REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of January __, 2004, by and between INTERACTIVE GROUP, INC., a Delaware
corporation (the "Company"), and the individuals listed on the signature page of
this Agreement who, concurrently with the execution hereof, are becoming
stockholders of the Company (individually, a "Stockholder," and collectively,
the "Stockholders").
A. The Company has entered into that certain Stock Purchase and Exchange
Agreement dated December 10, 2003 (the "Exchange Agreement"), by and between the
Company and Arrowhead Research Corporation, a California corporation ("Arrowhead
Research"), which provides, among other things, for the acquisition by the
Company of all of the outstanding securities of Arrowhead Research in exchange
for the issuance by the Company of a control block of the Company's Common
Stock.
B. Arrowhead Research was incorporated under the laws of the State of
California on May 7, 2003, issuing to the founders thereof 3,000,000 shares of
common stock and warrants to purchase an additional 3,000,000 shares of common
stock at the price of $1.50 per share. In October 2003, Arrowhead Research
completed a private placement in which it issued and sold, for an aggregate
purchase price of $2,645,000, Units each consisting of one share of common stock
and a warrant to purchase an additional share of common stock for the price of
$1.50. Since its incorporation in May 2003, the business and activities of
Arrowhead Research have been limited to organizational matters, preparation and
completion of the private placement, and the development of an initial plan of
proposed operations. Pursuant to its initial plan of proposed operations,
Arrowhead Research has entered into arrangements with the California Institute
of Technology, Pasadena, California ("CalTech"), and three individual professors
on the faculty of CalTech, with respect to the financing of research projects in
various aspects of nano technology development
C. If the transactions contemplated by the Exchange Agreement are
consummated, the former shareholders of Arrowhead Research would own
approximately 88.9% of the shares of the Company's Common Stock then
outstanding, and the current stockholders of the Company would retain
approximately 11.1% of its then outstanding shares of Common Stock. The former
shareholders of Arrowhead Research would also receive warrants to purchase
additional shares of the Company's Common Stock, in exchange for warrants
previously held to purchase shares of the common stock of Arrowhead Research.
D. Among other conditions to the Closing under the Exchange Agreement,
the Company is required to have executed and delivered this Agreement, pursuant
to which (i) all of the shares of the Company's Common Stock and (ii) all of the
warrants to purchase shares of the Company's Common Stock issued to the former
shareholders of Arrowhead Research pursuant thereto, together with (iii) all of
the shares of the Company Common Stock issuable upon exercise of such warrants,
shall be registered for resale under the Securities Act of 1933, as amended (the
"Securities Act").
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E. The Exchange Agreement provides that this Agreement shall also cover
any and all shares of the Company's Common Stock and warrants to purchase shares
of the Company's Common Stock issued in connection with the acquisition of
certain intellectual property from San Diego Magnetics, Inc., a California
corporation ("SDM"), and in connection with the compromise, cancellation and/or
conversion of substantially all of the Company's existing debt and other balance
sheet liabilities, together with all shares of the Company's Stock issuable upon
exercise of such warrants.
F. The shares of Common Stock and warrants to purchase shares of Common
Stock issuable as provided in Recitals A, C and E above, together with the
shares of Common Stock issuable upon exercise of such warrants, are hereinafter
collectively referred to as the "Securities".
G. The Company deems it necessary and advisable and in the best interests
of the Company and its stockholders to enter into this Agreement with the
Stockholders and, as a material inducement and consideration to the Stockholders
to enter into the Exchange Agreement, and to cause certain of the Stockholders
to sell intellectual property to the Company, and/or compromise, cancel and/or
convert amounts owed to them by the Company as contemplated by the Exchange
Agreement, the Company has agreed to enter into and execute this Agreement on
the terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements of the parties contained herein, the Company hereby
grants to each of the Stockholders certain rights with respect to the
registration under the Securities Act of the Securities to be acquired by them
pursuant to transactions contemplated by the Exchange Agreement, on the
following terms and subject to the following conditions:
1. Registration.
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(a) Within sixty (60) days after the Closing under the Exchange
Agreement, the Company shall prepare and file or cause to be prepared and filed
with the Commission a registration statement for the purpose of registering the
resale, from time to time by the Stockholders participating in the registration
(as provided in subparagraph 1(b) below) on a delayed or continuous basis
pursuant to Rule 415 of the Securities Act, all of the Securities (the
"Registration Statement"). The Registration Statement shall be on Form S-3, or
another appropriate form permitting registration of such Securities for resale
by the Selling Stockholders.
(b) The Company shall include among the shares covered by the
Registration Statement such portion of the Securities as shall be specified in a
written request given to the Company by one or more of the Stockholders within
thirty 30 days after the date of the Closing under the Exchange Agreement.
(individually, a "Selling Stockholder", and collectively, the "Selling
Stockholders"). Such written request shall include the information specified in
Paragraph 3(b) (ii) below regarding each Selling Stockholder, and such other
information as the Company may reasonably request. Each Selling Stockholder
shall be named as a selling security holder in the Registration Statement and
the related Prospectus in
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such a manner as to permit such Selling Stockholder to deliver such Prospectus
to purchasers of Securities in accordance with the Securities Act and applicable
state securities laws generally applicable to all such Selling Stockholders.
(c) The Company shall use reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act no
later than the date that is one-hundred and twenty (120) days after the date of
the Closing under the Exchange Agreement, and to keep the Registration Statement
continuously effective under the Securities Act for a period of not less than
one (1) full year from the date on which the Registration Statement first became
effective under the Securities Act.
(d) The Company shall supplement and amend the Registration Statement
if required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Registration Statement, if
required by the Securities Act or, to the extent to which the Company does not
reasonably object, as reasonably requested by the Selling Shareholders.
(e) The Company shall use reasonable best efforts to effect the
registration, qualification or compliance under any applicable securities or
"blue sky" laws of jurisdictions within the United States of the Securities
included in the Registration Statement; provided, however, that the Company
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alone shall be entitled to determine the jurisdictions in which such
registration, qualification or compliance shall be sought, and in no event shall
the Company be obligated to qualify to do business in any jurisdiction where it
is not so qualified or to take any action that would subject it to tax or the
service of process (other than process in connection with such registration) in
any jurisdiction where it is not subject thereto.
(f) The Company shall furnish to each Selling Stockholder such number
of copies of the prospectus contained in the registration statement filed under
the Securities Act (including each preliminary prospectus) in conformity with
the requirements of the Securities Act, and such other documents as such Selling
Stockholders may reasonably request in order to facilitate the disposition of
the Securities held by them which is covered by the registration statement; and
(g) The Company shall notify each Selling Stockholder, at any time
when a prospectus is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus in the registration
statement, as then in effect, includes an 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 not misleading, and prepare and furnish to them any
reasonable number of copies of any supplement to or amendment of such prospectus
as may be necessary so that, as thereafter delivered, 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.
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2. Expenses. The Company shall bear all costs and expenses relating to
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or incurred by it in connection with the registration specified in Paragraph 1
above ("Registration Expenses"), including without limitation all registration
and filing fees, printing expense, fees and disbursements of counsel and
independent accountants for the Company and fees and expenses incident to
compliance with state securities or "blue sky" laws, but specifically excluding
any fees and disbursements of counsel, accountants or other professionals
engaged by any Selling Stockholder. Each Selling Stockholder participating in
such registration shall be responsible for and bear any underwriters' discounts
and commissions properly allocable to the Securities included in a registration
statement at the request of a Selling Stockholder hereunder.
3. Indemnification.
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(a) The Company shall indemnify and hold harmless, to the extent
permitted by law, each Selling Stockholder any actions, losses, claims, damages,
liabilities and expenses (including legal fees and other expenses reasonably
incurred in the investigation and defense thereof) resulting from any untrue or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact in any registration statement, prospectus, offering circular
or other document filed in connection with any such registration, and against
any violation by the Company of the Securities Act or any state securities or
"blue sky" law, or any rule or regulation under any of them, applicable to the
Company in connection with such registration, unless and to the extent that any
such actions, claims, losses, damages, liabilities or expenses arise out of or
are based upon any of the written information specifically provided by the
Selling Stockholder for use in such registration statement, prospectus, offering
circular or other document pursuant to subparagraph 3(b) below.
(b) In connection with any registration in which any of the Selling
Stockholders is participating, each such Selling Stockholder shall furnish to
the Company such information in writing regarding the Selling Stockholder as the
Company reasonably requests for inclusion in the registration statement,
prospectus, offering circular and other documents filed in connection therewith,
and shall state that such information is provided specifically for use in the
registration statement, prospectus, offering circular or other documents. Each
such Selling Stockholder shall also indemnify and hold harmless, to the extent
permitted by law, the Company, and its directors and officers, and each
underwriter of the offering, if any (in a manner reasonably satisfactory in form
and substance to such underwriter), and each person who controls the Company or
each such underwriter (within the meaning of the Securities Act), against any
actions, losses, claims, damages, liabilities, and expenses (including legal and
other expenses reasonably incurred in the investigation and defense thereof)
resulting from any untrue or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact required to be stated in any
such documents or any supplement or amendment thereto, and against any violation
by the Company of the Securities Act or any state securities or "blue sky" law,
or any rule or regulation under any of them, applicable to the Company in
connection with such registration, or necessary to make the statements therein
not misleading, but only to the
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extent that such untrue statement or omission is made in reliance on and in
conformity with the written information furnished to the Company by such Selling
Stockholder specifically for use in any such documents; provided that the
indemnity contained in this Section 3(b) shall not apply to amounts paid in
settlement of any such actions, losses, claims, damages, liabilities and
expenses if such settlement is effected without the consent of the Selling
Stockholder, unless the consent of such Selling Stockholder is unreasonably
withheld, and provided, further, that in no event shall any indemnity under this
Section 3(b) exceed the proceeds from the registration received by the Selling
Stockholder.
(c) Promptly after receipt by an indemnified party under this Section
3 of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 3, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
that the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the indemnified party and the indemnifying party(s); provided,
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however, that an indemnified party shall retain the right to retain its own
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counsel, with the fees and expenses to be paid by the indemnifying party(s), if
representation of such indemnified party by the counsel retained by the
indemnifying party(s) would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party(s)
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 3, but the omission to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 3.
4. Miscellaneous.
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(a) Each of the parties hereto shall execute and deliver such other
and further documents and instruments, and take such other and further actions,
as may be reasonably requested of them for the implementation and consummation
of this Agreement and the transactions herein contemplated.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and the heirs, personal representatives, successors and
assigns of all of them, but shall not confer, expressly or by implication, any
rights or remedies upon any other party.
(c) This Agreement is made and shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware. Should any provision of this Agreement be rendered void, invalid or
unenforceable by any court for any reason, such invalidity or unenforceability
shall not void or render invalid or unenforceable any other provisions of this
Agreement.
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(d) All notices, requests or demands and other communications
hereunder must be in writing and shall be deemed to have been duly made if
personally delivered or mailed, postage prepaid, to the parties as follows:
If to the Company, to: InterActive Group, Inc.
_______________________
_______________________
Attn: President
If to any Stockholder, in care of: _______________________
_______________________
_______________________
Any party hereto may change its address by written notice to the other party
given in accordance with this subparagraph 4(d).
(e) This Agreement, together with the Exchange Agreement and the
other exhibits attached thereto, contain the entire agreement between the
parties and supersede all prior agreements, understandings and writings between
the parties with respect to the subject matter hereof and thereof. Each party
hereto acknowledges that no representations, inducements, promises or
agreements, oral or otherwise, have been made by any party, or anyone acting
with authority on behalf of any party, which are not embodied herein or in an
exhibit hereto, and that no other agreement, statement or promise may be relied
upon or shall be valid or binding. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally. This Agreement may be
amended or any term hereof may be changed, waived, discharged or terminated by
an agreement in writing signed by all parties hereto.
(f) The captions and headings used herein are for convenience only
and shall not be construed as a part of this Agreement.
(g) In the event of any litigation between the parties hereto, the
non-prevailing party(s) shall pay the reasonable expenses, including the
attorneys' fees, of the prevailing party(s) in connection therewith.
(h) This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which taken together shall constitute but
one and the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
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