Exhibit 10.3
MM COMPANIES, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 15, 2005, by and among MM Companies, Inc., a
Delaware corporation (the "Company"), on the one hand, and Xxxxxx Xxxxxxx
("GF") and Xxxxxx Xxxxxxx Productions, Inc., a Nevada corporation ("GFPI",
and together with GF, "Xxxxxxx"), on the other hand.
RECITALS
WHEREAS, concurrently with, and as a condition to, the execution and
delivery of this Agreement, GF and GFPI, on the one hand, and Xxxxxx Xxxxxxx
Ventures LLC, a Delaware limited liability company of which the Company is a
member ("GFV"), on the other hand, are entering into an assignment agreement,
in substantially the form attached hereto as Exhibit A (such agreement, the
"Assignment Agreement"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Xxxxxxx, on the one hand, and GFV, on the other hand, are entering
into a subscription agreement, in substantially the form attached hereto as
Exhibit B (such agreement, the "Subscription Agreement"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, each of GF and GFPI is executing and delivering that certain
limited liability company agreement of GFV, in substantially the form
attached hereto as Exhibit C (such agreement, the "Operating Agreement"); and
WHEREAS, pursuant to the Subscription Agreement, GFV is issuing to
Xxxxxxx, as consideration for the rights granted pursuant to the Assignment
Agreement, Membership Interests (as defined in the Operating Agreement) of
GFV having the rights set forth in the Operating Agreement (the Membership
Interests issued pursuant to the Subscription Agreement, the "Xxxxxxx
Interests"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Xxxxxxx, GFV and the Company are entering into an investor rights
agreement, in substantially the form attached hereto as Exhibit D (such
agreement, the "Investor Rights Agreement");
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. REGISTRATION; COMPLIANCE WITH THE SECURITIES ACT.
(a) Demand Registration.
(i) Demand. At any time after the date of this Agreement, Xxxxxxx
may, upon written request to the Company, demand that the Company effect a
registration under the Securities Act (the "Demand Registration") covering not
less than four percent (4%) of the shares of common stock of the Company, par
value $0.01 per share ("Common Stock"), into
which the Xxxxxxx Interests are exchangeable pursuant to the Investor Rights
Agreement (all of such shares, the "Xxxxxxx Shares"), and the Company will use
its commercially reasonable efforts to effect, as expeditiously as possible,
the filing of a registration statement (a "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), and the
registration under the Securities Act of the Xxxxxxx Shares which the Company
has been so requested to register by Xxxxxxx; provided, however, that the
Company shall not be obligated to effect more than one (1) Demand Registration
in any six-month period, nor more than three (3) Demand Registrations in
total, pursuant to this Section 1(a)(i).
The Company may, at its option, choose to file a
Registration Statement covering more than the number of Xxxxxxx Shares
requested to be registered in any such Demand Registration, or to maintain
any such Registration Statement in effect for more than six months, or both.
(ii) Xxxxxxx may, at any time prior to the effective date of the
Registration Statement relating to the Demand Registration, revoke such
request by providing a written notice to the Company revoking such request. A
registration requested pursuant to this Section 1(a) shall not be deemed to
have been effected unless a Registration Statement with respect thereto has
become effective; provided, however, that if such registration does not become
effective after the Company has filed the Registration Statement with respect
thereto solely by reason of Xxxxxxx'x refusal to proceed (other than a refusal
to proceed based upon the advice of counsel relating to a matter with respect
to the Company), then such registration shall be deemed to have been effected
unless Xxxxxxx shall have elected to pay all of the Company's reasonable
expenses in connection with such registration.
(iii) Effectiveness of Registration Statement. The Company agrees
to use its commercially reasonable best efforts to (x) cause the Registration
Statement relating to the Demand Registration to become effective as promptly
as practicable following a request for registration under Section 1(a); and
(y) thereafter keep such Registration Statement effective continuously for the
period specified in the next succeeding paragraph.
(iv) Except as provided in the last sentence of Section 1(a)(ii)
above, the Demand Registration will not be deemed to have been effected unless
the Registration Statement relating thereto has become effective under the
Securities Act and remained continuously effective (except as otherwise
permitted under this Agreement) for a period ending on the earlier of (i) the
date which is six months after the effective date of such Registration
Statement and (ii) the date on which all Xxxxxxx Shares covered by such
Registration Statement have been sold and the distribution contemplated
thereby has been completed.
(v) Inclusion of Other Securities; Cutback. The Company, and any
other holder of the Common Stock who has registration rights, may include its
Common Stock in the Demand Registration effected pursuant to this Section
1(a); provided, however, that if the managing underwriter of a proposed
underwritten offering contemplated thereby advises Xxxxxxx in writing that the
total amount or kind of securities to be included in such proposed public
offering is sufficiently large or of a type which such managing underwriter
believes would materially adversely affect the success of the proposed public
offering requested by Xxxxxxx, then the amount or kind of securities offered
for the account of the following groups of holders
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shall be reduced pro rata among members of such group in accordance with such
managing underwriter's recommendation in the following order of priority (with
the securities to be reduced first listed first): (1) securities other than
Xxxxxxx Shares, (2) securities offered by the Company, and (3) Xxxxxxx Shares;
provided that no Xxxxxxx Shares shall be reduced until all securities other
than Xxxxxxx Shares and securities offered by the Company are entirely
excluded from the underwriting.
(b) Piggyback Registration.
(i) If the Company at any time proposes to file a Registration
Statement under the Securities Act with respect to any class of equity
securities for its own account (other than in connection with (x) a
registration statement on Form S-4 or S-8 (or any successor or substantially
similar form), (y) an employee stock option, stock purchase, compensation,
incentive or similar plan or securities issued or issuable pursuant to any
such plan, or (z) a dividend reinvestment plan), other than for the
registration of securities for sale on a continuous or delayed basis pursuant
to Rule 415, or for the account of any other holder exercising registration
rights, then the Company shall in each case give written notice of such
proposed filing to Xxxxxxx at least fifteen (15) days before the anticipated
filing date of any such Registration Statement by the Company, and such notice
shall offer to Xxxxxxx the opportunity to have any or all of the Xxxxxxx
Shares held by Xxxxxxx included in such Registration Statement. If Xxxxxxx
desires to have Xxxxxxx Shares registered under this Section 1(b), Xxxxxxx
shall so advise the Company in writing within ten (10) days after the date
such notice is given (which request shall set forth the amount of Xxxxxxx
Shares for which registration is requested), and the Company shall use its
commercially reasonable best efforts to include in such Registration Statement
all such Xxxxxxx Shares so requested to be included therein.
(ii) Notwithstanding the foregoing, if the managing underwriter
or underwriters of any proposed public offering of securities subject to any
such Registration Statement advise the Company that the total amount or kind
of securities which Xxxxxxx, the Company and any other persons or entities
intended to be included in such proposed public offering is sufficiently large
to adversely affect the success of such proposed public offering, then the
amount or kind of securities to be offered for the account of Xxxxxxx shall be
allocated first to the Company and any holder of securities including
securities in such Registration Statement pursuant to the exercise of demand
registration rights (a "Requesting Securityholder"), then reduced pro rata,
together with the amount or kind of securities to be offered for the accounts
of any other persons requesting registration of securities pursuant to rights
similar to the rights of Xxxxxxx under this Section 1(b), to the extent
necessary to reduce the total amount or kind of securities to be included in
such proposed public offering to the amount or kind recommended by such
managing underwriter or underwriters before the securities offered by the
Company or any Requesting Securityholder are so reduced. Anything to the
contrary in this Agreement notwithstanding, the Company may withdraw or
postpone a Registration Statement referred to herein at any time before it
becomes effective or withdraw, postpone or terminate the offering after it
becomes effective without any obligation or liability to Xxxxxxx.
(c) Company Registration. Without limiting the provisions of Sections
1(a) and 1(b), if Xxxxxxx so requests in writing, and provided that (x) Form
S-2 or S-3, or an equivalent form of the Securities and Exchange Commission
(the "SEC" or the "Commission"),
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is available and (y) counsel for the Company shall have advised the Company
that it is advisable and in the best interests of the Company that the Company
file a Registration Statement covering all of the Xxxxxxx Shares (such advice,
the "Counsel Advice"), then the Company shall use its commercially reasonable
efforts to file, within ninety (90) days following the receipt of the Counsel
Advice, a Registration Statement on such form of the Commission as selected by
the Company in its good faith, and thereafter use its commercially reasonable
efforts to cause such Registration Statement to become and remain effective
within one hundred twenty (120) days after the filing by the Company of such
Registration Statement, to permit the sale and distribution of the Xxxxxxx
Shares. The Company shall use its commercially reasonable efforts to maintain
the effectiveness of a Registration Statement filed pursuant to this Section
1(c) until all the Xxxxxxx Shares have been sold and the distribution
contemplated thereby has been completed.
(d) Registration Covenants and Conditions.
(i) In connection with its obligations under Sections 1(a), 1(b)
and 1(c), the Company will: (x) furnish to Xxxxxxx without charge, at least
one copy of any effective Registration Statement and any post-effective
amendments thereto, including financial statements and schedules, and, if
Xxxxxxx so requests in writing, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference) in the
form filed with the SEC; and (y) deliver to Xxxxxxx and the underwriters, if
any, without charge, as many copies of the then effective prospectus relating
thereto (the "Prospectus") (including each prospectus subject to completion)
and any amendments or supplements thereto as such persons may reasonably
request.
(ii) As a condition to the inclusion of the Xxxxxxx Shares,
Xxxxxxx shall furnish to the Company such information regarding Xxxxxxx and
the distribution proposed by Xxxxxxx as the Company may request in writing or
as shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
(iii) Each of GF and GFPI hereby agrees that, upon receipt of any
notice from the Company of the happening of any event that, in the good faith
judgment of the Board of Directors of the Company, requires the suspension of
Xxxxxxx'x rights under this Article 1, each of GF and GFPI will forthwith
discontinue disposition of Xxxxxxx Shares pursuant to the then current
Prospectus until Xxxxxxx is advised in writing by the Company that the use of
the Prospectus may be resumed. If the Company shall have given any such notice
during a period when a Registration Statement is in effect, the Company shall
extend the period during which such Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during which any
such disposition of Xxxxxxx Shares is discontinued pursuant to this Section
1(d)(iv). If so directed by the Company, on the happening of such event,
Xxxxxxx will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in Xxxxxxx'x possession, of the
Prospectus current at the time of receipt of such notice.
(iv) Except as otherwise set forth in this Agreement, each of GF
and GFPI hereby covenants with the Company (x) not to make any sale of the
Xxxxxxx Shares without effectively causing the prospectus delivery
requirements under the Securities Act to be
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satisfied, and (y) if such Xxxxxxx Shares are to be sold by any method or in
any transaction other than on a national securities exchange, the Nasdaq
National Market, Nasdaq SmallCap Market or in the over-the-counter market, in
privately negotiated transactions, or in a combination of such methods, to
notify the Company at least five (5) business days prior to the date on which
Xxxxxxx first offers to sell any such Xxxxxxx Shares.
(v) Each of GF and GFPI acknowledges and agrees that the Xxxxxxx
Shares sold pursuant to the Registration Statement that covers any of the
Xxxxxxx Shares pursuant to the provisions of this Agreement, including the
Prospectus included therein, all amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement, are not
transferable on the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Xxxxxxx Shares is accompanied
by a certificate reasonably satisfactory to the Company to the effect that (x)
the Xxxxxxx Shares have been sold in accordance with such Registration
Statement and (y) the requirement of delivering a current Prospectus has been
satisfied.
(vi) Neither GF nor GFPI shall take any action with respect to
any distribution deemed to be made pursuant to such Registration Statement,
which would constitute a violation of Regulation M under the Exchange Act, or
any other applicable rule, regulation or law.
(vii) Upon the expiration of the effectiveness of any
Registration Statement, Xxxxxxx shall discontinue sales of Xxxxxxx Shares
pursuant to such Registration Statement upon receipt of notice from the
Company of its intention to remove from registration the Xxxxxxx Shares
covered by such Registration Statement which remain unsold, and Xxxxxxx shall
notify the Company of the number of Xxxxxxx Shares registered which remain
unsold immediately upon receipt of such notice from the Company.
(viii) In the case of the registration of any underwritten
primary offering initiated by the Company (other than in connection with (x) a
registration statement on Form S-4 or Form S-8 (or any successor or
substantially similar form), (y) an employee stock option, stock purchase,
compensation, incentive or similar plan or of securities issued or issuable
pursuant to any such plan, or (z) a dividend reinvestment plan) or any
underwritten secondary offering initiated at the request of a holder of
securities of the Company pursuant to registration rights granted by the
Company, each of GF and GFPI agrees not to effect any public sale or
distribution of securities of the Company except as part of such underwritten
registration, during the period beginning fifteen (15) days prior to the
closing date of such underwritten offering and during the period ending ninety
(90) days after such closing date (or such longer period as may be reasonably
requested by the Company or by the managing underwriter or underwriters).
(ix) Anything to the contrary contained in this Agreement
notwithstanding, when, in the opinion of counsel for the Company, registration
of the Xxxxxxx Shares is not required by the Securities Act, in connection
with a proposed sale of such Xxxxxxx Shares, neither GF nor GFPI shall have
any rights pursuant to Section 1(a), 1(b) or 1(c). In furtherance and not in
limitation of the foregoing, neither GF nor GFPI shall have any rights
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pursuant to Section 1(a), 1(b) or 1(c) at such time as all of the Xxxxxxx
Shares may be sold in a three-month period pursuant to Rule 144 promulgated
under the Securities Act.
(e) Registration Expenses. All expenses incident to the Company's
performance of or compliance with Sections 1(a), 1(b) and 1(c) above,
including without limitation all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications
or registrations (or the obtaining of exemptions therefrom) of the Xxxxxxx
Shares), printing expenses (including expenses of printing Prospectuses),
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), fees and disbursements of its counsel and its
independent certified public accountants, securities acts liability insurance
(if the Company elects to obtain such insurance), fees and expenses of any
special experts retained by the Company in connection with any registration
hereunder and fees and expenses of other persons retained by the Company (all
such expenses being referred to as "Registration Expenses"), shall be borne by
the Company; provided that Registration Expenses shall not include any fees
and expenses of counsel for Xxxxxxx, the expenses of any special audit or
accounting review (other than a review or audit of the Company's year-end
financial statements), out-of-pocket expenses incurred by Xxxxxxx and
underwriting discounts, commissions or fees attributable to the sale of the
Xxxxxxx Shares, all of which shall be borne by Xxxxxxx.
(f) Transfer of the Xxxxxxx Shares after Registration; Suspension.
(i) Each of GF and GFPI agrees that they will not offer to sell
or make any sale, assignment, pledge, hypothecation or other transfer with
respect to the Xxxxxxx Shares that would constitute a sale within the meaning
of the Securities Act except pursuant to either (1) a Registration Statement,
(2) Rule 144 under the Securities Act or (3) any other applicable exemption
from registration under the Securities Act, and that they will promptly notify
the Company of any changes in the information set forth in the Registration
Statement after it is prepared regarding GF or GFPI or their plan of
distribution to the extent required by applicable law.
(ii) In addition to any suspension rights under paragraph (iii)
below, upon the happening of any pending corporate development, public filing
with the SEC or similar event, that, in the judgment of the Company, renders
it advisable to suspend use of the Prospectus or upon the request by an
underwriter in connection with an underwritten public offering of the
Company's securities, the Company may, on not more than three (3) occasions in
any 12-month period for not more than seventy-five (75) days on each such
occasion, suspend use of the Prospectus, on written notice to Xxxxxxx (which
notice will not disclose the content of any material non-public information
and will indicate the date of the beginning and end of the intended period of
suspension, if known), in which case Xxxxxxx shall discontinue disposition of
the Xxxxxxx Shares covered by the Registration Statement or Prospectus until
copies of a supplemented or amended Prospectus are distributed to Xxxxxxx or
until Xxxxxxx is advised in writing by the Company that sales of the Xxxxxxx
Shares under the applicable Prospectus may be resumed and have received copies
of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. The suspension and notice
thereof described in this Section 1(f)(ii) shall be held in strictest
confidence and shall not
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be disclosed by Xxxxxxx except as may be required by law or to enforce the
provisions of this Agreement, subject to the provisos in Section 1(f)(iii)
below.
(iii) Subject to Section 1(f)(iv) below, in the event of: (1) any
request by the SEC or any other federal or state governmental authority during
the period of effectiveness of the Registration Statement for amendments or
supplements to a Registration Statement or related prospectus or for
additional information, (2) the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that
purpose, (3) the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Xxxxxxx Shares for sale in any jurisdiction or the initiation of any
proceeding for such purpose, or (4) any event or circumstance which
necessitates the making of any changes in the Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein
by reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or any omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, then the Company shall deliver a certificate in writing
to Xxxxxxx (the "Suspension Notice") to the effect of the foregoing (which
notice will not disclose the content of any material non-public information
and will indicate the date of the beginning and end of the intended period of
suspension, if known), and, upon receipt of such Suspension Notice, Xxxxxxx
will discontinue disposition of the Xxxxxxx Shares covered by to the
Registration Statement or Prospectus (a "Suspension") until Xxxxxxx'x receipt
of copies of a supplemented or amended Prospectus prepared and filed by the
Company, or until Xxxxxxx is advised in writing by the Company that the
current Prospectus may be used, and have received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such prospectus. In the event of any Suspension, the Company will use
its commercially reasonable efforts to cause the use of the Prospectus so
suspended to be resumed as soon as possible after delivery of a Suspension
Notice to Xxxxxxx. The Suspension and Suspension Notice described in this
Section 1(f)(iii) shall be held in strictest confidence and shall not be
disclosed by Xxxxxxx; provided, however, that if either GF or GFPI is
requested or ordered to disclose information relating to any such Suspension
Notice pursuant to any court or other governmental order or any other
applicable legal procedure, he or it shall provide the Company with reasonably
prompt notice of any such request or order to enable the Company to seek an
appropriate protective order or other remedy and shall provide the Company
with reasonable assistance in obtaining such protective order or other remedy
at the Company's sole expense; and provided further that, in the event that no
such protective order or other remedy is obtained or in the event of a
proceeding to enforce the provisions of this Agreement, GF or GFPI, as the
case may be, shall furnish only that portion of the information which he or it
is advised by counsel is legally required and shall exercise all reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded the information so furnished.
(iv) So long as a Suspension is not then in effect, Xxxxxxx may
sell the Xxxxxxx Shares under the effective Registration Statement so long as
such sale is also in compliance with applicable law.
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(v) In the event of a sale of Xxxxxxx Shares by Xxxxxxx, Xxxxxxx
must also deliver to the Company's transfer agent, with a copy to the Company,
a certificate of subsequent sale reasonably satisfactory to the Company, so
that ownership of Xxxxxxx Shares may be properly transferred. The Company will
cooperate to facilitate the timely preparation and delivery of certificates
(unless otherwise required by applicable law) representing the Xxxxxxx Shares
sold.
(g) Indemnification. For the purpose of this Section 1(g), the term
"Registration Statement" shall include any preliminary or final Prospectus,
exhibit, supplement or amendment included in or relating to a Registration
Statement referred to in Section 1(a), 1(b) or 1(c) hereof.
(i) Indemnification by the Company. The Company agrees to
indemnify and hold harmless Xxxxxxx and Xxxxxxx'x agents to the fullest extent
permitted by law, against any and all losses, claims, damages, liabilities or
expenses, joint or several, to which Xxxxxxx and such agents may become
subject under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state in any of them a material fact required to be stated therein or
necessary to make the statements in any of them, in light of the circumstances
under which they were made, not misleading, and will reimburse Xxxxxxx and
Xxxxxxx'x agents for any reasonable legal and other expenses as such
reasonable expenses are incurred by Xxxxxxx or such agent in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, liability, expense or action arises out of or is based upon (1)
an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, the Prospectus or any amendment
to or supplement of the Registration Statement or Prospectus made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of GF or GFPI expressly for use in the Registration Statement or the
Prospectus, (2) the failure of GF or GFPI to comply with the covenants and
agreements contained in this Agreement respecting resale of the Purchased
Shares or the sale of the Underlying Shares, or (3) any untrue statement or
omission of a material fact required to make such statement not misleading in
any Prospectus that is corrected in any subsequent Prospectus that was
delivered to Xxxxxxx before the pertinent sale or sales by Xxxxxxx.
(ii) Indemnification by Xxxxxxx. Each of GF and GFPI will
severally and not jointly indemnify and hold harmless the Company, each of its
directors, officers, agents and employees, and each person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages, liabilities or expenses to which the Company, its
directors, officers, agents and employees, or any controlling persons may
become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or
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regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of
Xxxxxxx, which consent shall not be unreasonably withheld) insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement to the Registration
Statement or Prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of GF or GFPI expressly for use therein, and
each of GF and GFPI will reimburse the Company, each of its directors,
officers, agents and employees, and any controlling persons for any reasonable
legal and other expense incurred by the Company, its directors, officers,
agents and employees, and any controlling persons, in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that GF or
GFPI shall not be liable for any such untrue or alleged untrue statement or
omission or alleged omission with respect to which GF or GFPI has delivered to
the Company in writing a correction before the occurrence of the event from
which such loss was incurred. Notwithstanding the provisions of this Section
1(g), GF or GFPI shall not be liable for any indemnification obligation under
this Agreement in excess of the aggregate amount of net proceeds received by
Xxxxxxx from the sale of Xxxxxxx Shares pursuant to the Registration
Statement.
(iii) Indemnification Procedure.
(1) Promptly after receipt by an indemnified party under
this Section 1(g) of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 1(g), promptly notify the indemnifying
party in writing of the claim; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party for contribution or otherwise under the indemnity agreement
contained in this Section 1(g) or otherwise, to the extent it is not
prejudiced as a result of such failure.
(2) In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled
to participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however,
that, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be a conflict between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it or other
indemnified parties that are different from or additional to those available
to the indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to
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assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 1(g) for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless:
(A) the indemnified party shall have employed such counsel
in connection with the assumption of legal defenses in accordance with the
proviso to the preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by such indemnifying party, representing all of the
indemnified parties who are parties to such action); or
(B) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action
against the indemnified party;
in each of which cases the reasonable fees and expenses of counsel for the
indemnified party shall be at the expense of the indemnifying party.
(iv) Contribution. If the indemnification provided for in this
Section 1(g) is required by its terms but is for any reason held to be
unavailable to, or is otherwise insufficient to hold harmless, an indemnified
party under this Section 1(g) with respect to any losses, claims, damages,
liabilities or expenses referred to in this Agreement, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred
to in this Agreement:
(1) in such proportion as is appropriate to reflect the
relative faults of the Company and Xxxxxxx in connection with the statements
or omissions or inaccuracies in the representations and warranties in this
Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations, or
(2) if the allocation provided by clause (1) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative faults referred to in clause (1) above but the relative
benefits received by the Company and Xxxxxxx from the issuance of the Xxxxxxx
Shares.
The relative faults of the Company and Xxxxxxx shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact or the inaccurate or the alleged inaccurate material fact
relates to information supplied by the Company or by Xxxxxxx and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses referred
to above shall be deemed to include, subject to the limitations set forth in
Section 1(g)(iii) hereof, any reasonable legal or other fees or expenses
incurred by such party in connection with investigating or defending any such
action or claim. The provisions set forth in Section 1(g)(iii) hereof with
respect to the notice of the threat or commencement of any threat or action
shall apply if a claim for contribution is to be made under this Section
1(g)(iv); provided, however, that no additional notice shall be required with
respect
10
to any threat or action for which notice has been given under Section
1(g)(iii) hereof for purposes of indemnification. The Company and Xxxxxxx
agree that it would not be just and equitable if contribution pursuant to this
Section 1(g)(iv) were determined solely by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in this paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
(h) Rule 144 Information. For two years after the date of this
Agreement, the Company shall file in a timely manner all reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder and shall take such further action to the
extent required to enable Xxxxxxx to sell the Xxxxxxx Shares pursuant to Rule
144 under the Securities Act (as such rule may be amended from time to time).
2. CONTINGENT ADDITIONAL SHARES. Unless the Market Capitalization (as
defined below) of the Company shall have equaled or exceeded $20,000,000 on
any one or more occasions prior to the third anniversary of the date hereof,
then, promptly after such third anniversary date, the Company shall, promptly
following the written request of Xxxxxxx, cause to be issued to Xxxxxxx one
hundred (100) shares of a new series of preferred stock of the Company, having
an aggregate liquidation preference of $1,000,000, bearing dividends at a rate
of eight percent (8%) per annum, redeemable at the option of the holder three
years from the date of issuance, and otherwise on substantially the terms set
forth in Exhibit E attached hereto; provided, however, that the Company shall
have no obligation to cause such preferred stock to be issued to Xxxxxxx upon
such written request in the event that, on or prior to such third anniversary
date, (i) either GF or GFPI shall have been in material breach of his or its
obligations, representations or warranties under the Assignment Agreement or
that certain agreement, dated as of the date hereof, by and between the
Company and GFPI (the "Services Agreement") and (ii) such breach, if
susceptible of cure, shall not have been cured by GF or GFPI, as appropriate.
For purposes hereof, "Market Capitalization" means, as of any date, the amount
equal to the average, over the preceding ten (10) trading days, of the result
obtained by multiplying (x) the number of shares of Common Stock issued and
outstanding as of such trading day by (y) the higher of the daily closing sale
price or bid price on such trading day of the Common Stock (as reported on the
principal securities exchange or quotation system on which the Common Stock is
then listed or admitted for trading).
3. MISCELLANEOUS.
(a) Successors and Assigns; Assignment. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by the
Company, on the one hand, or Xxxxxxx, on the other hand, without the prior
written consent of the other party; provided, however, that GF and GFPI can
assign their rights hereunder to their respective Permitted Transferees (as
such term is defined in the Investor Rights Agreement), if such Permitted
Transferee shall have executed and delivered to the Company an instrument
pursuant to which the transferee will have agreed to be bound by all of the
terms of this Agreement applicable to the transferor.
11
(b) Governing Law; Arbitration. This Agreement will be governed by
and construed and enforced under the internal laws of the State of New York,
without reference to principles of conflict of laws or choice of laws. Any
controversy or claim arising under, out of, or in relation to this Agreement
or any breach or alleged breach hereof, shall be determined and settled by
arbitration, pursuant to the rules then obtaining of the American Arbitration
Association (the "AAA"), and the procedures set forth herein. In the event of
an inconsistency between the rules of the AAA and the procedures set forth
herein, the procedures set forth herein shall control. The location of the
arbitration shall be in New York, New York. The arbitration shall be conducted
by a panel of three (3) neutral arbitrators who are independent and
disinterested with respect to the parties, the Agreement, and the outcome of
the arbitration. The parties shall first attempt to select mutually the three
(3) arbitrators. If no agreement can be reached by the parties within thirty
(30) days of the filing of the demand for arbitration, then each party shall
select one (1) arbitrator and the two (2) arbitrators thus selected shall then
select the third arbitrator. If any vacancy occurs in the board of arbitrators
appointed hereunder by reason of death, resignation, refusal to act, physical
incapacity or otherwise, a new arbitrator shall be appointed in the same
manner and by the same party or arbitrators, as applicable, by whom the
previous incumbent was appointed. The arbitrators shall be instructed and
directed to assume case management initiative and control over the arbitration
process (including, without limitation, scheduling of events, prehearing
discovery and activities, and the conduct of the hearing), in order to
complete the arbitration as expeditiously as is reasonably practical for
obtaining a just resolution of the dispute. Each party shall bear its own
expenses in connection with the arbitration, and shall share equally in the
payment of the arbitrators' fees as and when billed by the arbitrators, unless
the arbitrators rule otherwise. Such determination by the two (2) of the three
(3) arbitrators shall be final, binding and conclusive upon the parties hereto
and shall be rendered in such form that it may be judicially confirmed under
the laws of the State of New York. The parties hereto expressly consent to the
exclusive jurisdiction of the courts in New York County to enforce any award
of the arbitrators.
(c) Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Signed facsimile copies
of this Agreement will legally bind the parties to the same extent as original
documents.
(d) Headings. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to articles,
sections, paragraphs, exhibits and schedules will, unless otherwise provided,
refer to articles, sections and paragraphs hereof and exhibits and schedules
attached hereto, all of which exhibits and schedules are incorporated herein
by reference.
(e) Notices. Any notices and other communications required or
permitted under this Agreement shall be in writing and shall be delivered (i)
personally by hand or by courier, (ii) mailed by United States first-class
mail, postage prepaid or (iii) sent by facsimile directed (x) if to Xxxxxxx,
at Xxxxxxx'x address or facsimile number set forth below, or at such address
or facsimile number as Xxxxxxx may designate by giving at least ten (10) days'
advance written notice to the Company or (y) if to the Company, to its address
or facsimile number set forth below, or at such other address or facsimile
number as the Company may designate by giving at least ten (10) days' advance
written notice to Xxxxxxx. All such notices and other
12
communications shall be deemed given upon (i) receipt or refusal of receipt,
if delivered personally, (ii) three (3) days after being placed in the mail,
if mailed, or (iii) confirmation of facsimile transfer, if faxed.
The address of Xxxxxxx for the purpose of this Section 3(e) is as
follows:
Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx Productions, Inc.
[ADDRESS]
Facsimile:
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
The address of the Company for the purpose of this Section 3(e) is as
follows:
MM Companies, Inc.
000 X. Xxxxxx-Xxxxx Blvd., 4th Floor
Xxxxxx-Xxxxx, Pennsylvania 18702
Facsimile:
with a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(f) Amendments and Waivers. This Agreement may be amended and the
observance of any term of this Agreement may be waived only with the written
consent of the Company and Xxxxxxx. Any amendment effected in accordance with
this Section 3(f) will be binding upon the Company, Xxxxxxx and their
respective successors and assigns.
(g) Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its
terms.
(h) Entire Agreement. This Agreement, together with the Assignment
Agreement, the Services Agreement, the Subscription Agreement, the Operating
Agreement, and the Investor Rights Agreement, and
13
all exhibits and schedules hereto and thereto, constitutes the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties with
respect to the subject matter hereof.
(i) Further Assurances. From and after the date of this Agreement,
upon the request of the Company or Xxxxxxx, the Company and Xxxxxxx will
execute and deliver such instruments, documents or other writings, and take
such other actions, as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.
(j) Negotiated Agreement. Each of the Company, GF and GFPI
acknowledges that it or he has been advised and represented by counsel in the
negotiation, execution and delivery of this Agreement and accordingly agrees
that if an ambiguity exists with respect to any provision of this Agreement,
such provision shall not be construed against any party because such party or
such party's representatives drafted such provision.
(k) Meaning of Include and Including. Whenever in this Agreement the
word "include" or "including" is used, it shall be deemed to mean "include,
without limitation" or "including, without limitation," as the case may be,
and the language following "include" or "including" shall not be deemed to set
forth an exhaustive list.
(l) Equitable Remedies. Notwithstanding the provisions of Section
3(b) hereof, in the event of (x) a breach of this Agreement or (y) a failure
of a party to perform any of its or his obligations under this Agreement, and,
in either case, money damages would not be adequate compensation for the
damages that the other party would suffer by reason of such breach or failure,
each party hereto agrees that, in addition to and without limiting any other
remedy or right such party may have, the non-breaching party will have the
right to an injunction, temporary restraining order or other equitable relief
in any court of competent jurisdiction enjoining any such breach and enforcing
specifically the terms and provisions hereof. In the event of any controversy
or claim arising out of or relating to any such breach or failure, each of the
parties hereto irrevocably (a) submits to the non-exclusive jurisdiction of
any New York state court sitting in the County of New York or any federal
court sitting in U.S. District Court for the Southern District of the State of
New York, (b) waives any objection which such party may have at any time to
the laying of venue of any action or proceeding brought in any such court and
(c) waives any claim that such action or proceeding has been brought in an
inconvenient forum.
[Remainder of Page Intentionally Left Blank]
14
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date and year first above written.
MM COMPANIES, INC.
By:________________________________
Name: Xxxxx Xxxxxxxxx
Title: President
XXXXXX XXXXXXX
___________________________________
Xxxxxx Xxxxxxx
XXXXXX XXXXXXX PRODUCTIONS, INC.
By:________________________________
Name:
Title:
Exhibit A - Form of Assignment Agreement
--------- ----------------------------
Exhibit B - Form of Subscription Agreement
--------- ------------------------------
Exhibit C - Form of Operating Agreement
--------- ----------------------------
Exhibit D - Form of Investor Rights Agreement
--------- ---------------------------------
Exhibit E - Terms of the Shares of Preferred Stock Issued as Contingent
--------- -----------------------------------------------------------
Additional Shares (the "Contingent Preferred Stock")
----------------------------------------------------
Dividends: 8% per annum.
Liquidation Preference: Aggregate liquidation preference of $1,000,000.
Voting Rights: The holders of Contingent Preferred Stock shall not
be entitled to any voting rights with respect to such
Contingent Preferred Stock except as otherwise
provided by law.
Redemption: Shares of Contingent Preferred Stock are redeemable
at the option of the holders thereof three (3) years
from the date of issuance.
Conversion: The Contingent Preferred Stock shall not be
convertible into shares of Common Stock or any other
series or class of capital stock of the Company.
