EXHIBIT 4 (y)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of October 7,
1998 is made by and among DIGITAL LAVA INC., a Delaware corporation (the
"Company"), and the persons executing a counterpart of this Agreement on the
signature page hereof (each a "Holder" and collectively the "Holders").
RECITALS
In connection with the execution by the Holders of a letter agreement of
even date with this Agreement, the Company has agreed to issue to Holders
warrants (the "Warrant") to purchase 20,000 shares of the Company's common stock
("Common Stock"), and in connection therewith the Company has agreed to grant to
the Holders certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively, the "Securities
Act") with respect to the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares"). This Agreement sets forth the terms and
conditions of such undertaking.
AGREEMENTS
The Company and the Holders covenant and agree as follows:
1. Definitions. For purposes of this Agreement:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
statements or similar documents 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 the effectiveness of such registration statement or document by
the Securities and Exchange Commission (the "SEC");
(b) The term "Registrable Securities" means (i) the Warrant Shares and (ii)
any shares of Common Stock issued as (or issuable upon the conversion or
exercise of any convertible security, warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of such Warrant Shares, excluding in all cases, however, any
Registrable Securities sold by a Holder in a transaction in which such Holder's
registration rights under this Agreement are not assigned.
2. Registration.
(a) Demand Registration. Subject to the limitations set forth in Section
2(c) below, the Company shall, upon the written request of a Holder or Holders
of a majority of the Registrable Securities, use its best efforts to cause the
Registrable Securities specified in such request to be registered under the
Securities Act (a "Demand Registration").
(b) Notice of Demand Registration. Each request delivered pursuant to
Section 2(a) shall: (i) specify the amount of Registrable Securities intended to
be offered and sold by the Holders joining in the request; (ii) express the
present intent to offer such Registrable Securities for distribution; (iii)
describe the nature or method of the proposed offer and sale of the Registrable
Securities; and (iv) contain the undertaking of the Holders joining in such
request to provide all such information and materials and take all such action
as may be required in order to permit the Company to comply with all applicable
requirements of the Securities Act, the Registrable Securities and state
securities and "blue sky" laws, and to obtain acceleration of the effective date
of the Registration Statement (as defined below).
(c) Limitations on Demand Registrations. Notwithstanding anything herein to
the contrary, the obligations of the Company to cause any Registrable Securities
to be registered pursuant to Section 2(a) are subject to each of the following
further limitations, conditions and qualifications:
(i) The Holders may only request that the Company make any Demand
Registration subsequent to 180 days following the effective date of the
registration statement for the initial public offering of the Company's
securities.
(ii) Any request for Demand Registration made by a Holder or Holders
pursuant to Section 2(a), to be effective, shall request the registration
of the offering and sale or other distribution by the Holders of not less
than one-half of their Registrable Securities in the aggregate.
(iii) If a Holder or Holders request Demand Registration pursuant to
Section 2(a) and the related offering is to be underwritten, the managing
underwriter shall be a nationally recognized investment banking firm
approved by the Company in the reasonable exercise of its discretion.
(iv) The Company shall be required to effect only one Demand Registration
pursuant to Section 2(a); provided, however, that a registration shall not
count as a Demand Registration unless 90% of the Registrable Securities
requested to be included in such registration are sold pursuant to such
registration statement.
(d) Incidental Registration. Subject to the limitations set forth in
Section 2(f), at any time that the Company for its account or the account of
others shall propose the registration under the Securities Act of an offering of
any of its securities on a registration
form which can be used for registration of the Registrable Securities, the
Company shall give written notice as promptly as possible of such proposed
registration to the Holders, and shall include in the offering such amount of
Registrable Securities as the Holders shall request to be included by written
notice to the Company received within fifteen days after receipt of the
Company's notice, upon the same terms (including the method of distribution) as
the securities being sold by the Company pursuant to any such offering (an
"Incidental Registration").
(e) Notice of Incidental Registration. Each request delivered pursuant to
Section 2(d) shall: (i) specify the amount of Registrable Securities intended to
be offered and sold by each of the Holders; and (ii) contain the undertaking of
each of the participating Holders to provide all such information and materials
and take all such action as may be required in order to permit the Company to
comply with all applicable requirements of the Securities Act, the SEC and state
securities and "blue sky" laws and to obtain acceleration of the effective date
of the Registration Statement.
(f) Limitations on Incidental Registrations. Notwithstanding anything
contained herein to the contrary, the obligations of the Company to cause
Registrable Securities to be registered pursuant to Section 2(d) are subject to
each of the following limitations, conditions and qualifications:
(i) The Company shall not be required to give notice or include Registrable
Securities in any registration pursuant to Section 2(d) if the proposed
registration is primarily: (A) a registration of a stock option, thrift,
employee benefit or compensation plan or of securities issued or issuable
pursuant to any such plan; (B) a registration of securities proposed to be
issued in connection with a dividend reinvestment and stock purchase plan
or customer stock purchase plan; (C) a registration of securities proposed
to be issued in exchange for securities or assets of, or in connection with
a merger or consolidation with, another corporation or other entity; or (D)
a registration of securities which is solely a combination of any of the
above.
(ii) If the Company is advised in writing by the managing underwriter (or
its investment banking firm if the offering is not underwritten) that the
inclusion of Registrable Securities may, in the opinion of such underwriter
or investment banking firm, as the case may be, interfere with the orderly
sale and distribution of the securities proposed to be offered by the
Company or adversely affect the price at which such securities may be sold,
the number of shares of Registrable Securities to be included in the
offering shall be reduced or eliminated to the extent necessary as shall be
reasonably determined by such underwriter or investment banker, as the case
may be, in good faith.
(iii) If the Holders request registration pursuant to Section 2(d) and the
related offering is to be underwritten, the participating Holders will
enter into an underwriting agreement containing representations, warranties
and agreements consistent with those customarily made by an issuer and a
selling
shareholder in underwriting agreements with respect to secondary
distributions.
(iv) The Company may, in its sole discretion, without the consent of the
Holders and without liability to the Holders for such action, withdraw such
registration statement and abandon the proposed offering in which the
Holders had requested to participate at any time.
(v) The Holders may exercise Incidental Registrations pursuant to Section
2(d) so long as such Holders continue to hold Registrable Securities, and
so long as such Registrable Securities are not otherwise eligible for sale
pursuant to Rule 144 (or any successor rule) promulgated under the
Securities Act.
(vi) The Holders may exercise Incidental Registrations pursuant to Section
2(d) only subsequent to 180 days following the effective date of the
registration statement for the initial public offering of the Company's
securities.
3. Obligations of the Company. When required under the Agreement to
effect the registration of the Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Registration Statements. Prepare and file with the SEC a registration
statement or statements or similar documents (the "Registration Statement") with
respect to all Registrable Securities, other than any Registrable Securities
excluded by the Holders pursuant to Sections 2(a) and 2(d), and use its best
efforts to cause the Registration Statement to become effective and maintain the
effectiveness of the Registration Statement until the earlier of (i) the date
all such registered Registrable Securities are sold and any prospectus delivery
requirements under the Securities Act shall have lapsed, and (ii) 180 days.
(b) Amendments. 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 comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by the Registration Statement.
(c) Prospectuses. Furnish promptly to Holders such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Holders may reasonably request in order to
facilitate the disposition of Registrable Securities.
(d) Blue Sky. Use its best efforts to register and qualify the securities
covered by the Registration Statement under such other securities or Blue Sky
laws of such
jurisdictions as shall be reasonably requested by the Holders, and to prepare
and file in those jurisdictions such amendments (including post-effective
amendments) and supplements and to take such other actions necessary or
advisable to maintain such registration and qualifications in effect, and to
take all other actions necessary or advisable to enable the disposition of such
securities in such jurisdictions, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions or to provide any undertaking or make any change in its charter
or bylaws which the Company determines to be contrary to the best interest of
the Company and its stockholders.
(e) Underwriting Arrangements. 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
managing underwriter of such offering. The Holders shall also enter into and
perform their customary obligations under any such agreement including, without
limitation, customary indemnification and contribution obligations.
(f) Notification of Changes. Notify the Holders, at any time when a
prospectus relating to Registrable Securities covered by the Registration
Statement is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus including in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. The Company shall promptly amend or supplement the Registration
Statement to correct any such untrue statement or omission.
(g) Notification of Stop Orders. Notify the Holders of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration Statement
or the initiation of any proceedings for that purpose. The Company will make
every reasonable effort to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest possible
time.
(h) Review by Counsel. Permit a single firm of counsel designated Holders
of a majority of the Registrable Securities subject to sale to review (at the
expense of such selling stockholders, subject to the proviso set forth in
Section 5 below) the Registration Statement and all amendments and supplements
thereto a reasonable period of time prior to their filing, and shall not file
any document in a form to which counsel reasonably objects.
(i) Opinions. At the request of the Holders, use its best efforts to
furnish on the date that Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Agreement (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters.
(j) Due Diligence. Make available for inspection by the Holders, any
underwriters participating in the offering pursuant to the registration and the
single counsel, accountants or other agents retained by the Holders or any such
underwriter, all pertinent financial and other records, corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by the Holders or any
such underwriters in connection with the registration.
(k) Listing. If the class of the Company's securities is then listed on a
national securities exchange, use its best efforts to cause the Registrable
Securities to be listed on such exchange. If the Company's securities are not
then listed on a national securities exchange, use its best efforts to
facilitate the reporting of the Registrable Securities on NASDAQ.
(l) Further Actions. Take all other reasonable actions necessary to
expedite and facilitate disposition by the Holders of the Registrable Securities
pursuant to the Registration Statement.
4. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to Holders that Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be reasonably required to
effect the registration of the Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request.
5. Expenses of Registration. All expenses other than the underwriting
discounts and commissions incurred in connection with registration, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing, filing and qualification fees, printing and accounting
fees, the fees and disbursements of counsel for the Company (but excluding the
fees and disbursements of any counsel for the Holders) shall be borne by the
Company; provided, however, that the reasonable fees and disbursements of not
more than one counsel for the Holders collectively shall be borne by the Company
in connection with any Demand Registration.
6. Indemnification. If any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) By Company. To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for the Holders and each person, if any, who controls any such underwriter
within the meaning of the Securities Act or the Securities Act of 1934, as
amended (the "1934 Act"), against any losses, claims, damages, expenses or
liabilities (joint or several) to which any of them may become subject under the
Securities Act, the 1934 Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities (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 (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstance in which they are made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the 1934 Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the 1934 Act, any state securities law; and the
Company will reimburse the Holders and each such underwriter or controlling
person, promptly as such expenses are incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability action or proceeding; provided, however,
that the indemnity agreement contained in this subsection 6(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it aries out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by the Holders or any such underwriter
or controlling person, as the case may be. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Holders or any such underwriter or controlling person and shall survive the
transfer of the Registrable Securities by Holders.
(b) By Holders. To the extent permitted by law, each Holder will severally
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement, each person, if any, who
controls the Company within the meaning of the Securities Act or the 1934 Act,
any underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the 1934 Act or other federal or state securities law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) 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 by such Holder expressly for
use in connection with such registration, and such Holder will reimburse any
legal or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage liability or action;
provided, however, that the indemnity agreement contained in this subsection
6(b) shall not apply to amounts paid in settlement of such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
Holder, which consent shall not be unreasonably withheld; and provided further,
that such Holder shall be liable under this paragraph for only that amount of
losses, claims, damages and liabilities as does not exceed the proceeds to such
Holder as a result of the sale of Registrable Securities pursuant to such
registration.
(c) Procedure for Indemnification. 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 will, 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 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 parties; provided, however, that an 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
for the indemnifying party, representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 6 only to the extent
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 6. 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, promptly
as such expense, loss, damage or liability is incurred.
(d) 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 otherwise would be
liable under this Section 6 to the extent permitted by law, provided that (i) no
contribution shall be made under the circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in this
Section 6, (ii) 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 (iii) 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.
7. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of SEC Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit the Holders to sell securities of the Company to the public without
registration, the Company agrees, following the initial public offer of the
Company's securities, to:
(i) make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
(ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the 1934 Act; and
(iii) furnish to each Holder, so long as such Holder owns any Registrable
Securities, forthwith upon request (A) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144, the
Securities Act and the 1934 Act, (B) 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 (C) such other information as may be reasonably
requested in availing the Holder of any rule or regulation of the SEC which
permits the selling of any securities without registration.
8. Miscellaneous.
(a) Notices. Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed (i) if
to the Company, at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000,
(with a copy to: Xxxxxxxxxx Xxxxxxxxx Xxxxxx & Xxxxxx LLP, 00 Xxxx 00xx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxxx X. Xxxxx, Esq.) and (ii) if
to Holder to the address set forth for Xx. Xxxxxxxx "Xxxxx" Xxxxxxxx on the
signature page to this Agreement, or at such other address as each such party
furnishes by notice given in accordance with this Section 8(a).
(b) Waiver. 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,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) Governing Law. This Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of New York, as such
laws are applied by New York courts to agreements entered into and to be
performed in New York by and between residents of New York. In the event that
any provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(d) Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a written agreement executed by the Company and the holders of a
majority in interest of the sum of (x) the Registrable Securities and (y) the
then outstanding and unexercised Warrants.
(e) Assignability. The rights set forth in this Agreement shall accrue to
each subsequent holder of Registrable Securities originally issued to a Holder
who shall have executed a written consent agreeing to be bound by and subject to
the terms and conditions of this Agreement as a "Holder" with respect to such
Registrable Securities acquired by such transferee.
DIGITAL LAVA INC.
By: /s/ Xxxxx Xxxxx
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Authorized Officer
HOLDERS:
/s/ Xxxxxxxx "Xxxxx" Xxxxxxxx
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Name: Xxxxxxxx "Xxxxx" Xxxxxxxx
Address: 0000 Xxxxx Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Social Security/Tax I.D. No.: ________
/s/ Xxxxxxx and Xxxxxxxxxxx Xxxxxxxx
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Xxxxxxx and Xxxxxxxxxxx Xxxxxxxx
Social Security/Tax I.D.
Nos:______________________
/s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
Social Security/Tax I.D.
No:________________________
