1
EXHIBIT 10.1
SUBORDINATED NOTE PAYABLE CONVERSION AGREEMENT
----------------------------------------------
This Conversion Agreement (the "Agreement") is entered into as of November
1, 1998, by and among Jalate, Ltd., a California corporation (the "Company"),
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual ("▇▇. ▇▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇, an
individual ("▇▇. ▇▇▇▇▇"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual ("▇▇. ▇▇▇▇▇▇▇")
(▇▇. ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ hereinafter are referred to individually
as a "Holder" and collectively as the "Holders"), with reference to the
following facts
A. The Company has executed those certain Subordinated Secured Promissory
Notes all dated as of January 27, 1998, in the amounts and in favor of the
Holders as set forth on Schedule 1 hereto (the "Notes") (a Note in the amount of
$237,500 was originally issued by the Company to ▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual,
("▇▇. ▇▇▇▇▇▇▇"), who subsequently assigned such Note to ▇▇. ▇▇▇▇▇▇▇).
B. In connection with the execution of the Notes, (i) the Holders entered
into an Agency and Intercreditor Agreement (the "Intercreditor Agreement")
between the Holders and ▇▇. ▇▇▇▇▇▇▇ as "Secured Party," pursuant to which, among
other things, Secured Party was appointed as "Agent" for the Holders; and (ii)
the Company entered into a Security and Pledge Agreement dated as of January 27,
1998 (the "Security and Pledge Agreement") between the Company and the Secured
Party, pursuant to which the Company conveyed, assigned, transferred, delivered,
pledged and granted to Secured Party a security interest in and to the
Collateral (as defined in the Security and Pledge Agreement).
C. The Company has executed those certain Stock Purchase Warrants all
dated January 27, 1998 with the Holders, each as identified on Schedule 2 hereto
(the "Warrants") (Warrant No. 1 was originally issued to ▇▇.
▇▇▇▇▇▇▇, who subsequently assigned such Warrant to ▇▇. ▇▇▇▇▇▇▇).
D. The Company wishes to convert (the "Conversion") the outstanding
principal amounts of the Notes into shares of common stock, no par value, of the
Company ("Common Stock") at a conversion rate of $0.625 per share of Common
Stock, and each of the Holders wishes to receive such shares of Common Stock in
full satisfaction of the principal amounts owed to them under the Notes.
E. As a condition to the willingness of the Holders to effect the
Conversion, the Company has agreed to reduce the exercise prices of the Warrants
and extend the expiration dates under the Warrants as described herein.
NOW, THEREFORE, based on the above premises and in consideration of the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Conversion of Notes into Common Stock. The parties hereby agree that
the outstanding principal amount of the Notes shall be converted into shares of
Common Stock at a conversion rate of $0.625 per share of Common Stock. The
number of shares of Common Stock to be received by each Holder in connection
with the Conversion is shown in Schedule 1 attached hereto ("Conversion
Shares"). Each of the Holders hereby agrees that receipt of the Conversion
Shares by each of them pursuant to this Section 1 shall be in full satisfaction
and discharge of the principal amounts owed to them by the Company under their
respective Notes.
2
1.1 Delivery of Stock Certificates and Cancelled Notes; Listing
Application. Concurrently herewith the Company is issuing to the Holders
certificates evidencing their respective Conversion Shares in the names of such
Holders, and the accrued and unpaid interest due on each of the Notes as
indicated on Schedule 1 attached hereto, and the Holders are delivering the
original Notes to the Company marked "CANCELLED." The Company will file an
application to list the Conversion Shares on the American Stock Exchange in
connection with the earlier of (i) the registration of the Conversion Shares
pursuant to the registration rights granted under Section 3 hereof, (ii) such
date as the Conversion Shares may be sold pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Act"), or (iii) any other listing
application filed by the Company with the American Stock Exchange with respect
to which it would be cost-effective (as determined by the Company) to also list
the Conversion Shares; provided, however, that in any event the Company will
file the listing application with the American Stock Exchange by November 1,
1999.
1.2 Termination of Security and Pledge Agreement. The Company and
Secured Party hereby agree that the Security and Pledge Agreement is hereby
terminated and of no further force and effect and concurrently herewith the
Secured Party is returning the Collateral to the Company.
1.3 Restrictions on Transfer. The Holders hereby acknowledge that (i)
the Conversion Shares have not been registered under the Act, and are
"restricted securities" within the meaning of Rule 144 under the Act; and (ii)
the Conversion Shares may not be sold, transferred or pledged by such Holders
unless the Company shall have been supplied with reasonably satisfactory
evidence that such transfer is not in violation of the Act and any applicable
state securities laws. The Company may place a legend to that effect on each
certificate representing shares issuable to the Holders pursuant to this Section
1.3.
2. Amendments to Warrants. The parties agree that each of the Warrants is
hereby amended as follows (capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Warrant Agreements):
(a) The Purchase Price set forth in the introductory
paragraph is hereby changed from "$1.625" to "$0.625."
(b) The Expiration Date is hereby changed from
"January 27, 2003" to "November 1, 2003."
(c) Section 1.1 is hereby deleted and replaced with the
following: "This Warrant may be exercised in whole or in part at any time, and
from time to time, during the period commencing on the date of this Warrant and
expiring on November 1, 2003."
3. Registration Rights. The Conversion Shares will be entitled to the
registration rights set forth in Exhibit A attached hereto.
4. Voting Agreement. As an inducement to the Holders to enter into this
Agreement and effect the Conversion, simultaneously with the execution and
delivery of this Agreement, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ have each executed
and delivered a voting agreement substantially in the form set forth in Exhibit
B attached hereto.
3
5. Appointment of Director. Simultaneously with the execution and delivery
of this Agreement, the Company appoints ▇▇. ▇▇▇▇▇▇▇ to serve as a director of
the Company and ▇▇. ▇▇▇▇▇▇▇ accepts such appointment.
6. Representations of Holders. As a material inducement to the Company to
enter into this Agreement, each of the Holders individually represents and
warrants to the Company as follows:
6.1. Sole Ownership of Notes; No Encumbrances. Holder is the sole
owner of his or her Note, in the outstanding principal amount, plus accrued and
unpaid interest thereon, as set forth on such Schedule 1, free and clear of all
liens, claims, security interests or any other encumbrances whatsoever. Holder
has not transferred any of its interests in his or her Note.
6.2 Authorization. Holder has full right, power, capacity and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by Holder, and
constitutes the legal, valid and binding obligation of Holder, enforceable
against Holder in accordance with its terms.
6.3 Investment. Holder is an "accredited investor" within the
meaning of Regulation D promulgated under the Act. Holder is acquiring the
Conversion Shares for its own account for investment and not with a view to a
distribution thereof in violation of the Securities Act.
7. Representations of Company. As a material inducement to the Holders to
enter into this Agreement, the Company represents and warrants to each of the
Holders as follows:
7.1 Organization and Good Standing; Authorization; Absence of
Conflicts. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and is duly
qualified to transact business as a foreign corporation in each jurisdiction
where the nature of its business or its ownership of property requires such
qualification, except where the failure to be so qualified would not be
reasonably likely to have a material adverse effect on the Company's financial
condition or results of operation (a "Material Adverse Effect"). The Company has
full right, power, capacity and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement has been duly executed
and delivered by the Company, and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. The execution, delivery and performance of this Agreement by the
Company do not violate or conflict with or constitute a default under the
Company's articles of incorporation or bylaws or any agreement or contract to
which the Company is a party, except where such violation, conflict or default
would not be reasonably likely to have a Material Adverse Effect.
7.2 Issuance of Shares. The issuance and delivery of the Conversion
Shares has been duly authorized by all necessary corporate action on the part of
the Company. The Conversion Shares when issued in accordance with the provisions
of this Agreement will be duly and validly issued, fully paid and
non-assessable.
7.3 Conversion Rate. As of the approval of this Agreement by the
Company's Board of Directors, the conversion rate of $0.625 per share was higher
than the greater of book or market value of the Common Stock.
4
8. Indemnification. The Company, on one hand, and the Holders, on the
other hand, hereby agree to defend, indemnify and hold harmless the other and
their respective affiliates, officers, directors, controlling persons, agents,
representatives and employees from and against all liabilities, damages, losses,
costs and expenses (including reasonable attorneys' fees and other
professionals' fees) which they may incur by reason of any breach of the
representations, warranties and covenants made by the Company or such Holder
herein.
9. Miscellaneous.
9.1 Amendments. This Agreement may be amended or supplemented at any
time by the mutual written consent of the parties.
9.2 Entire Agreement. This Agreement, its exhibits and the documents
executed in connection herewith, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof.
9.3 Binding Effect, Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except Section 8 hereof which shall inure to the
benefit of and be enforceable by indemnified parties.
9.4 Assignability. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by a party without the prior written
consent of the other parties; provided, however, that a Holder may assign the
registration rights set forth in Exhibit A hereto to any transferee of the
Conversion Shares so long as (i) the Holder provides written notice to the
Company of such assignment within thirty (30) days of the transfer and (ii) the
transferee agrees in writing to be bound by all of the terms of Exhibit A; and
provided further that in no event may the registration rights set forth in
Exhibit A be assigned in such a manner that more than ten persons are entitled
to the benefits thereof.
9.5 Notices. All notices under this Agreement will be in writing and
will be delivered by personal service, facsimile transmission or telegram,
telecopy, certified mail (if such service is not available, then by first class
mail), postage prepaid, to such address as may be designated from time to time
by the relevant party, and which will initially be as set forth in each party's
signature block set forth below. Any notice sent by certified mail will be
deemed to have been given three (3) days after the date on which it is mailed.
All other notices will be deemed given when received. No objection may be made
to the manner of delivery of any notice actually received in writing by an
authorized agent of a party.
9.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California, without regard
to any applicable conflicts of law principles thereof, including all matters of
construction, validity and performance.
5
9.7 Fees and Expenses. Each party shall bear and be responsible for
all of the fees and expenses incurred by it in connection with the transactions
contemplated by this Agreement; provided, however, that the Company will pay the
fees and expenses (up to $1,500) of one attorney for the Holders selected by ▇▇.
▇▇▇▇▇▇▇.
9.8 The validity, legality or enforceability of the remainder of
this Agreement will not be affected even if one or more of the provisions of
this Agreement will be held to be invalid, illegal or unenforceable in any
respect.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
[signatures on following page]
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
"Company" "Secured Party"
JALATE, LTD.,
a California corporation
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Vice President and
Chief Financial Officer
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ "Holders"
City of ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, an individual
Address: c/o USA Waste Services,
Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
7
SCHEDULE 1
NOTES AND HOLDERS
Number of Accrued and
Conversion Unpaid
Holder Amount Shares Interest
------ -------- ---------- -----------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 237,500 380,000 $ 2,045.14
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 142,500 228,000 $ 1,227.08
▇▇▇▇ ▇. ▇▇▇▇▇ $ 95,000 152,000 $ 818.06
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 475,000 760,000 $ 4,090.28
--------- --------- ----------
Total $ 950,000 1,520,000 $ 8,180.56
========= ========= ==========
By assignment from ▇▇▇ ▇. ▇▇▇▇▇▇▇.
8
SCHEDULE 2
WARRANTS
Series A Warrant No. 1, Stock Purchase Warrant issued by the Company to ▇▇▇ ▇.
▇▇▇▇▇▇▇ on January 27, 1998, covering right to purchase up to 125,000 shares of
Common Stock at an exercise price of $1.625 per share, and subsequently assigned
by ▇▇▇ ▇. ▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Series A Warrant No. 2, Stock Purchase
Warrant issued by the Company to ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ on January 27, 1998,
covering right to purchase up to 75,000 shares of Common Stock at an exercise
price of $1.625 per share.
Series A Warrant No. 3, Stock Purchase Warrant issued by the Company to ▇▇▇▇ ▇.
▇▇▇▇▇ on January 27, 1998, covering right to purchase up to 50,000 shares of
Common Stock at an exercise price of $1.625 per share.
Series A Warrant No. 4, Stock Purchase Warrant issued by the Company to ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ on January 27, 1998, covering right to purchase up to 250,000 shares
of Common Stock at an exercise price of $1.625 per share.
9
EXHIBIT A
---------
Registration Rights
1. "Piggyback" Registration. If at any time the Company proposes to file a
registration statement under the Act with respect to an offering of its Common
Stock (other than a registration statement on Form S-4 or Form S-8 or any
successor or similar forms), whether or not for sale for its own account, then
the Company each such time shall give the Holder ten (10) business days written
notice before the filing thereof, which such notice shall offer the Holder the
opportunity to register all of such Holder's Conversion Shares which do not
qualify for an exemption from such registration under Rule 144 under the
Securities Act of 1933, as amended (the "Act") or a comparable or successor
exemption from registration ("Registrable Shares"). The Company shall include in
such registration statement all of the Holder's Registrable Shares with respect
to which the Company has received written request for inclusion within ten (10)
business days after notice has been duly given by the Company. Notwithstanding
the foregoing, the Company shall not be required to include the Holder's
Registrable Shares if the managing underwriter or underwriters of such offering
determine and advise the Company that inclusion of the Registrable Shares and
any other shares having "piggyback" registration rights (the "Other Shares")
would likely adversely affect such offering. If the managing underwriter or
underwriters determine that a portion of the Registrable Shares and Other Shares
may be included in the offering, the Registrable Shares and the Other Shares
shall be included in the registration on a pro rata basis (in relation to the
number of such Registrable Shares and Other Shares so requested to be included
in the offering).
The Holders acknowledge that nothing contained herein shall require or obligate
the Company to cause any registration statement pursuant to which the Holder has
exercised its "piggyback" registration rights pursuant to this Exhibit A to
become effective or, if declared effective, to maintain the effectiveness of
such registration statement.
2. Registration Expenses. Except as otherwise required by state securities laws
or the rules and regulations promulgated thereunder, all expenses, disbursements
and fees incurred by the Company in connection with carrying out its obligations
under this Exhibit A shall be borne by the Company; provided, however, that the
Holder shall pay (i) all costs and expenses of counsel, accounting or financing
professionals retained by such Holder, (ii) all underwriting discounts,
commissions, fees and expenses and all transfer taxes with respect to the shares
sold by such Holder, and (iii) all other expenses incurred by such Holder and
incidental to the sale and delivery of the shares to be sold by such Holder.
3. Conditions to Holder's Rights. It shall be a condition of the Holder's rights
under this Exhibit A that:
3.1 Cooperation. Such Holder shall cooperate with the Company by supplying
information and executing documents relating to such Holder or the securities of
the Company owned by such Holder in connection with such registration which are
customary for offerings of this type or is required by applicable laws or
regulations (including agreeing to sell such Holder's Registrable Securities on
the basis provided in any underwriting arrangements containing customary terms
reasonably satisfactory to such Holder); and
10
3.2 Undertakings. Such Holder shall enter into any undertakings and take
such other action relating to the conduct of the proposed offering which the
Company or the underwriters may reasonably request as being necessary to insure
compliance with federal and state securities laws and the rules or other
requirements of the National Association of Securities Dealers, Inc. or the
American Stock Exchange, or which the Company or the underwriters may reasonably
request to otherwise effectuate the offering.
4. Discontinuation of Use of Prospectus. The Holder agrees that upon receipt of
any written notice from the Company that the prospectus included in the
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, the Holder will forthwith discontinue
its disposition of Registrable Shares pursuant to the registration statement
relating to such Registrable Shares until the Holder's receipt of the copies of
the supplemented or amended prospectus and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in the Holder's possession, of the prospectus
relating to such Registrable Shares current at the time of receipt of such
notice.
5. Indemnification.
5.1. Indemnification by the Company. In the event of any registration of
any Registrable Shares under the Act, the Company will, and it hereby does,
indemnify and hold harmless, to the full extent permitted by law, each Holder,
its directors, officers, partners, heirs, personal representatives, agents and
affiliates and each other person, if any, who controls such Holder within the
meaning of the Act, against any and all losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect thereof)
which arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse each Holder and each such director, officer,
partner, heir, personal representative, agent or affiliate, and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement (i) in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by or on behalf of such Holder, specifically stating
that it is for use in the preparation thereof or (ii) which is corrected in an
amendment or supplement or final prospectus (or amendment or supplement thereto)
provided to the indemnified person and such amended, supplemented or final
prospectus (or amendment or supplement thereto) was not given by or on behalf of
such indemnified person to the person who purchased the Registrable Securities,
if such is required by law at or prior to the written confirmation of the sale
of the Registrable Securities to such person; and provided, further, that the
Company shall not be liable to any person to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any violation by such person of the Act or the
Securities Exchange Act of 1934, as amended. Such indemnity shall remain in full
force regardless of any investigation made by or on behalf of such Holder or any
such director, officer, partner, heir, personal representative, agent or
affiliate or controlling person and shall survive the transfer of such
securities by such Holder.
11
5.2 Indemnification by the Holders. As a condition to including any
Registrable Shares of a Holder in any registration statement, the Company shall
have received an undertaking reasonably satisfactory to it from such Holder, to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 5.1 of this Exhibit A) the Company, its directors, officers,
agents and affiliates and each other person, if any, who controls the Company
within the meaning of the Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission (i) was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Holder specifically stating that it is for the
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement or (ii) is
corrected in an amendment or supplement or final prospectus (or amendment or
supplement thereto) provided to the indemnifying person and such amended,
supplemented or final prospectus (or amendment or supplement thereto) was not
given by or on behalf of such indemnifying person to the person who purchased
the Registrable Securities, if such is required by law at or prior to the
written confirmation of the sale of the Registrable Securities to such person;
provided, however, that the liability of such indemnifying party under this
Section 5.2 of Exhibit A shall be limited to the amount of proceeds received by
such Holder in the offering giving rise to such liability. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and
shall survive the transfer of such securities by such Holder.
5.3 Notices of Claims, etc. Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section 5 of
Exhibit A, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 5 of Exhibit A, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such claim or
action is brought against an indemnified party, the indemnifying party shall be
entitled to participate in and, unless representation of such indemnified party
and any such indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them, to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by an indemnifying party with respect to
such claim, unless representation of such indemnified parties by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
12
5.4. Contribution. If the indemnification provided for in this Section 5
of Exhibit A shall for any reason be held by a court to be unavailable to an
indemnified party under Section 5.1 or 5.2 of Exhibit A hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under Section 5.1 or 5.2 of Exhibit A hereof,
the indemnified party and the indemnifying party under Section 5.1 or 5.2 of
Exhibit A hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigation of the same), (a) in such proportion as is appropriate to
reflect the relative fault of the Company and the Holder with respect to the
acts, statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations or (b) if the allocation provided by clause (a) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the Holder from the
offering of the securities covered by such registration statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. In addition, no person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such person's consent, which consent shall not be
unreasonably withheld.
5.5. Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subdivisions of this Section 5 of Exhibit A
(with appropriate modifications) shall be given by the Company and the Holder
with respect to any required registration or other qualification of securities
under any federal or state law or regulation of any governmental authority other
than the Act.
5.6. Indemnification Payments. The indemnification and contribution
required by this Section 5 of Exhibit A shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.