EXHIBIT 10.2
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REGISTRATION RIGHTS AGREEMENT
Dated as of January 27, 1998
by and among
CAMELOT MUSIC HOLDINGS, INC.
and
EACH SECURITIES HOLDER REFERRED TO HEREIN
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REGISTRATION RIGHTS AGREEMENT
Table of Contents
Page
SECTION 1. DEFINITIONS......................................................1
1.1. Defined Terms................................................... 1
SECTION 2. DEMAND REGISTRATION RIGHTS OF
SECURITIES HOLDERS ........................................... 7
2.1. Demand Registration Rights...................................... 7
2.2. Determination................................................... 7
2.3. Notices; Minimum Registerable Amounts........................... 8
2.4. Discretion of Securities Holder................................. 9
2.5. Allocation Among Initiating Securities Holders..................10
2.6. Piggyback Rights of Securities Holders and the
Company.......................................................10
SECTION 3. COMPANY SALE EVENTS.............................................11
3.1. Determination...................................................11
3.2. Notice ........................................................12
3.3. Piggyback Rights of Securities Holders..........................12
3.4. Discretion of the Company.......................................13
SECTION 4. BLACK-OUT PERIODS...............................................13
4.1. Black-Out Periods for Securities Holders........................13
SECTION 5. AGREEMENTS CONCERNING OFFERINGS.................................14
5.1. Obligations of Securities Holders...............................14
5.2. Obligations of the Company......................................14
5.3. Agreements Related to Offerings.................................16
5.4. Certain Expenses................................................18
5.5. Reports Under the Exchange Act; Rule 144........................19
5.6. Limitations on Subsequent Registration Rights. .................19
5.7. Indemnification and Contribution................................20
5.8. Underwritten Offerings..........................................28
5.9. Transfer of Rights Under this Agreement; Transfers
of Registerable Common........................................28
5.10. Termination of Rights...........................................29
SECTION 6. SEQUENCING OF PUBLIC SALE EVENTS................................29
6.1. Effective Notice Period.........................................29
6.2. Restrictive Legend on Certificates..............................30
SECTION 7. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY................................................31
SECTION 8. REPRESENTATIONS AND WARRANTIES
OF THE SECURITIES HOLDERS.....................................35
SECTION 9. DELIVERY OF COMFORT LETTER
AND LEGAL OPINION.............................................37
SECTION 10. MISCELLANEOUS...................................................37
10.1. Notices.........................................................37
10.2. Amendments and Waivers..........................................38
10.3. Termination.....................................................38
10.4. Survival of Representations and Warranties......................38
10.5. Headings........................................................39
10.6. Counterparts....................................................39
10.7. GOVERNING LAW...................................................39
10.8. Adjustment of Shares............................................39
10.9. No Inconsistent Agreements......................................39
10.10. Severability...................................................39
10.11. ENTIRE AGREEMENT...............................................39
10.12. Listing of New Common Stock....................................39
SCHEDULES
Schedule 1 - Registerable Common As of the Effective Date
EXHIBITS
Exhibit A - Securities Holders Questionnaire
Exhibit B - Supplemental Addendum
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of January 27, 1998, by and
among CAMELOT MUSIC HOLDINGS, INC. (formerly known as CM Holdings, Inc.), a
Delaware corporation (the "Company") and each SECURITIES HOLDER (as defined in
subsection 1.1).
W I T N E S S E T H :
WHEREAS, on August 9, 1996 the Company filed a voluntary petition for
relief under Chapter 11 of title 11 of the United States Code (as amended, the
"Bankruptcy Code") with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). On December 12, 1997, the Bankruptcy Court
entered an Order confirming the Second Amended Joint Chapter 11 Plan of CM
Holdings, Inc., Camelot Music, Inc., G.M.G. Advertising, Inc. and Grapevine
Records and Tapes, Inc. (the "Plan"); and
WHEREAS, the Plan provides that the Company shall enter into a
registration rights agreement with certain of its shareholders.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1. Defined Terms. (a) As used in this Agreement, the terms defined
in the caption and the recitals shall have the meanings set forth therein, and
the following terms shall have the following meanings:
"affiliate" shall have the meaning ascribed thereto in Rule 12b-2
under the Exchange Act as in effect on the date hereof.
"Agreement" shall mean this Registration Rights Agreement, as amended,
supplemented or otherwise modified from time to time.
"Camelot Group" shall mean the Company, Camelot Music, Inc., Camelot
Midwest Region, Inc., Camelot Northeast Region, Inc., Camelot Southeast
Region, Inc., Camelot Western Region, Inc., Camelot Distribution Co., Inc.,
Grapevine Records and Tapes, Inc. and the affiliates of each such entity.
"Commission" shall mean the United States Securities and Exchange
Commission or any successor thereto.
"Company Private Sale Event" shall mean any sale of New Common Stock
by the Company which sale is not effected pursuant to a Registration
Statement; excluding, however, any sale or related series of sales of New
Common Stock by the Company (a) in connection with the acquisition by the
Company or any other member of the Camelot Group of another company or
business or (b) pursuant to any employee compensation plan, agreement or
arrangement adopted by the Company or any other member of the Camelot
Group.
"Company Public Sale Event" shall mean any sale by the Company of New
Common Stock pursuant to a Registration Statement filed by the Company
(other than a Registration Statement filed by the Company on either Form
S-4 or Form S-8) pursuant to subsection 3.1.
"Company Sale Notice" shall mean a Notice of Offering from the Company
to each Security Holder stating that the Company proposes to effect a
Company Public Sale Event or a Company Private Sale Event, as the case may
be.
"Demand Registration" shall mean any Registration of Registerable
Common pursuant to a Registration Statement filed by the Company in
accordance with the provisions of subsection 2.2.
"Effective Date" shall mean January 27, 1998, being the date on which
the Plan became effective, as provided therein.
"Effective Notice Period" shall have the meaning assigned to such term
in subsection 6.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor legislation thereto.
"First Phase" shall mean the period of time commencing on the
Effective Date and ending on the date that is the earlier of (a) the date
on which the Company is eligible to use Form S-3 to effect a Registration
of shares of New Common Stock and (b) the fifteen (15) month anniversary of
the Effective Date.
"Form S-1" shall mean such form of registration statement under the
Securities Act as in effect on the date hereof or any successor form
thereto.
"Form S-3" shall mean such form of registration statement under the
Securities Act as in effect on the date hereof or any successor form
thereto.
"Form S-4" shall mean such form of registration statement under the
Securities Act as in effect on the date hereof or any successor form
thereto.
"Form S-8" shall mean such form of registration statement under the
Securities Act as in effect on the date hereof or any successor form
thereto.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Initiating Securities Holders" shall have the meaning assigned to
such term in subsection 2.3(b).
"Material Adverse Change" shall mean, for purposes of subsections
2.4(b) and (c), any material adverse change in, or the occurrence of any
event which would reasonably be expected to have a material adverse effect
on, the business, condition (financial or otherwise) or prospects of the
Camelot Group taken as a whole (it being understood that a change in
general political, financial, banking or capital market conditions shall
not be a "Material Adverse Change" unless such change has, or would
reasonably be expected to have, a material adverse effect on the Camelot
Group as described above).
"Minimum Registerable Amount" shall mean, on any date of determination
thereof during (a) the First Phase, the number of shares of Registerable
Common representing at least (i) in the case of a Demand Registration other
than a Shelf Registration, 10% of the issued and then outstanding shares of
New Common Stock or (ii) in the case of a Shelf Registration, 15% of the
issued and then outstanding shares of New Common Stock and (b) the Second
Phase, (i) in the case of a Demand Registration other than a Shelf
Registration, 7.5% of the issued and then outstanding shares of New Common
Stock or (ii) in the case of a Shelf Registration, 11.25% of the issued and
then outstanding shares of New Common Stock.
"NASD" shall mean the National Association of Securities Dealers, Inc.
or any successor thereto.
"New Common Stock" shall mean the common stock, par value $.01 per
share, of the Company authorized pursuant to the Plan to be issued from and
after the Effective Date, and any reclassification thereof.
"Notice of Offering" shall mean a written notice with respect to (a) a
proposed Sale Event pursuant to a Demand Registration, (b) a Company Public
Sale Event or (c) a Company Private Sale Event, in each case setting forth
(i) the expected maximum and minimum number of shares of Registerable
Common or New Common Stock, as the case may be, proposed to be offered and
sold, (ii) the lead managing underwriter, if applicable and known and (iii)
the proposed method of distribution and the expected timing of the
offering.
"Person" shall mean any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority, limited liability company or other entity
of whatever nature.
"Piggybacking Notice" shall have the meaning assigned to such term in
subsection 2.6(a).
"Piggybacking Securities Holder" shall have the meaning assigned to
such term in subsection 2.6(a).
"Preliminary Prospectus" shall mean each preliminary prospectus
included in a Registration Statement or in any amendment thereto prior to
the date on which such Registration Statement is declared effective under
the Securities Act, including any prospectus filed with the Commission
pursuant to Rule 424(a) under the Securities Act.
"Prospectus" shall mean each prospectus included in a Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective Registration Statement in accordance with Rule 430A), together
with any supplement thereto, as filed with, or transmitted for filing to,
the Commission pursuant to Rule 424(b) under the Securities Act.
"Public Sale Event" shall mean a Securities Holder Public Sale Event
or a Company Public Sale Event, as the case may be.
"Purchase Agreement" shall mean, in connection with any Sale Event,
any written agreement entered into by any Securities Holder providing for
the sale of Registerable Common and/or the Company providing for the sale
of New Common Stock.
"Registerable Common" shall mean with respect to each Securities
Holder (a) the shares of New Common Stock issued to such Securities Holder
pursuant to the Plan (in the number, as of the Effective Date, as set forth
on Schedule 1 hereto), and (b) any other securities issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such shares of Registerable Common;
excluding in all cases, however, any shares of Registerable Common from and
after the transfer thereof pursuant to a Registration Statement or Rule
144.
"Registration" shall mean a registration of securities pursuant to the
Securities Act.
"Registration Statement" shall mean any registration statement
(including the Preliminary Prospectus, the Prospectus, any amendments
(including any post-effective amendments) thereof, any supplements and all
exhibits thereto and any documents incorporated therein by reference
pursuant to the rules and regulations of the Commission), filed by the
Company with the Commission which complies with the requirements of the
Securities Act and the rules and regulations of the Commission thereunder
in connection with any Public Sale Event.
"Responsible Officer" shall mean with respect to any Person, the
president, chief executive officer, chief operating officer, chief
financial officer, vice president--finance or treasurer of such Person.
"Rule 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act, or any successor to such Rule.
"Rule 415" shall mean Rule 415 promulgated by the Commission under the
Securities Act, or any successor to such Rule.
"Rule 424" shall mean Rule 424 promulgated by the Commission under the
Securities Act, or any successor to such Rule.
"Rule 430A" shall mean Rule 430A promulgated by the Commission under
the Securities Act, or any successor to such Rule.
"Sale Event" shall mean any sale by the Company of New Common Stock
pursuant to a Company Private Sale Event or a Company Public Sale Event or
any sale by any Securities Holder of Registerable Common pursuant to any
Registration Statement.
"Second Phase" shall mean the period following the end of the First
Phase and prior to the Termination Date.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor legislation thereto.
"Securities Holder" shall mean each entity set forth on the signature
pages of this Agreement under the heading "SECURITIES HOLDERS".
"Securities Holder Public Sale Event" shall mean any sale of
Registerable Common by a Securities Holder pursuant to a Demand
Registration.
"Securities Holder Sale Notice" shall mean a Notice of Offering to the
Company from a Securities Holder requesting the Company to effect a Demand
Registration of Registerable Common (to which such Securities Holder is at
the time entitled pursuant to subsection 2.1) and stating whether such
Securities Holder is requesting that such Demand Registration be a Shelf
Registration; provided that if more than one Notice of Offering is required
to aggregate the Minimum Registerable Amount, the term "Securities Holder
Sale Notice" shall refer collectively to all such Notices of Offering
delivered by Securities Holders to the Company in accordance with
subsection 2.3(b).
"Securities Holder's Questionnaire" shall mean the questionnaire to be
provided by each Securities Holder to the Company in connection with a
Public Sale Event or Company Private Sale Event, substantially in the form
of Exhibit A, as the same from time to time may be amended, supplemented or
otherwise modified.
"Shelf Registration" shall mean any Registration of Registerable
Common pursuant to a Registration Statement filed by the Company in
accordance with the provisions of subsection 2.2 and which provides for the
offering of Registerable Common to be made on a continuous basis pursuant
to Rule 415.
"Subsidiary" shall mean, as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect the majority of the board of directors or other
managers of such corporation, partnership or other entity are at that time
owned directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a
"Subsidiary" or "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company.
"Supplemental Addendum" shall mean a Supplemental Addendum,
substantially in the form of Exhibit B to this Agreement.
"Termination Date" shall mean, as to each Securities Holder, the date
on which counsel to the Company delivers an opinion in accordance with
subsection 5.10 to such Securities Holder.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement.
SECTION 2. DEMAND REGISTRATION RIGHTS OF SECURITIES HOLDERS
2.1. Demand Registration Rights. At any time prior to the Termination
Date, each Securities Holder shall have the right, subject to subsections 2.3,
2.4(b) and (c) and 6.1, to request one (1) Demand Registration, and the Company
shall be obligated to provide a Demand Registration in response to each such
request; provided that the Company shall be obligated to provide no more than
two (2) such Demand Registrations during the First Phase; provided, further,
that, during the First Phase, if the initial Demand Registration is a Shelf
Registration, the Company shall be obligated to provide only such Shelf
Registration.
2.2. Determination. Subject to the terms and conditions hereof, if the
Company shall at any time receive a Securities Holder Sale Notice in accordance
with subsection 2.3 representing at least the Minimum Registerable Amount, then
the Company shall (a) (i) in the case of a Registration Statement on Form S-1,
use its reasonable best efforts to file such Registration Statement within 45
days, and in any event, but subject to subsection 5.3(b), make such filing
within 75 days, of the receipt of such Securities Holder Sale Notice or (ii) in
the case of a Registration Statement on Form S-3, use its reasonable best
efforts to file such Registration Statement within 30 days, and in any event,
but subject to subsection 5.3(b), make such filing within 60 days (provided that
such time periods shall begin on the date of the Company's receipt of the
Securities Holder Sale Notice which, together with any earlier delivered
Securities Holder Sale Notice, represents the applicable Minimum Registerable
Amount), which Registration Statement shall cover the maximum number of shares
of Registerable Common set forth in such Securities Holder Sale Notice, and, if
applicable, such additional shares of New Common Stock as permitted under
subsection 2.6 and (b) use its best efforts to facilitate such Demand
Registration as provided herein. Notwithstanding the foregoing, the Company may
delay the filing of (but not its obligation to expeditiously prepare) any
Registration Statement relating to a Demand Registration for a reasonable period
of time (not in excess of 90 days) if the Board of Directors of the Company
reasonably determines to delay such filing and, within ten (10) days of such
determination, the Company provides each Securities Holder that delivered a
Securities Holder Sale Notice with a certificate signed by the Chairman of the
Board of Directors of the Company or the Chief Executive Officer of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, the filing of such Registration Statement would adversely affect any
material business situation, transaction or negotiation then contemplated by the
Company or materially and adversely affect the Company. The Company shall
promptly give notice to each such Securities Holder of the end of any delay
period under this subsection. Subject to any extension under subsection 4.1(b),
the Company shall keep any Demand Registration Statement effective for a period
of (i) in the case of a Demand Registration other than a Shelf Registration,
until the earlier of (x) the four (4) month anniversary of the date that the
Registration Statement with respect thereto is declared effective by the
Commission and (y) the date on which all of the Registerable Common covered by
such Registration Statement has been sold and (ii) in the case of a Shelf
Registration, until the earlier of (x) two (2) years following the date the
Registration Statement with respect thereto is declared effective by the
Commission and (y) the date on which all of the Registerable Common covered by
such Registration Statement has been sold or, in each case, such shorter period
if any such Registration is terminated in accordance with the terms hereof prior
to the end of the applicable period.
2.3. Notices; Minimum Registerable Amounts. (a) Subject to subsection
2.1, any Securities Holder may send a Securities Holder Sale Notice to the
Company in respect of a Demand Registration. Simultaneously with the delivery to
the Company of a Securities Holder Sale Notice, the Securities Holder so
requesting a Demand Registration shall deliver to each other Securities Holder a
copy of such Securities Holder Sale Notice and such other information as such
Securities Holder may deem appropriate.
(b) Notwithstanding subsection 2.3(a), no Securities Holder Sale
Notice delivered by a Securities Holder shall be effective to require the
Company to provide a Demand Registration, unless (i) the aggregate number of
shares of New Common Stock represented by such Securities Holder Sale Notice
equals or exceeds the Minimum Registerable Amount or (ii) within twenty (20)
days of the delivery of the first Securities Holder Sale Notice in respect of an
aggregate number of shares of New Common Stock that does not equal or exceed the
Minimum Registerable Amount one or more additional Securities Holder Sale
Notices are delivered by Securities Holders then entitled to request a Demand
Registration pursuant to subsection 2.1(a) such that the aggregate number of
shares of New Common Stock represented by all such Securities Holder Sale
Notices (including the Securities Holder Sale Notice which commenced such twenty
(20) day period) is at least equal to the Minimum Registerable Amount. All
Securities Holders delivering Securities Holder Sale Notices in accordance with
the immediately preceding sentence are hereinafter referred to as the
"Initiating Securities Holders". Subject to subsection 2.4, the delivery of any
Securities Holder Sale Notice pursuant to this subsection 2.3(b), shall be
deemed a request by each Initiating Securities Holder under subsection 2.1 for a
Demand Registration, provided that if all Securities Holder Sale Notices so
delivered do not represent at least the Minimum Registerable Amount, then all
such Securities Holder Sale Notices shall be deemed null and void and shall not
constitute a request for Demand Registration under subsection 2.1 by any
Initiating Securities Holder.
(c) Any Securities Holder Sale Notice may be revised from time to time
prior to the earlier of (i) the execution of the Purchase Agreement, if any, for
such offering and (ii) the effectiveness of the Registration Statement for such
offering.
(d) The Company shall promptly provide a Securities Holder
Questionnaire (i) in the case of a Demand Registration, to each Securities
Holder that delivers a Securities Holder Sale Notice in accordance with this
subsection 2.3 and each Piggybacking Securities Holder and (ii) in the case of a
Company Public Sale Event or Company Private Sale Event, to each Securities
Holder that has indicated its desire pursuant to subsection 3.3 to participate
in such Sale Event.
2.4. Discretion of Securities Holder. (a) In connection with any
Securities Holder Public Sale Event, subject to the provisions of this
Agreement, the Securities Holder requesting a Demand Registration (if such
Public Sale Event was initiated by an individual Securities Holder) or the
Initiating Securities Holders owning a majority of the aggregate number of
shares of Registerable Common that all such Initiating Securities Holders are
seeking to include in such Public Sale Event (if such Public Sale Event was
initiated by Initiating Securities Holders), in its or their sole discretion, as
the case may be, shall determine whether (i) to proceed with, withdraw from or
terminate such proposed Securities Holder Public Sale Event, (ii) to enter into
one or more Purchase Agreements for such Securities Holder Public Sale Event and
(iii) to take such actions as may be necessary to close the sale of Registerable
Common contemplated by such offering, including, without limitation, waiving any
conditions to closing such sale which have not been fulfilled.
(b) Subject to subsection 2.4(c), in the event that the Securities
Holder or the Initiating Securities Holders, as the case may be, determine(s)
pursuant to subsection 2.4(a) not to proceed with a Demand Registration of
Registerable Common (i) at any time before the Registration Statement with
respect to such Demand Registration has been declared effective by the
Commission or (ii) as a result of a Material Adverse Change, at any time after
the Registration Statement with respect to such Demand Registration has been
declared effective by the Commission, and, in either such case, such Securities
Holder or Initiating Securities Holders, as the case may be, reimburse(s) the
Company for all reasonable fees, costs and expenses in connection therewith,
then all Securities Holder Sale Notices delivered in respect of such Demand
Registration shall be deemed null and void and shall not constitute a request
for Demand Registration under subsection 2.1 by any Securities Holder or
Initiating Securities Holders.
(c) If the Securities Holder or the Initiating Securities Holders, as
the case may be, determine(s) pursuant to subsection 2.4(a) not to proceed with
a Demand Registration (i) at any time at the request of the Company or (ii) as a
result of a Material Adverse Change before the Registration Statement with
respect to such Demand Registration has been declared effective by the
Commission, then, in either such case, such Securities Holder or Initiating
Securities Holders, as the case may be, will not be required to reimburse the
Company for the fees, costs and expenses in connection with such Demand
Registration and all Securities Holder Sale Notices delivered in respect of such
Demand Registration shall be deemed null and void and shall not constitute a
request for Demand Registration under subsection 2.1 by any Securities Holder or
Initiating Securities Holders.
2.5. Allocation Among Initiating Securities Holders. In connection
with any Demand Registration requested by Initiating Securities Holders in
accordance with subsection 2.3, if the lead managing underwriter selected by
such Initiating Securities Holders in accordance with subsection 5.8 with
respect to such offering (or, if the offering is not underwritten, if a
financial advisor to such Initiating Securities Holders) determines that
marketing factors require a limitation on the number of shares of Registerable
Common to be offered and sold in such offering, there shall be included in the
offering only that number of shares of Registerable Common that such lead
managing underwriter or financial advisor, as the case may be, reasonably and in
good faith believes will not jeopardize the success of the offering, which
shares of Registerable Common shall be allocated among the Initiating Securities
Holders on a pro rata basis based on the number of shares of Registerable Common
each such Initiating Securities Holder seeks to include in such offering.
2.6. Piggyback Rights of Securities Holders and the Company. (a) In
connection with any Demand Registration that has been requested by a Securities
Holder or Initiating Securities Holders, as the case may be, in accordance with
subsections 2.1 and 2.3, any other Securities Holder then holding Registerable
Common (a "Piggybacking Securities Holder") and the Company shall be entitled,
subject to subsection 2.6(b), to participate on the same terms and conditions as
such Securities Holder in the Securities Holder Public Sale Event relating
thereto and offer and sell shares of Registerable Common or shares of New Common
Stock, respectively, therein as provided in this subsection 2.6. Any party
desiring to so participate shall give written notice (a "Piggybacking Notice")
to the Securities Holder requesting such Demand Registration and, if such party
is not the Company, to the Company no later than fifteen (15) days following
receipt of a Securities Holder Sale Notice, of the aggregate number of shares of
Registerable Common that such Piggybacking Securities Holder or shares of New
Common Stock that the Company, as the case may be, then desires to offer and
sell in such Securities Holder Public Sale Event.
(b) The extent to which a Piggybacking Securities Holder or the
Company may participate in any Securities Holder Public Sale Event in accordance
with paragraph (a) of this subsection 2.6 shall be limited to that number of
shares of Registerable Common or shares of New Common Stock that will not
require a reduction in the number of shares of Registerable Common of the
Initiating Securities Holders or the Securities Holder requesting such Demand
Registration to be included therein or change in a manner materially adverse to
such Initiating Securities Holders or Securities Holder, as the case may be, the
proposed method of the offering, including, without limitation, the economic
benefits to such Initiating Securities Holders or Securities Holder. If the lead
managing underwriter selected by the Initiating Securities Holders or the
Securities Holder initiating such Securities Holder Public Sale Event (or, if
the offering is not underwritten, a financial advisor to such Initiating
Securities Holders or Securities Holder) determines that marketing factors
require a limitation on the number of shares of Registerable Common or shares of
New Common Stock to be offered and sold in such offering, there shall be
included in the Registration Statement with respect to such offering only that
number of shares of Registerable Common held by such Securities Holders or
shares of New Common Stock to be sold by the Company, if any, that such lead
managing underwriter or financial advisor, as the case may be, reasonably and in
good faith believes will not jeopardize the success of the offering, which
shares shall be allocated first among the Piggybacking Securities Holders on a
pro rata basis based on the number of shares of Registerable Common each such
Securities Holder is seeking to include in such offering and second to the
Company.
SECTION 3. COMPANY SALE EVENTS.
3.1. Determination. (a) Subject to subsection 6.1, the Company may at
any time effect a Company Public Sale Event pursuant to a Registration Statement
filed by the Company, provided that the Company gives each Securities Holder a
Company Sale Notice, no less than 21 days prior to the filing of the related
Registration Statement.
(b) The Company may at any time effect a Company Private Sale Event,
provided that the Company gives each Securities Holder a Company Sale Notice, so
as to be received no less than five (5) days prior to the closing date of such
Company Private Sale Event.
3.2. Notice. The Company Sale Notice shall contain a statement that
the Securities Holders are entitled to participate in such offering and the
number of shares of Registerable Common which represents the best estimate of
the lead managing underwriter (or, if not known or applicable, the Company) that
will be available for sale by the Securities Holders in the proposed offering.
3.3. Piggyback Rights of Securities Holders. (a) If the Company shall
have delivered a Company Sale Notice, Securities Holders shall be entitled to
participate on the same terms and conditions as the Company in the Company
Public Sale Event or the Company Private Sale Event, as the case may be, to
which such Company Sale Notice relates and to offer and sell shares of
Registerable Common therein only to the extent provided in this subsection 3.3.
Each Securities Holder desiring to participate in such offering shall notify the
Company in writing, by delivering a Piggybacking Notice no later than ten (10)
days following receipt of a Company Sale Notice in respect of a Company Public
Sale Event or four (4) days following receipt of a Company Sale Notice in
respect of a Company Private Sale Event, of the aggregate number of shares of
Registerable Common that such Securities Holder then desires to sell in the
offering.
(b) Each Securities Holder desiring to participate in a Company Public
Sale Event or a Company Private Sale Event may include shares of Registerable
Common in (i) any Registration Statement relating to a Company Public Sale Event
or (ii) in a Company Private Sale Event, in each case to the extent that the
inclusion of such shares shall not reduce the number of shares of New Common
Stock to be offered and sold by the Company to be included therein or change in
a manner materially adverse to the Company the proposed method of the offering,
including, without limitation, the economic benefits to the Company. If the lead
managing underwriter selected by the Company for such offering (or, if the
offering is not underwritten, a financial advisor to the Company) determines
that marketing factors require a limitation on the number of shares of
Registerable Common to be offered and sold in such Company Public Sale Event or
Company Private Sale Event, as the case may be, there shall be included in the
offering only that number of shares of Registerable Common, if any, that such
lead managing underwriter or financial advisor, as the case may be, reasonably
and in good faith believes will not jeopardize the success of the offering,
which shares of Registerable Common shall be allocated among such Securities
Holders on a pro rata basis based on the number of shares of Registerable Common
each such Securities Holder is seeking to include in such Sale Event.
3.4. Discretion of the Company. In connection with any Company Public
Sale Event or Company Private Sale Event, subject to the provisions of this
Agreement, the Company, in its sole discretion, shall determine whether (a) to
proceed with, withdraw from or terminate such Company Public Sale Event or
Company Private Sale Event, as the case may be, (b) to enter into the Purchase
Agreement for such Company Public Sale Event or Company Private Sale Event, as
the case may be, and (c) to take such actions as may be necessary to close the
sale of New Common Stock contemplated by such offering, including, without
limitation, waiving any conditions to closing such sale which have not been
fulfilled.
SECTION 4. BLACK-OUT PERIODS.
4.1. Black-Out Periods for Securities Holders. (a) No Securities
Holder shall offer to sell or sell any shares of Registerable Common pursuant to
a Demand Registration, and the Company shall not be required to supplement or
amend any Registration Statement or otherwise facilitate the sale of
Registerable Common pursuant thereto, during the 90-day period (or such lesser
number of days until the Company makes its next required filing under the
Exchange Act) immediately following the receipt by each Securities Holder of a
certificate of an authorized officer of the Company to the effect that the Board
of Directors of the Company has in good faith and for valid business reasons
requested that the Securities Holders refrain from selling shares of
Registerable Common; provided, however, that -------- ------- the identity of a
potential purchaser or purchasers of Registerable Common from a Securities
Holder shall not constitute a valid business reason. Any period described in
this subsection 4.1(a) during which Securities Holders are not able to sell
shares of Registerable Common pursuant to a Demand Registration is herein
referred to as a "black-out" period. The Company shall notify each Securities
Holder of the expiration or earlier termination of any "black-out" period (the
nature and pendency of which need not be disclosed during such "black-out"
period).
(b) The period during which the Company is required pursuant to
subsection 2.2 to keep any Demand Registration effective shall be extended by a
number of days equal to the number of days, if any, of any "black-out" period
applicable to Securities Holders pursuant to this subsection 4.1 occurring
during such period, plus a number of days equal to the number of days during
such period, if any, of any period during which the Securities Holders are
unable to sell any shares of Registerable Common pursuant to a Demand
Registration as a result of the happening of any event of the nature described
in subsection 5.3(c)(ii), 5.3(c)(iii) or 5.3(c)(v).
SECTION 5. AGREEMENTS CONCERNING OFFERINGS.
5.1. Obligations of Securities Holders. (a) Each Securities Holder
shall, upon the reasonable request of the Company, advise the Company of the
number of shares of Registerable Common then held or beneficially owned by it.
(b) It shall be a condition precedent to the obligations of the
Company to effect a Registration of any shares of Registerable Common or to
include shares of Registerable Common in a Company Private Sale Event that the
Securities Holders desiring to participate in a Public Sale Event or a Company
Private Sale Event, as the case may be, shall have furnished to the Company a
completed Securities Holder's Questionnaire and such additional information
regarding themselves, the Registerable Common held by them and the intended
method of disposition of such securities as shall be required by law or the
Commission to effect the Registration or private sale of their Registerable
Common and any other information relating to such Registration or private sale
reasonably requested by the Company.
5.2. Obligations of the Company. Whenever required under this
Agreement to proceed with a Registration of any Registerable Common, the Company
shall, subject to the terms and conditions of this Agreement, as expeditiously
as reasonably possible:
(a) In accordance with subsection 2.2, prepare and file with the
Commission a Registration Statement with respect to such Registerable
Common and use its best efforts to cause such Registration Statement to
become effective.
(b) Prepare and file with the Commission such amendments (including
post-effective amendments) to such Registration Statement and supplements
to the related Prospectus used in connection with such Registration
Statement, and otherwise use its best efforts, to the end that such
Registration Statement reflects the plan of distribution of the securities
registered thereunder that is included in the relevant Notice of Offering,
if any, in respect of a Demand Registration and, subject to subsection 2.2,
is effective until the completion of the distribution contemplated by such
Registration Statement or so long thereafter as a dealer is required by law
to deliver a Prospectus in connection with the offer and sale of the shares
of Registerable Common covered by such Registration Statement.
(c) Notify the Securities Holders selling Registerable Common, at any
time when a Prospectus relating thereto is required to be delivered under
the Securities Act, when the Company becomes aware of the occurrence of any
event, as a result of which the Prospectus included in such Registration
Statement (as then in effect) contains an untrue statement of material fact
or omits to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and use its best efforts to prepare and file promptly, and in any event
within 20 days, with the Commission a supplement or amendment to such
Prospectus so that, as thereafter delivered to purchasers of such
Registerable Common, such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Provide to any Securities Holder requesting to include
Registerable Common in such Registration Statement and any managing
underwriter participating in any distribution thereof, and to any attorney,
accountant or other agent retained by such Securities Holder or managing
underwriter, reasonable access to appropriate officers and directors of the
Company to ask questions and to obtain information reasonably requested by
any such Person in connection with such Registration Statement or any
amendment thereto, provided, however, that (i) in connection with any such
access or request, any such requesting Persons shall cooperate to the
extent reasonably practicable to minimize any disruption to the operation
by the Company of its business and (ii) any records, information or
documents shall be kept confidential by such requesting Persons, unless (x)
such records, information or documents are in the public domain or
otherwise publicly available other than through disclosure by such
requesting party or (y) disclosure of such records, information or
documents is required by court or administrative order or by applicable law
(including, without limitation, the Securities Act).
(e) Furnish to the participating Securities Holders, such number of
copies of a Prospectus, including a Preliminary Prospectus, in conformity
with the requirements of the Securities Act, and such other documents as
they may reasonably request in order to facilitate the disposition of
Registerable Common owned by them.
(f) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or "Blue
Sky" laws of such jurisdictions in the United States as shall be reasonably
requested by the Securities Holders, provided 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 to service of process in any such
states or jurisdictions or to make any filing or take any other action
which could subject it to taxation as a result of such filing.
(g) Enter into and perform its obligations under a Purchase Agreement,
if the offering is an underwritten offering, in usual and customary form,
with the managing underwriter of such underwritten offering; provided,
however, that each Securities Holder participating in such Public Sale
Event shall also enter into and perform its obligations under such Purchase
Agreement so long as such obligations are usual and customary obligations
of selling stockholders in a registered public offering.
5.3. Agreements Related to Offerings. Subject to the terms and
conditions hereof, in connection with any Demand Registration:
(a) The Company will cooperate with any underwriters for, and the
Securities Holders of, the shares of Registerable Common proposed to be
sold pursuant to a Registration Statement, and will, unless the parties to
the Purchase Agreement otherwise agree, enter into a Purchase Agreement not
inconsistent with the terms and conditions of this Agreement and containing
such other terms and conditions of a type and form reasonable and customary
for companies of similar size and credit rating (including, but not limited
to, such provisions for delivery of a "comfort letter" and legal opinion as
are customary), and take all such other reasonable actions as are necessary
or advisable to permit, expedite and facilitate the disposition of such
shares of Registerable Common in the manner contemplated by such
Registration Statement in each case to the same extent as if all the shares
of Registerable Common then being offered were for the account of the
Company.
(b) Neither a Registration Statement nor any amendment or supplement
thereto will be filed by the Company until counsel for the Initiating
Securities Holder or the Securities Holder delivering the relevant
effective Securities Holder Sale Notice shall have had a reasonable
opportunity to review the same and each Securities Holder participating in
such Sale Event shall have had a reasonable opportunity to exercise its
rights under subsection 5.2(d) with respect thereto. No amendment to such
Registration Statement naming any Securities Holder as a selling security
holder shall be filed with the Commission until such Securities Holder
shall have had a reasonable opportunity to review such Registration
Statement as originally filed. Neither such Registration Statement nor any
related Prospectus or any amendment or supplement thereto shall be filed by
the Company with the Commission which shall be disapproved (for reasonable
cause) by the managing underwriters named therein or any participating
Securities Holders within a reasonable period after notice thereof.
(c) The Company will use its reasonable efforts to keep the Securities
Holders informed of the Company's best estimate of the earliest date on
which such Registration Statement or any post-effective amendment thereto
will become effective and will notify each Securities Holder and the
managing underwriters participating in the distribution pursuant to such
Registration Statement promptly (i) when such Registration Statement or any
post-effective amendment to such Registration Statement becomes effective,
(ii) of any request by the Commission for an amendment or any supplement to
such Registration Statement or any related Prospectus, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
of such Registration Statement or of any order preventing or suspending the
use of any related Prospectus or the initiation or threat of any proceeding
for that purpose, (iv) of the suspension of the qualification of any shares
of New Common Stock included in such Registration Statement for sale in any
jurisdiction or the initiation or threat of a proceeding for that purpose,
(v) of any determination by the Company that an event has occurred (the
nature and pendency of which need not be disclosed during a "black-out
period" pursuant to subsection 4.1) which makes untrue any statement of a
material fact made in such Registration Statement or any related Prospectus
or which requires the making of a change in such Registration Statement or
any related Prospectus in order that the same will 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 not
misleading and (vi) of the completion of the distribution contemplated by
such Registration Statement if it relates to a Company Sale Event.
(d) In the event of the issuance of any stop order suspending the
effectiveness of such Registration Statement or of any order suspending or
preventing the use of any related Prospectus or suspending the
qualification of any shares of Common Stock included in such Registration
Statement for sale in any jurisdiction, the Company will use its reasonable
best efforts promptly to obtain its withdrawal.
(e) The Company agrees to otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable, but
not later than fifteen months after the effective date of such Registration
Statement, an earnings statement covering the period of at least twelve
months beginning with the first full fiscal quarter 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
promulgated thereunder.
(f) The Company shall, subject to permitted "blackout" periods, upon
the happening of any event of the nature described in subsection
5.3(c)(ii), 5.3(c)(iii) or 5.3(c)(v), as expeditiously as reasonably
possible, prepare a supplement or post-effective amendment to the
applicable Registration Statement or a supplement to the related Prospectus
or any document incorporated therein by reference or file any other
required documents and deliver a copy thereof to each Securities Holder so
that, as thereafter delivered to the purchasers of the Registerable Common
being sold thereunder, such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Upon receipt of any notice from the Company of the happening of
any event of the kind described in subsection 5.2(c), each Securities
Holder will immediately discontinue disposition of the Registerable Common
pursuant to the Registration Statement relating to such Registerable Common
until such Securities Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by subsection 5.2(c), or until such
Securities Holder has been 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 therein. If
reasonably requested by the Company, the Securities Holders will, or will
request the managing underwriter or underwriters, if any, to, deliver to
the Company all copies, other than permanent file copies, of the Prospectus
covering the Registerable Common current at the time of receipt of such
notice.
5.4. Certain Expenses. Subject to subsection 2.4(b), the Company shall
pay all fees, disbursements and expenses in connection with the performance of
its obligations hereunder, including, without limitation, all registration and
filing fees, printing expenses, auditors' fees, listing fees, registrar and
transfer agents' fees, reasonable fees and disbursements of counsel to each
Securities Holder and counsel for the Company, expenses (including reasonable
fees and disbursements of counsel) of complying with applicable securities or
"Blue Sky" laws and the fees of the NASD or other governing body of any
securities exchange on which the New Common Stock is listed in connection with
its review of any offering contemplated in such Registration Statement, but not
including underwriting fees, discounts and commissions; provided that, in
connection with a Company Public Sale Event, the Company's obligation to pay the
reasonable fees and disbursements of counsel to each Piggybacking Securities
Holder shall be limited to the reasonable fees and disbursements of a single law
firm for all such Piggybacking Securities Holders participating in such Sale
Event pursuant to subsection 3.3.
5.5. Reports Under the Exchange Act; Rule 144. (a) The Company agrees
to:
(i) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act or the Exchange
Act; and
(ii) furnish to any Securities Holder forthwith upon request (A) a
written statement by the Company that it has complied with the current
public information and reporting requirements of Rule 144 or any similar
rule or regulation hereafter adopted by the Commission and the Exchange
Act, (B) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(C) such other information as is available to the Company without
unreasonable cost or expense and may be reasonably requested in connection
with availing any Securities Holder of any rule or regulation of the
Commission which permits the selling of any such securities without
Registration or pursuant to such rule or regulation.
(b) During any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company shall, upon the request of any
Securities Holder, make available to such Securities Holder and any prospective
purchaser of Registerable Common designated by such Securities Holder the
information required by Rule 144(c) in order to permit resales of the
Registerable Common held by such Securities Holder pursuant to Rule 144.
(c) Any Securities Holder selling shares of Registerable Common
pursuant to Rule 144 shall promptly deliver to the Company a copy of the
completed Form 144 filed by such Securities Holder with the Commission.
5.6. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of Securities Holders owning a majority of the Registerable Common held by
Securities Holders at such time, enter into any agreement (other than this
Agreement) which would allow any holder or prospective holder of New Common
Stock (a) on demand of such holder to cause the Company to effect a Registration
of such securities prior to the thirty (30) month anniversary of the Effective
Date, (b) to include such securities in any Registration Statement filed under
subsection 2.2 hereof to the exclusion of shares of Registerable Common that any
Securities Holder desires to include in any such offering or (c) to include such
securities in any Company Public Sale Event or Company Private Sale Event to the
exclusion of shares of Registerable Common that any Securities Holder desires to
include in any such offering.
5.7. Indemnification and Contribution. (a) In connection with a Demand
Registration, provisions substantially in conformity with the following
provisions shall be contained in the related Purchase Agreement unless the
parties to such Purchase Agreement agree otherwise:
(i) The Company shall agree to indemnify and hold harmless each
Securities Holder and each Person, if any, who controls such Securities
Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act against any losses, claims, damages or liabilities,
joint or several, or actions in respect thereof to which such Securities
Holder or controlling Person may become subject under the Securities Act,
or otherwise (collectively, "Losses"), insofar as such Losses arise out of,
or are based upon, any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, any related
Preliminary Prospectus or any related Prospectus, or any amendment or
supplement thereto, or arise out of, or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse such Securities Holder or controlling Person for any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such Loss; provided, however, that the
Company shall not be so liable to the extent that any such Loss arises out
of, or is based upon, an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact
in said Registration Statement, said Preliminary Prospectus, said
Prospectus or any said amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by or on
behalf of a Securities Holder specifically for use therein. Notwithstanding
the foregoing, the Company shall not be liable in any such case to the
extent that any such Loss arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged omission made
in any Preliminary Prospectus if (A) such Securities Holder failed to send
or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale of Registerable Common to the Person
asserting such Loss or who purchased such Registerable Common which is the
subject thereof if, in either case, such delivery is required by the
Securities Act and (B) the Prospectus would have corrected such untrue
statement or omission or alleged untrue statement or alleged omission; and
the Company shall not be liable in any such case to the extent that any
such Loss arises out of, or is based upon, an untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and if, having previously been
furnished by or on behalf of the Company with copies of the Prospectus as
so amended or supplemented, such Securities Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or
concurrently with the sale of Registerable Common to the Person asserting
such Loss or who purchased such Registerable Common which is the subject
thereof if, in either case, such delivery is required by the Securities
Act. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(ii) Each Securities Holder severally shall agree to indemnify and
hold harmless the Company, each of its officers and directors who sign the
Registration Statement, each other Securities Holder and each Person, if
any, who controls the Company or such other Securities Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any Losses to which the Company, such officers or directors,
such other Securities Holder or such controlling Person may become subject
under the Securities Act, or otherwise, insofar as such Losses arise out
of, or are based upon, any untrue statement or alleged untrue statement of
any material fact contained in such Registration Statement, any related
Preliminary Prospectus or any related Prospectus, or any amendment or
supplement thereto, or arise out of, or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such officers or directors, such other
Securities Holder or such controlling Person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss, in each case to the extent, but only to the
extent, that any such Loss arises out of, or is based upon, an untrue
statement or alleged untrue statement of a material fact or an omission or
alleged omission to state a material fact in said Registration Statement,
said Preliminary Prospectus or said Prospectus, or any said amendment or
supplement in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of such Securities Holder
specifically for use therein; provided, however, that the liability of each
Securities Holder on account of the foregoing shall be limited to an amount
equal to the net proceeds of the sale of shares of Registerable Common by
such Securities Holder in the offering which gave rise to the liability.
(iii) The Company shall agree to indemnify and hold harmless each
underwriter and each Person, if any, who controls any such underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any Losses to which such underwriter or controlling
Person may become subject under the Securities Act, or otherwise, insofar
as such Losses arise out of, or are based upon, any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, any related Preliminary Prospectus or any related
Prospectus, or any amendment or supplement thereto, or arise out of, or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse such underwriter or controlling
Person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Loss; provided,
however, that the Company shall not be so liable to the extent that any
such Loss arises out of, or is based upon, an untrue statement or alleged
untrue statement of a material fact or an omission or alleged omission to
state a material fact in said Registration Statement, said Preliminary
Prospectus or said Prospectus or any said amendment or supplement in
reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of such underwriter specifically for use therein.
Notwithstanding the foregoing, the Company shall not be liable in any such
case to the extent that any such Loss arises out of, or is based upon, an
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus if (A) such underwriter failed
to send or deliver a copy of the Prospectus with or prior to the delivery
of written confirmation of the sale of Registerable Common to the Person
asserting such Loss or who purchased such Registerable Common which is the
subject thereof if, in either case, such delivery is required by the
Securities Act and (B) the Prospectus would have corrected such untrue
statement or omission or alleged untrue statement or alleged omission; and
the Company shall not be liable in any such case to the extent that any
such Loss arises out of, or is based upon, an untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and if, having previously been
furnished by or on behalf of the Company with copies of the Prospectus as
so amended or supplemented, such underwriter thereafter fails to deliver
such Prospectus as so amended or supplemented, prior to or concurrently
with the sale of Registerable Common to the Person asserting such Loss or
who purchased such Registerable Common which is the subject thereof if, in
either case, such delivery is required by the Securities Act. This
indemnity agreement will be in addition to any liability which the Company
may otherwise have, provided that the Company shall only be required to
provide the indemnification described in this subsection 5.7(a)(iii) to an
underwriter and each Person, if any, who controls such underwriter if such
underwriter agrees to indemnification provisions substantially in the form
set forth in subsection 5.7(b).
(iv) Each Securities Holder severally shall agree to indemnify and
hold harmless each underwriter and each Person, if any, who controls such
underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any Losses, joint or several, or
actions in respect thereof to which such underwriter or such controlling
Person may become subject under the Securities Act, or otherwise, insofar
as such Losses arise out of, or are based upon, any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, any related Preliminary Prospectus or any related
Prospectus, or any amendment or supplement thereto, or arise out of, or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse such underwriter or such
controlling Person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Loss, in each
case to the extent, but only to the extent, that any such Loss arises out
of, or is based upon, an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact
in said Registration Statement, said Preliminary Prospectus or said
Prospectus, or any said amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by or on
behalf of such Securities Holder specifically for use therein; provided
that the liability of such Securities Holder on account of the foregoing
shall be limited to an amount equal to the net proceeds of the sale of
shares of Registerable Common by such Securities Holder in the offering
which gave rise to the liability. Notwithstanding the foregoing, such
Securities Holder shall not be liable in any such case to the extent that
any such Loss arises out of, or is based upon, an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus if (A) such underwriter failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written
confirmation of the sale of Registerable Common to the Person asserting
such Loss or who purchased such Registerable Common which is the subject
thereof if, in either case, such delivery is required by the Securities Act
and (B) the Prospectus would have corrected such untrue statement or
omission or alleged untrue statement or alleged omission; and such
Securities Holder shall not be liable in any such case to the extent that
any such Loss arises out of, or is based upon, an untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and if, having previously been
furnished with copies of the Prospectus as so amended or supplemented, such
underwriter thereafter fails to deliver such Prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registerable Common
to the Person asserting such Loss or who purchased such Registerable Common
which is the subject thereof if, in either case, such delivery is required
by the Securities Act. No Securities Holder shall be required to provide
the indemnification described in this subsection 5.7(a)(iv) to an
underwriter or any Person who controls such underwriter if such underwriter
has not agreed to indemnification provisions substantially in the form set
forth in subsection 5.7(b).
(v) Promptly after receipt by an indemnified party pursuant to the
indemnification provisions of such Purchase Agreement of notice of any
claim or the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
pursuant to such indemnification provisions, notify the indemnifying party
in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to the indemnified party
otherwise than pursuant to the indemnification provisions of such Purchase
Agreement unless the indemnifying party is materially prejudiced by such
lack of notice. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate in defense of such
claim, and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, (x) the indemnifying party shall not be
liable to the indemnified party pursuant to the indemnification provisions
hereof or of such Purchase Agreement for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation, (y) the
indemnifying party shall not be liable for the costs and expenses of or
Losses arising out of any settlement of such claim or action unless such
settlement was effected with the consent of the indemnifying party and (z)
the indemnified party shall be obligated to cooperate with the indemnifying
party in the investigation of such claim or action; provided, however, that
the Securities Holders (together with their respective controlling Persons)
and the underwriters (together with their respective controlling Persons)
shall each as a separate group have the right to employ one separate
counsel to represent such Securities Holders and such underwriters (and
their respective controlling Persons) who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by
such Securities Holders and underwriters against the Company pursuant to
the indemnification provisions of such Purchase Agreement if, in the
reasonable judgment of either Securities Holders' counsel or counsel for
the underwriters, there exists an actual or potential conflict of interest
between such Securities Holders (and its controlling persons) on the one
hand and such underwriters (and their controlling persons) on the other,
and in that event the reasonable fees and expenses of both such separate
counsel shall also be paid by the Company.
(b) As a condition to agreeing in any Purchase Agreement to the
indemnification provisions described in subsection 5.7(a)(iii) and 5.7(a)(iv) in
favor of an underwriter participating in the offering covered by the related
Registration Statement and its controlling Persons, the Company and the
Securities Holders participating in an offering pursuant to such Registration
Statement may require that such underwriter agree in the Purchase Agreement to
provisions substantially in the form set forth in subsection 5.7(a)(v) and to
severally indemnify and hold harmless the Company, each of its officers and
directors who sign such Registration Statement, each Securities Holder
participating in such offering and each Person, if any, who controls the Company
or such Securities Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act against any Losses to which the Company, such
officers and directors, such Securities Holder or such controlling Person may
become subject under the Securities Act, or otherwise, insofar as such Losses
arise out of, or are based upon, any untrue statement or alleged untrue
statement of any material fact contained in such Registration Statement in which
such underwriter is named as an underwriter, any related Preliminary Prospectus
or any related Prospectus, or any amendment or supplement thereto, or arise out
of, or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and to reimburse the Company, such officers and
directors, such Securities Holder or such controlling Person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such Loss in each case to the extent, but only to the extent, that
any such Loss arises out of, or is based upon, an untrue statement or alleged
untrue statement of a material fact or an omission or alleged omission to state
a material fact in said Registration Statement, said Preliminary Prospectus or
said Prospectus or any said amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
such underwriter specifically for use therein.
(c) In order to provide for just and equitable contribution between
the Company and such Securities Holders in circumstances in which the
indemnification provisions described in this subsection 5.7 and contained in any
Purchase Agreement are for any reason insufficient or inadequate to hold the
indemnified party harmless (other than as a result of their non- applicability
in accordance with their terms), the Company and such Securities Holders shall
contribute to the aggregate Losses (including any investigation, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting any contribution actually received from Persons other than the Company
and such Securities Holders) incurred by the Company and one or more of its
directors or its officers who sign such Registration Statement or such
Securities Holders or any controlling Person of any of them, in such proportion
as is appropriate to reflect their relative degrees of fault in connection with
the actions which resulted in such Losses, as well as any other relevant
equitable considerations. The relative fault of the Company and of such
Securities Holder shall be determined by reference to, among other things,
whether the untrue or allegedly untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Securities Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, however, that the liability of each such
Securities Holder to make such contribution shall be limited to an amount equal
to the net proceeds of the sale of shares of Registerable Common by such
Securities Holder in the offering which gave rise to the liability. As among
themselves, such Securities Holders agree to contribute to amounts payable by
other such Securities Holders in such manner as shall, to the extent permitted
by law, give effect to the provisions in such Purchase Agreement comparable to
subsection 5.7(a)(ii). The Company and such Securities Holders agree that it
would not be just and equitable if their respective obligations to contribute
pursuant to this subsection 5.7(c) were to be determined by pro rata allocation
(other than as set forth above) of the aggregate Losses by reference to the
proceeds realized by such Securities Holders in a sale pursuant to said
Registration Statement or said Prospectus or by any other method of allocation
which does not take account of the considerations set forth in this subsection
5.7(c). No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution under
this subsection from any Person who was not guilty of such fraudulent
misrepresentation.
(d) The Company and the Securities Holders participating in an
offering pursuant to a Registration Statement agree that, if the underwriters
participating in a Public Sale Event are agreeable, the Purchase Agreement, if
any, relating to such Registration Statement shall contain provisions to the
effect that in order to provide for just and equitable contribution between such
underwriters on the one hand and the Company and such Securities Holders on the
other hand in circumstances in which the indemnification provisions of such
Purchase Agreement are for any reason insufficient or inadequate to hold the
indemnified party harmless (other than as a result of their non-applicability in
accordance with their terms), the Company and such Securities Holders on the one
hand and such underwriters on the other hand will contribute on the basis herein
set forth to the aggregate Losses (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or claims asserted, but after deducting any
contribution actually received from Persons other than the Company and such
Securities Holders and such underwriters), incurred by the Company and one or
more of its directors or its officers who sign such Registration Statement or
such Securities Holders or such underwriters or any controlling Person of any of
them, in such proportion as is appropriate to reflect their relative degrees of
fault in connection with the actions which resulted in such Losses, as well as
any other relevant equitable considerations. The relative fault of the Company,
of such Securities Holders and of such underwriter shall be determined by
reference to, among other things, whether the untrue or allegedly untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, by such Securities
Holders or by such underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. Notwithstanding the provisions set forth above, (x) no underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the shares of New Common Stock underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission and (y)
the liability of each such Securities Holder to make such contribution shall be
limited to an amount equal to the net proceeds of the sale of shares of
Registerable Common by such Securities Holder in the offering which gave rise to
the liability. As among themselves, such Securities Holders agree to contribute
to amounts payable by other such Securities Holders in such manner as shall, to
the extent permitted by law, give effect to the provisions in such Purchase
Agreement comparable to subsection 5.7(a)(ii). As between the Company and such
Securities Holders, such parties agree that it would not be just and equitable
if their respective obligations to contribute pursuant to this subsection 5.7(d)
were to be determined by pro rata allocation (other than as set forth above) of
the aggregate Losses by reference to the proceeds realized by such Securities
Holders in a sale pursuant to said Registration Statement or said Prospectus or
by any other method of allocation which does not take account of the
considerations set forth in this subsection 5.7(d). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution under the provisions set forth
above from any Person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and the Securities Holders
participating in any distribution of shares of Registerable Common under the
provisions of this subsection 5.7 and provisions in any Purchase Agreement
substantially similar to subsections 5.7(a), 5.7(b), 5.7(c) or 5.7(d) shall
survive the termination of any or all of the other provisions of this Agreement
or such Purchase Agreement.
5.8. Underwritten Offerings. If at any time any of the Securities
Holders participating in a Demand Registration desire to sell Registerable
Common in an underwritten offering, the investment banker or investment bankers
that will manage the offering will be selected by (a) if such Demand
Registration was initiated by Initiating Securities Holders, the Initiating
Securities Holders owning a majority of the aggregate number of shares of
Registerable Common that all such Initiating Securities Holders are seeking to
include in the related Sale Event and (b) if such Demand Registration was
initiated by an individual Securities Holder, the Securities Holder requesting
such Securities Holder Public Sale Event, provided that such investment banker
or bankers must be reasonably satisfactory to the Company.
5.9. Transfer of Rights Under this Agreement; Transfers of
Registerable Common. (a) At any time, the rights and obligations of a Securities
Holder under this Agreement may be transferred by a Securities Holder to a
transferee of Registerable Common, provided that, within a reasonable period of
time (but in no event later than 10 days) after such transfer, (i) the
transferring Securities Holder shall have furnished the Company and the other
Securities Holders written notice of the name and address of such transferee and
the Registerable Common with respect to which such rights are being transferred
and (ii) such transferee shall furnish the Company and the Securities Holders
(other than the transferring Securities Holder) a copy of a duly executed
Supplemental Addendum by which such transferee (A) assumes all of the
obligations and liabilities of its transferor hereunder, (B) enjoys all of the
rights of its transferor hereunder and (C) agrees to be bound hereby.
Notwithstanding the foregoing, a Securities Holder's transfer of less than all
of its rights and obligations under this Agreement in accordance with the
preceding sentence shall not be effective to transfer the right to request a
Demand Registration pursuant to subsection 2.1 hereof unless (x) at the time of
such transfer the transferor Securities Holder has not exhausted its right to
request such a Demand Registration and (y) the transfer is of at least 10% of
the issued and then outstanding shares of New Common Stock, provided, that,
subject to the Company's rights under subsection 5.10 of this Agreement, such a
transfer of the right to request a Demand Registration shall not divest the
transferor Securities Holder of its right to request a Demand Registration
pursuant to subsection 2.1 hereof.
(b) Except with respect to transfers pursuant to paragraph (a) above,
a transferee of Registerable Common shall neither assume any liabilities or
obligations nor enjoy any rights hereunder and shall not be bound by any of the
terms hereof.
5.10. Termination of Rights. The rights granted under this Agreement
shall terminate as to each Securities Holder at such time as such Securities
Holder shall receive, either before or after the Company's receipt of a
Securities Holder Sale Notice or a Piggybacking Notice, an opinion of counsel to
the Company in form reasonably satisfactory to counsel to such Securities Holder
that all of the Registerable Common then held by such Securities Holder can be
sold within a given three (3) month period commencing on the date of such
opinion in a transaction or transactions exempt from the Registration
requirements of the Securities Act.
SECTION 6. SEQUENCING OF PUBLIC SALE EVENTS.
6.1. Effective Notice Period. Subject to the last sentence of this
subsection 6.1, during the term of this Agreement, no priority of right shall
exist between or among Securities Holders or between any Securities Holder, on
the one hand, and the Company, on the other, with respect to providing a Notice
of Offering with respect to, and effecting, a Public Sale Event. Once properly
given, a Securities Holder Sale Notice or a Company Sale Notice regarding a
Company Public Sale Event, as the case may be, shall be effective (and shall
preclude any such Notice of Offering by another party) during the period (the
"Effective Notice Period") commencing on the date of such Notice of Offering and
ending on the earliest of (a) withdrawal of such Notice of Offering (notice of
which shall be promptly effected in the same manner as such Notice of Offering),
(b) the abandonment of the Public Sale Event to which such Notice of Offering
relates (notice of which shall be promptly effected in the same manner as such
Notice of Offering) and (c) the later of (i) 150 days after such a Notice of
Offering has been given, provided that the Registration Statement relating to
such Notice of Offering has been declared effective within 90 days of such
Notice of Offering, and (ii) 90 days after the closing date of the Public Sale
Event to which such Notice of Offering relates; provided that nothing in this
subsection 6.1 shall limit the Company's right to give a Notice of Offering with
respect to, and effect, a Company Private Sale Event. Upon the termination of an
Effective Notice Period, any Securities Holder so entitled pursuant to
subsection 2.1 or the Company can provide a Notice of Offering, provided that if
such Notice of Offering is given within 12 months after the end of an Effective
Notice Period by the party that gave the immediately preceding Notice of
Offering, any other party shall, for the 45-day period following its receipt of
such Notice of Offering, have the right to preempt such Notice of Offering by
itself delivering a Notice of Offering.
6.2. Restrictive Legend on Certificates. (a) Each Certificate
evidencing shares of New Common Stock distributed pursuant to the Plan to the
Securities Holders shall, subject to paragraph (b) below, be stamped or
otherwise imprinted with a conspicuous legend in the following form:
"The securities evidenced by this certificate were issued pursuant to
an exemption from registration under the Securities Act of 1933, as
amended (the "Act"), provided by Section 1145 of the Bankruptcy Code
and may be sold only pursuant to a Registration Statement effective
under the Act or an exemption from the provisions of Section 5 of the
Act."
(b) A holder of a certificate evidencing shares of New Common Stock
bearing the legend specified in paragraph (a) shall be entitled to receive from
the Company, whether or not in connection with a sale or proposed sale, a new
certificate or certificates evidencing an identical number of shares (the
transfer expenses for which shall be paid by the Company) but without such
legend at such time as (i) such shares are sold pursuant to a Registration
Statement effective under the Securities Act, (ii) such holder furnishes the
Company with a certificate to the effect that such holder is not an affiliate or
an "underwriter" within the meaning of Section 1145(b) of the Bankruptcy Code
and, upon the request of the Company, an opinion of counsel reasonably
satisfactory to the Company to such effect and to the effect that such shares
may be sold without registration under the Securities Act or (iii) the
registration rights granted in this Agreement otherwise terminate in accordance
with subsection 5.10. The shares of the New Common Stock represented by any such
replacement certificate issued without the legend specified in paragraph (a)
pursuant to the immediately preceding sentence shall cease to be Registerable
Common for all purposes of this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In connection with the Registration Statement in respect of any Demand
Registration, the Company shall, on the date of effectiveness of such
Registration Statement with the Commission (the "effective date"), certify to
each Securities Holder in a certificate of a Responsible Officer of the Company
to the effect that the representations and warranties set forth below are true
and correct at and as of the effective date. In connection with any other Sale
Event in which Securities Holders participate, except as otherwise may be agreed
upon by such participating Securities Holders and the Company, the Company shall
represent and warrant in the Purchase Agreement relating to such Sale Event to
the Securities Holders and any underwriters participating in such Sale Event as
follows (except as otherwise indicated, each reference in this Section to "the
Registration Statement" shall refer to a Registration Statement in respect of
any Demand Registration or other such Sale Event in which Securities Holders
participate, including all information deemed to be a part thereof, as amended,
and each reference to "the Prospectus" shall refer to the related Prospectus):
(a) (i) When the Registration Statement became (in the case of a
Demand Registration to be filed pursuant to a Shelf Registration) or shall
become effective, the Registration Statement did or will comply as of its
effective date in all material respects with the applicable requirements of
the Securities Act and the rules and regulations thereunder; (ii) when the
Prospectus is filed in accordance with Rule 424(b), the Prospectus (and any
supplements thereto) will comply in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder; (iii) the Registration Statement did not or will not as of its
effective date contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading; and (iv) the Prospectus, if
not filed pursuant to Rule 424(b), did not or will not as of the date
thereof, and on the date of any filing pursuant to Rule 424(b), the
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement, or the
Prospectus (or any supplement thereto) in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Securities Holder specifically for use in connection with the preparation
of the Registration Statement or the Prospectus (or any supplement thereto)
or any information furnished in writing to the Company by or on behalf of
any underwriter specifically for use in connection with the preparation of
the Registration Statement or the Prospectus (or any supplement thereto),
other than that the Company has no knowledge of any such untrue statement
or omission in respect of such information.
(b) The public accountants who certified the Company's financial
statements in the Registration Statement are independent certified public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder; the historical consolidated
financial statements, together with the related schedules and notes,
forming part of the Registration Statement and the Prospectus comply in all
material respects with the requirements of the Securities Act and the rules
and regulations thereunder and have been prepared, and present fairly in
all material respects the consolidated financial condition, results of
operations and changes in financial condition of the Company and its
consolidated Subsidiaries at the respective dates and for the respective
periods indicated, in accordance with generally accepted accounting
principles applied consistently throughout such periods (except as
specified therein); and the historical consolidated financial data set
forth in the Prospectus are derived from the accounting records of the
Company and its consolidated Subsidiaries, and are a fair presentation of
the data purported to be shown; and the pro forma consolidated financial
statements (if any), together with the related notes, forming part of the
Registration Statement and the Prospectus, comply in all material respects
with the requirements of Regulation S-X under the Securities Act.
(c) Except as may be set forth in the Prospectus, each member of the
Camelot Group has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which it
is chartered or organized, with the corporate power and authority to own
its properties and conduct its business as described in the Prospectus, and
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification where the failure to be so qualified would materially
adversely affect the business, operations, property or financial condition
of the Camelot Group taken as a whole.
(d) Except as may be set forth in the Prospectus, all the outstanding
shares of capital stock of each Subsidiary have been duly authorized and
validly issued and are fully paid and nonassessable by the issuer, and all
outstanding shares of capital stock of the Subsidiaries are owned by the
Company either directly or through Subsidiaries free and clear of any
security interests, claims, liens or encumbrances (other than those granted
to secure the obligations of the Camelot Group in respect of the Company's
working capital facility), in each case where the failure to so own the
capital stock of a Subsidiary would materially adversely affect the
business, operations, property or financial condition of the Camelot Group
taken as a whole.
(e) Except as may be set forth in the Prospectus, no member of the
Camelot Group is in violation of any term or provision of any charter,
by-law, franchise, license, permit, judgment, decree or order or any
applicable statute, rule or regulation, which violation is material to the
business, operations, property or financial condition of the Camelot Group
taken as a whole.
(f) Except as may be set forth in the Prospectus, no default exists
and no event has occurred which with notice, lapse of time, or both, would
constitute a default, in the due performance and observance of any term,
covenant or condition of any agreement to which the Company or any of the
Subsidiaries is a party or by which it or any of them is bound, which
default would materially adversely affect the business, operations,
property or financial condition of the Camelot Group taken as a whole.
(g) Except as may be set forth in the Prospectus, each member of the
Camelot Group has all requisite corporate power and authority and has
received and is operating in compliance in all material respects with all
governmental or regulatory or other franchises, grants, authorizations,
approvals, licenses, permits, easements, consents, certificates and orders,
necessary to own its properties and conduct businesses as currently owned
and conducted and as proposed to be conducted, except where the failure to
do so would not materially adversely affect the business, operations,
property or financial condition of the Camelot Group, taken as a whole.
(h) Except as may be described in the Prospectus, since the date of
the most recent financial statements included in the Prospectus, there has
been no material adverse change in the business, operations, property or
financial condition of the Camelot Group taken as a whole, whether or not
arising from transactions in the ordinary course of business.
(i) Except as may be described in the Prospectus, no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the best knowledge of the Company, threatened
against any member of the Camelot Group or against any of their respective
properties or revenues, existing or future which, if adversely determined,
could reasonably be expected to have a material adverse effect on the
business, property or financial condition of the Camelot Group taken as a
whole, or which otherwise is of a character required to be disclosed in the
Prospectus; there is no franchise, contract or other document of a
character required to be described in the Registration Statement or the
Prospectus, or to be filed as an exhibit, which is not adequately described
or filed as required; and such franchises, contracts and other documents
that are described in the Prospectus conform in all material respects to
the descriptions thereof contained in the Prospectus.
(j) Except as may be described in the Prospectus, there is no pending
or, to the best knowledge of the Company, threatened action, suit, or
judicial, arbitral, rule-making or other administrative or other proceeding
against the Company which challenges the validity of (i) this Agreement or
(ii) any Purchase Agreement entered into in connection with the offering or
any action taken or to be taken pursuant to or in connection with such
agreements.
(k) The Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all of the
issued and outstanding shares of capital stock of the Company have been
duly authorized and validly issued and, except as set forth in the
Prospectus, are fully paid and nonassessable.
(l) The Company has all requisite corporate power and authority, has
taken all requisite corporate action, and has received and is in compliance
with all governmental, judicial and other authorizations, approvals and
orders, necessary in connection with the offering, and to carry out the
provisions and conditions of this Agreement and the Purchase Agreement, if
any, related thereto, except for such approvals and conditions that need to
be obtained or satisfied as are set forth in the Prospectus and such
approvals or authorizations as may be required under the Securities Act,
the securities or "Blue Sky" laws of any jurisdiction or the rules of any
securities exchange on which the New Common Stock is listed in connection
with the purchase and distribution of shares of New Common Stock in the
offering. The Purchase Agreement, if any, entered into in connection with
the offering has been duly authorized, executed and delivered by the
Company and is a valid and binding and enforceable obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles; provided, that no representation is made as to the validity,
binding effect or enforceability of any provision that purports to provide
indemnification of any Person for any Losses resulting from violation by
such person of any applicable securities or "Blue Sky" laws.
(m) To the best knowledge of the Company, neither the sale of the New
Common Stock to be sold pursuant to the Registration Statement, nor the
execution, delivery or performance by the Company of the Purchase
Agreement, if any, entered into in connection with the offering or the
consummation of any other of the transactions contemplated in such Purchase
Agreement, if any, will conflict with, result in a breach of, or constitute
a default under, the charter or by-laws of the Company or any of the
Subsidiaries or the terms of any material indenture or other material
agreement or instrument to which the Company or any of the Subsidiaries is
a party or by which it or any of them is bound, or any material statute
applicable to the Company or any of the Subsidiaries or any material order,
decree, rule or regulation applicable to the Company or any of the
Subsidiaries of any Governmental Authority.
(n) Except (i) as set forth in the Prospectus, (ii) for rights to
registration pursuant to a Registration Statement on Form S-8 and (iii) to
the extent permitted under subsection 5.6, no holders of securities of the
Company have rights to the registration of such securities under any
Registration Statement except the Securities Holders.
For purposes of the foregoing representations and warranties, the Company may
assume that any agreement is the valid and binding obligation of any other
parties to such agreement.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE SECURITIES HOLDERS.
Each participating Securities Holder shall, in connection with a Sale
Event, if required by the terms of a Purchase Agreement relating to such Sale
Event, for itself severally and not jointly represent and warrant to (i) in the
case of an underwritten Public Sale Event, the Company, the underwriter or
underwriters and each other Securities Holder participating in such underwritten
Public Sale Event or (ii) in the case of a non-underwritten Sale Event, the
Company and the purchaser or purchasers and each other Securities Holder
participating in such non-underwritten Sale Event, as follows:
(a) Such Securities Holder has all requisite power and authority to
enter into and carry out the terms of this Agreement and such Purchase
Agreement and the other agreements and instruments related to such
agreements to which it is a party.
(b) Each of this Agreement and such Purchase Agreement has been duly
authorized, executed and delivered by or on behalf of such Securities
Holder, and constitutes the valid, binding and enforceable obligation of
such Securities Holder, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles; provided, that no representation is made as
to the validity, binding effect or enforceability of any provision
purporting to provide indemnification of any person for any Losses
resulting from violation by such person of any applicable securities or
"Blue Sky" laws.
(c) Such Securities Holder, immediately prior to any sale of shares of
Registerable Common pursuant to such Purchase Agreement, will have good
title to such shares of Registerable Common, free and clear of all liens,
encumbrances, equities or claims (other than those created by this
Agreement); and, upon payment therefor, good and valid title to such shares
of Registerable Common will pass to the purchaser thereof, free and clear
of any lien, charge or encumbrance created or caused by such Securities
Holder.
(d) Such Securities Holder has not taken and will not take, directly
or indirectly, any action designed to constitute or which has constituted
or which might reasonably be expected to cause or result in, under the
Exchange Act or the rules or regulations promulgated thereunder or other
applicable law, stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of shares of Registerable
Common.
(e) Written information furnished by or on behalf of such Securities
Holder to the Company expressly for use in the Registration Statement, any
related Preliminary Prospectus, or any related Prospectus or any amendment
or supplement thereto will not contain, in each case as of the date such
information was furnished, any untrue statement of a material fact or omit
to state any material fact required to be stated or necessary to make the
statements in such information not misleading.
(f) To the best knowledge of such Securities Holder, neither the sale
of the Registerable Common to be sold pursuant to the Registration
Statement, nor the execution, delivery or performance by such Securities
Holder of the Purchase Agreement, if any, entered into in connection with
the offering or the consummation of any other of the transactions
contemplated in such Purchase Agreement, if any, will conflict with, result
in a breach of, or constitute a default under, the charter or by-laws of
such Securities Holder or the terms of any material indenture or other
material agreement or instrument to which such Securities Holder is a party
or by which it is bound, or any material statute applicable to such
Securities Holder or any material order, decree, rule or regulation
applicable to such Securities Holder of any Governmental Authority.
SECTION 9. DELIVERY OF COMFORT LETTER AND LEGAL OPINION.
On the date that a Registration Statement relating to a Sale Event in
which Securities Holders participate is declared effective by the Commission,
the Company shall comply with the following:
(a) The Company shall have received, and delivered to each Securities
Holder participating in such Sale Event, a copy of the "comfort" letter or
letters, or updates thereof according to customary practice, of the
independent certified public accountants who have certified the Company's
financial statements included in the Registration Statement covering
substantially the same matters with respect to the Registration Statement
(including the Prospectus) and with respect to events subsequent to the
date of the Company's financial statements as are customarily covered in
accountants' letters delivered to underwriters in underwritten public
offerings of securities. The Company will use its reasonable best efforts
to cause such "comfort" letters to be addressed to such Securities Holders.
(b) Each Securities Holder and any underwriters participating in such
offering shall have received an opinion and any updates thereof of outside
counsel to the Company reasonably satisfactory to such Securities Holders
and underwriters covering substantially the same matters as are customarily
covered in opinions of issuer's counsel delivered to underwriters in
underwritten public offerings of securities, addressed to each of such
Securities Holders and underwriters participating in such offering and
dated the closing date thereof.
SECTION 10. MISCELLANEOUS.
10.1. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when actually delivered or, in the
case of notice by facsimile transmission, when sent and confirmation of receipt
is received. Notices to the Securities Holders shall be deemed to have been
given or made when sent. All notices shall be addressed as follows or to such
other address as may be hereafter designated in writing by the respective
parties hereto:
The Company: Camelot Music Holdings, Inc.
c/o Camelot Music, Inc.
Attention: Chief Financial Officer
ββββ βββββββ ββββββ, β.β.
βββββ ββββββ, ββββ βββββ
Telecopy: (βββ) βββ-ββββ
The Securities
Holders: The address of each Securities Holder as
set forth on the signature pages hereof.
10.2. Amendments and Waivers. The Securities Holders of not less than
66-2/3% of the Registerable Common held or beneficially owned by Securities
Holders at any point in time and the Company may from time to time enter into
written amendments, supplements or modifications to this Agreement for the
purpose of adding any provisions hereto or thereto or changing in any manner the
rights of the Securities Holders or the Company hereunder or thereunder, and the
Securities Holders of not less than 66-2/3% of the Registerable Common held or
beneficially owned by Securities Holders at any point in time may execute a
written instrument waiving, on such terms and conditions as may be specified
therein, any of the requirements of this Agreement which are solely for the
benefit of the Securities Holders and where such waiver does not adversely
affect the interests of the Company; provided, however, that no such waiver and
no such amendment, supplement or modification shall (i) adversely affect the
rights of a Securities Holder under Section 2 hereof or (ii) amend, modify or
waive any provision of Section 5 or this subsection 10.2, in each case without
the written consent of each Securities Holder. Any such waiver and any such
amendment, modification or supplement shall apply equally to each of the
Securities Holders and the Company.
10.3. Termination. This Agreement and the respective obligations and
agreements of the parties hereto, except as otherwise expressly provided herein,
shall terminate on the Termination Date.
10.4. Survival of Representations and Warranties. Except as they may
by their terms relate to an earlier date, all representations and warranties
made hereunder and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the termination of any or all of the provisions of this
Agreement.
10.5. Headings. The descriptive headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
10.6. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all of such
counterparts shall together constitute one and the same agreement.
10.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10.8. Adjustment of Shares. Each reference to a number of shares of
Common Stock in this Agreement shall be adjusted proportionately to reflect any
stock dividend, split or reverse split or the like affected with respect to all
outstanding shares of New Common Stock.
10.9. No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Securities Holders in this
Agreement or otherwise conflicts with the provisions hereof.
10.10. Severability. Any provision of this Agreement prohibited or
rendered unenforceable by any applicable law of any jurisdiction shall as to
such jurisdiction be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10.11. ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.
10.12. Listing of New Common Stock. Pursuant to the Plan, the Company
shall use its reasonable best efforts to cause the New Common Stock to be listed
or admitted to trading on the NASDAQ or another nationally recognized securities
exchange.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
CAMELOT MUSIC HOLDINGS, INC.
By: /s/ ββββ β. ββββββ
--------------------------------
Name: ββββ β. ββββββ
Title: Executive Vice President
and Chief Operating Officer
SECURITIES HOLDERS:
FERNWOOD ASSOCIATES, L.P.
By: /s/ ββββββ β. ββββββ
--------------------------------
Name: ββββββ β. ββββββ
Title: General Partner
βββ βββββββ ββββββ, ββββ βββββ
βββ ββββ, βββ ββββ βββββ
Attn: ββββ ββββββ
ββββββ ββββββ
βββββββ LYNCH, PIERCE, ββββββ &
βββββ INCORPORATED
By: /s/ ββββββ ββββββ
--------------------------------
Name: ββββββ ββββββ
Title: Managing Director
Debt and Equity Markets Group
World βββββββββ ββββββ
βββββ βββββ
βββ ββββ, βββ ββββ βββββ-ββββ
Attn: ββββ β. ββββββββ
βββ ββββββ AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ βββββββ β. βββββββ
--------------------------------
Name: βββββββ β. βββββββ
Title: Senior Vice President
and Director
βββ ββββββββ βββββ
ββββββββ βββββββ, ββ βββββ
Attn: βββββββ βββββββ
OAKTREE CAPITAL MANAGEMENT, LLC,
as a "Securities Holder" hereunder
(in its capacity as general partner
and investment manager of OCM
Opportunities Fund, L.P. and Columbia/
HCA Master Retirement Trust
(separate account I))
By: /s/ βββββββ ββββββ
--------------------------------
Name: βββββββ ββββββ
Title: Principal
By: /s/ βββββββ βββββ
--------------------------------
Name: βββββββ βββββ
Title: Managing Director and
General Counsel
βββ βββββ ββββ ββββββ, ββββ βββββ
βββ βββββββ, ββ βββββ
Attn: βββββββ βββββ
ββββ βββββββ
SCHEDULE 1
REGISTERABLE COMMON
AS OF THE EFFECTIVE DATE
==============================================================================
Shares of
Securities Holder Registerable Percentage
Common
------------------------------------------------------------------------------
Fernwood Associates, L.P. 1,549,595 25.996%
------------------------------------------------------------------------------
βββββββ Lynch, Pierce, 1,466,362 24.552%
ββββββ & βββββ Incorporated
------------------------------------------------------------------------------
Oaktree Capital Management, LLC 961,740 16.103%
------------------------------------------------------------------------------
βββ ββββββ American Capital 1,994,718 33.399%
Prime Rate Income Trust
------------------------------------------------------------------------------
TOTAL 5,972,415 100%
==============================================================================
EXHIBIT A
SECURITIES HOLDER'S QUESTIONNAIRE
Please complete and return immediately to Camelot Music Holdings, Inc.
at the following address:
Camelot Music Holdings, Inc.
c/o Camelot Music, Inc.
ββββ βββββββ ββββββ, β.β.
βββββ ββββββ, ββββ βββββ
Attention: Chief Financial Officer
The information requested below is required for purposes of any Public
Sale Event pursuant to the Registration Rights Agreement dated as of January 27,
1998 (the "Agreement") that may be initiated from time to time. If you do not
furnish the Company with the requested information, you will not be entitled to
participate in any such registration. Unless otherwise defined herein,
capitalized terms shall have the meanings ascribed thereto in the Agreement.
Please do not leave any request for information unanswered. If your
response to a request is "no" or "not applicable," please so state. If
additional space is required, please attach additional sheets to the end of this
Questionnaire, clearly identifying the portion hereof to which they relate.
If you have any questions regarding this Questionnaire, please contact
_________________________.
I. Information required for notices.
Institution Name: _________________________________________
Street Address: _________________________________________
Post Office Box: _________________________________________
City/State/Zip: _________________________________________
Fed. Tax ID. No.
(if any): _________________________________________
Telecopier Number: _________________________________________
Contacts (Please include alternative contacts).
1. Name: _________________________________________
Title: _________________________________________
Function: _________________________________________
Business Telephone: _________________________________________
2. Name: _________________________________________
Title: _________________________________________
Function: _________________________________________
Business Telephone: _________________________________________
II. Information required by the Securities Act of 1933, as amended, and related
regulations.
A. Federal Securities Laws
1. Name and Address. Give your name and address exactly as they should
appear in any Prospectus.
_________________________________________
_________________________________________
_________________________________________
_________________________________________
2. Ownership of Registerable Common. State the number of shares of
Registerable Common if any, owned by you or your affiliates as of the date
hereof.
Shares of Registerable Common: _______________________
3. Beneficial Ownership of New Common Stock. Please furnish the
following information, in the tabular form indicated, as to the shares of New
Common Stock beneficially owned (see definition at end of Questionnaire) by you
(including amounts held in your Trust Department in discretionary accounts):
If such ownership is
shared with others,
indicate nature and
Number of Nature of extent of such shared
Shares* Beneficial Ownership** ownership
--------- -------------------- ---------------------
* Include shares which you have the right to acquire through the exercise of
options, warrants or other securities on or before 60 days after the
estimated date of the Prospectus.
** Please indicate the extent to which you have sole voting power, shared
voting power, sole investment power and shared investment power with
respect to shares of New Common Stock you beneficially own.
4. Disclaimer of Beneficial Ownership. Please indicate below the
number and description of any shares of New Common Stock with respect to which
you disclaim beneficial ownership and whether such shares are included in the
figure(s) reported above.
5. Five Percent Beneficial Owners. Please give the name and address of
any Person, corporation or other entity, other than the parties to the
Agreement, known to you to own beneficially 5% or more of the outstanding New
Common Stock (i.e., _________ shares or more).
NOTES: For purposes of your response to this question, the term "Person"
includes two or more Persons acting as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring,
holding or disposing of the Company's securities.
6. Underwriters. Please describe briefly and state the nature of any
relationship or interest that you have or any associate of yours (see definition
at end of Questionnaire) has, in any underwriter of the securities to be
offered. If you are a member or controlling Person of a firm that may be an
underwriter of the securities to be offered, briefly describe your relationship
to, and interest in, such underwriter.
NOTE: The underwriters will be listed in the final amendment to the
Registration Statement, a copy of which will be sent to you at a later
date.
7. Material Relationships. Please list all material relationships that
you now have, or have had since _____________, with the Company or any of its
affiliates, other than your ownership of the New Common Stock or your
participation in the Company's bankruptcy case.
B. NASD Regulations.
7. NASD Membership. State whether you are a "member" of the National
Association of Securities Dealers, Inc. (the "NASD"), a "Person associated with
a member" or an "underwriter or a related Person" with respect to the proposed
offering.
NOTES: (1) The NASD By-Laws define "member" to mean either any broker or
dealer admitted to membership in the NASD.
(2) The NASD By-Laws define "Person associated with a member" to
mean every sole proprietor, partner, officer, director or branch
manager of any member, or any natural Person occupying a similar
status or performing similar functions, or any natural Person engaged
in the investment banking or securities business who is directly or
indirectly controlling or controlled by such member, whether or not
any such Person is registered or exempt from Registration with the
NASD.
(3) The NASD has interpreted "underwriter or a related Person"
with respect to a proposed offering to include an underwriter,
underwriters' counsel, financial consultants and advisers, finders,
members of the selling or distribution group, and any and all other
Persons "associated with" or "related to" any of such Persons.
8. Purchase by NASD Affiliates. If your answer to the preceding
question was "yes," please furnish the following information, in the tabular
form indicated, as to all purchases and acquisitions (including contracts to
purchase or to acquire) by you, of warrants, options or any other securities of
the Company or any subsidiary thereof, during the preceding 12 months, as well
as all proposed purchases or acquisitions by you which are to be consummated in
whole or in part prior to, at the time of or within six months after the
effectiveness of the Registration Statement.
Purchaser or Seller or Amount and Price or
Prospective Prospective Name of Other
Date Purchaser Seller Securities Consideration
---- ------------ ----------- ---------- -------------
____ ____________ ___________ __________ _____________
____ ____________ ___________ __________ _____________
____ ____________ ___________ __________ _____________
9. Dealings with Company. Please describe any other dealings within
the preceding 12 months not already described in response to the foregoing
questions between the Company or any subsidiary or controlling shareholder
thereof and any underwriter, related Person of such underwriter, NASD member or
Person associated with such member affiliated with you, as such terms are
defined in the Notes to Question 10.
The undersigned hereby represents and warrants to any Person who may
be liable in respect of a Registration or other offering pursuant to the
Agreement that the answers given in this Questionnaire are correctly stated to
the knowledge, information and belief of the undersigned. The undersigned hereby
agrees to promptly notify the Company of any change in such answers which may
occur during the period beginning with the date below and ending on the date 90
days after the effective date of any Registration Statement relating to a
Registration or other offering pursuant to the Agreement. The undersigned hereby
agrees, following notice of any proposed Registration to update and amend this
Questionnaire if there is any material change in the above information and to
provide any additional information requested by the Company pursuant to the
Agreement.
Dated: _____________, 19__.
Holder:________________________
By:____________________________
Name:__________________________
Title:_________________________
DEFINITIONS
As used in this Questionnaire:
"affiliate" means a Person or organization that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Company.
An "associated person" means (1) any corporation or organization
(other than the Company or a majority owned subsidiary) of which you are an
executive officer or partner or are, directly or indirectly, the beneficial
owner of 10% or more of any class or equity securities and (2) any trust or
other estate in which you have substantial beneficial interest or to which you
serve as trustee or in a similar fiduciary capacity.
Securities "owned beneficially" by you are securities (whether or not
registered in your name) in which you have or share (directly or indirectly
through any contract, arrangement, understanding, relationship or otherwise) (i)
voting power, which includes the power to vote or direct the voting of the
securities, or (ii) investment power, which includes the power to dispose, or
direct the disposition, of the securities. You are also deemed to be the
beneficial owner of any securities which you have the right to acquire
immediately or within 60 days (a) through the exercise of any option, warrant or
right, (b) through the conversion of a security or (c) pursuant to the power to
revoke, or the automatic termination of, a trust, discretionary account or
similar arrangement.
Thus, securities held in the name of other individuals, in the name of
an estate or trust or pursuant to a pledge agreement where you have either the
power to direct the voting of the securities or the disposition of such
securities should be listed as "owned beneficially" by you. The Commission has
also taken the position that securities held by your spouse, minor children, or
other relatives sharing your home should be shown as "owned beneficially" by you
on the theory that, absent special circumstances you are able to exercise a
controlling influence over the purchase, sale or voting of such securities.
EXHIBIT B
SUPPLEMENTAL ADDENDUM
The undersigned is a holder of New Common Stock of Camelot Music
Holdings, Inc. The undersigned hereby agrees as follows:
The undersigned hereby accepts the terms of and becomes a party to (as
a Securities Holder) the Registration Rights Agreement dated as of January 27,
1998 by and among Camelot Music Holdings, Inc. (the "Company") and each
Securities Holder named therein. In connection therewith, the undersigned agrees
to (A) assume all obligations and liabilities thereunder, (B) enjoy all of the
rights thereunder, (C) be bound thereby and (D) perform and comply with the
agreements and commitments on the part of the undersigned, as assignee, set
forth in the Registration Rights Agreement.
As used in this Supplemental Addendum, capitalized terms defined in
the Registration Rights Agreement shall have their respective defined meanings.
Name of
Address: Institution:________________________
By__________________________________
Title:
Date: ______________, ____