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EXHIBIT 10.49
QUESTRON TECHNOLOGY, INC.
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INVESTORS' RIGHTS AGREEMENT
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DATED AS OF NOVEMBER 9, 2000
750,000 SHARES OF COMMON STOCK
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TABLE OF CONTENTS
PAGE
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1. HOLDERS' PUT RIGHTS...................................................1
1.1 Granting of Put; Price...........................................1
1.2 Put Notice.......................................................1
1.3 Acceptance, Rejection............................................2
1.4 Obligation to Purchase Purchaser Shares..........................2
1.5 Limitations on Right of Repurchase...............................2
2. OFFER TO REPURCHASE UPON CHANGE IN CONTROL............................4
2.1 Notice of Change in Control Notice Event.........................4
2.2 Offer in Respect of a Change in Control..........................4
2.3 Acceptance, Rejection............................................5
2.4 Obligation to Purchase Purchaser Shares..........................5
2.5 Deferral of Obligation to Purchase...............................6
2.6 Limitations on Obligation to Repurchase..........................6
3. REGISTRATION RIGHTS...................................................7
3.1 Incidental Registration..........................................7
3.2 Shelf Registration...............................................9
3.3 Companies Registration..........................................10
3.4 Registration Procedures.........................................10
3.5 Reasonable Investigation........................................13
3.6 Registration Expenses...........................................14
3.7 Indemnification; Contribution...................................14
3.8 Holdback Agreements; Registration Rights to Others..............18
3.9 Availability of Information.....................................18
3.10 Material Development Election..................................19
4. ANTI-DILUTION PROTECTION.............................................19
4.1 Repurchases of Common Stock or Rights...........................19
4.2 Issuances of Additional Common Stock or Rights..................20
4.3 Notice of Issuance..............................................22
4.4 Closing of Issuance and Payment of Purchase Price...............22
4.5 Additional Agreements of the Parent.............................23
5. AGREEMENTS OF THE PARENT.............................................24
5.1 CUSIP Number....................................................24
5.2 Financial and Business Information..............................24
5.3 Inspection......................................................26
6. RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS........................26
6.1 Restrictions on Transfer........................................26
6.2 Legending of Certificates.......................................26
6.3 Securities Act Restrictions; Legend.............................26
6.4 Termination of Restrictions.....................................27
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7. DEFINED TERMS........................................................27
7.1 Terms Defined...................................................27
7.2 Accounting Principles...........................................40
7.3 Directly or Indirectly..........................................41
7.4 Section Headings and Table of Contents and Construction.........41
7.5 Governing Law...................................................41
8. MISCELLANEOUS........................................................42
8.1 Notices.........................................................42
8.2 Reproduction of Documents.......................................42
8.3 Survival; Entire Agreement......................................42
8.4 Successors and Assigns..........................................43
8.5 Amendments and Waivers..........................................43
8.6 Expenses........................................................43
8.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc..............44
8.8 Indemnification of Each Holder..................................45
8.9 Execution in Counterpart........................................46
Annex 1 -- Names and Addresses of Purchasers
Annex 2 -- Address of the Parent
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INVESTORS RIGHTS AGREEMENT
INVESTORS RIGHTS AGREEMENT, dated as of November 9, 2000, among
QUESTRON TECHNOLOGY, INC., a Delaware corporation (together with its successors
and assigns, the "PARENT"), and ALBION ALLIANCE MEZZANINE FUND II, L.P., IBJ
WHITEHALL CAPITAL CORPORATION and EXETER CAPITAL PARTNERS IV, L.P. (together
with their respective successors and assigns, the "PURCHASERS").
RECITALS
WHEREAS, pursuant to the Securities Purchase Agreement, the Purchasers
have agreed to purchase from the Parent, and the Parent has agreed to sell to
the Purchasers, seven hundred fifty thousand (750,000) Common Shares; and
WHEREAS, the Parent and the Purchasers wish to enter into this
Agreement to govern the terms of the relationship between the Parent and the
Purchasers;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties to this Agreement hereby agree as
follows:
1. HOLDERS' PUT RIGHTS.
1.1 GRANTING OF PUT; PRICE.
If, at any time, the Company shall elect to prepay all or any portion
of the principal amount of the Notes pursuant to Section 1.3 of the Note
Agreement, then, and in each such case, the Parent shall offer to repurchase
from each holder of Purchaser Shares which either holds Notes or is an affiliate
of a holder of Notes, a number of the Purchaser Shares equal to the
Proportionate Number of Purchaser Shares, at a price per share equal to the
Market Price.
1.2 PUT NOTICE.
The Parent will give notice of each Put Option pursuant to this Section
1 to each holder of Purchaser Shares not less than fifteen (15) days nor more
than sixty (60) days before the date fixed for prepayment of the Notes (the "PUT
REPURCHASE DATE"), stating:
(a) that the Company has elected to prepay Notes;
(b) the aggregate principal amount of Notes that the Company
has elected to prepay;
(c) the aggregate principal amount of Notes outstanding on the
date of the notice;
(d) that each holder of Purchaser Shares has the right to
cause the Parent to repurchase the Proportionate Number of the
Purchaser Shares held by such holder at the Market Price;
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(e) a detailed calculation, for each holder of Purchaser
Shares, of the Proportionate Number;
(f) a calculation reflecting the Market Price, calculated as
of the date of such notice;
(g) if the Market Price is based upon the Closing Prices for
the immediately preceding twenty (20) trading days, a statement to that
effect, and a statement that the actual Market Price will be the Market
Price calculated as of the actual Put Repurchase Date, which may be
greater or less than the estimated Market Price set forth in such
notice; and
(h) a description of the procedure for accepting the offered
repurchase (as set forth in Section 1.3) and stating that holders
seeking to have Purchaser Shares repurchased shall deliver certificates
representing the Purchaser Shares to be repurchased to the Parent,
together with stock powers duly endorsed, for arrival on the Put
Repurchase Date.
If the Parent shall not have received a written response to such notice from any
holder of Purchaser Shares within ten (10) Business Days prior to the Put
Repurchase Date, then the Parent shall immediately send a second notice to each
such holder of Purchaser Shares.
1.3 ACCEPTANCE, REJECTION.
Each holder of Purchaser Shares shall have the option to accept or
reject such offered repurchase. In order to accept such offered repurchase, a
holder of Purchaser Shares shall cause a notice of such acceptance to be
delivered to the Parent at least five (5) days prior to the Put Repurchase Date,
specifying the number of Purchaser Shares (which shall not exceed the
Proportionate Number with respect to such holder) which such holder is electing
to have the Parent repurchase. A failure to accept in writing such written offer
of repurchase as provided in this Section 1.3, or a written rejection of such
offered repurchase, shall be deemed to constitute a rejection of such offer.
1.4 OBLIGATION TO PURCHASE PURCHASER SHARES.
The Parent shall be obligated to purchase all Purchaser Shares
requested to be purchased by any holder delivering a notice of acceptance
pursuant to Section 1.3 and shall pay the aggregate Market Price for all shares
tendered for repurchase to each such holder in immediately available funds, on
the Put Repurchase Date, against delivery by such holder of any and all
certificates or other instruments evidencing the Purchaser Shares, together with
appropriate stock powers or other instruments of transfer or assignment duly
endorsed. In the event that any holder shall deliver a certificate or
certificates representing a number of Purchaser Shares greater than the number
tendered for repurchase, the Parent, in addition to making payment for the
repurchased shares, shall promptly deliver to he holder of such certificate a
new share certificate representing the number of shares of Common Stock not
repurchased pursuant to this Section 1.
1.5 LIMITATIONS ON RIGHT OF REPURCHASE.
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Notwithstanding anything contained in this Section 1 to the contrary,
the Parent shall not be obligated to pay the repurchase price in respect of any
Put Option, to the extent that (but only to the extent that), at any time:
(a) payment of the repurchase price at such time would result
in a breach of, or default or event of default in respect of, the Note
Agreement, the Notes, the June 1999 Note Agreement, the June 1999
Senior Subordinated Notes or the Senior Credit Facility without the
written consent of those holders of the Notes, those holders of the
June 1999 Senior Subordinated Notes and those lenders under the Senior
Credit Facility the consent of which would be necessary to waive such
breach, default or event of default (and, unless each such required
consent is given, the holders of the Purchaser Shares shall not accept
or be permitted to retain such payment); or
(b) payment of the repurchase price is, at such time,
prohibited by applicable law (including, without limitation, section
160 of the Delaware General Corporation Law);
provided, however, that if any such breach, event of default, default or
violation would not result from the purchase of any number of Purchaser Shares
that is less than the total number of shares the Parent is obligated to purchase
on the Put Repurchase Date, then:
(i) the Parent shall purchase on the Put Repurchase
Date the maximum number of Purchaser Shares it may so
purchase, allocated among the holders which have elected to
have their Purchaser Shares so repurchased ratably according
to the number of Purchaser Shares so tendered, at a purchase
price, in the case of each holder, equal to the Market Price
calculated with respect to such maximum number of shares;
(ii) at each such time thereafter as the Parent may
be permitted to purchase additional tendered and unpurchased
Purchaser Shares, the Parent shall give written notice to the
tendering holders of Purchaser Shares within three (3)
Business Days after such time and shall purchase, on the tenth
(10th) Business Day following the date such notice is required
to be given the maximum number of Purchaser Shares it may so
purchase, allocated among the holders which have elected to
have their Purchaser Shares so repurchased ratably according
to the number of remaining tendered and unpurchased Purchaser
Shares, at a purchase price per share , in the case of each
holder, equal to either:
(A) in the event that the Lock-Up
Termination Date has occurred, the Market Price
calculated as of the Put Repurchase Date; or
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(B) in the event that the Lock-Up
Termination Date has not yet occurred, the greater of
the Market Price calculated as of the Put Repurchase
Date and the Market Price, recalculated as of the
date such notice is given;
and
(iii) at any time following any failure of the Parent
to pay the repurchase price, whether as a result of the
operation of the provisions of this Section 1.5 or otherwise,
any holder of Purchaser Shares which has elected to have any
of such Purchaser Shares purchased by the Parent pursuant to
this Section 1 may demand that the Parent execute and deliver
to such holder, in lieu of and in satisfaction of the
obligation of the Parent to pay the repurchase price with
respect thereto, a promissory note of the Parent in a
principal amount equal to such repurchase price, which
promissory note shall bear interest, payable quarterly after
the date of such promissory note, at the rate of sixteen and
fifty one-hundredths percent (16.50%) per annum, in arrears,
and at the maturity thereof on the unpaid principal balance of
such promissory note, which promissory note shall mature on
June 30, 2005 or, if issued on or after June 30, 2005, which
shall be payable upon demand. The form of such promissory note
shall be acceptable to the Required Holders in their
discretion.
2. OFFER TO REPURCHASE UPON CHANGE IN CONTROL
2.1 NOTICE OF CHANGE IN CONTROL NOTICE EVENT
In the event of the obtaining of actual knowledge of a Change in
Control Notice Event by the Parent (including, without limitation, via the
receipt of notice of a Change in Control Notice Event from any holder of
Purchaser Shares), the Parent will, within three (3) Business Days after the
obtaining of such actual knowledge, give notice of such Change in Control Notice
Event to each holder of Purchaser Shares. Each such notice shall:
(a) be dated the date of the sending of such notice;
(b) refer to this Section 2; and
(c) specify, in reasonable detail, the nature and expected
date of the Change in Control which, if consummated, would result from
such Change in Control Notice Event.
2.2 OFFER IN RESPECT OF A CHANGE IN CONTROL.
In the event of a Change in Control occurring on or prior to the Shelf
Effective Date, the Parent will, within three (3) Business Days after the
occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would involve any action of the Parent, at
least five (5) days prior to such Change in Control), give notice of such Change
in Control to each holder of Purchaser Shares. Such notice shall contain a
separate offer (which offer shall be irrevocable, except as set forth in Section
2.5) to each holder of Purchaser Shares to repurchase at the Market Price all,
but not less than all, of the Purchaser Shares held by such holder no later than
a date (as applicable, the "CHANGE IN CONTROL REPURCHASE DATE")
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specified in such notice that is not less than twenty (20) days and not more
than thirty (30) days after the date of such notice, but in any event not later
than the date of the occurrence of such Change in Control. Each such notice
shall:
(a) be dated the date of the sending of such notice;
(b) specify, in reasonable detail, the nature and expected
date of the Change in Control;
(c) specify the Change in Control Repurchase Date;
(d) specify the number of Purchaser Shares outstanding and the
number of Purchase Shares held by each holder;
(e) a calculation reflecting the Market Price, calculated as
of the date of such notice;
(f) if the Market Price is based upon the Closing Prices for
the immediately preceding twenty (20) trading days, a statement to that
effect, and a statement that the actual Market Price will be the Market
Price calculated as of the actual Put Repurchase Date, which may be
greater or less than the estimated Market Price set forth in such
notice; and
(g) a description of the procedure for accepting the offered
repurchase (as set forth in Section 2.3) and stating that holders
seeking to have Purchaser Shares repurchased shall deliver certificates
representing the Purchaser Shares to be repurchased to the Parent,
together with stock powers duly endorsed, for arrival on the Put
Repurchase Date.
If the Parent shall not have received a written response to such notice from any
holder of Purchaser Shares within ten (10) days after the date of posting of
such notice to such holder of Purchaser Shares, then the Parent shall
immediately send a second notice to each such holder of Purchaser Shares.
In addition, the Company agrees to provide a written copy of each such notice
required either by Section 2.1 or by this Section 2.2 to ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.,
tel. ▇▇▇-▇▇▇-▇▇▇▇, facsimile ▇▇▇-▇▇▇-▇▇▇▇.
2.3 ACCEPTANCE, REJECTION
Each holder of Purchaser Shares shall have the option to accept or
reject such offered repurchase. To accept such offered repurchase, a holder of
Purchaser Shares shall cause a notice of such acceptance to be delivered to the
Parent not later than fifteen (15) days after the date of receipt by such holder
of the written offer of such repurchase (it being understood that the failure by
a holder to respond to such written offer of repurchase within such period of
fifteen (15) days or the delivery of a written notice of rejection of such offer
within such period shall be deemed to constitute a rejection of such offer).
2.4 OBLIGATION TO PURCHASE PURCHASER SHARES
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The Parent shall be obligated to purchase all Purchaser Shares
requested to be purchased by any holder delivering a notice of acceptance, and
shall pay the aggregate Market Price for payable to each such holder in
immediately available funds, on the Change in Control Repurchase Date, against
delivery by such holder of any and all certificates or other instruments
evidencing the Purchaser Shares, together with appropriate powers or other
instruments of transfer or assignment duly endorsed.
2.5 DEFERRAL OF OBLIGATION TO PURCHASE
The obligation of the Parent to repurchase Purchaser Shares pursuant to
the offers required by Section 2.2 and accepted in accordance with Section 2.3
is expressly subject to the occurrence of the Change in Control in respect of
which such offers and acceptances shall have been made. In the event that such
Change in Control does not occur prior to the Change in Control Repurchase Date
in respect thereof, such purchase shall be deferred until and shall be made on
the date on which such Change in Control occurs or, if the Parent determines
that efforts to effect such Change in Control have ceased or have been
abandoned, or that such Change in Control will occur, if at all, after the Shelf
Effective Date, then such offer, acceptances and obligation to purchase shall be
deemed to have been rescinded without liability or penalty to any Person
hereunder. The Parent shall keep each holder of Purchaser Shares reasonably and
timely informed of:
(a) any such deferral of the date of repurchase;
(b) the date on which such Change in Control and the
repurchase are expected to occur; and
(c) any determination by the Parent that efforts to effect
such Change in Control have ceased or been abandoned or that the Change
in Control will occur, if at all, after the Shelf Effective Date.
2.6 LIMITATIONS ON OBLIGATION TO REPURCHASE
Notwithstanding anything contained in this Section 2 to the contrary,
the Parent shall not be obligated to pay the repurchase price in respect of any
Change of Control, to the extent that (but only to the extent that), at any
time:
(a) payment of the repurchase price at such time would result
in a breach of, or default or event of default in respect of, the Note
Agreement, the Notes, the June 1999 Note Agreement, the June 1999
Senior Subordinated Notes or the Senior Credit Facility without the
written consent of those holders of the Notes, those holders of the
June 1999 Senior Subordinated Notes and those lenders under the Senior
Credit Facility the consent of which would be necessary to waive such
breach, default or event of default (and, unless each such required
consent is given, the holders of the Purchaser Shares shall not accept
or be permitted to retain such payment); or
(b) payment of the repurchase price is, at such time,
prohibited by applicable law (including, without limitation, section
160 of the Delaware General Corporation Law);
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provided, however, that if any such breach, event of default, default or
violation would not result from the purchase of any number of Purchaser Shares
that is less than the total number of shares the Parent is obligated to purchase
on the Put Repurchase Date, then:
(i) the Parent shall purchase on the Change in
Control Repurchase Date the maximum number of Purchaser Shares
it may so purchase, allocated among the holders which have
elected to have their Purchaser Shares so repurchased ratably
according to the number of Purchaser Shares so tendered, at a
purchase price, in the case of each holder, equal to the
Market Price calculated with respect to such maximum number of
shares;
(ii) at each such time thereafter as the Parent may
be permitted to purchase additional tendered and unpurchased
Purchaser Shares, the Parent shall give written notice to the
tendering holders of Purchaser Shares within three (3)
Business Days after such time and shall purchase, on the tenth
(10th) Business Day following the date such notice is required
to be given the maximum number of Purchaser Shares it may so
purchase, allocated among the holders which have elected to
have their Purchaser Shares so repurchased ratably according
to the number of remaining tendered and unpurchased Purchaser
Shares, at a purchase price per share , in the case of each
holder, equal to either:
(A) in the event that the Lock-Up
Termination Date has occurred, the Market Price
calculated as of the Put Repurchase Date; or
(B) in the event that the Lock-Up
Termination Date has not yet occurred, the greater of
the Market Price calculated as of the Put Repurchase
Date and the Market Price, recalculated as of the
date such notice is given;
and
(iii) at any time following any failure of the Parent
to pay the repurchase price, whether as a result of the
operation of the provisions of this Section 2.6 or otherwise,
any holder of Purchaser Shares which has elected to have any
of such Purchaser Shares purchased by the Parent pursuant to
this Section 2 may demand that the Parent execute and deliver
to such holder, in lieu of and in satisfaction of the
obligation of the Parent to pay the repurchase price with
respect thereto, a promissory note of the Parent in a
principal amount equal to such repurchase price, which
promissory note shall bear interest, payable quarterly after
the date of such promissory note, at the rate of sixteen and
fifty one-hundredths percent (16.50%) per annum, in arrears,
and at the maturity thereof on the unpaid principal balance of
such promissory note, which promissory note shall mature on
June 30, 2005 or, if issued on or after June 30, 2005, which
shall be payable upon demand. The form of such promissory note
shall be acceptable to the Required Holders in their
discretion.
3. REGISTRATION RIGHTS.
3.1 INCIDENTAL REGISTRATION.
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(a) FILING OF REGISTRATION STATEMENT. If the Parent at any
time proposes to register any of its Common Stock pursuant to a demand
or request by any Other Stockholder to register Securities held by such
Other Stockholder (an "INCIDENTAL REGISTRATION") under the Securities
Act (but not including any registration initiated by the Parent for the
purpose of selling shares for its own account, or any registration
pursuant to a registration statement on Form S-4 or Form S-8 or any
successor forms thereto, in connection with an offer made solely to
existing Security holders or employees of the Parent), for sale in a
Public Offering, it will each such time give prompt written notice to
all holders of Registrable Securities of its intention to do so, which
notice shall be given to all such holders at least thirty (30) Business
Days prior to the date that a registration statement relating to such
registration is proposed to be filed with the SEC. Upon the written
request of any such holder to include its Registrable Securities under
such registration statement (which request shall be made within fifteen
(15) Business Days after the receipt of any such notice and shall
specify the Registrable Securities intended to be disposed of by such
holder), the Parent will use its best efforts to effect the
registration of all Registrable Securities that the Parent has been so
requested to register by such holder; provided, however, that if, at
any time after giving written notice of its intention to register any
Securities and prior to the effective date of the registration
statement filed in connection with such registration, the Parent shall
determine for any reason not to register such Securities, the Parent
may, at its election, give written notice of such determination to each
such holder and, thereupon, shall be relieved of its obligation to
register any Registrable Securities of such Persons in connection with
such registration.
(b) SELECTION OF UNDERWRITERS. Notice of the Parent's
intention to register such Securities shall designate the proposed
underwriters of such offering, if any, and shall contain the Parent's
agreement to use its best efforts, if requested to do so, to arrange
for such underwriters to include in such underwriting the Registrable
Securities that the Parent has been so requested to register pursuant
to this Section 3.1, it being understood that the holders of
Registrable Securities shall have no right to select different
underwriters for the disposition of their Registrable Securities.
(c) PRIORITY ON INCIDENTAL REGISTRATIONS. If the managing
underwriter shall advise the Parent in writing (with a copy to each
holder of Registrable Securities requesting sale) that, in such
underwriter's opinion, the number of shares of Securities requested to
be included in such Incidental Registration exceeds the number that can
be sold in such offering within a price range acceptable to the Parent
(such writing to state the basis of such opinion and the approximate
number of shares of Securities that may be included in such offering
without such effect), the Parent will include in such Incidental
Registration, to the extent of the number of shares of Common Stock
that the Parent is so advised can be sold in such offering:
(i) first, Issuable Shares requested to be sold by
the Other Stockholders requesting such Registration;
(ii) second, Registrable Securities requested to be
sold by the holders of Purchaser Shares pursuant to this
Section 3.1 and all Issuable Shares proposed to be registered
by the Other Stockholders (other than those referred to in
Section 3.1(c)(i)), pro rata among such holders on the basis
of the number of shares of Issuable Shares requested to be so
registered by such holders; and
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(iii) third, Issuable Shares of Common Stock that the
Parent proposes to issue and sell for its own account.
3.2 SHELF REGISTRATION.
(a) FILING AND EFFECTIVENESS. The Parent will file a "shelf"
registration statement (the "SHELF REGISTRATION") on an appropriate
form pursuant to Rule 415 under the Securities Act or any similar rule
that may be adopted by the SEC with respect to dispositions of all of
the Registrable Securities in such manner or manners specified by the
holders thereof. The Parent agrees to cause the Shelf Registration to
be declared effective prior to the Shelf Effective Date, and agrees to
keep the Shelf Registration effective (and to take any and all other
actions reasonably necessary in order to permit public resale of the
Registrable Securities covered by the Shelf Registration) for a period
(the "SHELF EFFECTIVE PERIOD") beginning on the date such Shelf
Registration shall first be declared effective under the Securities Act
and ending upon the Shelf Termination Date, subject to the terms and
conditions set forth in this Agreement. The Parent further agrees, if
necessary, to supplement or make amendments to such Shelf Registration,
if required by the registration form utilized by the Parent for the
Shelf Registration or by the instructions applicable to such
registration form or by the Securities Act, and the Parent agrees to
furnish to the holders of the Registrable Securities covered by the
Shelf Registration copies of any such supplement or amendment prior to
its being used or filed with the SEC.
(b) APPROVAL OF SHELF REGISTRATIONS. If any holder of
Registrable Securities objects to such filing on the grounds that the
disclosure contained in the Shelf Registration contains any
misstatement of a material fact or omits to state a fact required to be
stated therein or necessary to make the statements therein not
misleading, then such holder shall have the right, in its sole
discretion, to withdraw from the Shelf Registration. If the Parent
receives notice of such withdrawal from any holder wishing to withdraw
from the Shelf Registration, then the Parent shall not name such holder
in the registration statement or, in the case of withdrawal in
connection with any amendment or supplement to a registration statement
in which such holder is already named, shall amend such registration
statement to delete references to such holder, and to withdraw the
Registrable Securities of such holder, from the registration statement.
The Shelf Registration shall not be considered effective with respect
to any such withdrawing holder.
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(c) SELECTION OF UNDERWRITERS. If any offering pursuant to a
Shelf Registration is in the form of an underwritten offering, the
underwriters of such offering shall be one or more underwriting firms
of recognized national standing selected by the Requisite Holders and
reasonably acceptable to the Parent. In the event of an underwritten
offering pursuant to the Shelf Registration, no securities of the
Parent (other than the Registrable Securities) shall be included in any
such offering without the prior written consent of all holders of
Registrable Securities participating in such offering. Notwithstanding
the foregoing, the Parent shall not be obligated to cooperate or
participate in more than one (1) underwritten offering under the Shelf
Registration.
3.3 COMPANIES REGISTRATION. If the Securities Act (whether by statutory
amendment, amendment of the rules and regulations thereunder or both) is amended
after the date hereof to provide for a Companies Registration Scheme, and the
Parent is or becomes eligible to participate in the Companies Registration
Scheme, then the Parent, promptly following the request of the Required Holders
made at any time at which the Parent is eligible to use such Companies
Registration Scheme, shall use its reasonable best efforts to register promptly
under the Companies Registration Scheme so as to facilitate the resale under the
registration statement contemplated by such Companies Registration Scheme of the
Registrable Securities in accordance with the method or methods of distribution
contemplated by the Holders.
3.4 REGISTRATION PROCEDURES.
The Parent will use its best efforts, subject, in the case of an
Incidental Registration, to the proviso to Section 3.1(a), to effect each
Registration, and to cooperate with the sale of such Registrable Securities in
accordance with the intended method of disposition, and the Parent will:
(a) subject, in the case of an Incidental Registration, to the
proviso to Section 3.1(a), prepare and file with the SEC the
registration statement and use its best efforts to cause the
Registration to become effective; provided, however, that before
filing:
(i) any registration statement, the Parent will
furnish to the holders of the Registrable Securities covered
by such registration statement, their counsel, and the
underwriters, if any, and their counsel, copies of all such
documents proposed to be filed, in the case of the Shelf
Registration, twenty (20) days, and, in the case of an
Incidental Registration, seven (7) days prior thereto; and
(ii) any amendment to any registration statement, any
prospectus or any supplement thereto, the Parent will furnish
to the holders of the Registrable Securities covered by such
registration statement, their counsel, and the underwriters,
if any, and their counsel, copies of all such documents
proposed to be filed a reasonable number of days prior
thereto;
which documents will in each case be subject to the reasonable review,
within such specified period, of such holders, their counsel and the
underwriters; and the Parent will not file (in the case of the Shelf
Registration) or name or make reference to in such registration
statement, prospectus, amendment or supplement (in the case of any
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Incidental Registration) any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such
documents incorporated by reference) to which the Requisite Holders
shall reasonably object within such specified period;
(b) subject, in the case of an Incidental Registration, to the
proviso to Section 3.1(a), prepare and file with the SEC such
amendments and post-effective amendments to any registration statement
and any prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement; and
cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act;
(c) furnish to each holder of Registrable Securities included
in such Registration and the underwriter or underwriters, if any,
without charge, at least one signed copy of the registration statement
and any post-effective amendment thereto, upon request, and such number
of conformed copies thereof and such number of copies of the prospectus
(including each preliminary prospectus and each prospectus filed under
Rule 424 under the Securities Act), any amendments or supplements
thereto and any documents incorporated by reference therein, as such
holder or underwriter may reasonably request in order to facilitate the
disposition of the Registrable Securities being sold by such holder (it
being understood that the Parent consents to the use of the prospectus
and any amendment or supplement thereto by each holder of Registrable
Securities covered by such registration statement and the underwriter
or underwriters, if any, in connection with the offering and sale of
the Registrable Securities covered by the prospectus or any amendment
or supplement thereto);
(d) notify each holder of the Registrable Securities of any
stop order or other order suspending the effectiveness of any
registration statement, issued or threatened by the SEC in connection
therewith, and take all reasonable actions required to prevent the
entry of such stop order or to remove it or obtain withdrawal of it at
the earliest possible moment if entered;
(e) if requested by the managing underwriter or underwriters,
if any, or any holder of Registrable Securities in connection with any
sale pursuant to a registration statement, promptly incorporate in a
prospectus supplement or post-effective amendment such information
relating to such underwriting as the managing underwriter or
underwriters, if any, or such holder reasonably requests to be included
therein; and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified of
the matters incorporated in such prospectus supplement or
post-effective amendment;
(f) on or prior to the date on which a Registration is
declared effective, use its best efforts to register or qualify, and
cooperate with the holders of Registrable Securities included in such
Registration, the underwriter or underwriters, if any, and their
counsel, in connection with the registration or qualification of the
Registrable Securities covered by such Registration for offer and sale
under the securities or "blue sky" laws of each state and other
jurisdiction of the United States as any such holder or the managing
underwriter, if any, reasonably requests in writing; use its best
efforts to
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keep each such registration or qualification effective, including
through new filings, or amendments or renewals, during the period such
registration statement is required to be kept effective; and do any and
all other acts or things necessary or advisable to enable the
disposition in all such jurisdictions reasonably requested of the
Registrable Securities covered by such Registration; provided, however,
that the Parent will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of process or
taxation in any such jurisdiction where it is not then so subject;
(g) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing Securities to be sold under such Registration,
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters,
if any, or such holders may request;
(h) use its best efforts to cause the Registrable Securities
to be registered with or approved by such other governmental agencies
or authorities within the United States and having jurisdiction over
the Parent or any Subsidiary as may reasonably be necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if
any, to consummate the disposition of such Registrable Securities;
(i) subject to the last sentence of Section 3.2(c), enter into
such agreements (including underwriting agreements in customary form)
and take such other actions as the Requisite Holders shall reasonably
request in order to expedite or facilitate the disposition of such
Registrable Securities;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each
Registration, a "comfort letter" from the Parent's independent
certified public accountants covering such matters of the type
customarily covered by "cold comfort letters" as the
underwriters, if any, and (in the case of the Shelf
Registration) the Required Holders reasonably request; and
(ii) at the time of any underwritten sale pursuant to
the registration statement, a "bring-down comfort letter,"
dated as of the date of such sale, from the Parent's
independent certified public accountants covering such matters
of the type customarily covered by comfort letters as the
underwriters, if any, and (in the case of the Shelf
Registration) the Required Holders reasonably request;
(k) use its best efforts to obtain, at the time of
effectiveness of each Registration and at the time of any underwritten
sale pursuant to each Registration, an opinion or opinions, favorable
to the underwriters, if any, or (in the case of the Shelf Registration)
the Required Holders in form and scope, from counsel for the Parent in
customary form;
(l) notify each seller of Registrable Securities covered by
such Registration, upon discovery that, or upon the happening of any
event as a result of which, the
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prospectus included in such Registration, as then in effect, includes
an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly prepare, file with the SEC and
furnish to such seller or holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers or prospective
purchasers of such Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they are made;
(m) otherwise comply with all applicable rules and regulations
of the SEC, and make generally available to its security holders (as
contemplated by Section 11(a) under the Securities Act) an earnings
statement satisfying the provisions of Rule 158 under the Securities
Act no later than ninety (90) days after the end of the twelve (12)
month period beginning with the first month of the Parent's first
fiscal quarter commencing after the effective date of the registration
statement, which statement shall cover said twelve (12) month period;
(n) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by each Registration
from and after a date not later than the effective date of such
Registration; and
(o) use its best efforts to cause all Registrable Securities
covered by each Registration to be listed subject to notice of
issuance, prior to the date of first sale of such Registrable
Securities pursuant to such Registration, on each securities exchange
on which the Common Stock is then listed; and, if the Common Stock is
not so listed, to use its best efforts to cause all Registrable
Securities covered by each Registration to be designated as National
Market System Securities, if the Common Stock is so designated (and, if
the Common Stock is listed on the NASDAQ National Market or the NASDAQ
SmallCap Market, to cause all Registrable Securities covered by each
Registration to be so listed); and, if the Common Stock is not so
designated, to arrange for at least two market makers to register with
the NASD as such with respect to such Registrable Securities.
The Parent may require each holder of Registrable Securities that will be
included in such Registration to furnish the Parent with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Parent may reasonably request in writing.
3.5 REASONABLE INVESTIGATION.
Subject to the last sentence of Section 3.2(c), the Parent shall:
(a) give the holders of Registrable Securities, their
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of the registration
statement, each prospectus included therein or filed with the SEC and
each amendment thereof or supplement thereto;
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(b) give each such holder and underwriter reasonable
opportunities to discuss the business of the Parent with its officers,
counsel and the independent public accountants who have certified its
financial statements;
(c) make available for inspection by any holder of Registrable
Securities included in any Registration, any underwriter participating
in any disposition pursuant to any Registration, and any attorney,
accountant or other agent retained by any such seller or underwriter,
all financial and other records, pertinent corporate documents and
properties of the Parent reasonably requested; and
(d) cause the Parent's officers, directors and employees to
supply all information reasonably requested by any such Person in
connection with such Registration;
in each such case, as shall be reasonably necessary, in the opinion of such
holder or such underwriter, to enable it to conduct a "reasonable investigation"
within the meaning of the section 11(b)(3) of the Securities Act and to satisfy
the requirement of reasonable care imposed by section 12(a)(2) of the Securities
Act.
3.6 REGISTRATION EXPENSES.
The Parent will pay all Registration Expenses in connection with each
registration of Registrable Securities, including, without limitation, any such
registration not effected by the Parent.
3.7 INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE PARENT. The Parent shall indemnify,
to the fullest extent permitted by law, each holder of Registrable
Securities, its officers, partners, directors and agents, if any, and
each Person, if any, who controls such holder within the meaning of
section 15 of the Securities Act, against all losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses (under the
Securities Act or common law or otherwise), joint or several, resulting
from any violation by the Parent of the provisions of the Securities
Act or any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus (and as
amended or supplemented if amended or supplemented) or any preliminary
prospectus or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus, in light of
the circumstances under which they were made) not misleading, except to
the extent that such losses, claims, damages, liabilities (or
proceedings in respect thereof) or expenses are caused by any untrue
statement or alleged untrue statement contained in or by any omission
or alleged omission from information concerning any holder furnished in
writing to the Parent by such holder expressly for use therein. If the
offering pursuant to any registration statement provided for under this
Section 3 is made through underwriters, no action or failure to act on
the part of such underwriters (whether or not such underwriter is an
Affiliate of any holder of Registrable Securities) shall affect the
obligations of the Parent to indemnify any holder of Registrable
Securities or any other Person pursuant to the preceding sentence. If
the offering pursuant to any registration statement provided for under
this Section 3 is made through underwriters, the Parent agrees, to the
extent
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required by such underwriters, to enter into an underwriting or other
agreement providing for indemnity of such underwriters, their officers,
partners, directors and agents, if any, and each Person, if any, who
controls such underwriters within the meaning of section 15 of the
Securities Act to the same extent as hereinbefore provided with respect
to the indemnification of the holders of Registrable Securities;
provided that the Parent shall not be required to indemnify any such
underwriter, or any officer or director of such underwriter or any
Person who controls such underwriter within the meaning of section 15
of the Securities Act, to the extent that the loss, claim, damage,
liability (or proceedings in respect thereof) or expense for which
indemnification is claimed results from such underwriter's failure to
send or give a copy of an amended or supplemented final prospectus to
the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of
the sale of Registrable Securities to such Person if such statement or
omission was corrected in such amended or supplemented final prospectus
prior to such written confirmation and the underwriter was provided
with such amended or supplemented final prospectus.
(b) INDEMNIFICATION FOR CONTROLLING PERSON LIABILITY. In
addition to the indemnification provided for in Section 3.7(a), the
Parent shall indemnify each holder of Registratble Securities, its
officers, partners, directors, partners and agents, if any, and each
Person, if any, who controls such holder within the meaning of section
15 of the Securities Act or Section 20 of the Exchange Act, against all
losses, claims, damages, liabilities (or proceedings in respect
thereof) and expenses, joint or several, in each case, under the
Securities Act, the Exchange Act, common law or otherwise, resulting
from:
(i) any violation by the Parent of the provisions of
the Securities Act or the Exchange Act;
(ii) any untrue statement or alleged untrue statement
of a material fact contained in any registration statement or
amendment thereto or prospectus (and as amended or
supplemented if amended or supplemented) or any preliminary
prospectus or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of any
prospectus, in light of the circumstances under which they
were made) not misleading, whether or not, in each such case,
the registration statement or amendment thereto or prospectus
(or amendment or supplement thereto) or preliminary prospectus
related or relates to any offering or sale of Registrable
Securities by any holder; and
(iii) any other untrue statement or alleged untrue
statement of a material fact or omission or alleged omission
to state a material fact necessary to make the statements in
any document issued or delivered to any purchaser or potential
purchaser or filed with the SEC pursuant to section 13 or
section 15(d) of the Exchange Act (in light of the
circumstances under which they were made) not misleading, in
each case, in connection with any offering or sale of
Securities of the Parent by any Person, whether or not such
Securities offered or sold are or were registered or required
to be registered under the Securities Act;
in each such case, to the extent that such losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses, joint or
several, are alleged to result from
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or exist by virtue of the fact that any holder of Registrable
Securities controls or is alleged to control (within the meaning of
section 15 of the Securities Act or section 20 of the Exchange Act) the
Parent or any Subsidiary or Affiliate, whether such claim or allegation
arises under section 15 of the Securities Act or section 20 of the
Exchange Act or otherwise; provided, however, that such indemnification
shall not extend to losses, claims, damages, liabilities (or
proceedings in respect thereof) or expenses caused by any untrue
statement or alleged untrue statement contained in or by any omission
or alleged omission from information furnished in writing to the Parent
by such holder expressly for use therein, or from any such information
provided by an underwriter selected by the holders or any of them.
(c) INDEMNIFICATION BY THE HOLDERS. In connection with any
registration statement in which a holder of Registrable Securities is
participating, each such holder, severally and not jointly, shall
indemnify, to the fullest extent permitted by law, the Parent, each
underwriter (if the underwriter so requires) and their respective
officers, partners, directors and agents, if any, and each Person, if
any, who controls the Parent or such underwriter within the meaning of
section 15 of the Securities Act, against any losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses resulting
from any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or necessary
to make the statements therein (in the case of any prospectus, in light
of the circumstances under which they were made) not misleading, but
only to the extent that such untrue statement is contained in or such
omission is from information so concerning a holder furnished in
writing by such holder expressly for use therein; provided, however,
that such holder's obligations hereunder shall be limited to an amount
equal to the net proceeds to such holder of the Registrable Securities
sold pursuant to such registration statement.
(d) CONTROL OF DEFENSE. Any Person entitled to indemnification
under the provisions of this Section 3.7 shall give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, permit such
indemnifying party to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified party; and if such defense
is so assumed, such indemnifying party shall not enter into any
settlement without the consent of the indemnified party if such
settlement attributes liability to the indemnified party and such
indemnifying party shall not be subject to any liability for any
settlement made without its consent (which shall not be unreasonably
withheld); and any underwriting agreement entered into with respect to
any registration statement provided for under this Section 3 shall so
provide. In the event an indemnifying party shall not be entitled, or
elects not, to assume the defense of a claim, such indemnifying party
shall not be obligated to pay the fees and expenses of more than one
counsel or firm of counsel for all parties indemnified by such
indemnifying party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified
parties in respect to such claim.
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(e) CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses:
(i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party on
the one hand and the indemnified party on the other; or
(ii) if the allocation provided by clause (i) above
is not permitted by applicable law or provides a lesser sum to
the indemnified party than the amount hereinafter calculated,
in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other but also the
relative fault of the indemnifying party and the indemnified
party as well as any other relevant equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities
shall be required to contribute any amount in excess of the amount such
holder would have been required to pay to an indemnified party if the
indemnity under Section 3.7(b) hereof was available. No Person guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The obligation
of any Person to contribute pursuant to this Section 3.7 shall be
several and not joint.
(f) TIMING OF PAYMENTS. An indemnifying party shall make
payments of all amounts required to be made pursuant to the foregoing
provisions of this Section 3.7 to or for the account of the indemnified
party from time to time promptly upon receipt of bills or invoices
relating thereto or when otherwise due or payable. Without limiting the
generality of the foregoing, each indemnifying party, as an interim
measure during the pendency of any claim, action, investigation,
inquiry or proceeding arising our of or based upon any matter or
subject for which indemnity (or contribution in lieu thereof) may be
available to any indemnified party under this Section 3.7, it will
promptly reimburse each indemnified party, as often as invoiced
therefor (but in no event more often than monthly) for all reasonable
legal or other expenses incurred in connection with the investigation
or defense of any such claim, action, investigation, inquiry or
proceeding, notwithstanding the absence of any judicial determination
as to the propriety or enforceability of the indemnifying party's
obligation to reimburse the indemnified party for such expenses and
notwithstanding the possibility that the obligations to pay such
expenses might later have been held to be improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement is held to be improper, the indemnified party agrees to
promptly return the amount so advanced to the indemnifying party,
together with interest from the date of determination, compounded
monthly, at the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) listed from time to time in
The Wall Street Journal which represents the base rate on corporate
loans posted by a substantial majority of the nation's thirty (30)
largest banks. Any such interim reimbursement payments which are not
made to the indemnified party within thirty (30) days of a request
therefor shall bear interest at such prime rate from the date of such
request. To the extent required by any underwriter in connection with
the execution of any underwriting agreement pursuant to which the
holders of Registrable Securities shall be selling any shares of Common
Stock, the Parent
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shall agree to advancement of the expenses of such underwriter to at
least the same extent as provided in this Section 3.7.
(g) SURVIVAL. The indemnity and contribution agreements
contained in this Section 3.7 shall remain in full force and effect
regardless of any investigation made by or on behalf of a participating
holder of Registrable Securities, its officers, partners, directors,
agents or any Person, if any, who controls such holder as aforesaid,
and shall survive the transfer of such Securities by such holder.
3.8 HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS.
(a) In connection with each underwritten sale of Registrable
Securities, the Parent agrees, and each holder of Registrable
Securities by acquisition of such Registrable Securities agrees, to
enter into customary holdback agreements (for an aggregate period or
periods not exceeding one hundred twenty (120) days in any period of
three hundred sixty (360) days or, in the case of any Registration,
such shorter time in which all securities purchased by the underwriters
are actually sold) concerning the sale or distribution of Registrable
Securities and other equity Securities of the Parent, except, in the
case of any holder of Registrable Securities, to the extent that such
holder is prohibited by applicable law or exercise of fiduciary duties
from agreeing to withhold Registrable Securities from sale or is acting
in its capacity as a fiduciary or investment adviser. Without limiting
the scope of the term "fiduciary," a holder shall be deemed to be
acting as a fiduciary or an investment adviser if its actions or the
Registrable Securities proposed to be sold are subject to the Employee
Retirement Income Security Act of 1974, as amended, or the Investment
Company Act of 1940, as amended, or if such Registrable Securities are
held in a separate account under applicable insurance law or
regulation.
(b) If the Parent shall at any time after the date hereof
provide to any holder of any Securities of the Parent rights with
respect to the registration of such Securities under the Securities
Act, such rights shall not be in conflict with or adversely affect any
of the rights provided in this Section 3 to the holders of Registrable
Securities.
3.9 AVAILABILITY OF INFORMATION.
At any time that any class of the Common Stock is registered under
section 12(b) or section 12(g) of the Exchange Act, the Parent will comply with
the reporting requirements of sections 13 and 15(d) of the Exchange Act (whether
or not it shall be required to do so pursuant to such Sections) and will comply
with all other public information reporting requirements of the SEC from time to
time in effect. In addition, the Parent shall file such reports and information,
and shall make available to the public and to the holders of Purchaser Shares
such information, as shall be necessary to permit such holders to offer and sell
Issuable Shares pursuant to the provisions of Rules 144 and 144A promulgated
under the Securities Act. The Parent will also cooperate with each such holder
in supplying such information as may be necessary for such holder to complete
and file any information reporting forms presently or hereafter required by the
SEC as a condition to the availability of an exemption from the registration
provisions of the Securities Act in connection with the sale of any Issuable
Shares. The Parent will furnish to each such holder, promptly upon their
becoming available, copies of all financial statements, reports, notices and
proxy statements sent or made available generally by the Parent to its
stockholders, and copies of all regular and periodic reports and all
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registration statements and prospectuses filed by the Parent with any securities
exchange or with the SEC.
3.10 MATERIAL DEVELOPMENT ELECTION.
The Parent shall be entitled, for a period of not more than ninety (90)
consecutive days, and on no more than one (1) occasion during any period of two
hundred seventy (270) days, to require that the holders of Registrable
Securities refrain from effecting any distribution of their Registrable
Securities pursuant to the Shelf Registration if the chief executive officer of
the Parent determines in his reasonable good faith judgment that, in accordance
with his understanding of the disclosure requirements of the United States
federal securities laws, such distribution would require disclosure of any
financing (other than a distribution of Securities under the Shelf Registration
or any Incidental Registration), acquisition, disposition, corporate
reorganization or other transaction or development involving the Parent or any
Subsidiary that is or would be material to the Parent and that, in the
reasonable good faith business judgment of such chief executive officer, such
disclosure at such time would not be in the best interests of the Parent (a
"MATERIAL DEVELOPMENT ELECTION"); provided, however, that the Company may not
exercise its Material Development Election for a period of more than forty-five
days between the Shelf Effective Date and the second anniversary of the date of
issuance of the Registrable Securities. The Parent shall, as promptly as
practicable, give the holders of Registrable Securities written notice of any
Material Development Election. The Parent, as promptly as practicable following
any determination that the holders may recommence sales under the Shelf
Registration (but no later than the expiration of the applicable number of days
after invoking such Material Development Election), shall notify all holders of
Registrable Securities in writing of such determination.
4. ANTI-DILUTION PROTECTION.
4.1. REPURCHASES OF COMMON STOCK OR RIGHTS.
In the event that the Parent shall repurchase, redeem, retire or
otherwise acquire shares of Common Stock or Rights from any Affiliate of the
Parent (other than repurchases of shares of Common Stock pursuant to and in
compliance with this Agreement, the June 1999 Investors Agreement or the Serial
Put Agreement, in each case as in effect on the date hereof) for a Consideration
Per Share greater than the Closing Price in effect on the date prior to the date
of such repurchase, redemption, retirement or acquisition, then the Parent shall
issue and sell to each holder of Purchaser Shares an additional number of shares
of Common Stock equal to the difference of:
(a) the product of:
(i) the number of Purchaser Shares held by such
holder of Purchaser Shares immediately prior to such event;
multiplied by
(ii) the quotient of:
(A) the product of:
(I) the Closing Price in effect on
the date immediately prior to the date of
such event; multiplied by
(II) the number of shares of Common
Stock (calculated on a Fully-Diluted Basis)
immediately after such event;
divided by
(B) the difference of:
(I) the product of:
(1) the number of shares of
Common Stock immediately prior to
such event (calculated on a Fully-
Diluted Basis); multiplied by
(2) the Closing Price in
effect on the date immediately
prior to the date of such event;
minus
(II) the Aggregate Consideration
Paid;
minus
(b) the number of Purchaser Shares held by such holder of
Purchaser Shares immediately prior to such event;
in each case, at a price per share equal to the Purchase Price, as further
provided in Section 4.4.
In the event that any of the Aggregate Consideration Paid consists of
Property other than cash, the value of such Property for purposes of computing
the Aggregate Consideration Paid shall be determined by the Valuation Agent as
of a date not more than thirty (30) days prior to the date of determination
thereof and shall be set forth in a written certificate of the Valuation Agent
which shall be delivered to the holders of the Purchaser Shares in the manner
contemplated by Section 8.1.
4.2. ISSUANCES OF ADDITIONAL COMMON STOCK OR RIGHTS.
In the event that the Parent shall issue or sell shares of Additional
Common Stock or Rights (excluding Excluded Securities) for no consideration or
at a Consideration Per Share lower than the Closing Price in effect on the date
prior to the date of such issuance or sale, then the Parent shall issue and sell
to each holder of Purchaser Shares an additional number of shares of Common
Stock equal to the difference of:
(a) the product of:
(i) the number of Purchaser Shares held by such
holder of Purchaser Shares immediately prior to such event;
multiplied by
(ii) the quotient of:
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(A) the sum of:
(I) the number of shares of Common
Stock outstanding immediately prior to such
event; plus
(II) the number of shares of
Additional Common Stock so issued or sold
(or initially issuable pursuant to such
Rights); divided by
(B) the sum of:
(I) the number of shares of Common
Stock outstanding immediately prior to such
event; plus
(II) the quotient of:
(1) the Aggregate
Consideration Receivable; divided
by
(2) the Closing Price in
effect on the date immediately
prior to the date of such issuance
or sale;
in each case immediately prior to such event;
minus
(b) the number of Purchaser Shares held by such holder of
Purchaser Shares immediately prior to such event;
in each case, at a purchase price per share equal to the Purchase Price.
In the event that any of the Aggregate Consideration Receivable
consists of Property other than cash, the value of such Property for purposes of
computing the Aggregate Consideration Receivable shall be determined by the
Valuation Agent as of a date not more than thirty (30) days prior to the date of
determination thereof and shall be set forth in a written certificate of the
Valuation Agent which shall be delivered to the holders of the Purchaser Shares
in the manner contemplated by Section 8.1.
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4.3. NOTICE OF ISSUANCE.
Whenever the Parent becomes obligated to issue and sell additional
shares of Common Stock to the holders of Purchaser Shares pursuant to the
provisions of Section 4.1 or Section 4.2, the Parent shall promptly (but no
later than five (5) Business Days, following the occurrence of such event) give
to each holder of Purchaser Shares notice of such issuance and sale, and shall
promptly deliver to each holder of Purchaser Shares a certificate of the chief
financial officer of the Parent setting forth:
(a) a brief statement of the facts requiring such issuance;
(b) the computation of the Consideration Per Share and Closing
Price used in connection with determining that such issuance and sale
are necessary, and the number of shares repurchased or sold and the
actual prices at which such repurchases or sales occurred (which
computation, in the event of any dispute, shall be verified by the
Valuation Agent at the expense of the Parent);
(c) for each holder, the number of Purchaser Shares held by
such holder;
(d) for each holder, the number of shares of Common Stock to
be issued pursuant to Section 4.1 or Section 4.2, as the case may be,
to such holder, together with the computation of such number;
(e) for each holder, the aggregate Purchase Price for the
shares to be issued and sold;
(f) the closing date for such sale, which shall be a date
fixed by the Parent which is not less than ten (10) Business Days and
not more than thirty (30) days after the date of such notice (the
"ADDITIONAL SALE CLOSING DATE"); and
(g) a description of the closing mechanics set forth in
Section 4.4.
4.4. CLOSING OF ISSUANCE AND PAYMENT OF PURCHASE PRICE.
Each holder of Purchaser Shares shall make payment of the Purchase
Price on the Additional Sale Closing Date of the aggregate Purchase Price for
the additional shares of Common Stock to be issued pursuant this Section 4,
which may be paid, as set forth below, in cash, in Notes or in a combination of
cash and Notes. The Parent shall deliver to each holder of Purchaser Shares,
against such wire transfer, a certificate or certificates representing the
aggregate number of shares of Common Stock to be issued pursuant this Section 4.
Notwithstanding the foregoing, no holder of Purchaser Shares shall have any
liability to the Parent or any other holder of Purchaser Shares in respect of
any failure to deliver the Purchase Price in connection with any issuance and
sale of additional shares of Common Stock by the Parent pursuant to this Section
4; provided, however, that the Parent shall not be required to issue
certificates representing any additional shares it is required to sell pursuant
to this Section 4, and no holder of Purchaser Shares shall have any rights in
respect of any such additional shares, until payment of the aggregate Purchase
Price therefor is made by such holder.
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(a) PAYMENT IN CASH. The holder of any Purchaser Shares may
pay the aggregate Purchase Price for the additional shares of Common
Stock being issued (and shall pay the excess of the Purchase Price for
such shares over the amounts so deemed to be paid by tender of Notes
pursuant to Section 4.4(b)) in cash or by certified or official bank
check payable to the order of the Parent or by wire transfer of
immediately available funds to the account of the Parent.
(b) PAYMENT IN NOTES. To the extent that any holder of any
Purchaser Shares surrenders with the certificates representing such
Purchaser Shares any Note then held by such holder (or by an affiliate
of such holder), such holder shall be deemed to have paid that portion
of the Purchase Price equal to one hundred percent (100%) of the
principal of such Note which the holder thereof directs the Parent to
accept as payment of the Purchase Price, which Note shall be
contributed to the Company and cancelled and not reissued by the
Company. To the extent that the principal amount of such tendered Note
is greater than the amount of the aggregate Purchase Price paid by
surrender thereof, the Parent shall cause the Company shall deliver a
new Note to the tendering holder thereof, in accordance with the
provisions of the Note Agreement, in the principal amount equal to the
amount not so applied to payment of the aggregate Purchase Price. At
the time of the issuance of the additional shares of Common Stock
pursuant hereto, the Company shall pay all accrued and unpaid interest
on the principal amount of any Note of such holder cancelled pursuant
to this Section 4.4(b) up to but excluding the date of such issuance.
For purposes of Rule 144 under the Securities Act, 17 C.F.R.
ss.230.144, the Parent and you agree that a tender of the principal of
any Notes in payment of the aggregate Purchase Price in respect of
additional shares shall not be deemed a prepayment of the Notes, but
rather a conversion of such Notes, pursuant to the terms of the Notes,
the Note Agreement and this Agreement, into such additional shares of
Common Stock.
4.5. ADDITIONAL AGREEMENTS OF THE PARENT.
The Parent covenants and agrees that:
(a) The Parent shall not, by amendment to its certificate of
incorporation, as in effect on the date hereof, or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
liquidation, issuance or sale of Securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Parent, or which
would have the effect of circumventing or avoiding the provisions of
this Section 4.
(b) The Parent shall not amend the provisions of the Series IV
Warrants or any other Rights or make any adjustment thereto (pursuant
to any antidilution provision or otherwise) so as to reduce the
Consideration Per Share applicable thereto, increase the number of
shares issuable upon exercise thereof or otherwise change the economic
terms (such as the purchase price, exercise price, conversion price or
conversion ratio thereof). If, notwithstanding such prohibition, the
Parent shall amend the provisions of the Series IV Warrants or any
other any Rights or make any adjustment thereto (pursuant to any
antidilution provision or otherwise) so as to reduce the Consideration
Per Share applicable thereto, increase the number of shares issuable
upon exercise thereof or otherwise change the economic terms (such as
the purchase price, exercise price, conversion price or conversion
ratio thereof), then, in addition to whatever other
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rights the holders of Purchaser Shares may have at law or in equity,
the Parent shall issue additional shares of Common Stock to each of the
holders of the Purchaser Shares, which numbers of shares shall be as
near as appropriate and practical to those that would be required by
the provisions of Section 4.1 through Section 4.2, inclusive, as are
most nearly analogous to the effect of such amendment and as shall be
fair and equitable, such number to be determined by the Valuation
Agent. Notwithstanding the foregoing, the Parent may amend the
provisions of the Share Purchase Rights or the Share Purchase Rights
Agreement in any manner which treats alike all holders of the Common
Stock (other than an "Acquiring Person," as defined in the Share
Purchase Rights Agreement).
(c) In the event that any of the events described in any of
Section 4.1 through Section 4.2, inclusive, give rise to an adjustment
to the purchase, exercise or conversion price or conversion ratio, or
number of shares of Common Stock issuable upon conversion or exercise,
of any Rights, then the numbers of additional shares of Common Stock
provided for in Section 4.1 through Section 4.2, inclusive, in respect
of such event shall give effect both to the event giving rise to such
issuance under this Agreement and to all such adjustments made in
respect of such other Rights; provided, however, that no such issuance
shall duplicate any issuance required to be made in respect thereof by
virtue of the provisions of Section 4.5(b).
(d) The Parent shall not at any time increase the par value of
the Common Stock.
5. AGREEMENTS OF THE PARENT.
5.1. CUSIP NUMBER.
The Parent covenants and agrees to maintain a CUSIP number in respect
of the Common Stock from the CUSIP Service Bureau of Standard & Poor's, a
division of ▇▇▇▇▇▇-▇▇▇▇, Inc.
5.2. FINANCIAL AND BUSINESS INFORMATION.
The Parent shall deliver to each holder of Purchaser Shares:
(a) QUARTERLY FINANCIAL STATEMENTS - as soon as practicable
after the end of each quarterly fiscal period in each fiscal year of
the Parent (other than the last quarterly fiscal period of each such
fiscal year), and in any event within fifty (50) days thereafter:
(i) a consolidated balance sheet as at the end of
such quarter; and
(ii) consolidated statements of income and retained
earnings and cash flows for such quarter and (in the case of
the second and third quarters) for the portion of the fiscal
year ending with such quarter;
in each case for the Parent and the Subsidiaries, setting forth in each
case, in comparative form, the financial statements for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to
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quarterly financial statements generally, and certified as complete and
correct by a Senior Financial Officer; provided, that delivery of
copies of the Parent's Quarterly Report on Form 10-Q or Form 10-QSB
filed with the SEC within the time period specified above shall be
deemed to satisfy the requirements of this Section 5.2 so long as such
Quarterly Report contains or is accompanied by the information
specified in this Section 5.2;
(b) ANNUAL FINANCIAL STATEMENTS - as soon as practicable after
the end of each fiscal year of the Parent, and in any event within one
hundred five (105) days thereafter:
(i) a consolidated balance sheet as at the end of
such year; and
(ii) consolidated statements of income and retained
earnings and cash flows for such year;
in each case for the Parent and the Subsidiaries, setting forth in the
case of each consolidated financial statement, in comparative form, the
financial statement for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied by an audit
report thereon of independent certified public accountants of
recognized national standing, which report shall state without
qualification (including, without limitation, qualifications related to
the scope of the audit, the compliance of the audit with generally
accepted auditing standards, or the ability of the Parent or a material
subsidiary thereof to continue as a going concern), that such financial
statements have been prepared and are in conformity with GAAP;
provided, that the delivery of the Parent's Annual Report on Form 10-K
or Form 10-KSB for such fiscal year filed with the SEC within the time
period specified above shall be deemed to satisfy the requirements of
this Section 5.2(b) so long as such Annual Report contains or is
accompanied by the reports and other information otherwise specified in
this Section 5.2(b);
(c) SEC AND OTHER REPORTS - promptly upon their becoming
available:
(i) each financial statement, report, notice or proxy
statement sent by the Parent or any Subsidiary to stockholders
generally;
(ii) each regular or periodic report (including,
without limitation, each Form 10-K, Form 10-KSB, Form 10-Q,
Form 10-QSB and Form 8-K), any registration statement which
shall have become effective, and each final prospectus and all
amendments thereto filed by the Parent or any Subsidiary with
the SEC; and
(iii) all press releases and other statements made
available by the Parent or any Subsidiary to the public
concerning material developments in the business of the Parent
or the Subsidiaries; and
(d) REQUESTED INFORMATION - with reasonable promptness, such
other data and information as from time to time may be reasonably
requested by any holder of Purchaser Shares.
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5.3. INSPECTION.
The Parent will permit the representatives of each holder of Purchaser
Shares to visit and inspect any of the Properties of the Parent or any of the
Subsidiaries, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
partners employees and independent public accountants (and by this provision the
Parent authorizes said accountants to discuss the finances and affairs of the
Parent and the Subsidiaries) all at such reasonable times and as often as may be
reasonably requested.
6. RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS.
6.1. RESTRICTIONS ON TRANSFER.
No holder of Purchaser Shares shall sell, assign, transfer or otherwise
dispose of any Purchaser Shares to any transferee prior to the earlier to occur
of December 31, 2000 and a Change in Control without the prior written consent
of the Parent, which, in the case of a disposition in a private sale and not in
a Public Offering or pursuant to Rule 144 under the Securities Act, shall not be
unreasonably withheld. Notwithstanding the foregoing, any holder of a Purchaser
Share shall be permitted to pledge or otherwise ▇▇▇▇▇ ▇ ▇▇▇▇ in and to such
Purchaser Shares (including, without limitation, pledging such Purchaser Shares
to a trustee for the benefit of certain secured noteholders pursuant to
documents relating to the financing of such holder or to one or more banks or
other institutions providing financing in connection with the purchase by such
holder of such Purchaser Shares), and, upon due foreclosure of any such pledge,
the Parent agrees to permit the registration of such Purchaser Shares in the
name of such pledgee and to permit such pledgee to sell such Purchaser Shares,
at private sale, in a foreclosure sale.
6.2. LEGENDING OF CERTIFICATES.
Each certificate representing any Purchaser Shares prior to December
31, 2000 shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF AN INVESTORS RIGHTS AGREEMENT, DATED AS OF NOVEMBER 9, 2000,
THE PROVISIONS OF WHICH ARE INCORPORATED HEREIN BY REFERENCE. SUCH
AGREEMENT CONTAINS, AMONG OTHER PROVISIONS, PROVISIONS WHICH LIMIT THE
TRANSFER OF THIS SECURITY. A COPY OF SUCH AGREEMENT IS AVAILABLE FROM
THE PARENT UPON REQUEST."
At any time on or after December 31, 2000, each holder of Purchaser Shares shall
be entitled to receive from the Parent, in exchange for any certificate
representing Purchaser Shares and bearing such legend, a replacement certificate
not bearing such legend, without any charge to such holder.
6.3. SECURITIES ACT RESTRICTIONS; LEGEND.
The Parent shall not register any transfer of Purchaser Shares if it
has reason to believe that such transfer is being requested in violation of the
registration requirements of section 5
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of the Securities Act. Each certificate representing a Registrable Securities
prior to the effectiveness of the Shelf Registration shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT."
At any time on or after November 30, 2001 or, if a Change in Control shall have
happened prior to such date, on the later of the Shelf Effective Date and the
date of such Change in Control, each holder of Purchaser Shares shall be
entitled to receive from the Parent, in exchange for any certificate
representing Purchaser Shares and bearing such legend, a replacement certificate
not bearing such legend, without any charge to such holder.
6.4. TERMINATION OF RESTRICTIONS.
(a) SHARES SOLD TO PUBLIC. So long as a holder of Purchaser
Shares is in compliance with this Agreement, each and all of the
provisions of this Agreement shall terminate immediately as to any of
such holder's Purchaser Shares (but this Agreement shall remain in
force with respect to any remaining Purchaser Shares):
(i) when such Purchaser Shares have been both
effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering such
Purchaser Shares; or
(ii) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under
the Securities Act; or
(iii) when they shall have been otherwise transferred
and subsequent disposition of them shall not require
registration or qualification under the Securities Act or any
similar state law then in force.
(b) OFFER TO PURCHASE ON CHANGE IN CONTROL. The provisions of
Section 2.1, Section 2.2, Section 2.3, Section 2.4 and Section 2.5
shall terminate on the Shelf Effective Date.
Whenever such restrictions shall terminate as to any Issuable Shares, the holder
thereof shall be entitled to receive from the Parent, without expenses (other
than transfer taxes, if any, in connection with any change of registered
holder), new Issuable Shares of like tenor not bearing the applicable legends
set forth in Section 6.2 or Section 6.3 hereof.
7. DEFINED TERMS.
7.1. TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
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ACCEPTABLE CONTROL PERSON - means any Person or Group who were the
beneficial owners of a majority of the Voting Stock or other voting equity
interest in a Person which became a Subsidiary (by acquisition of the Capital
Stock of such Person, merger or consolidation with a Subsidiary, acquisition of
Property of such Person or otherwise) immediately prior to the acquisition of
such Subsidiary by the Parent or a Subsidiary, and who received, whether prior
to, on or after the Closing Date, Common Stock in respect of the transfer of
such ownership.
ADDITIONAL COMMON STOCK - means Common Stock, including treasury
shares, issued after the date hereof.
ADDITIONAL SALE CLOSING DATE - Section 4.3(f).
AFFILIATE - means, at any time, a Person (other than a Subsidiary):
(a) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Parent;
(b) that beneficially owns or holds five percent (5%) or more
of any class of the Voting Stock of the Parent;
(c) five percent (5%) or more of the Voting Stock (or in the
case of a Person that is not a corporation, five percent (5%) or more
of the equity interest) of which is beneficially owned or held by the
Parent or a Subsidiary; or
(d) that is an officer or director of the Parent or any
Subsidiary;
at such time; provided, however, that none of the Purchasers nor any affiliate
of any Purchaser shall be deemed to be an "Affiliate," and no Person holding any
Purchaser Shares shall be deemed to be an "Affiliate" solely by virtue of the
ownership of such securities.
As used in this definition,
control -- means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
AGREEMENT - the introductory paragraph hereof.
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AGGREGATE CONSIDERATION PAID - means, in the case of a repurchase,
redemption, retirement or acquisition of shares of Common Stock, the aggregate
amount paid by the Parent in connection therewith and, in the case of a
repurchase, redemption, retirement or acquisition of Rights, the sum of:
(a) the aggregate amount paid by the Parent for such Rights;
plus
(b) the aggregate consideration or premiums stated in such
Rights to be payable for the shares of Common Stock covered thereby.
For purposes of clause (a) above, in the event of the repurchase,
redemption, retirement or acquisition of any Rights together with other
Securities or obligations of the Parent or any other Person in which the
purchase price for the Rights and such other Securities or obligations is
expressed as a single purchase price (including, without limitation, upon the
repurchase, redemption, retirement or acquisition of Preferred Stock or debt
Securities which are convertible into Common Stock), the aggregate amount paid
by the Parent for such Rights shall include only the portion of such single
purchase price attributable to such Rights, and not the portion attributable to
such other Securities or obligations. The portion of such purchase price
attributable to such Rights in such case shall be equal to the product of:
(i) such single purchase price; multiplied by
(ii) the quotient of:
(A) the fair market value (as determined by the
Valuation Agent) of such Right, independent of the value of
such other securities or obligations (computed using the
Black-Scholes option pricing model or such other pricing model
as the Valuation Agent determines is appropriate, and applying
such reasonable assumptions concerning price variances with
respect to the Common Stock and such other variables as the
Valuation Agent considers appropriate); divided by
(B) the fair market value (as determined by the
Valuation Agent) of such Right together with such other
securities or obligations (computed using such methodology and
making such assumptions as the Valuation Agent determines is
appropriate).
AGGREGATE CONSIDERATION RECEIVABLE - means, in the case of an issuance
or sale of shares of Additional Common Stock, the aggregate amount paid to the
Parent in connection therewith and, in the case of an issuance or sale of
Rights, or any amendment thereto, the sum of:
(a) the aggregate amount paid to the Parent for such Rights;
plus
(b) the aggregate consideration or premiums stated in such
Rights to be payable for the shares of Additional Common Stock covered
thereby;
in each case without deduction for any fees, expenses or underwriters discounts.
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For purposes of clause (a) above, in the event of the issuance or sale
of any Rights together with other Securities or obligations of the Parent or any
other Person in which the purchase price for the Rights and such other
Securities or obligations is expressed as a single purchase price (including,
without limitation, upon the issuance or sale of Preferred Stock or debt
Securities which are convertible into Common Stock), the aggregate amount paid
to the Parent for such Rights should include only the portion of such single
purchase price attributable to such Rights, and not the portion attributable to
such other Securities or obligations. The portion of such purchase price
attributable to such Rights in such case shall be equal to the product of:
(i) such single purchase price; multiplied by
(ii) the quotient of:
(A) the fair market value (as determined by the
Valuation Agent) of such Right, independent of the value of
such other securities or obligations (computed using the
Black-Scholes option pricing model or such other pricing model
as the Valuation Agent determines is appropriate, and applying
such reasonable assumptions concerning price variances with
respect to the Common Stock and such other variables as the
Valuation Agent considers appropriate); divided by
(B) the fair market value (as determined by the
Valuation Agent) of such Right together with such other
securities or obligations (computed using such methodology and
making such assumptions as the Valuation Agent determines is
appropriate).
BENEFICIAL OWNER - has the meaning contemplated by Rule 13d-3 under the
Exchange Act.
BUSINESS DAY - means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
CAPITAL STOCK - means any class of preferred, common or other capital
stock, share capital or similar equity interest of a Person including, without
limitation, any partnership interest in any partnership or limited partnership
and any membership interest in any limited liability company.
CHANGE IN CONTROL - means, at any time, the occurrence of any one or
more of the following events:
(a) any Person other than an Acceptable Control Person, or any
Group other than a Group composed solely of Acceptable Control Persons,
shall be or have become Beneficial Owners of Common Stock, Rights or
other Voting Stock of the Parent of more than thirty-five percent (35%)
(by percentage of votes) on a Partially Diluted Basis of the Voting
Stock of the Parent outstanding at such time;
(b) an Acceptable Control Person, or any Group composed solely
of Acceptable Control Persons, shall be or have become Beneficial
Owners of Common Stock, Rights
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or other Voting Stock of the Parent of fifty percent (50%) (by
percentage of votes) or more on a Partially Diluted Basis of the Voting
Stock of the Parent outstanding at such time;
(c) the Parent shall fail at any time, either directly or
indirectly through Finance, to hold one hundred percent (100%) of the
Capital Stock of the Company (including, without limitation, all Voting
Stock of the Company) and one hundred percent (100%) of the Rights
exercisable or convertible into Capital Stock of the Company;
(d) any one Person or Group shall have nominated, elected or
named, or shall have obtained the right or ability to nominate, elect
or name, whether by contract, as Beneficial Owners of Voting Stock of
the Parent or otherwise, a majority of the board of directors of the
Parent or of the Company, or Persons serving similar functions; or
(e) a sale, lease, conveyance, or other transfer, in a single
transaction or series of related transactions, of all or substantially
all of the Property of either the Parent or the Company shall occur.
CHANGE IN CONTROL NOTICE EVENT - means:
(a) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control;
or
(b) the making of any written offer by any Person or Group to
the holders of any Voting Stock which offer, if accepted by the
requisite number of such holders, would result in a Change in Control.
CHANGE IN CONTROL PAYMENT DATE -- Section 2.2.
CLOSING PRICE - means, on any date with respect to any share of Common
Stock:
(a) the last sale price, regular way, on such date or, if no
such sale takes place on such date, the average of the closing bid and
asked prices on such date, in each case as officially reported on the
principal national securities exchange on which the Common Stock is
then listed or admitted to trading; and
(b) if the Common Stock is not then listed or admitted to
trading on any national securities exchange, but is listed on the
NASDAQ National Market or the NASDAQ SmallCap Market, as the case may
be, the last trading price of the Common Stock on such date as reported
by NASDAQ, or if there shall have been no trading on such date, the
average of the reported closing bid and asked prices on such date as
shown by NASDAQ.
COMMON SHARES - means the seven hundred fifty thousand (750,000) shares
of the Common Stock issued to the Purchasers pursuant to the Securities Purchase
Agreement.
COMMON STOCK - means the Common Stock, par value $0.001 per share, of
the Parent, together with the associated Share Purchase Rights, for so long as
such Share Purchase Rights shall remain attached thereto pursuant to the terms
of the Share Purchase Rights Agreement.
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COMPANIES REGISTRATION SCHEME -- means an amendment or amendment to the
Securities Act (whether by statutory amendment, amendment of the rules and
regulations thereunder or both), such as, without limitation, as proposed in the
Report of the Advisory Committee on the Capital Formation and Regulatory
Processes of the Securities and Exchange Commission, dated July 24, 1996,
pursuant to which:
(a) issuers of Securities are permitted to register all
issuances of securities on an integrated company registration
statement; and
(b) under the provisions of such amendment, such registration
could cover the reoffering or resale by the holders thereof of
Registrable Securities..
COMPANY - means Questron Operating Company, Inc., an indirect
wholly-owned subsidiary of the Parent.
CONSIDERATION PER SHARE -- means, with respect to shares of Common
Stock or Rights, the quotient of:
(a) the Aggregate Consideration Paid (in the case of a
repurchase, redemption, retirement or other acquisition for value of
Common Stock or Rights) or the Aggregate Consideration Receivable (in
the case of an issuance or sale of Common Stock or Rights by the
Parent), as the case may be, in respect of such shares of Common Stock
or such Rights; divided by
(b) the total number of such shares of Common Stock or, in the
case of Rights, the total number of shares of Common Stock into which
such Rights are exercisable or convertible.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCLUDED SECURITIES - means and includes:
(a) shares of Common Stock or Rights issued in any of the
transactions described in Section 4.1 through Section 4.2, inclusive,
hereof, and in respect of which additional shares of Common Stock have
been issued pursuant to such Section;
(b) shares of Common Stock issuable upon exercise of the
Series IV Warrants or any other Rights outstanding on the date hereof,
pursuant to the terms of the Series IV Warrants or such Rights as in
effect on the date hereof and without any amendment thereto;
(c) shares of Common Stock or Rights issued to the public in a
bona fide public offering registered under the Securities Act to
Persons other than:
(i) Affiliates;
(ii) employees of the Parent or any Subsidiary; or
(iii) existing holders of Common Stock or Rights;
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(d) shares of Common Stock issued to Persons (other than the
Parent or any Subsidiary or Affiliate) selling all or substantially all
of the Property of any business, or all of the Capital Stock of any
Person, to the Parent or any wholly-owned Subsidiary, or issued to the
former stockholders of any corporation with which any Subsidiary shall
have merged, in any case, as a part of the consideration paid to such
Persons in connection with the acquisition by the Parent or such
Subsidiary of such business or Person; provided, however, that such
transaction was negotiated at arm's length in good faith by the Parent;
(e) following the Lock-Up Termination Date, shares of Common
Stock or Rights issued in any other bona fide sale transaction not
requiring registration under the Securities Act to Persons other than:
(i) Affiliates;
(ii) employees of the Parent or any Subsidiary; or
(iii) existing holders of Common Stock or Rights; and
(f) Rights consisting of employee stock options granted with
an exercise price not less than the Closing Price thereof as of the
date prior to the date of the grant, and shares of Common Stock issued
upon exercise of such Rights, issued to employees, consultants or
independent contractors of the Parent pursuant to any stock option plan
approved by the Board of Directors at any time, so long as, and to the
extent that:
(i) the aggregate number of shares of Common Stock
issuable upon exercise of such stock options (whether or not
then currently exercisable) at such time, together with all
shares of Common Stock previously issued upon exercise of such
stock options, does not exceed fifteen percent (15%) of the
outstanding number of shares of Common Stock at any time; and
(ii) no other holder of any Rights or any other
Securities of the Parent shall have the right to any
preemptive, subscription or similar right in respect of such
issuance.
FAIR VALUE - means, with respect to any share of Common Stock, the
quotient of:
(a) the fair salable value of the Parent, as a going concern,
giving effect to all Property thereof and subject to all liabilities
thereof, that would be realized in an arm's length sale between an
informed and willing buyer and an informed and willing seller, under no
compulsion to buy or sell, respectively, as of a date that is within
fifteen (15) days of the date as of which the determination is to be
made, determined by the Valuation Agent, such determination to be made
without regard to the absence of a liquid or ready market for such
Common Stock; divided by
(b) the total number of shares of Common Stock outstanding at
such time.
FINANCE - means Questron Finance Corp., a Delaware corporation, a
wholly-owned subsidiary of the Parent and parent of the Company.
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FULLY DILUTED BASIS - means, with respect to any calculation of the
number of shares of Common Stock at any time, the sum of:
(a) the number of shares of Common Stock outstanding at such
time; plus
(b) the aggregate number of shares of Common Stock issuable
upon the exercise, conversion or exchange, as the case may be, of all
Rights outstanding at such time, regardless of whether such Rights are
then exercisable, convertible or exchangeable and regardless of whether
the consideration given up by the holder of such Right in connection
with the exercise, conversion or exchange thereof would exceed the
value of the Common Stock received upon such exercise, conversion or
exchange, provided, however, that for the purposes of this clause (b)
the Share Purchase Rights shall not be deemed to be outstanding Rights
until the earlier to occur of (i) such Share Purchase Rights becoming
excercisable and (ii) such Share Purchase rights becoming transferable
separately from the shares of Common Stock to which such Share Purchase
Rights are attached.
GAAP - means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States of
America.
GROUP - means two (2) or more Persons acting as a partnership, limited
partnership, syndicate or other group for the purpose of acquiring, holding or
disposing of Securities of an issuer, as contemplated by section 13(d)(3) of the
Exchange Act.
INCIDENTAL REGISTRATION-- Section 3.1.
ISSUABLE SHARE -- means and includes at any time:
(a) a share of issued and outstanding Common Stock; and
(b) a Right and (without duplication) all shares of Common
Stock issuable upon exercise of such Right, in each case at such time.
For purposes of this definition of "Issuable Share", a Right to acquire one
share of Common Stock shall constitute one Issuable Share, and a Person shall be
deemed to own an Issuable Share if such Person has a Right to acquire such share
whether or not such Right is exercisable at such time.
JUNE 1999 INVESTORS AGREEMENT - means the Investors Agreement, dated as
of June 30, 1999, among the Parent, Albion Alliance Mezzanine Fund, L.P.,
Alliance Investment Opportunities Fund, LLC, The Equitable Life Assurance
Society of The United States and IBJ Whitehall Capital Corporation.
JUNE 1999 NOTE AGREEMENT - means the Note Agreement, dated as of June
30, 1999, among the Company, Albion Alliance Mezzanine Fund, L.P., Alliance
Investment Opportunities
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Fund, LLC, The Equitable Life Assurance Society of The United States and IBJ
Whitehall Bank & Trust Company, pursuant to which the June 1999 Senior
Subordinated Notes were issued.
JUNE 1999 REGISTRABLE SECURITIES - means "Registrable Securities," as
such term is defined as in the June 1999 Investors Agreement.
JUNE 1999 SENIOR SUBORDINATED NOTES - means the 14.50% Senior
Subordinated Notes due June 30, 2005 issued pursuant to the June 1999 Note
Agreement.
LOCK-UP TERMINATION DATE - means December 31, 2000.
MARKET PRICE - means, per share of Common Stock, as of any date of
determination, the arithmetic mean of the daily Closing Prices for the twenty
(20) consecutive trading days before such date of determination; provided that
if no Common Stock is then neither listed or admitted to trading on any national
securities exchange, the NASDAQ National Market or the NASDAQ SmallCap Market,
then "Market Price" means the Fair Value of one share of Common Stock, as
determined by the Valuation Agent as of the date of determination.
MATERIAL DEVELOPMENT ELECTION - Section 3.10.
NATIONAL MARKET SYSTEM SECURITY - has the meaning ascribed thereto in
Rule 11Aa2-1 under the Exchange Act.
NASD - means the National Association of Securities Dealers, Inc.
NASDAQ - means the NASDAQ Stock Market, Inc., a subsidiary of the NASD.
NASDAQ NATIONAL MARKET - has the meaning ascribed thereto in Rule
4200(r) of the NASDAQ.
NASDAQ SMALLCAP MARKET - has the meaning ascribed thereto in Rule
4200(t) of the NASDAQ.
NOTE AGREEMENT - means the Note Agreement, of even date herewith, among
the Company, Albion Alliance Mezzanine Fund II, L.P., IBJ Whitehall Bank & Trust
Company and Exeter Capital Partners IV, L.P., pursuant to which the Notes are
governed.
NOTES - means each of the 14.50% Series B Senior Subordinated Notes due
June 30, 2005 of the Company issued pursuant to the Note Agreement.
OTHER STOCKHOLDERS -- means and includes, at any time, all holders of
Issuable Shares at such time (other than the holders of Purchaser Shares).
PARENT - the introductory paragraph.
PARTIALLY DILUTED BASIS - means, with respect to any calculation of the
number of shares of Voting Stock of any Person held by another Person at any
time, the sum of:
(a) the number of shares of Voting Stock (by number of votes)
outstanding at such time; plus
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(b) the aggregate number of shares of Voting Stock issuable
upon the exercise, conversion or exchange, as the case may be, of all
Rights held by such Person (but not any other Rights) at such time
which are then currently exercisable or may become exercisable within
sixty (60) days into Voting Stock.
PERSON - means an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, or a government or agency
or political subdivision thereof.
PREFERRED STOCK - means, with respect to any Person, all Capital Stock
of such Person of any class which is preferred, as to payment of dividends,
payment upon a liquidation or dissolution of such Person or both, over the
common stock of such Person. When used herein without any modifier, "Preferred
Stock" means Preferred Stock of the Parent.
PROPERTY - means any and all interests in any kind of property of asset
whatsoever, whether real, personal or mixed and whether tangible or intangible.
PROPORTIONATE NUMBER - with respect to any holder of Purchaser Shares,
means the product of:
(a) the aggregate number of Purchaser Shares held by such
holder; multiplied by
(b) the quotient of:
(i) the aggregate principal amount of Notes which the
Company has elected to prepay; divided by
(ii) the aggregate principal amount of Notes
outstanding immediately prior to such prepayment.
PUBLIC OFFERING - shall mean, with respect to any Issuable Shares, any
sale in a transaction either registered under, or requiring registration under,
section 5 of the Securities Act.
PURCHASE PRICE - means, with respect to any share (or shares) of Common
Stock, the par value (or aggregate par value) thereof.
PURCHASERS - the introductory paragraph hereof.
PURCHASER SHARES - means the following, without duplication:
(a) all the Common Shares;
(b) any additional shares of Common Stock issued to the
holders of any Common Shares pursuant to Section 4;
(c) any shares of Common Stock into which any such shares of
Common Stock shall have been converted, exchanged or recapitalized at
any time; and
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(d) any shares issued to any holder of Notes in accordance
with Section 4.18 of the Note Agreement.
PUT OPTION - means the option of each holder of Purchaser Shares to
have such Purchaser Shares purchased by the Parent pursuant to Section 1.
PUT REPURCHASE DATE - Section 1.2.
REGISTRABLE SECURITIES - means, at any time, and Purchaser Shares at
such time; provided, however, that Purchaser Shares shall cease to be
Registrable Securities:
(a) when a registration statement with respect to the sale of
such Securities shall have become effective under the Securities Act
and such Securities shall have been disposed of in accordance with such
registration statement;
(b) when they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities
Act;
(c) when they shall have been otherwise transferred and
subsequent disposition of them shall not require registration or
qualification under the Securities Act or any similar state law then in
force; or
(d) when they shall have ceased to be outstanding.
REGISTRATION -- means the Shelf Registration and each Incidental
Registration.
REGISTRATION EXPENSES -- means all expenses incident to the Parent's
performance of or compliance with compliance with Section 3.1 through Section
3.5, inclusive, including, without limitation:
(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities);
(c) expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with The Depositary Trust
Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties);
(f) fees and disbursements of counsel for the Parent and its
independent certified public accountants (including the expenses of any
management review, cold comfort letters or any special audits required
by or incident to such performance and compliance);
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(g) securities acts liability insurance (if the Parent elects
to obtain such insurance);
(h) the reasonable fees and expenses of any special experts
retained by the Parent in connection with such registration;
(i) fees and expenses of other Persons retained by the Parent;
and
(j) reasonable fees and expenses of one (1) counsel for
holders of Registrable Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities or any other selling expenses, discounts
or commissions incurred in connection with the sale of Registrable Securities.
REQUIRED HOLDERS -- means, at any time, the holders (other than the
Parent or any Affiliate or Subsidiary) of at least a majority of the Purchaser
Shares at such time (excluding any Purchaser Shares held directly or indirectly
by the Parent or any Subsidiary).
REQUISITE HOLDERS -- means, with respect to any registration or
proposed registration of Registrable Securities pursuant to Section 3 hereof,
any holder or holders (other than the Parent or any Affiliate or Subsidiary)
holding at least a majority of the shares of Registrable Securities (excluding
any shares of Registrable Securities directly or indirectly held by the Parent
or any Affiliate or Subsidiary) to be so registered.
RIGHT - means and includes any warrant, option or other right to
acquire Common Stock and including, without limitation, and any right pursuant
to the provisions of any Security convertible or exchangeable into Common Stock
to acquire Common Stock.
SEC - means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
SECURITIES ACT - means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
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SECURITIES PURCHASE AGREEMENT - means, collectively, each of the
several substantially identical Securities Purchase Agreements, of even date
herewith, among the Parent, the Company, IBJ Bank & Trust Company and each of
the Purchasers, pursuant to which the Common Shares and the Notes were issued.
SECURITY - means "security" as defined by Section 2(1) of the
Securities Act.
SENIOR AGENT - has the meaning set forth in the Note Agreement.
SENIOR CREDIT FACILITY - has the meaning set forth in the Note
Agreement.
SERIAL PUT AGREEMENT - means (i) the Serial Put Agreement, entered into
as of September 22, 1997, among the Parent, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇., and
(ii) the Serial Put Agreement entered into as of January 27, 2000 among the
Parent, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
SHARE PURCHASE RIGHTS - means the preferred share purchase rights
issued pursuant to the Share Purchase Rights Agreement.
SHARE PURCHASE RIGHTS AGREEMENT - means the Rights Agreement, dated as
of October 23, 1998, between the Parent and American Stock Transfer & Trust
Company, as Rights Agent, as amended and modified from time to time in
accordance with its terms.
SHELF EFFECTIVE DATE - means September 30, 2001.
SHELF EFFECTIVE PERIOD - Section 3.2(a).
SHELF TERMINATION DATE - means, with respect to the Shelf Registration,
the earlier of:
(a) the first date upon which no Registrable Securities
remain; and
(b) the first date after September 30, 2002 upon which, for
each holder of Purchaser Shares, together with all related Persons of
such holder, the sum of:
(i) the aggregate number of Registrable Securities
held by such holder and its related Persons; plus
(ii) the aggregate number of June 1999 Registrable
Securities held by such holder and its related Persons;
comprises less than ten percent (10%) of the aggregate number of
outstanding shares of Common Stock on such date.
As used in clause (b) this definition,
related Persons - means, with respect to any holder of
Securities, all affiliates of such holder, all Persons for whom such
holder acts as an investment Manager or investment advisor and all
Persons who acts as investment advisors or investment managers to such
holder; provided, however, that:
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(A) Albion Alliance Mezzanine Fund, L.P., Alliance
Investment Opportunities Fund LLC and Albion Alliance
Mezzanine Fund II, L.P., shall be considered related Persons
of each other; and
(B) IBJ Whitehall Bank & Trust Company and IBJ
Whitehall Capital Corporation shall be considered related
Persons of each other.
SHELF REGISTRATION - Section 3.2(a).
SUBSIDIARY - means, as to any Person, any corporation in which such
Person or one or more Subsidiaries of such Person or such Person and one or more
Subsidiaries of such Person owns sufficient voting securities to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
corporation. The term "Subsidiary," as used herein without reference to any
Person, shall mean a Subsidiary of the Parent, and shall include, without
limitation, the Company.
VALUATION AGENT -- means a firm of independent certified public
accountants, an investment banking firm or a securities rating service (which
firm or service shall own no Securities of, and shall not be an Affiliate,
Subsidiary or a related Person of, the Parent) of recognized national standing
retained by the Parent and reasonably acceptable to the Required Holders.
VOTING STOCK -- means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency)
and, in the case of the Parent, shall include the Common Stock.
7.2. ACCOUNTING PRINCIPLES.
(a) GENERALLY. Unless otherwise provided herein, all financial
statements delivered in connection herewith will be prepared in
accordance with GAAP. Where the character or amount of any asset or
liability or item of income or expense, or any consolidation or other
accounting computation is required to be made for any purpose
hereunder, it shall be done in accordance with GAAP; provided, however,
that if any term defined herein includes or excludes amounts, items or
concepts that would not be included in or excluded from such term if
such term were defined with reference solely to GAAP, such term will be
deemed to include or exclude such amounts, items or concepts as set
forth herein.
(b) CONSOLIDATION. Whenever accounting amounts of a group of
Persons are to be determined "on a consolidated basis" it shall mean
that, as to balance sheet amounts to be determined as of a specific
time, the amount that would appear on a consolidated balance sheet of
such Persons prepared as of such time, and as to income statement
amounts to be determined for a specific period, the amount that would
appear on a consolidated income statement of such Persons prepared in
respect of such period, in each case with all transactions among such
Persons eliminated, and prepared in accordance with GAAP except as
otherwise required hereby.
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(c) CURRENCY. With respect to any determination, consolidation
or accounting computation required hereby, any amounts not denominated
in the currency in which this Agreement specifies shall be converted to
such currency in accordance with the requirements of GAAP (as such
requirements relate to such determination, consolidation or
computation) and, if no such requirements shall exist, converted to
such currency in accordance with normal banking procedures, at the
closing rate as reported in The Wall Street Journal published most
recently as of the date of such determination, consolidation or
computation or, if no such quotation shall then be available, as quoted
on such date by any bank or trust company reasonably acceptable to the
Required Holders.
7.3. DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
7.4. SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of
the Sections of this Agreement and the Table of Contents of this
Agreement appear as a matter of convenience only, do not constitute a
part hereof and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Agreement as
a whole and not to any particular Section or other subdivision.
References to Sections are, unless otherwise specified, references to
Sections of this Agreement. References to Annexes and Exhibits are,
unless otherwise specified, references to Annexes and Exhibits attached
to this Agreement.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
7.5. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
ANY CONFLICTS OF LAW RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY
OTHER JURISDICTION.
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8. MISCELLANEOUS.
8.1. NOTICES.
(a) METHOD; ADDRESS. All communications hereunder shall be in
writing and shall be delivered either by nationwide overnight courier
or by facsimile transmission (confirmed by delivery by nationwide
overnight courier sent on the day of the sending of such facsimile
transmission). Communications to the Parent shall be addressed as set
forth on Annex 2, or at such other address of which the Parent shall
have notified each holder of Purchaser Shares. Communications to the
holders of the Purchaser Shares shall be addressed as set forth on
Annex 1 by such holder, or at such other address of which such holder
shall have notified the Parent, and the Parent shall, or shall cause
the transfer agent for the Common Stock to, record such address in the
share register for the Common Stock.
(b) WHEN GIVEN. Any communication addressed and delivered as
herein provided shall be deemed to be received when actually delivered
to the address of the addressee (whether or not delivery is accepted)
or received by the telecopy machine of the recipient. Any communication
not so addressed and delivered shall be ineffective.
(c) SERVICE OF PROCESS. Notwithstanding the foregoing
provisions of this Section 8.1, service of process in any suit, action
or proceeding arising out of or relating to this agreement or any
document, agreement or transaction contemplated hereby, or any action
or proceeding to execute or otherwise enforce any judgment in respect
of any breach hereunder or under any document or agreement contemplated
hereby, shall be delivered in the manner provided in Section 8.6(c).
8.2. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by you at the closing of your purchase of the Common Shares
(except the share certificates themselves), and financial statements,
certificates and other information previously or hereafter furnished to any
holder of Purchaser Shares may be reproduced by the Parent or any holder of
Purchaser Shares by any photographic, photostatic, microfilm, micro-card,
miniature photographic, digital or other similar process and each holder of
Purchaser Shares may destroy any original document so reproduced. Any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Parent or such
holder of Purchaser Shares in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. Nothing in this Section 8.2 shall prohibit
the Parent or any holder of Purchaser Shares from contesting the accuracy or
validity of any such reproduction.
8.3. SURVIVAL; ENTIRE AGREEMENT.
All warranties, representations, certifications and covenants contained
herein, in the Securities Purchase Agreement or in any certificate or other
instrument delivered hereunder shall be considered to have been relied upon by
the other parties hereto and shall survive the delivery to you of the Common
Shares regardless of any investigation made by or on behalf of
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any party hereto. All statements in any certificate or other instrument
delivered pursuant to the terms hereof or of the Securities Purchase Agreement
shall constitute warranties and representations hereunder. All obligations
hereunder (including, without limitation, reimbursement obligations in respect
of costs, expenses and fees) shall survive the termination hereof. Subject to
the preceding sentence, this Agreement, the Purchaser Shares and the other
Financing Documents embody the entire agreement and understanding among the
Parent and the Purchasers, and supersede all prior agreements and
understandings, relating to the subject matter hereof.
8.4. SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Purchaser
Shares, and shall be enforceable by any such holder whether or not an express
assignment to such holder of rights hereunder shall have been made by any
holder. Anything contained in this Section 8.4 notwithstanding, the Parent may
not assign any of its respective rights, duties or obligations hereunder or
under any of the other Financing Documents without the prior written consent of
all holders of Purchaser Shares. Any holder of a Purchaser Share shall be
permitted to pledge or otherwise grant a pledge in and to such Purchaser Shares
(including, without limitation, pledging such Purchaser Shares to a trustee for
the benefit of certain secured noteholders pursuant to documents relating to the
financing of such holder or to one or more banks or other institutions providing
financing in connection with the purchase by such holder of such Purchaser
Share); provided, however, that any such pledgee shall not be considered a
holder hereunder until it shall have foreclosed upon such Purchaser Shares in
accordance with applicable law and informed the Parent in writing, of the same.
8.5. AMENDMENTS AND WAIVERS.
This Agreement may be amended, and the observance of any term hereof
may be waived, with (and only with) the written consent of the Parent and the
Required Holders (except as provided in the SBIC Side Letter); provided,
however, that compliance by the Parent with the provisions of Section 3 hereof,
with respect to any particular registration, may be waived by the Requisite
Holders and provided, further, that no such amendment or waiver shall, without
the written consent of the holders of all Purchaser Shares (exclusive of
Purchaser Shares held by the Parent, any Subsidiary or any Affiliate), amend or
waive the provisions of this Section 8.5; and provided further that the Company
and the Required Holders shall not amend, modify, waive or supplement any
provision of Section 1.5 or Section 2.6 which in any way affects the rights of
the lenders under the Senior Credit Agreement without the express written
consent of the Senior Agent.
8.6. EXPENSES.
The Parent shall pay when billed the reasonable costs and expenses
(including reasonable attorneys' fees) incurred by the holders of the Purchaser
Shares in connection with the consideration, negotiation, preparation or
execution of any amendments, waivers, consents, standstill agreements and other
similar agreements with respect to this Agreement, the Charter or any other
Financing Document (whether or not any such amendments, waivers, consents,
standstill agreements or other similar agreements are executed).
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8.7. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(a) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED
HEREBY.
(b) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE DOCUMENTS,
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH UNDER THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY FEDERAL
DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK OR ANY NEW YORK STATE
COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN ITS SOLE
DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT,
THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE
NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH OF
THE PARTIES HERETO IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY
PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM
JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY
BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES
THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION
OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT
OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL
SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
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(d) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY HOLDER OF PURCHASER SHARES TO SERVE ANY WRITS,
PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO
OBTAIN JURISDICTION OVER THE PARENT IN SUCH OTHER JURISDICTION, AND IN
SUCH OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
8.8. INDEMNIFICATION OF EACH HOLDER.
From and at all times after the date of this Agreement, and in addition
to all other rights and remedies against the Parent, the Parent agrees to
indemnify and hold harmless each holder of Purchaser Shares and each of its
directors, officers, partners, employees, agents, investment advisors and
affiliates (collectively, the "Indemnified Parties") against any and all claims
(whether valid or not), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including, without limitation, reasonable attorneys'
fees, costs and expenses), incurred by or asserted against such Indemnified
Party, from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or enforcement of this
Agreement or the other Financing Documents or any transactions contemplated
herein or therein, or any of the transactions contemplated hereunder
(collectively, the "Proceedings"), whether or not such Indemnified Party is a
party to or target of any such Proceeding; provided, however, that no
Indemnified Party shall have the right to be indemnified hereunder for any
liability resulting from the willful misconduct or gross negligence of such
Indemnified Party or breach by such Indemnified Party of its own obligations
under this Agreement. All of the foregoing losses, damages, costs and expenses
shall be payable as and when incurred upon the demand of each holder. Without
limiting the generality of the foregoing, each such indemnified Person shall be
entitled to collect, and the Parent shall be obligated to advance to each such
Person, to the fullest extent permitted by applicable law, all expenses
(including, without limitation, reasonable fees and disbursements of counsel)
attendant to defending against any such claims (whether valid or not), losses,
damages, liabilities, costs and expenses when and as incurred, regardless of
whether any judicial determination of entitlement to such indemnity has been
made, until or unless a final judicial determination that such Indemnified Party
is not entitled to such indemnity, in which case, such Indemnified Party shall
promptly repay to the Parent, with interest at the applicable statutory rate
applicable to judgments in the relevant jurisdiction, all amounts so advanced by
the Parent. The obligations of the Parent and the rights under this Section 8.8
of each holder of Purchased Securities shall survive the termination of this
Agreement.
If any Proceeding shall be brought or asserted or threatened to be
brought or asserted against an Indemnified Party in respect of which indemnity
may be sought from the Parent hereunder, such Indemnified Party shall promptly
notify the Parent in writing, and the Parent may, in its sole discretion,
promptly upon receipt of such notice, assume the defense thereof, including the
employment of counsel (who may be counsel for the Parent) reasonably
satisfactory to such Indemnified Party and the payment of all expenses therefor.
If the Parent elects to assume the defense of any such Proceeding, the
Indemnified Party shall have the right, in its sole discretion, to employ
separate counsel in any such action and to participate in the
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defense thereof, but the fees and expenses of such counsel shall be the expense
of such Indemnified Party unless:
(a) the Parent has agreed to pay such fees and expenses;
(b) the Parent shall have elected not to assume the defense of
such Proceeding or shall have failed to promptly assume the defense of
Proceeding or shall have failed to employ counsel reasonably
satisfactory to such Indemnified Part in any such Proceeding; or
(c) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Parent
and such Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to such Indemnified
Party that are different from or additional to those available to the
Parent (in which case, if such Indemnified Party notifies the Parent in
writing that it elects to employ separate counsel at the expense of the
Parent, the Parent shall not have the right to assume the defense of
such Proceeding on behalf of such Indemnified Party, it being
understood, however, that the Parent shall not, in connection with any
one such Proceeding or separate but substantially similar or related
Proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses or more than one separate firm of attorneys at any time for
such Indemnified Party and any other Indemnified Parties, which firm
shall be designated in writing by such Indemnified Parties).
The Parent shall not be liable for any settlement of any Proceeding by an
Indemnified Party effected without the Parent's written consent (which consent
shall not be unreasonably withheld). In addition, the Indemnified Party shall
cooperate with the Parent and their representatives in connection with the
defense or investigation of any claim or other matter for which indemnification
is sought, as reasonably requested by the Parent.
8.9. EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY; NEXT PAGE IS SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, all as of the date and year first above written.
QUESTRON TECHNOLOGY, INC.
By: ________________________________
Name:
Title:
ALBION ALLIANCE MEZZANINE FUND II, L.P.
By: AA MEZZ II GP, LLC, its General Partner
By: Albion Alliance LLC , its Sole Member
By:________________________________
Name:
Title:
IBJ WHITEHALL CAPITAL CORPORATION
By:________________________________
Name:
Title:
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
By: Exeter IV Advisors, Inc.
By:________________________________
Name:
Title:
50
ANNEX 1
NAMES AND ADDRESSES OF PURCHASERS
Albion Alliance LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
IBJ Whitehall Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Exeter Capital Partners IV, LP
▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
51
ANNEX 2
ADDRESS OF THE PARENT
Questron Technology, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chairman & CEO