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EXHIBIT 10.38
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of ____________ __, 19__, by and among Digital Entertainment
Network, Inc., a Delaware corporation (the "Company"), and the purchasers of the
Series A Convertible Preferred Stock (the "Convertible Preferred Stock") of the
Company (the "Holders").
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings:
Exchange Act: The Securities Exchange Act of 1934, as amended.
IPO: The underwritten initial public offering of the Common Stock
(as hereinafter defined) that results in net proceeds to the Company of at least
$20,000,000 and results in the Common Stock being listed on a national
securities exchange, including, without limitation, the NASDAQ Stock Market.
Person: Any individual, partnership, corporation, limited
liability company, trust, unit trust, unincorporated organization, government or
agency or political subdivision thereof, or any other entity.
Proceeding: An action, claim, suit or proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Registrable Securities: The shares of common stock, par value
$.01 per share, of the Company (the "Common Stock") received by the Holders upon
conversion of shares of the Convertible Preferred Stock, until such time as such
shares of Common Stock (i) are effectively registered under the Securities Act
and disposed of in accordance with a Registration Statement covering such
shares, (ii) are saleable by the Holder thereof pursuant to Rule 144(k) or (iii)
are distributed for resale pursuant to Rule 144.
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Registration Statement: Any registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
Securities Act: The Securities Act of 1933, as amended.
Special Counsel: Any one special counsel to the Holders, which
counsel shall be selected by the Holders of a majority of the Registrable
Securities requested to be included in the applicable registration.
underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. Demand Registration
(a) Requests for Registration. Subject to the terms of this
Agreement, the Holders of a majority of the then outstanding Registrable
Securities shall have the right by written notice delivered to the Company (the
"Demand Notice") to require the Company to register (a "Demand Registration")
under and in accordance with the provisions of the Securities Act the number of
Registrable Securities requested to be so registered pursuant and subject to the
terms of this Agreement.
Notwithstanding anything to the contrary set forth herein, the right to
require a Demand Registration hereunder may only be exercised after 365 days
following completion of the IPO.
In no event shall the number of Demand Registrations pursuant to this
Section 2(a) exceed one for all Holders unless the Demand Registration does not
become effective or is not maintained effective for the period required pursuant
to this Section 2(a), in which case the Holders of a majority of the then
outstanding Registrable Securities shall be entitled to one additional Demand
Registration in lieu thereof until such Demand Registration is declared and
maintained effective for such period.
Within 10 days after receipt by the Company of a Demand Notice sent by
such Holders of a majority of the then outstanding Registrable Securities, the
Company shall give written notice of such Demand Notice to all other Holders and
shall, subject to the provisions of Section 2(b) hereof, include in such
registration all Registrable Securities with respect to which the Company
received written requests for inclusion therein within 10 days after such notice
is given by the Company to such other Holders.
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All requests made pursuant to this Section 2 will specify the number of
Registrable Securities to be registered and the intended methods of disposition
thereof.
If the Holders of a majority of the then outstanding Registrable
Securities request that such Demand Registration be a "shelf" registration
pursuant to Rule 415 under the Securities Act, the Company shall file such
Demand Registration under Rule 415 and shall keep the Registration Statement
filed in respect thereof effective for a period that shall terminate on the
earlier of (i) 180 days from the date on which the SEC declares such
Registration Statement effective and (ii) the date on which all Registrable
Securities covered by such Registration Statement have been sold pursuant to
such Registration Statement.
(b) Priority on Demand Registration. If any of the Registrable
Securities registered pursuant to a Demand Registration are to be sold in a firm
commitment underwritten offering, and the managing underwriter or underwriters
advise the Holders of such securities in writing that in its opinion the total
number or dollar amount of Registrable Securities proposed to be sold in such
offering is such as to materially and adversely affect the success of such
offering, then there shall be included in such firm commitment underwritten
offering the number or dollar amount of Registrable Securities that in the
opinion of such managing underwriter can be sold, and such Registrable
Securities shall be allocated pro rata among the Holders on the basis of the
number or dollar amount of securities requested by such Holders to be included
in such offering.
(c) Postponement of Demand Registration. The Company shall be
entitled to postpone, for a reasonable period of time not in excess of 90 days,
the filing of a Registration Statement if the Company determines, in good faith
exercise of its reasonable business judgment, that such registration and
offering could materially adversely affect bona fide financing plans of the
Company or would require disclosure of information, the premature disclosure of
which could materially adversely affect the Company or any transaction under
consideration by the Company.
Upon the expiration of the postponement period, which period may be
extended for an additional 90 days if the requirements of this Section 2(c) are
met, the Company shall be required to file a Registration Statement covering the
Registrable Securities requested to be registered.
3. Piggyback Registration
(a) Right to Piggyback. If at any time after the IPO the Company
proposes to file a registration statement under the Securities Act with respect
to an offering of Common Stock (other than a registration statement (i) on Form
S-4 or Form S-8 or any successor forms thereto or (ii) filed solely in
connection with an exchange offer or an offering made solely to employees of the
Company), whether or not for its own account, then the Company shall give
written notice of such proposed filing to the Holders at least 30 days before
the anticipated filing date. Such notice shall offer such Holders the
opportunity to register such amount of Registrable Securities as each such
Holder may request (a "Piggyback Registration"). Subject to Section 3(b) hereof,
the Company shall include in each such Piggyback Registration all Registrable
Securities with respect to which
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the Company has received written requests for inclusion therein within 10 days
after notice has been given to the applicable Holder (which request shall
specify the intended method of distribution). The Holders shall be permitted to
withdraw all or part of the Registrable Securities from a Piggyback Registration
at any time prior to the effective date of such Piggyback Registration.
(b) Priority on Piggyback Registrations. The Company shall cause
the managing underwriter of a proposed underwritten offering to permit the
Holders that requested their Registrable Securities to be included in the
registration for such offering to include all such Registrable Securities on the
same terms and conditions as any other shares of Common Stock, if any, of the
Company included therein. Notwithstanding the foregoing, if the managing
underwriter of such underwritten offering informs such Holders that the total
number or dollar amount of securities that such Holders, the Company and any
other Persons having rights to participate in such registration, propose to
include in such offering is such as to materially and adversely affect the
success of such offering, then the amount of Common Stock to be offered (i) for
the account of Holders and (ii) for the account of all such other Persons (other
than the Company) shall be reduced or limited pro rata in proportion to the
respective dollar amounts of Common Stock requested by such persons to be
included in such offering.
4. Hold-Back Agreements
(a) Restrictions on Public Sale by Holders of Registrable
Securities. Each Holder agrees, in connection with any sale of securities by the
Company and in connection with any Registration Statement filed pursuant to
Section 2 or Section 3 hereof, if requested (pursuant to a timely written
notice) by the Company or the managing underwriter or underwriters in an
underwritten offering, not to effect any public sale or distribution of any of
the Company's securities, including a sale pursuant to Rule 144 (except as part
of such underwritten offering), during the period beginning 10 days prior to,
and ending 180 days after, the closing date of each underwritten offering made
by the Company or pursuant to such Registration Statement.
The foregoing provisions shall not apply to any Holder if such Holder is
prevented by applicable statute or regulation from entering into any such
agreement; provided, however, that any such Holder shall undertake in its
request to participate in any such underwritten offering, not to effect any
public sale or distribution of the class of securities covered by such
Registration Statement (except as part of such underwritten offering) during
such period unless it has provided 90 days' prior written notice of such sale or
distribution to the managing underwriter or underwriters.
(b) Restrictions on Public Sale by the Company. The Company
agrees that without the written consent of the managing underwriter in an
underwritten offering of Registrable Securities covered by a Registration
Statement filed pursuant to Section 2 or Section 3 hereof, it will not effect
any public or private sale or distribution of any of its equity securities,
including a sale pursuant to Regulation D under the Securities Act, during the
10-day period prior to, and during the 180-day period beginning on, the closing
date of each underwritten offering made pursuant to such
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Registration Statement (except (i) as part of such underwritten registration,
(ii) pursuant to registrations on Form S-4 or Form S-8 or any successor forms
thereto or filed solely in connection with an offering made solely to employees
of the Company, (iii) in connection with an exchange offer or (iv) in connection
with the acquisition of assets by the Company or its subsidiaries).
5. Registration Procedures
In connection with the Company's registration obligations pursuant to
Section 2 or Section 3 hereof, the Company shall effect such registrations to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) Prepare and file with the Securities and Exchange Commission
(the "SEC") a Registration Statement or Registration Statements on any
appropriate form under the Securities Act that shall be available for the sale
of the Registrable Securities by the Holders thereof in accordance with the
intended method or methods of distribution thereof, and use its best efforts to
cause each such Registration Statement to become effective and remain effective
as provided herein. Before filing any Registration Statement or Prospectus or
any amendments or supplements thereto (including documents that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall furnish or otherwise make available to the Holders of the Registrable
Securities covered by such Registration Statement, the Special Counsel and the
managing underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review of such Holders, the
Special Counsel and such underwriters, if any; provided, however, that the
Company shall not be required to deliver to such Holders a copy of any such
document that has not been materially changed from a copy of such document that
was previously delivered to such Holders.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective during the period
provided herein with respect to the disposition of the Registrable Securities
covered thereby; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or to such Prospectus as
so supplemented.
(c) Notify the selling Holders of Registrable Securities, the
Special Counsel and the managing underwriters, if any, promptly, and (if
requested by any such Person) confirm such notice in writing:
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(i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or any other Federal or
state governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information (provided, that
the Company shall not be required to notify the Holders or the Special Counsel
of all comments letters or the Company's responses thereto to the Holders or the
Special Counsel unless such letters request information from or about the
Holders),
(iii) of the issuance by the SEC or any other Federal or
state governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(iv) if at any time the representations and warranties
of the Company contained in any agreement contemplated by Section 5(n)
(including any underwriting agreement) below cease to be true and correct,
(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,
(vi) of the happening of any event that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
or that requires the making of any changes in a Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, 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 not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and
(vii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) Use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement, or the
lifting of any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction.
(e) If requested by the managing underwriters, if any, or the
Holders of a majority of the Registrable Securities being sold, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and
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such Holders reasonably agree should be included therein as may be required by
applicable law, (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as the Company has received notification
of the matters to be incorporated in such Prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to any
Registration Statement; provided, however, that the Company shall not be
required to take any actions under this Section 5(e) that are not, in the
opinion of counsel for the Company, in compliance with applicable law.
(f) Furnish to each selling Holder of Registrable Securities, the
Special Counsel and each managing underwriter, if any, without charge, at least
one conformed copy of the Registration Statement or Statements and any
post-effective amendment thereto, including financial statements (but excluding
schedules, all documents incorporated therein by reference or deemed
incorporated therein by reference and all exhibits, unless requested in writing
by such Holder, Special Counsel or underwriter).
(g) Deliver to each selling Holder of Registrable Securities, the
Special Counsel and the underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses relating to such Registrable Securities
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; and the Company hereby consents to the
use of such Prospectus or each amendment or supplement thereto by each of the
selling Holders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities to use
its reasonable best efforts to register or qualify or cooperate with the selling
Holders of Registrable Securities, the underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any seller or underwriter reasonably
requests in writing; keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; provided, however,
that the Company will not be required to (i) qualify generally to do business in
any jurisdiction where it is not then so qualified or (ii) take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject.
(i) Cooperate with the selling Holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends; and enable such Registrable
Securities to be registered in such names as the managing underwriters, if any,
shall request at least two business days prior to any sale of Registrable
Securities to the underwriters.
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(j) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all respects with the
filing of such Registration Statement and the granting of such approvals, as may
be necessary to enable the seller or sellers thereof or the underwriters, if
any, to consummate the disposition of such Registrable Securities.
(k) Upon the occurrence of any event contemplated by Section
5(c)(vi) or 5(c)(vii) above, prepare a supplement or post-effective amendment to
each Registration Statement or a supplement to the related Prospectus or any
document incorporated therein by reference, or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(l) Use its best efforts to cause all Registrable Securities
covered by such Registration Statement to be (i) listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed, or (ii) authorized to be quoted on The Nasdaq Stock Market National
Market if the securities so qualify; in each case, if requested by the Holders
of a majority of shares of the Registrable Securities covered by such
Registration Statement or the managing underwriters, if any.
(m) Prior to the effective date of the Registration Statement
relating to the Registrable Securities, (i) provide the transfer agent with
printed certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number for
the Registrable Securities.
(n) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith (including
those reasonably requested by the managing underwriters, if any, or the Holders
of a majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration;
(i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters, if any, with
respect to the business of the Company and its subsidiaries, the Registration
Statement, Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings and,
if true, confirm the same if and when requested;
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(ii) use its reasonable best efforts to obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the Holders of a majority of the Registrable
Securities being sold) addressed to each selling Holder of Registrable
Securities and each of the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and underwriters,
including without limitation the matters referred to in Section 5(n)(i) above;
(iii) use its reasonable best efforts to obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to each selling Holder of
Registrable Securities (unless such accountants shall be prohibited from so
addressing such letters by applicable standards of the accounting profession)
and each of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; and
(iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Registrable Securities
being sold, the Special Counsel and the managing underwriters, if any, to
evidence the continued validity of the representations and warranties of the
Company and its subsidiaries made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company.
(o) Make available for inspection by a representative of the
Holders of Registrable Securities being sold, any underwriter participating in
any disposition of Registrable Securities, if any, and any attorney or
accountant retained by such selling Holders or underwriter, at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents shall be kept
confidential by such Persons unless (i) such records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure of
such records, information or documents is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities or (iii)
disclosure of such records, information or documents, in the opinion of counsel
to such Person, is otherwise required by law (including, without limitation,
pursuant to the requirements of the Securities Act). Without limiting the
foregoing, no such information shall be used by such Person as the basis for any
market transactions in securities of the Company or its subsidiaries in
violation of law.
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(p) Comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at the end
of any fiscal quarter in which Registrable Securities are sold to underwriters
in a firm commitment or best efforts underwritten offering, and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company, after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing and the Company
may exclude from such registration the Registrable Securities of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(v), 5(c)(vi) or 5(c)(vii) hereof, such Holder will forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement or Prospectus until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
6. Registration Expenses
All reasonable fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not any of the Registration Statements become effective. Such fees
and expenses shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (x) with respect to
filings required to be made with the National Association of Securities Dealers,
Inc. and (y) of compliance with securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the underwriters or selling
Holders in. connection with Blue Sky qualifications of the Registrable
Securities pursuant to Section 5(h) hereof)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
in a form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the Holders of a
majority of the Registrable Securities included in any Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) fees and disbursements of all independent certified
public accountants referred to in Section 5(n)(iii) hereof (including the
expenses of any "cold comfort" letters required by this Agreement), (vi) the
fees and expenses of any "qualified independent underwriter" or other
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independent appraiser participating in an offering pursuant to Section 3 of
Schedule E to the Bylaws of the National Association of Securities Dealers, Inc.
and (vii) fees and expenses of all other Persons retained by the Company. In
addition, the Company shall pay its internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange on which similar securities issued by the
Company are then listed and the fees and expenses of any Person, including
special experts, retained by the Company.
In addition, whether or not any of the Registration Statements become
effective, the Company shall pay the reasonable fees and disbursements of a
Special Counsel for the Holders, together with appropriate local counsel.
The Company shall not be required to pay any underwriter's fees and
expenses (including discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals) relating
to the distribution of Registrable Securities.
7. Indemnification
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Securities whose Registrable
Securities are registered pursuant to this Agreement, the officers, directors,
agents and employees of each of them, each Person who controls such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of any such
controlling person, from and against all losses, claims, damages, liabilities,
costs (including, without limitation, the costs of preparation and reasonable
attorneys' fees) and expenses (collectively, "Losses") to be reimbursed
promptly, as incurred, arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or form of Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon 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, except insofar as the
same are based solely upon information furnished in writing to the Company by
such Holder expressly for use therein; provided, however, that the Company shall
not be liable to any Holder of Registrable Securities to the extent that (A) any
such Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus if
(i) such Holder failed to send or deliver a copy of the Prospectus with or prior
to the delivery of written confirmation of the sale by such Holder of a
Registrable Security to the person asserting the claim from which such losses
arise and (ii) the Prospectus would have corrected in all material respects such
untrue statement or alleged untrue statement or such omission or alleged
omission; or (B) any such Losses arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission in the
Prospectus, if (x) such untrue statement or alleged untrue statement, omission
or alleged omission is corrected in all material respects in an amendment or
supplement to the Prospectus and
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(y) having previously been furnished by or on behalf of the Company with copies
of the Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended and supplemented, prior to or concurrently
with the sale of a Registrable Security to the Person asserting the claim from
which such Losses arise.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement in which a Holder of Registrable
Securities is participating, such Holder of Registrable Securities shall furnish
to the Company in writing such information relating to such Holder, as such, or
the Registrable Securities being sold by such Holder (the "Holder Information")
as the Company reasonably requests for use in connection with any Registration
Statement or Prospectus and agrees to indemnify, to the fullest extent permitted
by law, the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling persons, from and against all Losses arising out
of or based upon any untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or arising out of
or based upon any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any Holder
Information so furnished in writing by such Holder to the Company expressly for
use in such Registration Statement or Prospectus and that such Holder
Information was solely relied upon by the Company in preparation of such
Registration Statement, Prospectus or preliminary prospectus. In no event shall
the liability of any selling Holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses) received by such Holder directly from the sale of the Registrable
Securities giving rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution to the same extent as provided above with respect to information so
furnished in writing by such Persons expressly for use in any Prospectus or
Registration Statement.
(b) Conduct of Indemnification Proceedings. If any Person shall
be entitled to indemnity hereunder (an "indemnified party"), such indemnified
party shall give prompt notice to the party from which such indemnity is sought
(the "indemnifying party") of any claim or of the commencement of any Proceeding
with respect to which such indemnified party seeks indemnification or
contribution pursuant hereto; provided, however, that the delay or failure to so
notify the indemnifying party shall not relieve the indemnifying party from any
obligation or liability except to the extent that the indemnifying party has
been prejudiced materially by such delay or failure. The indemnifying party
shall have the right, exercisable by giving written notice to an indemnified
party promptly after the receipt of written notice from such indemnified party
of such claim or Proceeding, to assume, at the indemnifying party's expense, the
defense of any such claim or Proceeding, with counsel reasonably satisfactory to
such indemnified party; provided, however, that an indemnified party shall have
the right to employ separate counsel in any such claim or Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless: (1) the indemnifying
party agrees to pay such
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fees and expenses; (2) the indemnifying party fails promptly to assume the
defense of such claim or Proceeding or fails to employ counsel reasonably
satisfactory to such indemnified party or (3) counsel for the indemnified party
advises the indemnifying party in writing that there are issues that raise
conflicts of interest between the indemnified party and the indemnifying party;
in which case the indemnified party shall have the right to employ counsel and
to assume the defense of such claim or proceeding; provided, however, that the
indemnifying party shall not, in connection with any one such claim or
Proceeding or separate but substantially similar or related claims or
Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one firm of attorneys (together with appropriate local counsel) at any time for
all of the indemnified parties, or for fees and expenses that are not
reasonable.
Whether or not such defense is assumed by the indemnifying party,
such indemnified party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably withheld).
All such fees and expenses (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or proceeding)
shall be paid to the indemnified party, as incurred, within five days of written
notice thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder). The indemnifying party shall not consent to entry of any judgment or
enter into any settlement or otherwise seek to terminate any Proceeding in which
any indemnified party is a party and as to which indemnification or contribution
could be sought by such indemnified party under this Section 7, unless such
judgment, settlement or other termination includes as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release, in form and substance reasonably satisfactory to the indemnified party,
from all liability in respect of such claim or litigation for which such
indemnified party would be entitled to indemnification hereunder.
(c) Contribution. If the indemnification provided for in this
Section 7 is unavailable to an indemnified party under Section 7(a) or 7(b)
hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall, jointly and severally, contribute to the amount
paid or payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or indemnifying parties, on the one hand, and such indemnified party, on
the other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party or indemnifying parties, on the
one hand, and such indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Section 7(d), an indemnifying party that
is a selling Holder of Registrable Securities shall not be required to
contribute any amount in excess of the amount by which the net proceeds (after
deducting the aggregate underwriters' discount) received by such indemnifying
party from the sale of such Registrable Securities exceeds the amount of any
damages that such indemnifying party has otherwise been required to pay
(including, without limitation, pursuant to any other indemnification or
contribution obligation such indemnifying party may have) by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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 indemnity, contribution and expense reimbursement obligations of the
Company hereunder shall be in addition to any liability the Company may
otherwise have hereunder or otherwise. The provisions of this Section 7 shall
survive so long as Registrable Securities remain outstanding, notwithstanding
any transfer of the Registrable Securities by any Holder or any termination of
this Agreement.
8. Rule 144
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act, and will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144. Upon the request of any Holder of Registrable
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such filing requirements.
9. Underwritten Registrations
If any Demand Registration is an underwritten offering, the Company
shall select the investment banker or bankers and managers to administer the
offering subject to the reasonable consent of the Holders of a majority of the
Registrable Securities included in such offering; provided, that such investment
banker or bankers and managers shall be reasonably satisfactory to the Company.
If any Piggyback Registration is an underwritten offering, the Company shall
have the right to select the investment banker or investment bankers and
managers to administer the offering.
10. Miscellaneous
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(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority of the then outstanding Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and shall be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by telecopier or
(iii) one business day after being deposited with a reputable next day courier,
postage prepaid, to the parties as follows:
(x) if to a Holder of Registrable Securities, at the
most current address given by such Holder to the Company in accordance with the
provisions of this Section 11(d), which address initially is, with respect to
each Holder, the address set forth on his respective signature page attached
hereto; and
(y) if to the Company, at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President;
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
(d) Owner of Registrable Securities. The Company will maintain,
or will cause its registrar and transfer agent to maintain, a stock book with
respect to the Common Stock, in which all transfers of Registrable Securities of
which the Company has received notice will be recorded. The Company may deem and
treat the person in whose name Registrable Securities are registered in the
stock book of the Company as the owner thereof for all purposes, including
without limitation, the giving of notices under this Agreement.
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(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder of any Registrable
Securities. The Company may not assign its rights or obligations hereunder
without the prior written consent of each Holder of any Registrable Securities.
No Holder may assign its rights or obligations hereunder without the prior
written consent of the Company.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
(i) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
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 which may
be hereafter declared invalid, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein.
(k) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DIGITAL ENTERTAINMENT NETWORK, INC.
By:
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---------------- Name:
----------------------------
----------------
Title:
---------------- ---------------------------
[HOLDER]
By:
---------------------------------
Name:
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Title:
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