EXHIBIT 10.3
FORM OF
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November
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__, 2000, by and among Xxxx Xxx Media, Inc., a Colorado corporation, with
offices located at 00000 Xxxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx 00000 (the
"Company"), and the persons signatory hereto (the "Holders").
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WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
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the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Holders, in one or more
closings, up to an aggregate of (i) $2,200,000 principal amount of Convertible
Debentures (the "Debentures"), which will be convertible into shares of the
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Company's common stock, no par value (the "Common Stock") (as converted, the
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"Conversion Shares"), in accordance with the terms of the Company's Debentures
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and (ii) warrants ("Warrants") to purchase 150,000 shares of Common Stock (as
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issued upon exercise of the Warrants, the "Warrant Shares");
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B. To induce the Holders 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"), and applicable state securities laws.
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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
Holders hereby agree as follows:
1. DEFINITIONS.
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As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Holder, any transferee or assignee
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thereof to whom a Holder assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.
b. "Person" means a corporation, a limited liability company, an
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association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof.
c. "Register," "registered," and "registration" refer to a
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registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with 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
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of such Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "Registrable Securities" means (i) the Conversion Shares issued
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or issuable upon conversion of the Debentures, respectively, (ii) the Warrant
Shares issued or issuable on exercise of the Warrants and (iii) any shares of
capital stock issued or issuable with respect to the Conversion Shares, the
Debentures, the Warrant Shares or the Warrants as a result of any stock split,
stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitation on conversions of Debentures or exercise in the
Warrants.
e. "Registration Statement" means a registration statement or
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registration statements of the Company filed under the Securities Act.
2. REGISTRATION.
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a. Mandatory Registration. The Company shall prepare, and, as soon
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as practicable, but in no event later than March 1, 2001 (the "Scheduled Filing
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Date"), file with the SEC a Registration Statement or Registration Statements
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(as is necessary) on Form S-3 covering the resale of all of the Registrable
Securities. In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration,
subject to the provisions of Section 2(e). The initial Registration Statement
prepared pursuant hereto shall register for resale a number of shares of Common
Stock equal to at least 200% of the number of Conversion Shares (based upon the
Market Price, as determined within three Trading Days prior to the Scheduled
Filing Date), and Warrant Shares, subject to adjustment as provided in Section
3(b). The terms "Market Price" and "Trading Days" shall have the meanings
ascribed to them in the Debentures. The Company shall use its best efforts to
have the Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than April 1, 2001 (the "Scheduled Effective
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Date"). Except as set forth on Schedule I annexed hereto, no Person other than
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the Investors has the right to include any securities of the Company in the
Registration Statement to be filed in accordance with this Section 2(a).
b. Piggy-Back Registrations. If at any time prior to the
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expiration of the Registration Period (as hereinafter defined) the Company
proposes to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
securities (other than a Registration Statement on Form S-4 or Form S-8 (or
their equivalents at such time) relating to securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock
option or other employee benefit plans) the Company shall promptly send to each
Investor written notice of the Company's intention to file a Registration
Statement and of such Investor's rights under this Section 2(b) and, if within
ten (10) days after receipt of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Investor requests to be registered,
subject to the priorities set forth in this Section 2(b) below. No right to
registration of Registrable Securities under this Section 2(b) shall be
construed to limit any registration required under Section 2(a). The obligations
of the Company under this Section 2(b) may be waived by Investors holding a
majority of the Registrable Securities. If an offering in connection with which
an Investor is entitled to registration under this Section 2(b) is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed to by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering. If a registration pursuant to this
Section 2(b) is to be an underwritten public offering and the managing
underwriter(s) advise the Company in writing that, in their reasonable good
faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account, (2) second, up to
the full number of securities proposed to be registered for the account of the
holders of securities entitled to inclusion of their securities in the
Registration Statement by reason of demand registration rights, and (3) third,
the securities requested to be registered by the Investors and other holders of
securities entitled to participate in the registration, as of the date hereof,
drawn from them pro rata based on the number each has requested to be included
in such registration.
c. Allocation of Registrable Securities. The initial number of
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Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities shall be allocated to the remaining
Investors, pro rata based on the number of Registrable Securities then held by
such Investors.
d. Legal Counsel. The Investors holding a majority of the
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Registrable Securities shall have the right, at its sole cost and expense, to
select one legal counsel to review and oversee any offering pursuant to this
Section 2 ("Legal Counsel"), which shall be Snow Xxxxxx Xxxxxx P.C. or such
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other counsel as thereafter designated by the holders of a majority of
Registrable Securities. The Company shall reasonably cooperate with Legal
Counsel in performing the Company's obligations under this Agreement.
e. Ineligibility for Form S-3. In the event that Form S-3 is
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unavailable for any registration of Registrable Securities hereunder, the
Company shall (i) register the sale of the Registrable Securities on another
appropriate form and (ii) undertake to register the Registrable Securities on
Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
f. Sufficient Number of Shares Registered. If the number of shares
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available under a Registration Statement filed pursuant to Section 2(a) is
insufficient to cover all of the Registrable Securities that such Registration
Statement is required to cover or an Investor's allocated portion of the
Registrable Securities pursuant to Section 2(c), the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover at least 200% of
such Registrable Securities (based on the market price of the Common Stock), in
each case, as soon as practicable, but in any event not later than twenty-five
(25) days after the necessity therefor arises (each such date, an "Additional
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Scheduled Filing Date"). The Company shall use it best efforts to cause such
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amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in no event later than sixty (60)
days after the Additional Scheduled Filing Date (each such date, an "Additional
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Scheduled Effective Date"). For purposes of the foregoing provision, the number
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of shares available under a Registration Statement shall be deemed "insufficient
to cover all of the Registrable Securities" if at any time the number of
Registrable Securities issued or issuable upon conversion of the Debentures
covered by such Registration Statement is greater than the quotient determined
by dividing (i) the number of shares of Common Stock available for resale under
such Registration Statement by (ii) 1.5. For purposes of the calculation set
forth in the foregoing sentence, any restrictions on the convertibility of the
Debentures shall be disregarded and such calculation shall assume that the
Debentures are then convertible and exercisable, respectively, into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the
Convertible Debentures) and the Warrants are exercisable at the then prevailing
Exercise Price (as defined in the Warrants).
3. RELATED OBLIGATIONS.
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Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(b) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a) or 2(f),
the Company will use its best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the Scheduled Filing Date) for the registration of Registrable Securities
pursuant to Section 2(a) and use its best efforts to cause such Registration
Statements relating to the Registrable Securities to become effective as soon as
possible after such filing (but, in no event later than one hundred and twenty
(120) days after the
Closing Date). The Company shall not file any other Registration Statement with
respect to any of its securities between the date hereof and the filing date of
such Registration Statement (other than a Registration Statement on Form S-8 (or
its equivalent at such time)). The Company shall keep the Registration Statement
required to be filed hereunder effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) promulgated under the Securities Act (or
successor thereto) or (ii) the date on which (A) the Investors shall have sold
all the Registrable Securities covered by such Registration Statement and (B)
none of the Debentures or Warrants is outstanding (the "Registration Period"),
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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. The term "best efforts" shall mean, among other
things, that the Company shall submit to the SEC, within three business days
after the Company learns that no review of a particular Registration Statement
will be made by the staff of the SEC or that the staff has no further comments
on the Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
48 hours after the submission of such request.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
that are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-KSB, Form
10-QSB or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company shall file such amendments
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or supplements with the SEC on the same day or as soon as practicably thereafter
on which the Exchange Act report is filed that created the requirement for the
Company to amend or supplement the Registration Statement.
c. The Company shall (a) permit Legal Counsel to review and comment
upon (i) the Registration Statement at least five (5) business days prior to its
filing with the SEC and (ii) all other Registration Statements and all
amendments and supplements to all Registration Statements within a reasonable
number of days prior to the their filing with the SEC and (b) not file any
document in a form to which Legal Counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
Legal Counsel, which approval shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) any correspondence from the
SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto.
d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
e. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as Legal Counsel or any Investor reasonably requests, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
f. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering; provided, however, that the Company shall have the right to consent to
the selection of such underwriter, which consent shall not be unreasonably
withheld.
g. As promptly as practicable after becoming aware of such event,
the Company shall notify Legal Counsel and each Investor in writing of the
happening of any event
as a result of which the prospectus included in a 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 promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to Legal Counsel and each
Investor (or such other number of copies as Legal Counsel or such Investor may
reasonably request). The Company shall also promptly notify Legal Counsel and
each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness and by overnight mail), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
h. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
i. At the request of any Investor, the Company shall furnish to such
Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request
(i) if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel, (iii) any underwriter participating in any
disposition pursuant to a Registration Statement, (iv) one firm of accountants
or other agents retained by the Investors and (v) one firm of attorneys retained
by such underwriters (collectively, the "Inspectors") all pertinent financial
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and other records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed necessary
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by each Inspector, and cause the Company's officers, directors and employees to
supply all information that any Inspector may reasonably request; provided,
however, that each Inspector shall hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Records or other
information that the Company determines in good faith to be confidential, and of
which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement of
which the Inspector has knowledge. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with Federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
the designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or the Nasdaq SmallCap
Market, and, without limiting the generality of the foregoing, to arrange for at
least two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities. The
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Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
n. The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
o. If requested by the managing underwriters or an Investor, the
Company shall (i) immediately incorporate in a prospectus supplement or post-
effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by an Investor or any underwriter of such Registrable Securities.
p. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
q. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
r. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
s. Within three (3) business days after a Registration Statement
that covers applicable Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
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t. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
u. Notwithstanding anything to the contrary in Section 3(g), at any
time after the Registration Statement has been declared effective, the Company
may delay the disclosure of material, non-public information concerning the
Company the disclosure of which at the time is not, in the good faith opinion of
the Board of Directors of the Company and its counsel, in the best interest of
the Company and, in the opinion of counsel to the Company, otherwise required
(a "Grace Period"); provided, that the Company shall promptly (i) notify the
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Investors in writing of the existence of material, non-public information giving
rise to a Grace Period and the date on which the Grace Period will begin, and
(ii) notify the Investors in writing of the date on which the Grace Period ends;
and, provided further, that during any consecutive 365-day period, there shall
be only one Grace Period, such Grace Period not to exceed 45 days in the
aggregate (an "Allowable Grace Period"). For purposes of determining the length
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of a Grace Period above, the Grace Period shall begin on and include the date
the Investors receive the notice referred to in clause (i) above and shall end
on and include the date the Investors receive the notice referred to in clause
(ii) above. During the length of any Grace Period, the Investors will continue
to be able to convert their Debentures into Common Stock but shall not be able
to sell the Conversion Shares. Upon expiration of the Allowable Grace Period,
the Company shall again be bound by the first sentence of Section 3(g) with
respect to the information giving rise thereto.
v. Each of the following events shall constitute a "Registration Default"
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for purposes of this Agreement:
(i) the Company's failure to file a Registration Statement by the
Scheduled Filing Date or Additional Scheduled Filing Date thereof, as
appropriate;
(ii) the SEC's failure to declare a Registration Statement effective
on or before the Scheduled Effective Date or Additional Scheduled Effective Date
thereof, as appropriate;
(iii) the Company's failure to request acceleration of the
effectiveness of a Registration Statement within three (3) business days after
the SEC has notified the Company that it may file such an acceleration request
as required by Section 3(a) hereof, except where the failure to meet such
deadline is a result solely of actions by the holders of Registrable Securities
or Legal Counsel;
(iv) the Investors' inability to sell all Registrable Securities
pursuant to an effective Registration Statement (whether because of a failure to
keep the Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to the Registration Statement, to
register sufficient shares of Common Stock or otherwise); or
(v) the aggregate days of Grace Period exceed the Allowable Grace
Period.
Upon the occurrence of a Registration Default (other than a Registration Default
described in clause (ii) above), the Company shall pay each Investor an amount
determined in accordance with the following formula for each day of such
Registration Default:
.003 x P x N
where
P = the Closing Ask Price (as defined in the Debentures) of the Company's
Common Stock on such day; and
N = the number of Registrable Securities that such Investor holds or may
acquire pursuant to conversion of the Debentures or exercise of the
Warrants on such day (without giving effect to any limitations on
conversion or exercise).
In the case of a Registration Default described in clause (ii) above, the
Company shall pay each Investor an amount determined in accordance with the
following formula for each day of such Registration Default:
.001 x P x N
In addition, upon the SEC's failure to declare a Registration Statement
effective on or before sixty (60) days after the Scheduled Effective Date, the
Company shall pay each Investor an amount determined in accordance with the
following formula for each day of such Registration Default:
.002 x P x N
The Company shall pay such amounts on demand by an Investor made at any time
during the continuance or after termination of such Registration Default. If the
Company does not remit payment of the amount due to such Investor, the Company
will pay the Investor's reasonable costs of collection, including attorneys'
fees. An Investor's right to demand such payment shall be in addition to any
other rights it may have under this Agreement, the Securities Purchase
Agreement, the Debentures, or otherwise, including its rights of Mandatory
Redemption under Section 4(a) of the Debentures.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
a. At least five (5) business days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Investor
in writing of the information the Company requires from each such Investor if
such Investor elects to have any of such Investor's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. 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 any 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 such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2(b), each such Investor agrees
to enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities.
d. 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(h) or
the first sentence of Section 3(g), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(h) or the
first sentence of Section 3(g).
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
f. Each Investor agrees not to take any action to cause such
Investor to become a registered broker-dealer as defined under the Exchange Act
or to effect any change to such Investor's status that would preclude the
Company from using Form S-3 for the Registration Statement.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than expenses incurred pursuant to
Section 3(j)(iv) and (v) and underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company and reasonable fees and disbursements of Legal Counsel,
shall be paid by the Company.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, and each Person, if
any, who controls, any Investor within the meaning of the Securities Act or the
Exchange Act, and any underwriter (as defined in the Securities Act) for the
Investors, and the directors and officers of, and each Person, if any, who
controls, any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
------------------
damages, liabilities, judgments, fines, penalties, charges, costs, attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"Claims"), incurred in investigating, preparing or defending any action, claim,
------
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency
or body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
-------------------
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state 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 any preliminary prospectus if used prior to the
effective date of such Registration Statement, or 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, (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any material violation of this Agreement (the
matters in the foregoing clauses (i) through (iv) being, collectively,
"Violations"). The Company shall reimburse the Investors and each such
----------
underwriter or controlling person, 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): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation that occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person or underwriter for such Indemnified Person
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(d);
(ii) with respect to any preliminary prospectus, shall not inure to the benefit
of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a violation and such Indemnified Person, notwithstanding such advice,
used it; (iii) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company, if such prospectus was timely made available by
the Company pursuant to Section 3(d); and (iv) shall not 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. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors and
officers, each Person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim or Indemnified
-----------------
Damages to which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or are based upon any Violation, in each case to the extent, and only to
the extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and, subject to Section 6(d),
such Investor will reimburse any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus and such prospectus was
provided to Investors as required, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any
distribution, to the same extent as provided above, with respect to information
such persons so furnished in writing expressly for inclusion in the Registration
Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or 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, assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority of the
issued or issuable Registrable Securities included in the Registration Statement
to which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person that relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
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 Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
e. 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 and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
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:
(i) 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
fraudulent misrepresentation; and (ii) 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 THE EXCHANGE ACT.
------------------------------
With a view to making available to the Investors 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 the Investors to sell securities of the
Company to the public without registration ("Rule 144") during the Registration
--------
Period, 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
so long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 6.5 of
the Securities Purchase Agreement) and the filing of such reports and other
documents as required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such 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) 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
Investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) 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;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws; (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; and (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions 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 then hold or have the right to acquire sixty-six and two-thirds
(66%) of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
-------------
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons 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. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: Xxxx Xxx Media, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Executive Vice President
and General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to an Investor, to its address and facsimile number on the signature page of
the Securities Purchase Agreement, or to such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, transmission by facsimile or overnight or courier delivery
in accordance with clause (A), (B) or (C) above, respectively.
c. Except as otherwise provided in this Agreement, the 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. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of California, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of California or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of California. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and Federal courts sitting in the City
of Los Angeles, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
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 in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement, the Securities Purchase Agreement, the Debentures
and the Warrants constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the Securities Purchase Agreement, the
Debentures, and the Warrants supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical 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 facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities,
determined as if all of the Debentures then outstanding have been converted into
or exercised for Registrable Securities without regard to any limitation on
conversions of the Debentures.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: INVESTOR:
------- --------
XXXX XXX MEDIA, INC. Investor:
By: /s/ By: /s/
______________________________ _________________________________
Name: Xxxxxxx X. Xxxxxxxx Name:
Title: President and Chief Title:
Executive Officer
