REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of June ___, 2003 (this
"AGREEMENT") by and between Odyssey Pictures Corporation, a Nevada corporation,
with principal executive offices located at 00000 Xxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxx, XX 00000 (the "COMPANY"), and La Jolla Cove Investors, Inc. (the
"INITIAL INVESTOR").
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of June ___, 2003, by and between the Initial
Investor and the Company (the "SECURITIES PURCHASE AGREEMENT"), the Company has
agreed to issue and sell to the Initial Investor an 8 % Convertible Debenture
(the "DEBENTURE") of the Company in the aggregate principal amount of $150,000
which, upon the terms of and subject to the conditions contained therein, is
convertible into shares of the Company's Common Stock (the "COMMON STOCK") ; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued upon conversion of the Debenture and the Warrant Shares
certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions
(A) As used in this Agreement, the following terms shall have the
meanings:
(1) "AFFILIATE" of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified Person.
For purposes of this definition, control of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract, securities, ownership or otherwise; and the
terms "CONTROLLING" and "CONTROLLED" have the respective meanings correlative to
the foregoing.
(2) "CLOSING DATE" means June ___, 2003.
(3) "COMMISSION" means the Securities and Exchange Commission.
(4) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(5) "INVESTOR" means each of the Initial Investor and any
transferee or assignee of Registrable Securities which agrees to become bound by
all of the terms and provisions of this Agreement in accordance with Section 8
hereof.
1
(6) "PERSON" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
(7) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed pursuant
to Rule 424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance on Rule 430A under the Securities Act)
included in the Registration Statement, 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 by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(8) "PUBLIC OFFERING" means an offer registered with the
Commission and the appropriate state securities commissions by the Company of
its Common Stock and made pursuant to the Securities Act.
(9) "REGISTRABLE SECURITIES" means the Common Stock issued or
issuable (i) upon conversion or redemption of the Debenture, (ii) exercise of
the Conversion Warrants (iii) pursuant to the terms and provisions of the
Debenture or the Securities Purchase Agreement, (iv) in connection with any
distribution, recapitalization, stock-split, stock adjustment or reorganization
of the Company; PROVIDED, HOWEVER, a share of Common Stock shall cease to be a
Registrable Security for purposes of this Agreement when it no longer is a
Restricted Security.
(10) "REGISTRATION STATEMENT" means a registration statement
of the Company filed on an appropriate form under the Securities Act providing
for the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under the
Securities Act, including the Prospectus contained therein and forming a part
thereof, any amendments to such registration statement and supplements to such
Prospectus, and all exhibits to and other material incorporated by reference in
such registration statement and Prospectus.
(11) "RESTRICTED SECURITY" means any share of Common Stock
issued upon conversion or redemption of the Debenture or Warrant except any such
share that (i) has been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by the
prospectus included in such registration statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities Act (or
any successor provision thereto) or is transferable pursuant to paragraph (k) of
Rule 144 under the Securities Act (or any successor provision thereto) or (iii)
otherwise has been transferred and a new share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company.
(12) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
2
(B) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement or the
Debenture.
2. REGISTRATION
(A) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
shall prepare and file with the Commission as soon as practicable a Registration
Statement relating to the offer and sale of the Registrable Securities and shall
use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but in
no event later than the Deadline (as defined in the Debenture). The Company
shall promptly (and, in any event, no more than 24 hours after it receives
comments from the Commission), notify the Buyer when and if it receives any
comments from the Commission on the Registration Statement and promptly forward
a copy of such comments, if they are in writing, to the Buyer. At such time
after the filing of the Registration Statement pursuant to this Section 2(A) as
the Commission indicates, either orally or in writing, that it has no further
comments with respect to such Registration Statement or that it is willing to
entertain appropriate requests for acceleration of effectiveness of such
Registration Statement, the Company shall promptly, and in no event later than
two (2) business days after receipt of such indication from the Commission,
request that the effectiveness of such Registration Statement be accelerated
within forty-eight (48) hours of the Commission's receipt of such request. The
Company shall notify the Initial Investor by written notice that such
Registration Statement has been declared effective by the Commission within 24
hours of such declaration by the Commission.
(B) ELIGIBILITY FOR USE OF FORM S-3 OR AN SB-2. The Company agrees that
at such time as it meets all the requirements for the use of Securities Act
Registration Statement on Form S-3 or SB-2 and it shall file all reports and
information required to be filed by it with the Commission in a timely manner
and take all such other action so as to maintain such eligibility for the use of
such form.
(C) ADDITIONAL REGISTRATION STATEMENT. In the event the Current Market
Price declines to a price per share the result of which is that the Company
cannot satisfy its conversion obligations to Initial Investor hereunder, the
Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Debenture
(the "ADDITIONAL REGISTRABLE SECURITIES") in addition to those previously
registered. The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than the Deadline. The Company shall not include any other securities in
the Registration Statement relating to the offer and sale of such Additional
Registrable Securities.
(D) (i) If the Company proposes to register any of its warrants, Common
Stock or any other shares of common stock of the Company under the Securities
Act (other than a registration (A) on Form S-8 or S-4 or any successor or
3
similar forms, (B) relating to Common Stock or any other shares of common stock
of the Company issuable upon exercise of employee share options or in connection
with any employee benefit or similar plan of the Company or (C) in connection
with a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under
the Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
registration to each Investor, which notice shall set forth such Investor's
rights under this Section 2(D) and shall offer such Investor the opportunity to
include in such registration statement such number of Registrable Securities as
such Investor may request. Upon the written request of any Investor made within
10 days after the receipt of notice from the Company (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Investor), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the Company has been
so requested to register by each Investor, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; PROVIDED,
HOWEVER, that (A) if such registration involves a Public Offering, each Investor
must sell its Registrable Securities to any underwriters selected by the Company
with the consent of such Investor on the same terms and conditions as apply to
the Company and (B) if, at any time after giving written notice of its intention
to register any Registrable Securities pursuant to this Section 2 and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
Registrable Securities, the Company shall give written notice to each Investor
and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(D) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(A) is declared effective by the
Commission.
(ii) If a registration pursuant to this Section 2(D) involves
a Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of shares of Common Stock that the Company and the
Investors intend to include in such registration exceeds the largest number of
shares of Common Stock that can be sold without having an adverse effect on such
Public Offering (the "MAXIMUM OFFERING SIZE"), the Company will include in such
registration only such number of shares of Common Stock as does not exceed the
Maximum Offering Size, and the number of shares in the Maximum Offering Size
shall be allocated among the Company, the Investors and any other sellers of
Common Stock in such Public Offering ("THIRD-PARTY SELLERS"), first, pro rata
among the Investors until all the shares of Common Stock originally proposed to
be offered for sale by the Investors have been allocated, and second, pro rata
among the Company and any Third-Party Sellers, in each case on the basis of the
relative number of shares of Common Stock originally proposed to be offered for
sale under such registration by each of the Investors, the Company and the
Third-Party Sellers, as the case may be. If as a result of the proration
provisions of this Section 2(D)(ii), any Investor is not entitled to include all
such Registrable Securities in such registration, such Investor may elect to
withdraw its request to include any Registrable Securities in such registration.
With respect to registrations pursuant to this Section 2(D), the number of
securities required to satisfy any underwriters' over-allotment option shall be
allocated among the Company, the Investors and any Third Party Seller pro rata
on the basis of the relative number of securities offered for sale under such
registration by each of the Investors, the Company and any such Third Party
Sellers before the exercise of such over-allotment option.
4
3. OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall:
(A) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five (5) years from the date on which the
Registration Statement is first declared effective by the Commission (the
"EFFECTIVE TIME") or such shorter period that will terminate when all the
Registrable Securities covered by the Registration Statement have been sold
pursuant thereto in accordance with the plan of distribution provided in the
Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the "REGISTRATION
PERIOD") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, 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, not misleading
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period 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, in light of the circumstances under which they were made, not
misleading;
(B) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(C) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto and (B) such number of
copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(D) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
5
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(D), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(E) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(F) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(G) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(H) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(I) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three (3) business days after a registration statement which includes
Registrable Securities is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(J) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investors of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;
6
(K) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11 (a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(L) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(M) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
PROVIDED, HOWEVER, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and PROVIDED, FURTHER, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;
(N) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(O) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
7
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(P) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(Q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any, and (R) In the event that any broker-dealer registered under the Exchange
Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
RULES") (or any successor provision thereto)) of the Company or has a "CONFLICT
OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "QUALIFIED INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 6 hereof and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(A) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
8
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request;
(B) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(C) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(E) or
3(F), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(E) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(A) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless each Investor and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and
directors and each person who controls such Investor or underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "INDEMNIFIED
PERSON") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement of a material fact contained in any Registration Statement or
an 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
arise out of or are based upon an untrue statement of a material fact contained
in any Prospectus or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and the Company hereby agrees to reimburse such Indemnified Person for all
reasonable legal and other expenses incurred by them in connection with
investigating or defending any such action or claim as and when such expenses
9
are incurred; PROVIDED, HOWEVER, that the Company shall not be liable to any
such Indemnified Person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon (i) an untrue
statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Person expressly for use therein or (ii) in the case of the occurrence of an
event of the type specified in Section 3(E), the use by the Indemnified Person
of an outdated or defective Prospectus after the Company has provided to such
Indemnified Person an updated Prospectus correcting the untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability.
(B) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "CLAIM"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "INDEMNIFYING PARTY") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party or (z) the Indemnifying Party shall have failed to employ
legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
(C) CONTRIBUTION. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (A) above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and the Indemnified Party in connection with the
10
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), 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 the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. 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 (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(D).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(D) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(D) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement.
(E) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. RULE 144
With a view to making available to the Investors the benefits of Rule
144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to
use its best efforts to:
(1) comply with the provisions of paragraph (c) (1) of Rule 144 and
(2) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
11
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. ASSIGNMENT
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by the Investors to any
permitted transferee of all or any portion of such Registrable Securities (or
all or any portion of the Debenture or Warrant of the Company which is
convertible into such securities) only if (a) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment, the securities so transferred or assigned to the
transferee or assignee constitute Restricted Securities and (d) at or before the
time the Company received the written notice contemplated by clause (b) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein.
9. AMENDMENT AND WAIVER
Any provision of this Agreement 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 Investors who hold a majority-in-interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be binding
upon each Investor and the Company.
10. CHANGES IN COMMON STOCK
If, and as often as, there are any changes in the Common Stock by way
of stock split, stock dividend, reverse split, combination or reclassification,
or through merger, consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the provisions hereof, as
may be required, so that the rights and privileges granted hereby shall continue
with respect to the Common Stock as so changed.
11. MISCELLANEOUS
(A) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(B) If, after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Agreement, then the Company forthwith shall grant
(by means of an amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
12
(C) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally, or sent by telecopier machine or by a
nationally recognized overnight courier service, and shall be deemed given when
so delivered personally, or by telecopier machine or overnight courier service
as follows:
(1) if to the Company, to:
Odyssey Pictures Corporation
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Buyer, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(3) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(C).
(D) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(E) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of San Diego or the state courts of the State of California sitting in the
City of San Diego in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
(F) Should any party hereto employ an attorney for the purpose of
enforcing or construing this Agreement, or any judgment based on this Agreement,
in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all reasonable attorneys' fees and all reasonable costs, including but not
13
limited to service of process, filing fees, court and court reporter costs,
investigative costs, expert witness fees, and the cost of any bonds, whether
taxable or not, and that such reimbursement shall be included in any judgment or
final order issued in that proceeding. The "prevailing party" means the party
determined by the court to most nearly prevail and not necessarily the one in
whose favor a judgment is rendered.
(G) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. 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 best 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.
(H) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(A) is declared effective by the Commission.
(I) This Agreement, the Securities Purchase Agreement, the Debenture
and the Conversion Warrants Agreement, of even date herewith among the Company
and the Initial Investor constitute the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. These Agreements supersede all prior agreements and undertakings among
the parties hereto with respect to the subject matter hereof.
(J) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(K) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(L) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
14
(M) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3, or any delay in such performance, could result
in direct damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct damages caused by such failure or
delay.
(N) This Agreement may be executed in counterparts, each of which shall
be deemed an original but both of which shall constitute one and the same
agreement. A facsimile transmission of this signed Agreement shall be legal and
binding on the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed and delivered on the date first above written.
Odyssey Pictures Corporation
By:
------------------------------
Name:
Title:
La Jolla Cove Investors, Inc.
By:
------------------------------
Name:
Title:
15
