ANNEX IV
TO
SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 31, 2005 (this
"Agreement"), is made by and between CONSPIRACY ENTERTAINMENT HOLDINGS, INC., a
Utah corporation with headquarters located at 000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx
Xxxxxx, 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 January 31, 2005, 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 Additional Shares and the
Payment Shares, if any, issued or issuable to the Holder as of the date of
the filing of the Registration Statement and any amendment thereto or as
of any subsequent date, and (ii) the good faith estimate of the Company of
the number of other Additional Shares and other Payment Shares, as the
case may be, which the Company anticipates, as of the date of the filing
of the Registration Statement and any amendment thereto or any subsequent
date, will be issuable to the Holder pursuant to the provisions of the
Transaction Agreements.
"Payment Shares" means shares of Common Stock issued by the Company
as provided in Section 2(b) below.
"Permitted Suspension Period" means up to two periods during any
consecutive 12-month period during which the Holder's right to sell
Registrable Securities under the Registration Statement is suspended, each
of which suspension period shall neither (i) be for more than ten (10)
days nor (ii) begin less than ten (10) business days after the last day of
the preceding suspension (whether or not such last day was during or after
a Permitted Suspension Period).
"Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure
in a registration statement, which shall be evidenced by a determination
in good faith by the Board of Directors of the Company that disclosure of
such information in the registration statement would be detrimental to the
business and affairs of the Company; or (ii) any material engagement or
activity by the Company which would, in the good faith determination of
the Board of Directors of the Company, be adversely affected by disclosure
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in a registration statement at such time, in each case where such
determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the
Securities Act or any successor rule providing for offering securities on
a continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the SEC.
"Registrable Securities" means, collectively, the Conversion Shares,
the Warrant Shares, and the Other Issuable Shares.
"Registration Statement" means a registration statement of the
Company under the Securities Act covering Registrable Securities on Form
SB-2, if the Company is then eligible to file using such form, and if not
eligible, on Form S-1 or other appropriate form.
"Required Effective Date" means, initially, the Initial Required
Effective Date or the Increased Required Effective Date (as those terms
are defined below), as the case may be.
"Restricted Sale Date" means the first date, other than a date
during a Permitted Suspension Period (as defined below), on which the
Investor is restricted from making sales of Registrable Securities covered
by any previously effective Registration Statement.
2. Registration.
(a) Mandatory Registration.
(i) The Company shall cause Company Counsel to prepare and
file with the SEC, as soon as practicable after the Closing Date but
no later than thirty (30) days after the effective date of the
registration statement, as amended, originally filed by the Company
on or about November 24, 2004 (the "Required Filing Date"), a
Registration Statement registering for resale by the Investor a
sufficient number of shares of Common Stock for the Initial
Investors to sell the Registrable Securities. Notwithstanding the
requirement to register all Registrable Securities, the Company's
obligation to register the Registrable Securities shall initially be
satisfied by the registration of the Initial Number of Shares to Be
Registered (as defined below). The "Initial Number of Shares to Be
Registered" is a number of shares of Common Stock which is at least
equal to the sum of (x) the number of shares into which the
Debentures and all dividends thereon through the Maturity Date would
be convertible at the time of filing of such Registration Statement
(assuming for such purposes that all such Debentures had been
eligible to be converted, and had been converted, into Conversion
Shares in accordance with their terms, whether or not such
eligibility, accrual of interest or conversion had in fact occurred
as of such date), based on the Conversion Price then in effect, (y)
the number of Warrant Shares covered by the Warrants (assuming for
such purposes that all the Warrants had been eligible to be
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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 (i) the Registrable Securities and (ii) the
Placement Agent Shares (as defined in the Joint Escrow
Instructions), 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) sixty
(60) days after the Required Filing Date.
(iii) If at any time (an "Increased Registered Shares Date"),
the number of shares of Common Stock represented by the Registrable
Securities, issued or to be issued as contemplated by the
Transaction Agreements, exceeds the aggregate number of shares of
Common Stock then registered or sought to be registered in a
Registration Statement which has not yet been declared effective,
the Company shall either
(X) amend the relevant Registration Statement filed by the
Company pursuant to the preceding provisions of this Section
2, if such Registration Statement has not been declared
effective by the SEC at that time, to register the Increased
Number of Shares to Be Registered (as defined below). The
"Increased Number of Shares to Be Registered" is a number of
shares of Common Stock which is at least equal to (A) the sum
of the number of shares theretofore issued on conversion of
the Debentures (including any interest paid on conversion by
the issuance of Conversion Shares) and on exercise of the
Warrants, plus the Other Issuable Shares issued or issuable as
of that date plus (B) the sum of (I) the number of shares into
which the Unconverted Debentures and all interest thereon
through the Maturity Date would be convertible at the time of
filing of such Registration Statement or amendment (assuming
for such purposes that all Debentures, reduced by any
previously converted Debentures, had been eligible to be
converted, and had been converted, into Conversion Shares in
accordance with their terms, whether or not such eligibility,
accrual of interest or conversion had in fact occurred as of
such date), (II) the number of Warrant Shares covered by the
unexercised Warrants (assuming for such purposes that all the
Warrants, reduced by any exercised Warrants, had been eligible
to be exercised and had been exercised for the issuance of
Warrant Shares in accordance with their terms, whether or not
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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.
The Company and Company Counsel will use their reasonable best efforts to cause
such Registration Statement to be declared effective on a date (each, an
"Increased Required Effective Date") which is no later than (q) with respect to
a Registration Statement under clause (X) of this subparagraph (ii), the Initial
Required Effective Date and (r) with respect to an Additional Registration
Statement, the earlier of (I) five (5) days after notice by the SEC that it may
be declared effective or (II) thirty (30) days after the Increased Registered
Shares Date.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable
Securities is not filed as contemplated by this Agreement with the
SEC by the Required Filing Date, the Company will make payments to
the Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date
or if there is a Restricted Sale Date, the Company will make
payments to the Initial Investor in such amounts and at such times
as shall be determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each
Computation Date (as defined below) and such amount shall be equal
to the Periodic Amount Percentage (as defined below) of the Purchase
Price for all Debentures for the period from the date following the
relevant Required Filing Date or the Required Effective Date or a
Restricted Sale Date, as the case may be, to the first relevant
Computation Date (each, a "First Period"), and thereafter to each
subsequent Computation Date (each, a "Subsequent Period"). The
"Periodic Amount Percentage" means (i) one percent (1%) of the
Purchase Price for the First Period, and (ii) two percent (2%) of
the Purchase Price for each Subsequent Period thereafter. Anything
in the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the relevant Effective Date the Purchase
Price shall be deemed to refer to the sum of the principal of the
Unconverted Debentures plus the Held Shares Value. By way of
illustration and not in limitation of the foregoing, if the
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Registration Statement is filed on or before the Required Filing
Date, but is not declared effective until seventy-five (75) days
after the Initial Required Effective Date, the Periodic Amount will
aggregate five percent (5%) of the Purchase Price (1% for days 1-30,
plus 2% for days 31-60, plus 2% for days 61-75).
(iv) Each Periodic Amount, if any, will be payable by the
Company, except as provided in the other provisions of the
immediately succeeding subparagraph (v), in cash or other
immediately available funds to the Investor (1) on the day after the
Required Filing Date, the Required Effective Date or a Restricted
Sale Date, as the case may be, and (2) on the earlier of (A) each
thirtieth day thereafter, (B) the third business day after the date
the Registration Statement is filed or is declared effective, or (C)
the third business day after the Registration Statement has its
restrictions removed after the relevant Effective Date, in each case
without requiring demand therefor by the Investor.
(v) Notwithstanding the provisions of the immediately
preceding subparagraph (iv), at the option of the Investor,
exercisable in its sole and absolute discretion by written notice to
the Company at any time before the Periodic Amount is paid, all or a
portion of the Periodic Amount shall be paid by the issuance of
additional shares of Common Stock to the Investor ("Payment Shares")
in an amount equal to the Periodic Amount being paid thereby divided
by the then applicable Conversion Price; provided, further that the
delivery date for the Payment Shares shall be three (3) business
days after the date the Investor gives the notice contemplated by
this subparagraph.
(vi) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed
by the Required Filing Date or the Registration Statement has not
been declared effective by a Required Effective Date, including if
the right to sell Registrable Securities under a previously
effective Registration Statement is suspended or the shares of the
Company's stock are not listed on the Principal Trading Market, may
be difficult to ascertain. The parties agree that the amounts
payable pursuant to the foregoing provisions of this Section 2(b)
represent a reasonable estimate on the part of the parties, as of
the date of this Agreement, of the amount of such damages.
(vii) Notwithstanding the foregoing, the amounts payable by
the Company pursuant to this provision shall not be payable to the
extent any delay in the filing or effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or to act
timely by the Initial Investor or its counsel.
(viii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date, the
Required Effective Date or a Restricted Sale Date, as the case may
be, or (2) the date after the Required Filing Date, the Required
Effective Date or Restricted Sale Date on which the Registration
Statement is filed (with respect to payments due as contemplated by
Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed or the shares of the Company's stock are listed
on the Principal Trading Market (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), as the case may be, and
(B) each date which is the earlier of (1) thirty (30) days after the
previous Computation Date or (2) the date after the previous
Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof)
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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.
(ix) Anything in the preceding provisions of this Section 2(b)
to the contrary notwithstanding, if, but only if, the Registration
Statement is declared effective within thirty (30) days following
the Initial Required Effective Date,
(A) the provisions of Section 2(b)(i) shall not apply; and
(B) the provisions of Section 2(b)(ii) shall not apply to the
fact that the Registration Statement was initially declared
effective after the Initial Required Effective Date;
and the Company will not have any obligation to pay any Periodic Amount to the
Investor with respect thereto; provided, however, that the provisions of Section
2(b)(ii) shall continue to apply to all other events described therein.
(c) SUBSEQUENT REGISTRATIONS. If, for any reason, the SEC does not
permit the registration of any specific component of the Registrable
Securities, such excluded Registrable Securities shall be registered by
the Company at the earliest possible time thereafter.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing
Date a Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use
its reasonable best efforts to cause such Registration Statement relating
to Registrable Securities to become effective by the Required Effective
Date and keep the Registration Statement effective at all times other than
during Permitted Suspension Periods during the period (the "Registration
Period") continuing until the earlier of (i) the date when the Investors
may sell all Registrable Securities under Rule 144 without volume or other
restrictions or limits (the "Unrestricted Sale Date") or (ii) the date the
Investors no longer own any of the Registrable Securities, which
Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during the Registration Period,
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods
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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;
(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
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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 Investor may reasonably request;
(g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a Notice of Effectiveness or any notice of
effectiveness or any stop order or other suspension of the effectiveness
of the Registration Statement at the earliest possible time;
(h) Comply with Regulation FD or any similar rule or regulation
regarding the dissemination of information regarding the Company, and in
furtherance of the foregoing, and not in limitation thereof, not disclose
to the Investor any non-public material information regarding the Company;
(i) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing that the effectiveness of the
Registration Statement is suspended for any reason, whether due to a
Potential Material Event or otherwise, the Investors shall not offer or
sell any Registrable Securities, or engage in any other transaction
involving or relating to the Registrable Securities, from the time of the
giving of such notice until such Investor receives written notice from the
Company that such the effectiveness of the Registration Statement has been
restored, whether because the Potential Material Event has been disclosed
to the public or it no longer constitutes a Potential Material Event or
otherwise; provided, however, that the Company may not so suspend the
right to such holders of Registrable Securities during the periods the
Registration Statement is required to be in effect other than during a
Permitted Suspension Period (and the applicable provisions of Section 2(b)
shall apply with respect to any such suspension other than during a
Permitted Suspension Period);
(j) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market and the quotation of the
Registrable Securities on the Principal Trading Market;
(k) Provide a transfer agent ("Transfer Agent") and registrar, which
may be a single entity, for the Registrable Securities not later than the
initial Effective Date;
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(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; and
(m) Take all other reasonable administrative steps and actions
(including the participation of Company counsel) necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement; provided, however, that the
foregoing does not require that the Company take any steps whatsoever
regarding the identification or selection of a broker to sell the
Registrable Securities, the identification of buyers of the Registrable
Securities, or the negotiation of the sale terms of the Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement; and
(b) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(f), (g) or (i) above, such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f), (g) or (i), and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of
such notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
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counsel for the Investors (as a group and not individually) equal to $5,000 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: (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
11
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 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.
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7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
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
13
(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.
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.
14
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 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.
15
(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, in addition to any other liability the Company may have by reason of
such failure or delay, the Company shall be liable for all direct damages
caused by any such failure or delay, unless the same is the result of
force majeure. Neither party shall be liable for consequential damages.
(l) This Agreement (including to the extent relevant the provisions
of other Transaction Agreements) constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
CONSPIRACY ENTERTAINMENT HOLDINGS, INC.
By:
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Name:
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Title:
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INITIAL INVESTOR:
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[Print Name of Initial Investor]
By:
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Name:
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Title:
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