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EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 31, 1999 (this
"AGREEMENT"), between Cafe Odyssey, Inc., a Minnesota corporation, with
principal executive offices located at 4801 West 81st Street, Suite 112,
Bloomington, Minnesota 55437 (the "COMPANY"), and The Shaar Fund Ltd. (the
"INITIAL INVESTOR").
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of August 31, 1999, between the Initial Investor and
the Company (the "SECURITIES PURCHASE AGREEMENT"), the Company has agreed to
issue and sell to the Initial Investor (i) 2,200 shares of Series D 8%
Convertible Preferred Stock, par value $0.01 per share (the "PREFERRED SHARES")
which, upon the terms of and subject to the conditions of the Company's
Certificate of Designation of Series D 8% Convertible Preferred Stock (the
"CERTIFICATE OF DESIGNATION"), are convertible into shares of the Company's
common stock, par value $0.01 per share (the "COMMON STOCK") and (ii) Common
Stock Purchase Warrants (the "WARRANTS") to purchase shares of Common Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "AFFILIATE," of any specified Person means any other
Person who directly, or indirectly through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the power,
directly or indirectly, to direct or cause the direction of the management
and policies of such Person whether by contract, securities, ownership or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have the respective
meanings correlative to the foregoing.
(ii) "CLOSING DATE" means the date and time of the issuance
and sale of the Preferred Shares.
(iii) "COMMISSION" means the Securities and Exchange
Commission.
(iv) "CURRENT MARKET PRICE" on any date of determination means
the
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closing bid price of a share of the Common Stock on such day as reported on
the Nasdaq SmallCap Market ("NASDAQ"); provided, if such security bid is not
listed or admitted to trading on the Nasdaq, as reported on the principal
national security exchange or quotation system on which such security is
quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system,
the closing bid price of such security on the over-the-counter market on the
day in question as reported by Bloomberg LP, or a similar generally accepted
reporting service, as the case may be.
(v) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder,
or any similar successor statute.
(vi) "INVESTORS" means the Initial Investor and any
transferee or assignee of Registrable Securities who agrees to become bound
by all of the terms and provisions of this Agreement in accordance with
Section 8 hereof.
(vii) "PERSON" means any individual, partnership,
corporation, limited liability company, joint stock company, association,
trust, unincorporated organization, or a government or agency or political
subdivision thereof.
(viii) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any prospectus
that discloses information previously omitted from a prospectus filed as part
of an effective registration statement in reliance on Rule 430A under the
Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by reference therein.
(ix) "PUBLIC OFFERING" means an offer registered with the
Commission and the appropriate state securities commissions by the Company of
its Common Stock and made pursuant to the Securities Act.
(x) "REGISTRABLE SECURITIES" means the Common Stock issued
or issuable (i) in lieu of cash dividend payments on the Preferred Shares,
(ii) upon conversion of the Preferred Shares or (iii) upon exercise of the
Warrants; provided, however, a share of Common Stock shall cease to be a
Registrable Security for purposes of this Agreement when it no longer is a
Restricted Security.
(xi) "REGISTRATION STATEMENT" means a registration statement
of the Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or delayed
basis by the holders of, all of the
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Registrable Securities pursuant to Rule 415 under the Securities Act,
including the Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such Prospectus,
and all exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(xii) "RESTRICTED SECURITY" means any share of Common
Stock issued or issuable in lieu of cash dividend payments on the Preferred
Shares, upon conversion of the Preferred Shares or exercise of the Warrants
except any such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement, (ii)
has been transferred in compliance with the resale provisions of Rule 144
under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities Act
(or any successor provision thereto), or (iii) otherwise has been transferred
and a new share of Common Stock not subject to transfer restrictions under
the Securities Act has been delivered by or on behalf of the Company.
(xiii) "SECURITIES ACT" means the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. REGISTRATION
(a) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The
Company shall prepare and file with the Commission not later than 30 days
after the Closing Date, a Registration Statement relating to the offer and
resale of the Registrable Securities by the holders thereof and shall use its
best efforts to cause the Commission to declare such Registration Statement
effective under the Securities Act as promptly as practicable but not later
than 150 days after the Closing Date, assuming for purposes hereof a number
of shares of Registrable Securities equal to at least 19.9% of the total
outstanding shares of Common Stock on the Closing Date. The Company shall
notify the Initial Investor by written notice that such Registration
Statement has been declared effective by the Commission within 24 hours of
such declaration by the Commission.
(b) REGISTRATION DEFAULT. If the Registration Statement
covering the Registrable Securities or the Additional Registrable Securities
(as defined in Section 2(d) hereof) required to be filed by the Company
pursuant to Section 2(a) or 2(d) hereof, as the case may be, is not (i) filed
with the Commission within 30 days after the Closing Date or (ii) declared
effective by the Commission within 150 days after the Closing Date (either of
which, without duplication, an "INITIAL DATE"), then the Company shall make
the payments to the Initial Investor as provided in the next sentence as
liquidated damages and not as a penalty. The amount to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date (as
defined below), and such amount shall be equal to 2% (the "LIQUIDATED DAMAGE
RATE") of the
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Purchase Price (as defined in the Securities Purchase Agreement) from the
Initial Date to the first Computation Date and for each Computation Date
thereafter, calculated on a pro rata basis to the date on which the
Registration Statement is filed with (in the event of an Initial Date
pursuant to clause (i) above) or declared effective by (in the event of an
Initial Date pursuant to clause (ii) above) the Commission (the "PERIODIC
AMOUNT") provided, however, that in no event shall the liquidated damages be
less than $25,000. The full Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Computation Date.
As used in this Section 2(b), "COMPUTATION DATE" means the
date which is 30 days after the Initial Date and, if the Registration
Statement required to be filed by the Company pursuant to Section 2(a) has
not theretofore been declared effective by the Commission, each date which is
30 days after the previous Computation Date until such Registration Statement
is so declared effective.
Notwithstanding the above, if the Registration Statement
covering the Registrable Securities or the Additional Registrable Securities
required to be filed by the Company pursuant to Section 2(a) or 2(d) hereof,
as the case may be, is not filed with the Commission by the 30th day after
the Closing Date, the Company shall be in default of this Registration Rights
Agreement.
(c) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that
at such time as it meets all the requirements for the use of Securities Act
Registration Statement on Form S-3 it shall file all reports and information
required to be filed by it with the Commission in a timely manner and take
all such other action so as to maintain such eligibility for the use of such
form.
(d) [Reserved]
(e) (i) If the Company proposes to register any of its
warrants, Common Stock or any other shares of common stock of the Company
under the Securities Act (other than a registration (A) on Form S-8 or S-4 or
any successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee
share options or in connection with any employee benefit or similar plan of
the Company or (C) in connection with a direct or indirect acquisition by the
Company of another Person or any transaction with respect to which Rule 145
(or any successor provision) under the Securities Act applies), whether or
not for sale for its own account, it will each such time, give prompt written
notice at least 20 days prior to the anticipated filing date of the
registration statement relating to such registration to the Initial Investor,
which notice shall set forth such Initial Investor's rights under this
Section 3(e) and shall offer the Initial Investor the opportunity to include
in such registration statement such number of Registrable Securities as the
Initial Investor may request. Upon the written request of an Initial Investor
made within 10 days after the receipt of notice from the Company (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Initial Investor), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
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Securities that the Company has been so requested to register by the Initial
Investor, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered; provided, however, that (A) if
such registration involves a Public Offering, the Initial Investor must sell
their Registrable Securities to the underwriters selected as provided in
Section 3(b) hereof on the same terms and conditions as apply to the Company
and (B) if, at any time after giving written notice of its intention to
register any Registrable Securities pursuant to this Section 3 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
such Registrable Securities, the Company shall give written notice to the
Initial Investor and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(e) shall terminate on the date
that the registration statement to be filed in accordance with Section 2(a)
is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves
a Public Offering and the managing underwriter thereof advises the Company
that, in its view, the number of shares of Common Stock, Warrants or other
shares of Common Stock that the Company and the Initial Investor intend to
include in such registration exceeds the largest number of shares of Common
Stock or Warrants (including any other shares of Common Stock or Warrants of
the Company) that can be sold without having an adverse effect on such Public
Offering (the "MAXIMUM OFFERING SIZE"), the Company will include in such
registration, only that number of shares of Common Stock or Warrants, as
applicable, such that the number of shares of Registrable Securities
registered does not exceed the Maximum Offering Size, with the difference
between the number of shares in the Maximum Offering Size and the number of
shares to be issued by the Company to be allocated (after including all
shares to be issued and sold by the Company) among the Company and the
Initial Investor pro rata on the basis of the relative number of shares of
Common Stock or Warrants offered for sale under such registration by each of
the Company and the Initial Investor.
If as a result of the proration provisions of this Section
2(e)(ii), any Initial Investor is not entitled to include all such
Registrable Securities in such registration, such Initial Investor may elect
to withdraw its request to include any Registrable Securities in such
registration. With respect to registrations pursuant to this Section 2(e),
the number of securities required to satisfy any underwriters' over-allotment
option shall be allocated pro rata among the Company and the Initial Investor
on the basis of the relative number of shares of Common Stock or Warrants
otherwise to be included by each of them in the registration with respect to
which such over-allotment option relates.
3. OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable
Securities, the Company shall:
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(a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration
Statement and supplements to the Prospectus as may be necessary to keep the
Registration Statement continuously effective and in compliance with the
provisions of the Securities Act applicable thereto so as to permit the
Prospectus forming part thereof to be current and useable by Investors for
resales of the Registrable Securities for a period of two years from the date
on which the Registration Statement is first declared effective by the
Commission (the "EFFECTIVE TIME") or such shorter period that will terminate
when all the Registrable Securities covered by the Registration Statement
have been sold pursuant thereto in accordance with the plan of distribution
provided in the Prospectus, transferred pursuant to Rule 144 under the
Securities Act or otherwise transferred in a manner that results in the
delivery of new securities not subject to transfer restrictions under the
Securities Act (the "REGISTRATION PERIOD") and (ii) take all lawful action
such that each of (A) the Registration Statement and any amendment thereto
does not, when it becomes effective, 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, not misleading and (B) the
Prospectus forming part of the Registration Statement, and any amendment or
supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing provisions of this Section 3(a),
the Company may, during the Registration Period, suspend the use of the
Prospectus for a period not to exceed 60 days (whether or not consecutive) in
any 12-month period if the Board of Directors of the Company determines in
good faith that because of valid business reasons, including pending mergers
or other business combination transactions, the planned acquisition or
divestiture of assets, pending material corporate developments and similar
events, it is in the best interests of the Company to suspend such use, and
prior to or contemporaneously with suspending such use the Company provides
the Investors with written notice of such suspension, which notice need not
specify the nature of the event giving rise to such suspension. At the end of
any such suspension period, the Company shall provide the Investors with
written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions
of the Securities Act with respect to the Registrable Securities of the
Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the Investors as set forth in the Prospectus
forming part of the Registration Statement;
(c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the
distribution or delivery of any Prospectus (including any supplements
thereto), provide (A) draft copies thereof to the Investors and reflect in
such documents all such comments as the Investors (and their counsel)
reasonably may propose and (B) to the Investors a copy of the accountant's
consent letter to be included in the filing and (ii) furnish to each Investor
whose Registrable Securities are included in the Registration Statement and
its legal counsel identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by
the Company, one copy of the
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Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments
and supplements thereto and such other documents, as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered
by the Registration Statement under such securities or "blue sky" laws of
such jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and
file in such jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may
be necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take all such other lawful actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (iv) take all such other lawful
actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject
itself to general taxation in any such jurisdiction or (C) file a general
consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the occurrence of any event, as a result of
which the Prospectus included in the 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, in light of the circumstances under which they were made,
not misleading, and promptly prepare an amendment to the Registration
Statement and supplement to the Prospectus to correct such untrue statement
or omission, and deliver a number of copies of such supplement and amendment
to each Investor as such Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class
or series issued by the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective
date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the
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Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon
as practicable, but in any event not later than three (3) months after (i)
the effective date (as defined in Rule 158(c) under the Securities Act) of
the Registration Statement, and (ii) the effective date of each
post-effective amendment to the Registration Statement, as the case may be,
an earnings statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158);
(1) In the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree
should be included therein and to which the Company does not reasonably
object and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees
to supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the
Registration Statement, in each case, as is customary for similar due
diligence examinations; provided, however, that all records, information and
documents that are designated in writing by the Company, in good faith, as
confidential, proprietary or containing any material nonpublic information
shall be kept confidential by such Investors and any such underwriter,
attorney, accountant or agent (pursuant to an appropriate confidentiality
agreement in the case of any such holder or agent), unless such disclosure is
made pursuant to judicial process in a court proceeding (after first giving
the Company an opportunity promptly to seek a protective order or otherwise
limit the scope of the information sought to be disclosed) or is required by
law, or such records, information or documents become available to the public
generally or through a third party not in violation of an accompanying
obligation of confidentiality; and provided, further, that, if the foregoing
inspection and information gathering
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would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible,
be coordinated on behalf of the Investors and the other parties entitled
thereto by one firm of counsel designed by and on behalf of the majority in
interest of Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as
are customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managers)
addressed to the underwriters, covering such matters as are customarily
covered in opinions requested in secondary underwritten offerings (it being
agreed that the matters to be covered by such opinions shall include, without
limitation, as of the date of the opinion and as of the Effective Time of the
Registration Statement or most recent post-effective amendment thereto, as
the case may be, the absence from the Registration Statement and the
Prospectus, including any documents incorporated by reference therein, of an
untrue statement of a material fact or the omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under which they
were made) not misleading, subject to customary limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants
of the Company (and, if necessary, from the independent public accountants of
any subsidiary of the Company or of any business acquired by the Company, in
each case for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each
underwriter participating in such underwritten offering (if such underwriter
has provided such letter, representations or documentation, if any, required
for such cold comfort letter to be so addressed), in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the
rules and regulations of the National Association of Securities Dealers, Inc.
(the "NASD RULES") (or any successor provision thereto)) of the Company or
has a "CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules
(or any successor provision thereto)) and such broker-dealer shall
underwrite, participate as a member of an underwriting syndicate or selling
group or assist in the distribution of any Registrable Securities covered by
the Registration Statement, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, the Company shall assist such
broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "QUALIFIED
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INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15) of the NASD Rules
(or any successor provision thereto)) to participate in the preparation of
the Registration Statement relating to such Registrable Securities, to
exercise usual standards of due diligence in respect thereof and to recommend
the public offering price of such Registrable Securities, (B) indemnifying
such qualified independent underwriter to the extent of the indemnification
of underwriters provided in Section 5 hereof, and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. As least seven days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "REQUESTED
INFORMATION") if such Investor elects to have any of its Registrable
Securities included in the Registration Statement. If at least two business
days prior to the anticipated filing date the Company has not received the
Requested Information from in Investor (a "NON-RESPONSIVE INVESTOR"), then
the Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor and have no further obligations to
the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all
of its Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section
3(e) or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION
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All expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(a) The Company shall indemnify and hold harmless each
Investor and each underwriter, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors
and each person who controls such Investor or underwriter within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act (each
such person being sometimes hereinafter referred to as an "INDEMNIFIED
PERSON") from and against any losses, claims, damages or liabilities, joint
or several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, not misleading, or arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Prospectus or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and the Company hereby agrees to reimburse such Indemnified
Person for all reasonable legal and other expenses incurred by them in
connection with investigating or defending any such action or claim as and
when such expenses are incurred; provided, however, that the Company shall
not be liable to any such Indemnified Person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or alleged untrue statement made in, or an omission
or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the
case of the occurrence of an event of the type specified in Section 3(e), the
use by the Indemnified Person of an outdated or defective Prospectus after
the Company has provided to such Indemnified Person an updated Prospectus
correcting the untrue statement or alleged untrue statement or omission or
alleged omission giving rise to such loss, claim, damage or liability.
(b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each
Investor agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company,
its directors (including any person who, with his or her consent, is named in
the Registration Statement as a director nominee of the Company), its
officers who sign any Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise,
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insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein (in light of the circumstances under which
they were made, in the case of the Prospectus), not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein; provided, however, that no
Investor or underwriter shall be liable under this Section 6(b) for any
amount in excess of the net proceeds paid to such Investor or underwriter in
respect of shares sold by it, and (ii) reimburse the Company for any legal or
other expenses incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY")
of written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 6 is being sought (the "INDEMNIFYING
PARTY") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that it otherwise
may have to the Indemnified Party, except to the extent that the Indemnifying
Party is materially prejudiced and forfeits substantive rights and defenses
by reason of such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying
Party shall be entitled to assume the defense thereof. Notwithstanding the
assumption of the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate legal counsel and
to participate in the defense of such Claim, and the Indemnifying Party shall
bear the reasonable fees, out-of-pocket costs and expenses of such separate
legal counsel to the Indemnified Party if (and only if): (x) the Indemnifying
Party shall have agreed to pay such fees, costs and expenses, (y) the
Indemnified Party and the Indemnifying Party shall reasonably have concluded
that representation of the Indemnified Party by the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim,
or if there may be legal defenses available to the Indemnified Party that are
in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period
of time after notice of the commencement of such Claim. If the Indemnified
Party employs separate legal counsel in circumstances other than as described
in clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any
Claim in the same jurisdiction, be liable for the fees and expenses of more
than one firm of counsel for the Indemnified Party (together with appropriate
local counsel). The Indemnified Party shall not, without the prior written
consent of the Indemnifying Party (which consent shall not unreasonably be
withheld), settle or compromise any Claim or consent to the entry of any
judgment that does not include an
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unconditional release of the Indemnifying Party from all liabilities with
respect to such Claim or judgment.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein,
then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), 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 the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state
a material fact relates to information supplied by such Indemnifying Party or
by such Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation (even if the Investors or any underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section
6(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the Investors
and any underwriters in this Section 6(d) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 6, in
no event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in
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this Section 6 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to an indemnified party at law or in equity.
7. RULE 144
With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"),
the Company agrees to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule
144; and
(b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section
13 or 15(d) under the Exchange Act; and, if at any time it is not required to
file such reports but in the past had been required to or did file such
reports, it will, upon the request of any Investor, make available other
information as required by, and so long as necessary to permit sales of, its
Registrable Securities pursuant to Rule 144.
8. ASSIGNMENT
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors
to any permitted transferee of all or any portion of such securities (or all
or any portion of any Preferred Shares or Warrant of the Company which is
convertible into such securities) of Registrable Securities only if: (a) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee and (ii)
the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee or
assignee constitute Restricted Securities, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein.
9. AMENDMENT AND WAIVER
Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority-in-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with
this Section 9 shall be binding upon each Investor and the Company.
10. MISCELLANEOUS
(a) A person or entity shall be deemed to be a holder of
Registrable Securities
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whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two
or more persons or entities with respect to the same Registrable Securities,
the Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities.
(b) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person any
registration rights with respect to any Company securities which are more
favorable to such other Person than those provided in this Agreement, then
the Company forthwith shall grant (by means of an amendment to this Agreement
or otherwise) identical registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall
be deemed given when so delivered personally or by overnight courier service,
or, if mailed, three days after the date of deposit in the United States
mails, as follows:
(i) to the Company, to:
Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
Attention: Stephen D. King
(612) 837-9917
(612) 837-9916 (Fax)
with a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: William M. Mower, Esq.
(612) 672-8358
(612) 672-8397 (Fax)
(ii) if to the Initial Investor, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
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(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
(iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. 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 best 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.
(g) The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof. The Company is not currently a party to any
agreement granting any registration rights with respect to any of its
securities to any person which conflicts with the Company's obligations
hereunder or gives any other party the right to include any securities in any
Registration Statement filed pursuant hereto, except for
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such rights and conflicts as have been irrevocably waived. Without limiting
the generality of the foregoing, without the written consent of the holders
of a majority in interest of the Registrable Securities, the Company shall
not grant to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted are subject
in all respect to the prior rights of the holders of Registrable Securities
set forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement. The restrictions on the Company's rights to
grant registration rights under this paragraph shall terminate on the date
the Registration Statement to be filed pursuant to Section 2(a) is declared
effective by the Commission.
(h) This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, dated as of a date even herewith (the "ESCROW
INSTRUCTIONS"), between the Company, the Initial Investor and Cadwalader,
Wickersham & Taft, the Preferred Shares and the Warrants constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein. This Agreement, the
Securities Purchase Agreement, the Escrow Instructions, the Certificate of
Designation and the Warrants supersede all prior agreements and undertakings
among the parties hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(j) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require.
(k) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(1) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3, or any delay in such performance
could result in direct damages to the Investors and the Company agrees that,
in addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused
by such failure or delay.
(m) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
CAFE ODYSSEY, INC.
By: /s/ Stephen D. King
----------------------------
Name: Stephen D. King
Title: CEO
THE SHAAR FUND LTD.
By: /s/ Samuel Levinson
---------------------------
Name: Samuel Levinson
Title: Managing Director
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