EXHIBIT 10.2
Eagle Pacific Industries, Inc.
Massachusetts Mutual Life Insurance Company
MassMutual Corporate Investors
MassMutual Participation Investors
MassMutual Corporate Value Partners Limited
and the
Spell Group
Rights Agreement
Dated as of May 1, 1997
EXHIBIT D
(to Purchase Agreement)
Table of Contents
(Not a part of the Agreement)
Section Heading Page
Parties.................................................................1
Section 1. Control By Spell Group.......................1
Section 2. Restrictions on Transfer.....................2
Section 3. Tag-Along Right..............................3
Section 4. Registration Rights..........................4
Section 5. Definitions.................................14
Section 6. Miscellaneous...............................16
Schedule I
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Rights Agreement
This Rights Agreement (the "Agreement") is entered into as of May 1, 1997 by and
among (i) Eagle Pacific Industries, Inc., a Minnesota corporation (the
"Company"), (ii) Massachusetts Mutual Life Insurance Company, MassMutual
Corporate Investors, MassMutual Participation Investors and MassMutual Corporate
Value Partners Limited (hereinafter referred to collectively as the
"Institutional Investors"), (iii) ▇▇▇▇▇ ▇. ▇▇▇▇▇, (iv) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, (v)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee under Agreement dated 6/14/78 F/B/O ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
(vi) ▇▇▇▇▇ ▇▇▇▇▇▇▇, and (vii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (each such individual and such
foundation being hereinafter referred to individually as a "Spell Investor" and
collectively, together with their respective Related Parties, as the "Spell
Group").
Whereas, the Institutional Investors have negotiated with the officers of
the Company to enter into a Preferred Stock Purchase Agreement dated as of the
date hereof (the "Purchase Agreement"), pursuant to which the Institutional
Investors will purchase from the Company 10,000 shares of 8% Convertible
Preferred Stock (the "8% Preferred Stock") of the Company. The shares of
Preferred Stock purchased by the Institutional Investors pursuant to the
Purchase Agreement and the shares of Common Stock issued or to be issued upon
conversion of the Preferred Stock are collectively referred to as the
"Institutional Investor Stock."
Whereas, Spell Group owns 447,530 shares of Common Stock of the Company,
which will constitute approximately 3.98% of the fully diluted Common Stock
outstanding immediately after the purchase of the Preferred Stock by the
Institutional Investors.
Whereas, the Institutional Investors have required as an absolute condition
to the purchase of the Preferred Stock from the Company, that the Company and
the Spell Group enter into this Agreement, and whereas the Company and the Spell
Group are desirous that the Institutional Investors enter into the Purchase
Agreement and purchase from the Company the Preferred Stock described above, the
Company and the Spell Group have agreed to enter into this Agreement.
Now therefore, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the parties agree as follows:
Section 1. Control By Spell Group.
Each Spell Investor covenants and agrees, severally and not jointly, that
(i) it will at all times own beneficially and of record not less than the number
of shares of Common Stock set forth across from the name of such Spell Investor
on Schedule I hereto (which is 80% of the shares of Common Stock owned by such
investor on March 29, 1997); provided that shares of Common Stock sold in an
Estate Sale shall be excluded from any determination pursuant to this clause
(i), and (ii) at each regular or special meeting of the shareholders of the
Company at which directors are to be elected, all of the shares of Common Stock
of the Company owned by such Spell Investor and any Related Party of such Spell
Investor shall be voted in favor of the nominee or nominees for the Board of
Directors of the Company selected by the holders of a majority of the
outstanding Common Stock owned by the Spell Group. Each Spell Investor,
severally and not jointly, (i) represents that except as disclosed in Schedule I
attached hereto, none of the shares of Common Stock owned by such investor have
been pledged, hypothecated or otherwise used as collateral, and (ii) except for
the shares of Common Stock listed in Schedule I and shares pledged under the
Company's leveraged equity purchase plan, the shares of Common Stock which are
subject to the restrictions set forth herein will not at any time be pledged,
hypothecated or otherwise used as collateral by such Spell Investor and all such
shares of Common Stock shall be endorsed with a legend referring to this
Agreement and the restrictions set forth herein on the sale, pledge or
hypothecation of such shares. The obligation of each Spell Investor to comply
with the restrictions set forth in this Section 1 shall terminate at such time
as the Institutional Investors no longer hold any Registrable Securities.
Section 2. Restrictions on Transfer.
(a) Restrictive Legend. The certificates representing the Institutional
Investor Stock to be issued to the Institutional Investors shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be sold or transferred in the absence of
an effective registration statement under the Act or an
exemption from registration thereunder. The securities
represented by this certificate are also subject to additional
restrictions on transfer and certain other agreements set
forth in a rights agreement dated as of May 1, 1997, a copy of
which may be obtained by the Holder hereof without charge at
the Company's principal place of business.
In the event that a Registration Statement covering the Institutional
Investor Stock shall become effective under the Act, or in the event that the
Company shall receive an opinion of its counsel that, in the opinion of such
counsel, such legend is not, or is no longer, necessary or required (including,
without limitation, because of the availability of the exemption afforded by
Rule 144(k) of the Regulations of the Commission), the Company shall, or shall
instruct its transfer agents and registrars to, remove such legend from the
certificates evidencing the Institutional Investor Stock or issue new
certificates without such legend in lieu thereof. Upon the written request of
any Institutional Investor, the Company covenants and agrees forthwith to
request its counsel to render an opinion with respect to the matters covered by
this subsection (a) and to bear all expenses in connection with the same.
(b) Notice of Proposed Transfer; Registration Not Required. Each
Institutional Investor agrees to give prior written notice to the Company of
such Institutional Investor's intention to transfer all or any part of its
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Institutional Investor Stock, describing briefly the manner and circumstances of
the proposed transfer. If in the opinion of counsel to such Institutional
Investor and counsel to the Company, the proposed transfer may be effected
without Registration, the Company, as promptly as practicable, shall notify such
Institutional Investor of such opinion and of the terms and conditions, if any,
to be observed in connection with such transfer, whereupon such Institutional
Investor shall be entitled to transfer such Institutional Investor Stock, in
accordance with the terms of the notice delivered to such Institutional Investor
by the Company. If either of such counsel is unable to render such an opinion
(in which case said counsel shall set forth in writing the basis for its legal
conclusions in this regard) or, if the Company shall not find either of such
opinions reasonably acceptable (in which case the Company shall set forth in
writing the reasons such opinion is not acceptable), the proposed transfer
described in the written notice given pursuant to this subsection may not be
effected by such Institutional Investor. All fees and expenses of counsel,
including reasonable fees and expenses of one counsel for all Institutional
Investors in connection with the rendition of the opinions provided for in this
subsection, shall be paid by the Company.
Section 3. Tag-Along Right.
With respect to any proposed transfer, sale or other disposition
(collectively, a "Proposed Transfer") of shares of Common Stock ("Shares") by
any Spell Investor, or any Related Party (such persons being hereinafter
referred to collectively as the "Control Group") to a person (such other person
being hereafter referred to as the "Proposed Purchaser"), other than pursuant to
an Exempt Transfer, each of the Institutional Investors shall have the right
(the "Tag-Along Right") to require the Proposed Purchaser to purchase from such
Institutional Investor up to the number of whole Shares owned by such
Institutional Investor, including Shares to be received upon conversion of the
Preferred Stock, equal to the sum of (A) the number derived by multiplying the
total number of Shares the members of the Control Group propose to transfer by a
fraction, the numerator of which is the total number of Shares owned by such
Institutional Investor (including Shares to be received upon conversion of the
Preferred Stock), and the denominator of which is the total number of Shares
then outstanding on a fully-diluted basis and (B) any additional Shares such
Institutional Investor shall be entitled to have purchased pursuant to the next
paragraph if any other Institutional Investor elects not to exercise its rights
thereunder. Any Shares purchased from Institutional Investors pursuant to this
Section 3 shall be for the same consideration and upon the same terms and
conditions as such Proposed Transfer by the Control Group; provided that in
connection with such sale no Institutional Holder shall be obligated to give any
indemnification, representation or warranty regarding the business or financial
condition of the Company. A representative of the Control Group (the "Control
Group Representative") shall, not less than thirty (30) nor more than forty-five
(45) calendar days prior to each Proposed Transfer, notify, or cause to be
notified, each Institutional Investor in writing of each such Proposed Transfer,
setting forth in such notice: (i) the name of the transferor and the number of
Shares proposed to be transferred, (ii) the name and address of the Proposed
Purchaser, (iii) the proposed amount and form of consideration and terms and
conditions of payment offered by such Proposed Purchaser and (iv) that the
Proposed Purchaser has been informed of the Tag-Along Right provided for in this
Section 3 and has agreed to purchase Shares in accordance with the terms hereof.
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The Tag-Along Right may be exercised by any Institutional Investor by
delivery of a written notice to the Control Group Representative (the "Tag-Along
Notice") within fifteen (15) business days following its receipt of the notice
specified in the last sentence of the preceding paragraph. The Tag-Along Notice
shall state the number of Shares that such Institutional Investor proposes to
include in such transfer to the Proposed Purchaser determined as aforesaid, plus
the number of additional Shares, if any, that such Institutional Investor would
be willing to sell to the Proposed Purchaser in the event that any of the other
Institutional Investors elects not to exercise their Tag-Along Rights in whole
or in part. The maximum number of additional Shares that each such Institutional
Investor shall be entitled to sell, and the Proposed Purchaser be required to
purchase, shall be determined by multiplying the total number of Shares that,
under the formula described in the previous paragraph, Institutional Investors
could have elected to sell to the Proposed Purchaser but elected not to so sell,
by a fraction, the numerator of which is the total number of Shares owned by
such Institutional Investor electing to sell additional Shares and the
denominator of which is the total number of Shares owned by all Institutional
Investors who delivered Tag-Along Notices. In the event that the Proposed
Purchaser does not purchase Shares from the Institutional Investors on the same
terms and conditions as specified in the notice referred to in the last sentence
of the preceding paragraph, then the Control Group shall not be permitted to
sell any Shares to the Proposed Purchaser in the Proposed Transfer. If no Tag-
Along Notice is received during the 15-day period referred to above (or if such
Notices do not cover all the Shares proposed to be transferred), the Control
Group shall have the right, for a period of ninety (90) days after the
expiration of the 15-day period referred to above, to transfer the Shares
specified in the notice referred to in the last sentence of the preceding
paragraph (or the remaining Shares) on terms and conditions no more favorable
than those stated in the Tag- Along Notice and in accordance with the provisions
of this Section 3.
The Company agrees not to effect any transfer of Shares by any member of
the Control Group until it has received evidence reasonably satisfactory to it
that the Tag-Along Right, if applicable to such transfer, has been complied
with. The rights provided in this Section 3 shall terminate at such time as the
Institutional Investors no longer hold Registrable Securities. The right of the
Control Group to sell Shares in accordance with this Section 3 shall at all
times be subject to the requirements of Section 2 of this Agreement.
Section 4. Registration Rights.
(a) Piggyback Registration Rights.
(1) Right to Piggyback. Subject to the last sentence of this subsection
(1), whenever the Company proposes to register any securities with the
Securities and Exchange Commission (the "Commission") under the Act (other than
a registration on Form S-4 or S-8 or a S-3 registration statement which relates
solely to a dividend reinvestment plan or employee purchase plan) and the
registration form to be used may be used for the registration of the Registrable
Securities (a "Piggyback Registration"), whether or not for sale for its own
account, the Company will give written notice to each of the Institutional
Investors, at least thirty (30) days prior to the anticipated filing date, of
its intention to effect such a registration, which notice will specify the kind
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and number of securities proposed to be registered, the distribution
arrangements and such other information that at the time would be appropriate to
include in such notice, and will, subject to subsection (a)(2) below, include in
such Piggyback Registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within fifteen (15)
days after delivery of the Company's notice. Except as may otherwise be provided
in this Agreement, Registrable Securities with respect to which such request for
registration has been received will be registered by the Company and offered to
the public in a Piggyback Registration pursuant to this Section 4 on the same
terms and conditions as those applicable to the registration of Common Stock (or
securities convertible into or exchangeable or exerciseable for Common Stock) to
be sold by the Company and by any other person selling under such registration.
(2) Priority on Piggyback Registrations. If the managing underwriter or
underwriters advise the holders of Registrable Securities in writing that in its
or their reasonable opinion, that the number or kind of securities proposed to
be sold in such registration (including Registrable Securities to be included
pursuant to subsection (a)(1) above) will materially adversely affect the
success of such offering, the Company will include in such registration the
number of securities, if any, which, in the opinion of such underwriter or
underwriters can be sold as follows: (i) first, the shares the Company proposes
to sell, (ii) second, the Registrable Securities requested to be included in
such registration by the Institutional Investors, and (iii) the securities
requested to be included by members of the Control Group. To the extent that the
privilege of includingRegistrable Securities in any Piggyback Registration must
be allocated among the Institutional Investors, the allocation shall be made pro
rata based on the number of Registrable Securities that each such participant
shall have requested to include therein.
(3) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering (other than an offering initiated as a Demand Registration
as provided in subsection (b) below), the Company will select a managing
underwriter or underwriters to administer the offering, which managing
underwriter or underwriters will be reasonably acceptable to the holders of a
majority of the Registrable Securities included therein.
(b) Demand Registration Rights.
(1) Right to Demand. At any time the Institutional Investors may make a
written request of the Company for registration with the Commission, under and
in accordance with the provisions of the Act, of all or part of their
Registrable Securities (a "Demand Registration"); provided, that the Company
need not effect a Demand Registration unless such Demand Registration shall
include at least 50% of the Registrable Securities held on the date of such
written request by the Institutional Investors collectively. Subject to
subsection (b)(3) below, the Company will include in such registration all
Registrable Securities of such Institutional Investors with respect to which the
Company has received written requests for inclusion therein. All requests made
pursuant to this subsection (b)(1) will specify the aggregate number of
Registrable Securities requested to be registered and will also specify the
intended methods of disposition thereof.
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(2) Number of Demand Registrations. The Institutional Investors
collectively shall be entitled to two (2) Demand Registrations; provided that if
▇▇▇▇▇▇▇ ▇▇▇▇▇ Mezzanine Capital Fund, L.P. ("▇▇▇▇▇") exercises its right to
participate in any such Demand Registration and the holders of the Registrable
Securities are unable to register all of the Registrable Securities requested to
be included in such registration on account of the ▇▇▇▇▇ participation, then the
Company shall grant to the holders of the Registrable Securities an additional
Demand Registration on the terms and conditions set forth herein. The expenses
of the Institutional Investors requesting a Demand Registration shall be borne
by the Company as provided in subsection (d) below. A Demand Registration shall
not be counted as a Demand Registration hereunder until such Demand Registration
has been declared effective by the Commission and remains effective for at least
60 consecutive days without being interfered with by any (i) stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court or regulatory agency or exchange, including NASDAQ or NASD, or
(ii) action by the Company or any stockholder (other than the Institutional
Investor(s) requesting such Demand Registration) requiring the suspension of
such offering.
(3) Priority on Demand Registration. If in any Demand Registration the
managing underwriter or underwriters thereof advise the Company in writing that
in its or their reasonable opinion the number of securities proposed to be sold
in such Demand Registration exceeds the number that can be sold in such offering
without having a material effect on the success of the offering (including,
without limitation, an impact on the selling price or the number of shares that
any participant may sell), the Company will include in such registration only
the number of securities that, in the reasonable opinion of such underwriter or
underwriters can be sold without having a material adverse effect on the success
of the offering as follows: (i) first, the Registrable Securities held by the
Institutional Investors that initiated such Demand Registration, (ii) second,
the Registrable Securities requested to be included in such Demand Registration
by any other Institutional Investors pro rata among those requesting
registration on the basis of the number of shares of Common Stock requested to
be included, and (iii) third, shares of Common Stock to be issued and sold by
the Company; provided that the foregoing priority is subject to the rights of
▇▇▇▇▇ to participate pro rata in accordance with the ▇▇▇▇▇ registration
agreeement.
(4) Selection of Underwriters. The holders of a majority of the Registrable
Securities to be included in such Demand Registration held by the Institutional
Investors that initiated such Demand Registration shall have the right to select
a managing underwriter or underwriters of recognized national standing that is
or are reasonably satisfactory to the Company to administer the offering.
(c) Registration Procedures. With respect to any Piggyback Registration or
Demand Registration (generically, a "Registration"), the Company will, subject
to Sections (4)(a)(2) and (4)(b)(3), as expeditiously as practicable:
(1) prepare and file with the Commission, within ninety (90) days
after mailing the applicable Notice, a registration statement or
registration statements (the "Registration Statement") relating to the
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applicable Registration; provided that the Company will include in any
Registration Statement all information that the holders of the Registrable
Securities so to be registered shall reasonably request and shall include
all financial statements required by the Commission to be filed therewith,
cooperate and assist in any filings required to be made with the National
Association of Securities Dealers, Inc. ("NASD"), and use its best efforts
to cause such Registration Statement to become effective; provided further,
that before filing a Registration Statement or prospectus related thereto
(a "Prospectus") or any amendments or supplements thereto, the Company will
furnish to the holders of the Registrable Securities covered by such
Registration Statement and the underwriters, if any, copies of all such
documents proposed to be filed, which documents will be subject to the
reasonable review of such holders and underwriters and their respective
counsel, and the Company will not file any Registration Statement or
amendment thereto or any Prospectus or any supplement thereto to which the
holders of a majority of the Registrable Securities covered by such
Registration Statement or the underwriters, if any, shall reasonably
object;
(2) use its best efforts to keep such Registration Statement current
for a period of ninety (90) days, or such shorter period which will
terminate when all Registrable Securities covered by such Registration
Statement have been sold, and prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement as
may be necessary to keep each Registration Statement effective for such
period; cause each Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus; the Company shall not be deemed
to have used its best efforts to keep a Registration Statement effective
during the applicable period if it voluntarily takes any action that would
result in selling holders of the Registrable Securities covered thereby not
being able to sell such Registrable Securities during that period unless
such action is required under applicable law, provided that the foregoing
shall not apply to actions taken by the Company in good faith and for valid
business reasons, including without limitation the acquisition or
divestiture of assets, so long as the Company promptly thereafter complies
with the requirements of subsection (11) of this subsection (c), if
applicable;
(3) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such
person or entity) confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been filed,
and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any request by the
Commission for amendments or supplements to the Registration Statement or
the Prospectus or for additional information, (C) of the issuance by the
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Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose, (D) if at any time the representations and warranties of the
Company contemplated by subsection (14) below cease to be true and correct,
(E) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose and (F) of the happening of any event which makes any
statement made in the Registration Statement, the Prospectus or any
document incorporated therein by reference untrue or which requires the
making of any changes in the Registration Statement, the Prospectus or any
document incorporated therein by reference in order to make the statements
therein not misleading;
(4) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(5) if requested by the managing underwriter or underwriters or a
holder of Registrable Securities being sold in connection with an
underwritten offering, promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters and
the holders of a majority of the Registrable Securities being sold agree
should be included therein relating to the plan of distribution with
respect to such Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold
to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten (or
best efforts underwritten) offering of the Registrable Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as notified of the matters
to be incorporated in such Prospectus supplement or post-effective
amendment;
(6) furnish to each selling holder of Registrable Securities and each
managing underwriter, without charge, at least one conformed copy of the
Registration Statement and any amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference
and all exhibits (including those incorporated by reference);
(7) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such selling holder of Registrable Securities and underwriters
may reasonably request; the Company consents to the use of each Prospectus
or any amendment or supplement thereto by each of the selling holders of
Registrable Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus
or any amendment or supplement thereto;
(8) prior to any public offering of Registrable Securities, register
or qualify or cooperate with the selling holders of Registrable Securities,
the underwriters, if any, and their respective counsel in connection with
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the registration or qualification of such Registrable Securities for offer
and sale under the securities or "blue sky" laws of such jurisdictions as
any seller or underwriter reasonably requests in writing, considering the
amount of Registrable Securities proposed to be sold in each such
jurisdiction, and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided that
the Company 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 that
would subject it to general service of process in any such jurisdiction
where it is not then so subject;
(9) cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends and to be in such denominations and
registered in such names as the managing underwriters may request at least
two (2) business days prior to any sale of Registrable Securities to the
underwriters;
(10) use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(11) upon the occurrence of any event contemplated by subsection
(3)(F) above, prepare a supplement or posteffective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(12) cause all Registrable Securities covered by any Registration
Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, or cause such Registrable
Securities to be authorized for trading on the NASDAQ National Market if
any similar securities issued by the Company are then so authorized, if
requested by the holders of a majority of such Registrable Securities or
the managing underwriters, if any;
(13) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the applicable Registration Statement;
(14) enter into such agreements (including an underwriting agreement)
and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and
in such connection, whether or not an underwriting agreement is entered
into and whether or not the Registration is an underwritten Registration
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(A) make such representations and warranties to the holders of such
Registrable Securities and the underwriters, if any, in form, substance and
scope as are customarily, made by issuers to underwriters in primary
underwritten offerings; (B) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any, and
the holders of a majority of the Registrable Securities being sold)
addressed to each selling holder and the underwriters, if any, covering the
matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such holders and
underwriters; (C) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to the
selling holders of Registrable Securities and the underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings; (D) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification
provisions and procedures set forth in subsection (f) below with respect to
all parties to be indemnified pursuant to said subsection; and (E) the
Company shall deliver such documents and certificates as may be reasonably
requested by the holders of a majority of the Registrable Securities being
sold and the managing underwriters, if any, to evidence compliance with
subsection 3(F) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company. The
above shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(15) make available for inspection by a representative of the holders
of a majority of the Registrable Securities, any underwriter participating
in any disposition pursuant to such Registration, and any attorney or
accountant retained by the sellers or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement;
provided that any records, information or documents that are designated by
the Company in writing as confidential shall be kept confidential by such
Persons unless disclosure of such records, information or documents is
required by court or administrative order or any regulatory body having
jurisdiction;
(16) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders, earnings statements satisfying the provisions of
Section 11 (a) of the Act, no later than forty-five (45) days after the end
of any 12-month period (or ninety (90) days, if such period is a fiscal
year) (A) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm or best efforts underwritten
offering, or (B) if not sold to underwriters in such an offering, beginning
with the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement, which statements shall
cover said 12-month periods; and
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(17) promptly prior to the filing of any document that is to be
incorporated by reference into any Registration Statement or Prospectus
(after initial filing of the Registration Statement), provide copies of
such document to counsel to the selling holders of Registrable Securities
and to the managing underwriters, if any, make the Company's
representatives available for discussion of such document and make such
changes in such document prior to the filing thereof as counsel for such
selling holders or underwriters may reasonably request so that such
document will comply in all material respects with the requirements of the
Securities Act.
The Company may require each seller of Registrable Securities as to which
any Registration is being effected to furnish to the Company such information
regarding such seller and the proposed distribution of such securities as
required by applicable laws and regulations.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in subsection (3)(F) of this
subsection (c), such holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement until such
holder's receipt of copies of the supplemented or amended Prospectus as
contemplated by subsection (11) of this subsection (c), or until it is advised
in writing (the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings, that
are incorporated by reference in the Prospectus, and, if so directed by the
Company, such holder 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 covering such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
time periods referred to in subsection (2) of this subsection (c) shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of
Registrable Securities covered by such Registration Statement shall have
received the copies of the supplemented or amended prospectus contemplated by
subsection (11) of this subsection (c) or the Advice.
(d) Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Section 4 will be borne by the Company,
including, without limitation, all registration and filing fees, the fees and
expenses of the counsel and accountants for the Company (including the expenses
of any "cold comfort" letters), all other costs and expenses of the Company
incident to the preparation, printing and filing under the Act of the
Registration Statement (and all amendments and supplements thereto) and
furnishing copies thereof and of the Prospectus included therein, the costs and
expenses incurred by the Company in connection with the qualification of the
Registrable Securities under the state securities or "blue sky" laws of various
jurisdictions, the costs and expenses associated with filings required to be
made with the NASD, the costs and expenses of listing the Registrable Securities
for trading on a national securities exchange or authorizing them for trading on
the NASDAQ National Market or the NASDAQ Smallcap Market, as the case may be,
and all other costs and expenses incurred by the Company in connection with any
Registration hereunder and, in connection with a Demand Registration, the
reasonable fees and expenses of one (1) firm of counsel selected by the
-11-
Institutional Investors holding more than 50% of the Registrable Securities
being sold or registered pursuant to the provisions of this Agreement; provided,
that, except as otherwise provided in Section 4(e)(2) below, the Company shall
not bear the costs and expenses of any selling holders of Registrable Securities
for underwriters' commissions or brokerage fees.
(e) Indemnification.
(1) Indemnification by the Company. The Company agrees to indemnify, to the
full extent permitted by law, each Institutional Investor, its officers,
directors and agents and each person who controls such Institutional Investor
(within the meaning of the Act and the Exchange Act), against all losses,
claims, damages, liabilities and expenses caused by any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary Prospectus or any omission or alleged omission to state therein a
material fact necessary to make the statements therein (in the case of a
Prospectus or any preliminary Prospectus, in light of the circumstances under
which they were made) not misleading, except insofar as the same are caused by
or contained in any information with respect to such Institutional Investor
furnished in writing to the Company by such Institutional Investor or its
representative expressly for use therein. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each person who controls such persons (within the meaning of the Act) to the
same extent as provided above with respect to the indemnification of the
Institutional Investor; provided, however, if pursuant to an underwritten public
offering of Registrable Securities, the Company and any underwriters enter into
an underwriting or purchase agreement relating to such offering that contains
provisions relating to indemnification and contribution between the Company and
such underwriters, such provisions shall be deemed to govern indemnification and
contribution as between the Company and such underwriters.
(2) Indemnification by Institutional Investors. In connection with any
registration in which a Institutional Investor is participating, each such
Institutional Investor will furnish to the Company in writing such information
with respect to such Institutional Investor as the Company reasonably requests
for use in connection with any Registration Statement or Prospectus and agrees
to indemnify, to the full extent permitted by law, the Company, the directors
and officers of the Company signing the Registration Statement, each person who
controls the Company (within the meaning of the Act and the Exchange Act) and
all underwriters participating in the distribution against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements in the Registration Statement or
Prospectus or preliminary Prospectus (in the case of the Prospectus or any
preliminary Prospectus, in light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information with respect to such
Institutional Investor so furnished in writing by such Institutional Investor or
its representative specifically for inclusion therein. In no event shall the
liability of any Institutional Investor hereunder be greater in amount than the
dollar amount of the proceeds received by such Institutional Investor upon the
sale of the Registrable Securities giving rise to such indemnification
-12-
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information with respect to such persons or entities so
furnished in writing by such persons or entities or their representatives
specifically for inclusion in any Prospectus or Registration Statement.
(3) Conduct of Indemnification Proceedings. Any person or entity entitled
to indemnification hereunder will (i) give prompt written notice to the
indemnifying party after the receipt by the indemnified party of a written
notice of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such indemnified party will claim
indemnification or contribution pursuant to this Agreement; 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
clauses (1) and (2), except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest may exist between
such indemnified and indemnifying parties with respect to such claim, permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Whether or not such defense is
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will be required to consent
to the entry of any judgment or to enter into any settlement that 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 of such
claim or litigation. An indemnifying party who is not entitled to, or elects not
to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel in any one jurisdiction for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(4) Contribution. If for any reason the indemnification provided for in the
preceding clauses (1) and (2) is unavailable to an indemnified party as
contemplated by the preceding clauses (1) and (2), then the indemnifying party
in lieu of indemnification shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage, liability or expense
in such proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations, provided that no Institutional
Investor shall be required to contribute in an amount greater than the
difference between the net proceeds received by such Institutional Investor with
respect to the sale of any Institutional Investor Stock and all amounts already
contributed by such Institutional Investor with respect to such claims,
including amounts paid for any legal or other fees or expenses incurred by such
Institutional Investor.
-13-
(f) Rule 144. The Company agrees that at all times after it has filed a
registration statement pursuant to the requirements of the Act relating to any
class of equity securities of the Company, it will file in a timely manner all
reports required to be filed by it pursuant to the Act and the Exchange Act.
Notwithstanding the foregoing, the Company may deregister any class of its
equity securities under Section 12 of the Exchange Act or suspend its duty to
file reports with respect to any class of its securities pursuant to Section
15(d) of the Exchange Act if it is then permitted to do so pursuant to the
Exchange Act and the rules and regulations thereunder.
(g) Participation in Underwritten Registrations. No Institutional Investor
may participate in any underwritten registration hereunder unless such
Institutional Investor (i) agrees to sell its Registrable Securities on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to select the underwriter pursuant to subsections (4)(a)(3) and
(4)(b)(4) above, and (ii) accurately completes in a timely manner and executes
all questionnaires, powers of attorney, underwriting agreements, custody
agreements and other documents customarily required under the terms of such
underwriting arrangements.
Section 5. Definitions.
In addition to the terms defined elsewhere in this Agreement, the following
terms have the following respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Advice" is defined in Section 4.
"Agreement" is defined in the heading of this Agreement.
"Commission" is defined in Section 4.
"Common Stock" shall mean the common stock, $.01 par value, of the Company
authorized at the date hereof and the Class B Common Stock, $.01 par value,
authorized on the date of issuance of the 8% Preferred Stock and any class of
common stock of the Company issued in substitution therefor.
"Company" is defined in the heading of this Agreement.
"Control Group" is defined in Section 3.
"Control Group Representative" is defined in Section 3.
"Demand Registration" is defined in Section 4.
"Estate Sale" shall mean the sale of Common Stock by the estate of any
person included in the Spell Group following the death of such Person.
-14-
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exempt Transfer" shall mean (1) transfers by a Spell Investor to his or
her Related Parties; provided that any such transferee agrees in writing to be
bound by this Agreement as if such transferee were an original signatory hereto
and (2) transfers by a Spell Investor pursuant to a Public Sale.
"Family Trust" means, in respect of any person, any trusts for the
exclusive benefit of such individual, his/her spouse and lineal descendants, so
long as such individual has the exclusive right to control each such trust.
"Institutional Investor" is defined in the heading of this Agreement.
"Institutional Investor Stock" is defined on page 1.
"NASD" is defined in Section 4.
"Piggyback Registration" is defined in Section 4.
"Preferred Stock" is defined on page 1.
"Proposed Purchaser" is defined in Section 3.
"Proposed Transfer" is defined in Section 3.
"Prospectus" is defined in Section 4.
"Public Sale" shall mean a sale of Common Stock by a Spell Investor in an
unsolicited broker transaction or directly with a market maker in the Company's
stock, or to the public or a Related Party pursuant to a Registration Statement
or pursuant to an exemption under Rule 144 of the Securities Act.
"Purchase Agreement" is defined on page 1.
"Registrable Securities" means the Preferred Stock and the underlying
shares of Common Stock to be issued by the Company upon conversion of the
Preferred Stock but only until such time as such Institutional Investor Stock
(i) has been effectively registered under the Act and disposed of in accordance
with the Registration Statement covering it, or (ii) has been sold to the public
pursuant to Rule 144 (or any similar provision then in force) under the Act.
"Registration" is defined in Section 4(c).
"Registration Statement" is defined in Section 4.
-15-
"Related Party" means, with respect to any person, (1) a spouse or child,
(2) a Family Trust, or (3) a corporation, partnership or limited liability
company of which such person owns or holds 51% or more controlling interest.
"Shares" is defined in Section 3.
"Spell Group" is defined in the heading of this Agreement.
"Spell Investor" is defined in the heading of this Agreement.
"Tag-Along Notice" is defined in Section 3.
"Tag-Along Right" is defined in Section 3.
Section 6. Miscellaneous.
(a) Successors, Assigns and Transferees. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, legatees, successors and assigns including any party to
which any Institutional Investor has transferred orsold his or its Institutional
Investor Stock. Each transferee of Institutional Investor Stock from an
Institutional Investor shall take such Institutional Investor Stock subject to
the same restrictions as existed in the hands of the transferor. Institutional
Investor Stock sold to the public pursuant to an effective Registration
Statement shall no longer be subject to any of the provisions of this Agreement.
(b) Specific Performance, Etc. The Company, each of the Institutional
Investors, each Spell Investor, in addition to being entitled to exercise all
rights provided herein, in the Company's Articles of Incorporation or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The parties hereto agree 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 agree to waive the defense
in any action for specific performance that a remedy at law would be adequate.
(c) Notices. All notices and other communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, when transmitted by telecopy, electronic or digital
transmission method, or sent by registered or certified mail (return receipt
requested) postage prepaid to the parties at the following addresses (or at such
other address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
Notices sent by mail shall be effective five days after mailing.
-16-
(i) If to the Company or any member of the Spell Group other than
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, at:
Eagle Pacific Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ at:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) If to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ at:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(iv) If to the Institutional Investors, at:
c/o Massachusetts Mutual Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
MassMutual Corporate Value Partners Limited
P.O. Box 1096
▇▇▇▇▇▇ Town, Grand Cayman
Cayman Islands, B.W.I.
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax:
(d) Amendments and Waivers. This Agreement may be amended, modified or
supplemented, and waivers of or consents to departures from the provisions
hereof may be given if approved by the Company in writing and the Company has
obtained the written consent of Institutional Investors holding at least a
majority of the then outstanding Registrable Securities and, in the case of any
amendment or waiver of the provisions of Section 1 or 3, the holders of a
majority of the Common Stock owned by the Spell Group. No action taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as waiver of any preceding or
-17-
succeeding breach and no failure by any party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder.
(e) Recapitalizations, Exchange, Etc. Affecting the Company's Stock. The
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to the Common Stock, to any and all shares of capital stock of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets, or otherwise) that may be issued in respect of,
in exchange for, or in substitution of the Common Stock and shall be
appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date hereof.
(f) Termination. This Agreement shall terminate and cease to be of any
further force or effect on the tenth anniversary of the date hereof.
(g) Applicable Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Minnesota without reference to any choice of law rules that would require the
application of the laws of any other jurisdiction.
(h) Severability. The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
(i) Interpretation. Time is of the essence of each provision of this
Agreement of which time is an element.
(j) Headings Descriptive. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement with respect to the subject matter hereof and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
(l) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.
(m) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same agreement.
-18-
In Witness Whereof, the parties have executed this Rights Agreement as of
the date first above written.
Eagle Pacific Industries, Inc.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-19-
Accepted and agreed to:
Massachusetts Mutual Life
Insurance Company
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Managing Director
This Agreement is executed on behalf of MassMutual Corporate Investors,
organized under a Declaration of Trust, dated September 13, 1985, as amended
from time to time. The obligations of such trust are not personally binding
upon, nor shall resort be had to the property of, any of the trustees,
shareholders, officers, employees or agents of such trust, but the trust
property only shall be bound.
MassMutual Corporate Investors
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Investment Officer
This Agreement is executed on behalf of MassMutual Participation Investors,
organized under a Declaration of Trust, dated April 7, 1988, as amended from
time to time. The obligations of such trust are not personally binding upon, nor
shall resort be had to the property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust, but the Trust's assets and property
only shall be bound.
MassMutual Participation Investors
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Investment Officer
MassMutual Corporate Value
Partners Limited
By Massachusetts Mutual Life
Insurance Company, as
Investment Manager
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Managing Director
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Accepted and agreed to:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[continued on next page]
-21-
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE UNDER
AGREEMENT 6-14-78 FBO
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
-22-
Schedule I
Investor 80% of Common Stock Owned on Total Number of
March 29, 1997 Shares Pledged
▇▇▇▇▇ ▇. ▇▇▇▇▇ 103,066 0
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 85,627 63,900
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 52,578 0
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee 99,610 0
under Agreement dated 6/14/78
F/B/O ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 17,143 21,429
