Exhibit 4.1.1
NUMATICS, INCORPORATED
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
Up to 50,000 Shares of Series A Preferred Stock
$0.01 Par Value Per Share
Warrants for the Purchase of
Shares of Class A Common Stock
$0.01 Par Value Per Share
December 26, 2002
To the Purchaser (the "Purchaser")
named on the signature page to
this Agreement:
Dear Sirs:
The undersigned, NUMATICS, INCORPORATED, a Michigan corporation (the
"Company"), proposes to issue and sell to the Purchaser, for an aggregate
purchase price not to exceed $50,000,000, (i) an aggregate of up to 50,000
shares (the "Shares") of its Series A Preferred Stock, par value $0.01 per share
("Preferred Stock"), and (ii) Warrants (the "Warrants"), in a number to be
determined as provided in this Agreement, for the purchase of shares of its
Class A Common Stock, par value $0.01 per share ("Common Stock").
The cash proceeds of the issuance and sale of Shares and Warrants shall
be used by the Company solely to fund repurchases by the Company of certain of
its outstanding Senior Subordinated Notes (as hereinafter defined), for an
aggregate purchase price not to exceed on average $550 per $1,000 principal
amount of Senior Subordinated Notes repurchased.
The Shares and Warrants will be issued and sold to the Purchaser
pursuant and subject to the terms and conditions of this Agreement.
Section 1. Definitions.
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Agreement" shall mean this Agreement and the Exhibits and
Schedules hereto individually and collectively as they may from time to
time be modified or amended.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which commercial banks in New York City are authorized
or required by law to close.
"Certificate of Designations" shall mean the Certificate of
Designations of the Company in the form attached as Exhibit A hereto.
"Closing" shall mean the closing of the purchase and sale of
Shares and Warrants pursuant to the terms and conditions of this
Agreement.
"Closing Date" shall mean the date of the Closing.
"Common Stock" shall mean the Company's authorized Class A
Common Stock , par value $0.01 per share, as constituted on the Closing
Date, and any stock into which such Class A Common Stock may thereafter
be converted or changed.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Company Material Adverse Effect" shall mean any event,
circumstance, occurrence, fact, condition, change or effect (other than
of a general economic, business or political nature) that is materially
adverse (i) to the business, operations, condition (financial or
otherwise), properties, assets or prospects of the Company, or (ii) to
the ability of the Company to perform its obligations hereunder or
under the other Transaction Documents.
"Consent" shall mean any consent, approval, authorization,
waiver, permit, grant, franchise, concession, agreement, license,
exemption or order of, registration, certificate, declaration or filing
with, or report or notice to, any Person, including any Governmental
Authority.
"control" of any Person means the possession, directly or
indirectly, of power (a) to direct or cause the direction of the
management and policies of such Person, whether by voting power, by
contract or otherwise, or (b) in the case of a corporation, to vote
more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power for the election of directors of such
corporation.
"Escrow Agent" shall mean Deutsche Bank Trust Company
Americas.
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"Escrow Agreement" shall mean the Escrow Agreement to be
entered into among the Company, the Purchaser, and the Escrow Agent,
substantially in the form of Exhibit B hereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Fully-Diluted Basis" shall mean, at any time, after giving
effect to the then outstanding Common Stock plus (without duplication)
all shares of Common Stock issuable, whether at such time, upon the
passage of time or the occurrence of future events, upon the exercise,
conversion or exchange of all then outstanding rights, warrants
(including the Warrants), options, convertible securities or
indebtedness, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock and securities convertible or exchangeable
into Common Stock.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" shall mean any mortgage, pledge, hypothecation,
security interest, lien, charge or other encumbrance.
"Liquidation Value" shall have the meaning provided in the
Certificate of Designations.
"Person" or "person" shall mean any natural person, company,
corporation, association, partnership, organization, business, firm,
joint venture, trust, unincorporated organization or any other entity
or organization, and shall include any Governmental Authority.
"Purchaser Material Adverse Effect" shall mean any event,
circumstance, occurrence, fact, condition, change or effect (other than
of a general economic, business or political nature) that is materially
adverse (i) to the business, operations, financial condition,
properties or assets of the Purchaser taken as a whole, or (ii) to the
ability of the Purchaser to perform its obligations hereunder or under
the other Transaction Documents.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section
4.10.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
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"Senior Subordinated Notes" shall mean the Company's
outstanding 9-5/8 Senior Subordinated Notes due 2008, issued in the
original principal amount of $115,000,000.
"Shares" shall have the meaning set forth in the first
paragraph hereof.
"Subsidiary" shall mean, with respect to any Person, any
corporation or other entity that is directly or indirectly (through one
or more intermediaries) controlled by, or with respect to which 50% or
more of the stock or other equity interests having ordinary voting
power to elect the board of directors (or other similar governing body)
is owned by, such Person.
"Transaction Documents" shall mean this Agreement, the
Warrants, the Escrow Agreement, the Certificate of Designations, and
any schedule, annex, exhibit, agreement, instrument or certificate
attached to, or furnished pursuant to or in connection with, this
Agreement, the Warrants, the Escrow Agreement or the Certificate of
Designations.
"Warrant Shares" shall mean shares of Common Stock issued or
issuable upon exercise of Warrants.
(b) Other Definitional Provisions. The words "hereof",
"herein", and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Terms defined in the singular shall have a comparable meaning when used in the
plural and vice versa. Whenever a representation or warranty made by a Person
herein refers to the knowledge of such Person, such knowledge shall be deemed to
consist of the actual knowledge of such Person and/or the knowledge which would
have been present after reasonable due inquiry by such Person.
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Section 2. Purchase and Sale of Shares and Warrants.
2.1 Purchase and Sale. Subject to the terms and conditions of
this Agreement, the Company agrees to issue and sell to the Purchaser,
and the Purchaser agrees to purchase from the Company, on the Closing
Date as provided in Section 2.4 below, at a price of $1,000.00 per
Share and $0.001 per Warrant, the numbers of Shares of Preferred Stock,
and Warrants for the number of shares of Common Stock, determined as
set forth in Section 2.2 below. The Preferred Stock shall be issued
pursuant to the Certificate of Designations, substantially in the form
of Exhibit A hereto, which shall be in effect on the Closing Date. The
Warrants shall be issued substantially in the form of Exhibit C hereto,
with all blanks filled in in conformity with the terms of this
Agreement.
2.2 Determination of Shares and Warrants to be Purchased, and
Exercise Price of Warrants.
(a) The number of Shares to be issued and sold to the
Purchaser shall be determined by taking the aggregate amount to be
disbursed on the Closing Date by the Escrow Agent pursuant to the
Escrow Agreement (rounded to the nearest $1,000), to fund the Company's
purchase or redemption of Senior Subordinated Notes on the Closing
Date, and dividing such amount by $1,000. Notwithstanding the foregoing
or any other provision in this Agreement to contrary, in no event shall
the Company be required to issue and sell to the Purchaser, or the
Purchaser be required to purchase from the Company, more than 50,000
Shares of Preferred Stock. In connection with the Company's repurchase
or redemption of Senior Subordinated Notes the Company shall, subject
to Section 8.2 hereof, fund the payment of all accrued unpaid interest
on such Senior Subordinated Notes, and the funds advanced by the
Purchaser shall be used solely to pay the portion of the repurchase or
redemption price allocable to the principal of such Senior Subordinated
Notes.
(b) The Warrants to be issued to the Purchaser shall be for a
total number of shares of Common Stock that (on a Fully-Diluted Basis)
would be equal to forty-five percent (45%) of the total outstanding
number of shares of Common Stock on the date of issuance (on a
Fully-Diluted Basis).
(c) The Warrant Purchase Price (as defined in the Warrants)
for which the Warrants are exercisable shall initially be $0.01 per
share of Common Stock.
2.3 Payment of Purchase Price for Shares and Warrants. Upon
satisfaction of the condition set forth in Section 6.8, the Escrow
Agreement shall be executed and delivered by each party thereto. If the
Escrow Agreement has been executed on or before January 28, 2003, then
on January 29, 2003 (or, if the Closing Date is extended beyond January
31, 2003, then at least two (2) Business Days prior to the Closing
Date), the Purchaser shall deposit in cash with the Escrow Agent, to be
held in escrow pending the Closing and disbursed pursuant to the Escrow
Agreement, the aggregate amount required
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to fund the Company's purchase or redemption of Senior Subordinated
Notes on the Closing Date, but in any event not in excess of
$50,000,000. Such deposit shall be made by wire transfer of immediately
available funds to such account s the Escrow Agent may indicate in
writing to the parties.
2.4 Closing.
(a) Closing Date; Termination. The closing shall take place on
January 31, 2003, or on such other date as the Company and the
Purchaser may mutually agree in writing. In the event that the Closing
does not occur on or before February 14, 2003, this Agreement shall
terminate, and the funds deposited pursuant to the Escrow Agreement by
the Purchaser, plus all interest accrued thereon, shall be returned by
the Escrow Agent to the Purchaser.
(b) Advances by Purchaser; Conversion into Shares and
Warrants. At the Closing, the Company and the Purchaser shall (subject
to the terms and conditions of this Agreement and the Escrow Agreement)
instruct the Escrow Agent to disburse to holders of the Senior
Subordinated Notes the cash purchase prices agreed upon by the Company
with such holders for the repurchases by the Company of their Senior
Subordinated Notes. Such disbursements shall be treated as advances by
the Purchaser to the Company pending the completion of all such
repurchases by the Company of Senior Subordinated Notes. Upon
completion of such repurchases of Senior Subordinated Notes on the
Closing Date, the aggregate principal amount of such advances by the
Purchaser to the Company shall be deemed automatically converted into
Shares of Preferred Stock, at the rate of one Share per $1,000
principal amount advanced, and the number of Warrants provided for in
Section 2.2(b) above.
2.5 Issue Price of Shares; No Discount; No Usury. Having
considered all facts relevant to a determination of the value of the
Shares and the Warrants being acquired by the Purchaser, including
among other things the nature of the Company's capitalization, business
and prospects, the Company and the Purchaser have concluded and do
hereby agree that the value of the Shares is $1,000.00 per Share, based
on yields of comparable instruments of comparable issuers. Accordingly,
the Company and the Purchaser agree that for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Regulations
thereunder, and for purposes of determining any discount with respect
to the Shares thereunder, the "issue price" of the Shares is $1,000.00
per Share. The Company and the Purchaser further agree that the Shares
shall for all purposes be treated as preferred stock, not indebtedness
of the Company; provided, however, that should the Shares or the
Warrant Securities (as defined in Section 2.6(a) below) be deemed to
represent indebtedness of the Company by any Governmental Authority or
in any judicial proceeding, the Company hereby agrees to the terms of
the Shares as set forth in the Certificate of Designations and the
terms of the Warrants as set forth herein and therein, and acknowledges
and agrees that any claim or defense of usury with respect to the terms
of the Shares or the Warrants to be sold to the Purchaser under this
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Agreement is prohibited pursuant to Section 275 of the Michigan Business
Corporation Act. Neither the Company nor the Purchaser shall take a position on
any income tax return, before any Governmental Authority charged with the
collection of any income tax or in any judicial proceeding that is inconsistent
with the terms of this Section 2.5.
2.6 Company's Incentive Repurchases of Warrants and Warrant Shares.
(a) Company's Call Upon Exit Event. Upon the occurrence of any Exit Event
the Purchaser shall assign and transfer to the Company that number of Warrants
and Warrant Shares (hereinafter collectively referred to as "Warrant
Securities") equal to the excess (if any) of (i) the total number of Warrant
Securities originally issued to the Purchaser on the Closing Date, over (ii) the
number of Warrant Securities which, if sold or exchanged by the Purchaser as a
result of such Exit Event (to the maximum extent permitted by the terms and
conditions thereof), would result in the Purchaser receiving cash or cash
equivalents that, when taken together with all previous dividends, distributions
or other payments from the Company on the Shares and Warrant Securities, and all
previous redemptions, sales or other dispositions of the Purchaser's Shares and
Warrant Securities, would result in the Purchaser achieving the greater of (A)
an Internal Rate of Return of at least forty percent (40%) on its cash
investments in Shares and Warrant Securities, or (B) the sum equal to 1.30
multiplied by the Purchaser's total cash investments in Shares and Warrant
Securities. The Company shall pay the Purchaser, in cash, for all Warrant
Securities which are reacquired by it under this Section 2.6(a), $0.001 per
Warrant or Warrant Share plus, in the case of Warrant Shares, the Warrant
Purchase Price paid upon exercise of Warrants to acquire such Warrant Shares.
Notwithstanding the foregoing, in no event shall the Purchaser be obligated or
required to assign or transfer to the Company any of the Shares purchased by
Purchaser hereunder.
(b) Purchaser's Put Upon Exit Event. Upon the occurrence of any Exit
Event, the Purchaser shall have the right and option (the "Put Option") to sell
to the Company all (but not less than all) of the Warrant Securities owned by
the Purchaser (to the extent not required to be transferred to the Company
pursuant to Section 2.6(a) above). The purchase price for all of the Warrant
Securities shall be the amount which, when taken together with all previous
dividends, distributions or other payments from the Company on the Shares and
Warrant Securities, and all previous redemptions, sales or other dispositions of
the Purchaser's Shares and Warrant Securities, would result in the Purchaser
achieving the greater of (i) an Internal Rate of Return of forty percent (40%)
on its cash investments in Shares and Warrant Securities, or (ii) the sum equal
to 1.30 multiplied by the Purchaser's total cash investments in Shares and
Warrant Securities. The Purchaser may exercise the Put Option by giving the
Company written notice of exercise at any time after receiving the notice
provided for in Section 2.6(d) below and not later than 3 days prior to the
scheduled date of the Exit Event. At the closing of the Put Option transaction,
which shall occur on the date of the Exit Event, (A) the Purchaser shall deliver
to the Company certificates for the Warrant Securities to be sold by it, which
certificates shall be duly endorsed in blank, in proper form for transfer, and
shall transfer
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good and valid title to all of such Warrant Securities, subject to no liens,
encumbrances, pledges, charges, security interests, rights, options or other
adverse interests of any kind, and (B) the Company shall deliver the purchase
price for the Warrant Securities to the Purchaser, by wire of immediately
available funds to any account specified in writing by the Purchaser to the
Company. Upon payment of the purchase price therefor, Warrant Securities so
repurchased shall be deemed cancelled and shall no longer have any validity
whatsoever.
(c) Certain Definitions. For purposes of this Agreement:
(i) "Exit Event" shall mean:
(A) any sale or other disposition of all or substantially all of
the assets of the Company, upon liquidation of the Company or otherwise;
(B) any merger or consolidation of the Company that results in an
exchange of a majority of the Common Stock of the Company for cash, cash
equivalents or other securities or property;
(C) any public offering of equity securities of the Company;
(D) any recapitalization, reorganization or other transaction or
event that results in a change in control of the Company; or
(E) a change in control of the Company where such change is the
result of the death or termination of employment of ▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇▇▇");
provided that, in any such event or transaction (other than a change in
ownership described in (E) above) either the Company receives consideration in
the form of cash or cash equivalents and promptly thereafter distributes all or
substantially all of such consideration to its stockholders, or the Purchaser is
required or permitted to sell or dispose of Warrant Securities in exchange for
cash or cash equivalents.
(ii) "Internal Rate of Return" means the annual rate which if used to
discount to present value the payments in cash or cash equivalents made or
received by the Purchaser, during the period from the date of calculation back
to the effective date of each investment made by the Purchaser in Shares and
Warrant Securities, would cause the net present value (on such effective date)
of such payments to equal zero (0). In calculating an Internal Rate of Return on
such investments in the Company:
(A) each dividend, distribution, amount paid in redemption or
repurchase or other payment received in cash or cash equivalents by the
Purchaser attributable to such Shares and Warrant Securities, and any
interest payable pursuant to the Escrow Agreement, shall be treated as a
cash inflow with a
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positive value, and each cash disbursement made by the Purchaser directly
attributable to such Shares and Warrant Securities shall be treated as a
cash outflow with a negative value;
(B) each such payment or disbursement shall be discounted from
the date actually made to the effective date of the Purchaser's investment
in Shares and Warrant Securities;
(C) the Internal Rate of Return realized on its investment by the
Purchaser shall be based upon its payment for the purchase of Shares and
Warrant Securities and other capital contributions made by it to the
Company, disregarding any payments made to other stockholders for the
acquisition of securities from them;
(D) indemnity payments, financing fees and payments in
reimbursement of the Purchaser's out-of-pocket expenses shall be
disregarded; and
(E) the "effective date" of the Purchaser's investment in the
Shares shall be deemed to be the date that the Purchaser deposits funds
with the Escrow Agent pursuant to Section 2.3 above.
(d) Notice and Payment. The Company shall give the Purchaser, at its
address as the same appears in the records of the Company, at least ten (10)
Business Days' but not more than thirty (30) days' prior written notice of any
Exit Event which triggers a required or permitted transfer pursuant to Section
2.6(a) or (b), specifying the effective date of the Exit Event. On or prior to
the date so specified in the Company's notice, the Company shall pay to the
Purchaser, at its address as the same appears in the records of the Company, in
immediately available funds, an amount equal to the aggregate price for the
Warrant Securities being reacquired from the Purchaser.
(e) Obligation Binding on Transferees. The Purchaser's obligation under
Section 2.6(a) to transfer and deliver Warrant Securities for cancellation shall
be binding upon its transferees or assignees of Warrant Securities.
(f) Cancellation or Reissuance of Certificates. Upon the timely receipt of
the repurchase price for Warrant Securities sold to the Company pursuant to
Section 2.6(a) or (b), the holder shall forward the Warrant Securities to the
Company. To the extent that less than all the holder's Warrant Securities are so
sold, the Company shall forthwith issue and deliver to such holder certificates
representing outstanding Warrants or Warrant Shares which the Company has not
repurchased. Upon timely payment of the repurchase price therefor, the
repurchased Warrant Securities shall no longer be deemed outstanding or have any
validity whatsoever.
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Section 3. Investor Rights.
3.1 Purchaser's Option to Acquire New Securities.
(a) Option to Purchase. Prior to issuing any debt securities, any equity
securities, or any rights, warrants, options, convertible securities,
exchangeable securities or indebtedness or other rights, exercisable for or
convertible or exchangeable into such debt or equity securities, of the Company
or any Subsidiary to any Person, the Company will first give or cause such
Subsidiary to give to the Purchaser the right, for the same price and upon the
same terms as are to be made available to the other proposed offeree(s), to
purchase the same proportion of the securities proposed to be sold by the
Company or such Subsidiary as the number of shares of Common Stock held or which
would be held upon exercise by the Purchaser of all Warrants and Warrant Shares
held by it bears to the number of shares of outstanding Common Stock on a
Fully-Diluted Basis. Any such right of purchase shall be exercisable for a
period of thirty (30) days after the Purchaser receives written notice of a
proposed issuance of securities (and any such notice by the Company or a
Subsidiary shall be given not less than thirty (30) nor more than ninety (90)
days prior to any such issuance).
(b) Exclusions. The right of purchase under Section 3.1(a) shall not apply
to (i) shares of Common Stock issuable upon the exercise of Warrants, (ii)
securities issued by a Subsidiary to the Company or another Subsidiary, or (iii)
shares of Common Stock, or options therefor, issued after the Closing Date to
directors, officers and employees of the Company pursuant to a stock option plan
or other equity incentive plan, provided that (A) the total number thereof
outstanding does not exceed five percent (5%) of the outstanding Common Stock,
determined on a Fully-Diluted Basis, and (B) such shares of Common Stock, or
options therefor, are issued to Persons other than ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or
▇▇▇▇▇ ▇. ▇▇▇▇▇.
3.2 Registration Rights. The Purchaser and the Company shall have the
respective rights and obligations set forth in Exhibit D hereto with respect to
registrations of the Company's securities under the Securities Act.
3.3 Restrictions on Transfers. Shares, Warrants and Warrant Shares shall
not be transferable by the Purchaser to any Person that is in competition with
the Company or is an Affiliate of such a Person.
3.4. [Intentionally omitted.]
3.5 Co-Sale Right. (a) In the event that ▇▇▇▇▇▇ or any other Person owned
or controlled (directly or indirectly) by ▇▇▇▇▇▇, or in which ▇▇▇▇▇▇ has a
beneficial interest, proposes to transfer shares of Common Stock, then ▇▇▇▇▇▇
shall deliver to the Purchaser and to the Company a written notice (the "Sale
Notice") to such effect, containing a description of the proposed transaction
and the terms thereof. Upon delivery of the Sale Notice, the Purchaser shall
have the right to require ▇▇▇▇▇▇ to arrange for the sale to the
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proposed transferee(s) of a percentage of the Purchaser's Warrants and Warrant
Shares equal to the percentage of ▇▇▇▇▇▇'▇ holdings of Common Stock that ▇▇▇▇▇▇
desires to sell or transfer to the transferee(s), on terms and conditions at
least as favorable to the Purchaser as the terms and conditions set out in the
Sale Notice (except that the price to the Purchaser for Warrants shall be
reduced by the exercise price thereof).
(b) If the transferee(s) designated in the Sale Notice will not purchase
all of the Common Stock and Warrants which ▇▇▇▇▇▇ and the Purchaser desire to
transfer pursuant to this Section 3.5, the number of shares (or Warrants) which
▇▇▇▇▇▇ and the Purchaser shall be permitted to transfer to such transferee(s)
shall be the same proportion of the aggregate number of shares of Common Stock
to be transferred as the shares of Common Stock (or Warrants) held by ▇▇▇▇▇▇ or
the Purchaser bear to all shares of Common Stock (and Warrants) held by ▇▇▇▇▇▇
and the Purchaser. The sales or transfers by the Purchaser shall be for the same
consideration and otherwise on the same terms and conditions as specified in the
Sale Notice (except that the price to the Purchaser for Warrants shall be
reduced by the exercise price thereof).
(c) Upon receiving the Sale Notice, the Purchaser shall have a period of
twenty (20) days to accept such offer, in whole or in part, by sending written
notice to ▇▇▇▇▇▇, with a copy to the Company.
(d) This Section 3.5 shall not apply to any transfer of Common Stock by
▇▇▇▇▇▇ (i) to any of his family members, to the executor or administrator of his
estate, or to a trust primarily for the benefit of ▇▇▇▇▇▇ or his family members,
(ii) to the Company upon ▇▇▇▇▇▇'▇ death, permanent disability or discharge, or
(iii) to any other director, officer or employee of the Company, provided that
any such transferee pursuant to clause (i) or (iii) above shall agree in writing
that the transferee, as to the shares so transferred, takes such shares subject
to the obligations of ▇▇▇▇▇▇ under Sections 3.5, 3.6, 3.7 and 3.8 of this
Agreement.
3.6 Board Representative of Purchaser. So long as any outstanding Warrants
or Warrant Shares are held by the Purchaser, the Company and ▇▇▇▇▇▇ shall take
all action within their respective power, including, but not limited to, the
voting of Common Stock, required to cause a representative designated by the
Purchaser to become a member of the Board of Directors of the Company. At the
option of the Purchaser, in lieu of a director designated by the Purchaser, the
Company and ▇▇▇▇▇▇ shall permit a non-voting representative of the Purchaser
(selected by the Purchaser) to attend all meetings of the Board of Directors,
and committees thereof, of the Company. The Company and ▇▇▇▇▇▇ shall cause the
Board of Directors to hold at least four (4) meetings per year, provide to the
Purchaser's director or representative all notices, documents and information
furnished to the directors or stockholders of the Company, at the same time as
furnished to such directors or stockholders, use best efforts to notify such
director or representative of and permit such director or representative to
participate by telephone in emergency meetings of the Board or committees
thereof and the stockholders, and to provide such director or representative
copies of the minutes of all such meetings
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promptly after they are held. The Company shall pay the reasonable expenses of
the director or representative designated by the Purchaser in connection with
attendance at meetings of the Board of Directors, committees thereof and the
stockholders of the Company.
3.7 Certain Restrictions on Exit Events. (a) Upon any sale of assets by
the Company constituting an Exit Event, the Company shall promptly as possible
make to its stockholders liquidating distributions of the proceeds of such sale.
(b) In connection with any Exit Event, neither ▇▇▇▇▇▇ nor the Company
shall permit any of the consideration that would otherwise be payable or
distributable to the stockholders of the Company to be assigned or allocated to
specific or individual selling stockholders and/or employees of the Company
(whether through agreements not to compete, employment agreements, other
compensatory arrangements, or otherwise) in excess of that which is normal and
customary in transactions similar to the Exit Event in question, and in any
event not until the Purchaser has received the maximum consideration payable for
the Shares and the Warrant Securities pursuant to the terms of Section 2.6.
3.8 Subordination of Repurchases from ▇▇▇▇▇▇. Until all Shares and Warrant
Securities held by the Purchaser are redeemed or repurchased by the Company,
▇▇▇▇▇▇ agrees that no Common Stock owned or held by him or by any other Person
owned or controlled (directly or indirectly) by him (which, for purposes of this
Section 3.8, shall include ▇▇▇▇▇▇'▇ family members, his estate, the executors
and administrators of his estate, and any trust primarily for the benefit of
▇▇▇▇▇▇ or his family members) shall be acquired or redeemed by the Company.
Section 4. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as follows:
4.1 Organizational Documents. The Company has prior to the execution of
this Agreement delivered to the Purchaser accurate and complete copies of its
articles of incorporation and by-laws (or equivalent documents), each as amended
to the date hereof (without giving effect to the Certificate of Designations).
4.2 Certificate of Designations. The Company has filed the Certificate of
Designations, in the form attached to this Agreement as Exhibit A, with the
Department of Consumer and Industry Services of the State of Michigan. The
Certificate of Designations is in full force and effect.
4.3 Existence and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan. The Company is duly qualified to do business and in good standing as a
foreign
-12-
corporation in each jurisdiction where it is required to so qualify or be in
good standing as a foreign corporation.
4.4 Power and Authority. (a) The Company has all corporate power and
authority necessary to own, operate or lease its properties and assets and to
conduct its business as now conducted by it. The Company has all corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and each of the other Transaction Documents.
(b) When delivered and paid for pursuant to the terms of this Agreement,
the Shares and the Warrants will (i) be duly authorized and validly issued, and
will be fully paid and non-assessable, (ii) be free from all taxes and Liens
with respect to the issuance thereof, (iii) not be subject to preemptive rights
or other similar rights of stockholders of the Company, and (iv) be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and under applicable state and federal securities laws. The Warrant
Shares have been duly authorized, validly reserved for issuance and, upon
issuance in accordance with the terms of the Warrants, will (A) be validly
issued, and will be fully paid and non-assessable, (B) be free from all taxes
and Liens with respect to the issuance thereof, (C) not be subject to preemptive
rights or other similar rights of stockholders of the Company, and (D) be free
of restrictions on transfer other than restrictions on transfer under this
Agreement and under applicable state and federal securities laws.
4.5 Corporate Action. On and as of the Closing Date, the Company will have
taken all corporate action required to authorize the issuance of the Shares, the
Warrants and the Warrant Shares, and the execution, delivery and performance by
the Company of the Transaction Documents.
4.6 Binding Effect. This Agreement constitutes, and each of the other
Transaction Documents to which the Company is a party when executed and
delivered by the Company will constitute, legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally or limitations on the availability of
equitable remedies.
4.7 Consents. No Consent is required to be obtained or made by or on behalf
of the Company in connection with the offer, issuance and sale of the Shares or
the Warrants, the execution, delivery or performance by the Company of any of
the Transaction Documents to which it is a party or the consummation of the
transactions contemplated thereby, except for (a) the approval of the Board of
Directors of the Company, (b) the filing of the Certificate of Designations in
the State of Michigan, and (c) filings with the SEC and under state securities
laws that may be required; in the cases of (a) and (b) above, each of which
Consent shall have been obtained or made prior to or
-13-
simultaneously with the Closing of the sale and purchase of Shares and Warrants
on the Closing Date.
4.8 No Conflicts, etc. (a) The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents to which it is a
party and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the reservation for issuance
and issuance of the Warrant Shares) do not and will not (A) conflict with, or
result in a breach or violation of or a default under, any terms or conditions
of its articles of incorporation (as supplemented by the Certificate of
Designations) or by-laws, (B) violate any applicable law, except for any such
violation that would not have a Company Material Adverse Effect, (C) result in
the creation of any Lien on the Shares, the Warrants or the Warrant Shares,
except for restrictions on subsequent transfer of such securities imposed by
this Agreement and under applicable securities laws, or (D) result in any breach
of, or constitute a default (or event which with the giving of notice or the
lapse of time or both, would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation pursuant to, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any of its or its Subsidiaries' assets is
bound, except for any such breaches, defaults or rights that would not have a
Company Material Adverse Effect.
4.9 Capitalization. The entire authorized, issued and outstanding capital
stock of the Company was as set forth in the SEC Documents on and as of the
dates indicated therein. All of the Company's outstanding shares of capital
stock have been validly issued, and are fully paid and non-assessable.
Immediately after the Closing, except as described in the SEC Documents, there
will be no options, warrants or other rights outstanding or proposed involving
the issuance of any additional shares of capital stock of the Company, and
except for this Agreement there will be no agreements or other instruments
providing registration rights or anti-dilution rights to stockholders or holders
of other securities of the Company.
4.10 SEC Documents. (a) The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC. The Company has delivered or made available to the Purchaser true
and complete copies of (i) its annual report on Form 10-K for its 2001 fiscal
year and quarterly reports filed to date on Form 10-Q for its 2002 fiscal year,
and (ii) each other report, registration statement, proxy statement and other
document (if any) filed with the SEC since December 31, 2001 (all of the
foregoing, collectively, the "SEC Documents").
(b) As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the
-14-
SEC promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and, except to the extent that
information contained therein has been revised or superseded by a later filed
SEC Document, none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.11 Financial Statements. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (a)
as may be otherwise indicated in such financial statements or the notes thereto,
or (b) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), correspond to the
books and records of the Company, and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end adjustments). Neither the Company nor
any of its Subsidiaries has any material indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due) that would have been required to be reflected in,
reserved against or otherwise described in the financial statements or in the
notes thereto in accordance with generally accepted accounting principles, which
was not fully reflected in, reserved against or otherwise described in the
financial statements or the notes thereto included in the SEC Documents or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the last date of such financial statements.
4.12 No Material Adverse Change. Since September 30, 2002, the date through
which the most recent quarterly report of the Company on Form 10-Q has been
prepared and filed with the SEC, a copy of which is included in the SEC
Documents, no Company Material Adverse Effect has occurred or exists, except as
otherwise disclosed or reflected in other SEC Documents.
4.13 No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries, or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company and which has not been so publicly disclosed or
announced.
4.14 Offering. Subject to the accuracy of the representations and
warranties of the Purchaser made in this Agreement, the offer, issuance and sale
of the Shares, the Warrants and the Warrant Shares to the Purchaser constitute
transactions exempt from the
-15-
registration and prospectus delivery requirements of Section 5 of the Securities
Act and from any state securities laws.
4.15 Brokers. Except for Prism Capital Advisors LLC, neither the Company
nor any of its affiliates has employed any broker, agent or finder in carrying
on the negotiations relating to this Agreement or to the transactions herein
contemplated.
4.16 Tax Matters. The Company and each of its Subsidiaries (a) have duly
and timely filed all federal, state and local or foreign income, franchise,
excise, real and personal property and other tax returns, reports and
declarations required by law to be filed on or prior to the Closing Date, (b)
have paid all taxes and other governmental assessments and charges due with
respect to the periods covered by such returns, reports and declarations, except
those being contested in good faith and for which the Company has made
appropriate reserves on its books, and (c) have paid or set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
As of the Closing Date, all deficiencies proposed as a result of any audit have
been paid or settled. Neither the Company nor any Subsidiary is a party to any
pending action or proceeding by any Governmental Authority for the assessment or
collection of any taxes or fees.
4.17 Litigation. There are no actions pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary or the
business of the Company or any Subsidiary, nor is there any judgment, decree,
injunction or order of any applicable Governmental Authority or arbitrator
outstanding against the Company or any Subsidiary. There is no action pending,
or, to the knowledge of the Company, threatened against or affecting the Company
or any Subsidiary or the business of the Company or any Subsidiary in connection
with, or relating to, the transactions contemplated by this Agreement or of any
action taken or to be taken in connection herewith or the consummation of the
transactions contemplated hereby.
4.18 No Misleading or Untrue Communication. Neither the Company nor, to the
knowledge of the Company, any Person representing the Company, has delivered at
any time any written communication in connection with the offer or sale of the
Shares and Warrants to the Purchaser, which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
4.19 Payments and Contributions. Neither the Company, any Subsidiary, nor
any of its or such Subsidiary's directors, officers or, to its knowledge, other
employees has (a) used any Company or Subsidiary funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful expense
relating to political activity; (b) made any direct or indirect unlawful payment
of Company or Subsidiary funds to any foreign or domestic government official or
employee; (c) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (d) made any
-16-
bribe, rebate, payoff, influence payment, kickback or other similar payment to
any Person with respect to Company or Subsidiary matters.
4.20 No Misrepresentation. The representations and warranties of the
Company contained in this Agreement and each other Transaction Document to which
the Company is a party do not contain any 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.
Section 5. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company as follows:
5.1 Existence and Qualification. The Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Purchaser is duly qualified to do business and in
good standing as a foreign limited liability company in each jurisdiction where
it is required to so qualify or be in good standing as a foreign limited
liability company.
5.2 Power and Authority. The Purchaser has all corporate power and
authority necessary to execute, deliver, and perform its obligations under this
Agreement and each of the other Transaction Documents to which it is a party.
5.3 Corporate Action. The Purchaser has taken all corporate action
required to authorize the execution, delivery and performance by the Purchaser
of the Transaction Documents.
5.4 Binding Effect. This Agreement constitutes, and each of the other
Transaction Documents to which the Purchaser is a party when executed and
delivered by the Purchaser will constitute, the legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally or limitations on the availability of
equitable remedies.
5.5 No Conflicts, etc. (a) The execution, delivery and performance by the
Purchaser of this Agreement and the other Transaction Documents to which it is a
party do not and will not (A) conflict with, or result in a material breach of
or a material default under, any terms or conditions of its certificate of
formation or limited liability company agreement (or equivalent organizational
documents), (B) violate any applicable law, except for any such violation that
would not have a Purchaser Material Adverse Effect, or (C) result in any breach
of, or constitute a default (or event which with the giving of notice or the
lapse of time or both, would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation pursuant to any
material
-17-
agreement or instrument to which the Purchaser is a party or by which any of its
assets it bound, except for any such breaches, defaults or rights that would not
have a Purchaser Material Adverse Effect.
5.6 Brokers. Neither the Purchaser nor any of its affiliates has employed
any broker, agent or finder in carrying on the negotiations relating to this
Agreement or to the transactions herein contemplated.
5.7 Securities Act. The Purchaser is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act. The Purchaser
acknowledges that (a) the Shares and Warrants being acquired by the Purchaser
are not being registered under the Securities Act on the ground that the
issuance thereof is exempt from registration under Section 4(2) of the
Securities Act (and Rule 506 of the SEC thereunder) as not involving any public
offering, and (b) the Company's reliance on such exemption is predicated in part
on the representations of the Purchaser set forth in this Agreement that it is
an "accredited investor" within the meaning of Regulation D promulgated under
the Securities Act, and is acquiring its Shares and Warrants for investment for
its own account, with no present intention of dividing its participation with
others or reselling or otherwise distributing the same, subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. The Purchaser is not aware of any particular
occasion, event or circumstance upon the occurrence or happening of which it
intends to dispose of its Shares or Warrants.
5.8 Restricted Securities. The Purchaser acknowledges that its Shares and
Warrants will be deemed "restricted securities" as defined in Rule 144 under the
Securities Act and that the transfer thereof is restricted by any applicable
provisions of Rule 144, unless registered under the Securities Act, or unless
there exists an exemption from registration under the Securities Act.
5.9 Resales. The Purchaser will not sell or transfer all or any part of its
Shares or Warrants unless and until it shall first have given notice to the
Company describing such sale or transfer and furnished to the Company either (i)
an opinion, reasonably satisfactory to counsel for the Company, of counsel
skilled in securities matters ("Securities Counsel") selected by the Purchaser
and reasonably satisfactory to the Company (it being understood that Fish &
▇▇▇▇▇▇▇▇▇▇ P.C. is reasonably satisfactory to the Company) to the effect that
the proposed sale or transfer may be made without registration under the
Securities Act, or (ii) an interpretive letter from the staff of the SEC to the
effect that no enforcement action will be recommended if the proposed sale or
transfer is made without registration under the Securities Act, in either case
accompanied by evidence that such transfer will be in compliance with applicable
state securities laws; provided, however, that the foregoing shall not apply
with respect to (1) any transfer pursuant to an effective registration statement
under the Securities Act, or pursuant to
-18-
Rule 144 thereunder, or (2) any transfers between the Purchaser and any
institutional affiliate of such Purchaser for its own account.
5.10 No Financing Needed. The Purchaser does not need or plan to arrange
financing in order to pay the purchase price for its Shares and Warrants or to
complete the transactions contemplated by this Agreement and the other
Transaction Documents to which it is a party.
5.11 No Knowledge of Misrepresentation or Omission. The Purchaser has
received or been afforded the opportunity to review prior to the date of this
Agreement all written materials which the Company was required to deliver or
make available to the Purchaser pursuant to this Agreement and the other
Transaction Documents. The Purchaser is acquiring the Shares and Warrants based
on the Purchaser's independent judgment as to the future prospects of the
Company (and not based on any projections or other data included in the SEC
Documents or obtained from the Company).
Section 6. Conditions Precedent to the Obligations of the Purchaser.
The obligation of the Purchaser to purchase Shares and Warrants hereunder
at the Closing shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived in writing in
whole or in part by the Purchaser:
6.1 Representations, Warranties and Covenants. All representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects with the same force and effect as though such
representations and warranties had been made at the time of, and immediately
after giving effect to, the sale of Shares and Warrants, except for such
representations and warranties that speak as of a specified date, which need
only be true and correct in all material respects as of such specified date. All
covenants and agreements contained in this Agreement and the Escrow Agreement to
be performed by the Company on or prior to the Closing Date shall have been
performed or complied with in all respects.
6.2 Certificate of Designations. The Certificate of Designations shall
have been duly filed with the Department of Consumer and Industry Services of
the State of Michigan. The Certificate of Designations shall be in full force
and effect as of the Closing and shall not have been amended or modified.
6.3 Officer's Certificate. The Company shall deliver to the Purchaser a
certificate of its President dated the Closing Date, in form and substance
reasonably satisfactory to the Purchaser and its counsel, (a) certifying the
satisfaction of the conditions in Sections 6.1, 6.2, 6.8 and 6.9, and (b)
certifying, as of the Closing Date, (i) the aggregate principal amount of Senior
Subordinated Notes with respect to which the Company has entered into binding
agreements to repurchase or redeem on the Closing
-19-
Date, and the average price per $1,000 face amount thereof payable by the
Company pursuant to such agreements, and (ii) the total number of shares of
Common Stock outstanding on a Fully-Diluted Basis.
6.4 Board and Stockholder Resolutions. The Company shall have delivered to
the Purchaser copies (certified by an authorized officer of the Company) of the
resolutions of the Board of Directors and (if required) stockholders of the
Company authorizing the execution, delivery and consummation by the Company of
this Agreement and the other Transaction Documents to which it is a party.
6.5 Secretary's Certificate. The Company shall have delivered copies
(certified by the Secretary or Assistant Secretary of the Company) of the
articles of incorporation and by-laws (or equivalent documents) of the Company,
as amended through the date of the Closing.
6.6 Additional Documents. The Purchaser shall have received all such
agreements, documents, instruments, approvals, certificates and information as
it shall request in connection with this Agreement, the Shares, the Warrants and
the transactions herein and therein contemplated, all of which shall be in form
and substance reasonably satisfactory to the Purchaser and its counsel.
6.7 No Adverse Change. The Purchaser shall be reasonably satisfied that no
Company Material Adverse Effect has occurred or exists.
6.8 Repurchases of Senior Subordinated Notes. The Company shall have
entered into binding agreements to repurchase or redeem, on or before the
Closing Date, Senior Subordinated Notes in an aggregate principal amount of at
least $92,000,000 and for an aggregate purchase price not to exceed on average
$550 per $1,000 principal amount of Senior Subordinated Note repurchased or
redeemed.
6.9 Amendments to Agreements with Certain Officers. The Company shall have
obtained amendments, in form and substance acceptable to the Purchaser, to its
agreements with ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇, which amendments
shall prohibit the Company from redeeming or repurchasing shares of Common Stock
owned by such individuals, so long as any Shares or Warrant Securities remain
outstanding, if such redemption of repurchase would be prohibited by Section 1.4
of the Certificate of Designations.
Section 7. Conditions Precedent to the Obligations of the Company.
The obligation of the Company under this Agreement with respect to the
Purchaser shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived in writing in whole
or in part by the Company:
-20-
7.1 Representations and Warranties. All representations and warranties of
the Purchaser set forth in this Agreement shall be true and correct in all
material respects with the same force and effect as though such representations
and warranties had been made at the time of, and immediately after giving effect
to, the sale of Shares and Warrants, except for such representations and
warranties that speak as of a specified date, which need only be true and
correct in all material respects as of such specified date.
7.2 Board Resolutions. The Purchaser shall have delivered copies (certified
by the President, Secretary or Assistant Secretary of the Purchaser) of the
resolutions of the Board of Managers of the Purchaser authorizing the execution,
delivery and consummation by the Purchaser of this Agreement and the other
Transaction Documents to which the Purchaser is a party.
7.3 Secretary's Certificate. The Purchaser shall have delivered copies
(certified by the Secretary or Assistant Secretary of such Purchaser) of the
certificate of formation of the Purchaser, as amended through the date of the
Closing.
Section 8. Covenants of the Company.
The Company covenants and agrees that:
8.1 Financial Statements and Information. After the Closing, the Company
will furnish or cause to be furnished to the Purchaser the following financial
statements and information:
(a) All reports and other written communications delivered by the Company
to its stockholders as such, and all registration statements (when available to
the public) and periodic reports filed by the Company or any officer or director
thereof with the SEC or any securities exchange, pursuant to the Securities Act,
the Exchange Act, or the rules of such securities exchange.
(b) With reasonable promptness, (i) all financial statements or reports
(including comment letters to management) furnished to the Company by its
independent certified public accountants, (ii) all press releases other than
press releases dealing with the sale of its products in the usual and ordinary
course of its business, and (ii) unaudited monthly financial statements for the
Company for each month, prepared in accordance with generally accepted
accounting principles consistently applied (except for the absence of notes to
such financial statements and subject to normal year-end adjustments and
accruals).
8.2 Repurchase or Redemption of Senior Subordinated Notes; Use of Proceeds.
Immediately following the execution of this Agreement, the Company shall use its
best efforts to enter into binding agreements to repurchase or redeem on or
before
-21-
the Closing Date, and on terms and conditions reasonably satisfactory to the
Company in its sole but reasonable discretion, Senior Subordinated Notes in an
aggregate principal amount of at least $92,000,000 and for an aggregate purchase
price not to exceed on average $550 per $1,000 principal amount of Senior
Subordinated Notes repurchased or redeemed. Subject to the foregoing, the
Company shall accept all tenders of Senior Subordinated Notes whose owners are
willing to have their Senior Subordinated Notes repurchased or redeemed at a
price equal to or less than $550 per $1,000 principal amount, but only to the
extent that the maximum amount of proceeds available to the Company from the
sale of the Shares and the Warrants (i.e., $50,000,000), plus any availability
in its senior credit facilities permitted to be used to repurchase Senior
Subordinated Notes, is sufficient to repurchase or redeem such Senior
Subordinated Notes. In no event, however, shall the Company use more than
$15,000,000 from sources other than the proceeds received from the sale of the
Shares and the Warrants (either by making draws under its senior credit
facilities or otherwise) to repurchase Senior Subordinated Notes, including
accrued unpaid interest thereon. The Company will cause the proceeds received
from the sales of Shares and Warrants to be used solely to repurchase or redeem
the Company's outstanding Senior Subordinated Notes, for an average price of not
more than $550 per $1,000 face amount thereof. The closing of such repurchase or
redemption of the Senior Subordinated Notes shall occur on the Closing Date and
simultaneously with the Closing.
8.3 Transactions with Affiliates. The Company will not purchase, acquire or
lease any property from, or sell, transfer or lease any property to, or enter
into any other transaction with, or permit any Subsidiary to do so, (a) any
stockholder, director, officer or employee of the Company or any Subsidiary, (b)
any person who beneficially owns stock of any Subsidiary, (c) any relative of
any person described in (a) or (b), or (d) any person, firm, joint venture,
corporation, partnership or other entity in which the Company, a Subsidiary or
any person described in (a), (b) or (c) above owns a five (5%) percent or
greater equity interest except (i) in transactions which are on terms comparable
in all material respects to the terms which would prevail in an arm's-length
transaction between unaffiliated third parties, (ii) in transactions between the
Company and any wholly-owned Subsidiary, or between wholly-owned Subsidiaries,
not otherwise prohibited by this Agreement, and (iii) existing transactions
disclosed in the SEC Documents.
8.4 Compensation. The Company shall not pay, or permit any Subsidiary to
pay, directly or indirectly, as salary, bonuses, fringe benefits, expenses,
drawing accounts, or otherwise, compensation or other remuneration for personal
services to any director, officer or stockholder of the Company or to any
relative of any director, officer or stockholder of the Company or to any Person
directly or indirectly affiliated with any director, officer or stockholder of
the Company or any relative thereof, except that the Company or a Subsidiary may
(a) pay reasonable directors' fees to its directors and reimburse its directors
for their reasonable expenses incurred in attending directors' meetings, (b)
provide reasonable fringe benefits to full-time employees of the Company
-22-
or any Subsidiary, to the extent not prohibited by other provisions of this
Agreement, and (c) pay reasonable compensation for services to officers and
employees of the Company, in amounts and at rates in effect on the date hereof,
with such increases as may hereafter be approved by the Compensation Committee
of the Company's Board of Directors (which Compensation Committee shall at all
times hereafter be "independent" and not include ▇▇▇▇▇▇ as a member thereof).
Section 9. Covenants of the Purchaser.
The Purchaser covenants and agrees that:
9.1 Acknowledgments. The Purchaser acknowledges that it has conducted to
its satisfaction an independent investigation and verification of the financial
condition, results of operations, assets, liabilities, properties and projected
operations of the Company, and in making its determination to proceed with the
transactions contemplated by this Agreement, the Purchaser has relied on the
results of its own independent investigation and verification and the
representations and warranties of the Company expressly and specifically set
forth in this Agreement. SUCH REPRESENTATIONS AND WARRANTIES BY THE COMPANY, AND
ANY OTHER REPRESENTATIONS OR WARRANTIES BY THE COMPANY SET FORTH IN ANY OTHER
TRANSACTION DOCUMENT, CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY TO THE PURCHASER IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, AND THE PURCHASER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT
ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE WHETHER EXPRESS,
IMPLIED OR STATUTORY (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE
OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES
OF THE COMPANY) ARE SPECIFICALLY DISCLAIMED BY THE COMPANY.
9.2 Legends. The Purchaser understands, acknowledges and agrees that the
Company may place appropriate legends on the certificates for the Shares,
Warrants and Warrant Shares concerning the restrictions set forth in Sections
5.8 and 5.9 and may refuse to transfer any of the Shares, Warrants or Warrant
Shares on its books should the holder thereof attempt to transfer any of them
otherwise than in compliance herewith and therewith. The Company agrees to
reissue certificates representing Shares, Warrants or Warrant Shares without the
legend provided for above at such time as (i) the Company has received an
opinion of Securities Counsel stating that the holder thereof is permitted to
dispose of such Shares, Warrants or Warrant Shares pursuant to Rule 144(k) under
the Securities Act, (ii) the Shares, Warrants or Warrant Shares are sold to a
purchaser or purchasers who (in the opinion of counsel to such purchasers, in
form and substance reasonably satisfactory to the Company and its counsel) are
able to dispose of such
-23-
Shares, Warrants or Warrant Shares publicly without registration under the
Securities Act, or (iii) such securities are registered under the Securities
Act.
Section 10. Survival of Representations and Warranties.
The representations and warranties of the Company contained in Section 4
and the representations and warranties of the Purchaser contained in Section 5
shall survive the Closing, and shall apply with respect to claims asserted in
writing prior to the second anniversary of this Agreement.
Section 11. Purchaser's Consent.
Any provision in this Agreement to the contrary notwithstanding, with the
written consents of the holder(s) a majority of the Shares, the Company may be
relieved from the effect of any default hereunder or from compliance with any
covenant, agreement or undertaking contained herein or in any instrument
executed and delivered as herein provided, except the provisions of the
Certificate of Designations.
Section 12. Judicial Proceedings.
12.1 The parties hereto irrevocably submit to the non-exclusive
jurisdiction of any Delaware State or Federal court sitting in the City of
Wilmington over any suit, action or proceeding arising out of or relating to
this Agreement, any of the other Transaction Documents or any of the Shares,
Warrants or Warrant Shares. To the fullest extent it may effectively do so under
applicable law, each party hereto irrevocably waives and agrees not to assert,
by way of motion, as a defense or otherwise, any claim that it is not subject to
the jurisdiction of any such court, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.
12.2 Each party hereto agrees, to the fullest extent it may effectively do
so under applicable law, that a judgment in any suit, action or proceeding of
the nature referred to in Section 12.1 brought in any such court shall, subject
to such rights of appeal on issues other than jurisdiction as may be available,
be conclusive and binding upon such party and may be enforced in the courts of
the United States of America or the State of Delaware (or any other courts to
the jurisdiction of which the Company or the Purchaser is or may be subject) by
a suit upon such judgment.
12.3 Each party hereto consents to service of process in any suit, action
or proceeding of the nature referred to in Section 12.1 by mailing a copy
thereof by registered or certified mail, postage prepaid, return receipt
requested, to its address specified in or designated pursuant to Section 13.1.
Such service (i) shall be deemed in every respect effective service of process
upon the Company in any such suit, action or
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proceeding and (ii) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon and personal delivery to the Company.
12.4 Nothing in this Section 12 shall affect the right of any of the
parties to serve process in any manner permitted by law, or limit any right that
any of the parties may have to bring proceedings against any of the other
parties in the courts of any jurisdiction or to enforce in any lawful manner a
judgment obtained in one jurisdiction in any other jurisdiction.
12.5 EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE NOW OR
HEREAFTER TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE
SHARES, WARRANTS OR WARRANT SHARES.
Section 13. Miscellaneous.
13.1 Notices. All notices, requests, demands, approvals, consents,
waivers or other communications required or permitted to be given hereunder
(each, a "Notice") shall be in writing, shall be in English, and shall be (a)
personally delivered, (b) sent by facsimile transmission, provided that the
original copy thereof also is sent by pre-paid, first class, registered or
certified mail (return receipt requested) or by next-day or overnight mail (to
any United States address) or by an internationally recognized express delivery
service (to any foreign address), (c) sent by first class, registered or
certified mail (return receipt requested) or by next-day or overnight mail (to
any United States address), postage and charges prepaid, or (d) delivered by an
internationally recognized express delivery service (to any foreign address),
postage and charges prepaid:
(i) If to the Purchaser, at the address and numbers set forth
on the signature page to this Agreement, marked for attention as
therein indicated; and
(ii) If to the Company, to:
Numatics, Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
or, in each case, at such other address and numbers as may have been furnished
in a Notice by such Person to the other parties. Any Notice shall be deemed
effective or given upon receipt (or refusal of receipt).
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13.2 Expenses. Each party hereto shall pay its own expenses incidental
to the preparation of this Agreement and the other Transaction Documents, the
carrying out of the provisions hereof and the consummation of the transactions
contemplated hereby, whether or not such transactions are consummated.
13.3 Publicity. Each party to this Agreement agrees not to disclose the
name of the other in any press release or other public disclosure, or in any
proxy statement, prospectus or other similar filings with any governmental
entity, unless, in each such case, the other party first has reviewed and
approved such usage, with such review and approval not to be unreasonably
delayed or withheld.
13.4 Governing Law. This Agreement and the other agreements and
instruments executed as provided herein, and the rights and obligations of the
parties hereunder and thereunder, shall be construed and interpreted in
accordance with and governed by the laws of the State of Delaware, without
giving effect to principles of conflicts of laws.
13.5 Severability. Should any Section or any part of a Section within
this Agreement be rendered void, invalid or unenforceable by any court of law
for any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section in this
Agreement.
13.6 Captions. The descriptive headings of the Sections of this
Agreement are inserted for convenience only and shall not affect the meaning,
construction or interpretation of any of the provisions hereof.
13.7 Amendments and Waivers. Neither this Agreement nor any term hereof
may be changed, discharged or terminated orally or in writing, except that any
term of this Agreement may be amended with (but only with) the prior written
consent of the party against whom enforcement of such provision is sought.
13.8 Successors and Assigns. All rights, covenants and agreements of
the parties contained in this Agreement shall, except as otherwise provided
herein, be binding upon and inure to the benefit of their respective successors
and assigns.
13.9 Counterparts. This Agreement may be executed (including by
telecopy facsimile transmission) with counterpart signature pages or in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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If you are in agreement with the foregoing, please sign in the space
provided below.
NUMATICS, INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
The foregoing is hereby accepted
and agreed to as of the date
first above written.
Purchaser:
---------
NUMAT, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fish & ▇▇▇▇▇▇▇▇▇▇ P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Garden, Esq.
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
The undersigned hereby enters into this Agreement solely for the purposes
specified in Sections 3.5, 3.6, 3.7 and 3.8.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT D
to
Preferred Stock and Warrant Purchase Agreement
by and between Numatics, Incorporated and the Purchaser named therein
Registration Rights
1. Definitions. Unless otherwise defined herein, terms defined in the
Preferred Stock and Warrant Purchase Agreement are used herein as therein
defined, and the following shall have (unless otherwise provided elsewhere
herein) the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Holder" means a holder of Registrable Securities.
"NASD" means the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"Pro Rata" means, with respect to any stockholder, in the same
proportion as the aggregate number of shares of Registrable Securities held by
such stockholder bears to the aggregate number of shares of Registrable
Securities held by all stockholders, in each case determined on a Fully-Diluted
Basis.
"Registrable Securities" means, collectively, (i) Common Stock of the
Company held at any time by the Purchaser or a permitted transferee of the
Purchaser, including without limitation Common Stock issued upon the exercise of
the Warrants, and (ii) Common Stock issued or issuable by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise with respect to
Registrable Securities. Registrable Securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) such securities shall have been sold pursuant to Rule 144 (or
any successor provision) under the Securities Act or (iii) such securities shall
have been otherwise transferred, new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require the registration or
qualification of such securities under the Securities Act or any similar state
law then in effect.
2. Incidental Registration Rights.
(a) If the Company at any time proposes to file on its behalf and/or on
behalf of any of its security holders (the "demanding security holders") a
Registration Statement under the Securities Act on any form (other than a
Registration Statement on Form S-4 or S-8 or any successor form for securities
to be offered in a transaction of the type referred to in Rule 145 under the
Securities Act or to employees of the Company pursuant to any employee benefit
plan, respectively) for the general registration of securities, it will give
written notice to all Holders at least thirty (30) days before the initial
filing with the SEC of such Registration Statement, which notice shall set forth
the intended method of disposition of the securities proposed to be registered
by the Company. The notice shall offer to include in such filing the aggregate
number of shares of Registrable Securities as such Holders may request.
(b) Each Holder desiring to have Registrable Securities registered under
this Section 2 shall advise the Company in writing within ten (10) Business Days
after the date of receipt of such offer from the Company, setting forth the
amount of such Registrable Securities for which registration is requested. In
addition, each such Holder desiring to have Registrable Securities registered
under this Section 2 shall accept the customary terms of the underwriting for
such offering of securities. The Company shall thereupon include in such filing
the number of shares of Registrable Securities for which registration is so
requested, subject to the next sentence, and shall use its best efforts to
effect registration under the Securities Act of such shares. If the managing
underwriter of a proposed public offering shall advise the Company in writing
that, in its opinion, the distribution of the Registrable Securities requested
to be included in the registration concurrently with the securities being
registered by the Company or such demanding security holders would materially
and adversely affect the distribution of such securities by the Company or such
demanding security holders, then all selling security holders (including the
demanding security holders, but not the Company) shall reduce the amount of
securities each intended to distribute through such offering on a Pro Rata
basis.
(c) Nothing herein shall be construed so as to require the Company, in
connection with any proposed offering under this Section 2, to engage the
services of an underwriter or to complete the proposed offering, and the Company
shall incur no liability to any Holder for its failure to complete the offering,
except as set forth in Sections 4 and 5.
(d) If the Company shall previously have received a request for
registration pursuant to this Section 2, and if such previous registration shall
not have been withdrawn or abandoned, the Company will not effect any
registration of any of its securities under the Securities Act (other than a
registration on Form S-4 or Form S-8, or any similar or successor form to any of
said forms) until a period of 90 days shall have elapsed from the effective date
of such previous registration.
3. Registration Procedures.
(a) If the Company is required by the provisions of Section 2 to use its
best efforts to effect the registration of any of its securities under the
Securities Act, the Company will, as expeditiously as possible:
(i) prepare and file with the SEC a Registration Statement with
respect to such securities and use its best efforts to cause such
Registration Statement to become and remain effective for a period of time
required for the disposition of such securities by the holders thereof, but
not to exceed six months or, in the case of a "shelf" registration
statement on Form S-3, nine months (provided that, before filing a
Registration Statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the Holder
copies of all such documents proposed to be filed);
(ii) prepare and file 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 effective
and to comply with the provisions of the Securities Act with respect to the
sale or other disposition of all securities covered by such Registration
Statement until the earlier of (A) such time as all of such securities have
been disposed of in a public offering or (B) the expiration of six months
or, in the case of a "shelf' registration statement on Form S-3, nine
months;
(iii) furnish to such selling security holders such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents, as such selling security holders may reasonably
request;
(iv) use its best efforts to register or qualify the securities
covered by such Registration Statement under such other securities or blue
sky laws of such jurisdictions within the United States and Puerto Rico as
each holder of such securities shall request (provided, however, that the
Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then
qualified or to file any general consent to service or process), and do
such other reasonable acts and things as may be required of it to enable
such holder to consummate the disposition in such jurisdiction of the
securities covered by such Registration Statement;
(v) notify the Holder at any time when a prospectus relating to
its Registrable Securities is required to be delivered under the Securities
Act, of the Company's becoming aware that the prospectus included in the
related Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly
prepare and furnish to the Holder and each underwriter a reasonable number
of copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(vi) furnish at the request of any Holder requesting registration
of Registrable Securities pursuant to Section 2, on the date that such
shares of Registrable Securities are delivered to the underwriters for sale
pursuant to such registration or, if such Registrable Securities are not
being sold through underwriters, on the date that the Registration
Statement with respect to such shares of Registrable Securities becomes
effective, (i) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed
to the underwriters, if any, and to the Holders making such request, in
customary form and covering matters of the type customarily covered in such
legal opinions; and (ii) a comfort letter dated such date, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to the Holders making such request and, if such
accountants refuse to deliver such letter to such Holders, then to the
Company, in a customary form and covering matters of the type customarily
covered by such comfort letters and as the underwriters or such Holders
shall reasonably request. Such opinion of counsel shall additionally cover
such other legal matters with respect to the registration in respect of
which such opinion is being given as such Holders may reasonably request.
Such letter from the independent certified public accountants shall
additionally cover such other financial matters (including information as
to the period ending not more than five Business Days prior to the date of
such letter) with respect to the registration in respect of which such
letter is being given as the Holders of a majority of the Registrable
Securities being so registered may reasonably request;
(vii) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such
Registrable Securities;
(viii) use its best efforts (a) to cause all such Registrable
Securities covered by such Registration Statement to be listed on each
national securities exchange on which similar securities issued by the
Company are then listed, if the listing of such Registrable Securities is
then permitted under the rules of such exchange, or (b) to secure
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" within the meaning
of Rule 11Aa2-1 of the SEC or, failing that, to secure NASDAQ authorization
for such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such
with respect to such Registrable Securities with the NASD;
(ix) provide a transfer agent and registrar for all such Registrable
Securities covered by such Registration Statement not later than the
effective date of such Registration Statement;
(x) make available for inspection by the Holder and by any
underwriter participating in any disposition to be effected pursuant to
such Registration Statement and by any attorney, accountant or other agent
retained by the Holder or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Company,
and cause all of the Company's officers, directors, employees and the
independent public accountants who have certified its financial statements
to supply all information reasonably requested by the Holder, underwriter,
attorney, accountant or agent in connection with such Registration
Statement;
(xi) permit a Holder of Registrable Securities constituting not less
than twenty percent (20%) of the Common Stock outstanding, determined on a
Fully-Diluted Basis, (a) to participate in the preparation of such
Registration Statement, (b) to require the insertion therein of material,
furnished to the Company in writing, which in the judgment of the Holder
should be included, and (c) to receive such documents and make such
requests as the Holder is entitled to under this Section 3;
(xii) at or prior to the effectiveness of such Registration Statement,
secure a CUSIP number for all Registrable Securities;
(xiii) notify the Holder of any stop order threatened or issued by the
SEC and take all actions reasonably necessary to prevent the entry of such
stop order or to remove it if entered; and
(xiv) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, but not later than 18 months
after the effective date of the Registration Statement, an earnings
statement covering the period of at least 12 months beginning with the
first full month after the effective date of such Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.
(b) It shall be a condition precedent to the obligation of the Company to
take any action hereunder in respect of the securities which are to be
registered at the request of any Holder that such Holder shall furnish to the
Company such information regarding the securities held by such Holder and the
intended method of disposition thereof as the Company shall reasonably request
and as shall be required in connection with the action taken by the Company.
(c) If any such Registration Statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, then the Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to the Holder and presented to the Company in
writing, to the effect that the holding by the Holder of such securities is not
to be construed as a recommendation by the Holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that the Holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to the Holder.
4. Expenses. All expenses incurred in complying with the terms set
forth hereunder, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for the Company, the reasonable fees and
expenses of counsel for any Holder of Registrable Securities constituting not
less than twenty percent (20%) of the Common Stock outstanding, determined on a
Fully-Diluted Basis, expenses of any special audits incident to or required by
any such registration and expenses of complying with the securities or blue sky
laws of any jurisdiction pursuant to Section 3, shall be paid by the Company,
except that the Company shall not be liable for any fees, discounts or
commissions to any underwriter or any fees or disbursements of counsel for any
underwriter in respect of the securities sold by such Holder.
5. Indemnification and Contribution.
(a) In the event of any registration of any Registrable Securities
under the Securities Act, the Company shall indemnify and hold harmless the
Holder of such Registrable Securities, such Holder's directors and officers, and
each other person (including each underwriter) who participated in the offering
of such Registrable Securities and each other person, if any, who controls such
Holder or such participating person within the meaning of the Securities Act,
against any losses, claims, damages, liabilities or expenses, joint or several,
to which such Holder or any such director or officer or participating person or
controlling person may become subject under the Securities Act, the Exchange Act
(and all rules and regulations under the Securities Act and the Exchange Act) or
any other statute or at common law, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue or alleged untrue statement of any material
fact contained, on the effective date thereof, in any Registration Statement
under which such securities were registered under the Securities Act or in any
filing with any state securities commission, any preliminary, summary or final
prospectus contained therein or any amendment or supplement thereto, (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action of or inaction by
the Company in connection with any such registration; and, in each such case,
the Company shall
reimburse such Holder or such director, officer or participating person or
controlling person for any legal or any other expenses reasonably incurred by
such Holder or such director, officer or participating person or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability, expense, proceeding or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any actual or alleged
untrue statement or actual or alleged omission, on the effective date thereof,
made in such Registration Statement, filing, preliminary prospectus, prospectus
or amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Holder specifically for use
therein. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or such director, officer or
participating person or controlling person, and shall survive the transfer of
such securities by such Holder.
If the offering pursuant to any Registration Statement provided for
hereunder is made through underwriters, no action or failure to act on the part
of such underwriters (whether or not any such underwriter is an affiliate of the
Holder or such director, officer or participating person or controlling person)
shall affect the Company's obligations to indemnify the Holder or such director,
officer or participating person or controlling person, pursuant to the preceding
paragraph. If the offering pursuant to any Registration Statement provided for
hereunder is made through underwriters, the Company agrees to enter into an
underwriting agreement in customary form with such underwriters and to indemnify
such underwriters, their officers and directors, if any, and each Person, if
any, who controls such underwriters within the meaning of the Securities Act to
the same extent as hereinbefore provided with respect to the indemnification of
the Holder and such director, officer or participating person or controlling
person; provided that the Company shall not be required to indemnify any such
underwriter, or any officer or director of such underwriter or any Person who
controls such underwriter within the meaning of the Securities Act, to the
extent that the loss, claim, damage, liability, expense, action or proceeding
for which indemnification is claimed results from such underwriter's failure to
send or give a copy of the amended or supplemented final prospectus, at or prior
to the written confirmation of the sale of Registrable Securities, to a Person
asserting the existence of an untrue statement or alleged untrue statement or
omission or alleged omission if such statement or omission was corrected in such
amended or supplemented final prospectus prior to such written confirmation and
the underwriter was given notice of the availability of such amended or
supplemented final prospectus.
(b) Each Holder, severally, not jointly, by acceptance hereof, agrees
to indemnify and hold harmless the Company, its directors and officers and each
other person, if any, who controls the Company within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director or officer or any such person
may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon information in writing provided
to the Company by such Holder specifically for use in the following documents
and contained,
on the effective date thereof, in any Registration Statement under which
securities were registered under the Securities Act at the request of such
Holder, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto. Notwithstanding the provisions of this
paragraph (b) or paragraph (d) below, no Holder shall be required to indemnify
any person pursuant to this Section 5 or to contribute pursuant to paragraph (d)
below in an amount in excess of the amount of the aggregate net proceeds
received by such Holder in connection with any such registration under the
Securities Act.
(c) If any claim, action, suit or proceeding (a "Proceeding") shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall be permitted to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party. An
Indemnified Party shall have the right to employ separate counsel in any such
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 has agreed in writing to pay such fees and expenses; or
(2) the Indemnifying Party shall have failed promptly to assume the defense of
such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, conditioned or delayed. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding. All fees and
expenses of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent herewith) shall be paid to the
Indemnified Party, as incurred, within ten (10) Business 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; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) If the indemnification provided for in this Section 5 from the
Indemnifying Party is unavailable to an Indemnified Party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been 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. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to herein. 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. Notwithstanding anything to the
contrary contained herein, a Holder shall be liable or required to contribute
under this Section 5(d) for only that amount as does not exceed the net proceeds
to such Holder as a result of the sale of Registrable Securities pursuant to
such Registration Statement.
6. Certain Limitations on Registration Rights. Notwithstanding the other
provisions of this Agreement:
(a) the Company shall not be obligated to register the Registrable
Securities of any Holder if, in the opinion of counsel to the Company reasonably
satisfactory to the Holder and its counsel (or, if the Holder has engaged an
investment banking firm, to such investment banking firm and its counsel), the
sale or other disposition of such Holder's Registrable Securities, in the manner
proposed by such Holder (or by such investment banking firm), may be effected
without registering such Registrable Securities under the Securities Act; and
(b) the Company shall have the right to delay the filing or effectiveness
of a registration statement required pursuant to Section 2 hereof during one
period aggregating not more than ninety (90) days in any calendar year in the
event that (i) the Company
would be required by law to disclose in the prospectus information not otherwise
then required by law to be publicly disclosed and (ii) in the judgment of the
Company's Board of Directors, there is a reasonable likelihood that such
disclosure, or any other action to be taken in connection with the prospectus,
would materially and adversely affect any existing or prospective material
business situation, transaction or negotiation or otherwise materially and
adversely affect the Company.
7. Selection of Managing Underwriters. The managing underwriter or
underwriters for any offering of Registrable Securities to be registered
pursuant to Section 2 shall be selected by the Company.
8. Rule 144. As long as any Holder owns Registrable Securities, the
Company, at all times while it shall be reporting under the Exchange Act,
covenants to timely file all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and to
promptly furnish the Holders with true and complete copies of all such filings.
The Company further covenants that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell any shares of Common Stock held by such Holder
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
providing any legal opinions. Upon the request of any Holder, the Company shall
deliver to such Holder a written certification of a duly authorized officer as
to whether it has complied with such requirements.
9. Market Standoff.
(a) Each Holder shall agree, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, not to sell
publicly any Common Stock (or other securities) of the Company owned or held by
such party, other than securities included in the underwriting, without the
consent of such underwriter, during the one hundred eighty (180) day period
following the effective date of the Company's registration statement for the
initial public offering of the Company filed under the Securities Act, provided
that:
(i) all other Holders, officers and directors of the Company and all
stockholders holding in excess of 5% of the outstanding Common Stock (on an as
converted basis) of the Company enter into similar agreements;
(ii) such agreement shall be in writing in a form satisfactory to the
Company and such underwriter; and
(iii) the Company may impose stop transfer instructions with respect
to the shares (or securities) subject to the foregoing restriction until the end
of said one hundred eighty (180) day period.
(b) If any securities of the Company held by a party who shall be bound by
an agreement described in Section 9(a) above shall be released (the "Released
Holder"), a number of securities held by each Holder shall be released equal to
the product of the number of securities held by such Holder multiplied by a
fraction, the numerator of which shall be equal to the number of securities held
by the Released Holder that were released and the denominator of which shall be
the total number of securities held by the Released Holder. Notwithstanding the
foregoing, this Section 9 shall not be deemed to restrict any Holder from
selling any Common Stock or any security convertible into or exchangeable or
exercisable for Common Stock in any private transaction exempt from the
registration requirements of the Securities Act.
10. Registration Rights of Others. If the Company shall at any time
hereafter provide to any other holder of securities of the Company rights with
respect to the registration of such securities under the Securities Act, such
rights shall not be in conflict with or materially and adversely affect any of
the rights provided herein to the Holder. Furthermore, if the Company shall at
any time hereafter provide to any other holder of securities of the Company
rights with respect to the registration of such securities under the Securities
Act that are superior to the rights of the Holder hereunder, then the Company
shall simultaneously therewith provide to the Holder such superior rights.
11. Transfer of Registration Rights. If and to the extent that the Holder
sells or otherwise disposes of Registrable Securities in any transaction that
does not require registration under the Securities Act, the rights of a Holder
hereunder with respect to such Registrable Securities shall be assignable to the
transferee of such Registrable Securities without the consent of the Company.