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EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of this 6th day of December, 1999, by and
between Tsunami Media, Inc., a California corporation (the "TMI")
and Tsunami Media Corporation, a Delaware corporation (the
"Company") with reference to the following facts:
A. Concurrently herewith, TMI and the Company have entered
into that certain Asset Purchase Agreement (the "Purchase
Agreement"), whereby TMI has sold and the Company has bought
certain assets of TMI.
B. The Company has issued 2,000,000 shares of its common
stock, without par value, to TMI as partial consideration for the
assets transferred under the Purchase Agreement.
C. The Company desires to grant to TMI, and its assignees
or transferees, certain registration lights for such shares.
NOW, THEREFORE, based on the above premises and in
consideration of the mutual covenants and agreements contained
herein, the parties agree as set forth below:
1 Definitions. When used in this Agreement, capitalized terms
shall have the meanings set forth below or elsewhere in
this Agreement
1.1 "Holder" means any person who at that time is the
holder based on the records of the Company of any
Registrable Securities, including assignees or transferees
of the Registrable Securities.
1.2 "Majority Holders" means the Holders of a majority
in Market Value of the Registrable Securities. In the case
of determinations made with respect to any Registration
Statement, the determination shall be made with regard to
the holdings of Selling Holders only.
1.3 "Market Value" for any security on any given date
means (i) the average closing price for the prior ten
trading days for such security on the principal stock
exchange on which such security is traded or (ii) if not so
traded, the closing (or, if no closing price is available,
the average of the bid and asked prices) for such period on
the NASDAQ if such security is listed on the NASDAQ or (iii)
if not listed on any exchange or quoted on the NASDAQ, such
value as may be determined in good faith by the Company's
Board of Directors, which determination shall be
conclusively binding on the parties, except that, at the
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request of the Majority Holders, the fair price shall be
determined by an investment banking firm reasonably
acceptable to the Company, whose fees will be paid by the
Holders unless the Market Price so determined exceeds 110%
of that set by the Board.
1.4 "Registrable Securities" means those shares of the
Company's Common Stock received or receivable under the
Purchase Agreement (including shares received from the
Company with respect to or in replacement of such shares by
reason of splits, dividends and recapitalization) but
excluding any shares which are not "restricted securities"
pursuant to Rule 144 or other comparable provision under
the 1933 Act ("Rule 144").
1.5 "Registration Statement" means any registration
statement or comparable document under the 1933 Act through
which a public sale or disposition of the Company's
securities may be registered or exempted from registrations (except a
form exclusively for the sale or distribution of securities
by the Company to employees of the Company or its
subsidiaries or for use exclusively in connection with a
business combination).
1.6 "SEC" means the Securities and Exchange Commission.
1.7 "Selling Holder" means with respect to any
Registration Statement, any Holder whose securities are
included therein.
1.8 "Sellers' Underwriter" means with respect to any
Registration Statement, the underwriter designated in
writing by the Majority Holders , subject to the reasonable
approval of the Company.
1.9 "1933 Act" shall mean the Securities Act of 1933,
as amended, or any future comparable law.
1.10 "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended, or any future comparable law.
2 Right to Demand Registration
2.1 Notice of Demand. The majority Holders may by
written notice request that the Company register Registrable
Securities under the 1933 Act. The Majority Holders shall
have one such demand. The notice shall set forth (i) the
number of shares to be included; (ii) the names of the
Selling Holders and the amounts to be sold by each; and
(iii) the proposed manner of sale, including the name of any
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proposed Sellers' Underwriter. Within 10 days after receipt
of such notice, the Company shall notify all other Holders
and offer to them the opportunity to include their shares in
such registration.
2.2 Holder and Registration. Within 60 days after
receipt of any notice pursuant to Section 2.1, the Company
shall prepare and file with the SEC a Registration Statement
on any applicable form, with respect to all the Registrable
Securities specified in such notice, and use its best
efforts to cause such Registration Statement to become
effective. The Company may not include any other Securities
in such Registration Statement to the extent that the
Sellers' Underwriter shall reasonably object.
2.3 Halfback. In the event that a registration is
demanded pursuant to this Section 2, and the Company is
advised in writing by its investment banking firm that the
shares for which registration is requested cannot be sold
without serious injury to the Company or its existing
shareholders (the grounds for which decision shall be
confidentially disclosed to any requesting Holder), the
Company shall have the option to require the Selling Holders
to withdraw such registration demand and not make any other
demand for a period of up to 180 days at which point the
Company will proceed with a Registration Statement without
regard to this Section 2.3. If the Company exercises its
halfback option pursuant to this Section 2.3, the withdrawn
registration demand shall not be counted toward the Majority
Holders' one demand right granted pursuant to this Section
2, and the Majority Holders will thereafter continue to have
the right to make one such demand.
3. Incidental Registration. Each time the Company proposes to
file a Registration Statement, except as a result of a demand
under Section 2, the Company shall take the following steps:
3.1 Notice. Mail a written notice of the offering and
the name of the managing underwriter (if any) to each Holder
at the address shown on the books and records of the Company
at least forty-five (45) days prior to the effective date of
any such Registration Statement; and
3.2 Inclusion of Shares. Include in such Registration
Statement any and all Registrable Securities specified in a
notice by the Holder which is received by the Company not
more than thirty (30) days following the mailing of the
notice specified in Section 3.1 above. In connection with
any registration, the Selling Holder must: (i) sell such
Registrable Securities in the manner and on the terms
adopted by or through the underwriter(s) acting on behalf of
the Company in connection with such registration, if such
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underwriter(s) so requests; and (ii) accept a reduction
(including a total elimination) in the number of shares to
be included in such registration on a pro rata basis (based
on the number of shares held by each) with any other selling
shareholders holding contractual pari passu registration
rights (except that the Company and any shareholder who has
exercised demand registration rights with respect to such
registration statement shall not be affected by such
reduction) if the underwriter(s) reasonably deem that
without such reduction (or elimination) the Company might be
substantially hindered in the terms or number of securities
which it could sell in such registration, provided that such
shares are then registered by the Company within 120 days
after the effective date of the Registration Statement from
which they are excluded. Nothing in this Section 3.2 shall
limit the ability of the Company to withdraw a Registration
Statement it has filed either before or after effectiveness.
In the case of an underwritten offering, a Selling Holder
may only withdraw his or her included shares after the filing of
the Registration Statement only (i) with the consent of the
underwriter; (ii) if the final price is less than the range of
prices given in the preliminary prospectus; (iii) if the Company
breaches its obligations; or (iv) as provided in Section 4.2.
4. Registration Procedures. Whenever the Company shall register
any securities pursuant to this Section 4, the parties agree as
follows:
4.1 Selling Holder Information. The Selling Holders
shall provide the Company with such information about such
Holder and his or her intended manner of distributing the
Registrable Securities, and shall otherwise cooperate with
the Company and the underwriter(s) as may be needed or
helpful in the reasonable opinion of the Company to complete
any obligation of the Company hereunder. Failure to comply
with this requirement shall excuse the Company from an
further obligation to a Selling Holder to include his or her
shares in that Registration Statement;
4.2 Consultation. The Company shall supply copies of
any Registration Statement, any amendment thereto and any
communications of the SEC related thereto to each Selling
Holder and to any Sellers' Underwriter prior to filing such
document with the SEC, and shall reasonably consult with
such persons and their counsel with respect to the form and
content of such filing. The Company will immediately amend
such Registration Statement to include such reasonable
changes as the Selling Holders and any Sellers' Underwriter
reasonably agree should be included therein. Any Selling
Holder requesting a change refused by the Company may
withdraw his or her shares from the Registration Statement;
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4.3 Provision of Prospectuses. The Company shall
furnish each Selling Holder and any Sellers' Underwriter
such number of copies of a summary prospectus or other
prospectus, including a preliminary prospectus in conformity
with the requirements of the 1933 Act, and such other
documents as such Selling Holder may reasonably request in
order to facilitate the public sale or other disposition of
such securities;
4.4 Blue Sky Compliance. The Company shall use its
best efforts to register or qualify the securities covered
by such Registration Statement under the securities or "blue
sky" laws of such jurisdictions as each Selling Holder shall
request (provided, however, that the Company shall not be
required (i) to consent to, or take any action which would
subject it to, general service of process for all purposes
or (ii) to qualify to do business in any jurisdiction where
it is not then subject or qualified) and do any and all
other acts or things which may be reasonably necessary or
advisable to enable the Selling Holders to consummate the
public sale or other disposition of such securities in such
jurisdictions;
4.5 Amendments. The Company shall use its best efforts
to prepare and file promptly with the SEC such amendments
and supplements to such Registration Statement and the
prospectus used in connection therewith, as may be necessary
to keep such Registration Statement continuously effective
and in compliance with the 1933 Act for up to six months, or
until all Registrable Securities registered in that
Registration Statement are sold, whichever is earlier;
4.6 Prospectus Delivery. At any time when a sale or
other public disposition pursuant to a Registration
Statement is subject to a prospectus delivery requirement,
the Company shall immediately notify each Selling Holder and
Sellers' Underwriter of the occurrence of any event as a
result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances then existing. Upon receipt of such a notice,
each Selling Holder shall immediately discontinue sales or
other dispositions of Registrable Securities pursuant to the
Registration Statement. The Selling Holders may resume
sales only upon receipt of amended prospectuses or after
such Holders have been advised by the Company that the use
of the previous prospectus may be legally resumed;
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4.7 Opinions. At the request of any Selling Holder, the
Company shall use its best efforts to furnish on the date
that the Registrable Securities are delivered to that Holder
and any Sellers' Underwriter for sale in connection with a
registration pursuant to this Agreement (i) an opinion of
the counsel representing the Company for the purposes of
such registration, and (ii) a letter from the independent
certified public accountants of the Company, each dated such
date and in form and substance as is customarily given by
counsel and independent certified public accountants to
underwriters in an underwritten public offering, addressed
to any Sellers' Underwriter and to the requesting Selling
Holders;
4.8 Stop-Orders. The Company agrees to immediately
notify each Selling Holder (i) of the issuance by the SEC of
any stop order or order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings
for that purpose, or (ii) of the receipt by the Company of
any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction, or the initiation of any proceedings for such
purpose. The Company, with the reasonable cooperation of
the Selling Holders, shall make every reasonable effort to
contest any such proceedings and to obtain the withdrawal of
any such order at the earliest possible moment;
4.9 Review of Records. The Company shall make
available all financial and other records, pertinent
corporate documents and properties of the Company for
inspection by any Selling Holder, any Sellers' Underwriter,
and their counsel and accountants, and shall cause the
Company's officers, directors and employees to supply all
information reasonably requested by any such person in
connection with any Registration Statement filed or to be
filed hereunder so long as such person agrees to keep
confidential any records, information or documents
designated by the Company in writing as confidential;
4.10 Earnings Statements. The Company shall make
earning statements satisfying and provisions of Section I
l(a) of the 1933 Act generally available to its security
holders no later than 45 days after the end of any 12-month
period commencing at the end of any fiscal quarter in which
Registrable Securities are sold;
4.11 Underwriting Agreement. At the request of the
Company or any Sellers' Underwriter, each Selling Holder
shall enter into an underwriting agreement in a form
consistent with those then currently in use by major
underwriters and with the provisions of this Agreement; and
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4.12 Compliance With Laws. In all actions taken under
this Agreement, the Company and each Selling Holder agree to
use their best efforts to comply with all provisions of the
1933 Act as well as any other applicable law.
5. Registration Not Required. The Company shall have no
obligation to any Holder under Sections 2 and 3 of this Agreement
(i) with respect to whom the Company has obtained an opinion of
counsel, in form reasonably satisfactory to such Holder, to the
effect that the Registrable Securities involved may be
immediately sold to the public without registration thereof,
whether pursuant to Rule 144 or otherwise; or (ii) if within ten
(10) days of the time that
registration is requested under this Agreement, the Company
offers to purchase the Registrable Securities to be included at
Market Value.
6. Reports under the 1934 Act. With the view to making the
benefit of Rule 144 and Rule 144A available to the Holders, at
any time after the Company becomes public the Company agrees to
use its best efforts to:
6.1 Make and keep public information available (as
such terms are understood and defined in Rule 144 or 144A)
at all times subsequent to the effective date of the first
Registration Statement covering an underwritten public
offering filed by the Company until no Registrable
Securities remain outstanding;
6.2 Timely file with the SEC all reports and other
documents required of the Company under the 1933 Act and the
1934 Act and any rules and regulations promulgated
thereunder; and
6.3 Promptly furnish to any Holder upon request at any
time (i) a written statement by the Company that it has
complied with these covenants; (ii) a copy of the most
recent annual or other quarterly report of the Company and
(iii) such other reports and documents so filed by the
Company as may be reasonably requested by the Holder.
7 Indemnity.
7.1 The Company's Indemnity. The Company will
indemnify each Selling Holder and any Sellers' Underwriter
(and any of their officers and directors and persons who
control such Holder or Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the ▇▇▇▇ ▇▇▇)
against all claims, losses, damages, liabilities and
expenses (including those relating to settlements approved
by the Company, which consent shall not be unreasonably
withheld) resulting from any untrue statement or
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alleged untrue statement of a material fact contained in any
Registration Statement (or in any other related document
incident to that registration) or from 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 is based
on (i) information furnished in writing to the Company by
such Holder, an underwriter, or any Selling Holder expressly
for use therein, or (ii) the circumstances set forth in
Section 7.2(y) hereof.
7.2 The Holder's Indemnity. Each Selling Holder will
indemnify the Company, any underwriter, and any other person
selling under a Registration Statement (and any of their
officers and directors and persons who control the Company
or such persons within the meaning of Section 15 of the 1933
Act or Section 20 of the ▇▇▇▇ ▇▇▇) against all claims,
losses, damages, liabilities and expenses (including those
relating to settlements approved by the Holder, which
consent shall not be unreasonably withheld) resulting from
(x) any untrue statement or alleged untrue statement of a
material fact contained in that Registration Statement (or
in any other document incident to that registration) or from
any omission or alleged omission to state a material fact
required to be stated or necessary to make the statements
therein not misleading, but only to the extent based upon
information furnished in writing to the Company by that
Holder expressly for inclusion in that Registration
Statement or other document or (y) any untrue
statement or alleged untrue statement of a material fact
contained in, or any omission or alleged omission of a material
fact from, a prospectus if (i) a later prospectus corrected the
untrue statement or alleged untrue statement, or omission or
alleged omission, (ii) at such time the Company had advised the
Holder of the availability of the revised prospectus, and (iii)
there would have been no such liability had such later prospectus
actually been delivered to the purchaser at or prior to
confirmation of sale.
8. Expenses of Registration. The Company shall bear all expenses
other than Selling Holder Expenses (defined below) incurred in
any Registration, including all registration and Filing fees
(including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), fees and expenses of
complying with securities and blue sky laws, printing expenses
and fees and disbursements of the independent certified public
accountants (including for any special audits) and of Company's
counsel. Each Selling Holder shall bear his or her equitable
share of any Selling Holder Expenses. "Selling Holder Expenses"
shall consist of (i) Selling Holder's legal costs, (ii) any
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proportionate share of brokerage or underwriting fees, expenses
or commissions and (iii) any other costs required to be paid by
Selling Holders in order to comply with state securities laws and
regulations.
9 Future Registration Rights. If the Company grants any person
rights (i) to demand that the Company register securities of the
Company under the 1933 Act or (ii) to have securities of the
Company included in a Registration Statement, which are more
favorable than the provisions of this Agreement in any regard
(including those relating to the expenses to be home by the
Company), the rights granted herein shall be deemed to be amended
to include such more favorable rights in addition to those set
forth herein. The Company agrees not to grant any person any
rights to include securities in a Registration Statement filed as
a result of a demand under Section 2.
10. Miscellaneous
10.1Modifications. This Agreement may not be amended,
altered or modified except by a writing signed by the
parties.
10.2 Notices. All notices under this Agreement will be
in writing and will be delivered by personal service or
telegram, telecopy or certified mail (if such service is not
available, then by first class mail), postage prepaid, to
such address as may be designated from time to time by the
relevant party, and which will initially be as set forth
below. Any notice sent by certified mail will be deemed to
have been given three (3) days after the date on which it is
mailed. All other notices will be deemed given when
received. No objection may be made to the manner of
delivery of any notice actually received in writing by an
authorized agent of a party. Notices will be addressed as
follows or to such other address as the party to whom the
same is directed will have specified in conformity with the
foregoing:
(i) If to the Company:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
(ii) If to TMI:
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
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(iii) If to a Holder:
at such address as is in the Company records for such Holder
(which shall be updated upon notice from the Holder or TNU
10.3 Successors and Assigns. Except as provided herein to
the contrary, this Agreement shall be binding upon and inure
to the benefit of the parties, their respective successors and
permitted assigns.
10.4 Disputes.
10.4.1 Governing Law; Jurisdiction. All questions
with respect to this Agreement and the rights and
liabilities of the parties will be governed by the laws
of California, regardless of the choice of law provisions
of California or any other jurisdiction. Any and all
disputes between the parties which may arise pursuant to
this Agreement not settled by arbitration will be heard
and determined before an appropriate federal or state
court located in Madera, California. The parties hereto
acknowledge that such court has the jurisdiction to
interpret and enforce the provisions of this Agreement
and the parties waive any and all objections that they
may have as to personal jurisdiction or venue in any of
the above courts.
10.4.2 Arbitration as Exclusive Remedy. Except
for actions seeking injunctive relief, which may be
brought before any court having jurisdiction, any Claim
arising out of or relating to this Agreement or any
related agreement, including without limitation its
validity, interpretation, enforceability or breach, which
are not settled by agreement between the parties, shall
be settled by arbitration in Los Angeles California under
the commercial arbitration rules of the American
Arbitration Association. Each party agrees that the
arbitration provisions of this Agreement are its
exclusive remedy for such claims and expressly waives any
right to a jury trial or to seek redress in another
forum. During the arbitration proceedings, each party
shall bear the fees of any arbitrator appointed by it,
and the fees of any neutral arbitrator(s) shall be borne
equally by each party. At the conclusion of the
arbitration proceedings, the losing party shall reimburse
the winning party for any fees for arbitrators
previously borne by the winning party.
10.4.3 Attorneys' Fees. In any dispute between
the parties hereto or their representatives concerning
any provision of this Agreement or the rights and duties
of any person or entity hereunder, the party or parties
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prevailing in such dispute shall be entitled, in addition
to such other relief as may be granted, to the attorneys'
fees and court costs incurred by reason of such dispute.
10.5 Waivers Strictly Construed. With regard to any
power, remedy or right provided herein or otherwise available
to any party hereunder (i) no waiver or extension of time will
be effective unless expressly contained in a writing signed by
the waiving party; and (ii) no alteration, modification or
impairment will be implied by reason of any previous waiver,
extension of time, delay or omission in exercise, or other
indulgence.
10.6 Rules of Construction.
10.6.1 Headings. The Article and Section headings
in this Agreement are inserted only as a matter of
convenience, and in no way define, limit, or extend or
interpret the scope of this Agreement or of any
particular Article or Section.
10.6.2 Tense and Case. Throughout this Agreement,
as the context may require, references to any word used
in one tense or case shall include all other appropriate
tenses or cases, and the term "including" means
"including but not limited to."
10.6.3 Severability. The validity, legality or
enforceability of the remainder of this Agreement will
not be affected even if one or more of the provisions of
this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
10.6.4 Legal. The language used in this Agreement
will be deemed to be the language chosen by the parties
to this Agreement to express their mutual intent, and no
rule of strict construction shall be applied against any
party. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless
the context requires otherwise
10.7 Entire Understanding. This Agreement, and any
agreement entered into contemporaneously herewith sets forth
the entire agreement and understanding of the parties hereto
in respect to the subject matter hereof, and supersedes all
prior agreements, arrangements and understandings relating to
the subject matter hereof and is not intended to confer upon
any other person any rights or remedies hereunder. There have
been no representations or statements, oral or written, that
have been relied on by any party hereto, except those
expressly set forth in this Agreement.
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10.8 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will
be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
TMI
Tsunami Media, Inc.,
a California corporation
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: President
COMPANY
Tsunami Media Corporation,
a Delaware corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President