controls such Holder or underwriter (within the meaning of
the 1933 Act or the Securities Exchange Act of 1934 (the "Exchange Act"),
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the 1933 Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
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or alleged untrue statement of a material fact contained in such registration
statements including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (iii) any violation or alleged violation
by the Company of the 1933 Act, the Exchange Act, or (iv) any state securities
law or any rule or regulation promulgated under the 1933 Act, the Exchange Act
or any state securities law, and the Company shall reimburse each such Holder,
affiliate, officer or director or partner, underwriter or controlling person for
any legal or other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable to any Holder in any such case for any such
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder or any other officer, director or controlling
person thereof.
(b) Holder Indemnity. Each Holder shall indemnify and hold
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harmless the Company, its affiliates, its counsel, officers, directors,
shareholders and representatives, any underwriter (as defined in the 1933 Act)
and each person, if any, who controls the Company or the underwriter (within the
meaning of the 1933 Act or the Exchange Act), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the Exchange Act or any state securities law, and the
Company shall reimburse each such Holder, affiliate, officer or director or
partner, underwriter or controlling person for any legal or other expenses
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; insofar as such losses, claims, damages or
liabilities (or actions and respect thereof) arise out of or are based upon any
statements or information provided by such Holder to the Company in connection
with the offer or sale of Registerable Securities.
(c) Notice; Right to Defend. Promptly after receipt by an
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indemnified party under this Section 5 of notice of the commencement of any
action (including any governmental action), such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 5, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in and if the indemnifying party agrees in writing that it will be
responsible for any costs, expenses, judgments, damages and losses incurred by
the indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if the indemnified party reasonably
believes that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Agreement only if and to the extent that such
failure is prejudicial to its ability to defend such action, and the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Agreement.
(d) Contribution. If the indemnification provided for in this
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Agreement is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder shall be obligated to
contribute pursuant to the Agreement shall be limited to an amount equal to the
proceeds to such Holder of the Registerable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which the Holder has otherwise been required
to pay in respect of such loss, claim, damage, liability or action or any
substantially similar loss, claim, damage, liability or action arising from the
sale of such Registerable Securities).
(e) Survival of Indemnity. The indemnification provided by
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this Agreement shall be a continuing right to indemnification and shall survive
the registration and sale of any Registerable Securities by any person entitled
to indemnification hereunder and the expiration or termination of this
Agreement.
6. Assignment of Registration Rights. The rights of the
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Holders under this Agreement, including the rights to cause the Company to
register Registerable Securities may not be assigned without the written prior
consent of the Company.
7. Limitations on Other Registration Rights. Except as
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otherwise set forth in this Agreement, the Company shall not, without the prior
written consent of the Holders of Registerable Securities representing a
majority thereof held by all the Holders, file any registration statement filed
on behalf of any person (including the Company) other than a Holder to become
effective during any period when the Company is not in compliance with this
Agreement.
8. Remedies.
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(a) Time is of Essence. The Company agrees that time is of the
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essence of each of the covenants contained herein and that, in the event of a
dispute hereunder, this Agreement is to be interpreted and construed in a manner
that will enable the Holders to sell their Registerable Securities as quickly as
possible after such Holders have indicated to the Company that they desire their
Registerable Securities to be registered. Any delay on the part of the Company
not expressly permitted under this Agreement, whether material or not, shall be
deemed a material breach of this Agreement.
(b) Remedies Upon Default or Delay. The Company acknowledges
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the breach of any part of this Agreement may cause irreparable harm to a Holder
and that monetary damages alone may be inadequate. The Company therefore agrees
that the Holder shall be entitled to injunctive relief or such other applicable
remedy as a court of competent jurisdiction may provide. Nothing contained
herein will be construed to limit a Holder's right to any remedies at law,
including recovery of damages for breach of any part of this Agreement.
9. Notices.
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(a) All communications under this Agreement shall be in
writing and shall be mailed by first class mail, postage prepaid, or telegraphed
or telexed with confirmation of receipt or delivered by hand or by overnight
delivery service,
i. If to the Company, at:
CI Sell Cars, Inc.
25402 Chapel Ridge
Spring, Texas
(832)465-6763
or at such other address as it may have furnished in writing
to the Holders of Registerable Securities at the time outstanding, or
ii. if to any Holder of any Registerable Securities,
to the address of such Holder as it appears in the stock or warrant ledger of
the Company.
(b) Any notice so addressed, when mailed by registered or
certified mail shall be deemed to be given three days after so mailed, when
telegraphed or telexed shall be deemed to be given when transmitted, or when
delivered by hand or overnight shall be deemed to be given when delivered.
10. Successors and Assigns. Except as otherwise expressly
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provided herein, this Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of the Company and each of the
Holders.
11. Amendment and Waiver. This Agreement may be amended, and
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the observance of any term of this Agreement may be waived, but only with the
written consent of the Company and the Holders of securities representing a
Majority of the Registerable Securities; provided, however, that no such
amendment or waiver shall take away any registration right of any Holder of
Registerable Securities or reduce the amount of reimbursable costs to any Holder
of Registerable Securities in connection with any registration hereunder without
the consent of such Holder; further provided, however, that without the consent
of any other Holder of Registerable Securities, any Holder may from time to time
enter into one or more agreements amending, modifying or waiving the provisions
of this Agreement if such action does not adversely affect the rights or
interest of any other Holder of Registerable Securities. No delay on the part of
any party in the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise by any party of any
right, power or remedy preclude any other or further exercise thereof, or the
exercise of any other right, power or remedy.
12. Counterparts. One or more counterparts of this Agreement
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may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and same instrument.
13. Governing Law. This Agreement shall be construed in
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accordance with and governed by the internal laws of the State of Texas, without
giving effect to conflicts of law principles.
14. Invalidity of Provisions. If any provision of this
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Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
15. Headings. The headings in this Agreement are for
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convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the ___ day of _____, 2003.
CI SELL CARS, INC. /s/
Signature of Holder
By:
Print Name of Holder
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Address of Holder
ECOLOGIC\RAGREGISTRTSAGR
ECOLOGIC\RAGREGISTRTSAGR