EXHIBIT 4.1
INVESTORS' RIGHTS AGREEMENT
This INVESTORS' RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 20,
2002, is entered into by and between Frank's Nursery & Crafts, Inc., a Delaware
corporation (the "COMPANY"), and each of the entities listed on Schedule I
hereto (the "STOCKHOLDERS").
W I T N E S S E T H
WHEREAS, pursuant to the Plan of Reorganization (the "PLAN") of the
Company as confirmed by the United States Bankruptcy Court for the District of
Maryland (Baltimore Division) in Chapter 11 Case Nos. 01-52415 and 01-52416, and
as became effective on May 20, 2002, the Stockholders shall receive shares of
the Company's Common Stock, par value $.001 per share ("COMMON STOCK"), in
connection with the Plan (the "SHARES"); and
WHEREAS, in connection with the delivery of the Shares to the Stockholder
pursuant to the Plan, the Company desires to grant to each Stockholder certain
registration rights and preemptive rights with respect to the stock of the
Company held by it.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows.
1. REGISTRATION RIGHTS
1.1. DEFINITIONS. For purposes of this Agreement:
(a) "AFFILIATE" of a Person means any Person that directly or
indirectly through one or more intermediaries controls or is controlled by, or
is under common control with, such other Person. For purposes of this
definition, the term "CONTROL" (including the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, direct or indirect, of the power to
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) "BACZKO WARRANT" means the Stock Purchase Warrants, dated as of
May 20, 2002, issued by the Company to ▇▇▇▇▇▇ ▇▇▇▇▇▇, representing the right to
purchase from the Company a total of 5,044 shares of Common Stock (as adjusted
pursuant to the terms thereof) together with any stock purchase warrants issued
in substitution, exchange or replacement therefor.
(c) "CYPRESS WARRANTS" means the Stock Purchase Warrants, dated as
of May 20, 2002, issued by the Company to Cypress Merchant Banking Partners LP
and Cypress Garden LTD. representing the right to purchase from the Company an
aggregate total of 908,000 shares of Common Stock (as adjusted pursuant to the
terms thereof) together with any stock purchase warrants issued in substitution,
exchange or replacement therefor.
(d) "FULLY DILUTED BASIS" and "FULLY DILUTED" means, in each case,
with respect to the calculation of the number of shares of Common Stock, (i) all
shares of Common Stock outstanding at the time of determination and (ii) all
shares of Common Stock issuable upon the exercise, conversion or exchange or any
Common Stock Equivalents (including stock appreciation rights, phantom stock and
similar types of securities); provided, however, that with respect to any
options, shares of Common Stock shall only be included in the determination of
Fully Diluted Basis to the extent such options are vested.
(e) "HOLDER" means a Person that (i) is a party to this Agreement
(or a permitted transferee under Section 1.11 hereof) and (ii) owns Registrable
Securities.
(f) "KIMCO WARRANT" means the Stock Purchase Warrants, dated as of
May 20, 2002, issued by the Company to Kimco Realty Services, Inc. representing
the right to purchase from the Company a total of 4,402,174 shares of Common
Stock (as adjusted pursuant to the terms thereof) together with any stock
purchase warrants issued in substitution, exchange or replacement therefor.
(g) "NASD" means the National Association of Securities Dealers,
Inc.
(h) "PARTICIPATING HOLDERS" means Holders participating, or electing
to participate, in an offering of Registrable Securities.
(i) "PERSON" means any individual, firm, corporation, company,
partnership, trust, incorporated or unincorporated association, limited
liability company, joint venture, joint stock company, government (or an agency
or political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of any such entity.
(j) "REGISTRABLE SECURITIES" means any shares of Common Stock (i)
held or deemed held by conversion by the Stockholders; (ii) issued in connection
with the exercise of any warrants or options granted to the Stockholders and
(iii) issued or issuable with respect to the securities referred to in clauses
(i) and (ii) above by virtue of any stock split, combination, stock dividend,
merger, consolidation or other similar event; provided, however, that shares of
Common Stock that are considered to be Registrable Securities shall cease to be
Registrable Securities (A) upon the sale thereof pursuant to an effective
registration statement, (B) upon the sale thereof pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, or pursuant to
another exemption from the registration requirements of the Securities Act if
after such sale such securities are freely tradable without restriction under
the Securities Act, (C) when such securities cease to be outstanding, (D) in a
private transaction where the transferor's rights under this Agreement are not
assigned, or are improperly assigned pursuant to the terms and conditions of
this Agreement or (E) if in the opinion of counsel to the Company, all such
securities owned by a Stockholder could be sold by such Stockholder pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act.
(k) "REGISTRATION EXPENSES" mean all expenses (other than
underwriting discounts and commissions) arising from or incident to the
performance of, or compliance with, this Article 1, including (i) SEC, stock
exchange, NASD and other registration and filing fees, (ii) all fees and
expenses incurred in connection with complying with any securities or blue sky
laws (including fees, charges and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) the fees, charges and disbursements of
counsel to the Company and of its independent public accountants and any other
accounting and legal fees, charges and expenses incurred by the Company
(including any expenses arising from any special audits or "comfort letters"
required in connection with or incident to any registration), (v) the fees,
charges and disbursements of any special experts retained by the Company in
connection with any registration pursuant to the terms of this Agreement, (vi)
all internal expenses of the Company (including all salaries and expenses of its
officers and employees performing legal or accounting duties), (vii) the fees
and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange or Nasdaq and (viii) Securities Act
liability insurance (if the Company elects to obtain such insurance), regardless
of whether any Registration Statement filed in connection with such registration
is declared effective. "Registration Expenses" shall also include fees, charges
and disbursements of (i) one (1) firm of counsel to all of the Participating
Holders participating in any Demand Request (including any underwritten public
offering) pursuant to this Article 1 (which shall be selected by a majority,
based on the number of Registrable Securities to be sold, of the Participating
Holders) and (ii) one (1) firm of counsel to all of the Participating Holders
participating in any Form S-3 Demand pursuant to Section 1.4 (which shall be
selected by a majority, based on
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the number of Registrable Securities to be sold, of the Participating Holders),
in the case of both clauses (i) and (ii), legal fees in an amount not to exceed
$25,000 for each Demand Request or each Form S-3 Demand, as applicable.
(l) "REGISTRATION STATEMENT" shall mean any Registration Statement
of the Company filed with the SEC on the appropriate form pursuant to the
Securities Act which covers any of the shares of Common Stock and any other
Registrable Securities pursuant to the provisions of this Agreement and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
(m) "SALE OF THE COMPANY" means the sale of the Company (whether by
merger, consolidation, recapitalization, reorganization, sale of securities,
sale of assets or otherwise) in one transaction or series of related
transactions to a Person or Persons, otherwise than in accordance with the terms
of the Plan, pursuant to which such Person or Persons (together with its
Affiliates) acquires (i) securities representing at least a majority of the
voting power of all securities of the company, assuming the conversion, exchange
or exercise of all securities convertible, exchangeable or exercisable for or
into voting securities, or (ii) all or substantially all of the Company's assets
on a consolidated basis.
(n) "SEC" or "COMMISSION" means the United States of America
Securities and Exchange Commission.
(o) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(p) "SELLING EXPENSES" shall mean the underwriting fees, discounts,
selling commissions and stock transfer taxes applicable to all Registrable
Securities registered by the Participating Holders.
(q) "THIRD AVENUE TRUST REALTY WARRANT" means the Stock Purchase
Warrants, dated as of May 20, 2002, issued by the Company to Third Avenue Trust,
on behalf of the Third Avenue Real Estate Value Fund Series representing the
right to purchase from the Company a total of 1,467,391 shares of Common Stock
(as adjusted pursuant to the terms thereof) together with any stock purchase
warrants issued in substitution, exchange or replacement therefor.
1.2. Demand Registration.
(a) REQUEST BY HOLDERS. Subject to Section 1.2(e)(ii), if the
Company receives at any time after the date of this Agreement a written request
from any of Kimco Realty Services, Inc., Third Avenue Trust, on behalf of the
Third Avenue Real Estate Value Fund Series, Cypress Merchant Banking Partners
LP, Cypress Garden LTD. or each of their respective transferees and assigns (the
"REQUESTING HOLDER") that the Company register Registrable Securities held by
the Requesting Holder (a "DEMAND REQUEST"), then the Company shall, within ten
(10) days after receipt of such Demand Request, give written notice of such
request ("REQUEST NOTICE") to all Holders. Each Demand Request shall (x) specify
the number of Registrable Securities that the Requesting Holder intends to sell
or dispose of, (y) state the intended method or methods of sale or disposition
of the Registrable Securities and (z) specify the expected price range (net of
underwriting discounts and commissions) acceptable to the Requesting Holder to
be received for such Registrable Securities. Following receipt of a Demand
Request, the Company shall:
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(i) use commercially reasonable efforts to file within one
hundred (100) days of the date of delivery to the Company of the Demand Request,
a Registration Statement covering such Registrable Securities which the Company
has been so requested to register by the Requesting Holder and other Holders who
request to the Company that their Registrable Securities be registered within
fifteen (15) days of the mailing of the Request Notice, providing for the
registration under the Securities Act of such Registrable Securities to the
extent necessary to permit the disposition of such Registrable Securities in
accordance with the intended method of distribution specified in such Demand
Request;
(ii) use its commercially reasonable efforts to have such
Registration Statement declared effective by the SEC as soon as practicable
thereafter; and
(iii) refrain from filing any other Registration Statements,
other than pursuant to a Registration Statement on Form S-4 or S-8 (or similar
or successor forms), with respect to any other securities of the Company until
such date which is one hundred and twenty (120) days following effectiveness of
the Registration Statement filed in response to the Demand Request.
(b) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Article 1 shall not be deemed to have been effected (i) unless
a Registration Statement with respect thereto has become effective and remained
effective in compliance with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the
Holders thereof set forth in such Registration Statement; (ii) if, after it has
become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court and has not thereafter become effective, or if the offering of
Registrable Securities is not consummated for any reason, including if the
underwriters of an underwritten public offering advise the Participating Holders
that the Registrable Securities cannot be sold at a net price per share equal to
or above the net price disclosed in the preliminary prospectus; (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived; or (iv)
if the Requesting Holder is cut back to fewer than fifty percent (50%) of the
Registrable Securities requested to be registered.
(c) SELECTION OF UNDERWRITERS. In the event that the Company is
required to file a Registration Statement covering any Registrable Securities of
any Requesting Holder pursuant to Section 1.2(a) hereof and the proposed public
offering is to be an underwritten public offering, the managing underwriter
shall be one or more reputable nationally recognized investment banks selected
by the Requesting Holder and reasonably acceptable to the Company, which consent
shall not be unreasonably withheld, delayed or conditioned.
(d) PRIORITY FOR DEMAND REGISTRATION. Notwithstanding any other
provision of this Article 1, if the managing underwriter of an underwritten
public offering determines and advises the Participating Holders and the Company
in writing that the inclusion of all securities proposed to be included by the
Company and any other Holders in the underwritten public offering would
materially and adversely interfere with the successful marketing of the
Requesting Holder's Registrable Securities, then the Company and other Holders
shall not be permitted to include any securities in excess of the amount, if
any, of securities which the managing underwriter of such underwritten public
offering shall reasonably and in good faith agree in writing to include in such
public offering in addition to the amount of Registrable Securities to be
registered for the Requesting Holder. The Company will be obligated to include
in such Registration Statement, as to each Holder, only a portion of the
Registrable Securities such Holder has requested be registered equal to the
ratio which such Holder's requested Registrable Securities bears to the total
number of Registrable Securities requested to be included in such Registration
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Statement by all Holders who have requested that their Registrable Securities be
included in such Registration Statement. It is acknowledged by the parties
hereto that pursuant to the foregoing provision, the securities to be included
in a registration requested by the Requesting Holder pursuant to Section 1.2
shall be allocated:
(i) first, to the Participating Holders; and
(ii) second, to the Company and any other stockholders of the
Company requesting registration of securities of the Company.
(e) Limitations on Demand Registrations
(i) The Company may delay making a filing of a Registration
Statement or taking action in connection therewith by not more than sixty (60)
consecutive days if the Company provides a written certificate signed by the
Chief Executive Officer of the Company to the Holders, prior to the time it
would otherwise have been required to file such Registration Statement or take
such action pursuant to this Section 1.2, stating that the Board of Directors of
the Company has determined in good faith that the filing of such Registration
Statement would be seriously detrimental to the Company or would otherwise
materially adversely affect a financing, acquisition, disposition, merger or
other material transaction (collectively, a "VALID BUSINESS REASON") and that it
is therefore essential to defer the filing of the Registration Statement;
provided, however, that such right to delay a Demand Request shall be exercised
by the Company not more than once in any twelve (12) month period and the
Company shall only have the right to delay a Demand Request so long as such
Valid Business Reason exists, and during such time, the Company may not file a
Registration Statement (other than Registration Statements on Form S-4 or S-8)
for securities to be issued and sold for its own account or for that of any
other security holder other than the Holders.
(ii) The Company shall only be obligated to effect five (5)
Demand Requests pursuant to this Section 1.2 and the Holders agree not to make a
Demand Request until 150 days after the effective date of a Registration
Statement relating to a Demand Request. Kimco Realty Services, Inc., its
Affiliates, and its transferees and assigns shall have up to three (3) Demand
Requests. Third Avenue Trust, on behalf of the Third Avenue Real Estate Fund
Series, its Affiliates and its transferees and assigns shall have one (1) Demand
Request. Cypress Merchant Banking Partners LP, Cypress Garden LTD., their
respective Affiliates and their respective transferees and assigns shall
collectively have one (1) Demand Request.
(iii) The Company shall not be required to comply with a
Demand Request unless such Demand Request is for the registration of Registrable
Securities that represent at least three percent (3%) of the total number of
shares of the Common Stock then outstanding on a Fully Diluted Basis.
(f) CANCELLATION OF REGISTRATION. A majority in interest of the
Participating Holders shall have the right to cancel a proposed registration of
Registrable Securities pursuant to this Section 1.2 when, (i) in their
discretion, market conditions are so unfavorable as to be seriously detrimental
to an offering pursuant to such registration or (ii) the request for
cancellation is based upon material adverse information relating to the Company
that is different from the information known to the Participating Holders at the
time of the Demand Request. Such cancellation of a registration shall not be
counted as one of the five (5) Demand Requests and notwithstanding anything to
the contrary in the Agreement, the Company shall be responsible for the expenses
of the Participating Holders incurred in connection with the registration prior
to the time of cancellation.
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1.3. Piggyback Registrations.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. Each time that the
Company proposes for any reason to register any of its Common Stock under the
Securities Act, either for its own account or for the account of a stockholder
or stockholders exercising demand registration rights (including any Form S-3
Demand) other than Demand Requests pursuant to Section 1.2 hereof and other than
pursuant to a Registration Statement on Forms S-4 or S-8 (or similar or
successor forms) (a "PROPOSED REGISTRATION"), the Company shall promptly give
written notice of such Proposed Registration to all of the Holders of
Registrable Securities (which notice shall be given not less than thirty (30)
days prior to the expected effective date of the Company's Registration
Statement) and shall offer such Holders the right to request inclusion of any of
such Holder's Registrable Securities in the Proposed Registration. No
registration pursuant to this Section 1.3 shall relieve the Company of its
obligation to register Registrable Securities pursuant to a Demand Request, as
contemplated by Section 1.2 hereof. The rights to piggyback registration may be
exercised an unlimited number of occasions.
(b) PIGGYBACK PROCEDURE. Each Holder of Registrable Securities shall
have fifteen (15) days from the date of receipt of the Company's notice referred
to in Section 1.3(a) above to deliver to the Company a written request
specifying the number of Registrable Securities such Holder intends to sell and
such Holder's intended method of disposition. Any Holder shall have the right to
withdraw such Holder's request for inclusion of such holder's Registrable
Securities in any Registration Statement pursuant to this Section 1.3 by giving
written notice to the Company of such withdrawal. Subject to Section 1.3(d)
below, the Company shall include in such Registration Statement all such
Registrable Securities so requested to be included therein; provided, however,
that the Company may at any time withdraw or cease proceeding with any such
Proposed Registration if it shall at the same time withdraw or cease proceeding
with the registration of all other shares of Common Stock originally proposed to
be registered. In the event that the Proposed Registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under this Section 1.3(b) shall specify that the Registrable
Securities be included in the underwriting on the same terms and conditions as
the shares, if any, otherwise being sold through underwriters under such
registration.
(c) SELECTION OF UNDERWRITERS. The managing underwriter for any
Proposed Registration that involves an underwritten public offering shall be one
or more reputable nationally recognized investment banks selected by the Company
and reasonably acceptable to a majority in interest of the Holders, whose
consent shall not be unreasonably withheld, delayed or conditioned.
(d) PRIORITY FOR PIGGYBACK REGISTRATION. Notwithstanding any other
provision of this Article 1, if the managing underwriter of an underwritten
public offering determines and advises the Company and the Holders in writing
that the inclusion of all Registrable Securities proposed to be included by the
Holders of Registrable Securities in the underwritten public offering would
materially and adversely interfere with the successful marketing of the
Company's securities, then the Holders of Registrable Securities shall not be
permitted to include any Registrable Securities in excess of the amount, if any,
of Registrable Securities which the managing underwriter of such underwritten
public offering shall reasonably and in good faith agree in writing to include
in such public offering in addition to the amount of securities to be registered
for the Company. The Company will be obligated to include in such Registration
Statement, as to each Holder, only a portion of the Registrable Securities such
Holder has requested be registered equal to the ratio which such Holder's
requested Registrable Securities bears to the total number of Registrable
Securities requested to be included in such Registration Statement by all
Holders who have requested that their Registrable Securities be included in such
Registration Statement. It is acknowledged by the parties hereto that pursuant
to the foregoing provision, the securities to be included in a registration
initiated by the Company shall be allocated:
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(i) first, pari passu to the stockholders implementing the
Proposed Registration, if any;
(ii) second, to the Company;
(iii) third, pari passu to the Holders; and
(iv) fourth, to any others requesting registration of
securities of the Company.
If as a result of the provisions of this Section 1.3(d), any Holder shall
not be entitled to include more than 50% of its Registrable Securities in a
registration that such Holder has requested to be so included, such Holder may
withdraw such Holder's request to include Registrable Securities in such
Registration Statement.
1.4. Form S-3 Registration.
(a) Any Requesting Holder (an "INITIATING FORM S-3 HOLDER") may
request at any time that the Company file a Registration Statement under the
Securities Act on Form S-3 (or similar or successor form) covering the sale or
other distribution of all or any portion of the Registrable Securities held by
such Initiating Form S-3 Holder pursuant to Rule 415 (or any similar provision
then in force) under the Securities Act ("FORM S-3 DEMAND") if (i) the
reasonably anticipated aggregate gross proceeds would equal or exceed
$1,000,000, (ii) the Company is a registrant qualified to use Form S-3 (or any
similar or successor form) to register such Registrable Securities and (iii) the
plan of distribution of the Registrable Securities is other than pursuant to an
underwritten public offering. If such conditions are met, the Company shall use
its commercially reasonable efforts to register under the Securities Act on Form
S-3 (or any similar or successor form) at the earliest practicable date, for
sale in accordance with the method of disposition specified in the Form S-3
Demand, the number of Registrable Securities specified in such Form S-3 Demand.
In connection with a Form S-3 Demand, the Company agrees to include in the
prospectus included in any Registration Statement on Form S-3, such material
describing the Company and intended to facilitate the sale of securities being
so registered as is reasonably requested for inclusion therein by the Initiating
Form S-3 Holder, whether or not the rules applicable to preparation of Form S-3
require the inclusion of such information. Notwithstanding the foregoing, if the
Company shall furnish to the Initiating Form S-3 Holder a certificate signed by
the Chief Executive Officer and Chief Financial Officer of the Company stating
that in the good faith opinion of the Board of Directors of the Company, a Valid
Business Reason exists, the Company shall have the right to delay or defer
taking action with respect to such filing for a period of sixty (60) days after
receipt of the Form S-3 Demand; provided, however, that such right to delay or
defer a Form S-3 Demand shall be exercised by the Company not more than once in
any twelve (12) month period, the Company shall only have the right to delay a
Form S-3 Demand so long as such Valid Business Reason exists, and during such
time the Company may not file a Registration Statement for securities to be
issued and sold for its own account or for that of any other Holders.
(b) Form S-3 Demands will not be deemed to be Demand Requests as
described in Section 1.2 hereof and Holders shall have the right to request five
(5) Form S-3 Demands. Notwithstanding the foregoing, the Company shall not be
obligated to file more than one (1) Registration Statement on Form S-3 pursuant
to this Section 1.4 in any given three (3) month period; provided, further, that
the Company shall not be required to effect a registration pursuant to this
Section 1.4 if it is requested within 120 days of the effective date of the most
recent registration pursuant to this Article 1 in which securities held by the
requesting Holder could have been included for sale or distribution. Kimco
Realty Services, Inc., its Affiliates, and its
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transferees and assigns shall have up to three (3) Form S-3 Demands. Third
Avenue Trust, on behalf of the Third Avenue Real Estate Fund Series, its
Affiliates and its transferees and assigns shall have one (1) Form S-3 Demand.
Cypress Merchant Banking Partners LP, Cypress Garden LTD., their respective
Affiliates and their respective transferees and assigns shall collectively have
one (1) Form S-3 Demand.
1.5. Registration Procedures.
(a) OBLIGATIONS OF THE COMPANY. Whenever registration of Registrable
Securities is required pursuant to this Agreement, the Company shall use its
commercially reasonable efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method of distribution
thereof as promptly as possible, and in connection with any such request, the
Company shall, as expeditiously as possible:
(i) Preparation of Registration Statement; Effectiveness.
Prepare and file with the SEC (in any event not later than one hundred (100)
days after receipt of a Demand Request to file a Registration Statement with
respect to Registrable Securities), a Registration Statement on any form on
which the Company then qualifies, which counsel for the Company shall deem
appropriate and pursuant to which such offering may be made in accordance with
the intended method of distribution thereof (except that the Registration
Statement shall contain such information as may reasonably be requested for
marketing or other purposes by the managing underwriter), and use its
commercially reasonable efforts to cause any registration required hereunder to
become effective as soon as practicable after the initial filing thereof and
remain effective for a period of not less than one hundred and eighty (180) days
(or such shorter period in which all Registrable Securities have been sold in
accordance with the methods of distribution set forth in the Registration
Statement); provided, however, that, in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such one hundred eighty (180) day period shall be
extended, if necessary, to keep the Registration Statement effective until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or delayed
basis;
(ii) Participation in Preparation. Provide any Participating
Holder, any underwriter participating in any disposition pursuant to a
Registration Statement, and any attorney, accountant or other agent retained by
any Participating Holder or underwriter (each, an "INSPECTOR" and, collectively,
the "INSPECTORS"), the opportunity to participate (including reviewing and
commenting on relevant documents and agreements) in the preparation of such
Registration Statement, each prospectus included therein or filed with the SEC
and each amendment or supplement thereto;
(iii) Due Diligence. For a reasonable period prior to the
filing of any Registration Statement pursuant to this Agreement, make available
for inspection at the Company's offices and copying by the Inspectors such
financial and other information and books and records, pertinent corporate
documents and properties of the Company and its subsidiaries and cause the
officers, directors, employees, counsel and independent certified public
accountants of the Company and its subsidiaries to respond to such inquiries and
to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement, as shall be reasonably necessary,
in the judgment of the respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act;
(iv) General Notifications. Promptly notify in writing the
Participating Holders, the sales or placement agent, if any, therefor and the
managing underwriter of the securities being sold, (A) when such Registration
Statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with respect to any
such Registration Statement or any post-effective amendment, when the same has
become effective, (B) when the SEC notifies the Company whether there will be a
"review" of such Registration Statement, (C) of
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any comments (oral or written) by the SEC and by the blue sky or securities
commissioner or regulator of any state with respect thereto or (D) of any
request by the SEC for any amendments or supplements to such Registration
Statement or the prospectus or for additional information;
(v) 10b-5 Notification. Promptly notify in writing the
Participating Holders, the sales or placement agent, if any, therefor and the
managing underwriter of the securities being sold pursuant to any Registration
Statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act upon discovery that, or upon the happening of
any event as a result of which, any prospectus included in such Registration
Statement (or amendment or supplement thereto) contains 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 under which they were made, and the Company shall promptly prepare
a supplement or amendment to such prospectus and file it with the SEC promptly
following notice of the occurrence of such event to each Participating Holder,
the sales or placement agent and the managing underwriter) so that after
delivery of such prospectus, as so amended or supplemented, to the purchasers of
such Registrable Securities, such prospectus, as so amended or supplemented,
shall not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made;
(vi) Notification of Stop Orders; Suspensions of
Qualifications and Exemptions. Promptly notify in writing the Participating
Holders, the sales or placement agent, if any, therefor and the managing
underwriter of the securities being sold of the issuance by the SEC of (A) any
stop order issued or threatened to be issued by the SEC or (B) any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose and the
Company agrees to use its commercially reasonable efforts to (x) prevent the
issuance of any such stop order, and in the event of such issuance, to obtain
the withdrawal of any such stop order and (y) obtain the withdrawal of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such Registration
Statement for sale in any jurisdiction at the earliest practicable date;
(vii) Amendments and Supplements; Acceleration. Prepare and
file with the SEC such amendments, including post-effective amendments to each
Registration Statement as may be necessary to keep such Registration Statement
continuously effective for the applicable time period required hereunder and if
applicable, file any Registration Statements pursuant to Rule 462(b) (or any
similar provision then in force) under the Securities Act; cause the related
prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement as so amended or in such prospectus as so
supplemented. If a majority in interest of the Participating Holders so request,
to request acceleration of effectiveness of the Registration Statement from the
SEC and any post-effective amendments thereto, if any are filed; provided that
at the time of such request, the Company does not in good faith believe that it
is necessary to amend further the Registration Statement in order to comply with
the provisions of this subparagraph. If the Company wishes to further amend the
Registration Statement prior to requesting acceleration, it shall have five (5)
days to so amend prior to requesting acceleration;
(viii) Copies. Furnish as promptly as practicable to each
Participating Holder and Inspector prior to filing a Registration Statement or
any supplement or amendment thereto, copies of such Registration Statement,
supplement or amendment as it is proposed to be filed, and after such filing
9
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as each such Participating Holder or underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Participating Holder;
(ix) Blue Sky. Use its commercially reasonable efforts to,
prior to any public offering of the Registrable Securities, register or qualify
(or seek an exemption from registration or qualifications) such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any Participating Holder or underwriter may request, and to continue such
qualification in effect in each such jurisdiction for as long as is permissible
pursuant to the laws of such jurisdiction, or for as long as a Participating
Holder or underwriter requests or until all of such Registrable Securities are
sold, whichever is shortest, and do any and all other acts and things which may
be reasonably necessary or advisable to enable any Participating Holder to
consummate the disposition in such jurisdictions of the Registrable Securities;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent of process in any such states or jurisdictions or subject itself
to material taxation in any such state or jurisdiction, but for this
subparagraph;
(x) Other Approvals. Use its commercially reasonable efforts
to obtain all other approvals, consents, exemptions or authorizations from such
governmental agencies or authorities as may be necessary to enable the
Participating Holders and underwriters to consummate the disposition of
Registrable Securities;
(xi) Agreements. Enter into customary agreements (including
any underwriting agreements in customary form), and take such other actions as
may be reasonably required in order to expedite or facilitate the disposition of
Registrable Securities;
(xii) "Cold Comfort" Letter. Use commercially reasonable
efforts to obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as the managing underwriter may reasonably
request, and reasonably satisfactory to a majority in interest of the
Participating Holders;
(xiii) Legal Opinion. Furnish, at the request of any
underwriter of Registrable Securities on the date such securities are delivered
to the underwriters for sale pursuant to such registration, an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the Holders, and the placement agent or sales agent,
if any, thereof and the underwriters, if any, thereof, covering such legal
matters with respect to the registration in respect of which such opinion is
being given as such underwriter may reasonably request and as are customarily
included in such opinions, and reasonably satisfactory to a majority in interest
of the Participating Holders;
(xiv) SEC Compliance, Earnings Statement. Use its commercially
reasonable efforts to comply with all applicable rules and regulations of the
SEC and make available to its shareholders, as soon as reasonably practicable,
but no later than fifteen (15) months after the effective date of any
Registration Statement, an earnings statement covering a period of twelve (12)
months beginning after the effective date of such Registration Statement, in a
manner which satisfies the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
10
(xv) Certificates, Closing. Provide officers' certificates and
other customary closing documents;
(xvi) NASD. Cooperate with each Participating Holder and each
underwriter participating in the disposition of such Registrable Securities and
underwriters' counsel in connection with any filings required to be made with
the NASD or any exchange upon which the Registrable Securities are listed, if
any;
(xvii) Road Show. Subject to the Company's business needs,
cause the appropriate officers as are requested by a managing underwriter to
participate in a "road show" or similar marketing effort being conducted by such
underwriter with respect to an underwritten public offering;
(xviii) Listing. Use its commercially reasonable efforts to
cause all such Registrable Securities to be listed on each securities exchange
or quotation system on which similar securities issued by the Company are then
listed and if not so listed, to be listed on the NASD automated quotation
system;
(xix) Transfer Agent, Registrar and CUSIP. Provide a transfer
agent and registrar for all Registrable Securities registered pursuant hereto
and a CUSIP number for all such Registrable Securities, in each case, no later
than the effective date of such registration;
(xx) Private Sales. Use its commercially reasonable efforts to
assist a Holder in facilitating private sales of Registrable Securities by,
among other things, providing officers' certificates and other customary closing
documents reasonably requested by a Holder; and
(xxi) Commercially Reasonable Efforts. Use its commercially
reasonable efforts to take all other actions necessary to effect the
registration of the Registrable Securities contemplated hereby.
(b) SELLER INFORMATION. The Company may require each Participating
Holder as to which any registration of such Holder's Registrable Securities is
being effected to furnish to the Company with such information regarding such
Participating Holder and such Participating Holder's method of distribution of
such Registrable Securities as the Company may from time to time reasonably
request in writing.
(c) NOTICE TO DISCONTINUE. Each Participating Holder whose
Registrable Securities are covered by a Registration Statement filed pursuant to
this Agreement agrees that, upon receipt of written notice from the Company of
the happening of any event of the kind described in Section 1.5(a)(v), such
Participating Holder shall forthwith discontinue the disposition of Registrable
Securities until such Participating Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 1.5(a)(v) or until it
is advised in writing by the Company that the use of the prospectus may be
resumed and has received copies of any additional or supplemental filings which
are incorporated by reference into the prospectus, and, if so directed by the
Company in the case of an event described in Section 1.5(a)(v), such
Participating Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Participating Holder's
possession, of the prospectus covering such Registrable Securities which is
current at the time of receipt of such notice. If the Company shall give any
such notice, the Company shall extend the period during which such Registration
Statement is to be maintained effective by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
1.5(a)(v) to and including the date when the Participating Holder shall have
received the copies of the supplemented or amended prospectus contemplated by,
and meeting the requirements of, Section 1.5(a)(v).
11
1.6. REGISTRATION EXPENSES. Except as otherwise provided herein, all
Registration Expenses shall be borne by the Company. All Selling Expenses
relating to Registrable Securities registered shall be borne by the
Participating Holders of such Registrable Securities pro rata on the basis of
the number of shares so registered.
1.7. Indemnification.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees,
notwithstanding termination of this Agreement, to indemnify and hold harmless to
the fullest extent permitted by law, each Holder, each of its directors,
officers, employees, advisors, agents and general or limited partners (and the
directors, officers, employees, advisors and agents thereof), their respective
Affiliates and each Person who controls (within the meaning of the Securities
Act or the Exchange Act) any of such Persons, and each underwriter and each
Person who controls (within the meaning of the Securities Act or the Exchange
Act) any underwriter (collectively, "HOLDER INDEMNIFIED PARTIES") from and
against any and all losses, claims, damages, expenses (including reasonable
costs of investigation and fees, disbursements and other charges of counsel and
any amounts paid in settlement effected with the Company's consent, which
consent shall not be unreasonably withheld or delayed) or other liabilities
(collectively, "LOSSES") to which any such Holder Indemnified Party may become
subject under the Securities Act, Exchange Act, any other federal law, any state
or common law or any rule or regulation promulgated thereunder or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) are resulting from or arising out of or based
upon (i) any untrue, or alleged untrue, statement of a material fact contained
in any Registration Statement, prospectus or preliminary prospectus (as amended
or supplemented) or any document incorporated by reference in any of the
foregoing or resulting from or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in
light of the circumstances under which they were made), not misleading or (ii)
any violation by the Company of the Securities Act, Exchange Act, any other
federal law, any state or common law or any rule or regulation promulgated
thereunder or otherwise incident to any registration, qualification or
compliance and in any such case, the Company will promptly reimburse each such
Holder Indemnified Party for any legal and any other Losses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability, action or investigation or proceeding; provided, however,
that the Company shall not be liable to any Holder Indemnified Party for any
Losses that arise out of or are based upon (x) written information provided by a
Holder Indemnified Party expressly for use in the Registration Statement or (y)
sales of Registrable Securities by a Holder Indemnified Party to a person to
whom there was not sent or given, at or before the written confirmation of such
sale, a copy of the prospectus (excluding documents incorporated by reference)
or the prospectus as then amended or supplemented (excluding documents
incorporated by reference) if the Company has previously furnished in a timely
manner a reasonable number of copies thereof to such Holder Indemnified Party in
compliance with this Agreement and the Losses of such Holder Indemnified Party
result from an untrue statement or omission of a material fact which was
corrected in the prospectus (or the prospectus as then amended or supplemented).
Such indemnity obligation shall remain in full force and effect regardless of
any investigation made by or on behalf of the Holder Indemnified Parties and
shall survive the transfer of Registrable Securities by such Holder Indemnified
Parties.
(b) INDEMNIFICATION BY HOLDERS. In connection with any proposed
registration in which a Holder is participating pursuant to this Agreement, each
such Holder shall furnish to the Company in writing such information with
respect to such Holder as the Company may reasonably request or as may be
required by law for use in connection with any Registration Statement or
prospectus or preliminary prospectus to be used in connection with such
registration and each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, any underwriter retained by the Company and their
respective directors, officers, partners, employees, advisors and agents, their
12
respective Affiliates and each Person who controls (within the meaning of the
Securities Act or the Exchange Act) any of such Persons to the same extent as
the foregoing indemnity from the Company to the Holders as set forth in Section
1.7(a) (subject to the exceptions set forth in the foregoing indemnity, the
proviso to this sentence and applicable law), but only with respect to any such
information furnished in writing by such Holder expressly for use therein;
provided, however, that the liability of any Holder under this Section 1.7(b)
shall be limited to the amount of the net proceeds received by such Holder in
the offering giving rise to such liability. Such indemnity obligation shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Holder Indemnified Parties (except as provided above) and shall
survive the transfer of Registrable Securities by such Holder.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder (the "INDEMNIFIED PARTY") agrees to give prompt
written notice to the indemnifying party (the "INDEMNIFYING PARTY") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, however, that, the failure so to notify
the Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder unless and to the extent
such Indemnifying Party is materially prejudiced by such failure. If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party
agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense
of such action with counsel satisfactory to the Indemnified Party in its
reasonable judgment or (iii) the named parties to any such action (including any
impleaded parties) reasonably believe that the representation of such
Indemnified Party and the Indemnifying Party by the same counsel would be
inappropriate under applicable standards of professional conduct. In the case of
clause (ii) above and (iii) above, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of such Indemnified Party.
No Indemnifying Party shall be liable for any settlement entered into without
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the written consent of the Indemnified Party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of the Indemnified Party from all liability arising out of such action
or claim and (B) does not include a statement as to, or an admission of, fault,
culpability or a failure to act by or on behalf of any Indemnified Party. The
rights afforded to any Indemnified Party hereunder shall be in addition to any
rights that such Indemnified Party may have at common law, by separate agreement
or otherwise.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 1.7 from the Indemnifying Party is unavailable or insufficient to hold
harmless an Indemnified Party in respect of any Losses referred to herein, then
the Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such Losses in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and the Indemnified Party, as well as any other
relevant equitable considerations. The relative faults of the 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, was
made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the Indemnifying Party's and Indemnified Party's relative
intent,
13
knowledge, access to information and opportunity to correct or prevent such
action; provided, however, that the liability of any Holder under this Section
1.7(d) shall be limited to the amount of the net proceeds received by such
Holder in the offering giving rise to such liability. The amount paid or payable
by a party as a result of the Losses or other liabilities referred to above
shall be deemed to include, subject to the limitations set forth in Sections
1.7(a), 1.7(b) and 1.7(c), any legal or other fees, charges 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 1.7(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 in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution pursuant to this
Section 1.7(d).
1.8. RULE 144 AND RULE 144A; OTHER EXEMPTIONS. With a view to making
available to the Holders the benefits of Rule 144 and Rule 144A promulgated
under the Securities Act and other rules and regulations of the SEC that may at
any time permit a Holder to sell securities of the Company to the public without
registration, the Company covenants that it shall use commercially reasonable
efforts to (i) file in a timely manner all reports and other documents required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder and (ii) take such further action
as each Holder may reasonably request (including providing any information
necessary to comply with Rule 144 and Rule 144A, if available with respect to
resales of the Registrable Securities under the Securities Act), at all times,
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (x) Rule 144 and Rule 144A (if
available with respect to resales of the Registrable Securities) under the
Securities Act, as such rules may be amended from time to time or (y) any other
rules or regulations now existing or hereafter adopted by the SEC. Upon the
written request of a Holder, the Company shall deliver to the Holder a written
statement as to whether it has complied with such requirements.
1.9. CERTAIN LIMITATIONS ON REGISTRATION RIGHTS. No Holder may participate
in any Registration Statement hereunder unless such Holder completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of such
underwriting arrangements and agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting agreement approved by the
Holder or Holders entitled hereunder to approve such arrangements; provided,
however, that no such Holder shall be required to make any representations or
warranties to the Company or the underwriters in connection with any such
registration other than representations and warranties as to (i) such Holder's
ownership of its Registrable Securities to be sold or transferred, (ii) such
Holder's power and authority to effect such transfer and (iii) such matters
pertaining to compliance with securities laws as may be reasonably requested.
Such Holders of Registrable Securities to be sold by such underwriters may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of the Company to and for the benefit of
such underwriters, shall also be made to and for the benefit of such Holders and
that any or all of the conditions precedent to the obligations of the
underwriters under the underwriting agreement be conditions precedent to the
obligations of the Holders.
1.10. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. The Company
represents and warrants that it has not granted registration rights prior to the
date hereof and agrees that from and after the date of this Agreement, it shall
not, without the prior written consent of the Holders of at least fifty percent
(50%) of the Registrable Securities then outstanding, enter into any agreement
(or amendment or waiver of the provisions of any agreement) with any holder or
prospective holder of any securities of the Company that would grant such holder
registration rights that are more favorable, pari passu or senior to
14
those granted pursuant to this Agreement, other than registration rights in
connection with an offering under Rule 144A (or any similar provision then in
force) under the Securities Act.
1.11. TRANSFER OF REGISTRATION RIGHTS. The rights of a Holder under this
Article 1 may be transferred or assigned in connection with a transfer of
Registrable Securities to (i) any Affiliate of a Holder, (ii) any subsidiary,
parent, partner, retired partner, employee, consultant, limited partner,
shareholder or member of a Holder or (iii) any family member or trust for the
benefit of any Holder, or (iv) any transferee who, after such transfer, holds at
least 50,000 shares of Registrable Securities (as adjusted for any stock
dividends, stock splits, combinations and reorganizations and similar events).
Notwithstanding the foregoing, such rights may only be transferred or assigned
provided that all of the following additional conditions are satisfied: (a) such
transfer or assignment is effected in accordance with applicable securities
laws; (b) such transferee or assignee agrees in writing to become subject to the
terms of this Agreement; and (c) the Company is given written notice by such
Holder of such transfer or assignment, stating the name and address of the
transferee or assignee and identifying the Registrable Securities with respect
to which such rights are being transferred or assigned.
1.12. "MARKET STAND-OFF" AGREEMENT. In the event of any registered public
offering of Company securities pursuant to a firm commitment underwriting, each
Holder agrees, if requested by the Company (or the managing underwriter of an
underwritten offering), not to effect any public sale or distribution (including
any sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act) of any Registrable Securities (except as part of the applicable
registration, if permitted) which securities are the same as or similar to those
being registered in connection with such registration, or which are convertible
into or exchangeable or exercisable for such securities, during the period
beginning seven (7) days before and ending 90 days (or such longer period up to
120 days if so requested by such managing underwriter) after the effective date
of the registration statement filed in connection with such registration, to the
extent such Holders are timely notified in writing by the Company or the
managing underwriter; provided, the Company's executive officers and directors
have entered into similar agreements for the same period.
2. PREEMPTIVE RIGHTS
2.1. RIGHT TO PARTICIPATE IN FUTURE ISSUANCES. In case the Company
proposes at any time to issue or sell any Common Stock or any other security of
the Company which is convertible into, exercisable for or exchangeable for,
directly or indirectly, Common Stock, whether at the time of issuance or upon
the passage of time or the occurrence of some future event (a "COMMON STOCK
EQUIVALENT"); such Common Stock and Common Stock Equivalents being the "OFFERED
SECURITIES"), the Company shall, no later than fifteen (15) days prior to the
consummation of such transaction (a "PREEMPTIVE RIGHTS TRANSACTION"), give
notice in writing (the "PREEMPTIVE RIGHTS OFFER NOTICE") to each Stockholder of
such Preemptive Rights Transaction. The Preemptive Rights Offer Notice shall
describe the proposed Preemptive Rights Transaction, identify any proposed
purchaser, and contain an offer (the "PREEMPTIVE RIGHTS OFFER") to sell to each
Stockholder, at the same price and for the same consideration to be paid by the
proposed purchaser (provided, that in the event any of such consideration is
no-cash consideration, at the election of such Stockholder to whom the
Preemptive Rights Offer is made, such Stockholder may pay cash equal to the
value of such non-cash consideration), all or any part of such Stockholder's pro
rata portion of the Offered Securities in, or exercisable for, as the case may
be, in the class of Common Stock held by such Stockholder (which shall be a
percentage of the Offered Securities equal to the percentage of all Fully
Diluted Common Stock (after considering Common Stock Equivalents) then
outstanding (or deemed outstanding) that is represented by the Fully Diluted
Common Stock held by such Stockholder). If any Stockholder to whom a Preemptive
Rights Offer is made fails to accept (a "NON-RESPONDING STOCKHOLDER") in writing
the Preemptive Rights Offer by the fifteenth (15th) day after the Company's
delivery of the Preemptive Rights Offer Notice, the Company may proceed with the
proposed Preemptive
15
Rights Transaction, free of any right on the part of any Non-Responding
Stockholders under this Section 2.1 in respect thereof.
2.2. EXCEPTIONS TO PREEMPTIVE RIGHTS. Section 2.1 shall not apply to (i)
issuances or sales of Common Stock or Common Stock Equivalents upon exercise,
conversion or exchange of any Common Stock Equivalent which, when issued, was
subject to or exempt from the preemptive rights provided under Section 2.1, (ii)
shares of capital stock issued in a stock split or stock dividend or shares of
capital stock or other securities distribute ratably or sold to all holders of
Common Stock on a per share equivalent basis, (iii) issuances of Common Stock or
Common Stock equivalents pursuant to any exercise, conversion or exchange of any
Common Stock Equivalent that was outstanding as of the date of this Agreement,
including the Baczko Warrant, Cypress Warrant, the Kimco Warrant and the Third
Avenue Trust Realty Warrant, (iv) issuances or sales, including by merger or
consolidation, of Common Stock or Common Stock Equivalents pursuant to
acquisitions or corporate partnership transactions with the approval of the
Board of Directors of the Company, (v) compensatory issuances of options,
restricted stock or other equity rights to officers, employees, directors or
consultants of the Company with approval of the Board of Directors of the
Company or (vi) issuances and sales required under the Plan.
3. COVENANTS OF THE COMPANY
3.1. CORPORATE EXISTENCE. The Company shall preserve and maintain, and,
except as otherwise permitted by Section 3.10, cause each subsidiary to preserve
and maintain, its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified, and cause
each subsidiary to qualify and remain qualified, as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or the ownership or lease of its properties,
except to the extent any failure thereof could not reasonably be expected to
have a material and adverse effect on the business assets, liabilities,
prospects, condition, financial or otherwise, or operations of the Company.
3.2. PRESERVATION OF PROPERTY AND ASSETS. The Company shall use its
commercially reasonable efforts to secure, preserve and maintain, and cause any
subsidiary to use its commercially reasonable efforts to secure, preserve and
maintain, all licenses and other rights to use patents, processes, licenses,
permits, trademarks, trade names, inventions, copyrights or other intellectual
property rights owned or possessed by it and deemed by the Company to be
material to the conduct of its business or the business of any subsidiary. The
Company shall also use its commercially reasonable efforts to maintain and
preserve, and cause each subsidiary to its best efforts to maintain and
preserve, all of its other properties and assets necessary for the proper
conduct of its business, in good repair, working order and condition, ordinary
wear and tear excepted. and, from time to time, make all necessary and proper
repairs, renewals, replacements, additions and improvements thereto, except to
the extent any failure thereof could not reasonably be expected to have a
material and adverse effect on the business assets, liabilities, prospects,
condition, financial or otherwise, or operations of the Company; and the Company
and its subsidiaries will at all times comply with each material provision of
all leases to which any of them is a party or under which any of them occupies
property if the breach of such provision might have a material and adverse
effect on the business, assets, liabilities, prospects, condition, financial or
otherwise, or operations of the Company.
3.3. DIRECTORS AND OFFICERS INSURANCE. The Company shall obtain and
maintain customary directors and officers' liability insurance and will at all
times exercise the powers granted to it by its Certificate of Incorporation, its
Bylaws, and by applicable law to indemnify and hold harmless to the fullest
extent permitted by applicable law present or former directors and officers of
the Company against any threatened or actual claim, action, suit, proceeding or
investigation made against them arising from
16
their service in such capacities (or service in such capacities for another
enterprise at the request of the Company).
3.4. RESTRICTIVE AGREEMENTS PROHIBITED. Neither the Company nor any
subsidiary shall become a party to any agreement that by its terms restricts the
Company's performance of this Agreement, the Plan, the Certificate of
Incorporation or the Bylaws.
3.5. EXPENSES OF DIRECTORS. The Company shall promptly reimburse in full,
each director of the Company who is not an employee of the Company and who was
elected as a director solely or in part by the Stockholders, for all of his or
her reasonable out-of-pocket expenses incurred in attending each meeting of the
Board or any committee thereof.
3.6. INDEMNITY FOR OFFICERS AND DIRECTORS. The Company shall at all times
maintain provisions in its Bylaws and/or Certificate of Incorporation
indemnifying all directors against liability to the maximum extent permitted
under the laws of the State of Delaware.
3.7. PUBLICITY. The Company shall not issue or cause the publication of
any press release, advertisement or other public communication relating to the
Stockholder (or any affiliate of the Stockholder), without the Stockholder's
prior written consent, except as may be required by law or in connection with a
registration of Registrable Securities.
3.8. EMPLOYEE AND OTHER STOCK ARRANGEMENTS. The Company will not, without
the approval of the Board (or a committee thereof), issue any of its capital
stock, or grant an option or rights to subscribe for, purchase or acquire any of
its capital stock, to any employee, consultant, officer or director of the
Company or a subsidiary. Each acquisition of any shares of capital stock of the
Company or any option or right to acquire any shares of capital stock of the
Company by an employee, officer or director of the Company will be conditioned
upon the execution and delivery by the Company and such employee, officer or
director of an agreement substantially in a form approved by the Board (or a
committee thereof).
3.9. LISTING. The Company shall use its commercially reasonable efforts to
cause the Common Stock and all Registrable Securities to be listed on the Nasdaq
National Market or a qualifying interdealer quotation system.
4. GENERAL PROVISIONS
4.1. SURVIVAL OF AGREEMENTS. All covenants, agreements, representations
and warranties made in this Agreement or any certificate or instrument delivered
to the Stockholder pursuant to or in connection with this Agreement shall
survive the execution and delivery of this Agreement, and the issuance, sale and
delivery of the Shares, and all statements contained in any certificate or other
instrument delivered by the Company hereunder or in connection herewith shall be
deemed to constitute representations and warranties made by the Company.
4.2. SPECIFIC PERFORMANCE. Each party hereto acknowledges and agrees that
the other parties hereto would be irreparably damaged if any provision of this
Agreement is not performed in accordance with its specific terms or is otherwise
breached. Accordingly, each party hereto agrees that the other parties hereto
will be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to specifically enforce this Agreement and its
terms and provisions in any action instituted, in addition to any other remedy
to which they may be entitled, at law or in equity.
17
4.3. TERMINATION. This Agreement shall automatically and without further
action terminate upon a Sale of the Company.
4.4. FURTHER ASSURANCES. The Company and the Stockholder each agree to
take such actions and execute and deliver such other documents or agreements as
may be necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
4.5. Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the exclusive
jurisdiction of any federal or state court located within the County of Kent,
State of Delaware over any dispute arising out of or relating to this Agreement
or any of the transactions contemplated hereby and each party hereby irrevocably
agrees that all claims in respect of such dispute or any suit, action or
proceeding related thereto shall be heard and determined in such courts. The
parties hereby irrevocably waive, to the fullest extent permitted by applicable
law, any objection which they may now or hereafter have to the laying of venue
of any such dispute brought in such court or any defense of inconvenient forum
for the maintenance of such dispute. Each of the parties hereto agrees that a
judgment in any such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 4.5
hereof.
4.6. NOTICES. Any notice, request, demand or other communication required
or permitted to be given to a party pursuant to the provisions of this Agreement
will be in writing and will be effective and deemed given under this Agreement
on the earliest of: (a) the date of personal delivery, (b) the date of
transmission by facsimile, with confirmed transmission and receipt, (c) two (2)
days after deposit with a nationally-recognized courier or overnight service
such as Federal Express, or (d) five (5) days after mailing via certified mail,
return receipt requested. All notices not delivered personally or by facsimile
will be sent with postage and other charges prepaid and properly addressed to
the party to be notified at the address set forth for such party:
If to the Stockholder:
At the address set forth next to such Stockholder's name on Schedule
I hereto.
If to the Company:
Frank's Nursery & Crafts, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Chief Executive Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto (and such party's permitted assigns) may change such
party's address for receipt of future notices hereunder by giving written notice
to the Company and the other parties hereto.
18
4.7. GOVERNING LAW. This Agreement and the performance of the transactions
and the obligations of the parties hereunder will be governed by and construed
and enforced in accordance with the laws of the State of Delaware, without
giving effect to any choice of law principles.
4.8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties hereto in respect of its subject matters and
supersedes all prior understandings, agreements, or representations by or among
the parties hereto, written or oral, to the extent they relate in any way to the
subject matter hereof or the transactions contemplated hereby.
4.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
4.10. AMENDMENTS AND WAIVERS. This Agreement may not be amended or
modified and no provision hereof may be waived, without the written consent of
the Company and the holders of at least fifty percent (50%) of the Registrable
Securities, provided, that any amendment or waiver that adversely affects the
rights of Kimco Realty Services, Inc. shall require Kimco Realty Services,
Inc.'s prior written consent. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.
4.11. SUCCESSORS AND ASSIGNS. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
4.12. SEVERABILITY. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision hereof will
not affect the validity or enforceability of the other provisions hereof;
provided that if any provision of this Agreement, as applied to any party or to
any circumstance, is adjudged by a court or governmental body not to be
enforceable in accordance with its terms, the parties agree that the court or
governmental body, making such determination will have the power to modify the
provision in a manner consistent with its objectives such that it is
enforceable, and/or to delete specific words or phrases, and in its reduced
form, such provision will then be enforceable and will be enforced.
4.13. TITLES AND SUBTITLES. The article and section headings contained in
this Agreement are inserted for convenience only and will not affect in any way
the meaning or interpretation of this Agreement.
4.14. THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any Person other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
4.15. CONSTRUCTION. The parties hereto have jointly participated in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the parties hereto and no presumption or burden of proof will arise
favoring or disfavoring any party hereto because of the authorship of any
provision of this Agreement.
19
Any reference to any federal, state, local or foreign law will also be deemed to
refer to such law as amended and all rules and regulations promulgated
thereunder, unless the context otherwise requires. The word "including" means
"including without limitation". Pronouns in masculine, feminine and neuter
genders will be construed to include any other gender, and words in the singular
form will be construed to include the plural and vice versa, unless the context
otherwise requires. The words "this Agreement", herein, "hereof", "hereby",
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The parties
hereto intend that each representation, warranty and covenant contained herein
will have independent significance. If any party hereto has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which
such party has breached, will not detract from or mitigate the fact that such
party is in breach of the first representation, warranty or covenant.
4.16. REMEDIES. The parties hereto shall have all remedies for breach of
this Agreement available to them as provided by law or equity. Without limiting
the generality of the foregoing, the parties agree that in addition to any other
rights and remedies available at law or in equity, the parties shall be entitled
to obtain specific performance of the obligations of each party to this
Agreement and immediate injunctive relief and that, in the event any action or
proceeding is brought in equity or to enforce the same, no party will urge, as a
defense, that there is an adequate remedy at law. No single or partial assertion
or exercise of any right, power or remedy of a party hereunder shall preclude
any other or further assertion or exercise thereof.
4.17. ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or any other agreement or
document to be executed or delivered pursuant hereto, the prevailing party shall
be entitled to reasonable attorneys' fees, costs, and disbursements in addition
to any other relief to which such party may be entitled.
4.18. AGGREGATION OF STOCK. All shares held or acquired by Affiliates or
persons will be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
[SIGNATURE PAGES FOLLOW]
20
IN WITNESS WHEREOF, a duly authorized representative of the parties
hereto have executed this Investors' Rights Agreement as of the date first above
written.
COMPANY: FRANK'S NURSERY & CRAFTS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Treasurer
[SIGNATURE PAGE TO FRANK'S INVESTORS' RIGHTS AGREEMENT]
This Investors' Rights Agreement is hereby executed as of the date
set forth below.
STOCKHOLDER:
Individuals:
_________________________________________
Print Name:
Entities:
Name of Entity:_________________
By:___________________________
Name:
Title:
Address of Stockholder:
_________________________________________
_________________________________________
_________________________________________
Date of Execution:
_________________________________________
[SIGNATURE PAGE TO FRANK'S INVESTORS' RIGHTS AGREEMENT]
SCHEDULE I
STOCKHOLDERS
1. Kimco Realty Services, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇ ▇▇▇▇▇▇
2. Third Avenue Trust, on behalf of the Third Avenue Value Fund Series
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: General Counsel
3. Cypress Merchant Banking Partners LP
c/o The Cypress Group LLC
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
4. Cypress Garden LTD.
c/o The Cypress Group LLC
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
5. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇