Exhibit 10.35
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of September 3, 1999, among Entertainment Boulevard, Inc., a
Nevada corporation (the "CORPORATION"), and the purchasers whose names appear
on the signature page hereof. Such purchasers are each referred to herein
individually as a "PURCHASER" and are collectively referred to herein as the
"PURCHASERS."
This Agreement is being entered into pursuant to the Securities
Purchase Agreement, dated as of the date hereof among the Corporation and the
Purchasers (the "PURCHASE AGREEMENT").
The Corporation and the Purchasers hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"ADVICE" shall have meaning set forth in Section 3(m).
"AFFILIATE" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "CONTROL,"
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms of "AFFILIATED," "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
"BOARD" shall have meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Corporation's Common Stock, $0.001 par
value per share.
"EFFECTIVENESS DATE" means with respect to the Registration
Statement the 120th day following the Closing Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2.
"EVENT" shall have the meaning set forth in Section 7(e).
"EVENT DATE" shall have the meaning set forth in Section 7(e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the 60th business day following the Closing
Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Common Stock issuable
upon conversion of the Securities; PROVIDED, HOWEVER, that Registrable
Securities shall include (but not be limited to) a number of shares of Common
Stock equal to no less than 200% of the maximum number of shares of Common
Stock which would be issuable upon conversion of the Securities, assuming
such conversion occurred either (i) on the Closing Date or (ii) the Filing
Date, whichever date would produce a greater number of Registrable
Securities. Such registered shares of Common Stock shall be allocated among
the Holders pro rata based on the total number of Registrable Securities
issued or issuable as of each date that a Registration Statement, as amended,
relating to the resale of the Registrable Securities is declared effective by
the
-2-
Commission. Notwithstanding anything herein contained to the contrary, if the
actual number of shares of Common Stock issuable upon conversion of the
Securities exceeds 200% of the number of shares of Common Stock issuable upon
conversion of the Securities based upon a computation as at the Closing Date
or the Filing Date, the term "Registrable Securities" shall be deemed to
include such additional shares of Common Stock.
"REGISTRATION STATEMENT" means the registration statements and any
additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES" means the 8% Mandatorily Convertible Series A
Preferred Stock, stated value $1,000 per share, and the Additional Securities
of the Corporation issued to the Purchasers pursuant to the Purchase
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Corporation pursuant to Section 4.
2. SHELF REGISTRATION.
On or prior to the Filing Date the Corporation shall prepare and
file with the Commission a "shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-1 (or
other applicable form), which may be converted to a Registration Statement on
Form S-3 upon the Corporation's meeting the eligibility requirements for Form
S-3. The Corporation shall (i) not permit any securities other than the
Registrable Securities (and those listed in SCHEDULE 2.1(s) of the Purchase
Agreement) to be included in the Registration Statement and (ii) use its best
efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as possible after the filing thereof, but in
any event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until such date as
is the earlier of (x) the date when all Registrable Securities
-3-
covered by such Registration Statement have been sold or (y) the date on
which the Registrable Securities may be sold without any restriction pursuant
to Rule 144(k) as determined by the counsel to the Corporation pursuant to a
written opinion letter, addressed to the Corporation's transfer agent to such
effect (the "EFFECTIVENESS PERIOD"). If an additional Registration Statement
is required to be filed because the actual number of shares of Common Stock
into which the Securities are convertible exceeds the number of shares of
Common Stock initially registered in respect of the Underlying Shares based
upon the computation on the Closing Date, the Corporation shall have fifteen
(15) Business Days to file such additional Registration Statement, and the
Corporation shall use its best efforts to cause such additional Registration
Statement to be declared effective by the Commission as soon as possible, but
in no event later than sixty (60) days after filing.
3. REGISTRATION PROCEDURES.
In connection with the Corporation's registration obligations
hereunder, the Corporation shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-1 (or other applicable form)
in accordance with the method or methods of distribution thereof as specified
by the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that not less than ten (10) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Corporation shall (i) furnish to the
Holders and any Special Counsel, copies of all such documents proposed to be
filed, which documents (other than those incorporated by reference) will be
subject to the review of such Holders and such Special Counsel within five
(5) days of receipt, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Corporation shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities or any Special Counsel,
shall reasonably object in writing within seven (7) Business Days of their
receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare
and file with the Commission such additional Registration Statements in order
to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as possible
to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as possible provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to
-4-
the Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and
any Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) 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) when the Commission notifies the Corporation
whether there will be a "review" of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement and (C)
with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or
supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission 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 and warranties
of the Corporation contained in any agreement contemplated hereby ceases to
be true and correct in all material respects; (v) of the receipt by the
Corporation 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
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 the light of the circumstances under which they were made, not
misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Corporation reasonably agrees should be included therein and (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Corporation has received
notification of the matters to be incorporated in such prospectus supplement
or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including
-5-
financial statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with
the Commission.
(g) Promptly deliver to each Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request; and the Corporation hereby consents to the
use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto provided such use is in compliance with applicable federal
and state securities laws.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling
Holders, and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration
Statement; PROVIDED, HOWEVER, that the Corporation shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or subject
the Corporation to any material tax in any such jurisdiction where it is not
then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to be sold pursuant to a Registration Statement, which certificates shall be
free of all restrictive legends, and to enable such Registrable Securities to
be in such denominations and registered in such names as any Holders may
request at least two (2) Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document
so that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on The OTC Bulletin
Board and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued
by the Corporation are then listed as and when required pursuant to the
Purchase Agreement.
-6-
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its
security holders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 not later than 45 days after the end
of any 12-month period (or 90 days after the end of any 12-month period if
such period is a fiscal year) commencing on the first day of the first fiscal
quarter of the Corporation after the effective date of the Registration
Statement, which statement shall conform to the requirements of Rule 158.
(m) The Corporation may require each selling Holder to furnish
to the Corporation within ten (10) days of receipt of request information
regarding such Holder and the distribution of such Registrable Securities as
is required by law to be disclosed in the Registration Statement, and the
Corporation may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Corporation, then such
Holder shall have the right to require (if such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar
federal statute then in force) the deletion of the reference to such Holder
in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Corporation that such Registration Statement
and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) it and its officers, directors or
Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Corporation of the
occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder's receipt of the copies of the supplemented Prospectus
and/or amended Registration Statement contemplated by Section 3(j), or until
it is advised in writing (the "ADVICE") by the Corporation that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration
Statement.
(n) If (i) there is material non-public information regarding
the Corporation which the Corporation's Board of Directors (the "BOARD")
reasonably determines not to be in the Corporation's best interest to
disclose and which the Corporation is not otherwise required to disclose, or
(ii) there is a significant business opportunity (including, but not limited
to, the acquisition or disposition of assets (other than in the ordinary
course of business) or any merger,
-7-
consolidation, tender offer or other similar transaction) available to the
Corporation which the Board reasonably determines not to be in the
Corporation's best interest to disclose, then the Corporation may postpone or
suspend use of the Registration Statement for a period not to exceed 20
consecutive days, provided that the Corporation may not postpone or suspend
its obligation under this Section 3(n) for more than 45 days in the aggregate
during any 12-month period; PROVIDED, HOWEVER, that no such postponement or
suspension shall be permitted for consecutive 20 day periods, arising out of
the same set of facts, circumstances or transactions.
4. REGISTRATION EXPENSES.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Corporation shall be borne by the Corporation
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (A) with respect to
filings required to be made with The OTC Market and each other securities
exchange or market on which Registrable Securities are required hereunder to
be listed, (B) with respect to filings required to be made with the National
Association of Securities Dealers, Inc. and the NASD Regulation, Inc. and (C)
in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection
with Blue Sky qualifications of the Registrable Securities and determination
of the eligibility of the Registrable Securities for investment under the
laws of such jurisdictions as Holders of a majority of Registrable Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the Holders of a
majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Corporation and Special Counsel for the
Holders, in the case of the Special Counsel, to a maximum amount of $5,000,
(v) Securities Act liability insurance, if the Corporation so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Corporation in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation, the
Corporation's independent public accountants (incuding the expenses of any
comfort letters or costs associated with the delivery by independent public
accountants of a comfort letter or comfort letters). In addition, the
Corporation shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.
-8-
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE CORPORATION. The Corporation shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents, brokers (including
brokers who offer and sell Registrable Securities as principal as a result of
a pledge or any failure to perform under a margin call of Common Stock),
investment advisors and employees of each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that such
untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Corporation by such Holder expressly
for use therein, which information was reasonably relied on by the
Corporation for use therein or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto. The Corporation
shall notify the Holders promptly of the institution, threat or assertion of
any Proceeding of which the Corporation is aware in connection with the
transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Corporation, the directors,
officers, agents and employees, each Person who controls the Corporation
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses, as incurred, arising solely out of or based solely
upon any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or arising solely out
of or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such Holder to the Corporation
specifically for inclusion in the Registration Statement or such Prospectus
and that such information was reasonably relied upon by the Corporation for
use in the Registration Statement, such Prospectus or such form of prospectus
or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use
in the Registration Statement, such Prospectus or such form of Prospectus.
-9-
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the reasonable fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses; or (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and
to employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (3) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided,
that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall
-10-
contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
6. RULE 144.
As long as any Holder owns Securities or Underlying Shares, if the
Corporation is not required to file reports pursuant to Section 13(a) or
15(d) of the Exchange Act, it will promptly prepare and promptly furnish to
the Holders and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been
made under the Exchange Act. As long as any Holder owns Securities or
Underlying Shares, the Corporation covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all reports required to be filed by the Corporation pursuant to Section 13(a)
or 15(d) of the Exchange Act after the date it becomes subject to the
reporting requirements of Section 13(a) or 15(d) of the Exchange Act. The
Corporation further covenants that it will promptly take such further action
as any Holder may reasonably request, all to the extent required from time to
time to enable such Person to sell Underlying Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including providing any legal
opinions referred to in the Purchase Agreement. Upon the request of any
Holder, the Corporation shall deliver to such
-11-
Holder a written certification of a duly authorized officer as to whether it
has complied with such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Corporation or by
a Holder, of any of their obligations under this Agreement, each Holder or
the Corporation, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Corporation and each Holder agree that monetary
damages would not provide adequate compensation for any losses incurred by
reason of a breach by it of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a
remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Corporation nor any
of its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Corporation or 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
disclosed in SCHEDULE 2.1(s) of the Purchase Agreement, neither the
Corporation nor any of its subsidiaries has previously entered into any
agreement currently in effect 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 Corporation shall not grant
to any Person the right to request the Corporation to register any securities
of the Corporation 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 with the provisions of this
Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. Neither the Corporation nor
any of its security holders (other than the Holders in such capacity pursuant
hereto or as disclosed in SCHEDULE 2.1(s) of the Purchase Agreement and Xxxx
Xxxx XxXxxxx Clearing Corporation) may include securities of the Corporation
in the Registration Statement, and the Corporation shall not after the date
hereof enter into any agreement providing such right to any of its security
holders, unless the right so granted is subject in all respects to the prior
rights in full of the Holders set forth herein, and is not otherwise in
conflict with the provisions of this Agreement.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not
an effective Registration Statement covering Underlying Shares, the
Corporation shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Corporation shall send to each Holder of Registrable Securities
written notice of such determination and, if within thirty (30) days after
receipt of such notice, any such Holder shall so
-12-
request in writing, (which request shall specify the Registrable Securities
intended to be disposed of by the Purchasers), the Corporation will cause the
registration under the Securities Act of all Registrable Securities which the
Corporation has been so requested to register by the Holder, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered, provided that if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Corporation shall determine for any reason not to register or to delay
registration of such securities, the Corporation may, at its election, give
written notice of such determination to such Holder and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities being registered pursuant to this Section 7(d) for the same period
as the delay in registering such other securities. The Corporation shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; PROVIDED, HOWEVER, that the
Corporation shall not be required to register any Registrable Securities
pursuant to this Section 7(d) that are eligible for sale pursuant to Rule
144(k) of the Securities Act. In the case of an underwritten public offering,
if the managing underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the
Corporation after consultation with the managing underwriter(s) should
reasonably determine that the inclusion of such Registrable Securities, would
materially adversely affect the offering contemplated in such registration
statement, and based on such determination recommends inclusion in such
registration statement of fewer or none of the Registrable Securities of the
Holders, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro-rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration), if the Corporation after consultation with the
managing underwriter(s) recommends the inclusion of fewer Registrable
Securities, or (y) none of the Registrable Securities of the Holders shall be
included in such registration statement, if the Corporation after
consultation with the managing underwriter(s) recommends the inclusion of
none of such Registrable Securities; PROVIDED, HOWEVER, that if securities
are being offered for the account of other persons or entities as well as the
Corporation, such reduction shall not represent a greater fraction of the
number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(other than the Corporation).
(e) FAILURE TO FILE REGISTRATION STATEMENT. The Corporation and
the Purchasers agree that the Holders will suffer damages if the Registration
Statement is not filed on or prior to the Filing Date and not declared
effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Time or
if certain other events occur. The Corporation and the Holders further agree
that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if (A) the Registration Statement is not filed on or
prior to the Filing Date, or is not declared effective by the Commission on
or prior to the Effectiveness Date (or in the event an additional
Registration Statement is filed because the actual number of shares of Common
Stock into which the Securities are convertible exceeds the number of shares
of Common Stock initially registered is not filed and declared effective with
the time periods set forth in Section 2), or (B) the
-13-
Corporation fails to file with the Commission a request for acceleration in
accordance with Rule 12dl-2 promulgated under the Exchange Act within five
(5) Business Days of the date that the Corporation is notified (orally or in
writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or not subject to further review, or (C)
the Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities at any time prior to the expiration of the Effectiveness Period,
without being succeeded immediately by a subsequent Registration Statement
filed with and declared effective by the Commission, or (D) trading in the
Common Stock shall be suspended or if the Common Stock is delisted from The
OTC Market for any reason for more than three (3) Business Days in the
aggregate, or (E) the conversion rights of the Holders are suspended for any
reason under the Certificate of Designation, or (F) the Corporation breaches
in a material respect any covenant or other material term or condition to
this Agreement, the Certificate of Designation or the Purchase Agreement
(other than a representation or warranty contained therein) or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby, and such breach
continues for a period of thirty (30) days after written notice thereof to
the Corporation, or (G) the Corporation has breached Section 3(n) (any such
failure or breach being referred to as an "EVENT," and for purposes of
clauses (A) and (E) the date on which such Event occurs, or for purposes of
clause (B) the date on which such five day period is exceeded, or for
purposes of clause (C) after more than fifteen (15) Business Days, or for
purposes of clause (D) the date on which such three Business Day period is
exceeded, or for clause (F) the date on which such thirty day period is
exceeded, being referred to as "EVENT DATE"), the Corporation shall pay in
cash as liquidated damages to each Holder an amount equal to (i) 2.0% of the
stated value of the outstanding Shares held by such Holder plus the stated
value of any Shares that have been converted to the extent any of the
Underlying Shares issued upon such conversion have not been sold, for the
30-day period, or portion thereof, commencing on the Event Date; and (ii)
3.0% of the stated value of the outstanding Shares held by such Holder plus
the stated value of any Shares that have been converted to the extent any of
the Underlying Shares issued upon such conversion have not been sold, for
each subsequent 30-day period, or portion thereof, commencing on the 31st day
after the Event Date until the applicable Event is cured, but not to exceed a
total of 30%. Payments to be made pursuant to this Section 7(e) shall be due
and payable immediately upon demand in immediately available funds.
(f) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Corporation and each of the Holders. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least 66-2/3% of the Registrable Securities to which such
waiver or consent relates; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(g) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and
-14-
effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., New York City time, on a Business
Day, (ii) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., New York City time, on any date
and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall
be with respect to each Holder at its address set forth under its name on
SCHEDULE 1 attached hereto, or with respect to the Corporation, addressed to:
Entertainment Boulevard
0000 Xxx Xxx Xxxxxx, Xxxxx 000
Xxxxxx Xxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
or to such other address or addresses or facsimile number or numbers as any
such party may most recently have designated in writing to the other parties
hereto by such notice. Copies of notices to any Holder shall be sent to
Stroock & Stroock & Xxxxx LLP, 000 Xxxxxx Xxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, Attention: Xxxxx X. Xxxxx, Esq., Facsimile No.: (000) 000-0000.
Copies of notices to the Corporation shall be sent to Xxxxxxx, Xxxxxxxx,
Xxxx, Xxxxxxxx & Xxxxxxxx, 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxx Xxxxx, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxx, Esq., Facsimile No.:
(000) 000-0000.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Corporation may not assign this Agreement or any of its rights
or obligations hereunder without the prior written consent of each Holder.
Each Purchaser may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.
(i) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Corporation register for resale
Registrable Securities in accordance with the terms of this Agreement, shall
be automatically assignable by each Holder to any Affiliate of such Holder,
any other Holder or Affiliate of any other Holder and up to four other
assignees of all or a portion of the Shares of the Securities or the
Registrable Securities if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Corporation within a reasonable time after such assignment,
(ii) the Corporation 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, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Corporation receives
the written notice contemplated by clause (ii) of this
-15-
Section, the transferee or assignee agrees in writing with the Corporation to
be bound by all of the provisions of this Agreement, and (v) such transfer
shall have been made in accordance with the applicable requirements of the
Purchase Agreement. The rights to assignment shall apply to the Holders (and
to subsequent) successors and assigns.
(j) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(k) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law thereof.
(l) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(m) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(n) HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(o) SHARES HELD BY THE CORPORATION AND ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the
Corporation or its Affiliates (other than any Holder or transferees or
successors or assigns thereof if such Holder is deemed to be an Affiliate
solely by reason of its holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons
as of the date first indicated above.
ENTERTAINMENT BOULEVARD, INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Executive Officer
PURCHASER: H.A.A. Inc.
------------------------
By: /s/ [Illegible]
-------------------------------
Name:
Title:
PURCHASER: Beeston Investments Ltd.
------------------------
By: /s/ [Illegible]
-------------------------------
Name:
Title:
PURCHASER: Xxxxx Holdings, a
Gibraltar Company
------------------------
By: /s/ [Illegible]
-------------------------------
Name:
Title:
-17-
SCHEDULE 1
18
