Exhibit 10.05
ANNEX IV
TO
SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 31, 2004 (this
"Agreement"), is made by and between CONSPIRACY ENTERTAINMENT HOLDINGS, INC., a
Utah corporation with headquarters located at 612 Santa Monica Boulevard, Santa
Monica, CA 90401 (the "Company"), and each entity named on a signature page
hereto (each, an "Initial Investor") (each agreement with an Initial Investor
being deemed a separate and independent agreement between the Company and such
Initial Investor, except that each Initial Investor acknowledges and consents to
the rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of August 31, 2004, between the Initial Investor
and the Company (the "Securities Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investors the Debentures and the Warrants; and
WHEREAS, the Debentures are convertible into shares of Common Stock (the
"Conversion Shares"; which term, for purposes of this Agreement, shall include
shares of Common Stock of the Company issuable in lieu of accrued interest, as
contemplated by the Debentures) upon the terms and subject to the conditions
contained in the Debentures; and
WHEREAS, the Warrant Shares may be issued upon the exercise of the
Warrants; and
WHEREAS, to induce the Initial Investor 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
"Securities Act"), with respect to the Registrable Securities (as defined
below);
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, the Company and the Initial
Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
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"Company Counsel" means Sichenzia Ross Friedman Ference LLP, or such other
reputable law firm as may be retained by the Company from time to time.
"Effective Date" means the date the SEC declares a Registration Statement
covering Registrable Securities and otherwise meeting the conditions
contemplated hereby to be effective.
"Held Shares Value" means, for shares of Common Stock acquired by the
Investor upon a conversion of a Debenture within the twenty (20) Trading Days
(excluding any Trading Days on which the on which the Investor is restricted
from making sales of Registrable Securities covered by any previously effective
Registration Statement) preceding the Restricted Sale Date, but not yet sold by
the Investor, the principal amount of the Debentures converted into such
Conversion Shares; provided, however, that if the Investor effected more than
one such conversion during such twenty (20) Trading Day period and sold less
than all of such shares, the sold shares shall be deemed to be derived first
from the conversions in the sequence of such conversions (that is, for example,
until the number of shares from the first of such conversions have been sold,
all shares shall be deemed to be from the first conversion; thereafter, from the
second conversion until all such shares are sold).
"Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Debentures or Registrable
Securities.
"Other Issuable Shares" means,(i) the Additional Shares and the Payment
Shares, if any, issued or issuable to the Holder as of the date of the filing of
the Registration Statement and any amendment thereto or as of any subsequent
date, and (ii) the good faith estimate of the Company of the number of other
Additional Shares and other Payment Shares, as the case may be, which the
Company anticipates, as of the date of the filing of the Registration Statement
and any amendment thereto or any subsequent date, will be issuable to the Holder
pursuant to the provisions of the Transaction Agreements.
"Payment Shares" means shares of Common Stock issued by the Company as
provided in Section 2(b) below.
"Permitted Suspension Period" means up to two periods during any
consecutive 12-month period during which the Holder's right to sell Registrable
Securities under the Registration Statement is suspended, each of which
suspension period shall neither (i) be for more than ten (10) days nor (ii)
begin less than ten (10) business days after the last day of the preceding
suspension (whether or not such last day was during or after a Permitted
Suspension Period).
"Potential Material Event" means any of the following: (i) the possession
by the Company of material information not ripe for disclosure in a registration
statement, which shall be evidenced by a determination in good faith by the
Board of Directors of the Company that disclosure of such information in the
registration statement would be detrimental to the business and affairs of the
Company; or (ii) any material engagement or activity by the Company which would,
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in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure
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in a registration statement at such time, in each case where such determination
shall be accompanied by a good faith determination by the Board of Directors of
the Company that the registration statement would be materially misleading
absent the inclusion of such information.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
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 SEC.
"Registrable Securities" means, collectively, the Conversion Shares, the
Warrant Shares, and the Other Issuable Shares.
"Registration Statement" means a registration statement of the Company
under the Securities Act covering Registrable Securities on Form SB-2, if the
Company is then eligible to file using such form, and if not eligible, on Form
S-1 or other appropriate form.
"Required Effective Date" means, initially, the Initial Required Effective
Date or the Increased Required Effective Date (as those terms are defined
below), as the case may be.
"Restricted Sale Date" means the first date, other than a date during a
Permitted Suspension Period (as defined below), on which the Investor is
restricted from making sales of Registrable Securities covered by any previously
effective Registration Statement.
2. Registration.
(a) Mandatory Registration.
(i) The Company shall cause Company Counsel to prepare and file with the
SEC, as soon as practicable after the Closing Date but no later than forty-five
(45) days after the Closing Date (the "Required Filing Date"), a Registration
Statement registering for resale by the Investor a sufficient number of shares
of Common Stock for the Initial Investors to sell the Registrable Securities.
Notwithstanding the requirement to register all Registrable Securities, the
Company's obligation to register the Registrable Securities shall initially be
satisfied by the registration of the Initial Number of Shares to Be Registered
(as defined below). The "Initial Number of Shares to Be Registered" is a number
of shares of Common Stock which is at least equal to the sum of (x) the number
of shares into which the Debentures and all dividends thereon through the
Maturity Date would be convertible at the time of filing of such Registration
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Statement (assuming for such purposes that all such Debentures had been eligible
to be converted, and had been converted, into Conversion Shares in accordance
with their terms, whether or not such eligibility, accrual of interest or
conversion had in fact occurred as of such date), based on the Conversion Price
then in effect, (y) the number of Warrant Shares covered by the Warrants
(assuming for such purposes that all the Warrants had been eligible to be
exercised and had been exercised for the issuance of Warrant Shares in
accordance with their terms, whether or not such eligibility or exercise had in
fact occurred as of such date), and (z) the number of Other Issuable Shares as
of the date of the filing of the Registration Statement or any amendment thereto
(provided, however, that for purposes of this provision, the number of Other
Issuable Shares shall not be greater than the number of such shares which the
SEC permits to be included in the Registration Statement). If, after the filing
of the Registration Statement and prior to the Effective Date, the Conversion
Price or the number of shares covered by the Warrants or both is or are to be
adjusted or if the number of Other Issuable Shares increases, the Company shall
file an amendment to the Registration Statement reflecting the registration of
the adjusted number of shares reflected in the foregoing formula based on such
adjustments. Unless otherwise specifically agreed to in writing in advance by
the Holder, the Registration Statement (X) shall include only the Registrable
Securities, and (Y) shall also state that, in accordance with Rule 416 and 457
under the Securities Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable to prevent dilution resulting from
stock splits, or stock dividends.
(ii) The Company and Company Counsel will use their reasonable best efforts
to cause such Registration Statement to be declared effective on a date (the
"Initial Required Effective Date") which is no later than the earlier of (Y)
five (5) days after oral or written notice by the SEC that it may be declared
effective or (Z) ninety (90) days after the Closing Date.
(iii) If at any time (an "Increased Registered Shares Date"), the number of
shares of Common Stock represented by the Registrable Securities, issued or to
be issued as contemplated by the Transaction Agreements, exceeds the aggregate
number of shares of Common Stock then registered or sought to be registered in a
Registration Statement which has not yet been declared effective, the Company
shall either
(X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at
that time, to register the Increased Number of Shares to Be Registered
(as defined below). The "Increased Number of Shares to Be Registered"
is a number of shares of Common Stock which is at least equal to (A)
the sum of the number of shares theretofore issued on conversion of
the Debentures (including any interest paid on conversion by the
issuance of Conversion Shares) and on exercise of the Warrants, plus
the Other Issuable Shares issued or issuable as of that date plus (B)
the sum of (I) the number of shares into which the Unconverted
Debentures and all interest thereon through the Maturity Date would be
convertible at the time of filing of such Registration Statement or
amendment (assuming for such purposes that all Debentures, reduced by
any previously converted Debentures, had been eligible to be
converted, and had been converted, into Conversion Shares in
accordance with their terms, whether or not such eligibility, accrual
of interest or conversion had in fact occurred as of such date), (II)
the number of Warrant Shares covered by the unexercised Warrants
(assuming for such purposes that all the Warrants, reduced by any
exercised Warrants, had been eligible to be exercised and had been
exercised for the issuance of Warrant Shares in accordance with their
terms, whether or not such issuance, eligibility or exercise had in
fact occurred as of such date), and (III) the number of Other Issuable
Shares as of the date of the filing of such amendment to the
Registration Statement (provided, however, that for purposes of this
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provision, the number of Other Issuable Shares shall not be greater
than the number of such shares which the SEC permits to be included in
the Registration Statement), or
(Y) if such Registration Statement has been declared effective by the
SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Number of Shares
to Be Registered over the aggregate number of shares of Common Stock
already registered.
The Company and Company Counsel will use their reasonable best efforts to cause
such Registration Statement to be declared effective on a date (each, an
"Increased Required Effective Date") which is no later than (q) with respect to
a Registration Statement under clause (X) of this subparagraph (ii), the Initial
Required Effective Date and (r) with respect to an Additional Registration
Statement, the earlier of (I) five (5) days after notice by the SEC that it may
be declared effective or (II) thirty (30) days after the Increased Registered
Shares Date.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities is
not filed as contemplated by this Agreement with the SEC by the Required Filing
Date, the Company will make payments to the Initial Investor in such amounts and
at such times as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities is
not effective by the relevant Required Effective Date or if there is a
Restricted Sale Date, the Company will make payments to the Initial Investor in
such amounts and at such times as shall be determined pursuant to this Section
2(b).
(iii) The amount (the "Periodic 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 the Periodic Amount Percentage (as
defined below) of the Purchase Price for all Debentures for the period from the
date following the relevant Required Filing Date or the Required Effective Date
or a Restricted Sale Date, as the case may be, to the first relevant Computation
Date (each, a "First Period"), and thereafter to each subsequent Computation
Date (each, a "Subsequent Period"). The "Periodic Amount Percentage" means (i)
one percent (1%) of the Purchase Price for the First Period, and (ii) two
percent (2%) of the Purchase Price for each Subsequent Period thereafter.
Anything in the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the relevant Effective Date the Purchase Price shall be
deemed to refer to the sum of the principal of the Unconverted Debentures plus
the Held Shares Value. By way of illustration and not in limitation of the
foregoing, if the Registration Statement is filed on or before the Required
Filing Date, but is not declared effective until seventy-five (75) days after
the Initial Required Effective Date, the Periodic Amount will aggregate five
percent (5%) of the Purchase Price (1% for days 1-30, plus 2% for days 31-60,
plus 2% for days 61-75).
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(iv) Each Periodic Amount, if any, will be payable by the Company, except
as provided in the other provisions of the immediately succeeding subparagraph
(v), in cash or other immediately available funds to the Investor (1) on the day
after the Required Filing Date, the Required Effective Date or a Restricted Sale
Date, as the case may be, and (2) on the earlier of (A) each thirtieth day
thereafter, (B) the third business day after the date the Registration Statement
is filed or is declared effective, or (C) the third business day after the
Registration Statement has its restrictions removed after the relevant Effective
Date, in each case without requiring demand therefor by the Investor.
(v) Notwithstanding the provisions of the immediately preceding
subparagraph (iv), at the option of the Investor, exercisable in its sole and
absolute discretion by written notice to the Company at any time before the
Periodic Amount is paid, all or a portion of the Periodic Amount shall be paid
by the issuance of additional shares of Common Stock to the Investor ("Payment
Shares") in an amount equal to the Periodic Amount being paid thereby divided by
the then applicable Conversion Price; provided, further that the delivery date
for the Payment Shares shall be three (3) business days after the date the
Investor gives the notice contemplated by this subparagraph.
(vi) The parties acknowledge that the damages which may be incurred by the
Investor if the Registration Statement is not filed by the Required Filing Date
or the Registration Statement has not been declared effective by a Required
Effective Date, including if the right to sell Registrable Securities under a
previously effective Registration Statement is suspended or the shares of the
Company's stock are not listed on the Principal Trading Market, may be difficult
to ascertain. The parties agree that the amounts payable pursuant to the
foregoing provisions of this Section 2(b) represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages.
(vii) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the
filing or effectiveness of the Registration Statement occurs because of an act
of, or a failure to act or to act timely by the Initial Investor or its counsel.
(viii) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after the Required Filing Date, the Required Effective Date or
a Restricted Sale Date, as the case may be, or (2) the date after the Required
Filing Date, the Required Effective Date or Restricted Sale Date on which the
Registration Statement is filed (with respect to payments due as contemplated by
Section 2(b)(i) hereof) or is declared effective or has its restrictions removed
or the shares of the Company's stock are listed on the Principal Trading Market
(with respect to payments due as contemplated by Section 2(b)(ii) hereof), as
the case may be, and (B) each date which is the earlier of (1) thirty (30) days
after the previous Computation Date or (2) the date after the previous
Computation Date on which the Registration Statement is filed (with respect to
payments due as contemplated by Section 2(b)(i) hereof) or is declared effective
or has its restrictions removed or the shares of the Company's stock are listed
on the Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be.
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(ix) Anything in the preceding provisions of this Section 2(b) to the
contrary notwithstanding, if, but only if, the Registration Statement is
declared effective within thirty (30) days following the Initial Required
Effective Date,
(A) the provisions of Section 2(b)(i) shall not apply; and
(B) the provisions of Section 2(b)(ii) shall not apply to the fact
that the Registration Statement was initially declared effective after
the Initial Required Effective Date;
and the Company will not have any obligation to pay any Periodic Amount to the
Investor with respect thereto; provided, however, that the provisions of Section
2(b)(ii) shall continue to apply to all other events described therein.
(c) Subsequent Registrations. If, for any reason, the SEC does not permit
the registration of any specific component of the Registrable Securities, such
excluded Registrable Securities shall be registered by the Company at the
earliest possible time thereafter.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing Date a
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times other than during Permitted
Suspension Periods during the period (the "Registration Period") continuing
until the earlier of (i) the date when the Investors may sell all Registrable
Securities under Rule 144 without volume or other restrictions or limits (the
"Unrestricted Sale Date") or (ii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (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) 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 the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all 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 seller or sellers thereof as set forth in the
Registration Statement;
(c) Permit a single firm of counsel designated by the Initial Investors
(which, until further notice, shall be deemed to be Krieger & Prager LLP, Attn:
Samuel M. Krieger, Esq., which firm has requested to receive such notification;
each, an "Investor's Counsel") to review the Registration Statement and all
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amendments and supplements thereto a reasonable period of time (but not less
than three (3) business days) prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects.
(d )Notify each Investor and the Investor's Counsel and any managing
underwriters immediately (and, in the case of (i)(A) below, not less than three
(3) business days prior to such filing) and (if requested by any such person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall communicate with the
Investor's Counsel with regard to its proposed written responses to the comments
contemplated in clause (C) of this Section 3(d), so that, to the extent
practicable, the Investors shall have the opportunity to comment thereon;
(e) Furnish to each Investor and to Investor's Counsel (i) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one (1) copy of the Registration Statement, each preliminary
prospectus and prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a 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;
(f) As promptly as practicable after becoming aware thereof, notify each
Investor of the happening of any event of which the Company has knowledge, as a
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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 use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, 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 SEC of
a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Comply with Regulation FD or any similar rule or regulation regarding
the dissemination of information regarding the Company, and in furtherance of
the foregoing, and not in limitation thereof, not disclose to the Investor any
non-public material information regarding the Company;
(i) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing that the effectiveness of the Registration
Statement is suspended for any reason, whether due to a Potential Material Event
or otherwise, the Investors shall not offer or sell any Registrable Securities,
or engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of such notice until such Investor
receives written notice from the Company that such the effectiveness of the
Registration Statement has been restored, whether because the Potential Material
Event has been disclosed to the public or it no longer constitutes a Potential
Material Event or otherwise; provided, however, that the Company may not so
suspend the right to such holders of Registrable Securities during the periods
the Registration Statement is required to be in effect other than during a
Permitted Suspension Period (and the applicable provisions of Section 2(b) shall
apply with respect to any such suspension other than during a Permitted
Suspension Period);
(j) Use its reasonable efforts to secure and maintain the designation of
all the Registrable Securities covered by the Registration Statement on the
Principal Trading Market and the quotation of the Registrable Securities on the
Principal Trading Market;
(k )Provide a transfer agent ("Transfer Agent") and registrar, which may be
a single entity, for the Registrable Securities not later than the initial
Effective Date;
(l) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the 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 may reasonably
request, and, within five (5) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the Transfer Agent for the Registrable Securities (with copies to the
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Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel, which shall
include, without limitation, directions to the Transfer Agent to issue
certificates of Registrable Securities(including certificates for Registrable
Securities to be issued after the Effective Date and replacement certificates
for Registrable Securities previously issued) without legends or other
restrictions, subject to compliance with applicable law and other rules and
regulations, including, without limitation, prospectus delivery requirements;
and
(m) Take all other reasonable administrative steps and actions (including
the participation of Company counsel) necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement; provided, however, that the foregoing does not require
that the Company take any steps whatsoever regarding the identification or
selection of a broker to sell the Registrable Securities, the identification of
buyers of the Registrable Securities, or the negotiation of the sale terms of
the Registrable Securities.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) 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 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; and
(b) 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(f), (g) or (i)
above, such Investor will immediately discontinue 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(f), (g) or (i), 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. All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $4,500 for
the review of the initial Registration Statement (and pre-effective amendments
thereto) and $2,000 for the review of each post-effective amendment to a
Registration Statement shall be borne by the Company.
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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 and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, and each Lender
Control Person (each, an "Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact 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 Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively referred to as "Violations"). Subject to clause (b) of this Section
6, the Company shall reimburse the Investors, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses 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) shall not (I) apply to
any Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Indemnified Party 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(b) hereof; (II) be available to the extent such Claim is
based on a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company or the amendment or supplement thereto
made available by the Company; (III) be available to the extent such Claim is
based on the delivery of a prospectus by the Investor after receiving notice
from the Company under Section 3(f), (g) or (i) hereof (other than a notice
regarding the effectiveness of the Registration Statement or any amendment or
supplement thereto), or (IV) 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 or delayed. The Investor will
indemnify the Company and its officers, directors and agents (each, an
"Indemnified Party") against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement or the amendment
or supplement thereto, subject to such limitations and conditions as are
applicable to the indemnification provided by the Company to this Section 6;
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provided, however, that except where the Investor has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, such
indemnification by the Investor shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9; provided, however, that the Investor shall not obligated to make any
indemnification payment to the Company under this Section 6 unless and until
there has been a final adjudication of liability on the part of the Investor.
(b)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, as the case may be. In case
any such action is brought against any Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such Indemnified Party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such Indemnified Party
under this Section 6 for any legal or other reasonable out-of-pocket expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and reasonable out-of-pocket
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Party provided such counsel is of the
opinion that all defenses available to the Indemnified Party can be maintained
without prejudicing the rights of the indemnifying party. 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 indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
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set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
except where the seller has committed fraud (other than a fraud by reason of the
information included or omitted from the Registration Statement as to which the
Company has not given notice as contemplated under Section 3 hereof) or
intentional misconduct, contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. Reports under Securities Act and Exchange Act. With a view to making
available to Investor the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:
(a) 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 Securities Act and the Exchange Act; and
(c) until the Unrestricted Sale Date, furnish to the Investor so long as
the Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) if not available on the
SEC's EDGAR system, 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; and
(d) at the request of any Investor holding Registrable Securities (a
"Holder"), give its Transfer Agent instructions (supported by an opinion of
Company counsel, if required or requested by the Transfer Agent) to the effect
that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the shares of Registrable Securities which
the Holder proposes to sell (the "Securities Being Sold") is not less
than (1) year and (B) as to such other matters as may be appropriate
in accordance with Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that the initial Investor's Counsel shall be
deemed acceptable if not given by Company Counsel) that, based on the
Rule 144 Certificate, Securities Being Sold may be sold pursuant to
the provisions of Rule 144, even in the absence of an effective
Registration Statement,
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the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities or other Securities (such transfer or assignment being subject to the
provisions of Section 4(a) of the Securities Purchase Agreement) only if the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee and (b) the securities with respect to which such registration rights
are being transferred or assigned.
10. No Inconsistent Agreements. Except as and to the extent specifically
set forth in Schedule 10 attached hereto, neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company nor any of its
subsidiaries, on or after the date of this Agreement, enter into, any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as and to the extent specifically set forth in Schedule 10 attached
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Holders set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
11. Amendment of Registration Rights. 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 an eighty (80%) percent
interest of the Registrable Securities (as calculated by the principal of the
Unconverted Debentures then held by the Investors). Any amendment or waiver
effected in accordance with this Section 11 shall be binding upon each Investor
and the Company.
12. 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
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Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Securities Purchase Agreement, (i) if to the
Company or to the Initial Investor, to their respective address contemplated by
the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 12(b).
(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)(i) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the exclusive jurisdiction of the
federal courts whose districts encompass any part of the County of New York or
the state courts of the State of New York sitting in the County 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 coveniens, to the bringing of any such proceeding in such
jurisdictions or to any claim that such venue of the suit, action or proceeding
is improper. To the extent determined by such court, the Company shall reimburse
the Investor for any reasonable legal fees and disbursements incurred by the
Investor in enforcement of or protection of any of its rights under this
Agreement. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
(ii) The Company and the Investor acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(e) The Company and the Investor hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other in respect of any matter arising out of or in connection with
this Agreement or any of the other Transaction Agreements.
(f) 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 or the validity or
enforceability of this Agreement in any other jurisdiction.
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(g) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more 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 telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(k) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
(l) This Agreement (including to the extent relevant the provisions of
other Transaction Agreements) constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings 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.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
CONSPIRACY ENTERTAINMENT HOLDINGS, INC.
By: _________________________________
Name: ______________________________
Title: _______________________________
INITIAL INVESTOR:
____________________________________
[Print Name of Initial Investor]
By: _________________________________
Name: ______________________________
Title: _______________________________
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