EXHIBT 14 (a)(2)(4)(ii)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 22, 2000, among
Franklin Capital Corporation, a Delaware corporation (the "Company"), and the
other undersigned parties hereto (collectively, with the purchasers that execute
the Joinder Agreement referred to below, the "Holders").
1. INTRODUCTION. The Company and the Holders are, parties to the
Preferred Stock Purchase Agreement (the "Stock Purchase Agreement") in the form
set forth in Exhibit A pursuant to which the Company has agreed, among other
things, to issue to each of the Holders the number of shares of its Class A
Convertible Preferred Stock, par value $1.00 per share (the "Preferred Stock")
which is set forth on the signature page to such Exhibit. The Company also may
enter into similar preferred stock purchase agreements after the date hereof for
the purchase of Preferred Stock with certain other parties (the "Other Purchase
Agreements" and such agreements collectively with the Stock Purchase Agreement,
the "Stock Purchase Agreements"). In connection with the consummation of those
closings under the Other Purchase Agreements, each of the purchasers thereunder
shall sign a joinder agreement in the form attached hereto as Exhibit B (each
such agreement, a "Joinder Agreement"), pursuant to which such party will become
a party to this agreement as a Holder of Registrable Securities. Pursuant to the
terms of the Certificate of Designation with respect to the Preferred Stock (the
"Certificate of Designation"), the Preferred Stock is convertible into shares of
the Company's common stock, par value $1.00 per share (the "Common Stock").
Certain capitalized terms used in this Agreement are defined in section 3
hereof; references to a "section" shall be to one of the sections of this
Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 REGISTRATION ON REQUEST.
(a) REQUEST. At any time prior to the second anniversary of the Closing
Date, upon the written request of one or more Initiating Holders, requesting
that the Company effect the registration under the Securities Act of all or part
of such Initiating Holders' Registrable Securities, and specifying the intended
method of disposition thereof, the Company will promptly give written notice of
such requested registration to all registered holders of Registrable Securities,
and thereupon the Company will, subject to the terms of this Agreement, use
commercially reasonable efforts to effect the registration under the Securities
Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition
in accordance with the intended method of disposition stated in
such request unless, an underwritten offering is requested, the
Company is unable, after good faith
efforts, to engage a nationally recognized investment bank to act
as underwriter for such offering;
(ii) all other Registrable Securities the holders of which
shall have made a written request to the Company for registration
thereof within 15 days after the giving of such written notice by
the Company (which request shall specify the intended method of
disposition of such Registrable Securities); and
(iii) all shares of Common Stock which the Company or other
holders of the Company's Common Stock having registration rights
may elect to register in connection with the offering of
Registrable Securities pursuant to this Section 2.1,
all to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities and the additional shares of Common Stock,
if any so to be registered; provided, that the Company shall not
be required to effect any registration requested by Initiating
Holders pursuant to this Section 2.1 (x) on more than one
occasion (y) if the Registrable Securities requested to be
registered are eligible for resale pursuant to Rule 144 under the
Securities Act and (z) unless the Holders have requested the sale
of shares of Registrable Securities that have a fair market value
(based upon the closing price of such Registrable Securities
quoted on the securities exchange or over-the-counter quotation
system on which such Registrable Securities are listed or quoted,
as the case may be, on the trading day immediately preceding any
request pursuant to this Section 2.1) of at least $1,000,000.
(b) REGISTRATION STATEMENT FORM. Registrations under this Section 2.1
shall be on such appropriate registration form of the Commission as shall permit
the disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in their request for such
registration and as shall be permitted under the Securities Act; provided, that
such form shall not indicate that the securities to be registered thereunder are
to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(c) EXPENSES. The Company will pay all Registration Expenses in connection
with any registration requested pursuant to this Section 2.1 by any Initiating
Holders. All other expenses (including underwriting discounts, commissions and
transfer taxes, if any and attorney fees for the Initiating Holders) in
connection with each other registration requested under this Section 2.1 shall
be allocated pro rata among all Persons on whose behalf securities of the
Company are included in such registration, on the basis of the respective
amounts of the securities then being registered on their behalf.
(d) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to
this Section 2.1 shall not be deemed to have been effected (i) unless a
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registration statement with respect thereto has become effective, provided that
a registration which does not become effective after the Company has filed a
registration statement with respect thereto by reason of the refusal to proceed
of the Initiating Holders (other than a refusal to proceed based upon the
written advice of counsel relating to a matter with respect to the Company)
shall be deemed to have been effected by the Company at the request of such
Initiating Holders (ii) if, after it has become effective, such registration
becomes subject to any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason, other than
by reason of some act or omission by such Initiating Holders with respect
thereto, (iii) if the conditions to closing specified in the purchase agreement
or underwriting agreement entered into in connection with such registration are
not satisfied, other than by reason of some act or omission by such Initiating
Holders or (iv) if the sale of the securities is not consummated due to the lack
of agreement between the Initiating Holders and the underwriters with respect to
the underwriting discount on the securities to be sold.
(e) SELECTION OF UNDERWRITERS. If a requested registration pursuant to
this Section 2.1 involves an underwritten offering, the managing or lead
underwriter, and any co-managing and co-lead underwriters shall be selected by
the Company.
(f) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, and the managing
underwriter shall advise the Company that, in its opinion, the number of
securities requested to be included in such registration (including Common Stock
of the Company or other Persons which are not Registrable Securities) exceeds
the number which can be sold in such offering within a price range acceptable to
the holders of a majority of the Registrable Securities requested to be included
in such registration, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by the holder or holders of Registrable Securities, and the holder
or Holders of any other similar registration rights which hold shares of capital
stock of the Company that rank senior or pari passu to the Preferred Stock, pro
rata among such holders requesting such registration on the basis of the number
of such securities requested to be included by such holders, (ii) second, Common
Stock the Company proposes to sell and (iii) third, Common Stock of the Company
held by other Persons having registration rights, other than as contemplated in
sub-clause (i) above proposed to be included in such registration by the holders
thereof. Notwithstanding the foregoing, in connection with any requested
registration pursuant to this Section 2.1, the Company shall in all events be
entitled to register and sell up to 25% of the total number of shares of Common
Stock to be registered.
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2.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any time
prior to the second anniversary of the Closing Date proposes to register any of
its securities under the Securities Act (other than by a registration on Form
S-4 or any successor form, Form S-8, or any successor form thereto, relating to
a stock option plan, stock purchase plan, managing directors' plan, savings or
similar plan and other than pursuant to Section 2.1), whether or not for sale
for its own account, it will each such time give prompt written notice to all
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.2. Upon the written request of any such holder made
within 10 Business Days after the receipt of any such notice (which request
shall specify the number of Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the Company will,
subject to the terms of this Agreement, use commercially reasonable efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the holders thereof, to
the extent required to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be registered,
by inclusion of such Registrable Securities in the registration statement which
covers the securities which the Company proposes to register, provided 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 Company shall determine for any reason
either not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each holder
of Registrable Securities and, thereupon, (i) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration, without prejudice, however, to
the rights of any holder or holders of Registrable Securities entitled to do so
to request that such registration be effected as a registration under Section
2.1, and (ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities, for the same period
as the delay in registering such other securities. No registration effected
under this Section 2.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 2.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 2.1. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.2.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by this Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities use commercially reasonable efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such underwriters,
PROVIDED that if the managing underwriter of such
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underwritten offering shall inform the holders of the Registrable Securities
requesting such registration the holders of any Common Stock or other securities
of the Company which shall have exercised, in respect of such underwritten
offering, registration rights comparable to the rights under this Section 2.2,
by letter of its belief that inclusion in such underwritten distribution of all
or a specified number of such Registrable Securities or of such other securities
of the Company so requested to be included would interfere with the successful
marketing of the securities so being registered (other than such Registrable
Securities, Common Stock or other securities of the Company so requested to be
included) by the underwriters (such writing to state the basis of such belief
and the approximate number of such Registrable Securities, shares of Common
Stock or other securities of the Company so requested to be included which may
be included in such underwritten offering without such effect), then the Company
may, upon written notice to all holders of such Registrable Securities, and
holders of Common Stock or other securities of the Company so requested to be
included, exclude pro rata from such underwritten offering (if and to the extent
stated by such managing underwriter to be necessary to eliminate such effect)
the number of such Registrable Securities, and shares of such Common Stock or
other securities of the Company so requested to be included the registration of
which shall have been requested by each holder of Registrable Securities, and by
the holders of such Common Stock or other securities of the Company so that the
resultant aggregate number of such Registrable Securities and of such other
shares of Common Stock or other securities of the Company so requested to be
included which are included in such underwritten offering shall be equal to the
approximate number of shares stated in such managing underwriter's letter.
2.3 REGISTRATION PROCEDURES. If and whenever the Company is required to use
commercially reasonable efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall, as expeditiously as possible:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration (including
such audited financial statements as may be required by the
Securities Act or the rules and regulations promulgated
thereunder) and thereafter use commercially reasonable efforts to
cause such registration statement to become and remain effective,
provided however that the Company may discontinue any
registration of its securities which are not Registrable
Securities (and, under the circumstances specified in Section
2.2(a), its securities which are Registrable Securities) at any
time prior to the effective date of the registration statement
relating thereto, and provided further that before filing such
registration statement or any amendments thereto, the Company
will furnish to the counsel selected by the holders of
Registrable Securities which are to be included in such
registration copies of all such documents proposed to be filed,
which documents will be subject to the review, but not the prior
approval, of such counsel;
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(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the 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 securities covered by such registration statement until
the earlier of such time as all of such securities have been
disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement or (i) in the case of a registration
pursuant to Section 2.1, the expiration of 90 days after such
registration statement becomes effective, or (ii) in the case of
a registration pursuant to Section 2.2, the expiration of 30 days
after such registration statement becomes effective;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement and each underwriter, if
any, of the securities being sold by such seller such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with
the requirements of the Securities Act, and such other documents,
as such seller and underwriter, if any, may reasonably request;
(iv) use commercially reasonable efforts to register or
qualify all Registrable Securities and other securities covered
by such registration statement under such other securities laws
or blue sky laws of such jurisdictions as any seller thereof and
any underwriter of the securities being sold by such seller shall
reasonably request, to keep such registrations or qualifications
in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably
necessary or advisable to enable such seller and underwriter to
consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subdivision (iv) be
obligated to be so qualified, to subject itself to taxation in
any such jurisdiction or to consent to general service of process
in any such jurisdiction;
(v) notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and
confirm such advice in writing promptly thereafter:
(a) when the registration statement, the
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prospectus or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and, with respect
to the registration statement or any post-effective amendment thereto, when
the same has become effective;
(b) of any request by the Commission for amendments or supplements to
the registration statement or the prospectus or for additional information;
(c) of the issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
by any Person for that purpose; and
(d) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the initiation or threat
of any proceeding for such purpose; and
(vi) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act, upon the discovery that, or upon the happening of any event
as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made, and at the request of any such seller
promptly prepare and furnish to such seller and each underwriter,
if any, 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 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
were made;
(vii) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the registration
statement at the earliest possible moment;
(viii) otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the
effective
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date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder, and will furnish to each such seller
at least five business days prior to the filing thereof a copy of
any amendment or supplement to such registration statement or
prospectus and shall not file any thereof to which any such
seller shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects
with the requirements of the Securities Act or of the rules or
regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement;
(x) use commercially reasonable efforts to list all
Registrable Securities covered by such registration statement on
any securities exchange on which any of the securities of the
same class as the Registrable Securities are then listed; and
(xi) use commercially reasonable efforts to provide a CUSIP
number for the Registrable Securities, not later than the
effective date of the registration statement.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement or amendment thereto
or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the holders of at least a majority of the
Registrable Securities covered by such registration statement or the underwriter
or underwriters, if any, shall reasonably object, provided that the Company may
file such document in a form required by law or upon the advice of its counsel.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (vi) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vi) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the
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Company's expense) all copies, other than permanent file copies, then in such
holder's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in paragraph (ii) of this Section 2.3
shall be extended by the length of the period from and including the date when
each seller of any Registrable Securities covered by such registration statement
shall have received such notice to the date on which each such seller has
received the copies of the supplemented or amended prospectus contemplated by
paragraph (vi) of this Section 2.3.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters
for any underwritten offering by holders of Registrable Securities pursuant to a
registration requested under Section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to the Company, each such holder and
the underwriters, and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of this
type. The holders of the Registrable Securities will cooperate with the Company
in the negotiation of the underwriting agreement and will give consideration to
the reasonable suggestions of the Company regarding the form thereof, provided
that nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations and warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. With respect to an Incidental
Registration as contemplated in Section 2.2, the holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
(c) HOLDBACK AGREEMENTS.
(i) Each holder of Registrable Securities agrees, (x) if so required
by the managing underwriter, not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or
distribution of or
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otherwise dispose of or enter into any hedging or similar transaction
relating to any Common Stock or Registrable Securities not to be sold in an
underwritten offering pursuant to Section 2.1 or 2.2, during the 30 days
prior to the anticipated consummation of such underwritten offering and 90
days after the applicable underwritten registration pursuant to Section 2.1
or 2.2 has become effective, except as part of such underwritten
registration and (y) in connection with any acquisition by or merger with
the Company which is accounted for under generally accepted accounting
principles as a pooling of interest, upon the request of the Company, not
to sell, make any short sale of, loan, grant any option for the purchase
of, effect any public sale or distribution of or otherwise dispose of or
enter into any hedging or similar transaction relating to any Common Stock
or Registrable Securities, for the period commencing 30 days before the
effective date of such acquisition or merger until the publication of the
Company's financial results covering a period of at least 30 days following
such acquisition or merger which is sufficient in accordance with
Accounting Series Release No. 135, or such shorter period if consistent
with the requirements for pooling of interests accounting treatment.
Notwithstanding clause (x) of the foregoing sentence and subject to clause
(y), during any period described above, each holder of Registrable
Securities subject to the foregoing sentence shall be entitled to sell
securities in a private sale so long as the purchaser of such securities
agrees to be bound by the restrictions set forth above to the same extent
as the seller for the remainder of the applicable period.
(ii) The Company agrees if so required by the managing underwriter (x)
not to sell, make any short sale of, - loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose
of its equity securities or securities convertible into or exchangeable or
exercisable for any of such securities during the 30 days prior to and the
90 days after any underwritten registration pursuant to Section 2.1 has
become effective, except as part of such underwritten registration and
except in connection with (A) a merger or acquisition by the Company in
which securities of the Company are issued directly to shareholders of the
target entity or sellers of assets in exchange for shares of such target
entity or such assets or (B) a stock option plan, stock purchase plan,
managing directors' plan, savings or similar plan, or an acquisition of a
business, merger or exchange of stock for stock, provided that no such
agreement pursuant to this clause (x) shall prevent the Company from
fulfilling its obligations pursuant to Section 2.1 or 2.2, subject to the
provisions of Section 2.7 and (y) to use - reasonable commercially
reasonable efforts to cause each director and executive officer of the
Company and any holder (other than the Holders) of its equity securities or
any securities convertible into or exchangeable or exercisable for any of
such equity securities, in each case purchased from the Company at any time
after the date of this Agreement (other than in a public offering and other
than securities issued to employees who are not directors or
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executive officers of the Company pursuant to an employee benefit plan or
similar arrangement) to agree not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of such securities during such period,
it being understood that no action is required by the Company pursuant to
this clause (y) until the managing underwriter requests.
(d) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No Person (other than the
Company, which will be subject to and governed by the other terms and provisions
of this Agreement) may participate in any underwritten offering hereunder unless
such Person (i) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved, subject to the terms and conditions
hereof, by the holders of a majority of Registrable Securities to be included in
such underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and upon execution of an appropriate confidentiality
agreement, will give each of them such access to its books and records
(collectively, the "Records") and such opportunities to discuss the business of
the Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act; provided, that Records
which the Company determines, in good faith, to be confidential and which it
notifies such holder, underwriter, counsel or accountant are confidential shall
not be disclosed by such Person (other than to any holder of Registrable
Securities) unless (a) such Records have become generally available to the
public or (b) the disclosure of such Records may be necessary or, in the case of
clause (z) below, appropriate (x) in compliance with any law, rule, regulation
or order applicable to any such holder, underwriter, counsel or accountant, (y)
in response to any subpoena or other legal process or (z) in connection with any
litigation to which such holder,
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underwriter, counsel or accountant is a party, and such Person shall sign an
agreement to such effect that shall be customary in form and reasonably
acceptable to the Company.
2.6 INDEMNIFICATION.
(A) INDEMNIFICATION BY THE COMPANY. In the event of any registration of any
securities of the Company under the Securities Act pursuant to this Agreement,
the Company will, and hereby does agree to, indemnify and hold harmless in the
case of any registration statement filed pursuant to Section 2.1 or 2.2, the
holder of any Registrable Securities covered by such registration statement, its
directors and officers, each Person, if any, who controls such holder within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the case of any preliminary prospectus, final prospectus or summary
prospectus, in light of the circumstances under which they were made, not
misleading, and the Company will reimburse such holder and each such director,
officer, and controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding, provided that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon (i) an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with information furnished to the Company by or
on behalf of such holder specifically for use therein and (ii) an untrue
statement or alleged untrue statement, or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement if such untrue statement or alleged
untrue statement, omission or alleged omission is corrected in an amendment or
supplement to such which amendment or supplement is delivered to holder in a
timely manner and holder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to or concurrently with the sale of such
Registrable Securities to the Person asserting such Damages. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by such
holder.
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(b) INDEMNIFICATION BY THE SELLERS. As a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
2.3, the Company shall have received from each seller of Registrable Securities
a written undertaking satisfactory to it from the prospective seller of such
Registrable Securities, to indemnify and hold harmless (in the same manner and
to the same extent as set forth in subdivision (a) of this Section 2.6) the
Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of such seller. Any such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 2.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 2.6, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment based on written advice of counsel, a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that the indemnifying party
may wish, with counsel reasonably satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement of any such action which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. No indemnified party shall consent to entry of any judgment or enter
into any settlement of any such action the defense of which has been assumed by
an indemnifying party without the consent of such indemnifying party.
13
(d) CONTRIBUTION. If the indemnification provided for in the preceding
subdivisions of this Section 2.6 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Holder or other Person, as the case may be, on the other
from the distribution of the Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Holder or other Person, as the case may be, on the other in
connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Holder or other Person, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
initial sale of the Preferred Stock by the Company to the purchasers pursuant to
the Stock Purchase Agreements bear to the gain, if any, realized by the selling
holder or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of the Company on the one
hand and of the Holder or other Person, as the case may be, on the other shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the other Person and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of
the provisions contained in the first sentence of subdivision (a) of this
Section 2.6, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (e) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this Section 2.6
had been available under the circumstances.
The Company and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (e) were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
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Section 2.6, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (e), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or 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.
2.7 SUSPENSION OF REGISTRATION. Notwithstanding anything to the contrary
contained herein, the Company will not be required to file any registration
statement pursuant to Section 2.1(a) or furnish any supplement to a prospectus
pursuant to Section 2.3(vi) during any of the following periods: (i) 30 days
prior to the anticipated consummation of a public offering by the Company of its
securities and 90 days subsequent to the consummation of such public offering
where, in the good faith judgment of the managing underwriter or underwriters
thereof, such filing or furnishing of such supplement would have an adverse
effect on such offering, (ii) if such filing or furnishing of such supplement is
prohibited by applicable law, (iii) if the filing of such registration statement
or furnishing of such supplement could require the Company to disclose a
material financing, acquisition or other corporate development (iv) during the
period described in Section 2.4(c)(ii), provided that the Company may not delay
the filing of any registration statement or furnishing of such supplement
pursuant to this Section 2.7 for more than an aggregate of 120 days in any
twelve-month period.
2.8 OTHER AGREEMENTS. The Company shall not enter into any agreement or
instrument which would conflict with or result in a breach or violation of any
of the terms or provisions of this Agreement.
3. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
BENEFICIAL OWNERSHIP or BENEFICIALLY OWNED: With respect to any
person, any securities with respect to which such person is deemed to have
"beneficial ownership" as defined in rule 13d-3 under the Securities Exchange
Act of 1934, as amended. For purposes of this Agreement only, any holder of
Preferred Stock shall be deemed to be the beneficial owner of any shares of
Common Stock of the Company issuable upon conversion of such Preferred Stock.
15
BUSINESS DAY: Any day except a Saturday, Sunday or nationally
recognized holiday in the State of New York, United States of America.
COMMISSION: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
COMMON STOCK: As defined in Section 1.
COMPANY: As defined in the introductory paragraph of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Exchange Act of 1934 shall include a reference to the comparable
section, if any, of any such similar Federal statute.
HOLDERS: As defined in the introductory paragraph of this Agreement.
INITIATING HOLDERS: Any holder or holders of Registrable Securities
holding more than 50% of the Registrable Securities issued and outstanding at
the time given, and initiating a request pursuant to Section 2.1 for the
registration of all or part of such holder's or holders' Registrable Securities.
PERSON: A corporation, limited liability company, an association, a
partnership, an organization, business, an individual, a governmental or
political subdivision thereof or a governmental agency.
PREFERRED STOCK: As defined in Section 1.
REGISTRABLE SECURITIES: The Common Stock or any other securities
issuable upon conversion of the Preferred Stock issued pursuant to any and all
of the Stock Purchase Agreements and any securities issued or issuable with
respect to any such Common Stock by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise which the holders thereof are entitled to
receive. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) 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) they shall have been
distributed or are eligible for distribution to the public pursuant to Rule 144
(or any successor provision)
16
under the Securities Act, (c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, or (d) they shall have ceased to be
outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, (a)
all Commission and any NASD registration and filing fees and expenses, (b) all
fees and expenses in connection with the registration or qualification of the
Registrable Securities for offering and sale under the State securities and blue
sky laws, (c) all expenses relating to the preparation, printing, distribution
and reproduction of the registration statement required to be filed hereunder,
each prospectus included therein or prepared for distribution pursuant hereto,
each amendment or supplement to the foregoing, the expenses of preparing the
Registrable Securities for delivery and the expenses of printing or producing
any underwriting agreement(s) among underwriters and "Blue Sky" or legal
investment memoranda, any selling agreements and all other documents in
connection with the offering, sale or delivery of Registrable Securities to be
disposed of, (d) fees, disbursements and expenses of counsel and independent
certified public accountants of the Company (but not for any attorney's fee of
the Holders), (e) fees, expenses and disbursements of any other persons retained
by the Company, including special experts retained by the Company in connection
with such registration and, (f) all fees and expenses incurred in connection
with the qualification of the shares of Common Stock constituting Registrable
Securities for quotation on the Nasdaq National Market, any over-the-counter
market, or the listing of such shares on any securities exchange.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as of
the same shall be in effect at the time. References to a particular section of
the Securities Act of 1933 shall include a reference to the comparable section,
if any, of any such similar Federal statute.
STOCK PURCHASE AGREEMENTS: As defined in Section 1.
4. RULES 144 AND 144A. The Company shall timely file the reports required
to be filed by it under the Securities Act and the Exchange Act (including but
not limited to the reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and
17
the rules and regulations adopted by the Commission thereunder and will take
such further action as any holder of Registrable Securities or any broker
facilitating such sale may reasonably request, all to the extent (i) 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 (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder any information to be delivered or filed in
connection with the requirements of this Section 4.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of 50% or more of the shares of Registrable Securities and, in the case
of any such amendment, action or omission to act in respect of the first
sentence of Section 4 the written consent of each holder affected thereby. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any consent authorized by this Section 5, whether or not such
Registrable Securities shall have been marked to indicate such consent.
Notwithstanding the foregoing, each signatory hereby agrees that without
obtaining any additional consent of any other Holder, any purchaser under any
and all of the Other Purchase Agreements shall become a party hereto by signing
a Joinder Agreement.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the Beneficial Owner thereof, the
Beneficial Owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the Beneficial Owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. NOTICES. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Stock Purchase Agreements or at such other address as such party shall have
furnished to the Company in writing, or (b) in the case of any other holder of
Registrable Securities, at the address that such holder shall have furnished to
the Company in writing, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company, or (c)
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in the case of the Company, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ to the attention of its Chief Executive Officer, or at such other address,
or to the attention of such other officer, as the Company shall have furnished
to each holder of Registrable Securities at the time outstanding. Each such
notice, request or other communication shall be effective (i) if given by mail,
72 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (ii) if given by any other means
(including, without limitation, by air courier), when delivered at the address
specified above, provided that any such notice, request or communication to any
holder of Registrable Securities shall not be effective until received.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, the provisions of this Agreement which are
for the benefit of the parties hereto other than the Company shall also be for
the benefit of and enforceable by any subsequent holder of any Registrable
Securities that acknowledges such assignment in writing and agrees to the terms
hereof.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAW.
11. COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE COMPANY
HEREBY
19
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO THE
COMPANY BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT
REQUESTED, TO THE COMPANY AT ITS ADDRESS SPECIFIED IN SECTION 7. THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
14. SEVERABILITY. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
20
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
FRANKLIN CAPITAL CORPORATION
By: /s/
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
Holders:
▇▇▇▇▇▇ FUND INC.
By: /s/
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇ ▇▇▇▇▇▇▇▇ SPECIAL VALUE FUND
By: /s/
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Portfolio Manager
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
By: /s/
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
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[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
By: /s/
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By: /s/
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By: /s/
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By: /s/
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By: /s/
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By: /s/
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▇▇▇▇▇ ▇▇▇▇▇
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[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
By: /s/
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: /s/
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By: /s/
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
By: /s/
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▇▇▇▇ ▇▇▇▇▇▇
By: /s/
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By: /s/
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▇▇▇▇ ▇▇▇▇▇▇▇
By: /s/
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By: /s/
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23
EXHIBIT A
Stock Purchase Agreement dated February 22, 2000 among the Company and the other
parties listed on the signature page attached thereto.
24
EXHIBIT B
Franklin Capital Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
Reference is hereby made to the (i) Preferred Stock Purchase Agreement
dated the date hereof, pursuant to which Franklin Capital Corporation (the
"Company"), issued to the undersigned purchasers shares of its Series A
Convertible Preferred Stock and (ii) Registration Rights Agreement dated
February 22, 2000 (the "Registration Rights Agreement"), pursuant to which the
Company, among other things, has granted to certain holders of such series of
preferred stock certain registration rights relating to shares of common stock
of the Company into which such preferred stock is convertible.
By executing the acknowledgement below each of you hereby agree to
become a party to the Registration Rights Agreement and shall be entitled to all
of the benefits and subject to all of the obligations as a Holder of Registrable
Securities (in each case as such term is defined in the Registration Rights
Agreement).
FRANKLIN CAPITAL CORPORATION
By: /s/
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice-President
and Secretary
ACKNOWLEDGED AND AGREED
Name of Purchaser
By: /s/
--------------------------------
Name:
Title:
By: /s/
--------------------------------
Name:
Title:
25