Document:

Exhibit 10.3

 

EXECUTION COPY

 

REGISTRATION
RIGHTS AGREEMENT

 

THIS REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated as of September 8, 2008, is made by and between AVP, Inc., a
Delaware corporation (the “Company”),
and RJSM Partners, LLC, a Delaware limited liability company (the “Investor”).

 

WHEREAS, the
Company and the Investor have entered into that certain Subscription Agreement,
dated as of the date hereof (the “Subscription Agreement”),
pursuant to which the Investor has acquired 50,000 shares of Series B
Convertible Preferred Stock (the “Preferred Stock”),
convertible into shares of Common Stock (as defined therein) of the Company;

 

WHEREAS, the
Company and the Investor have entered into that certain Securities Purchase
Agreement, dated as of September 8, 2008 (the “Purchase
Agreement”), pursuant to which the Investor: (i) as of the
date hereof, has acquired an
aggregate of 3,606,500 shares of the authorized but unissued Common Stock of
the Company (the “Initial Restricted Shares”)
and (ii) on or before September 15, 2008, will acquire an additional
2,000,000 shares of the authorized but unissued Common Stock of the Company
(the “Secondary Restricted Shares” and,
together with the Initial Restricted Shares, the “Restricted
Shares”);

 

WHEREAS, the
Company and the Investor have also entered into a Loan Agreement dated as of
the date hereof (the “Loan Agreement”)
pursuant to which the Investor has agreed to loan: (i) on the date hereof,
$1,803,250 and (ii) on or before September 15, 2008, an additional
$1,000,000 to the Company, and the Company has agreed to issue to the Investor
Promissory Notes (the “Notes”)
dated as of their respective dates to evidence the loans;

 

WHEREAS, the
Restricted Shares will be delivered to the Investor pursuant to the terms and
conditions of the Purchase Agreement, the Loan Agreement and the Notes and such
delivery may occur on the Maturity Date (as defined in the Loan Agreement) or
following a Change of Control (as defined in the Loan Agreement) or an election
by the Investor to cause the Company to prepay any of the Loans;

 

WHEREAS, the
Company and the Investor are entering into this Agreement as a condition to and
in connection with the Investor’s entering into the Purchase Agreement and the
Loan Agreement; and

 

WHEREAS, the
Company and the Investor deem it to be in their respective best interests to
set forth their rights in connection with public offerings and sales of the
Preferred Stock and Common Stock.

 

NOW
THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 

1.             Definitions.

 

All capitalized
terms used but not defined herein shall have the meanings given to such terms
in the Purchase Agreement.  For the
purposes of this Agreement, the following terms shall 

 

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have the respective
meanings set forth below or elsewhere in this Agreement as referred to below:

 

“Commission”
shall mean the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.

 

“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended and in effect from
time to time.

 

“Preferred Stock”
shall mean those shares of Series B Convertible Preferred Stock issued to
the Investor pursuant to the Subscription Agreement.

 

“Prospectus” means the
prospectus (including any preliminary prospectus and/or any final prospectus
filed pursuant to Rule 424(b) under the Securities Act and any
prospectus that discloses information previously omitted from a prospectus
filed as part of an effective registration statement in reliance on Rule 430A,
Rule 430B or Rule 430C under the Securities Act) included in a
Registration Statement, as amended or supplemented by any prospectus supplement
or any Issuer Free Writing Prospectus (as defined in Rule 433(h) under
the Securities Act) with respect to the terms of the offering or any portion of
the Registrable Securities covered by such Registration Statement and by all
other amendments and supplements to such prospectus, including all documents
and other information incorporated by reference in such prospectus.

 

“Registrable
Securities” shall mean, collectively, (a) the Common Stock issuable
upon conversion of the Preferred Stock, (b) any Restricted Shares
delivered to the Investor upon the occurrence of a Change of Control, following
a request by the Investor for prepayment of the Loans or on the Maturity Date
of the Loans, and (c) any other securities issued or issuable with respect
to the Preferred Stock and Common Stock by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization,
reclassification, arrangement, merger, consolidation or other reorganization or
otherwise; provided, however, that as to any particular
securities constituting Registrable Securities, such securities will cease to
be Registrable Securities (v) if the Company’s shares of Common Stock are
no longer registered under Section 12 of the Exchange Act or the Company
is no longer required to file periodic reports with the Commission pursuant to
Sections 13(a) or 15(d) of the Exchange Act, (w) when a
registration statement with respect to the sale by the holder thereof shall
have been declared effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (x) when
they have been sold to the public pursuant to Rule 144 or Rule 145 or
other exemption from registration under the Securities Act, (y) when they
have been acquired by the Company or (z) when they are able to be sold by
the Investor without restriction as to volume or manner of sale pursuant to Rule 144
under the Securities Act as specified in a legal opinion to such effect
rendered by counsel to the Company at its sole expense and reasonably
acceptable to the Company’s Common Stock transfer agent.

 

“Registration
Statement” means the Prospectus and other documents filed with the
Commission to effect a registration under the Securities Act.

 

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“Restricted
Security” or “Restricted Securities” means any share of Preferred
Stock or Common Stock except any that (i) has been registered pursuant to
an effective registration statement under the Securities Act and sold in a
manner contemplated by the prospectus included in such registration statement; (ii) has
been transferred by the holder in compliance with the resale provisions of Rule 144
under the Securities Act (or any successor provision thereto); or (iii) otherwise
has been transferred by the holder and a new certificate representing a share
of Common Stock not subject to transfer restrictions under the Securities Act
has been delivered by or on behalf of the Company.

 

2.                                      Registration
and Sale.

 

(a)           Demand Registrations.

 

(1)                   Requests for Registration. 
At any time after the Company delivers to the Investor shares of
Restricted Shares in accordance with the terms and conditions of the Loan Agreement,
the Investor may request in writing that the Company effect the registration of
any number of Registrable Securities held by the Investor (a “Registration
Request”).  Promptly after its
receipt of any Registration Request but no later than ten (10) days after
receipt of such Registration Request, the Company will give written notice of
such request to the Investor, and will use its reasonable best efforts to
register, in accordance with the provisions of this Agreement, all Registrable
Securities that have been requested to be registered in the Registration
Request or by the Investor  by written
notice to the Company given within 15 business days after the date the Company
has given such notice of the Registration Request.  The Company will pay all Registration
Expenses (as defined below) incurred in connection with any registration
pursuant to this Section 2(a).  Any
registration requested by the Investor pursuant to this Section 2(a)(1) is
referred to in this Agreement as a “Demand Registration.”

 

(2)                   Limitation on Demand Registrations.  The Investor will be entitled to initiate no
more than three (3) Demand Registrations, and the Company will not be
obligated to effect more than one Demand Registration in any six-month
period.  Upon filing a Registration
Statement, the Company will use its reasonable best efforts to keep such
Registration Statement effective with the Commission at all times until the
Registrable Securities have been sold in accordance with such Registration
Statement.  No request for registration
will count for the purposes of the limitations in this Section 2(a)(2) if
(i) the Investor determines in good faith to withdraw the proposed
registration prior to the effectiveness of the Registration Statement relating
to such request due to marketing conditions or regulatory reasons relating to
the Company (provided that this clause (i) shall cease to apply if the
Investor has previously withdrawn a proposed registration), (ii) the
Registration Statement relating to such request is not declared effective
within 180 days of the date such Registration Statement is first filed with the
Commission (other than by reason of the Investor having refused to proceed or
provide any required information for inclusion therein) and the Investor
withdraws the Registration Request prior to such Registration Statement being
declared effective, provided that this clause (ii) shall not apply to a
shelf Registration Statement on a Form S-3, and (iii) prior to the
sale of at least 85% of the Registrable Securities included in the applicable
registration relating to such request, such registration is adversely affected
by any stop order, injunction or other order or requirement of the Commission
or other governmental agency or court for any reason and the Company fails 

 

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to have such stop order,
injunction or other order or requirement removed, withdrawn or resolved to the
Investor’s reasonable satisfaction within thirty days of the date of such
order.

 

(3)                   Short-Form Registrations.  In no event shall the Company be obligated to
effect any registration other than pursuant to Form S-3 or any comparable
or successor form or forms or any similar short-form registration (“Short-Form Registration”)
unless it is not then eligible to utilize such form.

 

(4)                   Restrictions on Demand Registrations.  If the filing or initial effectiveness of a
registration statement with respect to a Demand Registration would require the
Company to make a public disclosure of material non-public information, which
disclosure in the good faith judgment of the Board of Directors (i) would
be required to be made in any Registration Statement so that such Registration
Statement would not be materially misleading, (ii) would not be required
to be made at such time but for the filing, effectiveness or continued use of
such Registration Statement, (iii) would reasonably be expected to
materially adversely affect the Company or its business if made at such time or
(iv) would reasonably be excepted to interfere with the Company’s ability
to effect a planned or proposed acquisition, disposition, financing,
reorganization, recapitalization or similar transaction, then the Company may
upon giving prompt written notice of such action to the participants in such
registration (each of whom hereby agrees to maintain the confidentiality of all
information disclosed to such participants) delay the filing or initial
effectiveness of, or suspend use of, such Registration Statement; provided,
that the Company shall not be permitted to do so (x) for more than
one-hundred twenty (120) days for a given occurrence of such a circumstance or (y) more
than three times during any 12-month period. 
In the event the Company exercises its rights under the preceding
sentence, the Investor agrees to suspend, promptly upon its receipt of the
notice referred to above, its use of any prospectus relating to such
registration in connection with any sale or offer to sell Registrable
Securities.  If the Company so postpones
the filing of a prospectus or the effectiveness of a Registration Statement,
the Investor will be entitled to withdraw such request and, if such request is
withdrawn, such registration request will not count for the purposes of the
limitation set forth in Section 2(a)(2). 
The Company will pay all Registration Expenses incurred in connection
with any such aborted registration or prospectus.

 

(5)                   Selection of Underwriters. 
If the Investor intends that the Registrable Securities covered by the
Registration Request shall be distributed by means of an underwritten offering,
the Investor will so advise the Company as a part of the Registration Request,
and the Company will include such information in the notice sent by the Company
to any known permitted transferees with respect to such Registration
Request.  In such event, the lead
underwriter to administer the offering will be chosen by the Company, subject
to the prior written consent of the Investor, not to be unreasonably withheld
or delayed.  If the offering is
underwritten, the right of the Investor to registration pursuant to this Section 2(a) will
be conditioned upon the Investor’s participation in such underwriting and the
inclusion of the Investor’s Registrable Securities in the underwriting, and the
Investor will (together with the Company) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting.  If the Investor
disapproves of the terms of the underwriting, the Investor may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter.

 

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(6)                   Priority on Demand Registrations.  The Company will not include in any
underwritten registration pursuant to this Section 2(a) any
securities that are not Registrable Securities, without the prior written
consent of the Investor.  If the managing
underwriters advise the Company that in their reasonable opinion the number of
Registrable Securities (and, if permitted hereunder, other securities requested
to be included in such offering) exceeds the number of securities that can be
sold in such offering without adversely affecting the marketability of the
offering (including an adverse effect on the per share offering price), the
Company will include in such offering only such number of securities that in
the reasonable opinion of such managing underwriters can be sold without
adversely affecting the marketability of the offering (including an adverse
effect on the per share offering price), which securities will be so included
in the following order of priority: (i) first, Registrable Securities of
the Investor, (ii) second, Registrable Securities of any permitted
transferee who has delivered written requests for registration pursuant to Section 2(a)(1),
pro rata on the basis of the aggregate number of Registrable Securities owned
by each such person, and (iii) third, any other securities of the Company
that have been requested to be so included, subject to the terms of this
Agreement.

 

(7)                   Effective Registration Statement.  A registration requested pursuant to Section 2(a)(1) shall
not be deemed to have been effected unless it is declared effective by the
Commission or is automatically effective upon filing pursuant to Rule 462
of the Securities Act and remains effective for the period specified in Section 2(a)(2).

 

(b)           Black-Out Periods.

 

(1)                   Notwithstanding
anything to the contrary in this Agreement, at any time after the filing of the
Registration Statement, the Company, by written notice to the Investor (a “Suspension
Notice”), may suspend sales of the Registrable Securities pursuant to a
Registration Statement for such times as the Company reasonably may determine
is necessary and advisable (but in no event for more than (x) an aggregate
of 90 days in any rolling 12-month period commencing on the date of this
Agreement or (y) more than 60 days in any rolling 90-day period), if any
of the following events shall occur:  (1) a
majority of the Board of Directors of the Company shall have determined in good
faith that (A) the offer or sale of any Registrable Securities would
materially impede, delay or interfere with any proposed financing, offer or
sale of securities, acquisition, merger, tender offer, business combination,
corporate reorganization or other significant transaction involving the Company
or (B) after the advice of counsel, the sale of Registrable Securities
pursuant to the Registration Statement would require disclosure of non-public
material information not otherwise required to be disclosed under applicable
law, and (C) (x) the Company has a bona fide business purpose for
preserving the confidentiality of the proposed transaction, (y) disclosure
would have a material adverse effect on the Company or the Company’s ability to
consummate the proposed transaction, or (z) the proposed transaction
renders the Company unable to comply with Commission requirements, in each case
under circumstances that would make it impractical or inadvisable to cause the
Registration Statement (or such filings) to become effective or to promptly
amend or supplement the Registration Statement on a post-effective basis, as
applicable; or (2) a majority of the Board of Directors of the Company
shall have determined in good faith, after the advice of counsel, that the Company
is required by law, rule or regulation or that it is in the best interests
of the Company to supplement the Registration Statement or file a
post-effective amendment to the Registration Statement in order to incorporate
information into the Registration Statement for the purpose of 

 

5

 

(A) including in the
Registration Statement any prospectus required under Section 10(a)(3) of
the Securities Act; (B) reflecting in the prospectus included in the
Registration Statement any facts or events arising after the effective date of
the Registration Statement (or of the most recent post-effective amendment)
that, individually or in the aggregate, represents a fundamental change in the
information set forth therein; or (C) including in the prospectus included
in the Registration Statement any material information with respect to the plan
of distribution not disclosed in the Registration Statement or any material
change to such information.  Any period
in which the use of the Registration Statement has been suspended in accordance
with this Section 2(b) is sometimes referred to herein as a “Blackout
Period.”  Upon the occurrence of any
such suspension, the Company shall use its commercially reasonable efforts to
cause the Registration Statement to become effective or to promptly amend or
supplement the Registration Statement on a post-effective basis or to take such
action as is necessary to make resumed use of the Registration Statement
compatible with the Investor’s best interests, as applicable, so as to permit
the Company to resume sales of the Registrable Securities as soon as possible.

 

(2)                   The
Investor shall not effect any sales of the Registrable Securities pursuant to
such Registration Statement (or such filings) at any time after they have
received a Suspension Notice from the Company and prior to receipt of an End of
Suspension Notice (as defined below).  If
so directed by the Company, the Investor will deliver to the Company all copies
(other than permanent file copies) then in the Investor’s possession of the
prospectus covering the Registrable Securities at the time of receipt of the
Suspension Notice.  The Company may
recommence effecting sales of the Registrable Securities pursuant to the
Registration Statement (or such filings) following further notice to such
effect (an “End of Suspension Notice”) from the Company, which End of
Suspension Notice shall be given by the Company to the Investor in the manner
described above promptly following the conclusion of any Suspension Event and
its effect.  Until the End of Suspension
Notice is so given to the Investor, the Company’s obligations under Section 3
to update or keep current the Registration Statement and the Company’s right to
sell Registrable Securities pursuant to the Registration Statement shall be
suspended, provided that such suspension shall not exceed the periods specified
in Section 2(b)(1) above.

 

(c)           Registration
Procedures.  Subject to Section 2(a)(4),
whenever the Investor of Registrable Securities have requested that any
Registrable Securities be registered pursuant to Section 2(a) or 2(c) of
this Agreement, the Company will use its reasonable best efforts to effect the
registration and sale of such Registrable Securities as soon as reasonably practicable
in accordance with the intended method of disposition thereof and pursuant
thereto.  The Company shall use its
reasonable efforts to as promptly as reasonably possible:

 

(1)                   prepare
and file with the Commission a Registration Statement with respect to such
Registrable Securities, make all required filings with the Financial Industry
Regulatory Authority and thereafter use its reasonable best efforts to cause
such Registration Statement to become effective as soon as reasonably
practicable and to remain effective as provided herein, provided that before
filing a Registration Statement or any amendments or supplements thereto, the
Company will, at the Company’s expense, furnish or otherwise make available to
the Holders’ Counsel (as defined below) copies of all such documents proposed
to be filed and such other documents reasonably requested by such counsel,
which documents will 

 

6

 

be subject to review and
comment of such counsel, including any comment letter from the Commission with
respect to such filing or the documents incorporated by reference therein,;

 

(2)                   prepare
and file with the Commission such amendments and supplements to such
Registration Statement as may be necessary to keep such Registration Statement
effective for a period of either (A) not less than (i) six months, (ii) if
such Registration Statement relates to an underwritten offering, such longer
period as, based upon the opinion of counsel for the underwriters, a prospectus
is required by law to be delivered in connection with sales of Registrable
Securities by an underwriter or dealer or (iii) continuously in the case
of shelf registration statements and any shelf registration statement shall be
filed upon its expiration (or in each case such shorter period ending on the
date that the securities covered by such shelf registration statement cease to
constitute Registrable Securities) or (B) such shorter period as will
terminate when all of the securities covered by such Registration Statement
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such Registration Statement (but in
any event not before the expiration of any longer period required 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 until such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such Registration Statement, and cause the related
prospectus to be supplemented by any prospectus supplement as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of the securities covered by such Registration Statement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act;

 

(3)                   furnish
to each seller of Registrable Securities, and each managing underwriter, if
any, such number of copies, without charge, of such Registration Statement,
each amendment and supplement thereto, including each preliminary prospectus,
final prospectus, any other prospectus (including any prospectus filed under Rule 424,
Rule 430A or Rule 430B under the Securities Act and any “issuer free
writing prospectus” as such term is defined under Rule 433 promulgated
under the Securities Act), all exhibits and other documents filed therewith and
such other documents as such seller or such managing underwriter may reasonably
request including in order to facilitate the disposition of the Registrable
Securities owned by such seller, and upon request a copy of any and all
transmittal letters or other correspondence to or received from, the Commission
or any other Governmental Entity relating to such offer;

 

(4)                   register
or qualify (or exempt from registration or qualification) such Registrable
Securities, and keep such registration or qualification (or exemption
therefrom) effective, under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things that may be reasonably necessary or reasonably advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subsection, (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);

 

(5)                   notify
each seller of such Registrable Securities, the holders’ counsel and the
managing underwriter(s), if any, at any time when a prospectus relating thereto
is 

 

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required to be delivered under
the Securities Act, upon discovery that, or upon the discovery of the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in such Registration Statement, prospectus or documents and, as
soon as reasonably practicable (but subject to the delay provisions of Section 2(a)(4)),
prepare and furnish to such seller a reasonable number of copies of a
supplement or amendment to such prospectus so that, in the case of the
Registration Statement, it will not contain any untrue statement of 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 any prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statement
therein, in light of the circumstances in which they were made, not misleading;

 

(6)                   notify
each seller of any Registrable Securities covered by such Registration
Statement, the Holders’ Counsel and the managing underwriter(s), if any, (i) when
such Registration Statement or the prospectus or any prospectus supplement or
post-effective amendment has been filed and, with respect to such Registration
Statement or any post-effective amendment, when the same has become effective, (ii) of
any request by the Commission for amendments or supplements to such
Registration Statement or to amend or to supplement such prospectus or for
additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of such Registration Statement or the
initiation of any proceedings for any of such purposes, (iv) if at any
time the representations and warranties of the Company contained in any
underwriting agreement contemplated by Section 2(d)(11) below cease to be
true and correct, and (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;

 

(7)                   upon
the occurrence of an event contemplated in Section 2(d)(5) or in Section
2(d)(6)(ii), (d)(6)(iii), (d)(6)(iv) or (d)(6)(v) (but subject to the delay
provisions of Section 2(a)(4)), prepare a supplement or amendment to the
Registration Statement or supplement to the related prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that such prospectus as thereafter delivered to the
sellers of such Registrable Securities will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made;

 

(8)                   cause
all such Registrable Securities to be listed on each securities exchange, if
any, on which similar securities issued by the Company are then listed;

 

(9)                   provide
a transfer agent and registrar for all such Registrable Securities not later
than the effective date of such Registration Statement;

 

(10)                 enter
into such customary agreements (including underwriting agreements and lock-up
agreements in customary form, and including provisions with respect to
indemnification and contribution in customary form) and take all such other
customary actions as the Investor or the underwriters, if any, reasonably
request in order to expedite or facilitate the 

 

8

 

disposition of such Registrable
Securities (including, making members of management and executives of the
Company available to participate in “road show,” similar sales events and other
marketing activities; provided that the Company shall not be required to make
members of management and executives of the Company so available for more than
five consecutive days or more than 10 days in any 365-day period);

 

(11)                 in
connection with any underwritten offering, make such representations and warranties
to the sellers and the managing underwriter(s), if any, with respect to the
business of the Company and the Company Subsidiaries, and the Registration
Statement, prospectus, and documents incorporated or deemed to be incorporated
by reference therein, in each case, in form, substance and scope as are
customarily made by the issuer in underwritten offerings, and, if true, make
customary confirmations of the same if and when requested;

 

(12)                 if
requested by any seller of Registrable Securities, or the managing
underwriter(s), if any, promptly include in a prospectus supplement or
amendment such information as the seller or managing underwriter(s), if any,
may reasonably request in order to permit the intended method of distribution
of such securities and make all required filings of such prospectus supplement
or such amendment as soon as practicable after the Company has received such
request;

 

(13)                 in
the case of certificated Registrable Securities, cooperate with the sellers of
such Registrable Securities and the managing underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
legends) representing Registrable Securities to be sold after receiving written
representations from each seller that that the Registrable Securities
represented by the certificates so delivered by such seller will be transferred
in accordance with the Registration Statement, and enable such Registrable
Securities to be in such denominations and registered in such names as the sellers
or managing underwriters, if any, may request prior to any sale of Registrable
Securities;

 

(14)                 make
available for inspection by any seller of Registrable Securities and the
holders’ counsel, any underwriter participating in any disposition pursuant to
such Registration Statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and documents relating to the business of the
Company, and cause the Company’s officers, directors, employees and independent
accountants to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such Registration
Statement, provided that it shall be a condition to such inspection and receipt
of such information that the inspecting person (i) enter into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company and (ii) agree to minimize the disruption to the Company’s
business in connection with the foregoing;

 

(15)                 otherwise
use its reasonable best efforts to comply with all applicable rules and
regulations of the Commission and any applicable national securities exchange;

 

(16)                 timely
provide to its security holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;

 

9

 

(17)                 in
the event of the issuance of any stop order suspending the effectiveness of a
Registration Statement, or of any order suspending or preventing the use of any
related prospectus or ceasing trading of any securities included in such
Registration Statement for sale in any jurisdiction, use every reasonable
effort to promptly obtain the withdrawal of such order;

 

(18)                 obtain
one or more comfort letters, addressed to the underwriters, if any, dated the
effective date of such Registration Statement and the date of the closing under
the underwriting agreement for such offering, signed by the Company’s independent
public accountants (and if necessary, any other independent certified public
accountants of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement) in customary form and covering such matters of the type
customarily covered by comfort letters as such underwriters shall reasonably
request;

 

(19)                 provide
legal opinions of the Company’s counsel, addressed to the underwriters, if any,
dated the date of the closing under the underwriting agreement, with respect to
the Registration Statement, each amendment and supplement thereto (including
the preliminary prospectus) and such other documents relating thereto as the
underwriter shall reasonably request in customary form and covering such
matters of the type customarily covered by legal opinions of such nature; and

 

(20)                 obtain
any required regulatory approval necessary for the Investor to sell its
Registrable Securities in an offering.

 

(d)           Registration
Expenses.

 

(1)                   Except
as otherwise provided in this Agreement, all expenses incidental to the Company’s
performance of or compliance with this Section 2, including all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws, word processing, duplicating and printing expenses,
messenger, telephone and delivery expenses, expenses incurred in connection
with any road show, and fees and disbursements of counsel for the Company and
all independent certified public accountants and other persons retained by the
Company (all such expenses, “Registration Expenses”), will be borne by
the Company.  The holders of the
securities so registered shall pay all underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Securities
hereunder and any other Registration Expenses required by law to be paid by a
selling holder pro rata on the basis of the amount of proceeds from the sale of
their shares so registered.

 

(2)                   In
connection with each Demand Registration, the Company will reimburse holder’s
counsel for their reasonable fees and disbursements.

 

(e)           Participation in
Underwritten Registrations.

 

(1)                   The
Investor may not participate in any registration hereunder that is underwritten
unless the Investor (i) agrees to sell its Registrable Securities on the
basis provided in the underwriting arrangements in customary form entered into
pursuant to this Agreement (including pursuant to the terms of any
over-allotment or “green shoe” option requested by the managing underwriter(s),
provided that no such person will be required to sell more than the 

 

10

 

number of Registrable
Securities that such person has requested the Company to include in any
registration), (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, provided that such
person shall not be required to make any representations or warranties other
than those related to title and ownership of shares and as to the accuracy and
completeness of statements made in a Registration Statement, prospectus,
offering circular, or other document in reliance upon and in conformity with
written information furnished to the Company or the managing underwriter(s) by
such person, and (iii) cooperates with the Company’s reasonable requests
in connection with such registration or qualification (it being understood that
the Company’s failure to perform its obligations hereunder, which failure is
caused by such person’s failure to cooperate with such reasonable requests,
will not constitute a breach by the Company of this Agreement).  Notwithstanding any other provision of this Section 2(e)(1),
if the managing underwriter(s) advise the Company that marketing factors
require a limitation on the number of securities to be underwritten (including
Registrable Securities), then the Company shall so advise the Investor, and the
number of shares that may be included in the underwritten registration shall be
reduced accordingly.  Any Registrable
Securities excluded or withdrawn from such underwritten registration shall be
withdrawn from the registration. 
Notwithstanding the foregoing, the liability of the Investor
participating in such an underwritten registration shall be limited to an
amount equal to the amount of gross proceeds attributable to the sale of the
Investor’s Registrable Securities.

 

(2)                   Each
person that is participating in any registration hereunder agrees that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 2 (d)(5) and (d)(6), such person will
forthwith discontinue the disposition of its Registrable Securities pursuant to
the Registration Statement until such person receives copies of a supplemented
or amended prospectus as contemplated by such Section 2(d)(5), (d)(6) and
(d)(7).  In the event the Company gives
any such notice, the applicable time period mentioned in Section 2(d)(2) during
which a Registration Statement is to remain effective will be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to this Section 2(f)(2) to and including the
date when each seller of a Registrable Security covered by such Registration
Statement will have received the copies of the supplemented or amended
prospectus contemplated by Section 2(d)(5), (d)(6) and (d)(7).

 

(f)            Termination of
Registration Rights.  The Investor’s
registration rights as to any securities held by such Holder (and its
Affiliates, partners, members and former members) shall not be available unless
such securities are Registrable Securities.

 

(g)           Furnishing
Information.

 

(1)                   The
Investor shall not use any free writing prospectus (as defined in Rule 405)
in connection with the sale of Registrable Securities without the prior written
consent of the Company.

 

(2)                   It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to Section 2(a), (c) and (d) that the Investor
and the underwriters, if any, shall furnish to the Company such information
regarding themselves, the Registrable Securities 

 

11

 

held by them and the intended
method of disposition of such securities as shall be required to effect the
registered offering of their Registrable Securities.

 

(h)           Indemnification.

 

(1)                   The
Company agrees to indemnify the Investor, and its respective officers,
directors, employees, agents, representatives and Affiliates, and each Person,
if any, that controls it within the meaning of the Securities Act and the rules and
regulations promulgated thereunder (each, an “Indemnitee”), against any
and all losses, claims, damages, actions, liabilities, costs and expenses
(including without limitation reasonable fees, expenses and disbursements of
attorneys and other professionals incurred in connection with investigating,
defending, settling, compromising or paying any such losses, claims, damages,
actions, liabilities, costs and expenses), joint or several, arising out of or
based upon any untrue statement or alleged untrue statement of material fact
contained in any registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto
or any documents incorporated therein by reference or contained in any free
writing prospectus (as such term is defined in Rule 405) prepared by the
Company or authorized by it in writing for use by such Investor (or any
amendment or supplement thereto); or any omission to state therein 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; provided,
that the Company shall not be liable to such Indemnitee in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon (i) an untrue
statement or omission made in such registration statement, including any such
preliminary prospectus or final prospectus contained therein or any such
amendments or supplements thereto or contained in any free writing prospectus
(as such term is defined in Rule 405) prepared by the Company or
authorized by it in writing for use by the Investor (or any amendment or
supplement thereto), in reliance upon and in conformity with information
furnished expressly for use in connection with such registration by any
Indemnitee and provided  further, that the foregoing
indemnification agreement with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnitee, from whom the person asserting any such
losses, claims, damages or liabilities purchased shares in the offering, if
sufficient copies of the prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) were
provided to the Investor by the Company but were not sent or given by or on
behalf of the Investor or underwriter or other aforementioned person to such
person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the shares to such person, and if the
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability, or (ii) offers or sales
effected by or on behalf such Indemnitee “by means of” (as defined in Rule 159A)
a “free writing prospectus” (as defined in Rule 405) that was not
authorized in writing by the Company.

 

(2)                   If
the indemnification provided for in Section 2(i)(1) is unavailable to
an Indemnitee with respect to any losses, claims, damages, actions,
liabilities, costs or expenses referred to therein or is insufficient to hold
the Indemnitee harmless as contemplated therein, then the Company, in lieu of
indemnifying such Indemnitee, shall contribute to the amount paid or payable by
such Indemnitee as a result of such losses, claims, damages, actions,
liabilities, costs or expenses in such proportion as is appropriate to reflect
the relative fault of the 

 

12

 

Indemnitee, on the one hand,
and the Company, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, actions, liabilities,
costs or expenses as well as any other relevant equitable considerations.  The relative fault of the Company, on the one
hand, and of the Indemnitee, on the other hand, shall be determined by
reference to, among other factors, whether the untrue statement of a material
fact or omission to state a material fact relates to information supplied by
the Company or by the Indemnitee and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission; the Company and each holder agree that it would not be just and
equitable if contribution pursuant to this Section 2(i)(2) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in Section 2(i)(1).  No Indemnitee guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from the Company if the
Company was not guilty of such fraudulent misrepresentation.

 

(i)            Rule 144
Reporting.  With a view to making
available to the Investor the benefits of certain rules and regulations of
the Commission which may permit the sale of the Registrable Securities to the
public without registration, the Company agrees to use its reasonable best
efforts to:

 

(1)                   make
and keep public information available, as those terms are understood and
defined in Rule 144(c)(1) or any similar or analogous rule promulgated
under the Securities Act, at all times after the effective date of this
Agreement;

 

(2)                   file
with the Commission, in a timely manner, all reports and other documents
required of the Company under the Exchange Act; and

 

(3)                   so
long as the Investor owns any Registrable Securities, furnish to the Investor
forthwith upon request: a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 under the Securities Act, and
of the Exchange Act; a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as such the Investor may
reasonably request in availing itself of any rule or regulation of the
Commission allowing it to sell any such securities without registration.

 

(j)            As used in this Section 2,
the following terms shall have the following respective meanings:

 

(1)                   “holders’
counsel” means one counsel for the selling Investor chosen by the Investor
holding a majority interest in the Registrable Securities being registered.

 

(2)                   “Rule 144”,
“Rule 159A”, “Rule 405” and “Rule 415”
mean, in each case, such rule promulgated under the Securities Act (or any
successor provision), as the same shall be amended from time to time.

 

3.             Miscellaneous.

 

(a)           Notices.  All notices and other communications pursuant
to this Agreement shall be delivered or sent in accordance with Section 7.4
of the Purchase Agreement.

 

13

 

(b)           Assignment.  The right to have the Company register Registrable
Securities pursuant to this Agreement may be assigned or transferred only with
the prior written consent of the Company (such consent not to be unreasonably
withheld, conditioned or delayed), and any such assignment or transfer without
such consent shall be void and of no effect. 
In the event of any such permitted assignment or transfer by the
Investor to any permitted transferee of all or any portion of such Registrable
Securities, such transfer will be allowed only if: (a) the Investor agrees
in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the Registrable Securities
with respect to which such registration rights are being transferred or
assigned, (c) immediately following such transfer or assignment, the
Registrable Securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities, (d) at or before the time the Company
received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by
all of the provisions contained herein, and (e) the Company is furnished
with an opinion of counsel, which counsel and opinion shall be satisfactory to
the Company, to the effect that the permitted assignment would be in compliance
with the Securities Act and any applicable state or other securities laws.  For the purposes of this Agreement, (i) any
reference to Investor herein shall include a permitted transferee or a
permitted assignee of the registration rights hereunder and (ii) any Registrable
Securities held by the Investor and a permitted transferee or a permitted
assignee shall be aggregated for the purposes of any calculation under this
Agreement.

 

(c)           Amendment and Waiver.  This Agreement may not be amended except by
an instrument in writing signed by the Company and by the Investor.  Any waiver, pursuant to this Subsection 3(c),
of a breach of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.

 

(d)           Governing Law;
Headings.  This agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to conflict of law provisions of such state.  The headings in this Agreement are for
convenience only and shall not affect the construction hereof.

 

(e)           Severability.  In the event that any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

 

(f)            Entire Agreement.  This Agreement is intended by the
parties as a final expression of their agreement and 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 and therein.  This Agreement and the Purchase Agreement
supersede all prior agreements and understandings between the parties with
respect to the subject matter contained herein and therein.

 

(g)           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.

 

14

 

[Remainder of page intentionally
left blank]

 

15

 

IN
WITNESS WHEREOF, the Company and the Investor have executed
this Agreement as of the date first above written.

 

	
   

  	
  AVP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Leonard Armato

  
	
   

  	
   

  	
  Name:

  	
  Leonard
  Armato

  
	
   

  	
   

  	
  Title:

  	
  CEO,
  Chairman, and Commissioner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RJSM
  PARTNERS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Lewin

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

16Exhibit 10.4

 

AVP, Inc.

6100 Center Drive, 9th Floor

Los Angeles, California  90045

 

September 8, 2008

 

RJSM Partners, LLC

660 Madison Avenue

17th Floor

New York, New York  10065

 

Re:  Side Letter

 

To RJSM Partners, LLC:

 

In reference
to your purchase of 50,000 shares of Series B Convertible Preferred Stock
pursuant to the Subscription Agreement between you and AVP, Inc. (the “Company”)
on the date hereof, the Company hereby agrees that, after the date hereof but
prior to the conversion of the Series B Convertible Preferred Stock into
shares of common stock of the Company, the Company will not designate any
additional authorized but unissued preferred stock as Series B Preferred
Stock without the prior written consent of a majority of the holders of the
then outstanding shares of Series B Preferred Stock.

 

As of the date
hereof, the Company represents and warrants that there are 94,944 shares of Series B
Convertible Preferred Stock currently authorized.  Immediately following the closing of the sale
and your purchase of the Series B Convertible Preferred Stock (the “Initial
Closing”), there will be 44,944 shares of Series B Convertible
Preferred Stock issued to third parties and 50,000 shares of Series B
Convertible Preferred Stock issued to RJSM Partners, LLC.  Effective upon the Initial Closing, no other
shares of Series B Convertible Preferred Stock shall be issued without the
prior written consent of the majority of the Series B Convertible
Preferred Stock holders.

 

This letter
agreement should be governed by and construed in accordance with the laws of
the State of Delaware without regard to conflict of law provisions of such
state.

 

[SIGNATURE PAGE FOLLOWS]

 

 

	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
  AVP, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Leonard Armato

  
	
   

  	
   

  	
   

  	
  Name: Leonard Armato

  
	
   

  	
   

  	
   

  	
  Title: CEO, Chairman, and 

  Commissioner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  RJSM Partners, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Nicholas Lewin

  	
   

  	
   

  
	
   

  	
  Name: Nicholas Lewin

  	
   

  	
   

  
	
   

  	
  Title: Managing Member

  	
   

  	
   

  

 

 

Side Letter Signature Page

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