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EXHIBIT 10.01
[EXECUTION COPY]
ENTERTAINMENT COMMUNICATIONS, INC.
REGISTRATION RIGHTS AGREEMENT
Dated as of May 21, 1996
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of May 21,
1996 among ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation (the
"Company") and CHASE EQUITY ASSOCIATES, L.P., a California limited partnership
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to the Convertible Subordinated Note Purchase
Agreement, dated May 21, 1996, between the Company and certain other parties
signatories thereto (the "Purchase Agreement"), the Purchaser has purchased
Convertible Subordinated Notes from the Company; and
WHEREAS, as a condition to the execution and delivery by the Purchaser
of the Purchase Agreement, the Company has agreed to grant to the Purchaser
registration rights with respect to certain securities of the Company;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings; provided, however, that capitalized terms used herein and
not otherwise defined shall have the meanings given such terms in the Purchase
Agreement:
"Agreement" means this Agreement as in effect on the date hereof and as
hereafter from time to time amended, modified or supplemented in accordance with
the terms hereof.
"Commission" means the Securities and Exchange Commission and any
successor commission or agency having similar powers.
"Company" has the meaning specified in the preamble to this Agreement.
"Company Securities" has the meaning specified in Section 2.1(g).
"Holder Request" has the meaning specified in Section 2.1(a).
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"Initial Public Offering" means the public offer and sale of Common
Stock of the Company, pursuant to the initial registration thereof under the
Securities Act.
"Managing Underwriter" has the meaning specified in Section 2.1(f).
"NASDAQ" means the NASDAQ National Market or the NASDAQ
Small Cap Market.
"Note" means each of the Convertible Subordinated Notes issued pursuant
to the Purchase Agreement.
"Purchase Agreement" has the meaning specified in the first
recital to this Agreement.
"Registrable Securities" means Underlying Securities of the
following types:
(a) all shares of Common Stock issued or issuable upon the conversion
of Notes or other convertible securities (including New Securities, if any) now
or hereafter owned or acquired of record by any Qualified Holder; and
(b) any shares of Common Stock issued or issuable by the Company in
respect of the Notes or shares of Common Stock referred to in the foregoing
clause (a) by way of a stock dividend or stock split or in connection with a
combination or subdivision of shares, reclassification, recapitalization,
merger, consolidation or other reorganization of the Company.
As to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144 (or any similar provision then in effect), (iii)
they shall have been otherwise transferred or disposed of, and new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by the Company, and subsequent transfer or disposition of them shall
not require their registration or qualification under the Securities Act or any
similar state law then in force, or (iv) they shall have ceased to be
outstanding.
"Registration Expenses" means any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article II hereof,
including, without limitation, all Commission, stock exchange or National
Association of Securities Dealers, Inc. ("NASD") registration and filing fees,
all fees and
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expenses of complying with securities and blue sky laws (including the
reasonable fees and disbursements of underwriters' counsel in connection with
blue sky qualifications and NASD filings), all fees and expenses of the transfer
agent and registrar for the Registrable Securities, all printing expenses, the
fees and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, and one firm
of counsel (other than house counsel) retained by the Holders, but excluding
underwriting discounts and commissions, applicable transfer and documentary
stamp taxes, if any, and filing fees which shall be borne by the seller of the
securities in all cases.
"Representative" means a representative designated by the Requisite
Holders of Registrable Securities that are subject to a registration request
pursuant to Article II hereof.
"Securities" means any Common Stock or other capital stock of the
Company, or warrants, options, convertible securities or other rights to acquire
the foregoing.
"Transferee" means any Person to whom any Purchaser has transferred
Registrable Securities and who continues to hold Registrable Securities.
"Underwritten Offering" has the meaning specified in Section 2.1(b).
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Demand Registrations. (a) Subject to Section 2.1(j) below,
at any time, and from time to time, following the first anniversary of an
underwritten Initial Public Offering, any Qualified Holder may request in
writing that the Company effect the registration under the Securities Act of all
or part of the Registrable Securities of such Holder, specifying in the request
the number and type of Registrable Securities to be registered by such Holder
and the intended method of disposition thereof (such notice is hereinafter
referred to as a "Holder Request"). Upon receipt of a Holder Request, the
Company will promptly give written notice of such requested registration to all
other Holders of Registrable Securities and securities convertible or
exercisable into Registrable Securities, which other Holders shall have the
right to include as Registrable Securities held by them in such registration and
thereupon the Company will, as
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expeditiously as possible, use all reasonable efforts to effect the registration
under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by the Qualified Holder requesting registration;
(ii) all other Registrable Securities which the Company has
been requested to register by any other Holder thereof by written
request given to the Company within 30 calendar days after the giving
of such written notice by the Company (which request shall specify the
intended method of disposition of such Registrable Securities), all to
the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so
to be registered; and
(iii) shares of Common Stock for which Notes may be converted
and which the Company has been requested to register by the Holder
thereof by written request given to the Company within 30 days after
the giving of such written notice by the Company (which request shall
specify the intended method of disposition of such shares of Common
Stock), all to the extent necessary to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of such
shares of Common Stock so to be registered;
provided, however, that, in addition to postponements and delays pursuant to
applicable law, the Company may postpone for not more than 90 calendar days, on
one occasion only with respect to each request for registration made under this
Section 2.1(a), the filing or effectiveness of a registration statement under
this Section 2.1(a) if the Company and the Representative agree that such
registration might reasonably be expected to have an adverse effect on any
proposal or plan by the Company to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or similar transaction; provided, further, however, that, in such event,
the Holders of Registrable Securities and securities convertible or exercisable
into Registrable Securities initiating the request for such registration will be
entitled to withdraw such request, and if such request is withdrawn such
registration will not count as one of the permitted registrations under this
Section 2.1.
(b) Notwithstanding the foregoing provisions of Section 2.1(a), the
Company shall not be obligated to effect more than one registration pursuant to
this Section 2.1 in any twelve month period, in each case through a firm
commitment underwriting through a nationally recognized underwriter (an
"Underwritten Offering") and any requested registration must be for an
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aggregate number of Registrable Securities which the Representative reasonably
believes will have aggregate net sale proceeds of $5,000,000.
(c) If the Company proposes to effect a registration requested pursuant
to this Section 2.1 by the filing of a registration statement on Form S-3 (or
any similar short-form registration statement), the Company will comply with any
and all reasonable requests by the Managing Underwriter to effect such
registration on another permitted form if such Managing Underwriter advises the
Company that, in its reasonable opinion, the use of another form of registration
statement is of material importance to such proposed offering.
(d) A registration requested pursuant to Section 2.1(a) will not be
deemed to have been effected unless it has become effective; provided, however,
that if after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency or
court (and such stop order, injunction or other order or requirement is not
caused by (i) the breach by a Holder requesting registration of such Holder's
obligations under this Agreement or (ii) an act or omission by any such Holder),
such registration will be deemed not to have been effected.
(e) The Company shall bear all Registration Expenses in connection with
any registration requested pursuant to Section 2.1 and the Holders (together
with Transferees, if any, participating in the registration on a pro rata
basis); provided, however, in the event a Holder withdraws its demand subsequent
to the exclusion of certain Registrable Securities pursuant to clause (h) below,
such Holder shall reimburse the Company for its pro rata share of Registration
Expenses based upon the proportion the number of shares of Registrable
Securities such Holder requested to be registered bears to the total number of
shares requested or proposed to be registered in such registration.
(f) The Company shall have the right, subject to the reasonable
approval of the Representative, to select the investment banker (or investment
bankers) that shall manage the offering (collectively, the "Managing
Underwriter").
(g) In connection with any offering pursuant to this Section 2.1, the
only shares that may be included in such offering are (i) Registrable
Securities, (ii) shares of authorized but unissued Common Stock that the Company
elects to include in such offering ("Company Securities"), and (iii) shares of
authorized but unissued Common Stock for which the Notes are convertible.
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(h) If in connection with any Underwritten Offering pursuant to this
Section 2.1, the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company will promptly so advise
each Holder of Registrable Securities and securities convertible or exercisable
into Registrable Securities that has requested registration, and shares shall be
excluded from such offering in the following order until such limitation has
been met: Company Securities, if any, shall be excluded until all of the Company
Securities shall have been so excluded, and, thereafter the Registrable
Securities requested to be included in such offering pursuant to Section
2.1(a)(ii) shall be excluded pro rata from among all Holders seeking to
participate in such offering, based on the respective number of Registrable
Securities as to which registration has been so requested by such Holders.
(i) If (i) any shares of Common Stock requested to be included in a
sale pursuant to this Section 2.1 shall not be outstanding but shall be issuable
upon conversion of Notes which are outstanding, or (ii) any shares of Common
Stock requested to be included in a sale pursuant to this Section 2.1 shall not
be shares of Voting Common Stock then the Holders of such Notes or Non-Voting
Common Stock and the Company shall take all actions necessary in order to
convert such Notes or Non-Voting Common Stock into shares of Voting Common Stock
in order to effect such sale.
(j) The Company shall be obligated to effect two registrations under
Section 2.1(a); provided, however, that such registrations under Section 2.1(a)
shall only count towards this limit if (i) the registration statement thereunder
becomes effective and remains effective (unless the failure to sell is due
solely to the breach by a Holder requesting registration of such Holder's
obligations under this Agreement or is due to a stop order, injunction or other
order or action of the Commission which is caused by a Holder requesting
registration) for 120 days or (if such sale occurs prior to the end of such 120
day period) until all shares of Registrable Stock and Common Stock for which the
Notes are convertible registered under such statement are sold and (ii) such
registration provides for distribution of all shares of Registrable Stock
requested to be included therein.
SECTION 2.2. Piggyback Registrations. (a) If the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than a registration on Form S-4 or S-8 or any successor or similar forms
thereto and other than pursuant to a registration under Section 2.1), whether or
not for sale for its own account, on a form and in a manner that would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it will give written notice to
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Holders and Transferees, if any, promptly of its intention to do so, describing
such securities and specifying the form and manner and the other relevant facts
involved in such proposed registration (including, without limitation, (x)
whether or not such registration will be in connection with an underwritten
offering of Registrable Securities and, if so, the identity of the Managing
Underwriter and whether such offering will be pursuant to a "best efforts" or
"firm commitment" underwriting and (y) the price (net of any underwriting
commissions, discounts and the like) at which the Registrable Securities are
reasonably expected to be sold). Upon the written request of any Holder or
Transferee delivered to the Company within 30 calendar days after the receipt of
any such notice (which request shall specify the Registrable Securities intended
to be disposed of by the Holders or Transferees and the intended method of
disposition thereof), such Holder or Transferee may participate in such
registration and sale, and the Company will use all reasonable efforts to effect
such registration under the Securities Act of all of the Registrable Securities
that the Company has been so requested to register; provided, however, that:
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of
such determination to the Holders and the Transferees and thereupon the
Company shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights, of the Holders or
Transferees to request that such registration be effected as a
registration under Section 2.1.
(ii) If such registration involves an Underwritten Offering,
the Holders and Transferees must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and
conditions as apply to the Company.
No registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect registration upon request under Section 2.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 2.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
dividend
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reinvestment plans or stock option or other employee benefit plans.
(c) The Registration Expenses (other than out of pocket expenses
incurred by the Holders or Transferees) incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2
shall be paid by the Company; provided, however, the Holders and Transferees
shall pay their pro rata share of any underwriting discounts and commissions.
(d) If a registration pursuant to this Section 2.2 involves an
Underwritten Offering and the Managing Underwriter advises the issuer that, in
its opinion, the number of securities proposed to be included in such
registration should be limited due to market conditions, then the Company will
exclude from such registration (i) first, on a pro rata basis, all equity
securities (other than equity securities which the Company proposes to include
in such registration) requested to be included in such registration, and (ii)
thereafter, the equity securities the Company proposes to sell in such
registration.
(e) The Company shall have the right to select the Managing Underwriter
with respect to the offering.
(f) If (i) any shares of Common Stock requested to be included in a
sale pursuant to this Section 2.2 shall not be outstanding but shall be issuable
upon the conversion of the Notes which are outstanding, or (ii) any shares of
Common Stock requested to be included in a sale pursuant to this Section 2.2
shall not be shares of Voting Common Stock, then the Holders of such Notes or
Non-Voting Common Stock and the Company shall take all actions necessary in
order to convert such Notes or NonVoting Common Stock into shares of Voting
Common Stock in order to effect such sale.
SECTION 2.3. Registration Procedures. (a) If and whenever the Company
is required to use all reasonable efforts to effect or cause the registration of
any Registrable Securities under the Securities Act as provided in Section 2.1
or Section 2.2, the Company will, as expeditiously as possible:
(i) Prepare and, in any event within 90 calendar days after
the end of the period within which requests for registration may be
given to the Company, file with the Commission a registration statement
with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statements to become and remain
effective; provided, however, that in the case of a registration
provided for in Section 2.1 or Section 2.2, before filing a
registration statement or prospectus or any
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amendments or supplements thereof, the Company will furnish to the
counsel selected by the Representative copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel; and, provided, further, that the Company may discontinue
any registration of its securities that is being effected pursuant to
Section 2.2 at any time prior to the effective date of the registration
statement relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period as may be requested by the Representative not exceeding the
earlier of the day 120 days from the date of effectiveness of such
registration statement or the date all Registrable Securities or shares
of Common Stock for which the Notes are convertible registered by such
registration statement have been sold and to comply with the provisions
of the Securities Act with respect to the disposition of all Common
Stock covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement.
(iii) Furnish to the Representative and to each underwriter,
if any, of such Registrable Securities, such number of copies of a
prospectus and preliminary prospectus for delivery in conformity with
the requirements of the Securities Act, and such other documents, as
the Representative may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities.
(iv) Use all reasonable efforts to register or qualify such
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as the
Representative shall reasonably request, and do any and all other acts
and things which may be reasonably necessary or advisable to enable the
Holders or Transferees to consummate the disposition of the Registrable
Securities owned by the Holders or Transferees in such jurisdictions,
except that the Company shall not for any such purpose be required (A)
to qualify to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 2.3(a)(iv), it is not
then so qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction where
it is not then so subject.
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(v) Use all reasonable efforts to cause such Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the Holders or Transferees to consummate the
disposition of such Registrable Securities.
(vi) Immediately notify the Representative at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the appropriate period mentioned in Section
2.3(a)(ii), if the Company becomes aware that the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing,
and, at the request of the Representative deliver a reasonable number
of copies of an amended or supplemental prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an 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 not misleading in
the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security Holders, in each case as soon as practicable,
but not later than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the period covered
corresponds to a fiscal year of the Company), an earnings statement of
the Company which will satisfy the provisions of Section 11(a) of the
Securities Act.
(viii) Use all reasonable efforts in cooperation with the
underwriters to list such Registrable Securities on the National Market
System of NASDAQ, the American Stock Exchange or the New York Stock
Exchange.
(ix) In the event the offering is an Underwritten Offering,
use all reasonable efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters of the type customarily covered by such letters
as the Representative reasonably requests.
(x) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and
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obtain such certificates and opinions as the Representative reasonably
requests in order to effect an underwritten public offering of such
Registrable Securities.
(b) Holders and Transferees will, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
2.3(a)(vi), forthwith discontinue disposition of the Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until Holders and Transferees receive copies of the supplemented or amended
prospectus contemplated by Section 2.3(a)(vi).
(c) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, Holders and Transferees, whether or not the
Registrable Securities of Holders or Transferees, or shares of Common Stock for
which the Notes are convertible are included in such registration, not to effect
any public sale or distribution, including any sale pursuant to Rule 144 under
the Securities Act, of any Registrable Securities, or of any security
convertible into or exchangeable or exercisable for any Registrable Securities
(other than as part of such Underwritten Offering) or the Notes or any shares of
Common Stock for which the Notes are convertible without the consent of the
Managing Underwriter, during a period commencing seven calendar days before and
ending 120 calendar days (or such lesser number as the Managing Underwriter
shall designate) after the effective date of such registration.
(d) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, Holders and Transferees agree to execute an
underwriting agreement in such customary form as the Underwriters may reasonably
request.
(e) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, the Company agrees, if so required by the Managing
Underwriter, not to effect any public sale or distribution of any of its equity
or debt securities, as the case may be, or securities convertible into or
exchangeable or exercisable for any of such equity or debt securities, as the
case may be, during a period commencing seven calendar days before and ending
120 calendar days after the effective date of such registration, except for such
Underwritten Offering or except in connection with a stock option plan, stock
purchase plan, savings or similar plan, or an acquisition, merger or exchange
offer.
(f) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, any Holder of Registrable Securities (or Notes with
respect to the shares of Common Stock for which the Notes are convertible)
requesting to be included in such registration may elect, in writing, prior to
the effective
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date of the registration statement filed in connection with such registration,
not to register such securities in connection with such registration, if such
Holder has agreed with the Company or the Managing Underwriter to limit its
rights under this Section 2.3.
(g) It is understood that in any Underwritten Offering, in addition to
any shares of Common Stock (the "initial shares") the underwriters have
committed to purchase, the underwriting agreement may grant the underwriters an
option to purchase up to a number of additional shares of authorized but
unissued shares of Common Stock (the "allotment shares") equal to 15% of the
initial shares (or such other maximum amount as the rules and regulations of the
National Association of Securities Dealers, Inc. may then permit), solely to
cover over-allotments. Allotment shares proposed to be sold shall first be
allocated to shares proposed to be sold by the Company until all such
securities, if any, shall have been so allocated. Thereafter, any additional
allotment shares shall be allocated to Registrable Securities proposed to be
sold by the Purchasers, the Transferees and any other shareholders of the
Company, pro rata.
(h) Notwithstanding anything in this Article II to the contrary, in
lieu of converting any Note prior to or simultaneously with the filing or the
effectiveness of any registration statement filed pursuant to this Article II,
the Holder of such Note may sell such Note to the underwriter of the offering
being registered upon the undertaking of such underwriter to convert such Note
before making any distribution pursuant to such registration statement and to
include the Common Stock issued upon such conversion among the securities being
offered pursuant to such registration statement. The Company agrees to cause
such Common Stock to be included among the securities being offered pursuant to
such registration statement to be issued within such time as will permit the
underwriter to make and complete the distribution contemplated by the
underwriting.
(i) With respect to any registration pursuant to Section 2.1 or Section
2.2 in which Registrable Securities of a Holder or Transferee are included, such
Holder or Transferee shall use all reasonable efforts to provide the Company
with such information as is necessary for the Company to effect such
registration pursuant to Section 2.1 or Section 2.2.
SECTION 2.4. Indemnification. (a) In the event of any registration of
any securities of the Company under the Securities Act pursuant to Section 2.1
or Section 2.2, the Company will, and it hereby agrees to, indemnify and hold
harmless, to the extent permitted by law, each seller of any Registrable
Securities covered by such registration statement,
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its directors and officers or general and limited partners, each other Person
who participates as an underwriter in the offering or sale of such securities
and each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or
expense whatsoever arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by them
in connection with investigating, preparing or defending against, or
serving as witnesses in connection with, any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter expressly for use in the preparation of
any registration statement (or any amendment thereto) or any preliminary
prospectus or prospectus (or any amendment or supplement thereto); and provided,
further, that the Company will not be liable to any Person who
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participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, under the indemnity agreement in this Section 2.4(a) with
respect to any preliminary prospectus or final prospectus or final prospectus as
amended or supplemented, as the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or controlling Person results
from the fact that such underwriter sold Registrable Securities to a Person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus or of the final prospectus as then
amended or supplemented, whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer, general or limited partner,
investment advisor or agent, underwriter or controlling Person and shall survive
the transfer of such securities by such seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 or Section 2.2, that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 2.4(a)) the Company (and
its directors and officers and each other Person who controls the Company within
the meaning of the Securities Act) with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such seller or underwriter
specifically stating that it is for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or supplement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such securities by such
seller. In that event, the obligations of the Company and such sellers pursuant
to this Section 2.4 are to be several and not joint; provided, however, that
with respect to each claim pursuant to this Section, the Company shall be liable
for the full amount of such claim, and each such seller's liability under this
Section 2.4 shall be limited to an amount equal to the net proceeds (after
deducting the underwriting discount and expenses) received by such seller from
the sale of
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Registrable Securities held by such seller pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 2.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 2.4, except to the extent (not including any such notice of an
underwriter) that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim (in which case the indemnifying party shall not be liable for the fees and
expenses of more than one firm of counsel for the sellers of Registrable
Securities, or more than one firm of counsel for the underwriters in connection
with any one action or separate but similar or related actions), the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish with counsel reasonably satisfactory to such indemnified
party, 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 for any legal or other expenses subsequently
incurred by such indemnifying party in connection with the defense thereof.
(d) The Company and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority.
SECTION 2.5. Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
2.4 is for any reason not available, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered
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the relative benefits received by each party from the offering of the
Registrable Securities (taking into account the portion of the proceeds of the
offering realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. The Company and
each Person selling securities agree with each other that no seller of
Registrable Securities shall be required to contribute any amount in excess of
the amount such seller would have been required to pay to an indemnified party
if the indemnity under Section 2.4(b) were available. The Company and each such
seller agree with each other and the underwriters of the Registrable Securities,
if requested by such underwriters, that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation (even
if the underwriters were treated as one entity for such purpose) or for the
underwriters' portion of such contribution to exceed the percentage that the
underwriting discount bears to the initial public offering price of the
Registrable Securities. For purposes of this Section 2.5, each Person, if any,
who controls an underwriter within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such underwriter, and each
director and each officer of the Company who signed the registration statement,
and each Person, if any, who controls the Company or a seller of Registrable
Securities within the meaning of Section 15 of the Securities Act shall have the
same rights to contribution as the Company or a seller of Registrable
Securities, as the case may be.
SECTION 2.6. Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of the Representative make publicly available
other information), and it will take such further action as a Holder or
Transferee may reasonably request, all to the extent required from time to time
to enable the Holder or Transferee to sell shares of Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of a Holder or Transferee, the
Company will deliver to such Holder or Transferee a written statement as to
whether it has complied with such requirements.
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SECTION 2.7. Other Provisions Regarding Registration Rights.
Notwithstanding anything to the contrary in any previous agreement or security,
upon the execution and delivery of this Agreement by all parties hereto, the
Company shall have no obligations to the Holders with respect to the
registration of any shares of Stock, except as provided in this Agreement.
ARTICLE III
TERMINATION
This Agreement shall in any event terminate with respect to any Holder
or any Transferee when (i) such Person and its Affiliates (other than the
Company) cease to hold Common Stock (including shares to be received upon the
conversion of the Notes) and (ii) solely with respect to the provisions of
Article II, on the third anniversary of the Company's Initial Public Offering.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon the parties hereto and their
respective successors and assigns, including, without limitation and without the
need for an express assignment, Transferees, and shall inure to the benefit of
and shall be enforceable by the respective successors and assigns of the parties
hereto and the successors and assigns of all Transferees. No Purchaser may
assign any of its rights hereunder to any Person other than a Transferee that
has complied with the requirements of the Purchase Agreement (if applicable) as
provided therein in all respects. Such Transferee must represent to the Company
in writing that it agrees (x) to be bound by and to comply with all provisions
of this Agreement or any other Transaction Document and (y) to execute any
amendment, supplement or other modification of this Agreement or any other
Transaction Document as may be reasonably requested by the Company; provided,
that the purpose of such amendment or other modification shall be limited to the
furtherance of the preceding clause (x) and shall not, in any respect, be
substantively inconsistent with any other terms or provisions hereof or thereof.
SECTION 4.2. Amendment and Modification; Waiver of Compliance;
Conflicts. (a) This Agreement may be amended only by a written instrument duly
executed by the Company and Holders and Transferees representing a majority in
interest of the Registrable Securities.
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(b) Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(c) In addition to the provisions of Section 4.2(b), any failure of the
Company to comply with any obligation, covenant, agreement or condition herein
may be waived by a written instrument duly executed by the Representative, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
SECTION 4.3. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and shall be made by personal service, facsimile, or reputable
courier service:
(i) if to any Stockholder or subsequent Stockholder, at the
address or telecopier number set forth on the signature pages hereof,
or such other address as shall be designated in a written notice
delivered to the Company, with a copy to Xxxxx, Xxxxx & Xxxxx, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Facsimile No. (000) 000-0000,
Attention: Xxxx X. Xxxxxxxxxxxxx, Esq.; and
(ii) if to the Company, at the address or telecopy number set
forth on the signature pages hereof, or such other address as shall be
designated in a written notice delivered to the other parties hereto,
with a copy to: Xxxxxx, Xxxxx & Xxxxxxx LLP, 0000 Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, Facsimile No. (000) 000-0000,
Attention: Xxxxxxx X. Xxxxxxx.
Unless otherwise specifically provided herein, any notice or other
communication shall be deemed to have been given when delivered in person or by
courier service, upon receipt of facsimile (electronically confirmed), or five
Business Days after depositing it in the United States airmail with postage
prepaid and properly addressed.
SECTION 4.4. Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding, written or verbal,
of the parties
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hereto in respect of the subject matter contained herein and supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
SECTION 4.5. Injunctive Relief. The Holders and the Company acknowledge
and agree that a violation of any of the terms of this Agreement will cause the
Holders irreparable injury for which an adequate remedy at law is not available.
Therefore, the Holders and the Company agree that the Holders shall be entitled
to an injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining the Company from committing any violations
of the provisions of this Agreement.
SECTION 4.6. Inspection. For so long as this Agreement shall be in
effect, this Agreement shall be made available for inspection by any Holder at
the principal executive offices of the Company.
SECTION 4.7. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 4.8. Indemnification. The Company hereby agrees, without
limitation as to time, to indemnify and hold harmless all Indemnified Parties
(as defined below) from and against all Losses (as defined below). "Indemnified
Party" shall mean each of the Holders, each affiliate of any Holder and
respective directors, officers, agents and employees of each of the foregoing,
and each other Person controlling any of the foregoing within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act.
"Losses" shall mean any and all losses, claims, damages, liabilities or other
costs or expenses to which an Indemnified Party may become subject which arise
out of or relate to or result from any investigative, administrative or judicial
proceeding brought or threatened relating to this Agreement, the Purchase
Agreement or any other Transaction Document, or arising out of or relating to a
breach by the Company of any of the terms of any such agreement or any
transaction, action or proceeding to or connected with the transactions
described in this Agreement, the Purchase Agreement or any other Transaction
Document; provided, that no Indemnified Party shall have the right to be
indemnified hereunder for such Indemnified Party's own gross negligence or
wilful misconduct as determined by a court of competent jurisdiction. In
addition to the foregoing, the Company agrees to reimburse each Indemnified
Party for all legal or other expenses incurred in connection with investigating,
defending or participating in any action or other proceeding relating to any
Losses (whether or not such Indemnified Party is a party to any such action or
proceeding).
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SECTION 4.9. Recapitalizations, Exchanges, Etc., Affecting the Common
Stock; New Issuances. The provisions of this Agreement shall apply, to the full
extent set forth herein with respect to the Common Stock and to any and all
other Securities of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of, such equity or
debt securities and shall be appropriately adjusted for any stock dividends,
splits, reverse splits, combinations, reclassifications, recapitalizations,
reorganizations and the like occurring after the date hereof.
SECTION 4.10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 4.11. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT BY THE COMPANY OR THE HOLDERS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OBLIGATION
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK AND EACH HOLDER, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT,
SUCH OTHER TRANSACTION DOCUMENT OR SUCH OBLIGATION. The Company and each Holder
hereby agrees that service of all process in any such proceeding in any such
court may be made by registered or certified mail, return receipt requested, to
such Person at its address provided on the signature pages hereto, such service
being hereby acknowledged by such Person to be sufficient for personal
jurisdiction in any action against such Person in any such court and to be
otherwise effective and binding service in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of the Company or any Holder to bring proceedings against the
other in the courts of any other jurisdiction.
SECTION 4.12. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including contract claims,
tort claims, breach of duty claims and all other common law and statutory
claims. Each party hereto acknowledges that this waiver is a material inducement
to enter
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into a business relationship, that each has already relied on this waiver in
entering into this Agreement, and that each will continue to rely on this waiver
in their related future dealings. Each party hereto further warrants and
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
ENTERTAINMENT COMMUNICATIONS, INC.
By:_____________________________________
Name:
Title:
Notice Address:
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxxxxxx 00000
Attention:______________________________
Telephone: 000-000-0000
Facsimile: 000-000-0000
CHASE EQUITY ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS, L.P.
its General Partner
By:
Name: Xxxxxxx X. Xxxxxx
Title: Principal
Notice Address:
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
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TABLE OF CONTENTS
Page
RECITALS..................................................................... 1
ARTICLE I
CERTAIN DEFINITIONS
Agreement.................................................... 1
Commission................................................... 1
Company...................................................... 1
Company Securities........................................... 1
Holder Request............................................... 1
Initial Public Offering...................................... 2
Managing Underwriter......................................... 2
NASDAQ....................................................... 2
Note......................................................... 2
Purchase Agreement........................................... 2
Registrable Securities....................................... 2
Registration Expenses........................................ 2
Representative............................................... 3
Securities................................................... 3
Transferee................................................... 3
Underwritten Offering........................................ 3
ARTICLE II
REGISTRATION RIGHTS
2.1. Demand Registrations......................................... 3
2.2. Piggyback Registrations...................................... 6
2.3. Registration Procedures...................................... 8
2.4. Indemnification.............................................. 12
2.5. Contribution................................................. 15
2.6. Rule 144..................................................... 16
2.7. Other Provisions Regarding Registration Rights............... 17
ARTICLE III
TERMINATION
ARTICLE IV
MISCELLANEOUS
4.1. Successors and Assigns....................................... 17
4.2. Amendment and Modification; Waiver of Compliance
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Page
Conflicts.................................................... 17
4.3. Notices...................................................... 18
4.4. Entire Agreement............................................. 18
4.5. Injunctive Relief............................................ 19
4.6. Inspection................................................... 19
4.7. Headings..................................................... 19
4.8. Indemnification.............................................. 19
4.9. Recapitalizations, Exchanges, Etc., Affecting
the Common Stock; New Issuances.............................. 20
4.10. Applicable Law............................................... 20
4.11. Consent to Jurisdiction and Service of Process............... 20
4.12. Waiver of Jury Trial......................................... 20
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