Exhibit 4.13
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of September 19, 1997, by and among WESTERN MICRO TECHNOLOGY, INC., a
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Delaware corporation (the "Company"), the persons who are "Purchasers" within
the meaning of and as defined in the Units Purchase Agreement dated as of
September 19, 1997, by and among the Company and such persons (the "Units
Purchase Agreement"), and ▇▇▇▇▇▇▇▇▇▇ & CO. INC., as placement agent (the
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"Placement Agent").
In order to induce the Purchasers to enter into the Units Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution of this Agreement is a condition to the
Closing under the Units Purchase Agreement.
The parties hereby agree as follows:
1. Definitions.
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Capitalized terms used herein without definition shall have their
respective meanings set forth in the Units Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
(a) Advice: See the last paragraph of Section 4 hereof.
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(b) Affiliate: "Affiliate" means, with respect to any specified Person,
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(i) any other Person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, such specified Person or (ii) any
officer or director of such other Person. For purposes of this definition, the
term "control" (including the terms "controlling," "controlled by" and "under
common control with") of a Person means the possession, direct or indirect, of
the power (whether or not exercised) 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.
(c) Certificate of Designation: The Certificate of Designation,
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Preferences and Rights of Series A Preferred Stock, as it may be amended from
time to time, as filed with the Secretary of State of the State of Delaware.
(d) Commission: The Securities and Exchange Commission or any other
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federal agency at the time administering the Securities Act.
(e) Common Stock: The shares of common stock, par value $0.01 per share,
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of the Company issuable or issued upon conversion of the Series A Preferred
Stock or upon exercise of any Common Stock Purchase Warrant or Placement Agent
Warrant and any common stock issued with respect thereto upon any stock
dividend, split or similar event.
(f) Common Stock Purchase Warrant: The warrant exercisable to purchase
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shares of Common Stock, issued and sold as part of a Unit pursuant to the Units
Purchase Agreement.
(g) Effectiveness Date: The date that is one hundred twenty (120) days
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after the date of the initial Closing under the Units Purchase Agreement.
(h) Effectiveness Period: See Section 2(a) hereof.
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(i) Exchange Act: The Securities Exchange Act of 1934, as amended, and the
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rules and regulations of the Commission promulgated thereunder.
(j) Filing Date: The date that is sixty (60) days after the date of the
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initial Closing under the Units Purchase Agreement.
(k) Initial Shelf Registration: See Section 2(a) hereof.
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(l) Losses: See Section 6(a) hereof.
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(m) Placement Agent Warrant: A Common Stock purchase warrant by and
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between the Company and the Placement Agent, dated as of the date hereof.
(n) Prospectus: The prospectus included in any Registration Statement
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(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, including, without
limitation, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and all other
amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
(o) Registrable Securities: The Common Stock issuable upon conversion of
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the Series A Preferred Stock, or upon exercise of any Common Stock Purchase
Warrant or Placement Agent Warrant, upon original issuance thereof and at all
times subsequent thereto, until, in the case of any such share of Common Stock,
(i) it is effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it, (ii) it is salable by
the holder thereof pursuant to Rule 144 within any three month period without
limitations on volume or (iii) it is distributed to the public pursuant to Rule
144.
(p) Registration Expenses: See Section 5 hereof.
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(q) Registration Statement: Any registration statement of the Company
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which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
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(r) Rule 144: Rule 144 promulgated by the Commission under the Securities
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Act as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission.
(s) Rule 415: Rule 415 as promulgated by the Commission under the
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Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission.
(t) Securities Act: The Securities Act of 1933, as amended, and the
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rules and regulations promulgated by the Commission thereunder.
(u) Series A Preferred Stock: The Series A Preferred Stock, par value
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$0.01 per share, of the Company issued and sold as part of a Unit pursuant to
the Units Purchase Agreement.
(v) Shelf Registration: Either the Initial Shelf Registration or a
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Subsequent Shelf Registration, as appropriate.
(w) Special Counsel: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L., or such other
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special counsel to the holders of the Registrable Securities as shall be
specified by the holders of a majority in aggregate principal amount of the
Registrable Securities, the fees and expenses of which will be paid by the
Company pursuant to Section 5 hereof. There shall be only one Special Counsel.
(x) Subsequent Shelf Registration: See Section 2(b) hereof.
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(y) Units: The Units issued and sold pursuant to the Units Purchase
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Agreement, each Unit consisting of two shares of Series A Preferred Stock and
one Common Stock Purchase Warrant.
(z) Units Purchase Agreement: See the first paragraph of this Agreement.
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2. Registration.
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(a) The Company shall prepare and file with the Commission a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415
covering the resale from time to time by the holders thereof of all of the
Registrable Securities (the "Initial Shelf Registration"). The Initial Shelf
Registration shall be on Form S-3 or another appropriate form permitting
registration of such Registrable Securities for resale by such holders. The
Company shall use all reasonable efforts to cause the Initial Shelf Registration
to be filed with the Commission on or before the Filing Date and to be declared
effective under the Securities Act on or prior to the Effectiveness Date and to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the date that is two (2) years (or for such other time period as shall
be specified in Rule 144(k) as the holding period required for termination of
certain restrictions on sales of restricted securities by persons other than
affiliates) from the date of the last Closing under the Units Purchase Agreement
(the "Effectiveness Period"), or such shorter period ending when (i) all
Registrable Securities covered by the Initial Shelf Registration have been sold,
or (ii) a Subsequent Shelf Registration covering all of the Registrable
Securities
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has been declared effective under the Securities Act, or (iii) there cease to be
outstanding any Registrable Securities.
(b) If the Initial Shelf Registration or any Subsequent Shelf Registration
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company shall use all reasonable efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within thirty (30) days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Company shall use all reasonable efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously effective
until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration or
Subsequent Shelf Registration, as the case may be, if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration, if required by the Securities Act, or if
reasonably requested by the holders of a majority in aggregate principal amount
of the Registrable Securities.
3. Liquidated Damages.
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(a) The parties hereto agree that the holders of Registrable Securities
will suffer damages and that it would not be feasible to ascertain the extent of
such damages with precision, if the Initial Shelf Registration has not become
effective on or prior to the Effectiveness Date. Accordingly, should the
Initial Shelf Registration not be declared effective on or prior to the
Effectiveness Date, the Company agrees to pay, as liquidated damages, and not as
a penalty (the "Liquidated Damages Amount"):
(i) to each holder of Series A Preferred Stock, an amount
equal to one-quarter of one percent per annum (25 basis points)
of the Liquidation Preference for each share of Series A
Preferred Stock held by such holder; provided, that such
liquidated damages will increase by an additional one-quarter of
one percent per annum (25 basis points) at each thirty (30) day
interval after the Effectiveness Date; and
(ii) to each holder of a Registrable Security, an amount
equal to one-quarter of one percent per annum (25 basis points)
calculated on an amount equal to the product of (x) the
Conversion Price (as defined in the Certificate of Designation)
actually used to effect the conversion of the Series A Preferred
Stock held by such holder or the Exercise Price actually paid to
effect the exercise of the Common Stock Purchase Warrant or the
Placement Agent Warrant held by such holder, times (y) the number
of shares of Common Stock received by such holder upon such
conversion or exercise; provided, that such liquidated damages
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will increase by an additional one-quarter of one percent per
annum (25 basis points) at each thirty (30) day interval after
the Effectiveness Date,
which Liquidated Damages Amount shall continue to be due and payable for so long
as and until the Initial Shelf Registration shall become effective, and will
cease to accrue on and after the date the Initial Shelf Registration becomes
effective.
(b) The Liquidated Damages Amount due shall be payable on each dividend
payment date to the record holder entitled to receive the dividend payment to be
made on such date or to the record holder of Registrable Securities, as
appropriate, provided that accrued Liquidated Damages Amounts shall be paid on
the applicable redemption date upon the redemption of any share of Series A
Preferred Stock (to the extent accrued with respect to such share of Series A
Preferred Stock) and, in the event of redemption of all Series A Preferred
Stock, shall also be paid on such redemption date to the holders of Common Stock
(to the extent accrued with respect to such Common Stock). All of the Company's
obligations set forth in this Section 3 which are outstanding with respect to
any Registrable Securities at the time such security ceases to be a Registrable
Security shall survive until such time as all such obligations with respect to
such security have been satisfied in full (notwithstanding termination of this
Agreement pursuant to Section 8(n)).
(c) In addition, as further liquidated damages if the Initial Shelf
Registration has not become effective on or prior to the Effectiveness Date, the
Conversion Price (as defined in the Certificate of Designation) shall adjust
upon the terms and conditions set forth in Section 5(j) of the Certificate of
Designation.
(d) The parties hereto agree that the liquidated damages provided for in
this Section 3 constitute a reasonable estimate of the damages that may be
incurred by holders of Series A Preferred Stock and of Registrable Securities by
reason of the failure of the Initial Shelf Registration to be declared effective
in accordance with the provisions hereof.
4. Registration Procedures.
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In connection with the Company's registration obligations under Section 2
hereof, the Company shall effect such registration to permit the sale of the
Registrable Securities in accordance with the method or methods of disposition
thereof intended by the holders of such Registrable Securities (except that the
Company shall not be required to effect any registration pursuant to Section 2
involving an underwriting), and pursuant thereto the Company shall as
expeditiously as practicable:
(a) Prepare and file with the Commission a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the holders thereof in
accordance with the intended method or methods of distribution thereof, and
cause each such Registration Statement to become effective and remain effective
as provided herein; provided, that before filing any such Registration Statement
or Prospectus or any amendments or supplements thereto (other than documents
that would be incorporated or deemed to be incorporated therein by reference and
that the Company is required
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by applicable securities laws or stock exchange requirements to file) the
Company shall furnish to the Special Counsel copies of all such documents
proposed to be filed, which documents will be subject to the review of such
Special Counsel and the holders, and the Company shall not file any such
Registration Statement or amendment thereto or any Prospectus or any amendment
or supplement thereto (other than such documents which, upon filing, would be
incorporated or deemed to be incorporated by reference therein and that the
Company is required by applicable securities laws or stock exchange requirements
to file) to which the holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement or the Special
Counsel shall reasonably object on a timely basis.
(b) Prepare and file with the Commission such amendments and post-
effective amendments to each Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the applicable period
specified in Section 2; cause the related Prospectus to be amended or
supplemented by any required amendment or Prospectus supplement, and as so
amended or supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the methods of disposition intended by the holders thereof
set forth in such Registration Statement as so amended or in such Prospectus as
so amended or supplemented.
(c) Notify the Special Counsel and any selling holders of Registrable
Securities promptly, and (if requested by any such Person) confirm such notice
in writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to a Registration Statement or related Prospectus or for
additional information, (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (v) of the
existence of any fact or the happening of any event which makes any statement
made in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or which requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
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(d) Use all reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable
moment.
(e) If reasonably requested by the holders of a majority in aggregate
principal amount of the Registrable Securities being sold, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the Company or the holders of a majority in aggregate principal
amount of such Registrable Securities agree should be included therein as
required by applicable law, (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to any Registration Statement consistent with clause (i) or (ii)
above; provided, that the Company shall not be required to take any actions
under this Section 4(e) that are not, in the opinion of outside counsel for the
Company, in compliance with applicable law.
(f) Furnish to each selling holder of Registrable Securities and the
Special Counsel, upon request and without charge, at least one conformed copy of
the Registration Statement or Statements and any post-effective amendment
thereto, including financial statements (but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits,
unless requested in writing by such holder or counsel).
(g) Deliver to each selling holder of Registrable Securities and the
Special Counsel, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus or each amendment or supplement thereto by each of the selling
holders of Registrable Securities in connection with the offering and sale of
the Registrable Securities covered by such Prospectus or any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register or
qualify or cooperate with the selling holders of Registrable Securities and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any seller reasonably requests in
writing; keep each such registration or qualification (or exemption therefrom)
effective 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 such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; provided, that the Company
will not be required to (i) qualify generally to do business in any jurisdiction
where it is not then so qualified or (ii) take any action that would subject it
to general service of process in any such jurisdiction where it is not then so
subject.
(i) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the
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United States, except as may be required solely as a consequence of the nature
of such selling holder, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals, as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 4(c)(v) or
4(c)(vi) above, prepare a supplement or post-effective amendment to each
Registration Statement or an amendment or supplement to the related Prospectus
or any document incorporated therein by reference or file any other required
document (such as a Current Report on Form 8-K) so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) If necessary in connection with a disposition of Registrable
Securities, make available for inspection, at the offices where normally kept
during reasonable business hours, by a representative of the holders of
Registrable Securities being sold and any attorney or accountant retained by
such selling holders, financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries as they may reasonably
request, and cause the officers, directors and employees of the Company and its
subsidiaries to supply all information reasonably requested by any such
representative, attorney or accountant in connection with such disposition;
provided, that any records, information or documents that are designated by the
Company in writing as confidential at the time of delivery of such records,
information or documents shall be kept confidential by such Persons, and such
Persons shall so agree in writing, unless (i) such records, information or
documents are in the public domain or otherwise publicly available, (ii)
disclosure of such records, information or documents is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities or (iii) disclosure of such records, information or documents is
otherwise required by law (including, without limitation, pursuant to the
requirements of the Securities Act).
(l) Comply with all applicable rules and regulations of the Commission and
make generally available to its security holders earning statements satisfying
the provisions of section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than forty-
five (45) days after the end of any twelve (12) month period (or ninety (90)
days after the end of any twelve (12) month period if such period is a fiscal
year) commencing on the first day of the first fiscal quarter of the Company,
after the effective date of a Registration Statement, which statements shall
cover said twelve (12) month periods.
(m) Enter into such agreements and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of such
Registrable Securities.
(n) Unless any Registrable Securities shall be in book-entry only form,
cooperate with the selling holders of Registrable Securities to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends;
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and enable such Registrable Securities to be in such denominations and
registered in such names as the holders may request.
(o) Provide the transfer agent for the Common Stock with printed
certificates for the Registrable Securities which are in a form eligible for
deposit with The Depository Trust Company.
(p) Cause the Common Stock to be listed on each securities exchange or
quotation system on which the Company's Common Stock is then listed no later
than the date the Registration Statement is declared effective and, in
connection therewith, to the extent applicable, to make such filings under the
Exchange Act and to have such filings declared effective thereunder.
The Company may require each selling holder of Registrable Securities as to
which any registration is being effected, and such selling holder of Registrable
Securities agrees, to furnish to the Company such information regarding the
distribution of such Registrable Securities as the Company may, from time to
time, reasonably request in writing and the Company may exclude from such
registration the Registrable Securities of any holder who unreasonably fails to
furnish such information within a reasonable time after receiving such request.
Each holder of Registrable Securities as to which any Registration Statement is
being effected agrees promptly to furnish to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such holder not misleading. Any sale of any Registrable
Securities by any holder shall constitute a representation and warranty by such
holder that the information relating to such holder and its plan of distribution
is as set forth in the Prospectus delivered by such holder in connection with
such disposition, that such Prospectus does not as of the time of such sale
contain any untrue statement of a material fact relating to such holder or its
plan of distribution and that such Prospectus does not as of the time of such
sale omit to state any material fact relating to such holder or its plan of
distribution necessary to make the statements in such Prospectus, in the light
of the circumstances under which they were made, not misleading.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iii),
4(c)(iv), 4(c)(v) or 4(c)(vi) hereof, such holder will forthwith discontinue
disposition of such Registrable Securities covered by the applicable
Registration Statement or Prospectus until such holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 4(j) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
5. Registration Expenses.
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All fees and expenses incident to the performance of or compliance with
this Agreement by the Company (the "Registration Expenses") shall be borne by
the Company whether or not any of the Registration Statements become effective
and whether or not any of the Registrable
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Securities are transferred pursuant to the Registration Statement. Such fees and
expenses shall include, without limitation, (a) all registration and filing fees
(including, without limitation, fees and expenses (i) with respect to
designation of the Registrable Securities as eligible for trading on The Nasdaq
Stock Market's National Market, and (ii) of compliance with securities or Blue
Sky laws, (b) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company and of printing Prospectuses), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company and the Special Counsel, (e) reasonable fees and disbursements of all
independent certified public accountants, (f) Securities Act liability insurance
if the Company so desires such insurance, and (g) fees and expenses of all other
Persons retained by the Company. In addition, the Company will, in any event,
bear its own internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange on
which similar securities issued by the Company are then listed and the fees and
expenses of any Person, including special experts, retained by the Company.
6. Indemnification.
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(a) Indemnification by the Company. The Company shall, without limitation
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as to time, indemnify and hold harmless, to the fullest extent permitted by law,
each holder of Registrable Securities, the officers, directors and agents and
employees of each of them, each Person who controls (within the meaning of
section 15 of the Securities Act or section 20 of the Exchange Act) such holder
and the officers, directors, agents and employees of any such controlling
person, from and against all losses, claims, damages, liabilities, costs
(including, without limitation, the costs of preparation and attorneys' fees)
and expenses (collectively, "Losses"), as incurred, arising out of or based upon
any untrue or allegedly untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of Prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same are based solely upon information furnished in writing to
the Company by such holder expressly for use therein; provided, that the Company
shall not be liable to any holder of Registrable Securities to the extent that
any such Losses arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus if either (A) (i) such holder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
such holder of a Registrable Security to the person asserting the claim from
which such Losses arise and (ii) the Prospectus would have completely corrected
such untrue statement or alleged untrue statement or such omission or alleged
omission; or (B) (x) such untrue statement or alleged untrue statement, omission
or alleged omission is completely corrected in an amendment or supplement to the
Prospectus and (y) having previously been furnished by or on behalf of the
Company with copies of the Prospectus as so amended or supplemented, such holder
thereafter fails to deliver such Prospectus as so amended or supplemented, prior
to or concurrently with the sale of a Registrable Security to the person
asserting the claim from which such Losses arise. The Company shall also
indemnify each selling broker, dealer manager and similar securities industry
professional participating in the
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distribution, and each of their officers, directors, agents and employees and
each Person who controls such Persons (within the meaning of section 15 of the
Securities Act or section 20 of the Exchange Act) to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities.
(b) Indemnification by Holder of Registrable Securities. In connection
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with any Registration Statement in which a holder of Registrable Securities is
participating, such holder agrees to indemnify, to the fullest extent permitted
by law, the Company, its officers, directors, agents and employees, each Person
who controls the Company (within the meaning of section 15 of the Securities Act
and section 20 of the Exchange Act), and the officers, directors, agents or
employees of such controlling persons, from and against all Losses arising out
of or based upon any untrue or allegedly untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of Prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or based upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in information so furnished in writing by such holder to
the Company expressly for use in such Registration Statement or Prospectus and
such information was solely relied upon by the Company in preparation of such
Registration Statement, Prospectus or preliminary prospectus, and such
information, if it contains an untrue statement or has an omission, was not
timely corrected, updated or supplemented in a writing by such holder to the
Company expressly for use in such Registration Statement or Prospectus. In no
event shall the liability of any selling holder of Registrable Securities
hereunder be greater in amount than the dollar amount of the proceeds (net of
payment of all expenses) received by such holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Person shall be
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entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any proceeding with
respect to which such indemnified party seeks indemnification or contribution
pursuant hereto; and the indemnifying party, upon request of the indemnified
party, shall assume the defense and retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel related to such proceeding. The failure
to so notify the indemnifying party shall not relieve the indemnifying party of
any obligation or liability except and only to the extent that such failure was
prejudicial to the indemnifying party and the indemnifying party was actually
damaged or suffered any loss or incurred any additional expense as a result
thereof. In any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same
11
jurisdiction, be liable for (A) the fees and expenses of more than one separate
firm (in additional to any local counsel) for all holders and all persons, if
any, who control any holder within the meaning of either section 15 of the
Securities Act or section 20 of the Exchange Act, and (B) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign a Registration Statement and each
person, if any, who controls the Company within the meaning of either such
section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than thirty (30) days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. The indemnifying party shall not
consent to entry of any judgment or enter into any settlement or otherwise seek
to terminate any proceeding in which any indemnified party is or could be a
party and as to which indemnification or contribution could be sought by such
indemnified party under this Section 6, unless such judgment, settlement or
other termination includes as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release, in form and
substance satisfactory to the indemnified party, from all liability in respect
of such claim or litigation for which such indemnified party would be entitled
to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section 6 is
------------
unavailable to an indemnified party under Section 6(a) or 6(b) hereof in respect
of any Losses or is insufficient to hold such indemnified party harmless, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall, jointly and severally, contribute to the amount paid or payable by
such indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or
indemnifying parties, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied in
writing by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any legal or other
fees or expenses incurred by such party in connection with any proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Section 6(d), an indemnifying party that
is a selling holder of Registrable Securities shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities sold by such indemnifying party and distributed to
the public exceeds the amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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 indemnity, contribution and expense reimbursement obligations of the
Company hereunder shall be in addition to any liability the Company may
otherwise have hereunder, under the Units Purchase Agreement, the Securities Act
or otherwise. The provisions of this Section 6 shall survive so long as
Registrable Securities remain outstanding, notwithstanding any transfer of the
Registrable Securities by any holder or any termination of this Agreement.
7. Information Requirements.
------------------------
(a) The Company shall file in a timely manner the reports required to be
filed by it under the Securities Act and the Exchange Act, and if at any time
the Company is not required to file such reports, it will, upon the request of
any holder of Registrable Securities, make publicly available other information
so long as necessary to permit sales pursuant to Rule 144 under the Securities
Act. The Company further covenants that it will cooperate with any holder of
Registrable Securities and take such further action as any holder of Registrable
Securities may reasonably request (including without limitation making such
representations as any such holder may reasonably request), all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the Securities Act. Upon the request of
any holder of Registrable Securities, the Company shall deliver to such holder a
written statement as to whether it has complied with such filing requirements.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities under any section of the
Exchange Act.
(b) The Company shall file in a timely manner the reports required to be
filed by it under the Exchange Act and shall comply with all other requirements
set forth in the instructions to Form S-3 in order to allow the Company to be
eligible to file registration statements on Form S-3.
8. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not entered, as of the
--------------------------
date hereof, and shall not enter, on or after the date of this Agreement, any
agreement with respect to its securities which is inconsistent with the rights
granted to the holders of Registrable Securities in this Agreement.
13
(b) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended (other than the last
sentence of Section 8(f)), modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of the holders of 66-2/3% of the then outstanding
Common Stock constituting Registrable Securities (with holders of Series A
Preferred Stock, Common Stock Purchase Warrants and the Placement Agent Warrant
deemed to be the holders for purposes of this Section 8(b), of the number of
outstanding shares of Common Stock into which such shares of Series A Preferred
Stock are then convertible or of the number of shares of Common Stock receivable
upon exercise of the warrants, as the case may be). Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least 66-2/3% of the
Registrable Securities being sold by such holders; provided, that the provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing and shall be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by telefax or
(iii) one (1) business day after being deposited with a reputable next-day
courier, charges prepaid, to the parties as follows:
(x) if to a holder of Registrable Securities, at the most current
address given by such holder to the Company in accordance with the
provisions of this Section 8(c); and
(y) if to the Company, to Western Micro Technology, Inc., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial
Officer,
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
(d) Owner of Registrable Securities. The Company will maintain, or will
-------------------------------
cause its registrar and transfer agent to maintain, a register with respect to
the Registrable Securities in which all transfers of Registrable Securities of
which the Company has received notice will be recorded. The Company may deem
and treat the person in whose name Registrable Securities are registered in such
register of the Company as the owner thereof for all purposes, including,
without limitation, the giving of notices under this Agreement.
(e) Approval of Holders. Whenever the consent or approval of holders of a
-------------------
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Purchasers or
subsequent holders of Registrable Securities if such subsequent holders are
deemed to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the holders of such required percentage. For purposes
of calculating the consent or approval of holders of
14
a majority of the then outstanding aggregate principal amount of Registrable
Securities, holders of Series A Preferred Stock deemed to be the holders for
purposes of this Section 8(e), of the number of outstanding shares of Common
Stock into which such shares of Series A Preferred Stock are then convertible.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each holder of any Registrable Securities.
The Company may not assign its rights or obligations hereunder without the prior
written consent of each holder of any Registrable Securities.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
(j) Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(k) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and the registration rights granted by the
Company with respect to the Registrable Securities. Except as provided in the
Units Purchase Agreement, there are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein, with respect to
the registration rights granted by the Company with respect to the Common Stock
issuable upon conversion of the Series A Preferred Stock or upon exercise of the
Common Stock Purchase Warrants. This Agreement supersedes all prior agreements
and understandings among the parties with respect to such registration rights.
(l) Attorneys' Fees. In any action or proceeding brought to enforce any
---------------
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing
15
party, as determined by the court, shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.
(m) Further Assurances. Each of the parties hereto shall use all
------------------
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby.
(n) Termination. This Agreement and the obligations of the parties
-----------
hereunder shall terminate at the end of the Effectiveness Period, except for any
liabilities or obligations under Section 5 or 6 or the proviso of Section 4(k)
above, and the obligations to make payments of and provide for liquidated
damages under Section 3 hereof to the extent such damages accrue prior to the
end of the Effectiveness Period, each of which shall remain in effect in
accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WESTERN MICRO TECHNOLOGY, INC.
By
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Financial Officer
▇▇▇▇▇▇▇▇▇▇ & CO. INC.
By
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
16