REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), is entered as of
December 15, 2006, by and between HandHeld Entertainment, Inc., a Delaware
corporation (the "COMPANY"), and ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ (the "SELLER").
WHEREAS, pursuant to the terms of a Purchase Agreement, dated as of
December 15, 2006 (the "PURCHASE AGREEMENT"), entered into by and between the
Company and the Seller, the Company has agreed, as partial consideration for the
acquisition by the Company from the Seller of the Interest (as defined in the
Purchase Agreement) to issue to the Seller a five (5)-year Convertible
Promissory Note in the principal amount of Eight Hundred Thousand Dollars
($800,000) (the "NOTE");
WHEREAS, the Note provides that prior to the Maturity Date (as defined in
the Note) the Seller my elect to convert the principal on the Note together with
accrued and unpaid interest thereon into that number of shares of the Company's
Common Stock, no par value per share ("COMMON STOCK") as determined pursuant to
Section 1.2 of the Note (as converted, the "CONVERSION SHARES");
WHEREAS, to induce the Seller to execute and deliver the Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Seller hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
(b) "REGISTRABLE SECURITIES" means (i) the Conversion Shares
issued or issuable upon conversion of the Note; and (ii) any shares of capital
stock issued or issuable with respect to the Conversion Shares as a result of
any stock split, stock dividend, recapitalization, exchange or similar event.
(c) "REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in compliance its obligations hereunder, whether or not any
registration statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to
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such registration statement, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, the expense of any special audits incident to or required by such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company);
(d) "REGISTRATION STATEMENT" means a registration statement of
the Company filed under the 1933 Act.
(e) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for the Seller, if any, relating to the sale
or disposition of the Registrable Securities pursuant to any registration
statement filed pursuant to this Agreement.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Purchase Agreement.
2. REGISTRATION.
2.1 Mandatory Registration. On or prior to ninety (90) days after the date
on which Seller requests (a "DEMAND") that the Company Register the Registrable
Securities, or the earliest date thereafter that will not require a new
stub-period financial statement audit (such demand by Seller hereafter defined
as the "NOTICE" and such date hereafter defined as the "DEMAND DATE"), the
Company shall prepare and file with the SEC a Registration Statement covering
for resale all of the Registrable Securities on Form SB-2, or such other Form as
may be available to the Company for such Registration, and shall indicate on the
cover of such form that such securities are being offered on a delayed or
continuous basis pursuant to Rule 415 under the 1933 Act. In the event that such
Registration does require such audit, the Company agrees to use its best efforts
to complete such audit. Company shall also use its best efforts to have the
Registration Statement become effective within one hundred and twenty (120) days
after the Demand Date. Seller shall be entitled to only one (1) Demand pursuant
to this Agreement.
2.2 Underwriting. If the registration involves an underwriting, the right
of the Seller to registration pursuant to this Section shall be conditioned upon
the Seller's participation in such underwriting. The Seller shall (together with
the Company and any other stockholders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by the Company.
2.3 Expiration of Demand Right. In the event Seller is offered the right to
participate in a Registration Statement pursuant to Section 3 hereinbelow and
such Registration Statement is declared effective by the SEC, Seller shall no
longer have the right to Demand registration of shares pursuant to this
Agreement.
3. COMPANY REGISTRATION
3.1 Inclusion in Registration. If the Company shall determine to register
any of its equity securities either for its own account or for the account of
any other security holder, other than a registration relating solely to employee
benefit plans, or a registration relating solely to an
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SEC Rule 145 transaction, or a registration on any registration form which does
not permit secondary sales, the Company will:
(a) Promptly, and in no event later than 15 days prior to the
anticipated filing date of the registration statement effecting such
registration, give to the Seller a written notice thereof (which shall include a
list of the jurisdictions in which the Company intends to qualify such
securities under the applicable blue sky or other state securities laws); and
(b) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request made by the Seller
within fifteen (15) days after receipt of the written notice from the Company
described in clause (i) above, except as otherwise provided in Section 8 below.
Such written request may specify all or a part of the Seller's Registrable
Securities.
3.2 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Seller in the written notice given pursuant to Section (a). In such
event, the right of the Seller to registration pursuant to this Section 3 shall
be conditioned upon the Seller's participation in such underwriting. The Seller
shall (together with the Company and any other stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
4. EXPENSES OF REGISTRATION
All Registration Expenses incurred in connection with any registration or
compliance pursuant to this Agreement shall be borne by the Company, and any and
all Selling Expenses shall be borne by the Seller.
5. REGISTRATION PROCEDURES
In the Notice provided by the Seller to the Company, the Seller shall
inform the Company of the number of shares the Seller desires to have
registered, acknowledging that the Seller does, at the time of such request,
intend to sell all shares that will be included in the registration statement.
After receipt of such information from the Seller, the Company shall, at its
expense:
(a) prepare and file with the Commission, within the time frame
specified in paragraph 2.1, above, the Registration Statement (such date of
filing, the "FILING DATE") covering the resale of the Registrable Securities in
accordance with the method or methods of distribution specified by the Seller,
and cause the Registration Statement to become effective and remain effective as
provided herein;
(b) prepare and file with the Commission such amendments,
including post-effective amendments, and supplements to the Registration
Statement as may be necessary to keep the Registration Statement continuously
effective as to the Registrable Securities for at least six (6) months following
the date it first becomes effective (the "EFFECTIVENESS PERIOD"); PROVIDED,
HOWEVER, that the Effectiveness Period shall be extended for a period of time
equal to
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the period during which the Seller refrains from selling any securities included
in such registration in accordance with the provisions set forth in Section 7
hereof;
(c) cause the prospectus forming a part of the Registration
Statement to be amended or supplemented by any required prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424 (or any
successor rule) under the Securities Act;
(d) respond promptly to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and promptly
provide the Seller and the Sellers' counsel true and correct copies of all
correspondence from and to the Commission relating to the Registration
Statement;
(e) promptly to take such action as may be reasonably necessary
so that (i) each of the Registration Statement and any amendment thereto and the
prospectus forming part thereof and any amendment or supplement thereto (and
each report or other document incorporated therein by reference in each case),
when it becomes effective, complies in all material respects with the Securities
Act and the Exchange Act and the respective rules and regulations thereunder,
(ii) each of 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, in the light of the circumstances in which they were made,
not misleading and (iii) each of the prospectus forming part of the Registration
Statement, and any amendment or supplement thereto, does not at any time during
the Effectiveness 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 the light of the circumstances in which they were made,
not misleading.
(f) notify the Seller as promptly as possible (and, in the case
of (i)(A) below, not less than five (5) Business Days prior to such filing) and
(if requested by the Seller) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a prospectus or any prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
contemplated hereby cease to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
prospectus or other documents so that, in the case of the Registration Statement
or the
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prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(g) cooperate with the Seller to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as the Seller may request at
least two (2) Business Days prior to any sale of Registrable Securities; and
(h) furnish such number of prospectuses and other documents
incident thereto as the Seller from time to time may reasonably request.
6. INDEMNIFICATION
6.1 The Company will indemnify the Seller to the fullest extent permitted
by applicable law with respect to each registration which has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to such registration,
qualification or compliance, or based on any 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 any violation by the Company of the
Securities Act, the Exchange Act or the respective rules or regulations
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with such registration, qualification or
compliance, and will reimburse the Seller for any legal or other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; PROVIDED that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by the Seller
or underwriter. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of an Indemnified Party (as defined in
Section 5.3 hereof) and shall survive the transfer of the Registrable Securities
by the Seller.
6.2 The Seller will, if Registrable Securities held by him are included in
the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
each underwriter, if any, of the Company's securities covered by such
registration statement, each person who controls the Company or such
underwriter, each other stockholder of the Company participating in such
registration, and each of their respective officers, directors, and partners,
and each person controlling such other stockholder, in each case, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in such registration statement, prospectus, offering
circular or other document made by the Seller, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements by the Seller therein not misleading, and will
reimburse the Company and such other stockholders, directors, officers,
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members, partners, persons, underwriters or control persons for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by the Seller;
PROVIDED, that the liability of such Seller pursuant to Section 5.2 and Section
5.4 hereof shall in no event exceed the net proceeds received by such Seller
from the sale of the Registrable Securities sold by the Seller pursuant to the
Registration Statement.
6.3 Each party entitled to indemnification under this Section 5 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and PROVIDED FURTHER that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement unless the Indemnifying Party is materially prejudiced
thereby. 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. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
6.4 If the indemnification provided for in this Section 5 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense 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 statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue (or alleged
untrue) statement of a material fact or the omission (or alleged 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.
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6.5 Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall be controlling.
6.6 The foregoing indemnity agreement of the Company and the Seller is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the SEC at the time the registration
statement in question becomes effective or the amended prospectus filed with the
SEC pursuant to SEC Rule 424(b) (the "FINAL PROSPECTUS"), such indemnity
agreement shall not inure to the benefit of any underwriter if a copy of the
Final Prospectus was furnished to the underwriter and was not furnished to the
person asserting the loss, liability, claim or damage at or prior to the time
such action is required by the Securities Act.
7. INFORMATION BY THE SELLER
The Seller shall furnish to the Company such information regarding the
Seller and the distribution proposed by the Seller as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
8. "MARKET STAND-OFF" AGREEMENT
The Seller agrees, if requested by the Company and an underwriter of common
stock (or other securities) of the Company, not to sell or otherwise transfer or
dispose of any common stock (or other securities) of the Company held by the
Seller during the 90-day period following the effective date of a registration
statement of the Company filed under the Securities Act which relates solely to
securities offered by or on behalf of the Company. If requested by the
underwriters, the Seller shall execute a separate agreement to the foregoing
effect. The Company may impose stop-transfer instructions with respect to the
shares (or securities) subject to the foregoing restriction until the end of
said period. The provisions of this Section 7 shall be binding upon any
transferee who acquires Registrable Securities, whether or not such transferee
is entitled to the registration rights provided hereunder.
9. NO INCONSISTENT AGREEMENTS.
Neither the Company nor any of its subsidiaries has, as of the date hereof
entered into and currently in effect, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Seller in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, at no time during the
Effectiveness Period shall the Company, grant to any person or entity the right
to request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Seller set forth herein, and are not otherwise in
conflict with the provisions of this Agreement.
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10. MISCELLANEOUS
10.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and to be performed entirely within such State without regard to principles of
conflicts of law.
10.2 PARAGRAPH AND SECTION HEADINGS. The descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
10.3 NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (a) when delivered personally to
the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day, (c) one Business Day
after the date when sent to the recipient by reputable express courier service
(charges prepaid), or (d) seven Business Days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to the
Seller and to the Company at the addresses indicated below:
If to the Seller: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇
Fax: ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
(which shall not constitute notice) ATTN: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
Fax: 0044113 ▇▇▇ ▇▇▇▇
And
▇▇▇▇▇▇▇▇ Venture Counsel
ATTN: ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: HandHeld Entertainment, Inc.
ATTN: ▇▇▇▇▇▇▇ Oscodar
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▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ Curls ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
(which shall not constitute notice) ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either party hereto may, from time to time,
designate in writing delivered pursuant to the terms of this Section.
10.4 AMENDMENTS. The terms, provisions and conditions of this Agreement may
not be changed, modified or amended in any manner except by an instrument in
writing duly executed by both of the parties hereto.
10.5 ASSIGNMENT. Neither this Agreement nor any of the rights, duties, or
obligations of any party hereunder may be assigned or delegated (by operation of
law or otherwise) by either party hereto except with the prior written consent
of the other party hereto; PROVIDED that all of the terms and provisions of this
Agreement shall inure to the benefit of and shall be enforceable by the
respective legal successors and permitted assigns of the parties hereto and to
any holder of Registrable Securities.
10.6 COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by any one or more parties
hereto, and each such executed counterpart shall be, and shall be deemed to be,
an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate but one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Registration
Rights Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
COMPANY HANDHELD ENTERTAINMENT, INC.
By: /s/ ▇▇▇▇ Oscodar
------------------------------------
Name: ▇▇▇▇▇▇▇ Oscodar
Title: President
SELLER ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
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