REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is
entered into as of the _____ day of ____________, _______, by and
among Branded Media Corporation, a Nevada corporation (the
"Company"), and ______________________, (the "Investor" and
together with its assignees, the "Investors").
Recitals
Whereas, the Company proposes to sell and issue up to Six
Hundred Thousand (600,000) shares of its Series A Preferred Stock
("Series A Stock") pursuant to the Series A Preferred Stock
Purchase Agreement (the "Purchase Agreement"); and
Whereas, as a condition of entering into the Purchase
Agreement, the Investor has requested that the Company extend to
it and any other Investors the registration rights, information
rights and other rights as set forth below.
Now, Therefore, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth
in this Agreement and in the Purchase Agreement, the parties
mutually agree as follows:
GENERAL
Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Form S-3" means such form under the Securities Act as
in effect on the date hereof or any successor registration form
under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
"Holder" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee
of record of such Registrable Securities in accordance with
Section 2.10 hereof.
"Register," "registered," and "registration" refer to
a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration
statement or document.
"Registrable Securities" means (a) Common Stock of the
Company issued or issuable upon conversion of the Shares; and (b)
any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to
the public either pursuant to a registration statement or Rule
144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the
number of shares determined by calculating the total number of
shares of the Company's Common Stock that are Registrable
Securities and either (a) are then issued and outstanding or (b)
are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses
incurred by the Company in complying with Sections 2.2, 2.3 and
2.4 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel
for the Company, reasonable fees and disbursements of a single
special counsel for the Holders (which shall be the same counsel
as counsel to the Company unless a conflict of interest arises),
blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SEC" or "Commission" means the Securities and
Exchange Commission.
"Securities Act" shall mean the Securities Act of
1933, as amended.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock
issued pursuant to the Purchase Agreement and held by the
Investors listed on Exhibit A hereto and their permitted assigns.
REGISTRATION; RESTRICTIONS ON TRANSFER
Restrictions on Transfer.
Each Holder agrees not to make any disposition of all
or any portion of the Shares or Registrable
Securities unless and until:
There is then in effect a registration statement
under the Securities Act covering such
proposed disposition and such disposition is
made in accordance with such registration
statement; or
(A) The transferee has agreed in writing to
be bound by the terms of this Agreement, (B)
such Holder shall have notified the Company
of the proposed disposition and shall have
furnished the Company with a detailed
statement of the circumstances surrounding
the proposed disposition, and (C) if
reasonably requested by the Company, such
Holder shall have furnished the Company with
an opinion of counsel, reasonably
satisfactory to the Company, that such
disposition will not require registration of
such shares under the Securities Act.
Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration
statement or opinion of counsel shall be
necessary for a transfer by a Holder which is
(A) a partnership to its partners or former
partners in accordance with partnership
interests, (B) a limited liability company to
its members or former members in accordance
with their interest in the limited liability
company, or (C) an individual to the Holder's
family member or trust for the benefit of an
individual Holder; provided that in each case
the transferor gives the Company notice
thereof and the transferee will be subject to
the terms of this Agreement to the same
extent as if he were an original Holder
hereunder.
Each certificate representing Shares or
Registrable Securities shall (unless otherwise
permitted by the provisions of the Agreement) be
stamped or otherwise imprinted with a legend
substantially similar to the following (in
addition to any legend required under applicable
state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
The Company shall be obligated to
reissue promptly unlegended certificates at the
request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel
may be counsel to the Company) reasonably
acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully
be so disposed of without registration,
qualification or legend.
Any legend endorsed on an instrument pursuant to
applicable state securities laws and the
stop-transfer instructions with respect to such
securities shall be removed upon receipt by the
Company of an order of the appropriate blue sky
authority authorizing such removal.
Demand Registration.
Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the
Holders of at least fifty percent (50%) of the
Registrable Securities then outstanding (the
"Initiating Holders") that the Company file a
registration statement under the Securities Act
covering the registration of at least thirty
percent (30%) of the Registrable Securities then
outstanding having an anticipated aggregate
offering price of not less than $10,000,000, then
the Company shall, within thirty (30) days of the
receipt thereof, give written notice of such
request to all Holders, and subject to the
limitations of this Section 2.2, use its best
efforts to effect, as soon as practicable, the
registration under the Securities Act of all
Registrable Securities that the Holders request to
be registered.
If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by
means of an underwriting, they shall so advise the
Company as a part of their request made pursuant
to this Section 2.2 or any request pursuant to
Section 2.4 and the Company shall include such
information in the written notice referred to in
Section 2.2(a) or Section 2.4(a), as applicable.
In such event, the right of any Holder to include
its Registrable Securities in such registration
shall be conditioned upon such Holder's
participation in such underwriting and the
inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided
herein. All Holders proposing to distribute their
securities through such underwriting shall enter
into an underwriting agreement in customary form
with the underwriter or underwriters selected for
such underwriting by a majority in interest of the
Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the
Company). Notwithstanding any other provision of
this Section 2.2 or Section 2.4, if the
underwriter advises the Company that marketing
factors require a limitation of the number of
securities to be underwritten (including
Registrable Securities) then the Company shall so
advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in
the underwriting shall be allocated to the Holders
of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held
by all such Holders (including the Initiating
Holders); provided, however, that the number of
shares of Registrable Securities to be included in
such underwriting and registration shall not be
reduced unless all other securities of the Company
are first entirely excluded from the underwriting
and registration. Any Registrable Securities
excluded or withdrawn from such underwriting shall
be withdrawn from the registration.
The Company shall not be required to effect a
registration pursuant to this Section 2.2:
prior to the earlier of (A) the third anniversary
of the date of this Agreement or (B) one
hundred eighty (180) days following the
effective date of the registration statement
pertaining to the Initial Offering;
after the Company has effected two (2)
registrations pursuant to this Section 2.2,
and such registrations have been declared or
ordered effective;
during the period starting with the date of
filing of, and ending on the date one hundred
eighty (180) days following the effective
date of the registration statement pertaining
to the offering; provided that the Company
makes reasonable good faith efforts to cause
such registration statement to become
effective;
if within thirty (30) days of receipt of a
written request from Initiating Holders
pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's
intention to file its Initial Offering within
ninety (90) days;
if the Company shall furnish to Holders
requesting a registration statement pursuant
to this Section 2.2, a certificate signed by
the Chairman of the Board stating that in the
good faith judgment of the Board of Directors
of the Company, it would be seriously
detrimental to the Company and its
shareholders for such registration statement
to be effected at such time, in which event
the Company shall have the right to defer
such filing for a period of not more than
ninety (90) days after receipt of the request
of the Initiating Holders; provided that such
right to delay a request shall be exercised
by the Company not more than twice in any
twelve (12) month period; or
if the Initiating Holders propose to dispose
of shares of Registrable Securities that may
be immediately registered on Form S-3
pursuant to a request made pursuant to
Section 2.4 below.
Piggyback Registrations. The Company shall
notify all Holders of Registrable Securities in writing
at least fifteen (15) days prior to the filing of any
registration statement under the Securities Act for
purposes of a private or public offering of securities
of the Company (including, but not limited to,
registration statements relating to secondary offerings
of securities of the Company and registration
statements demanded by any other Holder, but excluding
registration statements relating to employee benefit
plans or with respect to corporate reorganizations or
other transactions under Rule 145 of the Securities
Act) and will afford each such Holder an opportunity to
include in such registration statement all or part of
such Registrable Securities held by such Holder. Each
Holder desiring to include in any such registration
statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after the
above-described notice from the Company, so notify the
Company in writing. Such notice shall state the
intended method of disposition of the Registrable
Securities by such Holder. If a Holder decides not to
include all of its Registrable Securities in any
registration statement thereafter filed by the Company,
such Holder shall nevertheless continue to have the
right to include any Registrable Securities in any
subsequent registration statement or registration
statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and
conditions set forth herein.
Underwriting. If the registration statement under
which the Company gives notice under this Section
2.3 is for an underwritten offering, the Company
shall so advise the Holders of Registrable
Securities. In such event, the right of any such
Holder to be included in a registration pursuant
to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and
the inclusion of such Holder's Registrable
Securities in the underwriting to the extent
provided herein. All Holders proposing to
distribute their Registrable Securities through
such underwriting shall enter into an underwriting
agreement in customary form with the underwriter
or underwriters selected for such underwriting by
the Company. Notwithstanding any other provision
of the Agreement, if the underwriter determines in
good faith that marketing factors require a
limitation of the number of shares to be
underwritten, the number of shares that may be
included in the underwriting shall be allocated,
first, to the Company, second, to the Holders on a
pro rata basis based on the total number of
Registrable Securities held by the Holders; and
third, to any shareholder of the Company (other
than a Holder) on a pro rata basis. If such
offering is the Initial Offering, no such
reduction shall reduce the securities being
offered by the Company for its own account to be
included in the registration and underwriting and
any or all of the Registrable Securities of the
Holders may be excluded in accordance with the
immediately preceding sentence. In no event will
shares of any other selling shareholder be
included in such registration which would reduce
the number of shares which may be included by
Holders without the written consent of Holders of
not less than fifty percent (50%) of the
Registrable Securities proposed to be sold in the
offering. If any Holder disapproves of the terms
of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the
Company and the underwriter, delivered at least
ten (10) business days prior to the effective date
of the registration statement. Any Registrable
Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from
the registration. For any Holder which is a
partnership or corporation, the partners, retired
partners and shareholders of such Holder, or the
estates and family members of any such partners
and retired partners and any trusts for the
benefit of any of the foregoing person shall be
deemed to be a single "Holder", and any pro rata
reduction with respect to such "Holder" shall be
based upon the aggregate amount of shares carrying
registration rights owned by all entities and
individuals included in such "Holder," as defined
in this sentence.
Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any
registration initiated by it under this Section
2.3 prior to the effectiveness of such
registration whether or not any Holder has elected
to include securities in such registration. The
Registration Expenses of such withdrawn
registration shall be borne by the Company in
accordance with Section 2.5 hereof.
Form S-3 Registration. In case the Company shall
receive from any Holder or Holders of Registrable
Securities a written request or requests that the
Company effect a registration on Form S-3 (or any
successor to Form S-3) or any similar short-form
registration statement and any related qualification or
compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders,
the Company will:
promptly give written notice of the proposed
registration, and any related qualification or
compliance, to all other Holders of Registrable
Securities; and
as soon as practicable, effect such registration
and all such qualifications and compliances as may
be so requested and as would permit or facilitate
the sale and distribution of all or such portion
of such Holder's or Holders' Registrable
Securities as are specified in such request,
together with all or such portion of the
Registrable Securities of any other Holder or
Holders joining in such request as are specified
in a written request given within fifteen (15)
days after receipt of such written notice from the
Company; provided, however, that the Company shall
not be obligated to effect any such registration,
qualification or compliance pursuant to this
Section 2.4:
if Form S-3 (or any successor or similar form) is
not available for such offering by the
Holders, or
if the Holders, together with the holders of
any other securities of the Company entitled
to inclusion in such registration, propose to
sell Registrable Securities and such other
securities (if any) at an aggregate price to
the public of less than five hundred thousand
dollars ($500,000), or
if within thirty (30) days of receipt of a
written request from Initiating Holders
pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's
intention to make a public offering within
ninety (90) days;
if the Company shall furnish to the Holders a
certificate signed by the Chairman of the
Board of Directors of the Company stating
that in the good faith judgment of the Board
of Directors of the Company, it would be
seriously detrimental to the Company and its
shareholders for such Form S-3 registration
to be effected at such time, in which event
the Company shall have the right to defer the
filing of the Form S-3 registration statement
for a period of not more than ninety (90)
days after receipt of the request of the
Holder or Holders under this Section 2.4;
provided, that such right to delay a request
shall be exercised by the Company not more
than twice in any twelve (12) month period, or
if the Company has, within the twelve (12)
month period preceding the date of such
request, already effected two (2)
registrations on Form S-3 for the Holders
pursuant to this Section 2.4, or
in any particular jurisdiction in which the
Company would be required to qualify to do
business or to execute a general consent to
service of process in effecting such
registration, qualification or compliance.
Subject to the foregoing, the Company shall
file a Form S-3 registration statement covering
the Registrable Securities and other securities so
requested to be registered as soon as practicable
after receipt of the request or requests of the
Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for
registration or registrations effected pursuant to
Sections 2.2 or 2.3, respectively. All such
Registration Expenses incurred in connection with
registrations requested pursuant to this Section
2.4 after the first two (2) registrations shall be
paid by the selling Holders pro rata in proportion
to the number of shares sold by each.
Expenses of Registration. Except as specifically
provided herein, all Registration Expenses incurred in
connection with any registration, qualification or
compliance pursuant to Section 2.2 or any registration
under Section 2.3 or Section 2.4 herein shall be borne
by the Company. All Selling Expenses incurred in
connection with any registrations hereunder, shall be
borne by the holders of the securities so registered
pro rata on the basis of the number of shares so
registered. The Company shall not, however, be
required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the
request of which has been subsequently withdrawn by the
Initiating Holders unless (a) the withdrawal is based
upon material adverse information concerning the
Company of which the Initiating Holders were not aware
at the time of such request or (b) the Holders of a
majority of Registrable Securities agree to forfeit
their right to one requested registration pursuant to
Section 2.2 or Section 2.4, as applicable, in which
event such right shall be forfeited by all Holders).
If the Holders are required to pay the Registration
Expenses, such expenses shall be borne by the holders
of securities (including Registrable Securities)
requesting such registration in proportion to the
number of shares for which registration was requested.
If the Company is required to pay the Registration
Expenses of a withdrawn offering pursuant to clause (a)
above, then the Holders shall not forfeit their rights
pursuant to Section 2.2 or Section 2.4 to a demand
registration.
Obligations of the Company. Whenever required to
effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably
possible:
Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and
use all reasonable efforts to cause such
registration statement to become effective, and,
upon the request of the Holders of a majority of
the Registrable Securities registered thereunder,
keep such registration statement effective for up
to thirty (30) days or, if earlier, until the
Holder or Holders have completed the distribution
related thereto. The Company shall not be
required to file, cause to become effective or
maintain the effectiveness of any registration
statement that contemplates a distribution of
securities on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.
Prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection with such
registration statement as may be necessary to
comply with the provisions of the Securities Act
with respect to the disposition of all securities
covered by such registration statement for the
period set forth in paragraph (a) above.
Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities
Act, and such other documents as they may
reasonably request in order to facilitate the
disposition of Registrable Securities owned by
them.
Use its reasonable best efforts to register and
qualify the securities covered by such
registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders; provided that
the Company shall not be required in connection
therewith or as a condition thereto to qualify to
do business or to file a general consent to
service of process in any such states or
jurisdictions.
In the event of any underwritten public offering,
enter into and perform its obligations under an
underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such
offering. Each Holder participating in such
underwriting shall also enter into and perform its
obligations under such an agreement.
Notify each Holder of Registrable Securities
covered by such registration statement at any time
when a prospectus relating thereto is required to
be delivered under the Securities Act of the
happening of any event as a result of which the
prospectus included in such registration
statement, as then in effect, includes an untrue
statement of a material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in the light of the circumstances then
existing.
Use its best efforts to furnish, on the date that
such Registrable Securities are delivered to the
underwriters for sale, if such securities are
being sold through underwriters, (i) an opinion,
dated as of such date, of the counsel representing
the Company for the purposes of such registration,
in form and substance as is customarily given to
underwriters in an underwritten public offering,
addressed to the underwriters, if any, and (ii) a
letter dated as of such date, from the independent
certified public accountants of the Company, in
form and substance as is customarily given by
independent certified public accountants to
underwriters in an underwritten public offering
addressed to the underwriters.
Termination of Registration Rights. All
registration rights granted under this Section 2 shall
terminate and be of no further force and effect five
(5) years after the date of the Company's Initial
Offering. In addition, a Holder's registration rights
shall expire if (a) such Holder (together with its
affiliates, partners and former partners) holds less
than 1% of the Company's outstanding Common Stock
(treating all shares of convertible Preferred Stock on
an as converted basis) or (b) all Registrable
Securities held by and issuable to such Holder (and its
affiliates, partners, former partners, members and
former members) may be sold under Rule 144 during any
ninety (90) day period.
Delay of Registration; Furnishing Information.
No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any
such registration as the result of any controversy
that might arise with respect to the
interpretation or implementation of this Section 2.
It shall be a condition precedent to the
obligations of the Company to take any action
pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such
information regarding themselves, the Registrable
Securities held by them and the intended method of
disposition of such securities as shall be
required to effect the registration of their
Registrable Securities.
The Company shall have no obligation with respect
to any registration requested pursuant to Section
2.2 or Section 2.4 if, due to the operation of
subsection 2.2(b), the number of shares or the
anticipated aggregate offering price of the
Registrable Securities to be included in the
registration does not equal or exceed the number
of shares or the anticipated aggregate offering
price required to originally trigger the Company's
obligation to initiate such registration as
specified in Section 2.2 or Section 2.4, whichever
is applicable.
Indemnification. In the event any Registrable
Securities are included in a registration statement
under Sections 2.2, 2.3 or 2.4:
To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the
partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who
controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or
liabilities (joint or several) to which they may
become subject under the Securities Act, the
Exchange Act or other federal or state law,
insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise
out of or are based upon any of the following
statements, omissions or violations (collectively
a "Violation") by the Company: (i) any untrue
statement or alleged untrue statement of a
material fact contained in such registration
statement, including any preliminary prospectus or
final prospectus contained therein or any
amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a
material fact required to be stated therein, or
necessary to make the statements therein not
misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any
rule or regulation promulgated under the
Securities Act, the Exchange Act or any state
securities law in connection with the offering
covered by such registration statement; and the
Company will pay as incurred to each such Holder,
partner, officer, director, underwriter or
controlling person for any legal or other expenses
reasonably incurred by them in connection with
investigating or defending any such loss, claim,
damage, liability or action; provided however,
that the indemnity agreement contained in this
Section 2.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage,
liability or action if such settlement is effected
without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such
loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in
conformity with written information furnished
expressly for use in connection with such
registration by such Holder, partner, officer,
director, underwriter or controlling person of
such Holder.
To the extent permitted by law, each Holder will,
if Registrable Securities held by such Holder are
included in the securities as to which such
registration qualifications or compliance is being
effected, indemnify and hold harmless the Company,
each of its directors, its officers and each
person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such
registration statement or any of such other
Holder's partners, directors or officers or any
person who controls such Holder, against any
losses, claims, damages or liabilities (joint or
several) to which the Company or any such
director, officer, controlling person, underwriter
or other such Holder, or partner, director,
officer or controlling person of such other Holder
may become subject under the Securities Act, the
Exchange Act or other federal or state law,
insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each
case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in
conformity with written information furnished by
such Holder under an instrument duly executed by
such Holder and stated to be specifically for use
in connection with such registration; and each
such Holder will pay as incurred any legal or
other expenses reasonably incurred by the Company
or any such director, officer, controlling person,
underwriter or other Holder, or partner, officer,
director or controlling person of such other
Holder in connection with investigating or
defending any such loss, claim, damage, liability
or action if it is judicially determined that
there was such a Violation; provided, however,
that the indemnity agreement contained in this
Section 2.9(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 the Holder, which consent
shall not be unreasonably withheld; provided
further, that in no event shall any indemnity
under this Section 2.9 exceed the net proceeds
from the offering received by such Holder.
Promptly after receipt by an indemnified party
under this Section 2.9 of notice of the
commencement of any action (including any
governmental action), such indemnified party will,
if a claim in respect thereof is to be made
against any indemnifying party under this Section
2.9, deliver to the indemnifying party a written
notice of the commencement thereof and the
indemnifying party shall have the right to
participate in, and, to the extent the
indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however,
that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if
representation of such indemnified party by the
counsel retained by the indemnifying party would
be inappropriate due to actual or potential
differing interests between such indemnified party
and any other party represented by such counsel in
such proceeding. The failure to deliver written
notice to the indemnifying party within a
reasonable time of the commencement of any such
action, 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 2.9, but the
omission so to deliver written notice to the
indemnifying party will not relieve it of any
liability that it may have to any indemnified
party otherwise than under this Section 2.9.
If the indemnification provided for in this
Section 2.9 is held by a court of competent
jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages
or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent
permitted by applicable law contribute to the
amount paid or payable by such indemnified party
as a result of such loss, claim, damage or
liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party
on the other in connection with the Violation(s)
that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable
considerations. The relative fault of the
indemnifying party and of the indemnified party
shall be determined by a court of law by reference
to, among other things, whether the untrue or
alleged untrue statement of a material fact or the
omission to state a material fact relates to
information supplied by the indemnifying party or
by the indemnified party and the parties' relative
intent, knowledge, access to information and
opportunity to correct or prevent such statement
or omission; provided, that in no event shall any
contribution by a Holder hereunder exceed the net
proceeds from the offering received by such Holder.
The obligations of the Company and Holders under
this Section 2.9 shall survive completion of any
offering of Registrable Securities in a
registration statement and the termination of this
agreement. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except
with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any
settlement which does not include as an
unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of
a release from all liability in respect to such
claim or litigation.
Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities
pursuant to this Section 2 may be assigned by a Holder
to a transferee or assignee of Registrable Securities
which (a) is a subsidiary, parent, general partner,
limited partner, retired partner, member or retired
member of a Holder, (b) is a Holder's family member or
trust for the benefit of an individual Holder, or (c)
acquires at least one hundred thousand (100,000) shares
of Registrable Securities (as adjusted appropriately
for "Common Stock Events" as defined in the Certificate
of Designation for the Series A Stock); provided,
however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written
notice of the name and address of such transferee or
assignee and the securities with respect to which such
registration rights are being assigned and (ii) such
transferee shall agree to be subject to all
restrictions set forth in this Agreement.
Amendment of Registration Rights. Any provision of
this Section 2 may be amended and the observance
thereof may be waived (either generally or in a
particular instance and either retroactively or
prospectively), only with the written consent of the
Company and the Holders of at least fifty percent (50%)
of the Registrable Securities then outstanding. Any
amendment or waiver affected in accordance with this
Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this
Section 2, Holders of Registrable Securities hereby
agree to be bound by the provisions hereunder.
Limitation on Subsequent Registration Rights. After
the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of
fifty percent (50%) of the Registrable Securities then
outstanding, enter into any agreement with any holder
or prospective holder of any securities of the Company
that would grant such holder registration rights pari
passu or senior to those granted to the Holders
hereunder.
Rule 144 Reporting. With a view to making available to
the Holders the benefits of certain rules and
regulations of the SEC which may permit the sale of the
Registrable Securities to the public without
registration, the Company agrees to use its best
efforts, at all times after the effective date of the
first registration filed by the Company for an offering
of its securities to the general public, to:
Make and keep public information available, as those
terms are understood and defined in SEC Rule 144
or any similar or analogous rule promulgated under
the Securities Act;
File with the SEC, in a timely manner, all reports
and other documents required of the Company under
the Exchange Act; and
So long as a Holder owns any Registrable
Securities, furnish to such Holder forthwith upon
request: a written statement by the Company as to
its compliance with the reporting requirements of
said Rule 144 of the Securities Act, and of the
Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of
the most recent annual or quarterly report of the
Company; and such other reports and documents as a
Holder may reasonably request in availing itself
of any rule or regulation of the SEC allowing it
to sell any such securities without registration.
COVENANTS OF THE COMPANY
Basic Financial Information and Reporting.
The Company will maintain true books and records of
account in which full and correct entries will be
made of all its business transactions pursuant to
a system of accounting established and
administered in accordance with generally accepted
accounting principles consistently applied, and
will set aside on its books all such proper
accruals and reserves as shall be required under
generally accepted accounting principles
consistently applied.
As soon as practicable after the end of each
fiscal year of the Company, and in any event
within ninety (90) days thereafter, the Company
will furnish each Investor a balance sheet of the
Company, as at the end of such fiscal year, and a
statement of income and a statement of cash flows
of the Company, for such year, all prepared in
accordance with generally accepted accounting
principles consistently applied and setting forth
in each case in comparative form the figures for
the previous fiscal year, all in reasonable
detail. Such financial statements shall be
accompanied by a report and opinion thereon by
independent public accountants of national
standing selected by the Company's Board of
Directors.
As soon as practicable after the end of each
fiscal quarter of the Company, and in any event
within forty-five (45) days thereafter, the
Company will furnish each Investor a balance sheet
of the Company as of the end of each such fiscal
quarter, and a statement of income and a statement
of cash flows of the Company for such period and
for the current fiscal year to date, all prepared
in accordance with generally accepted accounting
principles, with the exception that no notes need
be attached to such statements and year-end audit
adjustments may not have been made.
So long as an Investor (with its affiliates) shall
own not less than one hundred thousand (100,000)
shares of Registrable Securities (as adjusted for
"Common Stock Events" as defined in the
Certificate of Designation for the Series A Stock)
(a "Major Investor"), the Company will furnish
each such Investor, as soon as practicable after
the end of each month, and in any event within
twenty (20) days thereafter, a balance sheet of
the Company as of the end of each such monthly
period, and a statement of income and a statement
of cash flows of the Company for such period and
for the current fiscal year to date, all prepared
in accordance with generally accepted accounting
principles, with the exception that no notes need
be attached to such statements and year-end audit
adjustments may not have been made.
The Company will furnish each Major Investor at
least thirty (30) days prior to the beginning of
each fiscal year an annual operating plan and
budget, prepared on a monthly basis for the
ensuing fiscal year, and on a basis consistent
with prior periods (including, among other items,
appropriate reserves, accruals and provisions for
income taxes) and representing the best estimate
of the Company based upon available information.
The Company shall also furnish to such Major
Investor, within a reasonable time of its
preparation, amendments to the annual budget, if
any. Such budget shall include underlying
assumptions and a brief qualitative description of
the Company's plan by the Chief Executive Officer
in support of that budget.
In the event the Company fails to provide the
reports or financial statements required by this
Section 3.1, the Major Investors may give the
Company notice requesting immediate delivery of
such reports. If the Company fails to deliver
such reports upon receipt of such notice, then any
of the Major Investors shall have the right and
authority, at the Company's sole expense, to
request an audit by a single accounting firm of
its or their choice, such that the reports or
financial statements are produced to its or their
sole satisfaction.
Inspection Rights. Each Major Investor shall have
the right to visit and inspect any of the properties of
the Company or any of its subsidiaries, and to discuss
the affairs, finances and accounts of the Company or
any of its subsidiaries with its officers, and to
review such information as is reasonably requested all
at such reasonable times and as often as may be
reasonably requested; provided, however, that the
Company shall not be obligated under this Section 3.2
with respect to a competitor of the Company or with
respect to information which the Board of Directors
determines in good faith is confidential and should
not, therefore, be disclosed.
Confidentiality of Records. Each Investor agrees to
use, and to use its best efforts to insure that its
authorized representatives use, the same degree of care
as such Investor uses to protect its own confidential
information to keep confidential any information
furnished to it which the Company identifies as being
confidential or proprietary (so long as such
information is not in the public domain), except that
such Investor may disclose such proprietary or
confidential information to any partner, subsidiary or
parent of such Investor for the purpose of evaluating
its investment in the Company as long as such partner,
subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
Reservation of Common Stock. The Company will at all
times reserve and keep available, solely for issuance
and delivery upon the conversion of the Preferred
Stock, all Common Stock issuable from time to time upon
such conversion.
Stock Vesting. Unless otherwise approved by the Board
of Directors, all stock options and other stock
equivalents issued after the date of this Agreement to
employees, directors, consultants and other service
providers shall be subject to vesting in accordance
with a stock option plan to be adopted by the Company.
Visitation Rights. The Company shall allow each Major
Investor to attend all meetings of the Company's Board
of Directors in a nonvoting capacity, and in connection
therewith, the Company shall give such Investors copies
of all notices, minutes, consents and other materials,
financial or otherwise, which the Company provides to
its Board of Directors; provided, however, that the
Company reserves the right to exclude such Investors
from access to any material or meeting or portion
thereof if the Company believes upon advice of counsel
that such exclusion is reasonably necessary to preserve
the attorney-client privilege, to protect highly
confidential proprietary information or for other
similar reasons.
Termination of Covenants. All covenants of the
Company contained in Section 3 of this Agreement shall
expire and terminate as to each Investor upon the
earlier of (i) the effective date of the registration
statement, which results in the Preferred Stock being
converted into Common Stock or (ii) upon (a) the sale,
lease or other disposition of all or substantially all
of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by
consolidation, merger or other reorganization in which
the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately
after such transaction, securities representing less
than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction,
provided that this Section 3.19 shall not apply to a
merger effected exclusively for the purpose of changing
the domicile of the Company (a "Change in Control").
MISCELLANEOUS
Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York.
Survival. The representations, warranties, covenants,
and agreements made herein shall survive any
investigation made by any Holder and the closing of the
transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder
solely as of the date of such certificate or instrument.
Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors,
assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of
Registrable Securities from time to time; provided,
however, that prior to the receipt by the Company of
adequate written notice of the transfer of any
Registrable Securities specifying the full name and
address of the transferee, the Company may deem and
treat the person listed as the holder of such shares in
its records as the absolute owner and holder of such
shares for all purposes, including the payment of
dividends or any redemption price.
Entire Agreement. This Agreement, the Exhibits and
Schedules hereto, the Purchase Agreement and the other
documents delivered pursuant thereto constitute the
full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by
any representations, warranties, covenants and
agreements except as specifically set forth herein and
therein.
Severability. In the event one or more of the
provisions of this Agreement should, for any reason, be
held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions
of this Agreement, and this Agreement shall be
construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
Amendment and Waiver.
Except as otherwise expressly provided, this Agreement
may be amended or modified only upon the written
consent of the Company and the holders of at least
fifty percent (50%) of the Registrable Securities.
Except as otherwise expressly provided, the
obligations of the Company and the rights of the
Holders under this Agreement may be waived only
with the written consent of the holders of at
least fifty percent (50%) of the Registrable
Securities.
Notwithstanding the foregoing, this Agreement may
be amended with only the written consent of the
Company to include additional purchasers of Shares
as "Investors," "Holders" and parties hereto.
Delays or Omissions. It is agreed that no delay
or omission to exercise any right, power, or remedy
accruing to any Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it
be construed to be a waiver of any such breach, default
or noncompliance, or any acquiescence therein, or of
any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver,
permit, consent, or approval of any kind or character
on any Holder's part of any breach, default or
noncompliance under the Agreement or any waiver on such
Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective
only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, by
law, or otherwise afforded to Holders, shall be
cumulative and not alternative.
Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed telex or facsimile
if sent during normal business hours of the recipient;
if not, then on the next business day, (c) five (5)
days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d)
one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with
written verification of receipt. All communications
shall be sent to the party to be notified at the
address as set forth on the signature pages hereof or
at such other address as such party may designate by
ten (10) days advance written notice to the other
parties hereto.
Attorneys' Fees. In the event that any suit or action
is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall
be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such
prevailing party under or with respect to this
Agreement, including without limitation, such
reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of
reference only and are not to be considered in
construing this Agreement.
Additional Investors. Notwithstanding anything to the
contrary contained herein, if the Company shall issue
additional shares of its Preferred Stock pursuant to
the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by
executing and delivering an additional counterpart
signature page to this Agreement and shall be deemed an
"Investor" hereunder.
Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an
original, but all of which together shall constitute
one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
In Witness Whereof, the parties hereto have executed this
Registration Rights Agreement as of the date set forth in the
first paragraph hereof.
COMPANY:
BRANDED MEDIA CORPORATION
By:
Name: Xxxxxx X. Xxxxxx
Title: President
INVESTOR:
By:
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