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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July
31, 1998, by and between The Producers Entertainment Group Ltd., a corporation
organized under the laws of the State of Delaware, U.S.A., with headquarters
located at 5757 Wilshire Blvd., PH1, Los Angeles, California 90036 (the
"Company"), and the buyer set forth on the execution page hereof (the "Buyer").
RECITALS
A. In connection with the Securities Purchase Agreement by and between
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyer (i) a number of
shares of the Company's Series D Convertible Preferred Stock (the "Series D
Shares"); (ii) a number of shares of the Company's Series E Convertible
Preferred Stock (the "Series E Shares") and (iii) a number of shares of the
Company's Series F Convertible Preferred Stock (each a "Warrant" and
collectively the "Warrants") to purchase a number of shares of the Company's
common stock, $.001 par value per share ("Common Stock"). The Series D Shares
and the Series E Shares (collectively, the "Preferred Shares") are each
convertible in accordance with the terms of the Articles of Amendment (as
defined in the Securities Purchase Agreement) into Common Stock. The Common
Stock into which the Preferred Shares are convertible may be referred to herein
as the "Conversion Shares." In accordance with the terms of the Articles of
Amendment, shares of Common Stock may be issued in payment of dividends on the
Preferred Shares ("Dividend Shares").
B. The Buyer has agreed to purchase and pay for the Series D Shares,
the Series E Shares and the Warrants as provided in the Securities Purchase
Agreement. Upon each Closing (as defined in the Securities Purchase Agreement),
the Company will issue in the Buyer's name its certificate representing the
Preferred Shares, along with the Warrants, purchased at such Closing by the
Buyer.
C. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
AGREEMENTS
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all parties hereto,
the Company and the Buyer hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
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i. "Investor" or "Investors" means the Buyer and any permitted
transferee(s) or assignee(s) thereof to whom the Buyer assigns this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
iii. "Registrable Securities" means the Conversion Shares, the Warrant
Shares, the Dividend Shares (if any), shares issued pursuant to Section 2(b)
hereof (if any), and any shares of capital stock issued or issuable, from time
to time (with any adjustments) on or in exchange for or otherwise with respect
to either of the foregoing (including without limitation any shares issued
pursuant to Section 2(b) hereinafter).
iv. "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. (i) The Company shall use its best efforts
to prepare, and, on or before the date that is thirty (30) business days after
the date of the First Closing, file with the SEC a Registration Statement or
Registration Statements (as necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration of all of the Registrable Securities) (any of which may contain a
combined prospectus with other registrations by the Company), covering the
resale of all of the Registrable Securities, which Registration Statement(s), to
the extent allowable under the 1933 Act and the rules promulgated thereunder
(including without limitation Rule 416), shall state that such Registration
Statement(s) also covers such indeterminate number of additional shares (the
"Indeterminate Shares") of Common Stock as may become issuable upon conversion
of the Preferred Shares to prevent dilution resulting from stock splits, stock
dividends or similar transactions. In the event that there is no form of
Registration Statement available pursuant to which the Company may register all
of the Registrable Securities, the Company shall register all of the Registrable
Securities permitted by the SEC to be so registered pursuant to the terms and
conditions of the preceding sentence and will file a registration statement
covering the resale of the remaining Registrable Securities as soon as possible
thereafter. In any event, the Registrable Securities underlying the Preferred
Shares and Warrants issued at any Additional Closing shall be registered prior
to such Additional Closing.
(ii) To the extent the Indeterminate Shares for any reason can not be
registered under the Registration Statement(s) required under Section 2(a)(i)
above, then with respect to such Indeterminate Shares, the Company shall use its
best efforts to prepare, and, on or before the date that is fifteen (15) days
after the Indeterminate Shares become issuable, file with the SEC a Registration
Statement or Registration Statements (as necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration of all
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of the Indeterminate Shares) (any of which may contain a combined prospectus
with other registrations by the Company), covering the resale of all of the
Indeterminate Shares.
A copy of the Registration Statement(s) (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of the Buyer, which approval
shall not be unreasonably withheld, delayed, conditioned or denied) the Buyer
and its counsel prior to its filing or other submission. If the Company has not
received comments from the Buyer with respect to the Registration Statement
within five (5) business days of Buyer's receipt thereof, the Company may
conclusively presume the Buyer has approved the form and substance of the
Registration Statement.
b. Liquidated Damages. The Company shall use its best efforts to obtain
effectiveness of the Registration Statement as soon as practicable. If (i) the
Registration Statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not declared effective
by the SEC within one hundred twenty (120) days after the date of the First
Closing (other than by reason of any act or failure to act in a timely manner by
the Investor or its counsel) (the "Registration Deadline") or if, after the
Registration Statement has been declared effective by the SEC, sales cannot be
made pursuant to the Registration Statement (by reason of a suspension, a stop
order, the Company's failure to update the Registration Statement, or any other
reason outside the control of the Investor but not including a suspension of
trading to permit adequate dissemination of press releases), or (ii) the Common
Stock is not listed or included for quotation on either the National Association
of Securities Dealers Automated Quotation system Small Cap Market ("NASDAQ Small
Cap"), the OTC Bulletin Board Market or another United States national
securities exchange or market; then in either case (in either case, a "Delay")
the Company will make payments to the Investors, as liquidated damages and in
such amounts and at such times as shall be determined pursuant to this Section
2(b) as damages to the Investor by reason of any such delay in or reduction of
its ability to sell the Registrable Securities (which remedy shall be exclusive
of any other remedies available at law or in equity), an amount to be determined
as follows. The Company shall pay to the Investor an amount equal to the
purchase price for the Series D Shares purchased at the First Closing
(including, without limitation, any Preferred Shares that have been converted
into Conversion Shares then held by such Investors and excluding any Preferred
Shares that have been converted into Conversion Shares which have been sold or
otherwise transferred by the Investor and which the Investor does not own of
record or beneficially) (the "Aggregate Share Price") multiplied by: one and
one-half percent (1.5%) multiplied by the sum of: (i) the number of 30 day
periods beginning the day after the Registration Deadline and ending on the date
the Registration Statement is declared effective by the SEC, provided, however,
that there shall be excluded from such period any delays which are solely
attributable to changes required by the Investor in the Registration Statement
with respect to information relating to the Investor, including, without
limitation, changes to the plan of distribution; (ii) the number of 30 day
periods (prorated for partial 30 day periods) that sales cannot be made pursuant
to the Registration Statement after the Registration Statement has been declared
effective; and (iii) the number of 30 day periods (prorated for partial 30 day
periods) that the Common Stock is not listed or included for quotation on the
NASDAQ Small Cap Market, the OTC Bulletin Board Market, or another United States
national securities exchange or market after the Registration Statement has been
declared effective. Notwithstanding anything to the contrary in this Section
2(b), the failure to file a Registration Statement or any amendments or
supplements thereto when such documents otherwise would be
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required to be filed hereunder, or the failure to the Investor to sell its
Registrable Securities under the Registration Statement, each due to a Blackout
(as defined below), shall not constitute a default under or a breach of this
Section 2 and shall not entitle the Investor to liquidated damages.
For example, if the Registration Statement becomes effective sixty (60)
days after the end of the Registration Deadline, the Company would pay US$3,750
for each thirty (30) day period for each US$250,000 of Aggregate Share Price
until the Registration Statement becomes effective.
Such amounts shall be paid in cash or, at the Company's option such
amounts may be paid in shares of Common Stock valued at the "Conversion Price"
for the Series D Shares, as defined in the Series D Articles. Any shares of
Common Stock issued for such amounts shall be Registrable Securities. If the
Company desires to pay such amounts in shares of Common Stock it shall so notify
the Investor in writing at least two (2) business days before the date on which
such amounts are first payable in cash and such amounts shall be so convertible
(pursuant to the mechanics set forth in the Articles of Amendment), beginning on
the last day upon which the cash amount would otherwise be due in accordance
with the following sentence. Payments of cash pursuant hereto shall be made
within five (5) days after the end of each period that gives rise to such
obligation, provided that, if any such period extends for more than thirty (30)
days, interim payments shall be made for the full amount owed up to the date of
such interim payment at the end of each thirty (30) day period. At any time
after one (1) year from the date of the First Closing, upon delivery by legal
counsel for the Company to the Buyer and the Company's transfer agent a legal
opinion to the effect that the Conversion Shares may be sold without restriction
pursuant to Rule 144, and so long as the Company permits the conversion of the
Preferred Shares into Common Stock in accordance with the terms of the
Securities Purchase Agreement and the Series D Articles, liquidated damages as
called for in this paragraph shall cease and the Investor may rely upon Rule 144
for conversion of the Series D Preferred into Common Stock and subsequent sales
thereof.
c. Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Company shall file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 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) the Company shall send to the Investor written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Investor shall so request in writing, the Company, to the extent permitted by
law, shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
will be included in the Registration Statement; provided that no portion of the
equity securities which the Company is offering for its own account shall be
excluded; provided, further that the Company shall be entitled to exclude
Registrable Securities to the extent necessary to avoid breaching obligations
existing prior to the date hereof to other stockholders of the Company.
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Any exclusion of Registrable Securities shall be made pro rata among
the Investors seeking to include Registrable Securities, in proportion to the
number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right of the Investor to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
d. Eligibility for Form SB-2.The Company represents and warrants that
it meets the requirements for the use of Form SB-2 for registration of the sale
by the Buyer of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner. In
the event that Form SB-2 is not available for registration of the Registrable
Securities, the Company shall register the securities on another appropriate
form.
3. RELATED OBLIGATIONS. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement(s) effective pursuant to Rule 415
at all times until the earlier of (i) the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be issued
in the future), (ii) the date as of which the Investors may immediately sell all
of the Registrable Securities without restriction pursuant to Rule 144
promulgated under the 1933 Act (or successor thereto) or otherwise, or (iii) the
date on which none of the Preferred Shares or Warrant Shares is outstanding (the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement. In the event
the number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities issued
or issuable upon conversion of the Preferred Shares, the Company shall
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amend the Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover all of
the Registrable Securities, in each case, as soon as practicable, but in any
event within fifteen (15) days after the need therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) promptly after the same
is prepared and filed with the SEC, (i) one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and each amendment or
supplement thereto in each case relating to such Registration Statement (other
than any portion thereof which contains information for which the Company has
sought confidential treatment); and (ii) such number of copies of a final
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 (or to be owned) by such Investor.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement(s) under such
other securities or "blue sky" laws of such jurisdictions in the United States
as each Investor who holds (or has the right to hold) Registrable Securities
being offered reasonably requests, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause more than nominal expense
or burden to the Company, or (e) make any change in its charter or bylaws.
e. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company shall use its best efforts
promptly to prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, and deliver such number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request.
f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
g. [Intentionally omitted.]
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h. At the request of the Investor, but no more than three (3) times in
any one ninety (90) day period, the Company shall furnish, on the date of
effectiveness of the Registration Statement and thereafter from time to time on
such dates as the Investor may reasonably request an opinion, dated as of such
requested date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Company's transfer agent
and/or to the Investors. Such opinion shall be substantially as set forth in
Exhibit I attached hereto.
i. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
such underwriters (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to an Investor) or use of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or
(b) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance reasonably satisfactory to the
Company) with the Company with respect thereto, substantially in the form of
this Section 3(i). Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iii) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to a Registration
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Statement and enable such certificates to be in such denominations or amounts,
as the case may be, the Investors may reasonably request and registered in such
names as the Investors may request, all in accordance with the terms and
conditions of this Agreement. Within two (2) business days after receipt of all
documents, duly executed and in proper form, required for conversion of
Preferred Shares including the Notice of Conversion and the original certificate
representing the Preferred Shares to be converted, the Company shall deliver (at
the Company's expense) to its transfer agent instructions, accompanied by any
required opinion of counsel, that permit sales of unlegended securities in a
timely fashion that complies with then mandated securities settlement procedures
for regular way market transactions.
l. Upon the First Closing and upon each Additional Closing, the Company
shall promptly secure the listing of the Registrable Securities then underlying
the Preferred Shares and the Warrants purchased by the Buyer on the NASDAQ Small
Cap Market (or, if at such time the Common Stock trades on the OTC Bulletin
Board Market, make such Registrable Securities eligible to trade), and upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed or eligible to trade (subject to official
notice of issuance) and shall maintain, so long as any other shares of Common
Stock shall be so listed or eligible to trade, such listing or eligibility of
shares of Registrable Securities from time to time issued under the terms of
this Agreement and the Registration Rights Agreement. As applicable, the Company
shall at all times comply in all respects with the Company's reporting, filing
and other obligations under the by-laws or rules of the National Association of
Securities Dealers, the NASDAQ SmallCap Market or if applicable the OTC Bulletin
Board Market (and such other national securities exchange or market on which the
Common Stock may be listed or eligible to trade, as applicable).
m. The Company shall establish 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.
n. The Company shall comply with all laws applicable to the filing of a
Registration Statement for the resale of the Registrable Securities, and for the
offering and sale of securities pursuant to Regulation D under the 1933 Act and
all applicable rules and regulations of governmental authorities promulgated in
connection therewith (including without limitation the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and all the rules
and regulations promulgated thereunder by the SEC).
o. The Company shall take all other reasonable actions necessary to
facilitate disposition by the Investors of Registrable Securities pursuant to a
Registration Statement.
4. OTHER OBLIGATIONS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
a. At least fifteen (15) 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 if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement. 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
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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. Each
Investor is required to respond to the Company's written request for information
pursuant to this Section 4(a) within five (5) business days of receipt of such
written request. Failure to provide with reasonable specificity any information
reasonably requested by the Company within such five (5) business day period
shall result in a tolling of the time limits specified herein for the Company to
file the Registration Statement for a number of days equal to the number of days
beyond five (5) business days after the Investor's receipt of such written
request for information, plus ten (10) additional days.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, 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.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses incurred by the Company
pursuant to Section 5 below.
f. The Investor covenants and agrees that (i) it will not offer or sell
any Registrable Securities under the Registration Statement until it has
received copies of the prospectus required to be delivered to the Investor by
the Company, as then amended or supplemented and notice from the Company that
the Registration Statement and any post-effective amendments thereto have become
effective; (ii) it will not offer or sell any Registrable Securities under the
Registration Statement upon notice by the Company of a Blackout; and (iii) the
Investor, its officers, directors and affiliates, if any, will comply with the
prospectus delivery requirements of the 1933 Act as
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applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
g. The Investor covenants and agrees that upon written notice by the
Company (via facsimile or otherwise) to the Investor, the Investor shall, within
three (3) business days thereafter, inform the Company in writing, via facsimile
or otherwise at the Investor's option, of any change in the Investor's
beneficial ownership of Registrable Securities and shares of Common Stock of the
Company from the effective date of the Registration Statement or of the previous
request for such information, as applicable.
5. EXPENSES OF REGISTRATION. The Company agrees to pay all reasonable
expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company. If Investors who hold a majority of Registrable
Securities undertake to resell the Registrable Securities in an underwritten
public offering, the Company will reasonably cooperate as is customarily
required in an underwritten public offering. The Investors who participate in
such a public offering shall pay all expenses incurred in connection with such
registration, whether incurred by them or the Company, including without
limitation, underwriting discounts and commissions, all registration, listing
and qualification fees, printing charges, and fees and disbursements of
accountants and counsel for the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the 1934 Act, if any, and any underwriter (as defined in the
1933 Act) for the Investors, and the directors and the officers of, and each
person, if any, who controls, any such underwriter within the meaning of the
1933 Act or the 1934 Act (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities or expenses (joint or several) ("Losses" and,
together with actions, proceedings or inquiries by any regulatory or self
regulatory organization, whether commenced or threatened, in respect thereof,
"Claims") to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or the omission or
alleged omission to state a material fact therein required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder each as it relates to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses
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are incurred and are due and payable, for any legal fees or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim arising out of or based upon a Violation which reasonably results from
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to a Claim arising out of
or based upon a Violation which reasonably results from the Investor's proposed
method of distribution of the Registrable Securities that was contained in a
Registration Statement delivered to the Investor pursuant to Section 2(a) hereof
and is expressly approved by the Investor or with respect to which the Investor
did not provide a response within the time period allotted to the Investor in
Section 2(a); (iii) shall not inure to the benefit of any person if the untrue
statement or omission of the material fact contained in the prospectus was
corrected in the prospectus, as then amended or supplemented, if such corrected
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (iv) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company or the failure of the Investor to comply with
federal or state law relating to the offering or sale of the Registrable
Securities; and (v) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld, delayed or conditioned. Such
indemnity shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or such Violation results from information contained in a Registration
Statement, as amended or supplemented, or any prospectus, relating to the
Investor which such Investor has not corrected within the time period allotted
to the Investor pursuant to Section 2(a) hereof, or to the extent such Claim is
based upon any violation or alleged violation by the Investor of the 1933 Act,
1934 Act or any other law; and such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld, delayed or
conditioned; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall survive the
transfer of the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect
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to any prospectus shall not inure to the benefit of any person if the untrue
statement or omission of material fact contained in the prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement or otherwise expressly
consented to with respect to its inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Party under this Section 6
of notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Party; provided, however, that an
Indemnified Party shall have the right to retain its own counsel with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Party and the indemnifying party would be
inappropriate due to an actual or potential conflict of interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that the
Company shall have the right to approve the selection of counsel and legal fees
and expenses of such firm shall be reasonable. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any claim for indemnification by an
Indemnified Party is prohibited or is insufficient to hold such Indemnified
Party harmless for any Losses in respect to which Section 6 would apply (other
than by reason of exceptions provided in Section 6), 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 the 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 the 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 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 7(d), any
attorney's or other fees or expenses incurred by such party in connection with
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any Claim to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section 7 was available to
such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7 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 7, the Investor shall not be
required to contribute, in the aggregate, any amount in excess of the proceeds
actually received by the Investor from the sale of the Registrable Securities
subject to the Claim. No person guilty of fraudulent misrepresentations (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentations.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
a. if at any time the Company is not required to file reports under the
1934 Act, then the Company shall so inform the Investor in writing, and at the
request of the Investor, to make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement); and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of the 1933 Act and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investor to sell
such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be assignable
by the Investors to any transferee of at least 1,000 shares of Registrable
Securities if: (i) 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, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address, telephone and facsimile numbers of
such transferee or assignee, (b) the number and kind of securities with respect
to which such registration rights are being transferred or assigned, (c) the
number of shares of Common Stock of the Company owned prior to the assignment
and (d) the revisions to the current prospectus necessary to accurately reflect
all information required of the transferee or assignee; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein, (v) such transfer shall have been made in accordance with
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the applicable requirements of the Securities Purchase Agreement, (vi) such
transferee shall submit evidence reasonably satisfactory to the Company that the
Transferee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act; and (vii) in the event the
assignment occurs subsequent to the date of effectiveness of the Registration
Statement required to be filed pursuant to Section 2(a), the transferee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment. Notwithstanding anything herein to the
contrary, no assignment of the rights represented by this Agreement shall be
effective unless in compliance with any applicable securities laws of any
applicable jurisdiction.
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or facsimile, in each case properly addressed to the
party to receive such notice. The addresses for such communications shall be:
If to the Company: The Producers Entertainment Group, Ltd.
5757 Wilshire Blvd., PH1
Los Angeles, California 90036
Telephone: 213.634.8634
Facsimile: 213.634.8635
Attention: Mr. Irwin Meyer, Chairman & CEO
If to the Buyer, at the address on the signature page of the Securities
Purchase Agreement. Each party shall provide written notice to the other party
of any change in address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the state of Delaware without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. The Company irrevocably consents to the
jurisdiction of the state and federal courts of the state of
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Delaware in any suit or proceeding arising out of or based on this Agreement and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of
inconvenient forum to the maintenance of such suit or proceeding. Service of
process in any civil action relating to or arising out of this Agreement
(including also all Exhibits or Addenda hereto) or the transaction(s)
contemplated herein may be accomplished in any manner provided by law.
e. This Agreement, the Escrow Agreement, the Articles of Amendment, the
Warrants, and the Securities Purchase Agreement (including all exhibits and
addenda thereto) constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement and the other agreements previously
identified supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of the
signature page of this Agreement bearing the signature of the party so
delivering this Agreement to the Escrow Agent, with the original executed
Agreement to be delivered to the Escrow Agent via overnight delivery.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT DATED
JULY 31, 1998]
COMPANY:
THE PRODUCERS ENTERTAINMENT GROUP, LTD.
By: /S/ ARTHUR BERNSTEIN
-------------------------------------
-------------------------------------
(Print Name and Title)
Attest: /S/ COLLIER MARIANO, JR.
----------------------------
Secretary
----------------------------
BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc.,
its General Partner
By: /S/ THOMAS DUSZYNSKI
-------------------------------------
Mr. Tom Duszynski, Chief Operating
Officer
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EXHIBIT I TO REGISTRATION RIGHTS AGREEMENT
[DATE]
[NAME AND ADDRESS OF BUYER]
[NAME AND ADDRESS OF COMPANY'S TRANSFER AGENT]
Re: Registration of Certain Securities of The Producers
Entertainment Group, Ltd.
Ladies and Gentlemen:
We are counsel to The Producers Entertainment Group, Ltd., a Delaware
Corporation (the "Company"), whose stock is listed for trading on the NASDAQ
Small Cap Market utilizing the symbol "TPEG." We understand that [NAME OF BUYER]
(the "Holder") has purchased from the Company (a) a number of shares of the
Company's Series D Convertible Preferred Stock of The Producers Entertainment
Group, Ltd. (the "Series D Shares"), (b) a number of shares of the Company's
Series E Convertible Preferred Stock of The Producers Entertainment Group, Ltd.
(the "Series E Shares"), and (c) a number of warrants (the "Warrants") to
purchase common stock of the Company, $.001 par value per share ("Common
Stock"). The Series D Shares and the Series E Shares (collectively, the
"Preferred Shares") are each convertible in accordance with the terms of the
Articles of Amendment (as defined in the Securities Purchase Agreement, as
defined below) into Common Stock. The Warrants are exercisable into Common
Stock. The Series D Shares, Series E Shares and the Warrants were purchased
pursuant to a Securities Purchase Agreement between the Company and the Holder
dated as of July 31, 1998 (including all Exhibits and Addenda thereto, the
"Securities Purchase Agreement").
Pursuant to a Registration Rights Agreement between the Company and the
Holder dated as of July 31, 1998, the Company agreed with the Holder, among
other things, to register the Common Stock into which the Series D Shares and
the Series E Shares (and, as applicable, Common Stock issued (i) in payment of
dividends on the Preferred Shares and/or (ii) in payment of certain penalties
for late or non-registration of the said Common Stock) are convertible and the
Common Stock into which the Warrants are exercisable (collectively, the
"Registrable Securities") under the Securities Act of 1933, as amended (the
"1933 Act"), upon the terms provided in the Registration Rights Agreement. In
connection with the Company's obligations under the Registration Rights
Agreement, the Company filed a registration statement on Form S-3, No.
333-_________, on [DATE S-3 WAS FILED] (the "Registration Statement") with the
United States Securities and Exchange Commission relating to the Registrable
Securities, which names the Holder as a selling stockholder thereunder.
[OTHER INTRODUCTORY AND SCOPE OF EXAMINATION LANGUAGE TO BE INSERTED,
AS IS USUAL AND CUSTOMARY FOR SUCH OPINION LETTERS.]
Based upon the foregoing, we are of the opinion that the Registration
Statement has been declared effective by the U.S. Securities and Exchange
Commission, and that resales of the Registrable Securities has been registered
under the 1933 Act.
Very truly yours,
----------------------
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