REGISTRATION RIGHTS AGREEMENT, dated as of July 19, 1996 (this
"Agreement"), between RECOVERY ENGINEERING, INC., a Minnesota corporation (the
"Company"), and GS CAPITAL PARTNERS II, L.P., a Delaware limited partnership, GS
CAPITAL PARTNERS II OFFSHORE, L.P., a Cayman Island limited partnership, ▇▇▇▇▇▇▇
▇▇▇▇▇ & CO. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, L.P., a Delaware limited
partnership, and ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, L.P., a Delaware limited partnership
(the foregoing parties, other than the Company, being referred to herein as the
"Investors").
1. Background. The Company and the Investor have entered into a
Securities Purchase Agreement, dated as of the date hereof (the "Securities
Purchase Agreement"). In order to induce the Investors to enter into and
consummate the transactions contemplated by the Securities Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement.
2. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Conversion Shares" means (a) the shares of Common Stock or
other equity securities issued or issuable upon conversion of the Notes and (b)
any shares of Common Stock or other securities issued or issuable, in respect of
the Common Stock or other equity securities referred to in clause (a) above by
way of a dividend, distribution, stock split, combination of shares or any
similar event.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar federal statute.
"Incidental Registration" is defined in Section 3.2.
"Notes" means the 5% Convertible Notes due 2003 issued
pursuant to the Securities Purchase Agreement and any securities issued in
exchange therefor pursuant to any Exchange (as defined in Section 3.3(o)).
"Participating Holders" means the holders of Registrable
Securities participating in the particular registration.
"Person" means a corporation, an association, a partnership, a
limited liability company, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 3, including, without
limitation, all registration, filing and applicable fees of the Commission,
stock exchange or NASD registration and filing fees and all listing fees and
fees with respect to the inclusion of securities in NASDAQ (as defined in
Section 3.3(j)), all fees and expenses of complying with state securities or
blue sky laws (including fees and disbursements of counsel to the underwriters
or the Participating Holders in connection with "blue sky" qualification of the
Registrable Securities and determination of their eligibility for investment
under the laws of the various jurisdictions), all word processing, duplicating
and printing expenses, all messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants including the expenses of any audit and/or "cold comfort" letters
required by or incident to such registration, all expenses in connection with
any road show, all fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, all transfer taxes, and the fees and expenses
of one counsel to the Participating Holders (selected by the Requisite
Percentage of Participating Holders); provided, however, that Registration
Expenses shall exclude and the Participating Holders shall pay all underwriting
discounts and commissions in respect of the Registrable Securities being
registered.
"Registrable Securities" means (i) any Notes and (ii) any
Conversion Shares. As to any particular Registrable Securities, such securities
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 such securities are sold pursuant to
Rule 144 (or similar rule adopted by the Commission) under the Securities Act,
or (c) when such securities cease to be outstanding.
"Requested Registration" is defined in Section 3.1(a).
"Requisite Percentage of Outstanding Holders" mean the holders
of Registrable Securities who, assuming conversion of all then outstanding Notes
into Conversion Shares, would hold 25% or more of the total Conversion Shares
that would then be outstanding.
"Requisite Percentage of Participating Holders" means
Participating Holders of Registrable Securities who, assuming conversion of all
then outstanding Notes into Conversion Shares, would hold a majority of the
total Conversion Shares that would then be held by all Participating Holders.
"Securities Act" means the Securities Act of 1933, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
3. Registration Under Securities Act, etc.
3.1 Requested Registrations.
(a) Request for Registration. Subject to the
limitations imposed by Sections 3.1(c) below, at any time and from time to time,
one or more holders of Registrable Securities representing the Requisite
Percentage of Outstanding Holders shall have the right to require the Company to
file a registration statement under the Securities Act covering all or any part
of their respective Registrable Securities, by delivering a written request
therefor to the Company specifying the number and amount of Registrable
Securities and the intended method of distribution thereof. Any such request
pursuant to this Section 3.1(a) is referred to herein as a "Requested
Registration." The Company shall give prompt written notice of each Requested
Registration to all other holders of record of Registrable Securities, and
thereupon the Company shall use its best efforts to effect the registration
under the Securities Act (including, without limitation, by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested) so
as to permit promptly the sale, in accordance with the intended method of
distribution, of the Registrable Securities which the Company has been so
requested to register in the Requested Registration and all other Registrable
Securities which the Company has been requested to register by the holders
thereof by written request given to the Company within 30 days after the giving
of such written notice by the Company.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 3.1 in connection
with an underwritten offering by one or more Participating Holders of
Registrable Securities, no securities other than Registrable Securities shall be
included among the securities covered by such registration unless (i)
Participating Holders representing the Requisite Percentage of Participating
Holders shall have consented in writing to the inclusion therein of such other
securities and (ii) such inclusion shall be permitted only to the extent that it
is pursuant to and subject to the terms of the underwriting agreement or
arrangements and the inclusion of such securities will not have a material
adverse effect on the offering (including, without limitation, on the pricing of
the offering).
(c) Limitations on Requested Registrations; Expenses.
The Company shall not be obligated to effect any Requested Registration pursuant
to this Section 3.1 until the second anniversary of the date hereof. Thereafter,
the Company shall be obligated to effect only three Requested Registrations
pursuant to this Section 3.1. The Company shall pay all Registration Expenses in
connection with each Requested Registration requested pursuant to this Section
3.1.
(d) Registration Statement Form. Registrations under
this Section 3.1 shall be on Form S-3 or any successor form, if permitted, or
such appropriate registration form of the Commission as shall be selected by the
Company and as shall be reasonably acceptable to the Requisite Percentage of
Participating Holders. The Company agrees to include in any such registration
statement all information which, in the opinion of counsel to the Participating
Holders and counsel to the Company, is required to be included.
(e) Effective Registration Statement. A registration
requested pursuant to this Section 3.1 shall not be deemed to have been effected
(including for purposes of paragraph (c) of this Section 3.1) (i) unless a
registration statement with respect thereto has become effective and has been
kept continuously effective for a period of at least 120 days (or such shorter
period which shall terminate when all the Registrable Securities covered by such
registration statement have been sold pursuant thereto), (ii) if, after it has
become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Participating Holders and
has not thereafter become effective, or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in connection with
such registration are not satisfied or waived, other than by reason of a failure
on the part of the Participating Holders.
(f) Selection of Underwriters. The managing
underwriter or underwriters of each underwritten offering of the Registrable
Securities so to be registered shall be selected by the Requisite Percentage of
Participating Holders, and shall be reasonably acceptable to the Company (it
being agreed that any nationally recognized investment bank firm shall be
reasonably acceptable to the Company).
(g) Cutbacks in Requested Registration. If the
managing underwriter of any underwritten offering shall advise the Participating
Holders in such offering that not all of the Registrable Securities covered by
the registration statement can be sold in such offering within a price range
acceptable to the Requisite Percentage of Participating Holders, then the
Participating Holders representing the Requisite Percentage of Participating
Holders shall have the right to notify the Company in writing that they have
determined that the registration statement be abandoned or withdrawn, in which
event the Company shall abandon or withdraw such registration statement. If the
managing underwriter of any underwritten offering shall advise the Company in
writing (with a copy to each Participating Holder) that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering within a price range acceptable to the
Requisite Percentage of Participating Holders, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, Registrable Securities requested to be included in such
registration, pro rata among the Participating Holders requesting such
registration in accordance with the number of Conversion Shares (treating for
these purposes Notes requested to be registered as having been converted into
Conversion Shares) each such Participating Holder requested to be registered. In
connection with any such registration to which this Section 3.1(g) is
applicable, no securities other than Registrable Securities shall be covered by
such registration.
3.2 Incidental Registration.
(a) Incidental Registration. If, at any time, the
Company proposes or is required to register any of its equity securities, or any
securities convertible into or exchangeable for equity securities, under the
Securities Act, whether or not for sale for its own account (other than pursuant
to registrations on form S-8 or any similar form solely for registration of
securities in connection with an employee benefit plan or dividend reinvestment
plan) (an "Incidental Registration"), the Company will give prompt written
notice to all holders of record of Registrable Securities of its intention to so
register its securities and of such holders' rights under this Section 3.2. Upon
the written request of any holder of Registrable Securities made within 20 days
following the receipt of any such written notice (which request shall specify
the maximum number of Registrable Securities intended to be disposed of by such
holder and the intended method of distribution thereof), the Company will use
its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof together with any other securities the Company is obligated
to register pursuant to incidental registration rights of other security holders
of the Company. No registration effected under this Section 3.2 shall relieve
the Company of its obligation to effect any Requested Registration under Section
3.1.
(b) Abandonment or Delay. If, at any time after the
Company has given written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination and its reasons therefor to all holders of record
of Registrable Securities and (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any obligation of
the Company to pay the Registration Expenses in connection therewith) , without
prejudice, however, to the rights of any holder or holders of Registrable
Securities entitled to do so to request that such registration be effected as a
registration under Section 3.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities.
(c) Holder's Right to Withdraw. Each holder of
Registrable Securities shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 3.2 at any time by giving written notice to the Company of its
request to withdraw.
(d) Limitations on Incidental Registrations;
Expenses. The Company shall not be obligated to effect any Incidental
Registration pursuant to this Section 3.2 until the second anniversary of the
date hereof. Thereafter, there shall be no limitation on the number of
Incidental Registrations which the Company shall be obligated to effect pursuant
to this Section 3.2. The Company will pay all Registration Expenses in
connection with each Incidental Registration requested pursuant to this Section
3.2.
(e) Underwriters' Cutback in Incidental
Registrations. If the managing underwriter of any underwritten offering shall
inform the Company by letter of its belief that the number of Registrable
Securities requested to be included in such registration would materially
adversely affect such offering, then the Company will include in such
registration, to the extent of the number and type of securities which the
Company is so advised can be sold in (or during the time of) such offering,
first, the securities proposed by the Company to be sold for its own account
and, second, the Registrable Securities and all other securities of the Company
which are requested to be included in such registration pursuant to incidental
registration rights granted by the Company to other securities holders which are
not inconsistent with the rights granted by, or otherwise in conflict with the
terms of, this Agreement ("Additional Incidental Rights"), pro rata among the
Participating Holders and such other holders requesting such registration
pursuant to Additional Incidental Rights based on the number of shares of Common
Stock (with each Note being considered to represent the number of Common Stock
into which it is convertible) subject to registration rights originally
requested to be included by such holders in such registration.
3.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 or 3.2 hereof,
the Company will as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect
such registration (and shall include all financial statements
required by the Commission to be filed therewith) and
thereafter use its best efforts to cause such registration
statement to become effective; provided, however, that before
filing such registration statement (including all exhibits) or
any amendment or supplement thereto or comparable statements
under securities or blue sky laws of any jurisdiction, the
Company shall furnish such documents to the Participating
Holders, their counsel, and each underwriter, if any,
participating in the offering of the Registrable Securities,
and its counsel; and provided, further, however, that the
Company may discontinue any registration of its securities
which are not Registrable Securities, at any time prior to the
effective date of the registration statement relating thereto;
(b) notify each Participating Holder of the
Commission's requests for amending or supplementing the
registration statement and the prospectus, and prepare and
file with the Commission such amendments and supplements to
such registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement effective for such period (which shall
not exceed 120 days) as any seller of Registrable Securities
pursuant to such registration statement shall request and to
comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by
such registration statement in accordance with the included
methods of disposition by the seller or sellers thereof set
forth in such registration statement;
(c) furnish, without charge, to each Participating
Holder and each underwriter, if any, such number of conformed
copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and
such other documents, as such Participating Holder may
reasonably request;
(d) use its best efforts (i) to register or qualify
all Registrable Securities and other securities covered by
such registration statement under such securities or blue sky
laws of such States of the United States of America where an
exemption is not available and as the Participating Holders
shall reasonably request, (ii) to keep such registration or
qualification in effect for so long as such registration
statement remains in effect, and (iii) to take any other
action which may be reasonably necessary or advisable to
enable such Participating Holders to consummate the
disposition in such jurisdictions of the securities to be sold
by such Participating Holders, except that the Company shall
not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this
subsection (d) be obligated to be so qualified or to consent
to general service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable
Securities covered by such registration statement to be
registered with or approved by such other federal or state or
foreign governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company and counsel
to the Participating Holders to consummate the disposition of
such Registrable Securities;
(f) furnish to each Participating Holder and each
underwriter, if any, participating in the offering of the
securities covered by such registration statement, a signed
counterpart of
(i) an opinion of outside counsel (or inside
counsel if satisfactory to each underwriter) for the
Company, and
(ii) a "comfort" letter signed by the
independent public accountants who have certified the
Company's financial statements included or
incorporated by reference in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein)
and, in the case of the accountants' comfort letter, with
respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities
(and dated the dates such opinions and comfort letters are
customarily dated) and, in the case of the legal opinion, such
other legal matters, and, in the case of the accountants'
comfort letter, such other financial matters, as the Requisite
Percentage of Participating Holders, or the underwriters, may
reasonably request;
(g) promptly notify each Participating Holder and
each managing underwriter, if any, participating in the
offering of the securities covered by such registration
statement (i) when such registration statement, any
pre-effective amendment, the prospectus or any prospectus
supplement related thereto or post-effective amendment to such
registration statement has been filed, and, with respect to
such registration statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the
Commission for amendments or supplements to such registration
statement or the prospectus related thereto or for additional
information; (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that
purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or
the initiation of any proceeding for such purpose; (v) at any
time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in
the light of the circumstances under which they were made, and
in the case of this clause (v), at the request of any
Participating Holder, promptly prepare and furnish to it and
each managing underwriter, if any, participating in the
offering of the Registrable Securities a reasonable number of
copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and
(vi) at any time when the representations and warranties of
the Company contemplated by Section 3.4(a) hereof cease to be
true and correct;
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve
months beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder, and
promptly furnish to each such Participating Holder a copy of
any amendment or supplement to such registration statement or
prospectus;
(i) provide and cause to be maintained a transfer
agent and registrar (which, in each case, may be the Company)
for all Registrable Securities covered by such registration
statement from and after a date not later than the effective
date of such registration;
(j) use its best efforts to cause all Registrable
Securities covered by such registration statement to be listed
on a national securities exchange or to secure designation of
all such Registrable Securities as a National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
"national market system security" within the meaning of Rule
11Aa2-1 of the Commission, in each case to the extent the
shares of the Company's Common Stock are so listed or
designated;
(k) deliver promptly to counsel to the Participating
Holders and each underwriter, if any, participating in the
offering of the Registrable Securities, copies of all
correspondence between the Commission and the Company, its
counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to such
registration statement;
(1) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
registration statement;
(m) provide a CUSIP number for all Registrable
Securities, no later than the effective date of the
registration statement;
(n) make available its employees and personnel and
otherwise provide reasonable assistance to the underwriters
(taking into account the needs of the Company's businesses) in
their marketing of Registrable Securities;
(o) with respect to the registration of any Notes
under the Securities Act pursuant to Section 3.1 or 3.2, prior
to the effective date of such registration, (i) select a
trustee (the "Trustee") reasonably acceptable to the holders
of a majority of the outstanding principal amount of the Notes
requested to be included in such registration, (ii) prepare,
duly authorize, execute and deliver an indenture (the
"Indenture") satisfactory in form and substance to the holders
of a majority of the outstanding principal of the Notes
requested to be included in such registration, reflecting the
terms set forth in the Securities Purchase Agreement and the
outstanding principal amount of the Notes and qualified under
the Trust Indenture Act of 1939, as amended, and (iii)
exchange all of the outstanding Notes for Securities (as
defined in the Indenture) having an aggregate outstanding
principal amount equal to the Notes so exchanged (the
"Exchange"), which Securities shall be executed by the Company
and authenticated and delivered by the Trustee pursuant to the
Indenture. Following such Exchange, the Notes shall be
canceled and shall be void and of no further force and effect.
The Company may require each Participating Holder as to the Registrable
Securities of whom any registration is being effected to furnish the Company
such information regarding such holder and the distribution of such securities
as the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees that upon receipt
of any notice from the Company of the happening of any event of the kind
described in subsection (g) (iii) or (v) of this Section 3.3, the Participating
Holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until, in the case of subsection (g)(iii) of this Section 3.3, such
stop order is removed or proceedings therefor terminated, and, in the case of
subsection (g)(v) of this Section 3.3, such holder's receipt of the copies of
the supplemented or amended prospectus contemplated by subsection (g)(v) of
this Section 3.3 and, if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then in
such holder's possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
3.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by
the underwriters for any underwritten offering by Participating Holders pursuant
to a registration requested under Section 3.1, the Company will use its best
efforts to enter into an underwriting agreement with such underwriters for such
offering, such agreement to be reasonably satisfactory in substance and form to
the Company, each such holder and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 3.6 hereof. The
Participating Holders will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reasonable suggestions
of the Company regarding the form thereof. The Participating Holders shall be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of the Participating Holders and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of the
Participating Holders. No Participating Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's ownership of and title to the Registrable Securities, such
holder's intended method of distribution and any other representations required
by law, and any liability of the Participating Holder to any underwriter or
other person under such underwriting agreement shall be limited to liability
arising from misstatements in or omissions from its representations and
warranties and shall be limited to an amount equal to the net proceeds that the
Participating Holder derives from such registration.
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 3.2 hereof and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
Participating Holder, use its best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such
Participating Holder among the securities of the Company to be distributed by
such underwriters. The Participating Holders shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
Participating Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Participating Holders. No Participating
Holder shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder's ownership of and
title to the Registrable Securities, such holder's intended method of
distribution and any other representations required by law, and any liability of
the Participating Holder to any underwriter or other person under such
underwriting agreement shall be limited to liability arising from misstatements
in or omissions from its representations and warranties and shall be limited to
an amount equal to the net proceeds that the Participating Holder derives from
such registration.
3.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the Participating Holders,
their underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and, to the
extent practicable, each amendment thereof or supplement thereto, and give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and employees and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
3.6 Indemnification.
(a) Indemnification by the Company. In the event of
any registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, each Participating Holder, its directors, officers,
partners, agents and affiliates or general and limited partners (and the
directors, officers, employees, stockholders and affiliates thereof), and each
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such Participating Holder
or any such underwriter within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities, joint or several (or actions or
proceedings, whether commenced or threatened) to which such Participating Holder
or any such director, officer, partner, agent or affiliate or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, joint or several (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
securities were registered under the Securities Act or under any state
securities and "blue sky" laws, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
together with the documents incorporated by reference therein, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such Participating Holder and each such director, officer, partner,
agent or affiliate, or general or limited partner, underwriter and controlling
Person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such Participating Holder or
underwriter, as the case may be, specifically stating that it is for use in the
preparation thereof; and provided, further, that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
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 final prospectus. Such indemnity shall remain in full force
regardless of any investigation made by or on behalf of such Participating
Holder or any such director, officer, partner, agent or affiliate or controlling
Person and shall survive the transfer of such securities by such Participating
Holder.
(b) Indemnification by the Participating Holders. As
a condition to including any Registrable Securities in any registration
statement, the Company shall have received an undertaking satisfactory to it
from the Participating Holders to, severally but not jointly, indemnify and hold
harmless (in the same manner and to the same extent as set forth in subsection
(a) of this Section 3.6) the Company, each director and officer of the Company,
and each other Person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, but only if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such Participating Holder specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
the liability of such indemnifying party under this Section 3.6(b) shall be
limited to the amount of net proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by the Participating Holder.
(c) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section 3.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action or proceeding; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 3.6, except to the extent that the indemnifying party is materially
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to the indemnified party
otherwise than under this Section 3.6. In case any such action or proceeding is
brought against an indemnified party, the indemnifying party shall be entitled
to participate therein and, unless in the opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
or proceeding include both the indemnified party and the indemnifying party and
if in the opinion of outside counsel to the indemnified party there may be legal
defenses available to such indemnified party and/or other indemnified parties
which are different from or in addition to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to defend such action or proceeding on behalf of such indemnified party
or parties; provided, further, that the indemnifying party shall be obligated to
pay for only one counsel for all indemnified parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any legal
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation (unless the first proviso
in the preceding sentence shall be applicable). No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for
in this Section 3.6 shall for any reason be held by a court to be unavailable to
an indemnified party under subsection (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subsection (a) or (b) hereof, the indemnified
party and the indemnifying party under subsection (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the Participating Holders which resulted in such loss, claim,
damage or liability, or action in respect thereof, with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect not only the relative fault but also the relative benefits received by
the Company and the Participating Holders from the offering of the securities
covered by such registration statement as well as any other relevant equitable
considerations. The parties hereto agree that it would not be just and equitable
if contributions pursuant to this Section 3.6(d) were to be determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above. 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 Participating Holders'
obligations to contribute as provided in this subsection (d) are several and not
joint in proportion to the relative value of their respective Registrable
Securities covered by such registration statement. In addition, no Person shall
be obligated to contribute hereunder any amounts in payment for any settlement
of any action or claim effected without such Person's consent, which consent
shall not be unreasonably withheld. Notwithstanding anything in this subsection
(d) to the contrary, no indemnifying party (other than the Company) shall be
required to contribute any amount in excess of the net proceeds received by such
party from the sale of the Registrable Securities in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subsections of this
Section 3.6 (with appropriate modifications) shall be given by the Company and
each Participating Holder with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act. The indemnification
agreements contained in this Section 3.6 shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the transfer of any of the Registrable Securities by any
of the Participating Holders.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 3.6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
3.7 Certain Rights of the Investor If Named in a Registration
Statement. If any statement contained in a registration statement under the
Securities Act or in any filing under the state securities laws of any
jurisdiction refers to any of the Investors by name or otherwise as the holder
of any securities of the Company, then the Investor shall have the right to
require (i) the insertion therein of language, in form and substance
satisfactory to the Investor, to the effect that the holding by such Investor of
such securities does not necessarily make the Investor a "controlling person" of
the Company within the meaning of the Securities Act and is not to be construed
as a recommendation by such Investor of the investment quality of the Company's
debt or equity securities covered thereby and that such holding does not imply
that such Investor will assist in meeting any future financial requirements of
the Company or (ii) in the event that such reference to such Investor by name or
otherwise is not, in the reasonable judgment of such Investor as advised by its
counsel, required by the Securities Act or any of the rules and regulations
promulgated thereunder, or any state securities laws of any jurisdiction, the
deletion of such reference to such Investor.
3.8 Unlegended Certificates. In connection with the offering
of any Registrable Securities registered pursuant to this Article 3, the Company
shall (i) facilitate the timely preparation and delivery to Participating
Holders and the underwriters, if any, participating in such offering, of
unlegended certificates representing ownership of such Registrable Securities
being sold in such denominations and registered in such names as requested by
such Participating Holders or such underwriters and (ii) instruct any transfer
agent and registrar of such Registrable Securities to release any stop transfer
orders with respect to any such Registrable Securities.
3.9 Limitation on Sale or Distribution of Other Securities.
The Company hereby agrees that, if it shall previously have received a request
for registration pursuant to Section 3.1 or 3.2 hereof, and if such previous
registration shall not have been withdrawn or abandoned, (i) the Company shall
not effect any public or private offer, sale or other distribution of its
securities or effect any registration of any of its equity securities under the
Securities Act (subject to the provisions of Section 3.2 hereof) (other than a
registration on Form S-8 or any successor or similar form which is then in
effect), whether or not for sale for its own account, until a period of 120 days
(or such shorter period as the Requisite Majority of Participating Holders shall
agree) shall have elapsed from the effective date of such previous registration
(and the Company shall so provide in any registration rights agreements
hereafter entered into with respect to any of its securities); and (ii) the
Company shall use its best efforts to cause each holder of its equity securities
purchased from the Company at any time after the date of this Agreement other
than in a public offering to agree not to effect any public sale or distribution
of any such securities during such period, including a sale pursuant to Rule 144
under the Securities Act.
3.10 No Required Sale. Nothing in this Agreement shall be
deemed to create an independent obligation on the part of any Participating
Holder to sell any Registrable Securities pursuant to any effective registration
statement.
4. Rule 144. The Company shall take all actions reasonably necessary to
enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144, or (b) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended with the
consent of the Company, and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, in each case
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of holders of Registrable Securities, assuming all
then outstanding Notes were converted into Conversion Shares, who would then
hold not less than a majority of the Conversion Shares that would then be
outstanding. Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 5, whether
or not such Registrable Securities shall have been marked to indicate such
consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company (accompanied by a written acknowledgment of, and consent to, such
election by such nominee), be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or holders
of Registrable Securities pursuant to this Agreement or any determination of any
number or percentage of shares of Registrable Securities held by any holder or
holders of Registrable Securities contemplated by this Agreement. If the
beneficial owner of any Registrable Securities so elects to be treated as the
holder of such Registrable Securities, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
7. Notices. All communications provided for hereunder shall be sent by
postage-prepaid first-class mail, shall be deemed to be received three days
after being sent, or, if earlier, the date of actual receipt, and shall be
addressed as follows:
(a) if to the Investors, addressed to it in the manner set
forth in the Securities Purchase Agreement, or at such other address as it shall
have furnished to the Company in writing;
(b) if to any other holder of Registrable Securities, at the
address that such holder shall have furnished to the Company in writing, or,
until any such other holder so furnishes to the Company an address, then to and
at the address of the last holder of such Registrable Securities who has
furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set forth
in the Securities Purchase Agreement, or at such other address as the Company
shall have furnished to each holder of Registrable Securities at the time
outstanding.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by the
Company. This Agreement and/or the registration and other rights contained
herein (including these assignment rights) may be assigned by each of the
Investors to any one or more transferees or distributees of all or part of such
Investor's Registrable Securities. A holder of Registrable Securities shall be
permitted, in connection with a transfer or disposition of Registrable
Securities, to impose conditions or constraints on the ability of the
transferee, as a holder of Registrable Securities, to request a registration
pursuant to Section 3.1 and shall provide the Company with copies of such
conditions or constraints and the identity of such transferees.
9. Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate. In any
action or proceeding brought to enforce any provision of this Agreement
(including the indemnification provisions thereof), the successful party shall
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
10. No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company has not previously entered into any agreement with respect to its
securities granting any registration rights to any Person other than the
registration rights granted pursuant to this Agreement and the registration
rights included in (a) the Common Stock Warrant To Purchase 28,750 shares of
Common Stock of the Company, dated March 11, 1993, issued to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and (b) the Common Stock Warrant to Purchase 28,750 Shares of Common Stock of
the Company, dated March 11, 1993, issued to ▇▇▇▇ ▇. ▇▇▇▇▇.. The rights granted
to the holders of Registrable Securities hereunder do not in any way conflict
with and are not inconsistent with any other agreements to which the Company is
a party or by which it is bound. The Company further agrees that if any other
registration rights agreement entered into after the date of this Agreement with
respect to any of its securities contains terms which are more favorable to, or
less restrictive on, the other party thereto than the terms and conditions
contained in this Agreement are (insofar as they are applicable) to the holders
of Registrable Securities, then the terms and conditions of this Agreement shall
immediately be deemed to have been amended without further action by the Company
or any of the holders of Registrable Securities so that such holders shall be
entitled to the benefit of any such more favorable or less restrictive terms or
conditions.
11. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
12. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New York,
without regard to the conflicts of laws principles thereof. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and the United
States of America located in the County of New York for any action or proceeding
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any action or proceeding relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in the Note Purchase Agreement shall be effective service of process for any
action or proceeding brought against it in any such court. Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to the laying
of venue of any action or proceeding arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York or the
United States of America located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. The Company hereby waives any right it may
have to a trial by jury in respect of any action, proceeding or litigation
directly or indirectly arising out of, under or in connection with, this
Agreement.
13. Recapitalizations, etc. In the event that any capital stock or
other securities are issued in respect of, in exchange for, or in substitution
of, any Registrable Securities by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
change in the Company's capital structure, appropriate adjustments shall be made
in this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
14. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party to such action or proceeding shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
RECOVERY ENGINEERING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President & CEO
GS CAPITAL PARTNERS II, L.P.
By: GS Advisors, L.P., its general partner
By: GS Advisors, Inc., its general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
GS CAPITAL PARTNERS II OFFSHORE, L.P.
By: GS Advisors, II (Cayman), L.P., its
general partner
By: GS Advisors II, Inc., its
general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇▇, ▇▇▇▇▇ & CO. VERWALTUNGS GmbH
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
and
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇▇
Title: Registered Agent
STONE STREET FUND 1996, L.P.
By: Stone Street Empire Corp., its
general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇.▇.
By: Stone Street Empire Corp., its managing
general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
