EXHIBIT 10.3
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QUESTRON TECHNOLOGY, INC.
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INVESTORS RIGHTS AGREEMENT
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DATED AS OF JUNE 29, 1999
680,000 SHARES OF COMMON STOCK
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TABLE OF CONTENTS
Page
1. HOLDERS' PUT RIGHTS....................................................1
1.1 Granting of Put; Price.......................................1
1.2 Put Notice...................................................1
1.3 Acceptance, Rejection........................................2
1.4 Obligation to Purchase Purchaser Shares......................2
1.5 Limitations on Right of Repurchase...........................3
2. OFFER TO REPURCHASE UPON CHANGE IN CONTROL.............................4
2.1 Notice of Change in Control Notice Event.....................4
2.2 Offer in Respect of a Change in Control......................4
2.3 Acceptance, Rejection........................................5
2.4 Obligation to Purchase Purchaser Shares......................5
2.5 Deferral of Obligation to Purchase...........................5
2.6 Limitations on Obligation to Repurchase......................6
3. REGISTRATION RIGHTS....................................................7
3.1 Incidental Registration......................................7
3.2 Shelf Registration...........................................8
3.3 Companies Registration.......................................9
3.4 Registration Procedures......................................9
3.5 Reasonable Investigation....................................13
3.6 Registration Expenses.......................................13
3.7 Indemnification; Contribution...............................13
3.8 Holdback Agreements; Registration Rights to Others..........16
3.9 Availability of Information.................................17
3.10 Material Development Election...............................17
4. ANTI-DILUTION PROTECTION..............................................18
4.1 Repurchases of Common Stock or Rights.......................18
4.2 Issuances of Additional Common Stock or Rights..............19
4.3 Notice of Issuance..........................................20
4.4 Closing of Issuance and Payment of Purchase Price...........21
4.5 Additional Agreements of the Parent.........................21
5. AGREEMENTS OF THE PARENT..............................................22
5.1 CUSIP Number................................................22
5.2 Financial and Business Information..........................22
5.3 Inspection..................................................23
6. RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS.........................24
6.1 Restrictions on Transfer....................................24
6.2 Legending of Certificates...................................24
6.3 Securities Act Restrictions; Legend.........................24
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TABLE OF CONTENTS (continued)
Page
6.4 Termination of Restrictions..................................25
7. DEFINED TERMS..........................................................25
7.1 Terms Defined................................................25
7.2 Accounting Principles........................................36
7.3 Directly or Indirectly.......................................37
7.4 Section Headings and Table of Contents and Construction......37
7.5 Governing Law................................................37
8. MISCELLANEOUS..........................................................37
8.1 Notices......................................................38
8.2 Reproduction of Documents....................................38
8.3 Survival; Entire Agreement...................................38
8.4 Successors and Assigns.......................................39
8.5 Amendments and Waivers.......................................39
8.6 Expenses.....................................................39
8.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc...........39
8.8 Indemnification of Each Holder...............................41
8.9 Execution in Counterpart.....................................42
Annex 1 - Names and Addresses of Purchasers
Annex 2 - Address of the Parent
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INVESTORS RIGHTS AGREEMENT
INVESTORS RIGHTS AGREEMENT, dated as of June 29, 1999, among QUESTRON
TECHNOLOGY, INC., a Delaware corporation (together with its successors and
assigns, the "Parent"), and ALBION ALLIANCE MEZZANINE FUND, L.P., ALLIANCE
INVESTMENT OPPORTUNITIES FUND, L.L.C., THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES and IBJ WHITEHALL BANK & TRUST COMPANY (together with their
respective successors and assigns, the "Purchasers").
RECITALS
WHEREAS, pursuant to the Securities Purchase Agreement, the
Purchasers have agreed to purchase from the Parent, and the Parent has agreed to
sell to the Purchasers, six hundred eighty thousand (680,000) Common Shares; and
WHEREAS, the Parent and the Purchasers wish to enter into this
Agreement to govern the terms of the relationship between the Parent and the
Purchasers;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties to this Agreement hereby agree as
follows:
1. HOLDERS' PUT RIGHTS.
1.1 Granting of Put; Price.
If, at any time, the Company shall elect to prepay all or any portion
of the principal amount of the Notes pursuant to Section 1.3 of the Note
Agreement, then, and in each such case, the Parent shall offer to repurchase
from each holder of Purchaser Shares which either holds Notes or is an affiliate
of a holder of Notes, a number of the Purchaser Shares equal to the
Proportionate Number of Purchaser Shares, at a price per share equal to the
Market Price.
1.2 Put Notice.
The Parent will give notice of any each Put Option pursuant to this
Section 1 to each holder of Purchaser Shares not less than fifteen (15) days nor
more than sixty (60) days before the date fixed for prepayment of the Notes (the
"Put Repurchase Date"), stating:
(a) that the Company has elected to prepay Notes;
(b) the aggregate principal amount of Notes that the
Company has elected to prepay;
(c) the aggregate principal amount of Notes outstanding on
the date of the notice;
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(d) that each holder of Purchaser Shares has the right to
cause the Parent to repurchase the Proportionate Number of the
Purchaser Shares held by such holder at the Market Price;
(e) a detailed calculation, for each holder of Purchaser
Shares, of the Proportionate Number;
(f) a calculation reflecting the Market Price, calculated
as of the date of such notice;
(g) if the Market Price is based upon the Closing Prices
for the immediately preceding twenty (20) trading days, a statement
to that effect, and a statement that the actual Market Price will be
the Market Price calculated as of the actual Put Repurchase Date,
which may be greater or less than the estimated Market Price set
forth in such notice; and
(h) a description of the procedure for accepting the
offered repurchase (as set forth in Section 1.3) and stating that
holders seeking to have Purchaser Shares repurchased shall deliver
certificates representing the Purchaser Shares to be repurchased to
the Parent, together with stock powers duly endorsed, for arrival on
the Put Repurchase Date.
If the Parent shall not have received a written response to such notice from any
holder of Purchaser Shares within ten (10) Business Days prior to the Put
Repurchase Date, then the Parent shall immediately send a second notice to each
such holder of Purchaser Shares.
1.3 Acceptance, Rejection.
Each holder of Purchaser Shares shall have the option to accept or
reject such offered repurchase. In order to accept such offered repurchase, a
holder of Purchaser Shares shall cause a notice of such acceptance to be
delivered to the Parent at least five (5) days prior to the Put Repurchase Date,
specifying the number of Purchaser Shares (which shall not exceed the
Proportionate Number with respect to such holder) which such holder is electing
to have the Parent repurchase. A failure to accept in writing such written offer
of repurchase as provided in this Section 1.3, or a written rejection of such
offered repurchase, shall be deemed to constitute a rejection of such offer.
1.4 Obligation to Purchase Purchaser Shares.
The Parent shall be obligated to purchase all Purchaser Shares
requested to be purchased by any holder delivering a notice of acceptance
pursuant to Section 1.3, and shall pay the aggregate Market Price for all shares
tendered for repurchase to each such holder in immediately available funds, on
the Put Repurchase Date, against delivery by such holder of any and all
certificates or other instruments evidencing the Purchaser Shares, together with
appropriate stock powers or other instruments of transfer or assignment duly
endorsed. In the event that any holder shall deliver a certificate or
certificates representing a number of Purchaser Shares greater than the number
tendered for repurchase, the Parent, in addition to making payment for the
repurchased shares, shall promptly deliver to he holder of such certificate a
new share certificate representing the number of shares of Common Stock not
repurchased pursuant to this Section 1.
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1.5 Limitations on Right of Repurchase.
Notwithstanding anything contained in this Section 1 to the contrary,
the Parent shall not be obligated to pay the repurchase price in respect of any
Put Option, to the extent that (but only to the extent that), at any time:
(a) payment of the repurchase price at such time would
result in a breach of, or default or event of default in respect of,
the Note Agreement, the Notes or the Senior Credit Facility without
the written consent of those holders of the Notes and those lenders
under the Senior Credit Facility the consent of which would be
necessary to waive such breach, default or event of default (and,
unless each such required consent is given, the holders of the
Purchaser Shares shall not accept or be permitted to retain such
payment); or
(b) payment of the repurchase price is, at such time,
prohibited by applicable law (including, without limitation, section
160 of the Delaware General Corporation Law);
provided, however, that if any such breach, event of default, default or
violation would not result from the purchase of any number of Purchaser Shares
that is less than the total number of shares the Parent is obligated to purchase
on the Put Repurchase Date, then:
(i) the Parent shall purchase on the Put
Repurchase Date the maximum number of Purchaser Shares it
may so purchase, allocated among the holders which have
elected to have their Purchaser Shares so repurchased
ratably according to the number of Purchaser Shares so
tendered, at a purchase price, in the case of each holder,
equal to the Market Price calculated with respect to such
maximum number of shares;
(ii) at each such time thereafter as the Parent
may be permitted to purchase additional tendered and
unpurchased Purchaser Shares, the Parent shall give written
notice to the tendering holders of Purchaser Shares within
three (3) Business Days after such time and shall purchase,
on the tenth (10th) Business Day following the date such
notice is required to be given the maximum number of
Purchaser Shares it may so purchase, allocated among the
holders which have elected to have their Purchaser Shares
so repurchased ratably according to the number of remaining
tendered and unpurchased Purchaser Shares, at a purchase
price per share, in the case of each holder, equal to
either:
(A) in the event that the Lock-Up
Termination Date has occurred, the Market Price
calculated as of the Put Repurchase Date; or
(B) in the event that the Lock-Up
Termination Date has not yet occurred, the
greater of the Market Price calculated as of the
Put Repurchase Date and the Market Price,
recalculated as of the date such notice is given;
and
(iii) at any time following any failure of the
Parent to pay the repurchase price, whether as a result of
the operation of the provisions of this Section 1.5 or
otherwise, any
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holder of Purchaser Shares which has elected to have any of
such Purchaser Shares purchased by the Parent pursuant to
this Section 1 may demand that the Parent execute and
deliver to such holder, in lieu of and in satisfaction of
the obligation of the Parent to pay the repurchase price
with respect thereto, a promissory note of the Parent in a
principal amount equal to such repurchase price, which
promissory note shall bear interest, payable quarterly
after the date of such promissory note, at the rate of
sixteen and fifty one-hundredths percent (16.50%) per
annum, in arrears, and at the maturity thereof on the
unpaid principal balance of such promissory note, which
promissory note shall mature on June 30, 2005 or, if issued
on or after June 30, 2005, which shall be payable upon
demand. The form of such promissory note shall be
acceptable to the Required Holders in their discretion.
2. OFFER TO REPURCHASE UPON CHANGE IN CONTROL
2.1 Notice of Change in Control Notice Event
In the event of the obtaining of actual knowledge of a Change in
Control Notice Event by the Parent (including, without limitation, via the
receipt of notice of a Change in Control Notice Event from any holder of
Purchaser Shares), the Parent will, within three (3) Business Days after the
obtaining of such actual knowledge, give notice of such Change in Control Notice
Event to each holder of Purchaser Shares. Each such notice shall:
(a) be dated the date of the sending of such notice;
(b) refer to this Section 2; and
(c) specify, in reasonable detail, the nature and expected
date of the Change in Control which, if consummated, would result
from such Change in Control Notice Event.
2.2 Offer in Respect of a Change in Control.
In the event of a Change in Control occurring on or prior to the
Shelf Effective Date, the Parent will, within three (3) Business Days after the
occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would involve any action of the Parent, at
least five (5) days prior to such Change in Control), give notice of such Change
in Control to each holder of Purchaser Shares. Such notice shall contain a
separate offer (which offer shall be irrevocable, except as set forth in Section
2.5) to each holder of Purchaser Shares to repurchase at the Market Price all,
but not less than all, of the Purchaser Shares held by such holder no later than
a date (as applicable, the "Change in Control Repurchase Date") specified in
such notice that is not less than twenty (20) days and not more than thirty (30)
days after the date of such notice, but in any event not later than the date of
the occurrence of such Change in Control. Each such notice shall:
(a) be dated the date of the sending of such notice;
(b) specify, in reasonable detail, the nature and expected
date of the Change in Control;
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(c) specify the Change in Control Repurchase Date;
(d) specify the number of Purchase Shares outstanding and
the number of Purchaser Shares held by each holder;
(e) a calculation reflecting the Market Price, calculated
as of the date of such notice;
(f) if the Market Price is based upon the Closing Prices
for the immediately preceding twenty (20) trading days, a statement
to that effect, and a statement that the actual Market Price will be
the Market Price calculated as of the actual Put Repurchase Date,
which may be greater or less than the estimated Market Price set
forth in such notice; and
(g) a description of the procedure for accepting the
offered repurchase (as set forth in Section 2.3) and stating that
holders seeking to have Purchaser Shares repurchased shall deliver
certificates representing the Purchaser Shares to be repurchased to
the Parent, together with stock powers duly endorsed, for arrival on
the Put Repurchase Date.
If the Parent shall not have received a written response to such notice from any
holder of Purchaser Shares within ten (10) days after the date of posting of
such notice to such holder of Purchaser Shares, then the Parent shall
immediately send a second notice to each such holder of Purchaser Shares.
In addition, the Company agrees to provide a written copy of each such notice
required either by Section 2.1 or by this Section 2.2 to ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.,
tel. ▇▇▇-▇▇▇-▇▇▇▇, facsimile ▇▇▇-▇▇▇-▇▇▇▇.
2.3 Acceptance, Rejection
Each holder of Purchaser Shares shall have the option to accept or
reject such offered repurchase. To accept such offered repurchase, a holder of
Purchaser Shares shall cause a notice of such acceptance to be delivered to the
Parent not later than fifteen (15) days after the date of receipt by such holder
of the written offer of such repurchase (it being understood that the failure by
a holder to respond to such written offer of repurchase within such period of
fifteen (15) days or the delivery of a written notice of rejection of such offer
within such period shall be deemed to constitute a rejection of such offer).
2.4 Obligation to Purchase Purchaser Shares
The Parent shall be obligated to purchase all Purchaser Shares
requested to be purchased by any holder delivering a notice of acceptance, and
shall pay the aggregate Market Price for payable to each such holder in
immediately available funds, on the Change in Control Repurchase Date, against
delivery by such holder of any and all certificates or other instruments
evidencing the Purchaser Shares, together with appropriate powers or other
instruments of transfer or assignment duly endorsed.
2.5 Deferral of Obligation to Purchase
The obligation of the Parent to repurchase Purchaser Shares pursuant
to the offers required by Section 2.2 and accepted in accordance with Section
2.3 is expressly subject to the occurrence of the Change in Control in respect
of which such offers and acceptances shall have been made. In the event that
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such Change in Control does not occur prior to the Change in Control Repurchase
Date in respect thereof, such purchase shall be deferred until and shall be made
on the date on which such Change in Control occurs or, if the Parent determines
that efforts to effect such Change in Control have ceased or have been
abandoned, or that such Change in Control will occur, if at all, after the Shelf
Effective Date, then such offer, acceptances and obligation to purchase shall be
deemed to have been rescinded without liability or penalty to any Person
hereunder. The Parent shall keep each holder of Purchaser Shares reasonably and
timely informed of:
(a) any such deferral of the date of repurchase;
(b) the date on which such Change in Control and the
repurchase are expected to occur; and
(c) any determination by the Parent that efforts to effect
such Change in Control have ceased or been abandoned or that the
Change in Control will occur, if at all, after the Shelf Effective
Date.
2.6 Limitations on Obligation to Repurchase
Notwithstanding anything contained in this Section 2 to the contrary,
the Parent shall not be obligated to pay the repurchase price in respect of any
Put Option, to the extent that (but only to the extent that), at any time:
(a) payment of the repurchase price at such time would
result in a breach of, or default or event of default in respect of,
the Note Agreement, the Notes or the Senior Credit Facility without
the written consent of those holders of the Notes and those lenders
under the Senior Credit Facility the consent of which would be
necessary to waive such breach, default or event of default (and,
unless each such required consent is given, the holders of the
Purchaser Shares shall not accept or be permitted to retain such
payment); or
(b) payment of the repurchase price is, at such time,
prohibited by applicable law (including, without limitation, section
160 of the Delaware General Corporation Law);
provided, however, that if any such breach, event of default, default or
violation would not result from the purchase of any number of Purchaser Shares
that is less than the total number of shares the Parent is obligated to purchase
on the Put Repurchase Date, then:
(i) the Parent shall purchase on the Change in
Control Repurchase Date the maximum number of Purchaser
Shares it may so purchase, allocated among the holders
which have elected to have their Purchaser Shares so
repurchased ratably according to the number of Purchaser
Shares so tendered, at a purchase price, in the case of
each holder, equal to the Market Price calculated with
respect to such maximum number of shares;
(ii) at each such time thereafter as the Parent
may be permitted to purchase additional tendered and
unpurchased Purchaser Shares, the Parent shall give written
notice to the tendering holders of Purchaser Shares within
three (3) Business Days after such time and shall purchase,
on the tenth (10th) Business Day following the date such
notice is
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required to be given the maximum number of Purchaser Shares
it may so purchase, allocated among the holders which have
elected to have their Purchaser Shares so repurchased
ratably according to the number of remaining tendered and
unpurchased Purchaser Shares, at a purchase price per
share, in the case of each holder, equal to either:
(A) in the event that the Lock-Up
Termination Date has occurred, the Market Price
calculated as of the Put Repurchase Date; or
(B) in the event that the Lock-Up
Termination Date has not yet occurred, the
greater of the Market Price calculated as of the
Put Repurchase Date and the Market Price,
recalculated as of the date such notice is given;
and
(iii) at any time following any failure of the
Parent to pay the repurchase price, whether as a result of
the operation of the provisions of this Section 2.6 or
otherwise, any holder of Purchaser Shares which has elected
to have any of such Purchaser Shares purchased by the
Parent pursuant to this Section 2 may demand that the
Parent execute and deliver to such holder, in lieu of and
in satisfaction of the obligation of the Parent to pay the
repurchase price with respect thereto, a promissory note of
the Parent in a principal amount equal to such repurchase
price, which promissory note shall bear interest, payable
quarterly after the date of such promissory note, at the
rate of sixteen and fifty one-hundredths percent (16.50%)
per annum, in arrears, and at the maturity thereof on the
unpaid principal balance of such promissory note, which
promissory note shall mature on June 30, 2005 or, if issued
on or after June 30, 2005, which shall be payable upon
demand. The form of such promissory note shall be
acceptable to the Required Holders in their discretion.
3. REGISTRATION RIGHTS.
3.1 Incidental Registration.
(a) Filing of Registration Statement. If the Parent at any
time proposes to register any of its Common Stock pursuant to a
demand or request by any Other Stockholder to register Securities
held by such Other Stockholder (an "Incidental Registration") under
the Securities Act (but not including any registration initiated by
the Parent for the purpose of selling shares for its own account, or
any registration pursuant to a registration statement on Form S-4 or
Form S-8 or any successor forms thereto, in connection with an offer
made solely to existing Security holders or employees of the Parent),
for sale in a Public Offering, it will each such time give prompt
written notice to all holders of Registrable Securities of its
intention to do so, which notice shall be given to all such holders
at least thirty (30) Business Days prior to the date that a
registration statement relating to such registration is proposed to
be filed with the SEC. Upon the written request of any such holder to
include its Registrable Securities under such registration statement
(which request shall be made within fifteen (15) Business Days after
the receipt of any such notice and shall specify the Registrable
Securities intended to be disposed of by such holder), the Parent
will use its best efforts to effect the registration of all
Registrable Securities that the Parent has
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been so requested to register by such holder; provided, however, that
if, at any time after giving written notice of its intention to
register any Securities and prior to the effective date of the
registration statement filed in connection with such registration,
the Parent shall determine for any reason not to register such
Securities, the Parent may, at its election, give written notice of
such determination to each such holder and, thereupon, shall be
relieved of its obligation to register any Registrable Securities of
such Persons in connection with such registration.
(b) Selection of Underwriters. Notice of the Parent's
intention to register such Securities shall designate the proposed
underwriters of such offering, if any, and shall contain the Parent's
agreement to use its best efforts, if requested to do so, to arrange
for such underwriters to include in such underwriting the Registrable
Securities that the Parent has been so requested to register pursuant
to this Section 3.1, it being understood that the holders of
Registrable Securities shall have no right to select different
underwriters for the disposition of their Registrable Securities.
(c) Priority on Incidental Registrations. If the managing
underwriter shall advise the Parent in writing (with a copy to each
holder of Registrable Securities requesting sale) that, in such
underwriter's opinion, the number of shares of Securities requested
to be included in such Incidental Registration exceeds the number
that can be sold in such offering within a price range acceptable to
the Parent (such writing to state the basis of such opinion and the
approximate number of shares of Securities that may be included in
such offering without such effect), the Parent will include in such
Incidental Registration, to the extent of the number of shares of
Common Stock that the Parent is so advised can be sold in such
offering:
(i) first, Issuable Shares requested to be sold
by the Other Stockholders requesting such Registration;
(ii) second, Registrable Securities requested to
be sold by the holders of Purchaser Shares pursuant to this
Section 3.1 and all Issuable Shares proposed to be
registered by the Other Stockholders (other than those
referred to in Section 3.1(c)(i)), pro rata among such
holders on the basis of the number of shares of Issuable
Shares requested to be so registered by such holders; and
(iii) third, Issuable Shares of Common Stock that
the Parent proposes to issue and sell for its own account.
3.2 Shelf Registration.
(a) Filing and Effectiveness. The Parent will file a
"shelf" registration statement (the "Shelf Registration") on an
appropriate form pursuant to Rule 415 under the Securities Act or any
similar rule that may be adopted by the SEC with respect to
dispositions of all of the Registrable Securities in such manner or
manners specified by the holders thereof. The Parent agrees to cause
the Shelf Registration to be declared effective prior to the Shelf
Effective Date, and agrees to keep the Shelf Registration effective
(and to take any and all other actions reasonably necessary in order
to permit public resale of the Registrable Securities covered by the
Shelf Registration) for a period (the "Shelf Effective Period")
beginning on the date such Shelf Registration shall first be declared
effective under the Securities Act and ending upon the Shelf
Termination Date, subject to the terms
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and conditions set forth in this Agreement. The Parent further
agrees, if necessary, to supplement or make amendments to such Shelf
Registration, if required by the registration form utilized by the
Parent for the Shelf Registration or by the instructions applicable
to such registration form or by the Securities Act, and the Parent
agrees to furnish to the holders of the Registrable Securities
covered by the Shelf Registration copies of any such supplement or
amendment prior to its being used or filed with the SEC.
(b) Approval of Shelf Registrations. If any holder of
Registrable Securities objects to such filing on the grounds that the
disclosure contained in the Shelf Registration contains any
misstatement of a material fact or omits to state a fact required to
be stated therein or necessary to make the statements therein not
misleading, then such holder shall have the right, in its sole
discretion, to withdraw from the Shelf Registration. If the Parent
receives notice of such withdrawal from any holder wishing to
withdraw from the Shelf Registration, then the Parent shall not name
such holder in the registration statement or, in the case of
withdrawal in connection with any amendment or supplement to a
registration statement in which such holder is already named, shall
amend such registration statement to delete references to such
holder, and to withdraw the Registrable Securities of such holder,
from the registration statement. The Shelf Registration shall not be
considered effective with respect to any such withdrawing holder.
(c) Selection of Underwriters. If any offering pursuant to
a Shelf Registration is in the form of an underwritten offering, the
underwriters of such offering shall be one or more underwriting firms
of recognized national standing selected by the Requisite Holders and
reasonably acceptable to the Parent. In the event of an underwritten
offering pursuant to the Shelf Registration, no securities of the
Parent (other than the Registrable Securities) shall be included in
any such offering without the prior written consent of all holders of
Registrable Securities participating in such offering.
Notwithstanding the foregoing, the Parent shall not be obligated to
cooperate or participate in more than one (1) underwritten offering
under the Shelf Registration.
3.3 Companies Registration. If the Securities Act (whether by
statutory amendment, amendment of the rules and regulations thereunder or both)
is amended after the date hereof to provide for a Companies Registration Scheme,
and the Parent is or becomes eligible to participate in the Companies
Registration Scheme, then the Parent, promptly following the request of the
Required Holders made at any time at which the Parent is eligible to use such
Companies Registration Scheme, shall use its reasonable best efforts to register
promptly under the Companies Registration Scheme so as to facilitate the resale
under the registration statement contemplated by such Companies Registration
Scheme of the Registrable Securities in accordance with the method or methods of
distribution contemplated by the Holders.
3.4 Registration Procedures.
The Parent will use its best efforts, subject, in the case of an
Incidental Registration, to the proviso to Section 3.1(a), to effect each
Registration, and to cooperate with the sale of such Registrable Securities in
accordance with the intended method of disposition, and the Parent will:
(a) subject, in the case of an Incidental Registration, to
the proviso to Section 3.1(a), prepare and file with the SEC the
registration statement and use its best efforts to cause the
Registration to become effective; provided, however, that before
filing:
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(i) any registration statement, the Parent will
furnish to the holders of the Registrable Securities
covered by such registration statement, their counsel, and
the underwriters, if any, and their counsel, copies of all
such documents proposed to be filed, in the case of the
Shelf Registration, twenty (20) days, and, in the case of
an Incidental Registration, seven (7) days prior thereto;
and
(ii) any amendment to any registration statement,
any prospectus or any supplement thereto, the Parent will
furnish to the holders of the Registrable Securities
covered by such registration statement, their counsel, and
the underwriters, if any, and their counsel, copies of all
such documents proposed to be filed a reasonable number of
days prior thereto;
which documents will in each case be subject to the reasonable
review, within such specified period, of such holders, their counsel
and the underwriters; and the Parent will not file (in, the case of
the Shelf Registration) or name or make reference to in such
registration statement, prospectus, amendment or supplement (in the
case of any Incidental Registration) any registration statement or
amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference) to which the
Requisite Holders shall reasonably object within such specified
period;
(b) subject, in the case of an Incidental Registration, to
the proviso to Section 3.1(a), prepare and file with the SEC such
amendments and post-effective amendments to any registration
statement and any prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such
registration statement; and cause the prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act;
(c) furnish to each holder of Registrable Securities
included in such Registration and the underwriter or underwriters, if
any, without charge, at least one signed copy of the registration
statement and any post-effective amendment thereto, upon request, and
such number of conformed copies thereof and such number of copies of
the prospectus (including each preliminary prospectus and each
prospectus filed under Rule 424 under the Securities Act), any
amendments or supplements thereto and any documents incorporated by
reference therein, as such holder or underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities being sold by such holder (it being understood that the
Parent consents to the use of the prospectus and any amendment or
supplement thereto by each holder of Registrable Securities covered
by such registration statement and the underwriter or underwriters,
if any, in connection with the offering and sale of the Registrable
Securities covered by the prospectus or any amendment or supplement
thereto);
(d) notify each holder of the Registrable Securities of any
stop order or other order suspending the effectiveness of any
registration statement, issued or threatened by the SEC in connection
therewith, and take all reasonable actions required to prevent the
entry of such stop order or to remove it or obtain withdrawal of it
at the earliest possible moment if entered;
10
(e) if requested by the managing underwriter or
underwriters, if any, or any holder of Registrable Securities in
connection with any sale pursuant to a registration statement,
promptly incorporate in a prospectus supplement or post-effective
amendment such information relating to such underwriting as the
managing underwriter or underwriters, if any, or such holder
reasonably requests to be included therein; and make all required
filings of such prospectus supplement or post-effective amendment as
soon as practicable after being notified of the matters incorporated
in such prospectus supplement or post-effective amendment;
(f) on or prior to the date on which a Registration is
declared effective, use its best efforts to register or qualify, and
cooperate with the holders of Registrable Securities included in such
Registration, the underwriter or underwriters, if any, and their
counsel, in connection with the registration or qualification of the
Registrable Securities covered by such Registration for offer and
sale under the securities or "blue sky" laws of each state and other
jurisdiction of the United States as any such holder or the managing
underwriter, if any, reasonably requests in writing; use its best
efforts to keep each such registration or qualification effective,
including through new filings, or amendments or renewals, during the
period such registration statement is required to be kept effective;
and do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions reasonably requested
of the Registrable Securities covered by such Registration; provided,
however, that the Parent will not be required to qualify generally to
do business in any jurisdiction where it is not then so qualified or
to take any action which would subject it to general service of
process or taxation in any such jurisdiction where it is not then so
subject;
(g) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing Securities to be sold under such Registration,
and enable such Registrable Securities to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or such holders may request;
(h) use its best efforts to cause the Registrable
Securities to be registered with or approved by such other
governmental agencies or authorities within the United States and
having jurisdiction over the Parent or any Subsidiary as may
reasonably be necessary to enable the seller or sellers thereof or
the underwriter or underwriters, if any, to consummate the
disposition of such Registrable Securities;
(i) subject to the last sentence of Section 3.2(c), enter
into such agreements (including underwriting agreements in customary
form) and take such other actions as the Requisite Holders shall
reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each
Registration, a "comfort letter" from the Parent's
independent certified public accountants covering such
matters of the type customarily covered by "cold comfort
letters" as the underwriters, if any, and (in the case of
the Shelf Registration) the Required Holders reasonably
request; and
11
(ii) at the time of any underwritten sale
pursuant to the registration statement, a "bring-down
comfort letter," dated as of the date of such sale, from
the Parent's independent certified public accountants
covering such matters of the type customarily covered by
comfort letters as the underwriters, if any, and (in the
case of the Shelf Registration) the Required Holders
reasonably request;
(k) use its best efforts to obtain, at the time of
effectiveness of each Registration and at the time of any
underwritten sale pursuant to each Registration, an opinion or
opinions, favorable to the underwriters, if any, or (in the case of
the Shelf Registration) the Required Holders in form and scope, from
counsel for the Parent in customary form;
(l) notify each seller of Registrable Securities covered by
such Registration, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
Registration, 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, and promptly prepare, file with the SEC and furnish to
such seller or holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers or prospective purchasers of
such Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they are made;
(m) otherwise comply with all applicable rules and
regulations of the SEC, and make generally available to its security
holders (as contemplated by Section 11(a) under the Securities Act)
an earnings statement satisfying the provisions of Rule 158 under the
Securities Act no later than ninety (90) days after the end of the
twelve (12) month period beginning with the first month of the
Parent's first fiscal quarter commencing after the effective date of
the registration statement, which statement shall cover said twelve
(12) month period;
(n) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by each Registration
from and after a date not later than the effective date of such
Registration; and
(o) use its best efforts to cause all Registrable
Securities covered by each Registration to be listed subject to
notice of issuance, prior to the date of first sale of such
Registrable Securities pursuant to such Registration, on each
securities exchange on which the Common Stock is then listed; and, if
the Common Stock is not so listed, to use its best efforts to cause
all Registrable Securities covered by each Registration to be
designated as National Market System Securities, if the Common Stock
is so designated (and, if the Common Stock is listed on the NASDAQ
National Market or the NASDAQ SmallCap Market, to cause all
Registrable Securities covered by each Registration to be so listed);
and, if the Common Stock is not so designated, to arrange for at
least two market makers to register with the NASD as such with
respect to such Registrable Securities.
The Parent may require each holder of Registrable Securities that will be
included in such Registration to furnish the Parent with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Parent may reasonably request in writing.
12
3.5 Reasonable Investigation.
Subject to the last sentence of Section 3.2(c), the Parent shall:
(a) give the holders of Registrable Securities, their
underwriters, if any, and their respective counsel and accountants
the opportunity to participate in the preparation of the registration
statement, each prospectus included therein or filed with the SEC and
each amendment thereof or supplement thereto;
(b) give each such holder and underwriter reasonable
opportunities to discuss the business of the Parent with its
officers, counsel and the independent public accountants who have
certified its financial statements;
(c) make available for inspection by any holder of
Registrable Securities included in any Registration, any underwriter
participating in any disposition pursuant to any Registration, and
any attorney, accountant or other agent retained by any such seller
or underwriter, all financial and other records, pertinent corporate
documents and properties of the Parent reasonably requested; and
(d) cause the Parent's officers, directors and employees to
supply all information reasonably requested by any such Person in
connection with such Registration;
in each such case, as shall be reasonably necessary, in the opinion of such
holder or such underwriter, to enable it to conduct a "reasonable investigation"
within the meaning of the section 11(b)(3) of the Securities Act and to satisfy
the requirement of reasonable care imposed by section 12(a)(2) of the Securities
Act.
3.6 Registration Expenses.
The Parent will pay all Registration Expenses in connection with each
registration of Registrable Securities, including, without limitation, any such
registration not effected by the Parent.
3.7 Indemnification; Contribution.
(a) Indemnification by the Parent. The Parent shall
indemnify, to the fullest extent permitted by law, each holder of
Registrable Securities, its officers, partners, directors and agents,
if any, and each Person, if any, who controls such holder within the
meaning of section 15 of the Securities Act, against all losses,
claims, damages, liabilities (or proceedings in respect thereof) and
expenses (under the Securities Act or common law or otherwise), joint
or several, resulting from any violation by the Parent of the
provisions of the Securities Act or any untrue statement or alleged
untrue statement of a material fact contained in any registration
statement or prospectus (and as amended or supplemented if amended or
supplemented) or any preliminary prospectus or caused by any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the
case of any prospectus, in light of the circumstances under which
they were made) not misleading, except to the extent that such
losses, claims, damages, liabilities (or proceedings in respect
thereof) or expenses are caused by any untrue statement or alleged
untrue statement contained in or by any omission or alleged omission
from information concerning any holder furnished in writing to the
Parent by such holder expressly
13
for use therein. If the offering pursuant to any registration
statement provided for under this Section 3 is made through
underwriters, no action or failure to act on the part of such
underwriters (whether or not such underwriter is an Affiliate of any
holder of Registrable Securities) shall affect the obligations of the
Parent to indemnify any holder of Registrable Securities or any other
Person pursuant to the preceding sentence. If the offering pursuant
to any registration statement provided for under this Section 3 is
made through underwriters, the Parent agrees, to the extent required
by such underwriters, to enter into an underwriting or other
agreement providing for indemnity of such underwriters, their
officers, partners, directors and agents, if any, and each Person, if
any, who controls such underwriters within the meaning of section 15
of the Securities Act to the same extent as hereinbefore provided
with respect to the indemnification of the holders of Registrable
Securities; provided that the Parent shall not be required to
indemnify any such underwriter, or any officer or director of such
underwriter or any Person who controls such underwriter within the
meaning of section 15 of the Securities Act, to the extent that the
loss, claim, damage, liability (or proceedings in respect thereof) or
expense for which indemnification is claimed results from such
underwriter's failure to send or give a copy of an amended or
supplemented final prospectus to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission
at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected
in such amended or supplemented final prospectus prior to such
written confirmation and the underwriter was provided with such
amended or supplemented final prospectus.
(b) Indemnification for Controlling Person Liability. In
addition to the indemnification provided for in Section 3.7(a), the
Parent shall indemnify each holder of Registrable Securities, its
officers, partners, directors, partners and agents, if any, and each
Person, if any, who controls such holder within the meaning of
section 15 of the Securities Act or Section 20 of the Exchange Act,
against all losses, claims, damages, liabilities (or proceedings in
respect thereof) and expenses, joint or several, in each case, under
the Securities Act, the Exchange Act, common law or otherwise,
resulting from:
(i) any violation by the Parent of the provisions
of the Securities Act or the Exchange Act;
(ii) any untrue statement or alleged untrue
statement of a material fact contained in any registration
statement or amendment thereto or prospectus (and as
amended or supplemented if amended or supplemented) or any
preliminary prospectus or caused by any omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
(in the case of any prospectus, in light of the
circumstances under which they were made) not misleading,
whether or not, in each such case, the registration
statement or amendment thereto or prospectus (or amendment
or supplement thereto) or preliminary prospectus related or
relates to any offering or sale of Registrable Securities
by any holder; and
(iii) any other untrue statement or alleged
untrue statement of a material fact or omission or alleged
omission to state a material fact necessary to make the
statements in any document issued or delivered to any
purchaser or potential purchaser or filed with the SEC
pursuant to section 13 or section 15(d) of the Exchange Act
(in light of the circumstances under which they were made)
not misleading, in each case, in connection
14
with any offering or sale of Securities of the Parent by
any Person, whether or not such Securities offered or sold
are or were registered or required to be registered under
the Securities Act;
in each such case, to the extent that such losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses, joint
or several, are alleged to result from or exist by virtue of the fact
that any holder of Registrable Securities controls or is alleged to
control (within the meaning of section 15 of the Securities Act or
section 20 of the Exchange Act) the Parent or any Subsidiary or
Affiliate, whether such claim or allegation arises under section 15
of the Securities Act or section 20 of the Exchange Act or otherwise;
provided, however, that such indemnification shall not extend to
losses, claims, damages, liabilities (or proceedings in respect
thereof) or expenses caused by any untrue statement or alleged untrue
statement contained in or by any omission or alleged omission from
information furnished in writing to the Parent by such holder
expressly for use therein, or from any such information provided by
an underwriter selected by the holders or any of them.
(c) Indemnification by the Holders. In connection with any
registration statement in which a holder of Registrable Securities is
participating, each such holder, severally and not jointly, shall
indemnify, to the fullest extent permitted by law, the Parent, each
underwriter (if the underwriter so requires) and their respective
officers, partners, directors and agents, if any, and each Person, if
any, who controls the Parent or such underwriter within the meaning
of section 15 of the Securities Act, against any losses, claims,
damages, liabilities (or proceedings in respect thereof) and expenses
resulting from any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact
required to be stated in the registration statement or prospectus or
preliminary prospectus or any amendment thereof or supplement thereto
or necessary to make the statements therein (in the case of any
prospectus, in light of the circumstances under which they were made)
not misleading, but only to the extent that such untrue statement is
contained in or such omission is from information so concerning a
holder furnished in writing by such holder expressly for use therein;
provided, however, that such holder's obligations hereunder shall be
limited to an amount equal to the net proceeds to such holder of the
Registrable Securities sold pursuant to such registration statement.
(d) Control of Defense. Any Person entitled to
indemnification under the provisions of this Section 3.7 shall give
prompt notice to the indemnifying party of any claim with respect to
which it seeks indemnification and unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, permit
such indemnifying party to assume the defense of such claim, with
counsel reasonably satisfactory to the indemnified party; and if such
defense is so assumed, such indemnifying party shall not enter into
any settlement without the consent of the indemnified party if such
settlement attributes liability to the indemnified party and such
indemnifying party shall not be subject to any liability for any
settlement made without its consent (which shall not be unreasonably
withheld); and any underwriting agreement entered into with respect
to any registration statement provided for under this Section 3 shall
so provide. In the event an indemnifying party shall not be entitled,
or elects not, to assume the defense of a claim, such indemnifying
party shall not be obligated to pay the fees and expenses of more
than one counsel or firm of counsel for all parties indemnified by
such indemnifying party in respect of such claim,
15
unless in the reasonable judgment of any such indemnified party a
conflict of interest may exist between such indemnified party and any
other of such indemnified parties in respect to such claim.
(e) Contribution. If for any reason the foregoing indemnity
is unavailable, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such
losses, claims, damages, liabilities or expenses:
(i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the
other; or
(ii) if the allocation provided by clause (i)
above is not permitted by applicable law or provides a
lesser sum to the indemnified party than the amount
hereinafter calculated, in such proportion as is
appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the
indemnified party on the other but also the relative fault
of the indemnifying party and the indemnified party as well
as any other relevant equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities
shall be required to contribute any amount in excess of the amount
such holder would have been required to pay to an indemnified party
if the indemnity under Section 3.7(b) hereof was available. No Person
guilty of fraudulent misrepresentation (within the meaning of section
11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The obligation of any Person to contribute pursuant to this Section
3.7 shall be several and not joint.
(f) Timing of Payments. An indemnifying party shall make
payments of all amounts required to be made pursuant to the foregoing
provisions of this Section 3.7 to or for the account of the
indemnified party from time to time promptly upon receipt of bills or
invoices relating thereto or when otherwise due or payable. Without
limiting the generality of the foregoing, each indemnifying party, as
an interim measure during the pendency of any claim, action,
investigation, inquiry or proceeding arising our of or based upon
any matter or subject for which indemnity (or contribution in lieu
thereof) may be available to any indemnified party under this Section
3.7, it will promptly reimburse each indemnified party, as often as
invoiced therefor (but in no event more often than monthly) for all
reasonable legal or other expenses incurred in connection with the
investigation or defense of any such claim, action, investigation,
inquiry or proceeding, notwithstanding the absence of any judicial
determination as to the propriety or enforceability of the
indemnifying party's obligation to reimburse the indemnified party
for such expenses and notwithstanding the possibility that the
obligations to pay such expenses might later have been held to be
improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement is held to be improper, the indemnified
party agrees to promptly return the amount so advanced to the
indemnifying party, together with interest from the date of
determination, compounded monthly, at the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
listed from time to time in The Wall Street Journal which represents
the base rate on corporate loans posted by a substantial majority of
the nation's thirty (30) largest banks. Any such interim
reimbursement payments which are not made to the indemnified party
within thirty (30) days of a request therefor shall bear interest at
such prime rate from the date of such request. To the extent required
by any underwriter in connection with the execution of any
underwriting agreement pursuant to which the holders of Registrable
Securities shall be selling any
16
shares of Common Stock, the Parent shall agree to advancement of the
expenses of such underwriter to at least the same extent as provided
in this Section 3.7.
(g) Survival. The indemnity and contribution agreements
contained in this Section 3.7 shall remain in full force and effect
regardless of any investigation made by or on behalf of a
participating holder of Registrable Securities, its officers,
partners, directors, agents or any Person, if any, who controls such
holder as aforesaid, and shall survive the transfer of such
Securities by such holder.
3.8 Holdback Agreements; Registration Rights to Others.
(a) In connection with each underwritten sale of
Registrable Securities, the Parent agrees, and each holder of
Registrable Securities by acquisition of such Registrable Securities
agrees, to enter into customary holdback agreements (for an aggregate
period or periods not exceeding one hundred twenty (120) days in any
period of three hundred sixty (360) days or, in the case of any
Registration, such shorter time in which all securities purchased by
the underwriters are actually sold) concerning the sale or
distribution of Registrable Securities and other equity Securities of
the Parent, except, in the case of any holder of Registrable
Securities, to the extent that such holder is prohibited by
applicable law or exercise of fiduciary duties from agreeing to
withhold Registrable Securities from sale or is acting in its
capacity as a fiduciary or investment adviser. Without limiting the
scope of the term "fiduciary," a holder shall be deemed to be acting
as a fiduciary or an investment adviser if its actions or the
Registrable Securities proposed to be sold are subject to the
Employee Retirement Income Security Act of 1974, as amended, or the
Investment Company Act of 1940, as amended, or if such Registrable
Securities are held in a separate account under applicable insurance
law or regulation.
(b) If the Parent shall at any time after the date hereof
provide to any holder of any Securities of the Parent rights with
respect to the registration of such Securities under the Securities
Act, such rights shall not be in conflict with or adversely affect
any of the rights provided in this Section 3 to the holders of
Registrable Securities.
3.9 Availability of Information.
At any time that any class of the Common Stock is registered under
section 12(b) or section 12(g) of the Exchange Act, the Parent will comply with
the reporting requirements of sections 13 and 15(d) of the Exchange Act (whether
or not it shall be required to do so pursuant to such Sections) and will comply
with all other public information reporting requirements of the SEC from time to
time in effect. In addition, the Parent shall file such reports and information,
and shall make available to the public and to the holders of Purchaser Shares
such information, as shall be necessary to permit such holders to offer and sell
Issuable Shares pursuant to the provisions of Rules 144 and 144A promulgated
under the Securities Act. The Parent will also cooperate with each such holder
in supplying such information as may be necessary for such holder to complete
and file any information reporting forms presently or hereafter required by the
SEC as a condition to the availability of an exemption from the registration
provisions of the Securities Act in connection with the sale of any Issuable
Shares. The Parent will furnish to each such holder, promptly upon their
becoming available, copies of all financial statements, reports, notices and
proxy statements sent or made available generally by the Parent to its
stockholders, and copies of all
17
regular and periodic reports and all registration statements and prospectuses
filed by the Parent with any securities exchange or with the SEC.
3.10 Material Development Election.
The Parent shall be entitled, for a period of not more than ninety
(90) consecutive days, and on no more than one (1) occasion during any period of
two hundred seventy (270) days, to require that the holders of Registrable
Securities refrain from effecting any distribution of their Registrable
Securities pursuant to the Shelf Registration if the chief executive officer of
the Parent determines in his reasonable good faith judgment that, in accordance
with his understanding of the disclosure requirements of the United States
federal securities laws, such distribution would require disclosure of any
financing (other than a distribution of Securities under the Shelf Registration
or any Incidental Registration), acquisition, disposition, corporate
reorganization or other transaction or development involving the Parent or any
Subsidiary that is or would be material to the Parent and that, in the
reasonable good faith business judgment of such chief executive officer, such
disclosure at such time would not be in the best interests of the Parent (a
"Material Development Election"); provided, however, that the Company may not
exercise its Material Development Election for a period of more than forty-five
days between the Shelf Effective Date and the second anniversary of the date of
issuance of the Registrable Securities. The Parent shall, as promptly as
practicable, give the holders of Registrable Securities written notice of any
Material Development Election. The Parent, as promptly as practicable following
any determination that the holders may recommence sales under the Shelf
Registration (but no later than the expiration of the applicable number of days
after invoking such Material Development Election), shall notify all holders of
Registrable Securities in writing of such determination.
4. ANTI-DILUTION PROTECTION.
4.1 Repurchases of Common Stock or Rights.
In the event that the Parent shall repurchase, redeem, retire or
otherwise acquire shares of Common Stock or Rights from any Affiliate of the
Parent (other than repurchases of shares of Common Stock pursuant to and in
compliance with the Serial Put Agreement) for a Consideration Per Share greater
than the Closing Price in effect on the date prior to the date of such
repurchase, redemption, retirement or acquisition, then the Parent shall issue
and sell to each holder of Purchaser Shares an additional number of shares of
Common Stock equal to the difference of:
(a) the product of:
(i) the number of Purchaser Shares held by such
holder of Purchaser Shares immediately prior to such event;
multiplied by
(ii) the quotient of:
(A) the product of:
(I) the Closing Price in effect on the
date immediately prior to the date of such
event; multiplied by
18
(II) the number of shares of Common Stock
(calculated on a Fully-Diluted Basis)
immediately after such event;
divided by
(B) the difference of:
(I) the product of:
(1) the number of shares of Common
Stock immediately prior to such event
(calculated on a Fully-Diluted Basis);
multiplied by
(2) the Closing Price in effect on
the date immediately prior to the date
of such event;
minus
(II) the Aggregate Consideration Paid;
minus
(b) the number of Purchaser Shares held by such holder
of Purchaser Shares immediately prior to such event;
in each case, at a price per share equal to the Purchase Price, as further
provided in Section 4.4.
In the event that any of the Aggregate Consideration Paid consists of
Property other than cash, the value of such Property for purposes of computing
the Aggregate Consideration Paid shall be determined by the Valuation Agent as
of a date not more than thirty (30) days prior to the date of determination
thereof and shall be set forth in a written certificate of the Valuation Agent
which shall be delivered to the holders of the Purchaser Shares in the manner
contemplated by Section 8.1.
4.2 Issuances of Additional Common Stock or Rights.
In the event that the Parent shall issue or sell shares of Additional
Common Stock or Rights (excluding Excluded Securities) for no consideration or
at a Consideration Per Share lower than the Closing Price in effect on the date
prior to the date of such issuance or sale, then the Parent shall issue and sell
to each holder of Purchaser Shares an additional number of shares of Common
Stock equal to the difference of:
(a) the product of:
(i) the number of Purchaser Shares held by such
holder of Purchaser Shares immediately prior to such event;
multiplied by
(ii) the quotient of:
19
(A) the sum of:
(I) the number of shares of Common Stock
outstanding immediately prior to such event;
plus
(II) the number of shares of Additional
Common Stock so issued or sold (or initially
issuable pursuant to such Rights); divided by
(B) the sum of:
(I) the number of shares of Common Stock
outstanding immediately prior to such event;
plus
(II) the quotient of:
(1) the Aggregate Consideration
Receivable; divided by
(2) the Closing Price in effect on
the date immediately prior to the
date of such issuance or sale;
in each case immediately prior to such event;
minus
(b) the number of Purchaser Shares held by such holder
of Purchaser Shares immediately prior to such event;
in each case, at a purchase price per share equal to the Purchase Price.
In the event that any of the Aggregate Consideration Receivable
consists of Property other than cash, the value of such Property for purposes of
computing the Aggregate Consideration Receivable shall be determined by the
Valuation Agent as of a date not more than thirty (30) days prior to the date of
determination thereof and shall be set forth in a written certificate of the
Valuation Agent which shall be delivered to the holders of the Purchaser Shares
in the manner contemplated by Section 8.1.
4.3 Notice of Issuance.
Whenever the Parent becomes obligated to issue and sell additional
shares of Common Stock to the holders of Purchaser Shares pursuant to the
provisions of Section 4.1 or Section 4.2, the Parent shall promptly (but no
later than five (5) Business Days, following the occurrence of such event) give
to each holder of Purchaser Shares notice of such issuance and sale, and shall
promptly deliver to each holder of Purchaser Shares a certificate of the chief
financial officer of the Parent setting forth:
(a) a brief statement of the facts requiring such issuance;
20
(b) the computation of the Consideration Per Share and
Closing Price used in connection with determining that such issuance
and sale are necessary, and the number of shares repurchased or sold
and the actual prices at which such repurchases or sales occurred
(which computation, in the event of any dispute, shall be verified by
the Valuation Agent at the expense of the Parent);
(c) for each holder, the number of Purchaser Shares held by
such holder;
(d) for each holder, the number of shares of Common Stock
to be issued pursuant to Section 4.1 or Section 4.2, as the case may
be, to such holder, together with the computation of such number;
(e) for each holder, the aggregate Purchase Price for the
shares to be issued and sold;
(f) the closing date for such sale, which shall be a date
fixed by the Parent which is not less than ten (10) Business Days and
not more than thirty (30) days after the date of such notice (the
"Additional Sale Closing Date"); and
(g) a description of the closing mechanics set forth in
Section 4.4.
4.4 Closing of Issuance and Payment of Purchase Price.
Each holder of Purchaser Shares shall make payment of the Purchase
Price on the Additional Sale Closing Date of the aggregate Purchase Price for
the additional shares of Common Stock to be issued pursuant this Section 4,
which may be paid, as set forth below, in cash, in Notes or in a combination of
cash and Notes. The Parent shall deliver to each holder of Purchaser Shares,
against such wire transfer, a certificate or certificates representing the
aggregate number of shares of Common Stock to be issued pursuant this Section 4.
Notwithstanding the foregoing, no holder of Purchaser Shares shall have any
liability to the Parent or any other holder of Purchaser Shares in respect of
any failure to deliver the Purchase Price in connection with any issuance and
sale of additional shares of Common Stock by the Parent pursuant to this Section
4; provided, however, that the Parent shall not be required to issue
certificates representing any additional shares it is required to sell pursuant
to this Section 4, and no holder of Purchaser Shares shall have any rights in
respect of any such additional shares, until payment of the aggregate Purchase
Price therefor is made by such holder.
(a) Payment in Cash. The holder of any Purchaser Shares may
pay the aggregate Purchase Price for the additional shares of Common
Stock being issued (and shall pay the excess of the Purchase Price
for such shares over the amounts so deemed to be paid by tender of
Notes pursuant to Section 4.4(b)) in cash or by certified or official
bank check payable to the order of the Parent or by wire transfer of
immediately available funds to the account of the Parent.
(b) Payment in Notes. To the extent that any holder of any
Purchaser Shares surrenders with the certificates representing such
Purchaser Shares any Note then held by such holder (or by an
affiliate of such holder), such holder shall be deemed to have paid
that portion of the Purchase Price equal to one hundred percent
(100%) of the principal of such Note which the holder thereof directs
the Parent to accept as payment of the Purchase Price, which Note
shall be
21
contributed to the Company and cancelled and not reissued by the
Company. To the extent that the principal amount of such tendered
Note is greater than the amount of the aggregate Purchase Price paid
by surrender thereof, the Parent shall cause the Company shall
deliver a new Note to the tendering holder thereof, in accordance
with the provisions of the Note Agreement, in the principal amount
equal to the amount not so applied to payment of the aggregate
Purchase Price. At the time of the issuance of the additional shares
of Common Stock pursuant hereto, the Company shall pay all accrued
and unpaid interest on the principal amount of any Note of such
holder cancelled pursuant to this Section 4.4(b) up to but excluding
the date of such issuance. For purposes of Rule 144 under the
Securities Act, 17 C.F.R. ss.230.144, the Parent and you agree that a
tender of the principal of any Notes in payment of the aggregate
Purchase Price in respect of additional shares shall not be deemed a
prepayment of the Notes, but rather a conversion of such Notes,
pursuant to the terms of the Notes, the Note Agreement and this
Agreement, into such additional shares of Common Stock.
4.5 Additional Agreements of the Parent.
The Parent covenants and agrees that:
(a) The Parent shall not, by amendment to its certificate
of incorporation, as in effect on the date hereof, or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, liquidation, issuance or sale of Securities or any other
voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Parent, or which would have the effect of circumventing or
avoiding the provisions of this Section 4.
(b) The Parent shall not amend the provisions of the Series
IV Warrants or any other Rights or make any adjustment thereto
(pursuant to any antidilution provision or otherwise) so as to
reduce the Consideration Per Share applicable thereto, increase the
number of shares issuable upon exercise thereof or otherwise change
the economic terms (such as the purchase price, exercise price,
conversion price or conversion ratio thereof). If, notwithstanding
such prohibition, the Parent shall amend the provisions of the Series
IV Warrants or any other any Rights or make any adjustment thereto
(pursuant to any antidilution provision or otherwise) so as to
reduce the Consideration Per Share applicable thereto, increase the
number of shares issuable upon exercise thereof or otherwise change
the economic terms (such as the purchase price, exercise price,
conversion price or conversion ratio thereof), then, in addition to
whatever other rights the holders of Purchaser Shares may have at law
or in equity, the Parent shall issue additional shares of Common
Stock to each of the holders of the Purchaser Shares, which numbers
of shares shall be as near as appropriate and practical to those that
would be required by the provisions of Section 4.1 through Section
4.2, inclusive, as are most nearly analogous to the effect of such
amendment and as shall be fair and equitable, such number to be
determined by the Valuation Agent. Notwithstanding the foregoing, the
Parent may amend the provisions of the Share Purchase Rights or the
Share Purchase Rights Agreement in any manner which treats alike all
holders of the Common Stock (other than an "Acquiring Person," as
defined in the Share Purchase Rights Agreement).
(c) In the event that any of the events described in any of
Section 4.1 through Section 4.2, inclusive, give rise to an
adjustment to the purchase, exercise or conversion price or
22
conversion ratio, or number of shares of Common Stock issuable upon
conversion or exercise, of any Rights, then the numbers of additional
shares of Common Stock provided for in Section 4.1 through Section
4.2, inclusive, in respect of such event shall give effect both to
the event giving rise to such issuance under this Agreement and to
all such adjustments made in respect of such other Rights; provided,
however, that no such issuance shall duplicate any issuance required
to be made in respect thereof by virtue of the provisions of Section
4.5(b).
(d) The Parent shall not at any time increase the par value
of the Common Stock.
5. AGREEMENTS OF THE PARENT.
5.1 CUSIP Number.
The Parent covenants and agrees to maintain a CUSIP number in respect
of the Common Stock from the CUSIP Service Bureau of Standard & Poor's, a
division of ▇▇▇▇▇▇-▇▇▇▇, Inc.
5.2 Financial and Business Information.
The Parent shall deliver to each holder of Purchaser Shares:
(a) Quarterly Financial Statements - as soon as practicable
after the end of each quarterly fiscal period in each fiscal year of
the Parent (other than the last quarterly fiscal period of each such
fiscal year), and in any event within fifty (50) days thereafter:
(i) a consolidated balance sheet as at the end of
such quarter; and
(ii) consolidated statements of income and
retained earnings and cash flows for such quarter and (in
the case of the second and third quarters) for the portion
of the fiscal year ending with such quarter;
in each case for the Parent and the Subsidiaries, setting forth in
each case, in comparative form, the financial statements for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified as complete and correct
by a Senior Financial Officer; provided, that delivery of copies of
the Parent's Quarterly Report on Form 10-Q or Form 10-QSB filed with
the SEC within the time period specified above shall be deemed to
satisfy the requirements of this Section 5.2 so long as such
Quarterly Report contains or is accompanied by the information
specified in this Section 5.2;
(b) Annual Financial Statements - as soon as practicable
after the end of each fiscal year of the Parent, and in any event
within one hundred five (105) days thereafter:
(i) a consolidated balance sheet as at the end of
such year; and
(ii) consolidated statements of income and
retained earnings and cash flows for such year;
23
in each case for the Parent and the Subsidiaries, setting forth in
the case of each consolidated financial statement, in comparative
form, the financial statement for the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and accompanied
by an audit report thereon of independent certified public
accountants of recognized national standing, which report shall state
without qualification (including, without limitation, qualifications
related to the scope of the audit, the compliance of the audit with
generally accepted auditing standards, or the ability of the Parent
or a material subsidiary thereof to continue as a going concern),
that such financial statements have been prepared and are in
conformity with GAAP; provided, that the delivery of the Parent's
Annual Report on Form 10-K or Form 10-KSB for such fiscal year filed
with the SEC within the time period specified above shall be deemed
to satisfy the requirements of this Section 5.2(b) so long as such
Annual Report contains or is accompanied by the reports and other
information otherwise specified in this Section 5.2(b);
(c) SEC and Other Reports - promptly upon their becoming
available:
(i) each financial statement, report, notice or
proxy statement sent by the Parent or any Subsidiary to
stockholders generally;
(ii) each regular or periodic report (including,
without limitation, each Form 10-K, Form 10-KSB, Form 10-Q,
Form 10-QSB and Form 8-K), any registration statement which
shall have become effective, and each final prospectus and
all amendments thereto filed by the Parent or any
Subsidiary with the SEC; and
(iii) all press releases and other statements
made available by the Parent or any Subsidiary to the
public concerning material developments in the business of
the Parent or the Subsidiaries; and
(d) Requested Information - with reasonable promptness,
such other data and information as from time to time may be
reasonably requested by any holder of Purchaser Shares.
5.3 Inspection.
The Parent will permit the representatives of each holder of
Purchaser Shares to visit and inspect any of the Properties of the Parent or any
of the Subsidiaries, to examine all their respective books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers,
partners employees and independent public accountants (and by this provision
the Parent authorizes said accountants to discuss the finances and affairs of
the Parent and the Subsidiaries) all at such reasonable times and as often as
may be reasonably requested.
6. RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS.
6.1 Restrictions on Transfer.
No holder of Purchaser Shares shall sell, assign, transfer or
otherwise dispose of any Purchaser Shares to any transferee prior to the earlier
to occur of December 31, 2000 and a Change in Control
24
without the prior written consent of the Parent, which, in the case of a
disposition in a private sale and not in a Public Offering or pursuant to Rule
144 under the Securities Act, shall not be unreasonably withheld.
Notwithstanding the foregoing, any holder of a Purchaser Share shall be
permitted to pledge or otherwise ▇▇▇▇▇ ▇ ▇▇▇▇ in and to such Purchaser Shares
(including, without limitation, pledging such Purchaser Shares to a trustee for
the benefit of certain secured noteholders pursuant to documents relating to the
financing of such holder or to one or more banks or other institutions providing
financing in connection with the purchase by such holder of such Purchaser
Shares), and, upon due foreclosure of any such pledge, the Parent agrees to
permit the registration of such Purchaser Shares in the name of such pledgee and
to permit such pledgee to sell such Purchaser Shares, at private sale, in a
foreclosure sale.
6.2 Legending of Certificates.
Each certificate representing any Purchaser Shares prior to December
31, 2000 shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS OF AN INVESTORS RIGHTS AGREEMENT, DATED AS OF
JUNE 29, 1999, THE PROVISIONS OF WHICH ARE INCORPORATED
HEREIN BY REFERENCE. SUCH AGREEMENT CONTAINS, AMONG OTHER
PROVISIONS, PROVISIONS WHICH LIMIT THE TRANSFER OF THIS
SECURITY. A COPY OF SUCH AGREEMENT IS AVAILABLE FROM THE
PARENT UPON REQUEST."
At any time on or after December 31, 2000, each holder of Purchaser Shares shall
be entitled to receive from the Parent, in exchange for any certificate
representing Purchaser Shares and bearing such legend, a replacement certificate
not bearing such legend, without any charge to such holder.
6.3 Securities Act Restrictions; Legend. The Parent shall not register
any transfer of Purchaser Shares if it has reason to believe that such transfer
is being requested in violation of the registration requirements of section 5 of
the Securities Act. Each certificate representing a Registrable Securities prior
to the effectiveness of the Shelf Registration shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT IN A
TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT."
At any time on or after December 31, 2000 or, if a Change in Control shall have
happened prior to such date, on the later of the Shelf Effective Date and the
date of such Change in Control, each holder of Purchaser Shares shall be
entitled to receive from the Parent, in exchange for any certificate
representing Purchaser Shares and bearing such legend, a replacement certificate
not bearing such legend, without any charge to such holder.
25
6.4 Termination of Restrictions.
(a) Shares Sold to Public. So long as a holder of Purchaser
Shares is in compliance with this Agreement, each and all of the
provisions of this Agreement shall terminate immediately as to any of
such holder's Purchaser Shares (but this Agreement shall remain in
force with respect to any remaining Purchaser Shares):
(i) when such Purchaser Shares have been both
effectively registered under the Securities Act and
disposed of in accordance with the registration statement
covering such Purchaser Shares; or
(ii) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision)
under the Securities Act; or
(iii) when they shall have been otherwise
transferred and subsequent disposition of them shall not
require registration or qualification under the Securities
Act or any similar state law then in force.
(b) Offer to Purchase on Change In Control. The provisions
of Section 2.1, Section 2.2, Section 2.3, Section 2.4 and Section 2.5
shall terminate on the Shelf Effective Date.
Whenever such restrictions shall terminate as to any Issuable Shares, the holder
thereof shall be entitled to receive from the Parent, without expenses (other
than transfer taxes, if any, in connection with any change of registered
holder), new Issuable Shares of like tenor not bearing the applicable legends
set forth in Section 6.2 or Section 6.3 hereof.
7. DEFINED TERMS.
7.1 Terms Defined.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
Acceptable Control Person - means any Person or Group who were the
beneficial owners of a majority of the Voting Stock or other voting equity
interest in a Person which became a Subsidiary (by acquisition of the Capital
Stock of such Person, merger or consolidation with a Subsidiary, acquisition of
Property of such Person or otherwise) immediately prior to the acquisition of
such Subsidiary by the Parent or a Subsidiary, and who received, whether prior
to, on or after the Closing Date, Common Stock in respect of the transfer of
such ownership.
Additional Common Stock - means Common Stock, including treasury
shares, issued after the date hereof.
Additional Sale Closing Date - Section 4.3(f).
26
Affiliate - means, at any time, a Person (other than a Subsidiary):
(a) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Parent;
(b) that beneficially owns or holds five percent (5%) or
more of any class of the Voting Stock of the Parent;
(c) five percent (5%) or more of the Voting Stock (or in
the case of a Person that is not a corporation, five percent (5%) or
more of the equity interest) of which is beneficially owned or held
by the Parent or a Subsidiary; or
(d) that is an officer or director of the Parent or any
Subsidiary;
at such time; provided, however, that none of the Purchasers nor any affiliate
of any Purchaser shall be deemed to be an "Affiliate," and no Person holding any
Purchaser Shares shall be deemed to be an "Affiliate" solely by virtue of the
ownership of such securities.
As used in this definition,
control - means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
Agreement - the introductory paragraph hereof.
Aggregate Consideration Paid - means, in the case of a repurchase,
redemption, retirement or acquisition of shares of Common Stock, the aggregate
amount paid by the Parent in connection therewith and, in the case of a
repurchase, redemption, retirement or acquisition of Rights, the sum of:
(a) the aggregate amount paid by the Parent for such
Rights; plus
(b) the aggregate consideration or premiums stated in such
Rights to be payable for the shares of Common Stock covered thereby.
For purposes of clause (a) above, in the event of the repurchase,
redemption, retirement or acquisition of any Rights together with other
Securities or obligations of the Parent or any other Person in which the
purchase price for the Rights and such other Securities or obligations is
expressed as a single purchase price (including, without limitation, upon the
repurchase, redemption, retirement or acquisition of Preferred Stock or debt
Securities which are convertible into Common Stock), the aggregate amount paid
by the Parent for such Rights shall include only the portion of such single
purchase price attributable to such Rights, and not the portion attributable to
such other Securities or obligations. The portion of such purchase price
attributable to such Rights in such case shall be equal to the product of:
(i) such single purchase price; multiplied by
(ii) the quotient of:
27
(A) the fair market value (as determined by the
Valuation Agent) of such Right, independent of the value of
such other securities or obligations (computed using the
Black-Scholes option pricing model or such other pricing
model as the Valuation Agent determines is appropriate, and
applying such reasonable assumptions concerning price
variances with respect to the Common Stock and such other
variables as the Valuation Agent considers appropriate);
divided by
(B) the fair market value (as determined by the
Valuation Agent) of such Right together with such other
securities or obligations (computed using such methodology
and making such assumptions as the Valuation Agent
determines is appropriate).
Aggregate Consideration Receivable - means, in the case of an
issuance or sale of shares of Additional Common Stock, the aggregate amount paid
to the Parent in connection therewith and, in the case of an issuance or sale of
Rights, or any amendment thereto, the sum of:
(a) the aggregate amount paid to the Parent for such
Rights; plus
(b) the aggregate consideration or premiums stated in such
Rights to be payable for the shares of Additional Common Stock
covered thereby;
in each case without deduction for any fees, expenses or underwriters discounts.
For purposes of clause (a) above, in the event of the issuance or
sale of any Rights together with other Securities or obligations of the Parent
or any other Person in which the purchase price for the Rights and such other
Securities or obligations is expressed as a single purchase price (including,
without limitation, upon the issuance or sale of Preferred Stock or debt
Securities which are convertible into Common Stock), the aggregate amount paid
to the Parent for such Rights should include only the portion of such single
purchase price attributable to such Rights, and not the portion attributable to
such other Securities or obligations. The portion of such purchase price
attributable to such Rights in such case shall be equal to the product of:
(i) such single purchase price; multiplied by
(ii) the quotient of:
(A) the fair market value (as determined by the
Valuation Agent) of such Right, independent of the value of
such other securities or obligations (computed using the
Black-Scholes option pricing model or such other pricing
model as the Valuation Agent determines is appropriate, and
applying such reasonable assumptions concerning price
variances with respect to the Common Stock and such other
variables as the Valuation Agent considers appropriate);
divided by
(B) the fair market value (as determined by the
Valuation Agent) of such Right together with such other
securities or obligations (computed using such methodology
and making such assumptions as the Valuation Agent
determines is appropriate).
28
Beneficial Owner - has the meaning contemplated by Rule 13d-3 under
the Exchange Act.
Business Day - means a day other than a Saturday, a Sunday or a day
on which banks in the State of New York are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
Capital Stock - means any class of preferred, common or other capital
stock, share capital or similar equity interest of a Person including, without
limitation, any partnership interest in any partnership or limited partnership
and any membership interest in any limited liability company.
Change in Control - means, at any time, the occurrence of any one or
more of the following events:
(a) any Person other than an Acceptable Control Person, or
any Group other than a Group composed solely of Acceptable Control
Persons, shall be or have become Beneficial Owners of Common Stock,
Rights or other Voting Stock of the Parent of more than thirty-five
percent (35%) (by percentage of votes) on a Partially Diluted Basis
of the Voting Stock of the Parent outstanding at such time;
(b) an Acceptable Control Person, or any Group composed
solely of Acceptable Control Persons, shall be or have become
Beneficial Owners of Common Stock, Rights or other Voting Stock of
the Parent of fifty percent (50%) (by percentage of votes) or more on
a Partially Diluted Basis of the Voting Stock of the Parent
outstanding at such time;
(c) the Parent shall fail at any time, either directly or
indirectly through Finance, to hold one hundred percent (100%) of the
Capital Stock of the Company (including, without limitation, all
Voting Stock of the Company) and one hundred percent (100%) of the
Rights exercisable or convertible into Capital Stock of the Company;
(d) any one Person or Group shall have nominated, elected
or named, or shall have obtained the right or ability to nominate,
elect or name, whether by contract, as Beneficial Owners of Voting
Stock of the Parent or otherwise, a majority of the board of
directors of the Parent or of the Company, or Persons serving similar
functions; or
(f) a sale, lease, conveyance, or other transfer, in a
single transaction or series of related transactions, of all or
substantially all of the Property of either the Parent or the Company
shall occur.
Change in Control Notice Event - means:
(a) the execution of any written agreement which, when
fully performed by the parties thereto, would result in a Change in
Control; or
(b) the making of any written offer by any Person or Group
to the holders of any Voting Stock which offer, if accepted by the
requisite number of such holders, would result in a Change in
Control.
29
Change in Control Payment Date - Section 2.2.
Closing Price - means, on any date with respect to any share of
Common Stock:
(a) the last sale price, regular way, on such date or, if
no such sale takes place on such date, the average of the closing bid
and asked prices on such date, in each case as officially reported on
the principal national securities exchange on which the Common Stock
is then listed or admitted to trading; and
(b) if the Common Stock is not then listed or admitted to
trading on any national securities exchange, but is listed on the
NASDAQ National Market or the NASDAQ SmallCap Market, as the case may
be, the last trading price of the Common Stock on such date as
reported by NASDAQ, or if there shall have been no trading on such
date, the average of the reported closing bid and asked prices on
such date as shown by NASDAQ.
Common Shares - means the six hundred eighty thousand (680,000)
shares of the Common Stock issued to the Purchasers pursuant to the Securities
Purchase Agreement.
Common Stock - means the Common Stock, par value $0.001 per share, of
the Parent, together with the associated Share Purchase Rights, for so long as
such Share Purchase Rights shall remain attached thereto pursuant to the terms
of the Share Purchase Rights Agreement.
Companies Registration Scheme - means an amendment or amendment to
the Securities Act (whether by statutory amendment, amendment of the rules and
regulations thereunder or both), such as, without limitation, as proposed in the
Report of the Advisory Committee on the Capital Formation and Regulatory
Processes of the Securities and Exchange Commission, dated July 24, 1996,
pursuant to which:
(a) issuers of Securities are permitted to register all
issuances of securities on an integrated company registration
statement; and
(b) under the provisions of such amendment, such
registration could cover the reoffering or resale by the holders
thereof of Registrable Securities..
Company - means Questron Operating Company, Inc., an indirect
wholly-owned subsidiary of the Parent.
Consideration Per Share - means, with respect to shares of Common
Stock or Rights, the quotient of:
(a) the Aggregate Consideration Paid (in the case of a
repurchase, redemption, retirement or other acquisition for value of
Common Stock or Rights) or the Aggregate Consideration Receivable (in
the case of an issuance or sale of Common Stock or Rights by the
Parent), as the case may be, in respect of such shares of Common
Stock or such Rights; divided by
(b) the total number of such shares of Common Stock or, in
the case of Rights, the total number of shares of Common Stock into
which such Rights are exercisable or convertible.
30
Exchange Act - means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
Excluded Securities - means and includes:
(a) shares of Common Stock or Rights issued in any of the
transactions described in Section 4.1 through Section 4.2, inclusive,
hereof, and in respect of which additional shares of Common Stock
have been issued pursuant to such Section;
(b) shares of Common Stock issuable upon exercise of the
Series IV Warrants or any other Rights outstanding on the date
hereof, pursuant to the terms of the Series IV Warrants or such
Rights as in effect on the date hereof and without any amendment
thereto;
(c) shares of Common Stock or Rights issued to the public
in a bona fide public offering registered under the Securities Act to
Persons other than:
(i) Affiliates;
(ii) employees of the Parent or any Subsidiary;
or
(iii) existing holders of Common Stock or Rights;
(d) shares of Common Stock issued to Persons (other than
the Parent or any Subsidiary or Affiliate) selling all or
substantially all of the Property of any business, or all of the
Capital Stock of any Person, to the Parent or any wholly-owned
Subsidiary, or issued to the former stockholders of any corporation
with which any Subsidiary shall have merged, in any case, as a part
of the consideration paid to such Persons in connection with the
acquisition by the Parent or such Subsidiary of such business or
Person; provided, however, that such transaction was negotiated at
arm's length in good faith by the Parent;
(e) following the Lock-Up Termination Date, shares of
Common Stock or Rights issued in any other bona fide sale transaction
not requiring registration under the Securities Act to Persons other
than:
(i) Affiliates;
(ii) employees of the Parent or any Subsidiary;
or
(iii) existing holders of Common Stock or Rights;
and
(f) Rights consisting of employee stock options granted
with an exercise price not less than the Closing Price thereof as of
the date prior to the date of the grant, and shares of Common Stock
issued upon exercise of such Rights, issued to employees, consultants
or independent contractors of the Parent pursuant to any stock option
plan approved by the Board of Directors at any time, so long as, and
to the extent that:
31
(i) the aggregate number of shares of Common
Stock issuable upon exercise of such stock options (whether
or not then currently exercisable) at such time, together
with all shares of Common Stock previously issued upon
exercise of such stock options, does not exceed fifteen
percent (15%) of the outstanding number of shares of Common
Stock at any time; and
(ii) no other holder of any Rights or any other
Securities of the Parent shall have the right to any
preemptive, subscription or similar right in respect of
such issuance.
Fair Value - means, with respect to any share of Common Stock, the
quotient of:
(a) the fair salable value of the Parent, as a going
concern, giving effect to all Property thereof and subject to all
liabilities thereof, that would be realized in an arm's length sale
between an informed and willing buyer and an informed and willing
seller, under no compulsion to buy or sell, respectively, as of a
date that is within fifteen (15) days of the date as of which the
determination is to be made, determined by the Valuation Agent, such
determination to be made without regard to the absence of a liquid or
ready market for such Common Stock; divided by
(b) the total number of shares of Common Stock outstanding
at such time.
Finance - means Questron Finance Corp., a Delaware corporation, a
wholly-owned subsidiary of the Parent and parent of the Company.
Fully Diluted Basis - means, with respect to any calculation of the
number of shares of Common Stock at any time, the sum of:
(a) the number of shares of Common Stock outstanding at
such time; plus
(b) the aggregate number of shares of Common Stock issuable
upon the exercise, conversion or exchange, as the case may be, of all
Rights outstanding at such time, regardless of whether such Rights
are then exercisable, convertible or exchangeable and regardless of
whether the consideration given up by the holder of such Right in
connection with the exercise, conversion or exchange thereof would
exceed the value of the Common Stock received upon such exercise,
conversion or exchange.
GAAP - means accounting principles as promulgated from time to time
in statements, opinions and pronouncements by the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board and in
such statements, opinions and pronouncements of such other entities with respect
to financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States of
America.
Group - means two (2) or more Persons acting as a partnership,
limited partnership, syndicate or other group for the purpose of acquiring,
holding or disposing of Securities of an issuer, as contemplated by section
13(d)(3) of the Exchange Act.
Incidental Registration - Section 3.1.
32
Issuable Share - means and includes at any time:
(a) a share of issued and outstanding Common Stock; and
(b) a Right and (without duplication) all shares of Common
Stock issuable upon exercise of such Right, in each case at such
time.
For purposes of this definition of "Issuable Share", a Right to acquire one
share of Common Stock shall constitute one Issuable Share, and a Person shall be
deemed to own an Issuable Share if such Person has a Right to acquire such share
whether or not such Right is exercisable at such time.
Lock-Up Termination Date - means the later to occur of the Shelf
Effective Date and the date upon which the restrictions on transfer of the
Purchaser Shares pursuant to Section 6.1 shall terminate (whether by the terms
of Section 6.1 or by waiver thereof).
Market Price - means, per share of Common Stock, as of any date of
determination, the arithmetic mean of the daily Closing Prices for the twenty
(20) consecutive trading days before such date of determination; provided that
if no Common Stock is then neither listed or admitted to trading on any national
securities exchange, the NASDAQ National Market or the NASDAQ SmallCap Market,
then "Market Price" means the Fair Value of one share of Common Stock, as
determined by the Valuation Agent as of the date of determination.
Material Development Election - Section 3.10.
National Market System Security - has the meaning ascribed thereto in
Rule 11Aa2-1 under the Exchange Act.
NASD - means the National Association of Securities Dealers, Inc.
NASDAQ - means the NASDAQ Stock Market, Inc., a subsidiary of the
NASD.
NASDAQ National Market - has the meaning ascribed thereto in Rule
4200(r) of the NASDAQ.
NASDAQ SmallCap Market - has the meaning ascribed thereto in Rule
4200(t) of the NASDAQ.
Note Agreement - means the Note Agreement, of even date herewith,
among the Company and the Purchasers, pursuant to which the Notes are governed.
Notes - means each of the 14.50% Senior Subordinated Notes due June
30, 2005 of the Company issued pursuant to the Note Agreement.
Other Stockholders - means and includes, at any time, all holders of
Issuable Shares at such time (other than the holders of Purchaser Shares).
Parent - the introductory paragraph.
33
Partially Diluted Basis - means, with respect to any calculation of
the number of shares of Voting Stock of any Person held by another Person at any
time, the sum of:
(a) the number of shares of Voting Stock (by number of
votes) outstanding at such time; plus
(b) the aggregate number of shares of Voting Stock issuable
upon the exercise, conversion or exchange, as the case may be, of all
Rights held by such Person (but not any other Rights) at such time
which are then currently exercisable or may become exercisable within
sixty (60) days into Voting Stock.
Person - means an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, or a government or agency
or political subdivision thereof.
Preferred Stock - means, with respect to any Person, all Capital
Stock of such Person of any class which is preferred, as to payment of
dividends, payment upon a liquidation or dissolution of such Person or both,
over the common stock of such Person. When used herein without any modifier,
"Preferred Stock" means Preferred Stock of the Parent.
Property - means any and all interests in any kind of property of
asset whatsoever, whether real, personal or mixed and whether tangible or
intangible.
Proportionate Number - with respect to any holder of Purchaser
Shares, means the product of:
(a) the aggregate number of Purchaser Shares held by such
holder; multiplied by
(b) the quotient of:
(i) the aggregate principal amount of Notes which
the Company has elected to prepay; divided by
(ii) the aggregate principal amount of Notes
outstanding immediately prior to such prepayment.
Public Offering - shall mean, with respect to any Issuable Shares,
any sale in a transaction either registered under, or requiring registration
under, section 5 of the Securities Act.
Purchase Price - means, with respect to any share (or shares) of
Common Stock, the par value (or aggregate par value) thereof.
Purchasers - the introductory paragraph hereof.
Purchaser Shares - means the following, without duplication:
(a) all the Common Shares;
34
(b) any additional shares of Common Stock issued to the
holders of any Common Shares pursuant to Section 4; and
(c) any shares of Common Stock into which any such shares
of Common Stock shall have been converted, exchanged or recapitalized
at any time.
Put Option - means the option of each holder of Purchaser Shares to
have such Purchaser Shares purchased by the Parent pursuant to Section 1.
Put Repurchase Date - Section 1.2.
Registrable Securities - means, at any time, and Purchaser Shares at
such time; provided, however, that Purchaser Shares shall cease to be
Registrable Securities:
(a) when a registration statement with respect to the sale
of such Securities shall have become effective under the Securities
Act and such Securities shall have been disposed of in accordance
with such registration statement;
(b) when they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the
Securities Act;
(c) when they shall have been otherwise transferred and
subsequent disposition of them shall not require registration or
qualification under the Securities Act or any similar state law then
in force; or
(d) when they shall have ceased to be outstanding.
Registration - means the Shelf Registration and each Incidental
Registration.
Registration Expenses - means all expenses incident to the Parent's
performance of or compliance with compliance with Section 3.1 through Section
3.5, inclusive, including, without limitation:
(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable
Securities);
(c) expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with The Depositary Trust
Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal
or accounting duties);
35
(f) fees and disbursements of counsel for the Parent and
its independent certified public accountants (including the expenses
of any management review, cold comfort letters or any special audits
required by or incident to such performance and compliance);
(g) securities acts liability insurance (if the Parent
elects to obtain such insurance);
(h) the reasonable fees and expenses of any special experts
retained by the Parent in connection with such registration;
(i) fees and expenses of other Persons retained by the
Parent; and
(j) reasonable fees and expenses of one (1) counsel for
holders of Registrable Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities or any other selling expenses, discounts
or commissions incurred in connection with the sale of Registrable Securities.
Required Holders - means, at any time, the holders (other than the
Parent or any Affiliate or Subsidiary) of at least a majority of the Purchaser
Shares at such time (excluding any Purchaser Shares held directly or indirectly
by the Parent or any Subsidiary).
Requisite Holders - means, with respect to any registration or
proposed registration of Registrable Securities pursuant to Section 3 hereof,
any holder or holders (other than the Parent or any Affiliate or Subsidiary)
holding at least a majority of the shares of Registrable Securities (excluding
any shares of Registrable Securities directly or indirectly held by the Parent
or any Affiliate or Subsidiary) to be so registered.
Right - means and includes any warrant, option or other right to
acquire Common Stock and including, without limitation, and any right pursuant
to the provisions of any Security convertible or exchangeable into Common Stock
to acquire Common Stock.
SEC - means, at any time, the Securities and Exchange Commission or
any other federal agency at such time administering the Securities Act.
Securities Act - means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Securities Purchase Agreement - means, collectively, each of the
several substantially identical Securities Purchase Agreements, of even date
herewith, among the Parent, the Company and each of the Purchasers, pursuant to
which the Common Shares and the Notes were issued to the Purchasers.
Security - means "security" as defined by Section 2(1) of the
Securities Act.
Senior Agent - has the meaning set forth in the Note Agreement.
Senior Credit Facility - has the meaning set forth in the Note
Agreement.
36
Serial Put Agreement - means the Serial Put Agreement, entered into
as of September 22, 1997, among the Parent, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇.
Share Purchase Rights - means the preferred share purchase rights
issued pursuant to the Share Purchase Rights Agreement.
Share Purchase Rights Agreement - means the Rights Agreement, dated
as of October 23, 1998, between the Parent and American Stock Transfer & Trust
Company, as Rights Agent, as amended and modified from time to time in
accordance with its terms.
Shelf Effective Date - means June 30, 2000.
Shelf Effective Period - Section 3.2(a).
Shelf Termination Date - means, with respect to the Shelf
Registration, the earlier of:
(a) the first date upon which no Registrable Securities
remain; and
(b) the first date after June 30, 2002 upon which the
aggregate number of Registrable Securities comprises less than ten
percent (10%) of the aggregate number of outstanding shares of Common
Stock on such date.
Shelf Registration - Section 3.2(a).
Subsidiary - means, as to any Person, any corporation in which such
Person or one or more Subsidiaries of such Person or such Person and one or more
Subsidiaries of such Person owns sufficient voting securities to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
corporation. The term "Subsidiary," as used herein without reference to any
Person, shall mean a Subsidiary of the Parent, and shall include, without
limitation, the Company.
Valuation Agent - means a firm of independent certified public
accountants, an investment banking firm or a securities rating service (which
firm or service shall own no Securities of, and shall not be an Affiliate,
Subsidiary or a related Person of, the Parent) of recognized national standing
retained by the Parent and reasonably acceptable to the Required Holders.
Voting Stock - means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency)
and, in the case of the Parent, shall include the Common Stock.
7.2 Accounting Principles.
(a) Generally. Unless otherwise provided herein, all
financial statements delivered in connection herewith will be
prepared in accordance with GAAP. Where the character or amount of
any asset or liability or item of income or expense, or any
consolidation or other
37
accounting computation is required to be made for any purpose
hereunder, it shall be done in accordance with GAAP; provided,
however, that if any term defined herein includes or excludes
amounts, items or concepts that would not be included in or excluded
from such term if such term were defined with reference solely to
GAAP, such term will be deemed to include or exclude such amounts,
items or concepts as set forth herein.
(b) Consolidation. Whenever accounting amounts of a group
of Persons are to be determined "on a consolidated basis" it shall
mean that, as to balance sheet amounts to be determined as of a
specific time, the amount that would appear on a consolidated balance
sheet of such Persons prepared as of such time, and as to income
statement amounts to be determined for a specific period, the amount
that would appear on a consolidated income statement of such Persons
prepared in respect of such period, in each case with all
transactions among such Persons eliminated, and prepared in
accordance with GAAP except as otherwise required hereby.
(c) Currency. With respect to any determination,
consolidation or accounting computation required hereby, any amounts
not denominated in the currency in which this Agreement specifies
shall be converted to such currency in accordance with the
requirements of GAAP (as such requirements relate to such
determination, consolidation or computation) and, if no such
requirements shall exist, converted to such currency in accordance
with normal banking procedures, at the closing rate as reported in
The Wall Street Journal published most recently as of the date of
such determination, consolidation or computation or, if no such
quotation shall then be available, as quoted on such date by any bank
or trust company reasonably acceptable to the Required Holders.
7.3 Directly or Indirectly.
Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
7.4 Section Headings and Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles
of the Sections of this Agreement and the Table of Contents of this
Agreement appear as a matter of convenience only, do not constitute a
part hereof and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Agreement
as a whole and not to any particular Section or other subdivision.
References to Sections are, unless otherwise specified, references to
Sections of this Agreement. References to Annexes and Exhibits are,
unless otherwise specified, references to Annexes and Exhibits
attached to this Agreement.
(b) Construction. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
7.5 Governing Law.
38
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
ANY CONFLICTS OF LAW RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY
OTHER JURISDICTION.
8. MISCELLANEOUS.
8.1 Notices.
(a) Method; Address. All communications hereunder shall be
in writing and shall be delivered either by nationwide overnight
courier or by facsimile transmission (confirmed by delivery by
nationwide overnight courier sent on the day of the sending of such
facsimile transmission). Communications to the Parent shall be
addressed as set forth on Annex 2, or at such other address of which
the Parent shall have notified each holder of Purchaser Shares.
Communications to the holders of the Purchaser Shares shall be
addressed as set forth on Annex 1 by such holder, or at such other
address of which such holder shall have notified the Parent, and the
Parent shall, or shall cause the transfer agent for the Common Stock
to, record such address in the share register for the Common Stock.
(b) When Given. Any communication addressed and delivered
as herein provided shall be deemed to be received when actually
delivered to the address of the addressee (whether or not delivery is
accepted) or received by the telecopy machine of the recipient. Any
communication not so addressed and delivered shall be ineffective.
(c) Service of Process. Notwithstanding the foregoing
provisions of this Section 8.1, service of process in any suit,
action or proceeding arising out of or relating to this agreement or
any document, agreement or transaction contemplated hereby, or any
action or proceeding to execute or otherwise enforce any judgment in
respect of any breach hereunder or under any document or agreement
contemplated hereby, shall be delivered in the manner provided in
Section 8.6(c).
8.2 Reproduction of Documents.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by you at the closing of your purchase of the Common Shares
(except the share certificates themselves), and financial statements,
certificates and other information previously or hereafter furnished to any
holder of Purchaser Shares may be reproduced by the Parent or any holder of
Purchaser Shares by any photographic, photostatic, microfilm, micro-card,
miniature photographic, digital or other similar process and each holder of
Purchaser Shares may destroy any original document so reproduced. Any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Parent or such
holder of Purchaser Shares in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. Nothing in this Section 8.2 shall prohibit
the Parent or any holder of Purchaser Shares from contesting the accuracy or
validity of any such reproduction.
39
8.3 Survival; Entire Agreement.
All warranties, representations, certifications and covenants
contained herein, in the Securities Purchase Agreement or in any certificate or
other instrument delivered hereunder shall be considered to have been relied
upon by the other parties hereto and shall survive the delivery to you of the
Common Shares regardless of any investigation made by or on behalf of any party
hereto. All statements in any certificate or other instrument delivered pursuant
to the terms hereof or of the Securities Purchase Agreement shall constitute
warranties and representations hereunder. All obligations hereunder (including,
without limitation, reimbursement obligations in respect of costs, expenses and
fees) shall survive the termination hereof. Subject to the preceding sentence,
this Agreement, the Purchaser Shares and the other Financing Documents embody
the entire agreement and understanding among the Parent and the Purchasers, and
supersede all prior agreements and understandings, relating to the subject
matter hereof.
8.4 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Purchaser
Shares, and shall be enforceable by any such holder whether or not an express
assignment to such holder of rights hereunder shall have been made by any
holder. Anything contained in this Section 8.4 notwithstanding, the Parent may
not assign any of its respective rights, duties or obligations hereunder or
under any of the other Financing Documents without the prior written consent of
all holders of Purchaser Shares. Any holder of a Purchaser Share shall be
permitted to pledge or otherwise grant a pledge in and to such Purchaser Shares
(including, without limitation, pledging such Purchaser Shares to a trustee for
the benefit of certain secured noteholders pursuant to documents relating to the
financing of such holder or to one or more banks or other institutions providing
financing in connection with the purchase by such holder of such Purchaser
Share); provided, however, that any such pledgee shall not be considered a
holder hereunder until it shall have foreclosed upon such Purchaser Shares in
accordance with applicable law and informed the Parent in writing, of the same.
8.5 Amendments and Waivers.
This Agreement may be amended, and the observance of any term hereof
may be waived, with (and only with) the written consent of the Parent and the
Required Holders; provided, however, that compliance by the Parent with the
provisions of Section 3 hereof, with respect to any particular registration, may
be waived by the Requisite Holders and provided, further, that no such amendment
or waiver shall, without the written consent of the holders of all Purchaser
Shares (exclusive of Purchaser Shares held by the Parent, any Subsidiary or any
Affiliate), amend or waive the provisions of this Section 8.5; and provided
further that the Company and the Required Holders shall not amend, modify, waive
or supplement any provision of Section 1.5 or Section 2.6 which in any way
affects the rights of the lenders under the Senior Credit Agreement without the
express written consent of the Senior Agent.
8.6 Expenses.
The Parent shall pay when billed the reasonable costs and expenses
(including reasonable attorneys' fees) incurred by the holders of the Purchaser
Shares in connection with the consideration, negotiation, preparation or
execution of any amendments, waivers, consents, standstill agreements and other
similar
40
agreements with respect to this Agreement, the Charter or any other Financing
Document (whether or not any such amendments, waivers, consents, standstill
agreements or other similar agreements are executed).
8.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc.
(a) Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY.
(b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE DOCUMENTS,
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH UNDER THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY FEDERAL
DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK OR ANY NEW YORK
STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN
ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT
TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND AGREES NOT TO
ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN
PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED
HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) Service of Process. EACH PARTY HERETO IRREVOCABLY
AGREES THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED
MAIL AT THE ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE,
TO THE EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED
HEREBY, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE
ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT
OR AGREEMENT CONTEMPLATED HEREBY. RECEIPT OF PROCESS SO SERVED SHALL
BE CONCLUSIVELY
41
PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED
STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
(d) Other Forums. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OF ANY HOLDER OF PURCHASER SHARES TO SERVE ANY
WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW
OR TO OBTAIN JURISDICTION OVER THE PARENT IN SUCH OTHER JURISDICTION,
AND IN SUCH OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
8.8 Indemnification of Each Holder.
From and at all times after the date of this Agreement, and in
addition to all other rights and remedies against the Parent, the Parent agrees
to indemnify and hold harmless each holder of Purchaser Shares and each of its
directors, officers, partners, employees, agents, investment advisors and
affiliates (collectively, the "Indemnified Parties") against any and all claims
(whether valid or not), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including, without limitation, reasonable attorneys'
fees, costs and expenses), incurred by or asserted against such Indemnified
Party, from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or enforcement of this
Agreement or the other Financing Documents or any transactions contemplated
herein or therein, or any of the transactions contemplated hereunder
(collectively, the "Proceedings"), whether or not such Indemnified Party is a
party to or target of any such Proceeding; provided, however, that no
Indemnified Party shall have the right to be indemnified hereunder for any
liability resulting from the willful misconduct or gross negligence of such
Indemnified Party or breach by such Indemnified Party of its own obligations
under this Agreement. All of the foregoing losses, damages, costs and expenses
shall be payable as and when incurred upon the demand of each holder. Without
limiting the generality of the foregoing, each such indemnified Person shall be
entitled to collect, and the Parent shall be obligated to advance to each such
Person, to the fullest extent permitted by applicable law, all expenses
(including, without limitation, reasonable fees and disbursements of counsel)
attendant to defending against any such claims (whether valid or not), losses,
damages, liabilities, costs and expenses when and as incurred, regardless of
whether any judicial determination of entitlement to such indemnity has been
made, until or unless a final judicial determination that such Indemnified Party
is not entitled to such indemnity, in which case, such Indemnified Party shall
promptly repay to the Parent, with interest at the applicable statutory rate
applicable to judgments in the relevant jurisdiction, all amounts so advanced by
the Parent. The obligations of the Parent and the rights under this Section 8.8
of each holder of Purchased Securities shall survive the termination of this
Agreement.
If any Proceeding shall be brought or asserted or threatened to be
brought or asserted against an Indemnified Party in respect of which indemnity
may be sought from the Parent hereunder, such Indemnified Party shall promptly
notify the Parent in writing, and the Parent may, in its sole discretion,
promptly upon receipt of such notice, assume the defense thereof, including the
employment of counsel (who may be counsel for the Parent) reasonably
satisfactory to such Indemnified Party and the payment
42
of all expenses therefor. If the Parent elects to assume the defense of any such
Proceeding, the Indemnified Party shall have the right, in its sole discretion,
to employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expense of such
Indemnified Party unless:
(a) the Parent has agreed to pay such fees and expenses;
(b) the Parent shall have elected not to assume the defense
of such Proceeding or shall have failed to promptly assume the
defense of Proceeding or shall have failed to employ counsel
reasonably satisfactory to such Indemnified Part in any such
Proceeding; or
(c) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Parent
and such Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to such Indemnified
Party that are different from or additional to those available to the
Parent (in which case, if such Indemnified Party notifies the Parent
in writing that it elects to employ separate counsel at the expense
of the Parent, the Parent shall not have the right to assume the
defense of such Proceeding on behalf of such Indemnified Party, it
being understood, however, that the Parent shall not, in connection
with any one such Proceeding or separate but substantially similar or
related Proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable
fees and expenses or more than one separate firm of attorneys at any
time for such Indemnified Party and any other Indemnified Parties,
which firm shall be designated in writing by such Indemnified
Parties).
The Parent shall not be liable for any settlement of any Proceeding by an
Indemnified Party effected without the Parent's written consent (which consent
shall not be unreasonably withheld). In addition, the Indemnified Party shall
cooperate with the Parent and their representatives in connection with the
defense or investigation of any claim or other matter for which indemnification
is sought, as reasonably requested by the Parent.
8.9 Execution in Counterpart.
This Agreement may be executed in one or more counterparts and shall
be effective when at least one counterpart shall have been executed by each
party hereto, and each set of counterparts that, collectively, show execution by
each party hereto shall constitute one duplicate original.
[Remainder of page left blank intentionally; next page is signature page]
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered, all as of the date and year first above written.
QUESTRON TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
ALLIANCE INVESTMENT OPPORTUNITIES FUND, L.L.C.
By: Alliance Investment Opportunities Management, L.L.C., as Managing Member
By: Alliance Capital Management, L.P. as Managing Member
By: Alliance Capital Management Corporation, as General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
ALBION ALLIANCE MEZZANINE FUND, L.P.
By: Albion Alliance LLC, its General Partner
By: /s/ U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Investment Officer
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
ANNEX 1
Names and Addresses of Purchasers
================================================================================
Purchaser Name ALBION ALLIANCE MEZZANINE FUND, L.P.
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Address for All Other Albion Alliance Mezzanine Fund, L.P.
Notices c/o Albion Alliance LLC
1345 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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Other Instructions Signature Page Format:
ALBION ALLIANCE MEZZANINE FUND, L.P.
By: Albion Alliance LLC, its General Partner
By:
------------------------------
Name:
Title:
================================================================================
Annex 1-1
================================================================================
Purchaser Name ALLIANCE INVESTMENT OPPORTUNITIES FUND,
L.L.C.
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Address for All Other Alliance Investment Opportunities Fund, L.L.C.
Notices c/o Albion Alliance LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Alliance Capital Management
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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Other Instructions Signature Page Format:
ALLIANCE INVESTMENT OPPORTUNITIES FUND,
L.L.C.
By: Alliance Investment Opportunities
Management, L.L.C., as Managing Member
By: Alliance Capital Management L.P., as
Managing Member
By: Alliance Capital Management Corporation,
as General Partner
By:
----------------------------------
Name:
Title:
================================================================================
Annex 1-2
================================================================================
Purchaser Name THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
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Address for All Other The Equitable Life Assurance Society of
Notices the United States
c/o Albion Alliance LLC
1345 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------
Other Instructions Signature Page Format:
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By:
------------------------------
Name:
Title:
================================================================================
Annex 1-3
================================================================================
Purchaser Name IBJ WHITEHALL BANK & TRUST COMPANY
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Address for All Other IBJ Whitehall Bank & Trust Company
Notices ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------
Other Instructions Signature Page Format:
IBJ WHITEHALL BANK & TRUST COMPANY
By:
------------------------------
Name:
Title:
================================================================================
Annex 1-4
ANNEX 2
Address of Parent
Questron Technology, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn:
Annex 2-1