Exhibit 10.5 - Registration Rights Agreement
ANNEX IV
TO
SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 19, 2004 (this
"Agreement"), is made by and between SATELLITE ENTERPRISES CORP., a Nevada
corporation with headquarters located at 000 Xxxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxx, Xxxxxxxxxxx 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 May 19, 2004, between the Initial Investor and
the Company (the "Securities Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investors the Purchased Shares and the Warrants; 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.
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"Held Shares Value" means, the amount equal to (i) the number shares of
Purchased Shares still held by the Holder, multiplied by (ii) the Per Share
Purchase Price.
"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 Purchased Shares, Warrants or
Warrant Shares.
"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 determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
registration statement would be detrimental to the business and affairs of the
Company; or (ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time, which
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 Purchased Shares, the
Warrant Shares, the Additional Shares, the Payment Shares and, to the extent
purchased prior to the filing of the Registration Statement, the Option 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.
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"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 Initial Closing Date but no
later than sixty (60) days after the Initial Closing Date (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) one hundred
fifty percent (150%) of the sum of (i) the number of Purchased Shares,
(ii) the number of Warrant Shares covered by the Warrants (assuming
for such purposes that all the Warrants had been issued, had been
eligible to be exercised and had been exercised for the issuance of
Warrant Shares in accordance with their terms, whether or not such
issuance, eligibility or exercise had in fact occurred as of such
date) and (y) one hundred percent (100%) of the number of Option
Shares, if any, purchased prior the initial filing of the Registration
Statement. Unless otherwise specifically agreed to in writing in
advance by the Initial Investor (including as provided in this
Agreement), the Registration Statement (W) shall include only (1) the
Registrable Securities, (2) the shares issuable on exercise of
warrants issued to the Finder in connection with the transactions
contemplated by the Transaction Agreements, and (3) such shares of the
Company's Common Stock as set forth on Schedule 10 attached hereto
(whether such shares are held by the shareholders listed on said
Schedule 10 or their respective transferees), and (X) 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) one hundred twenty (120)
days after the Closing 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 ninety percent (90%) of 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,
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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 the sum of (I) one hundred fifty
percent (150%) of the sum of (A) the Purchased Shares and
Additional Shares, if any, previously issued or currently
issuable, plus (B) the adjusted number of shares issued or still
issuable the adjusted number of shares issued or still issuable
upon exercise of the Warrants (assuming for such purposes that
all the Warrants, including the Additional Warrants, had been
issued, had been eligible to be exercised and had been exercised
for the issuance of Warrant Shares in accordance with their
terms, whether or not such issuance, eligibility or exercise had
in fact occurred as of such date), plus (II) one hundred percent
(100%) of the sum of (A) the number of Payment Shares, if any,
previously issued or currently issuable, and (B) the number of
Option Shares, if any, purchased prior the initial filing of 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 plus any Option
Shares purchased prior to the filing of the Additional
Registration Statement and not previously 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 payment 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, then 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 Purchased
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Shares 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
two percent (2%) of the Purchase Price for each such period. 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 Held Shares Value. By way of
illustration and not in limitation of the foregoing, if the
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
six percent (6%) of the Purchase Price (2% for days 1-30, plus 2% for
days 31-60, plus 2% for days 61-75).
(iv) Each Periodic Amount, if any, will be payable by the Company, except
as provided in the other provisions of the immediately succeeding
subparagraph (v), in cash or other immediately available funds to the
Investor (1) on the day after the Required Filing Date, the Required
Effective Date or a Restricted Sale Date, as the case may be, and (2)
on the earlier of (A) each thirtieth day thereafter, (B) the third
business day after the date the Registration Statement is filed or is
declared effective, or (C) the third business day after the
Registration Statement has its restrictions removed after the relevant
Effective Date, in each case without requiring demand therefor by the
Investor.
(v) Notwithstanding the provisions of the immediately preceding
subparagraph (iv),
(A) at the option of the Company, exercisable in its discretion
on the date the Periodic Amount is due; provided, however, that
the Company may exercise this discretion if, but only if, the
Effective Date is within one hundred eighty (180) days after the
Closing Date and the Registration Statement covering the Payment
Shares is then effective1; or
(B) 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
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1 If the Investor requests payment of any accrued Periodic Amount on any
date which is earlier than one hundred eighty (180) days after the Closing Date
but prior to the Effective Date, and if, prior to the payment thereof, the
Investor does not elect to have such payment made in shares as provided in
clause (B) of this paragraph, the Company shall either pay such amount to the
Investor or deposit such amount in escrow with the Company Counsel with a
statement that it will issue shares to the Investor pursuant to this clause (A)
if the conditions provided herein are met. If such amount is paid in escrow, it
shall be held until such date or the earlier issuance of shares pursuant to such
election in accordance with such terms. If the shares are not issued or issuable
by such date, the Company Counsel shall release the funds to the Investor. If
the shares are duly issued to the Investor, as confirmed by the Investor, the
funds held in escrow may be released to the Company.
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Shares") in an amount equal to the Periodic Amount being paid thereby
divided by the then Applicable Per Share Purchase Price Per Share (as
defined below); 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. The term
"Applicable Per Share Purchase Price" means the lower of the Per Share
Purchase Price or the Adjusted Per Share Purchase Price, if any (in
each case subject to adjustment in the same manner as the Exercise
Price of the Warrant is adjusted).
(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) 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 or five (5) Trading Days after oral or written
notice by the SEC that it may be declared effective, whichever is
earlier,
(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;
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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 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 (provided, however,
that if Company Counsel reasonably asserts that the form of such
document is legally sufficient for filing, and Investor's Counsel
continues to reasonably object, then Company Counsel and Investor's
Counsel will work in good faith to resolve any dispute for a period of
ten (10) business days, and the Required Filing Date and Initial
Required Effective Date will be extended for a period which is the
shorter of (x) such ten (10) business day period or (y) one (1)
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business day after such dispute is resolved; and, provided further,
that if after such ten (10) business day period, if Company Counsel
and Investor's Counsel have not resolved any pending disputes
regarding the form of such document, then the Company shall have the
right to file such document notwithstanding objection by Investor's
Counsel);
(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
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
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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, if
and to the extent required or contemplated by the rules or regulations
of the Principal Trading Market, of all the Registrable Securities
covered by the Registration Statement on the Principal Trading Market
within the meaning of Rule 11Aa2-1 of the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the
quotation of the Registrable Securities on the Principal Trading
Market;
(k) Provide a transfer agent ("Transfer Agent") and registrar, which may
be a single entity, for the Registrable Securities not later than the
initial Effective Date;
(l) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to
the Registration Statement and enable such certificates for the
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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 counsel for the Investors
(as a group and not individually) equal to $4,500 for the review of
the initial Registration Statement (and pre-effective amendments
thereto) and $2,000 for the review of each post-effective amendment to
a Registration Statement shall be borne by the Company.
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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 Buyer 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 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 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
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supplement thereto, subject to such limitations and conditions as are
applicable to the indemnification provided by the Company to this
Section 6. 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.
(b) Promptly after receipt by an Indemnified Party under this Section 6 of
notice of the commencement of any action (including any governmental
action), such Indemnified Party shall, if a Claim in respect thereof
is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume control of
the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Party, as the case may be. In
case any such action is brought against any Indemnified Party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the
provisions herein stated and after notice from the indemnifying party
to such Indemnified Party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such Indemnified
Party under this Section 6 for any legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The Indemnified Party shall have the
right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and reasonable out-of-pocket
expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense
of the action with counsel reasonably satisfactory to the Indemnified
Party provided such counsel is of the opinion that all defenses
available to the Indemnified Party can be maintained without
prejudicing the rights of the indemnifying party. The failure to
deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Party under
this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as
such expense, loss, damage or liability is incurred and is due and
payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees
to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that (a) no contribution shall be
made under 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
12
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
(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
13
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 a eighty (80%) percent interest of the Registrable
Securities (as calculated by the number of Purchased Shares then held
by the Investors). Any amendment or waiver effected in accordance with
this Section 11 shall be binding upon each Investor and the Company.
12. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices
or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of
such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Securities Purchase Agreement, (i) if
to the Company or to the Initial Investor, to their respective address
14
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) This Agreement shall be governed by and interpreted 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.
(e) The Company and the Investor hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with this Agreement or any of the other Transaction
Agreements.
(f) If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any
other jurisdiction.
(g) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns
of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.
(k) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company
agrees that, in addition to any other liability the Company may have
by reason of such failure or delay, the Company shall be liable for
15
all direct damages caused by any such failure or delay, unless the
same is the result of force majeure. Neither party shall be liable for
consequential damages.
(l) This Agreement (including to the extent relevant the provisions
of other Transaction Agreements) constitutes the entire agreement
among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
SATELLITE ENTERPRISES CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
INITIAL INVESTOR:
------------------------------------
[Print Name of Initial Investor]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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SCHEDULE 10
The shares issuable on exercise of the Warrants listed below and the Outstanding
Shares listed below may be included in the Registration Statement.
Warrants
The Company has issued the following warrants:
Warrant, dated November 26, 2003, to purchase 1,000,000 shares of Common
Stock
Warrant, dated December 1, 2003, to purchase 1,000,000 shares of Common
Stock
Each of the above warrants contains piggy-back registration rights provisions.
Outstanding Shares
The following shareholders have registration rights with respect to their shares
of Common Stock:
GCH Capital -- 1,000,000 shares issued on December 1, 2003
Xxxxxxxxxx Investments, Ltd. -- -- 1,000,000 shares issued on November 20,
2003
The Morpheus Trust -- 2,000,000 shares issued on April 14, 2004
Dojo Investments, Ltd. -- 3,000,000 issued on April 14, 2004
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