Document:

exv10w22

 

Exhibit 10.22

REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this “Agreement”) is made and entered into as of April 21,
2005, by and among Uroplasty, Inc., a Minnesota corporation (the “Company”), and the investors
signatory hereto (each a “Investor” and collectively, the “Investors”).

          This Agreement is made pursuant to the Securities Purchase Agreement, dated as of April 20,
2005, by and among the Company and the Investors (the “Purchase Agreement”).

          The Company and the Investors hereby agree as follows:

     1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement will have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms have the respective meanings set forth
in this Section 1:

          “Additional Shares” means any shares of Common Stock issuable to Investors in accordance with
Section 4.6 of the Purchase Agreement.

          “Effective Date” means the date that the initial Registration Statement filed pursuant to
Section 2(a) is first declared effective by the Commission.

          “Effectiveness Date” means (a) with respect to the initial Registration Statement required to
be filed under Section 2(a), the earlier of: (i) the 90th day following the Closing
Date; provided, that, if the Commission reviews and has written comments to the filed
Registration Statement that would require the filing of a pre-effective amendment thereto with the
Commission, then the Effectiveness Date under this clause (a)(i) shall be the 120th day
following the Closing Date, and (ii) the fifth Trading Day following the date on which the Company
is notified by the Commission that the initial Registration Statement will not be reviewed or is no
longer subject to further review and comments; (b) with respect to any additional Registration
Statements that may be required pursuant to Section 2(b), the earlier of (i) the 90th
day following (x) if such Registration Statement is required because the Commission shall have
notified the Company in writing that certain Registrable Securities were not eligible for inclusion
on a previously filed Registration Statement, the date or time on which the Commission shall
indicate as being the first date or time that such Registrable Securities may then be included in a
Registration Statement, or (y) if such Registration Statement is required for a reason other than
as described in (x) above, the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement(s) is required; provided, that, if the
Commission reviews and has written comments to a Registration Statement filed under Section 2(b)
that would require the filing of a pre-effective amendment thereto with the Commission, then the
Effectiveness Date under this clause (b)(i) for such Registration Statement shall be the
120th day following the date that the Company first knows, or reasonably should have
known, that such additional Registration Statement is required under such Section, and (ii) the
fifth 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; and (c) with respect to a Registration Statement required to be filed under Section
2(c), the earlier of: (c)(i) the 90th day following the date on which the Company
becomes

 

 

eligible to utilize Form S-3 to register the resale of Common Stock; provided, that,
if the Commission reviews and has written comments to such filed Registration Statement that would
require the filing of a pre-effective amendment thereto with the Commission, then the Effectiveness
Date under this clause (c)(i) shall be the 120th day following the date on which the
Company becomes eligible to utilize Form S-3 to register the resale of Common Stock, and (ii) the
fifth Trading Day following the date on which the Company is notified by the Commission that the
initial Registration Statement will not be reviewed or is no longer subject to further review and
comments.

          “Effectiveness Period” has the meaning set forth in Section 2(a).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Filing Date” means (a) with respect to the initial Registration Statement required to be
filed under Section 2(a), the 30th day following the Closing Date; (b) with respect to
any additional Registration Statements that may be required pursuant to Section 2(b), the
30th day following (x) if such Registration Statement is required because the Commission
shall have notified the Company in writing that certain Registrable Securities were not eligible
for inclusion on a previously filed Registration Statement, the date or time on which the
Commission shall indicate as being the first date or time that such Registrable Securities may then
be included in a Registration Statement, or (y) if such Registration Statement is required for a
reason other than as described in (x) above, the date on which the Company first knows, or
reasonably should have known, that such additional Registration Statement(s) is required; and (c)
with respect to a Registration Statement required to be filed under Section 2(c), the
30th day following the date on which the Company becomes eligible to utilize Form S-3 to
register the resale of Common Stock.

          “Holder” or “Holders” means the holder or holders, as the case may be, from time to time of
Registrable Securities.

          “Indemnified Party” has the meaning set forth in Section 5(c).

          “Indemnifying Party” has the meaning set forth in Section 5(c).

          “Losses” has the meaning set forth in Section 5(a).

          “New York Courts” means the state and Federal courts sitting in the City of New York, Borough
of Manhattan.

          “Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

          “Prospectus” means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A 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

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covered by a 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.

          “Registrable Securities” means: (i) the Shares, (ii) the Warrant Shares, (iii) any Additional
Shares issued and/or issuable pursuant to Section 4.6 of the Purchase Agreement, and (iv) any
securities issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event, or any conversion price adjustment with respect to any of the
securities referenced in (i), (ii), or (iii) above.

          “Registration Statement” means each of the following: (i) the initial registration statement
required to be filed in accordance with Section 2(a) and (ii) each additional registration
statement that may be required to be filed under Section 2(b), and including, in each case, the
Prospectus, amendments and supplements to each 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.

          “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Shares” means the shares of Common Stock issued or issuable to the Investors at Closing
pursuant to the Purchase Agreement.

          “Warrants” means the Common Stock purchase warrants issued or issuable to the Investors
pursuant to the Purchase Agreement.

          “Warrant Shares” means the shares of Common Stock issued or issuable upon exercise of the
Warrants.

     2. Registration.

          (a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a
Registration Statement covering the resale of all Registrable Securities not already covered by an
existing and effective Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415, on Form SB-2 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form SB-2, in which case such

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registration shall be on another appropriate form for such purpose). Such Registration
Statement shall contain (except if otherwise required pursuant to written comments received from
the Commission upon a review of such Registration Statement) the “Plan of Distribution” attached
hereto as Annex A. The Company shall cause such Registration Statement to be declared
effective under the Securities Act as soon as possible but, in any event, no later than its
Effectiveness Date, and shall use its reasonable best efforts to keep the Registration Statement
continuously effective under the Securities Act until the date which is the earlier of (i) five
years after its Effective Date, (ii) such time as all of the Registrable Securities covered by such
Registration Statement have been publicly sold by the Holders, or (iii) such time as all of the
Registrable Securities covered by such Registration Statement may be sold by the Holders pursuant
to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the
“Effectiveness Period”). The initial Registration Statement required to be filed by the Company
shall include all Shares, all Warrant Shares potentially issuable upon an assumed exercise in full
of all Warrants issued at Closing (without regard to any exercise limitations contained therein)
and any Additional Shares then outstanding or issuable.

          (b) If for any reason the Commission does not permit all of the Registrable Securities
identified in Section 2(a) to be included in the initial Registration Statement filed pursuant to
Section 2(a), or for any other reason any outstanding or then issuable Registrable Securities are
not then covered by an effective Registration Statement, then the Company shall prepare and file 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 for an offering to be made on a continuous basis pursuant to Rule 415, on Form SB-2
(except if the Company is not then eligible to register for resale the Registrable Securities on
Form SB-2, in which case such registration shall be on another appropriate form for such purpose).
Each such Registration Statement shall contain (except if otherwise required pursuant to written
comments received from the Commission upon a review of such Registration Statement) the “Plan of
Distribution” attached hereto as Annex A. The Company shall cause each such Registration
Statement to be declared effective under the Securities Act as soon as possible but, in any event,
by its Effectiveness Date, and shall use its reasonable best efforts to keep such Registration
Statement continuously effective under the Securities Act during the entire Effectiveness Period.
Promptly following any date on which the Company becomes eligible to use a registration statement
on Form S-3 to register the Registrable Securities for resale, the Company shall file a
registration statement on Form S-3 covering the Registrable Securities (or a post-effective
amendment on Form S-3 to the then effective Registration Statement) and shall cause such
Registration Statement to be declared effective as soon as possible thereafter, but in any event
prior to the Effectiveness Date therefor. Such Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the Commission upon a review of such
Registration Statement) the “Plan of Distribution” attached hereto as Annex A. The Company
shall cause such Registration Statement to be declared effective under the Securities Act as soon
as possible but, in any event, by its Effectiveness Date, and shall use its reasonable best efforts
to keep such Registration Statement continuously effective under the Securities Act during the
entire Effectiveness Period.

          (c) If: (i) a Registration Statement is not filed on or prior to its Filing Date (if the
Company files a Registration Statement without affording the Holders the opportunity to

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review and comment on the same as required by Section 3(a) hereof, the Company shall not be
deemed to have satisfied this clause (i)), or (ii) a Registration Statement is not declared
effective by the Commission on or prior to its required Effectiveness Date, or (iii) after its
Effective Date, without regard for the reason thereunder or efforts therefore, such Registration
Statement ceases for any reason to be effective and available to the Holders as to all Registrable
Securities to which it is required to cover at any time prior to the expiration of its
Effectiveness Period for more than an aggregate of 30 Trading Days (which need not be consecutive)
(any such failure or breach being referred to as an “Event,” and for purposes of clauses (i) or
(ii) the date on which such Event occurs, or for purposes of clause (iii) the date which such 30
Trading Day-period is exceeded, being referred to as “Event Date”), then in addition to any other
rights the Holders may have hereunder or under applicable law: on the one-month anniversary of each
such Event Date, and on each monthly anniversary thereafter, the Company shall pay to each Holder
an amount in cash, as partial liquidated damages and not as a penalty, equal to 1.0% of the
aggregate Investment Amount paid by such Holder pursuant to the Purchase Agreement until the
applicable Event is cured. The parties agree that the Company will not be liable for liquidated
damages under this Section in respect of the Warrants. If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days after the date payable, the
Company will pay interest thereon at a rate of 10% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.
The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata basis
for any portion of a month prior to the cure of an Event, except in the case of the first Event
Date.

          (d) Each Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling Holder Questionnaire”). The Company
shall not be required to include the Registrable Securities of a Holder in a Registration Statement
and shall not be required to pay any liquidated or other damages under Section 2(c) to any Holder
who fails to furnish to the Company a fully completed Selling Holder Questionnaire at least two
Trading Days prior to the Filing Date (subject to the requirements set forth in Section 3(a)).

     3. Registration Procedures.

          In connection with the Company’s registration obligations hereunder, the Company shall:

          (a) Not less than four Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, the Company shall furnish to each Holder
copies of the “Selling Stockholders” section of such document, the “Plan of Distribution” and any
risk factor contained in such document that addresses specifically this transaction or the Selling
Stockholders, as proposed to be filed which documents will be subject to the review of such Holder.
The Company shall not file a Registration Statement, any Prospectus or any amendments or
supplements thereto in which the “Selling Stockholder” section thereof differs from the disclosure
received from a Holder in its Selling Holder Questionnaire (as amended or supplemented).

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          (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection therewith as may
be necessary to keep such Registration Statement continuously effective as to the applicable
Registrable Securities for its Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the Securities Act all of
the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible to any comments received from the Commission with
respect to each Registration Statement or any amendment thereto and, as promptly as reasonably
possible provide each Holder true and complete copies of all correspondence from and to the
Commission relating to such Registration Statement that would not result in the disclosure to such
Holder of material and non-public information concerning the Company; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act with respect to
the Registration Statements and the disposition of all Registrable Securities covered by each
Registration Statement.

          (c) Notify the Holders as promptly as reasonably possible (and, in the case of (i)(A) below,
not less than three Trading Days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one Trading Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether there will be a “review”
of such Registration Statement and whenever the Commission comments in writing on such Registration
Statement (the Company shall provide true and complete copies thereof and all written responses
thereto to each Holder that pertains to such Holder as a Selling Stockholder or to the Plan of
Distribution, but not information which the Company believes would constitute material and
non-public information); and (C) with respect to each Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a Registration Statement
or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt
by the Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event or passage of time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to such Registration Statement, Prospectus or other
documents so that, in the case of such Registration Statement or the Prospectus, as the case may
be, it will not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

          (d) Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii)

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any suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

          (e) Furnish to each Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested by such Person
(including those previously furnished) promptly after the filing of such documents with the
Commission.

          (f) Upon notification by the Commission that a Registration Statement will not be reviewed or
is no longer subject to further review and comments, the Company shall request acceleration of such
Registration Statement such that it becomes effective at 5:00 p.m. (New York City time) on such
Effective Date.

          (g) Deliver to each Holder, by 9:00 a.m. (New York City time) on the day following the
Effective Date, without charge, an electronic copy of each Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto. The Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders
in connection with the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.

          (h) Prior to any public offering of Registrable Securities, to register or qualify or
cooperate with the selling Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of all jurisdictions within the United States, to keep
each such registration or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by the Registration Statements.

          (i) Cooperate with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to the
Registration Statements, which certificates shall be free, to the extent permitted by the Purchase
Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may request.

          (j) Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to
the affected Registration Statements or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, no Registration Statement nor any Prospectus will
contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

     4. Registration Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses

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referred to in the foregoing sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then listed for trading,
and (B) in compliance with applicable state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for Registrable Securities and of
printing prospectuses if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v)
Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be responsible for all
of its internal expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of any annual audit and
the fees and expenses incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.

     5. Indemnification.

          (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors,
agents, investment advisors, partners, members and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation
and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent, but only to the
extent, that (1) such untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved in writing by such
Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus
or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A
hereto for this purpose) or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated or defective and prior
to the receipt by such Holder of an Advice (as defined in Section 6(d) below) or an amended or
supplemented Prospectus, but only if and to the extent that following the receipt of the Advice or
the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would
have been corrected. The Company shall notify the

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Holders promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this Agreement.

          (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising
solely out of or based solely upon: (x) such Holder’s failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent that, (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information relates to such Holder or
such Holder’s proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or
such form of Prospectus or in any amendment or supplement thereto or (2) in the case of an
occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of an Advice or an
amended or supplemented Prospectus, but only if and to the extent that following the receipt of the
Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such
Loss would have been corrected. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

          An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably

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satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be
at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

          All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such Proceeding in a manner
not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten
Trading Days of written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).

          (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided for in this Section
was available to such party in accordance with its terms.

          The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5(d) were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by

10

 

which the proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.

     The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

     6. Miscellaneous.

          (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as the case may be, in addition to
being entitled to exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.

          (b) No Piggyback on Registrations. Except as and to the extent specified in
Schedule 3.1(v) to the Purchase Agreement, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include securities of the
Company in a Registration Statement other than the Registrable Securities, and the Company shall
not during the Registration Period enter into any agreement providing any such right to any of its
security holders.

          (c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.

          (d) Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder’s receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised
in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed,
and, in either case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

          (e) Piggy-Back Registrations. If at any time during the Effectiveness Period there
is not an effective Registration Statement covering all of the Registrable Securities (including,
but not limited to, any Additional Shares) and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own account or the account
of others under the Securities Act of any of its equity securities, other

11

 

than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with stock option or other
employee benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement all or any part of
such Registrable Securities (including, but not limited to, any Additional Shares) such holder
requests to be registered, subject to customary underwriter cutbacks applicable to all holders of
registration rights.

          (f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this Section 6(f), may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and the Holders of no less than a majority in interest of the
then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates exclusively to the rights
of certain Holders and that does not directly or indirectly affect the rights of other Holders may
be given by Holders of at least a majority of the Registrable Securities to which such waiver or
consent relates.

          (g) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:

	 	 	 
	If to the Company:

	 	Uroplasty, Inc.
	

	 	2718 Summer Street NE
	

	 	Minneapolis, MN 55413
	

	 	Facsimile: (612) 378-2027
	

	 	Attn.: Sam B. Humphries, President and CEO
	 
	 	 
	With a copy to:

	 	Messerli & Kramer P.A.
	

	 	150 South Fifth Street, Suite 1800
	

	 	Minneapolis, MN 55402
	

	 	Facsimile: (612) 672-3777
	

	 	Attn.: Jeffrey C. Robbins, Esq.

	 	 	 
	If to an Investor:

	 	To the address set forth under such Investor’s name on the
signature pages hereto.

12

 

     If to any other Person who is then the registered Holder:

	 	 	 
	

	 	To the address of such Holder as it appears in the stock transfer
books of the Company

or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

          (h) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign its rights or obligations hereunder without the
prior written consent of each Holder. Each Holder may assign their respective rights hereunder in
the manner and to the Persons as permitted under the Purchase Agreement.

          (i) Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.

          (j) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought against a party
hereto or its respective Affiliates, employees or agents) will be commenced in the New York Courts.
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York
Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to process being served
in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury in any Proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of this Agreement, then the prevailing
party in such Proceeding shall be reimbursed by the other party for its attorney’s fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.

          (k) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

13

 

          (l) Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or unenforceable.

          (m) Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

          (n) Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under this Agreement are several and not joint with the obligations of each other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under this Agreement. Nothing contained herein or in any Transaction Document,
and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors
as a partnership, an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement or any other Transaction Document.
Each Investor acknowledges that no other Investor will be acting as agent of such Investor in
enforcing its rights under this Agreement. Each Investor shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Investor to be joined as an additional party
in any Proceeding for such purpose. The Company acknowledges that each of the Investors has been
provided with the same Registration Rights Agreement for the purpose of closing a transaction with
multiple Investors and not because it was required or requested to do so by any Investor.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]

14

 

          IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	 	UROPLASTY, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	 	 	 	 	 
	

	 	 	 	Sam B. Humphries, President
	

	 	 	 	  and Chief Executive Officer

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF INVESTORS TO FOLLOW]

15

 

          IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	 	NAME OF INVESTING ENTITY
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	

	 	By:	 	 
	 	 	 	 	 
	

	 	 	 	Name:
	

	 	 	 	Title:

	 	 	 	 	 
	 	 	ADDRESS FOR NOTICE
	 
	 	 	 	 
	

	 	c/o:	 	 
	 	 	 	 	 
	 
	 	 	 	 
	

	 	Street:	 	 
	 	 	 	 	 

	 	 	 	 	 
	

	 	City/State/Zip:	 	 
	 	 	 	 	 
	 
	 	 	 	 

	 	 	 	 	 
	

	 	Attention:	 	 
	 	 	 	 	 

	 	 	 	 	 
	

	 	Tel:	 	 
	 	 	 	 	 
	 
	 	 	 	 
	

	 	Fax:	 	 
	 	 	 	 	 
	 
	 	 	 	 
	

	 	Email:	 	 
	 	 	 	 	 

16exv4w2

 

Exhibit 4.2

CONSULTING AGREEMENT

AGREEMENT made as of April 5, 2005, by and between Hong Kong Capital Advisors Limited with offices
at 8th Floor Henley Building, 5 Queen’s Road, Central, Hong Kong (hereinafter referred to as
“Consultant”) and LJ International Inc. with offices at Unit #12, 12/F, Block A, Focal Industrial
Centre Hung Hom, Hong Kong (hereinafter referred to as the “Company”).

WHEREAS, the Company desires to obtain the benefit of the services of Consultant to provide the
services hereinafter set forth; and

WHEREAS, Consultant desires to render such services to the Company;

NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained and the
acts herein described, it is agreed between the parties as follows:

1 The Company hereby engages and retains Consultant and Consultant hereby agrees to render services
and advice to the Company, for a three (3) year period commencing April 5, 2005 and ending April 5,
2008.

2 The services to be rendered by Consultant shall consist primarily of shareholder and media
relations activities. In particular, these services shall consist of consulting with management
concerning relations with shareholders, opportunities to expand the Company’s exposure to
investors, support and strategic planning for the Company’s relationships with its shareholders and
introductions to the financial and trade media based in Hong Kong and elsewhere with objectives of
generating media coverage. The Consultant may from time to time delegate or sub-contract some or
most of its services to outside entities at its own discretion and at its own expense and without
providing any prior notice to the Company.

Consultant shall have the sole discretion as to the form, manner and place in which said advice
shall be given and the amount of time to be devoted to serve under this Agreement. Except as
provided hereinafter, an oral opinion by Consultant to the Company shall be considered sufficient
compliance with the requirements of this paragraph. From time to time, however, the Company may
request that Consultant render a written report in connection with specific advice it may give to
the Company and Consultant shall submit such report in writing. Consultant shall devote to the
Company only such time as it may deem necessary, and when reasonably requested by the Company, and
shall not by this Agreement be prevented or barred from

 

 

rendering services of the same or similar nature, as herein described, or services of any nature
whatsoever for or on behalf of persons, firms or corporations other than the Company. The Company
recognizes the Consultant provides services to other clients. Consultant agrees and acknowledges
that none of the services to be performed by it under this Agreement involve or include any
investment advice, the offer or sale of securities in a capital-raising transaction or advice with
respect to mergers or acquisitions.

In order to facilitate Consultant performing its services hereunder, the Company shall:

	(a)  	furnish to Consultant all information which Consultant reasonably requests in connection with
the performance of its services hereunder concerning the business operations and financial
condition of the Company;
	 
	(b)  	make the officers, directors, employees, independent accountants, legal counsel of the
Company and its subsidiaries and affiliates available to Consultant;
	 
	(c)  	furnish to Consultant the names of all parties with which the Company has had discussions or
contacts for the twelve months prior to the date hereof concerning any prior shareholder or
media events.

The Company confirms that it is aware that the Consultant:

	(a)  	shall use and rely primarily upon the foregoing information and information from public
sources in performing its services hereunder without independently verifying the same;
	 
	(b)  	does not assume responsibility for the accuracy or completeness of any such information and;
	 
	(c)  	shall not be required to make any appraisal of any assets or business.

The Company represents to Consultant that to the best of its knowledge the information it provides
to Consultant in connection with Consultant providing its services hereunder is accurate and
complete in all material respects at the time that it is furnished to Consultant and the Company
represents and warrants that if it learns of any material inaccuracy therein it will immediately
advise Consultant and furnish corrected information to Consultant.

 

 

3. Confidentiality:

In order for the intent of this Agreement to be carried out, information regarding the Company may
be disclosed to Consultant. As a condition to receiving such information, Consultant agrees to
treat confidentially such information and any other information provided by the Company to
Consultant relating to the Company (collectively, the “Evaluation Material”). Consultant hereby
also agrees that it shall use the Evaluation Material solely for the purposes set forth in the
Agreement and shall not disclose, or otherwise reveal to any third party the existence of, this
Evaluation Material or the information provided herein. Notwithstanding anything in this Agreement
to the contrary, Consultant shall have the right to disclose any Evaluation Material or any other
information (i) to its affiliates, officers, directors, employees, advisors (including legal,
accounting, professional and financial advisors), and/or (ii) pursuant to a subpoena, Civil
Investigative Demand (or similar process), order, statute, rule or other legal requirement
promulgated or imposed by a court or by a judicial, regulatory, self-regulatory or legislative
body, organization, agency or committee or otherwise in connection with any judicial or
administrative proceeding (including, in response to oral questions, interrogatories or requests
for information or documents). Notwithstanding the foregoing, information will not be deemed
Evaluation Material if it (i) was already available to, or in the possession of, Consultant prior
to its disclosure by, or at the direction of, the Company, or (ii) is or becomes available in the
public domain on or after the date hereof (other than as a result of a disclosure by Consultant).

4. Compensation:

The Company shall compensate the Consultant for the availability of its services during the three
year period of this Agreement by:

	 	(i)  	The delivery, to the Consultant, of warrants that may be exercised into the
Company’s publicly-traded common stock (traded on the Nasdaq under symbol JADE) on a
cashless exercise basis pursuant to the following schedule:

	 	 	 	 	 
	Exercise Price	 	No. of warrants	 
	 
	$2.80
	 	 	50,000	 
	$3.00
	 	 	150,000	 
	$3.50
	 	 	150,000	 
	$4.00
	 	 	100,000	 
	$4.50
	 	 	50,000	 
	 
	 	 	 
	Total
	 	 	500,000	 

 

 

	 	(ii)  	The Company shall reimburse the Consultant for its reasonable and necessary
out-of-pocket disbursements and expenses in connection with services rendered, upon
submission of substantiation therefore. Any amounts in excess of HKD 10,000 must be
pre-approved in writing by the Company.

	5.  	Indemnification:

	 	(i)  	The Company agrees to indemnify and hold harmless Consultant, its employees,
subsidiaries, affiliates, agents, sub-agents, directors, officers, shareholders and
all of their respective trustees, employees, directors and officers, and each person,
who directly or indirectly is working for or providing management services to
Consultant against any and all loss, liability, claim, damage and expense whatsoever
(including but not limited to attorneys’ fees and any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any information
provided to Consultant by the Company or arising out of Consultant’s services in
reliance thereon.
	 
	 	(ii)  	None of Consultant, its employees, directors, officers, shareholders,
affiliates, subsidiaries, agents, sub-agents, nor any of their respective employees,
directors and officers, or controlling persons or trustees shall have any liability to
the Company, its subsidiaries or affiliates or any person asserting a claim on behalf
of or in the right of the Company or its subsidiaries or affiliates in connection with
or as a result of Consultant’s engagement hereunder or any matter referred to herein,
except to the extent that a loss, claim, liability, damage or expense incurred by the
Company or its subsidiary or affiliate is finally determined by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct or fraud
of the person or entity performing services hereunder.
	 
	 	(iii)  	Notice to Indemnifying Party
	 
	 	   	Any party (the “Indemnified Party”) seeking indemnification save and except under
sub- clause 5 (ii) shall promptly give the party from whom such indemnification is
sought (the “Indemnifying Party”) written notice of the matter with respect to which
such indemnification is sought, which notice shall specify in reasonable detail, if
known, the amount or an estimate of the amount of the liability arising therefrom
and the basis of the claim. Such notice shall be a condition precedent to any
liability of the Indemnifying Party for indemnification

 

 

	 	   	hereunder, but the failure of the Indemnified Party to give prompt notice of a claim
shall not adversely affect the Indemnified Party’s right to indemnification
hereunder unless the defense of that claim is materially prejudiced by such failure.
	 
	 	(iv)  	Third Party Claims

	 	(a)  	Defense by Indemnifying Party
	 
	 	   	In connection with any claim giving rise to indemnity hereunder resulting
from or arising out of any claim or legal proceeding by a person who is not a
party to this Agreement (a “Third Party Claim”), the Indemnifying Party at
its sole cost and expense may, upon written notice to the Indemnified Party,
assume the defense of any such Third Party Claim (i) if it acknowledges to
the Indemnified Party in writing its obligations to indemnify the Indemnified
Party with respect to all elements of such Third Party Claim (subject to any
limitations on such liability contained in this Agreement) and (ii) if it
provides assurances, reasonably satisfactory to the Indemnified Party, that
it will be financially able to satisfy such Third Party Claim in full if the
same is decided adversely. If the Indemnifying Party assumes the defense of
any Third Party Claim, it may use counsel of its choice to prosecute such
defense, subject to the approval of such counsel by the Indemnified Party,
which approval shall not be unreasonably withheld or delayed. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such Third Party Claim, with its counsel and at its own
expense. If the Indemnifying Party assumes the defense of any such Third
Party Claim, the Indemnifying Party shall take all steps necessary to pursue
the resolution thereof in a prompt and diligent manner. In the event that
the Indemnifying Party exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the Indemnified Party
shall cooperate with the Indemnifying Party in such defense and make
available to the Indemnifying Party all witnesses, pertinent records,
materials and information in the Indemnified Party’s possession or under the
Indemnified Party’s control relating reasonably required by the Indemnifying
Party without cost to the Indemnifying Party. The Indemnified Party shall
cooperate with the Indemnifying Party in such defense and make available to
the Indemnifying Party all witnesses, pertinent records, materials and
information in the Indemnified Party’s possession or under the Indemnified

 

 

	 	   	Party’s control relating thereto as are reasonably required by the
Indemnifying Party. The Indemnifying Party shall be entitled to consent to a
settlement of, or the stipulation of any judgment arising from, any such
Third Party Claim, with the consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed; provided, however, that no
such consent shall be required from the Indemnified Party if (i) the
Indemnifying Party pays or causes to be paid all losses arising out of such
settlement or judgment concurrently with the effectiveness thereof (as well
as all other losses theretofore incurred by the Indemnified Party which then
remain unpaid or unreimbursed), (ii) in the case of a settlement, the
settlement is conditioned upon a complete release by the claimant of the
Indemnified Party and (iii) such settlement or judgment does not require the
encumbrance of any asset of the Indemnified Party or impose any restriction
upon its conduct of business.
	 
	 	(b)  	Defense by Indemnified Party
	 
	 	   	If the Indemnifying Party does not assume the defense of any such Third Party
Claim or within a reasonable time period as may be determined by the
Indemnified Party, the Indemnified Party may defend against such Third Party
Claim and settle or compromise the same, after giving notice thereof to the
Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and the Idemnifying Party shall be entitled to participate in
(but not control) such defense with its own counsel and at its own expense.
The Indemnifying Party shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Indemnifying
Party’s expense, all such witnesses, records, materials and information in
the Indemnifying Party’s possession or under the Indemnifying Party’s control
relating thereto as are reasonably required by the Indemnified Party. During
the defense of any such Third Party Claim, the Indemnified Party shall be
entitled to seek reimbursement of any costs or expenses of providing such a
defense from the Indemnifying Party, who shall make those reimbursements in a
prompt manner. If the Indemnifying Party thereafter seeks to question the
manner in which the Indemnified Party defended such Third Party Claim or the
amount or nature of any such settlement, the Indemnifying Party shall have
the burden to prove by a preponderance of the evidence that the Indemnified
Party did not defend or settle such third-party claim in a reasonably

 

 

	 	   	prudent manner. The Indemnified Party shall not settle or compromise any
Third Party Claim for which it is entitled to indemnification hereunder,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have assumed the defense of such suit after notification as
provided herein and within a reasonable timeframe nominated in writing by the
Indemnified Party.
	 
	 	(c)  	Payment
	 
	 	   	If required to pay a Third Party Claim to the Indemnified Party the
Indemnifying Party shall pay such claim within the time limit set out in any
court order and in all other cases promptly and within a reasonable time
after either the conclusion or settlement of any court action involving a
Third Party Claim or settlement of such claim by negotiation.

6. This instrument contains the entire agreement of the parties. There are no representations or
warranties other than as contained herein, and there shall not be any liability to Consultant for
any services rendered to the Company pursuant to the terms of this Agreement. No waiver or
modification hereof shall be valid unless executed in writing with the same formalities as this
Agreement. Waiver of the breach of any term or condition of this Agreement shall not be deemed a
waiver of any other of subsequent breach, whether of like or of a different nature.

7. This Agreement shall be construed according to the laws of the Special Administrative Region of
Hong Kong as they are applied to agreements executed, delivered, and to be performed entirely
within such country and shall be binding upon the parties hereto, their successors and assigns.

     IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed and their
respective seals to be hereunto affixed the day and year first above written.

	 	 	 	 	 
	LJ International Inc.

	 	Hong Kong Capital Advisors Limited	 	 
	 
	 	 	 	 
	By:

	 	By:	 	 
	 
	 	 	 	 
	Ringo Ng
	 	 	 	 
	 	 	 
	Chief Financial Officer

	 	Director

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