EXHIBIT 10.5
SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made and entered into as of the 14th day of April,
2000 by and between MegaMedia Networks, Inc.,. a Delaware corporation (the
"Company"), and City-Guide ISP, Inc., a Florida corporation (the "Subscriber").
W I T N E S S E T H:
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WHEREAS, Subscriber is selling certain assets to Titan Hosting, Inc., a
Delaware corporation and wholly-owned subsidiary of the Company ("Buyer")
pursuant to a Purchase and Sale of Assets Agreement between Buyer, Subscriber,
the Company and the shareholders of Subscriber dated of even date herewith (the
"Purchase Agreement"), and as part of the purchase price for such assets, the
Company has agreed to issue to Subscriber 200,000 shares of the Company's common
stock, $.01 par value (the "Purchase Shares"); and
WHEREAS, ; and Buyer will be issuing to Subscriber as part of the
purchase price for the assets being acquired a $720,000 promissory note
convertible into shares of common stock of the Company at a conversion price of
$3.00 per share (the "Conversion Shares", and together with the Purchase Shares,
shall be collectively referred to as the "Shares"); and
WHEREAS, the terms of the Purchase Agreement for the assets provides
for piggy-back registration rights for the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto do hereby agree as follows:
1. Purchase of Stock. Upon closing of the asset purchase as
contemplated in the Purachase Agreement, the Company shall cause to be issued to
Subscriber a stock certificate or stock certificates for an aggregate of 200,000
shares of the Company's Common Stock (the "Purchase Shares") in partial
consideration for the acquisition of certain assets of Subscriber.
2. Conversion Shares: Upon the closing of the asset purchase as
contemplated in the Purchase Agreement, Subscriber will be issued a $720,000
promissory note, convertible at the discretion of Subscriber into shares of
common stock of the Company at a conversion rate of $3.00 per share (the
"Conversion Shares"). Hereinafter the Purchase Shares and the Conversion Shares
shall be collectively referred to as the "Shares."
3. Representations and Warranties. Subscriber hereby represents,
warrants and covenants to the Company that in connection herewith:
(a) Review and Evaluation of Information regarding the
Company: The shareholders of Subscriber, and as applicable, its officers and
directors, have had an opportunity to examine the governing instruments and the
material documents and records of the Company, to ask questions and receive
answers from the representatives of the Company concerning the Company `s
financial condition and business and to obtain such other information that they
have deemed necessary to make a fully informed decision.
(b) Purchaser's Financial Experience. The shareholders of
Subscriber, and as applicable, its officers and directors, are sufficiently
experienced in financial and business matters to be capable of evaluating the
merits and risks of his investment in the Shares. The shareholders of
Subscriber, and as applicable, its officers and directors, are familiar with the
nature and risks attending investments
(c) Suitability of Investment. Subscriber understands that the
Shares are speculative investments and involve a high degree of risk, including
but not limited to: there is no guarantee of success of the business of the
Company; Subscriber may not receive any return (economic or otherwise) on its
investment, and management and the majority shareholders of the Company have
extreme latitude and generally, the sole discretion, to determine the financial
picture, operations and potential dissolution of the Company. Subscriber, its
shareholders and, as applicable, its officers and directors, have evaluated the
merits and risks of Subscriber's proposed investment in the Shares, including
those risks particular to Subscriber's and its shareholders' respective
financial and personal situation, respectively, and they have determined that
this investment is suitable for Subscriber. Subscriber has adequate financial
resources for an investment of this character, and at this time Subscriber could
bear a complete loss of its investment.
(d) Investment Intent. Subscriber is purchasing the Shares for
investment purposes only and for its own account, and has no present commitment,
agreement or intention to sell, distribute or otherwise dispose of any of them
or to enter into any such commitment or agreement.
(e) Unregistered Securities; Limitations on Disposition.
Subscriber understands that the Shares are being sold without registration under
federal or any state securities laws ("Securities Laws") by reason of specific
exemptions from registration and that the Company is relying on the information
given herein in its determination of whether such specific exemptions are
available. Subscriber understands that because the Shares have not been and will
not be registered under the Securities Laws, they cannot be sold unless and
until they are subsequently registered or an exemption from registration is
available. Subscriber acknowledges and understands that the certificates
evidencing the Shares will bear a restrictive legend to the effect of this
subprovision 3(e). Subscriber represents that he can afford to hold the Shares
for an indefinite period of time.
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(f) Non-Reliance. Subscriber is not relying on the Company or
any representation contained herein with respect to the tax or economic effect
of his investment in the Company.
(g) Prohibitions on Cancellation, Termination, Revocation,
Transferability, and Assignment. Subscriber hereby acknowledges and agrees that,
except as may be specifically provided herein or by applicable law, he is not
entitled to cancel, terminate, or revoke this Agreement, and this Agreement
shall survive his death or disability. Subscriber further agrees that he may not
transfer or assign his rights or obligations under this Agreement without the
written consent of the Company.
(h) Authority to Enter into Agreement. The Subscriber has the
full right, power, and authority to execute and deliver this Agreement and
perform its obligations hereunder.
4. Indemnification. Subscriber shall indemnify and hold
harmless the Company and its agents and counsel against any and all loss damage
liability or expense (including attorneys' fees and costs) which may be suffered
by reason of any breach of his representations, warranties or covenants
contained in Section 3 hereof.
5. Registration of Shares.
(a) Between the date of this Agreement and April 14, 2002, if
the Company shall determine to register its Common Stock for its own account or
the account of a security holder or holders pursuant to a registration statement
filed under the Securities Act of 1933, as amended (the "Securities Act") (other
than a registration relating solely to employee benefit plans, or in connection
with a business combination or reorganization on Form S-4 or other appropriate
form, or a registration on any registration statement form which does not permit
secondary sales) the Company will:
(i) promptly give to Subscriber written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Shares specified in a written request or requests,
made by Subscriber within fifteen (15) days after receipt of the written notice
from the Company described in clause (i) above except as set forth in Section
5(b) below. Such written request may specify all or a part of Subscriber's
Shares.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Subscriber as a part of the written notice given
pursuant to Section 5(a)(i). In such event, the right of Subscriber to
registration pursuant to this Section 5 shall be conditioned upon Subscriber's
participation in such underwriting and the inclusion of Subscriber in the
underwriting to the extent provided herein. If Subscriber proposes to distribute
his Shares through such underwriting, he shall (together with the Company and
other shareholders
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distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section 5, if the underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, the amount of Shares to
be included in the Company's proposed offering that are held by the Subscriber
and all other holders of securities requesting registration shall be reduced by
the amount indicated by the underwriter on a pro rata basis among all of such
holders, with such reduction allocated in proportion to the total number of
securities each of such holders, initially sought to have registered in
connection with the Company's proposed offering. If Subscriber disapproves of
the terms of any such underwriting he may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any of Subscriber's Shares excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
Notwithstanding the foregoing, in connection with a registered public offering
involving an underwriting, to the extent that Subscriber's Shares are included
therein, Subscriber shall also enter into such agreements regarding the timing
of the sale of the Shares by Subscriber (i.e., lock-up agreement), as may be
required by the underwriter.
(c) Company Registration Expenses. In the case of any
registration effected pursuant to Section 5(a), the Company shall bear any
additional registration and qualification fees and expenses (not including stock
transfer taxes and underwriters' fees, discounts and commissions, which will be
the sole responsibility of Subscriber) and any additional costs and
disbursements of counsel for the Company that result from inclusion of Shares
held by the Subscriber in such registration.
(d) Registration Procedures. In the case of a registration
effected by the Company pursuant to Section 5(a), the Company will keep
Subscriber advised in writing as to the initiation of the registration and as to
the completion thereof. At its expense, the company will:
i) Keep such registration, qualification or
compliance pursuant to Section 5(a) effective until termination of the offering,
if an underwritten offering, or if not underwritten, for a period of ninety (90)
days or until Subscriber has completed the distribution described in the
registration statement relating thereto, whichever first occurs; and
ii) Furnish such number of prospectuses and other
documents incident thereto as Subscriber from time to time may reasonably
request.
(e) Indemnification.
i) The Company will indemnify Subscriber, with
respect to which registration, qualification or compliance has been effected
pursuant to this Section 5, and each underwriter, if any, its officers,
directors and partners and each person who controls any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular, or amendment or
supplement thereto, or other
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document (including any related registration statement, notification amendment
or the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse Subscriber, each such
underwriter, its officers, directors and partners and each person who controls
any such underwriter, for any legal and any other expense reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by Subscriber or underwriter and stated to
be specifically for use in any of the foregoing documents.
ii) The Subscriber will, if Subscriber's Shares are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act and the rules and regulations
thereunder, each other party covered by the registration statement, and each of
their officers, directors and partners, and each person controlling such other
party, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, amendment or supplement thereto, or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such directors,
officers, partners, persons, underwriters, other parties or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by Subscriber and stated to be specifically for use therein.
iii) Each party entitled to indemnification under this
subsection (f) (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
subsection (f). No
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Indemnifying Party, in the defense of any such claim or litigation shall, except
with the consent of each Indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(f) Information by Subscriber. Subscriber shall furnish to the
Company such information regarding Subscriber and the distribution proposed by
Subscriber as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 5.
6. Right to Terminate or Delay Registration. If deemed to be in the
best interests of the Company due pending unpublished material information, the
time necessary to complete financial statements, or other reason deemed
appropriate by the Company and counsel to the Company, the Company shall have
the right to delay, terminate or withdraw any registration initiated by it under
Section prior to the effectiveness of such registration, whether or not
Subscriber has elected to include Shares in such registration.
7. Governing Law; Jurisdiction. This Agreement will be governed by,
construed and enforced in accordance with the laws of the State of Florida.
8. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes and terminates any prior communication, agreement or
understanding, whether written or oral. This Agreement may be modified only by a
writing signed by all parties.
9. Notices. Whenever notice is provided for in this Agreement, it shall
be given in writing and hand delivered, or mailed by registered or certified
mail, return receipt requested, or sent by telecopier to the party or parties to
whom addressed at the addresses or telecopier numbers set forth on the signature
page of this Agreement. The date of delivery shall be the date received if
delivered by hand or sent by telecopier, or within three (3) days of mailing, if
mailed. Any party may change the address to which notice shall be delivered or
mailed by notice duly given.
10. Benefits. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective heirs, beneficiaries,
legal representatives, successors, and assigns (including successive as well a
immediate successors to and assigns of said parties).
11. Attorneys' Fees. In the event of suit or other legal proceeding,
including mediation or arbitration, to enforce the terms of this Agreement, the
prevailing party shall be entitled to collect from the non-prevailing party its
reasonable attorneys' fees, reasonable expenses and court costs, which shall
include any appellate proceeding.
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12. Severability. In the event that any of the provisions of this
Agreement, or portions thereof, are held to be unenforceable or invalid by any
court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby.
13. Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the context
may require.
14. Section Headings. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
15. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which
together shall constitute but one and the same instrument.
MEGAMEDIA NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxx, III
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Print Name: Xxxxxxx X. Xxxxx, III
(a/k/a Xxxxx Xxxxx and Xxxxxx Xxxxx)
Its: Chief Financial Officer
Address: 00 X. Xxxx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SUBSCRIBER:
CITY-GUIDE ISP, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
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Print Name: Xxxxx X. Xxxxxxxxx
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Its: President
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Address: 000 X. Xxxxxxx Xx.
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Xxxxx, XX 00000
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Telephone: 000-000-0000
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Facsimile: 000-000-0000
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