INVESTOR RIGHTS AGREEMENT
Exhibit
10.2
This
Investor Rights Agreement (this “Agreement”) is made and entered into as of
February 22, 2008, by and among ProElite, Inc., a New Jersey corporation
(the “Company”), and Showtime Networks Inc. (“Holder”) with reference to the
following.
A. Pursuant
to the Subscription Agreement between the Company and Holder dated as of the
date hereof, the Company has issued to Holder two warrants (the “Warrants”) to
purchase an aggregate of 4,000,000 shares of the Company’s Common Stock
(“Shares”).
B. The
parties desire to enter into this Agreement providing for certain registration
rights with respect to the shares of the Company’s Common Stock issuable upon
exercise of the Warrants (the “Warrant Shares”), and restrictions on resale.
The
Company, and the Holder hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein that are defined in
the
Warrant Agreements shall have the meanings given such terms in the Warrant
Agreements. As used in this Agreement, the following terms shall have the
following meanings:
“Closing”
means
the closing of the transactions contemplated by the Purchase
Agreement.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
shares of the Company’s Common Stock.
“Effectiveness
Date”
means,
with respect to the Registration Statement required to be filed hereunder,
the
earlier of (a) the 120th
day
following the filing of the Registration Statement, and (b) the fifth trading
day following the date on which the Company is notified by the Commission that
the Registration Statement will not be reviewed or is no longer subject to
further review and comments.
“Effectiveness
Period”
shall
have the meaning set forth in Section 2.1 except that for purposes of Section
3,
the Effectiveness Period shall extend until all Shares issuable upon exercise
of
the Warrants have been sold or may be sold without volume restrictions pursuant
to Rule 144(k).
“Filing
Date”
means,
with respect to the Registration Statement required to be filed hereunder,
the
later to occur of the 45th
calendar
day following the date that the Company receives a request from Holder that
the
Company effect a registration with respect to at least 50% of the Registrable
Securities or six months from the effective date of the Investor Registration
Statement.
“Holder”
or
“Holders”
means
the holder or holders, as the case may be, from time to time, of Registrable
Securities.
“Indemnified
Party”
shall
have the meaning set forth in Section 6(c).
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“Indemnifying
Party”
shall
have the meaning set forth in Section 6(c).
“Losses”
shall
have the meaning set forth in Section 6(a).
“Permitted
Transferee”
shall
have the meaning set forth in the Subscription Agreement as of the date hereof
between Holder and the Company.
“Person”
means
any individual, partnership, corporation, group, trust or other legal
entity.
“Plan
of Distribution”
shall
have the meaning set forth in Section 2.1.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Prospectus”
means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable
Securities”
means,
as to this Agreement only, all of the Warrant Shares, together with any shares
of the Company’s Common Stock issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.
“Registration
Statement”
means
the registration statements required to be filed hereunder, including (in each
case) the Prospectus, amendments and supplements to the registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in the registration statement.
“Rule
415”
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
“Rule
424”
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
“Securities
Act”
means
to Securities Act of 1933, as amended.
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“Selling
Shareholder Questionnaire”
shall
have the meaning set forth in Section 4(a).
“Transfer”
means
any assignment, sale, disposition or any other like transfer of
securities.
“Warrant
Agreements”
means
the applicable Warrants issued pursuant to the Subscription
Agreement.
2. Registration.
2.1 On
or
prior to the Filing Date, the Company shall prepare and file with the
Commission, and in accordance with the Securities Act and all applicable
regulations promulgated thereunder, the Registration Statement covering the
resale of all of the Registrable Securities (or so much of the Registrable
Securities as Holder requests to be included therein) for an offering to be
made
on a continuous basis pursuant to Rule 415. The Registration Statement required
hereunder shall be on Form SB-2 (except if the Company is not then eligible
to
register for resale the Registrable Securities on Form SB-2, in which case
the
Registration shall be on another appropriate form in accordance herewith).
The
Registration Statement required hereunder shall contain (except if otherwise
directed by the Holders) substantially the “Plan of Distribution” attached
hereto as Annex A. Subject to the terms of this Agreement, the Company shall
use
its best efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof,
but
in any event not later than the Effectiveness Date, and shall use its best
efforts to keep the Registration Statement continuously effective under the
Securities Act until the date when all of the Shares have been sold or may
be
sold without volume restrictions pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent and the affected
Holders (the “Effectiveness
Period”).
2.2 Notwithstanding
the foregoing obligations, if the Company furnishes to Holder a certificate
signed by the Company’s chief executive officer stating that in the good faith
judgment of the Company’s Board of Directors it would be materially detrimental
to the Company and its shareholders for such registration statement to either
become effective or remain effective for as long as such registration statement
otherwise would be required to remain effective, because such action would
(i)
materially interfere with a significant acquisition, corporate reorganization,
or other similar transaction involving the Company; (ii) require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential; or (iii) render the Company unable
to
comply with requirements under the Securities Act or Exchange Act, then the
Company shall have the right to defer taking action with respect to such filing,
and any time periods with respect to filing or effectiveness thereof shall
be
tolled correspondingly, for a period of not more than thirty (30) days after
the
request of Holder; provided,
however,
that
the Company may not invoke this right more than once in any twelve (12) month
period; and provided
further
that the
Company shall not register any securities for its own account or that of any
other stockholder during such thirty (30) day period other than pursuant to
a
registration relating to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase, or similar plan; a registration
on
any form that does not include substantially the same information as would
be
required to be included in a registration statement covering the sale of the
Registrable Securities; or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that
are
also being registered.
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3. “Piggy
Back” Registration.
If
at any
time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account under the Securities Act of any
of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with the stock option
or
other employee benefit plans, then the Company shall send to Holder a written
notice of such determination and, if within fifteen days after the date of
such
notice, Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights. In such event, the provisions
of Section 4 shall apply to such a registration.
4. Registration
Procedures.
In
connection with the Company’s registration obligations pursuant to this
Agreement, the Company shall:
(a) Not
less
than five trading days prior to the filing of the Registration Statement or
any
related Prospectus or any amendment or supplement thereto, the Company shall,
(i) furnish to Holder copies of any disclosure relating to the Holders,
including but not limited to the entire Selling Stockholder and Plan of
Distribution sections which sections shall be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of counsel, to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Holder shall reasonably object in good faith, provided
that
the Company is notified of such objection in writing no later than two trading
days after the Holder has been so furnished copies of such documents. Prior
to
any filing relating to the Registration Statement, Holder agrees to furnish
to
the Company a completed Questionnaire substantially in the form attached to
this
Agreement as Annex B (a “Selling
Shareholder Questionnaire”)
within
five trading days of written request by the Company.
(b) (i)
Prepare
and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably practicable to any comments received from
the
Commission with respect to the Registration Statement or any amendment thereto
and, as promptly as reasonably practicable, provide Holder true and complete
copies of all correspondence from and to the Commission relating to the
Registration Statement; (iv) comply with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period
in
accordance with the intended methods of disposition by the Holder set forth
in
the Registration Statement as so amended or in such Prospectus as so
supplemented; and (v) take all other actions as may be reasonably necessary
or
appropriate in furtherance of the matters required by this Section
3(b).
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(c) Notify
Holder as promptly as reasonably practicable and confirm such notice in writing
promptly 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) when the Commission notifies the Company whether there will be a
“review” of the Registration Statement and whenever the Commission comments in
writing on the Registration Statement (the Company shall upon request provide
true and complete copies thereof and all written responses thereto to each
of
the Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the Registration Statement or Prospectus or for additional
information, (iii) of the issuance by the Commission or any other federal or
state governmental authority 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) 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 (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible
for
inclusion therein or 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.
(d) Use
commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) Furnish
to Holder, without charge and upon request, at least one conformed copy of
the
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
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(f) Promptly
deliver to Holder, without charge and upon request, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request in
connection with resales by Holder. Subject to the terms of this Agreement,
the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by Holder in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving on any notice pursuant to Section
4(c)
until
the Company has delivered the Advice and either the supplemented prospectus
or
the amended Registration Statement as contemplated by Section 7(c).
(g) Prior
to
any resale of Registrable Securities by the Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the Holder in
connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale
by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep the
Registration or qualification (or exemption therefrom) effective during the
distribution period described in the Registration Statement and to do any and
all other acts or things reasonably necessary to enable the disposition in
such
jurisdictions of the Registrable Securities covered by the Registration
Statement, provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified, subject
the Company to any tax in any such jurisdiction where it is not then so subject
or file a general consent to service of process in any such
jurisdiction.
(h) If
requested by the Holder, cooperate with the Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to
be delivered to a transferee pursuant to the Registration Statement, which
certificates shall be free, to the extent permitted by any applicable purchase
agreement, of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such Holders
may
request.
(i) Upon
the
occurrence of any event contemplated by Section 4(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to
the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain 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,
in light of the circumstances under which they were made, not misleading. If
the
Company notifies Holder in accordance with clauses (ii) through (v) of Section
4(c)
above to
suspend the use of any Prospectus until the requisite changes to such Prospectus
have been made, then Holder shall suspend use of such Prospectus. The Company
will use its best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable.
(j) Comply
with all applicable rules and regulations of the Commission.
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5. Registration
Expenses.
All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to any Registration Statement. The
fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses with respect to filings required to be made with the trading
market on which the Common Stock is then listed for trading, (ii) printing
expenses (including, without limitation, expenses of printing certificates
for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for
the
Company, (v) Securities Act liability insurance, if the Company so desires
such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated
by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation,
all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or any legal fees or other
costs of Holder.
6. Indemnification.
(a) Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless Holder, the officers, directors, agents, managers, members,
partners, shareholders and employees of Holder, each Person who controls Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”),
as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus
or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus
or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements or omissions are based solely upon information regarding
Holder furnished in writing to the Company by Holder expressly for use therein,
or to the extent that such information relates to Holder or Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that Holder has approved Annex A hereto
for this purpose) or (ii) in the case of an occurrence of an event of the type
specified in Section 4(c)(ii)
through (v), the use by Holder of an outdated or defective Prospectus after
the
Company has notified Holder in writing that the Prospectus is outdated or
defective. The Company shall notify Holder promptly of the institution, threat
or assertion of any Proceeding of which the Company is aware in connection
with
the transactions contemplated by this Agreement.
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(b) Indemnification
by Holder.
Holder
shall, severally and not jointly, indemnify and hold harmless the Company,
its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and
against all Losses, as incurred, to the extent arising out of or based solely
upon: (i) Holder’s failure to comply with the prospectus delivery requirements
of the Securities Act or (ii) any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case (A) to the extent, but
only
to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by Holder to the Company specifically for
inclusion in the Registration Statement or such Prospectus or (B) to the extent
that (x) such untrue statements or omissions are based solely upon information
regarding Holder furnished in writing to the Company by such Holder expressly
for use therein, or (C) to the extent that such information relates to Holder
or
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by Holder expressly for use in the
Registration Statement (it being understood that Holder has approved Annex
A
hereto for this purpose), such Prospectus or such form of Prospectus or in
any
amendment or supplement thereto or (y) in the case of an occurrence of an event
of the type specified in Section 4(c)(ii)
through (v), the use by Holder of an outdated or defective Prospectus after
the
Company has notified Holder in writing that the Prospectus is outdated or
defective; provided,
however,
that
the indemnity agreement contained in this Section 5(b) 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 Holder. In no event shall
the liability of any selling Holder hereunder be greater in amount than the
dollar amount of the net proceeds received by Holder upon the sale of the
Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the
right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees
and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (ii) the Indemnifying Party shall have failed promptly to assume
the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such
Indemnified Party in any such Proceeding; or (iii) the named parties to any
such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall reasonably believe
that a material conflict of interest is likely to exist if the same counsel
were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party,
the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of one separate counsel shall be at the expense
of the Indemnifying Party). The Indemnifying Party shall not be liable for
any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of
any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from
all liability on claims that are the subject matter of such Proceeding.
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Subject
to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in
a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten trading days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is not entitled
to
indemnification hereunder, determined based upon the relative faults of the
parties.
(d) Contribution.
If a
claim for indemnification under Section 6(a)
or
6(b)
is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
of a
material fact, has been taken or made by, or relates to information supplied
by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in this Agreement, any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d)
were
determined by pro rata allocation or by any other method of allocation that
does
not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
6(d),
no
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the proceeds actually received by such Holder from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that such Holder has otherwise been required to pay by reason
of
such untrue or alleged untrue statement or omission or alleged omission, except
in the case of fraud by such Holder.
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The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
7. Rights
and Obligations of Holder and the Company.
(a) Remedies.
In the
event of a breach by the Company or by Holder of any of their obligations under
Sections 2 and 3 of this Agreement, Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement will be entitled to specific performance of its rights
under this Agreement. The parties agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any
of the provisions of this Agreement and hereby further agrees that, in the
event
of any action for specific performance in respect of such breach, it shall
waive
the defense that a remedy at law would be adequate.
(b) Compliance.
Holder
covenants and agrees that he will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.
(c) Discontinued
Disposition.
Holder
agrees by his acquisition of such Registrable Securities that, upon receipt
of a
notice from the Company of the occurrence of any event of the kind described
in
Section 4(c),
Holder
will forthwith discontinue disposition of such Registrable Securities under
the
Registration Statement until Holder’s receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement or until it is advised in
writing (the “Advice”)
by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company will use its best efforts to ensure that
the
use of the Prospectus may be resumed as promptly as it practicable.
8. Lock-Up.
During
the period beginning on the date hereof and ending March 5, 2009 (the
“Lock-up Period”), Holder will not sell, transfer, assign, pledge or hypothecate
any Warrants or Warrant Shares (the “Covered
Securities”),
unless it is to a Permitted Transferee that agrees to be subject to the terms
and conditions of this Section. In addition, during the Lock-Up Period, the
Covered Securities shall not be the subject of any hedging, short sale,
derivative, put, or call transactions that would result in the effective
economic disposition of the Covered Securities by any person. The obligations
of
the Holder that are contained in herein also apply (i) to all Covered
Securities that Holder may receive as a stock dividend or other distribution
on
the Covered Securities and (ii) to all other securities of the Company that
Holder may receive in a recapitalization or similar transaction in exchange
for
Covered Securities acquired by Holder.
10
9. Miscellaneous.
(a) Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be made in accordance with the provisions of the
Subscription Agreement.
(b) Successors
and Assigns.
This
Agreement shall inure to the benefit of and be binding upon the successors
and
permitted assigns of each of the parties and shall inure to the benefit of
each
Holder. Each Holder may assign their respective rights hereunder to its
Permitted Transferees.
(c) Execution
and Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(d) Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be with the internal laws of the State of California,
without giving effect to the principles of conflicts of law. All actions arising
out of or relating to this Agreement shall be heard and determined exclusively
in any California federal court sitting in the City of Los Angeles.
(e) Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
(f) Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
(g) Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
[SIGNATURE
PAGES FOLLOW]
11
IN
WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as
of
the date first written above.
|
By:____________________________________
Name: Xxxxxxx
XxXxxx
Title: Chief
Executive Officer
|
|
|
SHOWTIME
NETWORKS INC.
By:____________________________________
Name:
Title:
|
12
Exhibit
10.2
ANNEX
A
PLAN
OF DISTRIBUTION
The
Selling Stockholders (the “Selling
Stockholders”)
of the
common stock (“Common
Stock”)
of Pro
Elite, Inc., a New Jersey corporation (the “Company”)
and
any of their pledgees, assignees and successors-in-interest may, from time
to
time, sell any or all of their shares of Common Stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when selling
shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the date of this
prospectus;
|
|
·
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per share;
|
|
·
|
a
combination of any such methods of
sale;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise; or
|
|
·
|
any
other method permitted pursuant to applicable law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities
Act”),
if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. Each
Selling Stockholder does not expect these commissions and discounts relating
to
its sales of shares to exceed what is customary in the types of transactions
involved.
A
-
1
In
connection with the sale of our common stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus,
which qualify for sale pursuant to Rule 144 under the Securities Act, may be
sold under Rule 144 rather than under this prospectus. Each Selling Stockholder
has advised us that they have not entered into any agreements, understandings
or
arrangements with any underwriter or broker-dealer regarding the sale of the
resale shares. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the Selling Stockholders without registration and
without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to the prospectus or Rule 144 under the Securities
Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to our common stock for a period of two business
days prior to the commencement of the distribution. In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may limit
the timing of purchases and sales of shares of our common stock by the Selling
Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time
of
the sale.
A
-
2
Exhibit
10.2
ANNEX
B
Pro
Elite, Inc.
SELLING
SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The
undersigned beneficial owner of common stock, (the “Common
Stock”),
of
Pro Elite, Inc., a New Jersey corporation (the “Company”),
(the
“Registrable
Securities”)
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”)
a
registration statement on Form SB-2 (the “Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended
(the “Securities
Act”),
of
the Registrable Securities, in accordance with the terms of the Investor Rights
Agreement, dated as of February 12, 2008 (the “Investor
Rights Agreement”),
among
the Company and the holder named therein. A copy of the Investor Rights
Agreement is available from the Company upon request at the address set forth
below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Investor Rights Agreement.
Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling
Securityholder”)
of
Registrable Securities hereby elects to include the Registrable Securities
owned
by it and listed below in Item 3 (unless otherwise specified under such Item
3)
in the Registration Statement.
B
- 1
QUESTIONNAIRE
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
|
1.
|
Name.
|
||||
|
(a)
|
Full
Legal Name of Selling Securityholder
|
||||
|
(b)
|
Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:
|
||||
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote or
dispose
of the securities covered by the questionnaire):
|
||||
|
2.
|
Address
for Notices to Selling Securityholder:
Telephone:_______________________________________________________________________________
Fax:_____________________________________________________________________________________
Contact
Person:____________________________________________________________________________
|
||||
|
3.
|
Beneficial
Ownership of Registrable Securities:
|
||||
|
(a)
|
Type
and Number of Registrable Securities beneficially owned:
|
||||
|
4.
|
Broker-Dealer
Status:
|
||||
|
(a)
|
Are
you a broker-dealer?
|
||||
|
Yes
|
¨
|
No
|
¨
|
||
|
Note: If
yes, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
|||||
B
- 2
|
(b)
|
Are
you an affiliate of a broker-dealer?
|
||||
|
Yes
|
¨
|
No
|
¨
|
||
|
(c)
|
If
you are an affiliate of a broker-dealer, do you certify that you
bought
the Registrable Securities in the ordinary course of business, and
at the
time of the purchase of the Registrable Securities to be resold,
you had
no agreements or understandings, directly or indirectly, with any
person
to distribute the Registrable Securities?
|
||||
|
Yes
|
¨
|
No
|
¨
|
||
|
5.
|
Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
|
||||
|
Except
as set forth below in this Item 5, the undersigned is not the beneficial
or registered owner of any securities of the Company other than the
Registrable Securities listed above in Item 3.
|
|||||
|
(a)
|
Type
and Amount of Other Securities beneficially owned by the Selling
Securityholder:
|
||||
|
6.
|
Relationship
with the Company:
|
||||
|
Except
as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of
more of
the equity securities of the undersigned) has held any position or
office
or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years. State any
exceptions here:
|
|||||
|
State
any exceptions here:
|
|||||
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.
B
- 3
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
and Questionnaire to be executed and delivered either in person or by its duly
authorized agent.
|
Dated: ________________
|
Beneficial
Owner
______________________________________
By:_________________________________________
Name:__________________________________
Title:___________________________________
|
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:
B
- 4
