ANNEX IV
TO
SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 23, 2004
(this "Agreement"), is made by and between INFINIUM LABS, INC., a Delaware
corporation with headquarters located at 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx,
XX 00000 (the "Company"), and each entity named on a signature page hereto
(each, an "Initial Investor") (each agreement with an Initial Investor being
deemed a separate and independent agreement between the Company and such Initial
Investor, except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of December 23, 2004, between the
Initial Investor and the Company (the "Securities Purchase Agreement";
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Securities Purchase Agreement), the Company has agreed to issue
and sell to the Initial Investors the Debentures and the Warrants; and
WHEREAS, the Debentures are convertible into shares of Common Stock
(the "Conversion Shares"; which term, for purposes of this Agreement, shall
include shares of Common Stock of the Company issuable in lieu of accrued
interest, as contemplated by the Debentures) upon the terms and subject to the
conditions contained in the Debentures; and
WHEREAS, the Warrant Shares may be issued upon the exercise of the
Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Registrable Securities (as defined
below);
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Company Counsel" means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, or such
other reputable law firm as may be retained by the Company from time to time.
"Effective Date" means the date the SEC declares a Registration
Statement covering Registrable Securities and otherwise meeting the conditions
contemplated hereby to be effective.
"Held Shares Value" means, for shares of Common Stock acquired by
the Investor upon a conversion of a Debenture within the twenty (20) Trading
Days (excluding any Trading Days on which the on which the Investor is
restricted from making sales of Registrable Securities covered by any previously
effective Registration Statement) preceding the Restricted Sale Date, but not
yet sold by the Investor, the principal amount of the Debentures converted into
such Conversion Shares; provided, however, that if the Investor effected more
than one such conversion during such twenty (20) Trading Day period and sold
less than all of such shares, the sold shares shall be deemed to be derived
first from the conversions in the sequence of such conversions (that is, for
example, until the number of shares from the first of such conversions have been
sold, all shares shall be deemed to be from the first conversion; thereafter,
from the second conversion until all such shares are sold).
"Investor" means the Initial Investor and any permitted transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Debentures or Registrable
Securities.
"Other Issuable Shares" means (i) the Payment Shares, if any, issued
or issuable to the Holder as of the date of the filing of the Registration
Statement and any amendment thereto or as of any subsequent date, and (ii) the
good faith estimate of the Company of the number of other Payment Shares, as the
case may be, which the Company anticipates, as of the date of the filing of the
Registration Statement and any amendment thereto or any subsequent date, will be
issuable to the Holder pursuant to the provisions of the Transaction Agreements.
"Payment Shares" means shares of Common Stock issued by the Company
as provided in Section 2(b) below.
"Permitted Suspension Period" means up to two periods during any
consecutive 12-month period during which the Holder's right to sell Registrable
Securities under the Registration Statement is suspended, each of which
suspension period shall neither (i) be for more than ten (10) days nor (ii)
begin less than ten (10) business days after the last day of the preceding
suspension (whether or not such last day was during or after a Permitted
Suspension Period).
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"Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by a determination in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company; or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time, in each case where such determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
"Registrable Securities" means, collectively, the Conversion Shares,
the Warrant Shares, the Other Issuable Shares, and, if issuable in accordance
with the terms of the Agreement, the Additional Warrant Shares.
"Registration Statement" means a registration statement of the
Company under the Securities Act covering Registrable Securities on Form SB-2,
if the Company is then eligible to file using such form, and if not eligible, on
Form S-1 or other appropriate form.
"Required Effective Date" means, initially, the Initial Required
Effective Date or the Increased Required Effective Date (as those terms are
defined below), as the case may be.
"Restricted Sale Date" means the first date, other than a date
during a Permitted Suspension Period (as defined below), on which the Investor
is restricted from making sales of Registrable Securities covered by any
previously effective Registration Statement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION.
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(i) The Company shall cause Company Counsel to prepare and file
with the SEC, as soon as practicable after the Closing Date but no later than
January 15, 2005 (the "Required Filing Date"), a Registration Statement
registering for resale by the Investor a sufficient number of shares of Common
Stock for the Initial Investors to sell the Registrable Securities.
Notwithstanding the requirement to register all Registrable Securities, the
Company's obligation to register the Registrable Securities shall initially be
satisfied by the registration of the Initial Number of Shares to Be Registered
(as defined below). The "Initial Number of Shares to Be Registered" is a number
of shares of Common Stock which is at least equal to the sum of (x) two hundred
percent (200%) of the number of shares into which the Debentures and all
dividends thereon through the Maturity Date would be convertible at the time of
filing of such Registration Statement (assuming for such purposes that all such
Debentures had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or not such
eligibility, accrual of interest or conversion had in fact occurred as of such
date), based on the Conversion Price then in effect, (y) the number of Warrant
Shares covered by the Warrants (assuming for such purposes that all the Warrants
actually issued or issuable as of the date of the filing of the Registration
Statement or any pre-effective amendment thereto had been eligible to be
exercised and had been exercised for the issuance of Warrant Shares in
accordance with their terms, whether or not such eligibility or exercise had in
fact occurred as of such date), and (z) the number of Other Issuable Shares as
of the date of the filing of the Registration Statement or any amendment thereto
(provided, however, that for purposes of this provision, the number of Other
Issuable Shares shall not be greater than the number of such shares which the
SEC permits to be included in the Registration Statement). If, after the filing
of the Registration Statement and prior to the Effective Date, the Conversion
Price or the number of shares covered by the Warrants or both is or are to be
adjusted or if the number of Other Issuable Shares increases, the Company shall
file an amendment to the Registration Statement reflecting the registration of
the adjusted number of shares reflected in the foregoing formula based on such
adjustments. Unless otherwise specifically agreed to in writing in advance by
the Holder, the Registration Statement (X) shall include only (1) the
Registrable Securities, (2) the shares issuable on exercise of the Finder's
Warrants (as defined in the Joint Escrow Instructions) and (3) the shares listed
in Schedule 1 annexed hereto, and (Y) shall also state that, in accordance with
Rule 416 and 457 under the Securities Act, it also covers such indeterminate
number of additional shares of Common Stock as may become issuable to prevent
dilution resulting from stock splits, or stock dividends.
(ii) The Company and Company Counsel will use their reasonable best
efforts to cause such Registration Statement to be declared effective on a date
(the "Initial Required Effective Date") which is no later than the earlier of
(Y) five (5) days after oral or written notice by the SEC that it may be
declared effective or (Z) March 16, 2005.
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(iii) If at any time (an "Increased Registered Shares Date"), the
number of shares of Common Stock represented by the Registrable Securities,
issued or to be issued as contemplated by the Transaction Agreements, exceeds
the aggregate number of shares of Common Stock then registered or sought to be
registered in a Registration Statement which has not yet been declared
effective, the Company shall either
(X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at
that time, to register the Increased Number of Shares to Be
Registered (as defined below). The "Increased Number of Shares to Be
Registered" is a number of shares of Common Stock which is at least
equal to (A) the sum of the number of shares theretofore issued on
conversion of the Debentures (including any interest paid on
conversion by the issuance of Conversion Shares) and on exercise of
the Warrants, plus the Other Issuable Shares issued or issuable as
of that date plus (B) the sum of (I) two hundred percent (200%) of
the number of shares into which the Unconverted Debentures and all
interest thereon through the Maturity Date would be convertible at
the time of filing of such Registration Statement or amendment
(assuming for such purposes that all Debentures, reduced by any
previously converted Debentures, had been eligible to be converted,
and had been converted, into Conversion Shares in accordance with
their terms, whether or not such eligibility, accrual of interest or
conversion had in fact occurred as of such date), (II) the number of
Warrant Shares covered by the unexercised Warrants (assuming for
such purposes that all the Warrants, including all the Warrants
actually issued or issuable as of the Increased Registered Shares
Date, reduced by any exercised Warrants, had been eligible to be
exercised and had been exercised for the issuance of Warrant Shares
in accordance with their terms, whether or not such issuance,
eligibility or exercise had in fact occurred as of such date), and
(III) the number of Other Issuable Shares as of the date of the
filing of such amendment to the Registration Statement (provided,
however, that for purposes of this provision, the number of Other
Issuable Shares shall not be greater than the number of such shares
which the SEC permits to be included in the Registration Statement),
or
(Y) if such Registration Statement has been declared effective by
the SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Number of
Shares to Be Registered over the aggregate number of shares of
Common Stock already registered.
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The Company and Company Counsel will use their reasonable best efforts to cause
such Registration Statement to be declared effective on a date (each, an
"Increased Required Effective Date") which is no later than (q) with respect to
a Registration Statement under clause (X) of this subparagraph (ii), the Initial
Required Effective Date and (r) with respect to an Additional Registration
Statement, the earlier of (I) five (5) days after notice by the SEC that it may
be declared effective or (II) thirty (30) days after the Increased Registered
Shares Date.
(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed as contemplated by this Agreement with the SEC by the
Required Filing Date, the Company will make payments to the Initial Investor in
such amounts and at such times as shall be determined pursuant to this Section
2(b).(1)
(ii) If the Registration Statement covering the Registrable
Securities in form as contemplated by this Agreement(2) is not effective by the
relevant Required Effective Date or if there is a Restricted Sale Date, the
Company will make payments to the Initial Investor in such amounts and at such
times as shall be determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date (as
defined below) and such amount shall be equal to the Periodic Amount Percent age
(as defined below) of the Purchase Price for all Debentures for the period from
the date following the relevant Required Filing Date or the Required Effective
Date or a Restricted Sale Date, as the case may be, to the first relevant
Computation Date (each, a "First Period"), and thereafter to each subsequent
Computation Date (each, a "Subsequent Period"). The "Periodic Amount Percentage"
means (i) two percent (2%) of the Purchase Price for the First Period, and (ii)
two percent (2%) of the Purchase Price for each Subsequent Period thereafter.
Anything in the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the relevant Effective Date the Purchase Price shall be
deemed to refer to the sum of the principal of the Unconverted Debentures plus
the Held Shares Value. By way of illustration and not in limitation of the
foregoing, if the Registration Statement is filed on or before
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(1) The Company acknowledges that a Registration Statement that includes
shares not otherwise permitted to be included in the Registration
Statement, or which is not filed not in compliance with the provisions of
Section 3 hereof, including, but not limited to Section 3(c), shall not be
a Registration Statement filed or effective "as contemplated by this
Agreement."
(2) See footnote 1.
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the Required Filing Date, but is not declared effective until seventy-five (75)
days after the Initial Required Effective Date, the Periodic Amount will
aggregate six percent (5%) of the Purchase Price (2% for days 1-30, plus 2% for
days 31-60, plus 2% for days 61-75).
(iv) Each Periodic Amount, if any, will be payable by the Company,
except as provided in the other provisions of the immediately succeeding
subparagraph (v), in cash or other immediately available funds to the Investor
(1) on the day after the Required Filing Date, the Required Effective Date or a
Restricted Sale Date, as the case may be, and (2) on the earlier of (A) each
thirtieth day thereafter, (B) the third business day after the date the
Registration Statement is filed or is declared effective, or (C) the third
business day after the Registration Statement has its restrictions removed after
the relevant Effective Date, in each case without requiring demand therefor by
the Investor.
(v) Notwithstanding the provisions of the immediately preceding
subparagraph (iv), at the option of the Investor, exercisable in its sole and
absolute discretion by written notice to the Company at any time before the
Periodic Amount is paid, all or a portion of the Periodic Amount shall be paid
by the issuance of additional shares of Common Stock to the Investor ("Payment
Shares") in an amount equal to the Periodic Amount being paid thereby divided by
the then applicable Conversion Price; provided, further that the "Delivery Date"
for the Payment Shares shall be three (3) business days after the date the
Investor gives the notice contemplated by this subparagraph, and the provisions
of Sections 5(c) and (d) shall apply with respect thereto.
(vi) The parties acknowledge that the damages which may be incurred
by the Investor if the Registration Statement is not filed by the Required
Filing Date or the Registration Statement has not been declared effective by a
Required Effective Date, including if the right to sell Registrable Securities
under a previously effective Registration Statement is suspended or the shares
of the Company's stock are not listed on the Principal Trading Market, may be
difficult to ascertain. The parties agree that the amounts payable pursuant to
the foregoing provisions of this Section 2(b) represent a reasonable estimate on
the part of the parties, as of the date of this Agreement, of the amount of such
damages.
(vii) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the filing or effectiveness of the Registration Statement occurs because of
an act of, or a failure to act or to act timely by the Initial Investor or its
counsel.
(viii) "Computation Date" means (A) the date which is the earlier of
(1) thirty (30) days after the Required Filing Date, the Required Effective Date
or a Restricted Sale Date, as the case may be, or (2) the date after the
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Required Filing Date, the Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed or the shares of the Company's stock are listed on the
Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the
earlier of (1) thirty (30) days after the previous Computation Date or (2) the
date after the previous Computation Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b)(i) hereof)
or is declared effective or has its restrictions removed or the shares of the
Company's stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.
(c) SUBSEQUENT REGISTRATIONS. If, for any reason, the SEC does not
permit the registration of any specific component of the Registrable Securities,
such excluded Registrable Securities shall be registered by the Company at the
earliest possible time thereafter.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC by the Required
Filing Date a Registration Statement with respect to not less than the number of
Registrable Securities provided in Sect ion 2(a) above, and thereafter use its
reasonable best efforts to cause such Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times other than during
Permitted Suspension Periods during the period (the "Registration Period")
continuing until the earlier of (i) the date when the Investors may sell all
Registrable Securities under Rule 144 without volume or other restrictions or
limits (the "Unrestricted Sale Date") or (ii) the date the Investors no longer
own any of the Registrable Securities, which Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
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accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Permit a single firm of counsel designated by the Initial
Investors (which, until further notice, shall be deemed to be Xxxxxxx & Prager
LLP, Attn: Xxxxxx X. Xxxxxxx, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel") to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
(but not less than three (3) business days) prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects.
(d) Notify each Investor and the Investor's Counsel and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than three (3) business days prior to such filing) and (if requested by any such
person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. In addition, the Company shall communicate with the
Investor's Counsel with regard to its proposed written responses to the comments
contemplated in clause (C) of this Section 3(d), so that, to the extent
practicable, the Investors shall have the opportunity to comment thereon;
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(e) Furnish to each Investor and to Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(f) As promptly as practicable after becoming aware thereof,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Invest or may
reasonably request;
(g) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
(h) Comply with Regulation FD or any similar rule or regulation
regarding the dissemination of information regarding the Company, and in
furtherance of the foregoing, and not in limitation thereof, not disclose to the
Investor any non-public material information regarding the Company;
(i) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing that the effectiveness of the Registration
Statement is suspended for any reason, whether due to a Potential Material Event
or otherwise, the Investors shall not offer or sell any Registrable Securities,
or engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of such notice until such Investor
receives written notice from the Company that such the effectiveness of the
Registration Statement has been restored, whether because the Potential Material
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Event has been disclosed to the public or it no longer constitutes a
Potential Material Event or otherwise; provided, however, that the Company may
not so suspend the right to such holders of Registrable Securities during the
periods the Registration Statement is required to be in effect other than during
a Permitted Suspension Period (and the applicable provisions of Section 2(b)
shall apply with respect to any such suspension other than during a Permitted
Suspension Period);
(j) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market and the quotation of the Registrable
Securities on the Principal Trading Market;
(k) Provide a transfer agent ("Transfer Agent") and registrar,
which may be a single entity, for the Registrable Securities not later than the
initial Effective Date;
(l) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts as the case may be, as the Investors may
reasonably request, and, within five (5) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the Transfer Agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel, which shall
include, without limitation, directions to the Transfer Agent to issue
certificates of Registrable Securities (including certificates for Registrable
Securities to be issued after the Effective Date and replacement certificates
for Registrable Securities previously issued) without legends or other
restrictions, subject to compliance with applicable law and other rules and
regulations, including, without limitation, prospectus delivery requirements;
(m) Take all other reasonable administrative steps and actions
(including the participation of Company counsel) necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement; provided, however, that the foregoing does not
require that the Company take any steps whatsoever regarding the identification
or selection of a broker to sell the Registrable Securities, the identification
of buyers of the Registrable Securities, or the negotiation of the sale terms
of the Registrable Securities; and
(n) Not file any other registration statement (other than the
Registration Statement and amendments thereto) during the period commencing on
the Closing Date and ending on the Effective Date.
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4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(b) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f), (g)
or (i) above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f), (g) or (i),
and, if so directed by the Company, such Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $4,500 for
the review of the initial Registration Statement (and pre-effective amendments
thereto) and $2,000 for the review of each post-effective amendment to a
Registration Statement shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor, and
each Lender Control Person (each, an "Indemnified Party"), against any losses,
claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any prospectus included
therein:
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(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment thereof
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation under the Securities Act, the Exchange
Act or any state securities law (the matters in the foregoing clauses (i)
through (iii) being, collectively referred to as "Violations"). Subject to
clause (b) of this Section 6, the Company shall reimburse the Investors,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (I) apply to any Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of such Indemnified Party
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(b)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company or the amendment or supplement thereto made available by the
Company; (III) be available to the extent such Claim is based on the delivery of
a prospectus by the Investor after receiving notice from the Company under
Section 3(f), (g) or (i) hereof (other than a notice regarding the effectiveness
of the Registration Statement or any amendment or supplement thereto), or (IV)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. The Investor will indemnify the Company and
its officers, directors and agents (each, an "Indemnified Party") against any
claims arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company, by or
on behalf of such Investor, expressly for use in connection with the preparation
of the Registration Statement or the amendment or supplement thereto, subject to
such limitations and conditions as are applicable to the indemnification
provided by the Company to this Section 6; provided, however, that except where
the Investor has committed fraud (other than a fraud by reason of the
information included or omitted from the Registration Statement as to which the
Company has not given notice as contemplated under Section 3 hereof) or
intentional misconduct, such indemnification by the Investor shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities. Such indemnity shall remain in full force and
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effect regardless of any investigation made by or on behalf of the Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9; provided, however, that the Investor shall not
obligated to make any indemnification payment to the Company under this Section
6 unless and until there has been a final adjudication of liability on the part
of the Investor.
(b) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Party, as
the case may be. In case any such action is brought against any Indemnified
Party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Party under this Section 6 for any legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Party provided such counsel is of the opinion that all defenses available to the
Indemnified Party can be maintained without prejudicing the rights of the
indemnifying party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Party under
this Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
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circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to
making available to Investor the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) until the Unrestricted Sale Date, furnish to the Investor so
long as the Investor owns Registrable Securities, promptly upon request, (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) if not
available on the SEC's XXXXX system, a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investor to sell such securities pursuant to Rule 144 without
Registration; and
(d) at the request of any Investor holding Registrable Securities
(a "Holder"), give its Transfer Agent instructions (supported by an opinion of
Company counsel, if required or requested by the Transfer Agent) to the effect
that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the shares of Registrable Securities
which the Holder proposes to sell (the "Securities Being Sold") is
not less than (1) year and (B) as to such other matters as may be
appropriate in accordance with Rule 144 under the Securities Act,
and
15
(ii) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that the initial Investor's Counsel shall be
deemed acceptable if not given by Company Counsel) that, based on
the Rule 144 Certificate, Securities Being Sold may be sold pursuant
to the provisions of Rule 144, even in the absence of an effective
Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities or other Securities (such transfer or assignment being subject to the
provisions of Section 4(a) of the Securities Purchase Agreement) only if the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee and (b) the securities with respect to which such registration rights
are being transferred or assigned.
10. NO INCONSISTENT AGREEMENTS. Except as and to the extent
specifically set forth in Schedule 10 attached hereto, neither the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company nor
any of its subsidiaries, on or after the date of this Agreement, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specifically set forth in
Schedule 10 attached hereto, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
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11. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold an eighty (80%) percent interest of the Registrable Securities (as
calculated by the principal of the Unconverted Debentures then held by the
Investors). Any amendment or waiver effected in accordance with this Section 11
shall be binding upon each Investor and the Company.
12. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be
given in the manner contemplated by the Securities Purchase Agreement, (i) if to
the Company or to the Initial Investor, to their respective address contemplated
by the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 12(b).
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) (i) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing of any
such proceeding in such jurisdictions or to any claim that such venue of the
suit, action or proceeding is improper. To the extent determined by such court,
the Company shall reimburse the Investor for any reasonable legal fees and
17
disbursements incurred by the Investor in enforcement of or protection of any of
its rights under this Agreement. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.
(ii) The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(e) The Company and the Investor hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other in respect of any matter arising out of or in connection with
this Agreement or any of the other Transaction Agreements.
(f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(g) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(k) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
18
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(l) This Agreement (including to the extent relevant the
provisions of other Transaction Agreements) constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
INFINIUM LABS, INC.
By:_____________________________
Name:___________________________
Title:__________________________
INITIAL INVESTOR:
________________________________
[Print Name of Initial Investor]
By:_____________________________
Name:___________________________
Title:__________________________
SCHEDULE 1
1. All Registrable Shares contemplated by the Registration Rights Agreement,
dated as of December 13, 2004 (the "Existing Registration Rights
Agreement"), between the Company and the Initial Investors named therein
(the "Original Investors")
2. The shares referred to in clause (2) of Section 2(a)(i) of the Existing
Registration Rights Agreement.
3. The shares listed in item A of Schedule 1 to the Existing Registration
Rights Agreement
4. Any shares derived from a Permitted Transaction contemplated by item B of
Schedule 1 to the Existing Registration Rights Agreement
5. Any shares permitted to be included in the Registration Statement pursuant
to the specific prior written consent of the Original Investors
