EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made and entered
into as of the 6th day of March 2003 (the "EFFECTIVE DATE") between Factory 2-U
Stores, Inc., a Delaware corporation (the "COMPANY"), and the parties set forth
on the signature page and Exhibit A hereto (each, a "PURCHASER" and
collectively, the "PURCHASERS").
R E C I T A L S:
A. The Purchasers have purchased shares of the Company's Common Stock (as
defined below) pursuant to Subscription Agreements (each, a "SUBSCRIPTION
AGREEMENT" and collectively, the "SUBSCRIPTION AGREEMENTS") by and between the
Company and each Purchaser.
B. The Company and the Purchasers desire to set forth the registration
rights to be granted by the Company to the Purchasers.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants, and conditions set forth herein and in the Subscription
Agreements, the parties mutually agree as follows:
A G R E E M E N T:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"APPROVED MARKET" means the Nasdaq National Market, the New York Stock
Exchange, Inc., or the American Stock Exchange, Inc.
"BUSINESS DAY" means any day of the year, other than a Saturday, Sunday, or
other day on which the Commission is required or authorized to close.
"CERTIFICATE OF INCORPORATION" means the Restated Certificate of
Incorporation of the Company as filed with the Secretary of State of the State
of Delaware, as the same may be amended from time to time.
"CLOSING DATE" means February 28, 2003, or such other time as is mutually
agreed between the Company and the Purchasers for the closing of the sale
referred to in Recital A above.
"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 $0.01 per share, of the
Company and any and all shares of capital stock or other equity securities of:
(i) the Company which are added to or exchanged or substituted for the Common
Stock by reason of the declaration of any stock dividend or stock split, the
issuance of any distribution or the reclassification, readjustment,
recapitalization or other such modification of the capital structure of the
Company; and (ii) any other corporation, now or hereafter organized under the
laws of any state or other governmental authority, with which the Company is
merged, which results from any consolidation or reorganization to which the
Company is a party, or to which is sold all or substantially all of the shares
or assets of the Company, if immediately after such merger, consolidation,
reorganization or sale, the Company or the stockholders of the Company own
equity securities having in the aggregate more than 50% of the total voting
power of such other corporation.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"FAMILY MEMBER" means (a) with respect to any individual, such individual's
spouse, any descendants (whether natural or adopted), any trust all of the
beneficial interests of which are owned by any of such individuals or by any of
such individuals together with any organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended, the estate of any such
individual, and any corporation, association, partnership or limited liability
company all of the equity interests of which are owned by those above described
individuals, trusts or organizations and (b) with respect to any trust, the
owners of the beneficial interests of such trust.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the Commission, which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the Commission.
"HOLDER" means each Purchaser or any of such Purchaser's respective
successors and Permitted Assigns who acquire rights in accordance with this
Agreement with respect to the Registrable Securities directly or indirectly from
such Purchaser, including from and Permitted Assignee.
"INSPECTOR" means any attorney, accountant, or other agent retained by a
Purchaser for the purposes provided in Section 4(j).
"MAJORITY HOLDERS" means at any time Holders of a majority of the
Registrable Securities.
"PERMITTED ASSIGNEE" means (a) with respect to a partnership, its partners
or former partners in accordance with their partnership interests, (b) with
respect to a corporation, its shareholders in accordance with their interest in
the corporation, (c) with respect to a limited liability company, its members or
former members in accordance with their interest in the limited liability
company, (d) with respect to an individual party, any Family Member of such
party, (e) an entity that is controlled by, controls, or is under common control
with a transferor, or (f) a party to this Agreement.
The terms "REGISTER," "REGISTERED," and "REGISTRATION" refers to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means shares of Common Stock issued to each
Purchaser pursuant to the Subscription Agreements, EXCLUDING (i) any Registrable
Securities that have been publicly sold or may be sold immediately without
registration under the Securities Act either pursuant to Rule 144 of the
Securities Act or otherwise; (ii) any Registrable Securities sold by a person in
a transaction pursuant to a registration statement filed under the Securities
Act or (iii) any Registrable Securities that are at the time subject to an
effective registration statement under the Securities Act.
"REGISTRATION DEFAULT DATE" means the date which is 90 days following the
Closing Date; PROVIDED, HOWEVER, if the Registration Statement is subject to
review by the SEC staff the Registration Default Date shall be the date which is
150 days following the Closing Date.
"REGISTRATION DEFAULT PERIOD" means the period following the Registration
Default Date during which any Registration Event occurs and is continuing.
"REGISTRATION EVENT" means the occurrence of any of the following events:
(a) the Company fails to file with the SEC the Registration Statement
on or before the date by which the Company is required to file the
Registration Statement pursuant to Section 3(a),
(b) the Registration Statement covering Registrable Securities is not
declared effective by the Commission on or before the Registration Default
Date,
(c) after the SEC Effective Date, sales cannot be made pursuant to
the Registration Statement for any reason (including without limitation by
reason of a stop order, or the Company's failure to update the Registration
Statement) but except as excused pursuant to Section 3(a), or
(d) the Common Stock generally or the Registrable Securities
specifically are not listed or included for quotation on an Approved
Market, or trading of the Common Stock is suspended or halted on the
Approved Market, which at the time constitutes the principal market for the
Common Stock.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute promulgated in replacement thereof, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"SEC EFFECTIVE DATE" means the date the Registration Statement is declared
effective by the Commission.
"S-3 BLACKOUT PERIOD" means, with respect to a registration, a period not
in excess of 30 Trading Days in any period of 365 consecutive days, in each case
commencing on the day immediately after the Company notifies the Purchasers that
they are required, pursuant to Section 4(f), to suspend offers and sales of
Registrable Securities during which the Company, in the good faith judgment of
its Board of Directors, determines (because of the existence of, or in
anticipation of, any acquisition, financing activity, or other transaction
involving the Company, or the unavailability for reasons beyond the Company's
control of any required financial statements, disclosure of information which is
in its best interest not to publicly disclose, or any other event or condition
of similar significance to the Company) that the registration and distribution
of the Registrable Securities to be covered by such registration statement, if
any, would be seriously detrimental to the Company and its shareholders;
PROVIDED, HOWEVER, that no S-3 Blackout Period may commence sooner than 60 days
after the end of a prior S-3 Blackout Period and there shall not be more than
two S-3 Blackout Periods in any 12-month period.
"TRADING DAY" means a day on whichever (a) the national securities
exchange, (b) the Nasdaq Stock Market, or (c) such other securities market, in
any such case which at the time constitutes the principal securities market for
the Common Stock, is open for general trading of securities.
2. TERM. This Agreement shall continue in full force and effect for a
period of two (2) year from the Effective Date.
3. REGISTRATION.
(a) REGISTRATION ON FORM S-3. As promptly as reasonably practicable after
the date hereof, but in any event not later than 60 days after the Closing Date
(the "REGISTRATION FILING DATE"), the Company shall use its commercially
reasonable best efforts to file with the Commission a shelf registration
statement on Form S-3 relating to the resale by the Holders of all of the
Registrable Securities; PROVIDED, HOWEVER, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 3(a), or keep such registration effective pursuant to Section 4:
(i) in any particular jurisdiction in which the Company would be required to
qualify to do business as a foreign corporation or as a dealer in securities
under the securities or blue sky laws of such jurisdiction or to execute a
general consent to service of process in effecting such registration,
qualification or compliance, in each case where it has not already done so; or
(ii) during any S-3 Blackout Period.
(b) PIGGYBACK REGISTRATION. If the Company shall determine to register for
sale for cash any of its Common Stock, for its own account or for the account of
others (other than the Holders), other than (i) a registration relating solely
to employee benefit plans or securities issued or issuable to employees,
consultants (to the extent the securities owned or to be owned by such
consultants could be registered on Form S-8) or any of their Family Members
(including a registration on Form S-8) or (ii) a registration relating solely to
a Commission Rule 145 transaction, a registration on Form S-4 in connection with
a merger, acquisition, divestiture, reorganization, or similar event, the
Company shall promptly give to the Holders written notice thereof (and in no
event shall such notice be given less than 30 calendar days prior to the filing
of such registration statement), and shall, subject to Section 3(c), include in
such registration (and any related qualification under blue sky laws or other
compliance) (a "PIGGYBACK REGISTRATION"), all of the Registrable Securities
specified in a written request or requests, made within 20 calendar days after
receipt of such written notice from the Company, by any Holder or Holders.
However, the Company may, without the consent of the Holders, withdraw such
registration statement prior to its becoming effective if the Company or such
other shareholders have elected to abandon the proposal to register the
securities proposed to be registered thereby.
(c) UNDERWRITING. If a Piggyback Registration is for a registered public
offering involving an underwriting, the Company shall so advise the Holders in
writing or as a part of the written notice given pursuant to Section 3(b). In
such event the right of any Holder to registration pursuant to Section 3(b)
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and any other
shareholders of the Company distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company or
selling shareholders, as applicable. Notwithstanding any other provision of this
Section 3(c), if the underwriter or the Company determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may exclude some or all Registrable Securities from such
registration and underwriting. The Company shall so advise all Holders (except
those Holders who have indicated to the Company their decision not to distribute
any of their Registrable Securities through such underwriting), and the number
of shares of Registrable Securities that may be included in the registration and
underwriting, if any, shall be allocated among such Holders as follows:
(i) In the event of a Piggyback Registration that is initiated by the
Company, the number of shares that may be included in the registration and
underwriting shall be allocated first to the Company and then, subject to
obligations and commitments existing as of the date hereof, to all selling
shareholders, including the Holders, who have requested to sell in the
registration on a pro rata basis according to the number of shares
requested to be included; and
(ii) In the event of a Piggyback Registration that is initiated by the
exercise of demand registration rights by a shareholder or shareholders of
the Company (other than the Holders), then the number of shares that may be
included in the registration and underwriting shall be allocated first to
such selling shareholders who exercised such demand and then, subject to
obligations and commitments existing as of the date hereof, to all other
selling shareholders, including the Holders, who have requested to sell in
the registration, on a pro rata basis according to the number of shares
requested to be included.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities and/or other securities so withdrawn
from such underwriting shall also be withdrawn from such registration; PROVIDED,
HOWEVER, that, if by the withdrawal of such Registrable Securities a greater
number of Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities pursuant to the terms and limitations set forth herein in the same
proportion used above in determining the underwriter limitation.
(e) OTHER REGISTRATIONS. Prior to the SEC Effective Date the Company will
not, without the prior written consent of the Majority Holders, file or request
the acceleration of any other registration statement filed with the Commission,
and during any time subsequent to the SEC Effective Date when the Registration
Statement for any reason is not available for use by any Holder for the resale
of any Registrable Securities, the Company shall not, without the prior written
consent of the Majority Holders, file any other registration statement or any
amendment thereto with the Commission under the Securities Act or request the
acceleration of the effectiveness of any other registration statement previously
filed with the Commission, other than (A) any registration statement on Form S-8
and (B) any registration statement or amendment which the Company is required to
file or as to which the Company is required to request acceleration pursuant to
any obligation in effect on the date of execution and delivery of this
Agreement.
(f) FAILURE TO FILE REGISTRATION STATEMENT. If a Registration Event
occurs, then the Company will make payments to the Purchase as partial
liquidated damages for the minimum amount of damages to the Purchaser by reason
thereof, and not as a penalty, at the rate of $0.05 per share per month, for
each calendar month of the Registration Default Period (pro rated for any period
less than 30 days). Each such payment shall be due and payable within five (5)
days after the end of each calendar month of the Registration Default Period
until the termination of the Registration Default Period and within five (5)
days after such termination. Such payments shall be in partial compensation to
the Purchaser, and shall not constitute the Purchaser's exclusive remedy for
such events. The Registration Default Period shall terminate upon (i) the filing
of the Registration Statement in the case of clause (a) of the definition of
"Registration Event," (ii) the SEC Effective Date in the case of clause (b) of
the definition of "Registration Event," (iii) the ability of the Purchaser to
effect sales pursuant to the Registration Statement in the case of clause (c) of
the definition of "Registration Event," (iv) the listing or inclusion and/or
trading of the Common Stock on an Approved Market, as the case may be, in the
case of clause (d) of the definition of "Registration Event," and (v) in the
case of the events described in clauses (b) and (c) of the definition of
"Registration Event," the earlier termination of the Registration Period. The
amounts payable as partial liquidated damages pursuant to this paragraph shall
be payable in lawful money of the United States. Amounts payable as partial
liquidated damages hereunder shall cease when the Purchaser no longer holds the
Registrable Securities.
4. REGISTRATION PROCEDURES. In the case of each registration,
qualification, or compliance effected by the Company pursuant to Section 3
hereof, the Company will keep each Holder including securities therein
reasonably advised in writing as to the initiation of each registration,
qualification, and compliance and as to the completion thereof. At its expense
with respect to any registration statement filed pursuant to Section 3, the
Company will use its commercially reasonable best efforts to:
(a) prepare and file with the Commission with respect to such Registrable
Securities, a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate, and which
form shall be available for the sale of the Registrable Securities in accordance
with the intended method(s) of distribution thereof, and use its commercial
efforts to cause such registration statement to become and remain effective at
least for a period ending with the first to occur of (i) the sale of all
Registrable Securities covered by the registration statement, (ii) the
availability under Rule 144 for the Holder to immediately, freely resell without
restriction all Registrable Securities covered by the registration statement,
and (iii) one year after a registration statement filed pursuant to Section 3(a)
is declared effective by the Commission (in either case, the "EFFECTIVENESS
PERIOD"); PROVIDED, HOWEVER, if at the end of such one-year period, any Holder
is not able to immediately, freely resell all Registrable Securities that it
owns, the Effectiveness Period shall continue until terminated pursuant to
clause (i) or (ii); provided that no later than five business days before filing
with the Commission a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of any registration statement, the Company shall (i) furnish to
one counsel ("HOLDERS COUNSEL") selected by the Holders of a majority of the
Registrable Securities covered by such registration statement copies of all such
documents proposed to be filed (excluding any exhibits other than applicable
underwriting documents), in substantially the form proposed to be filed, which
documents shall be subject to the review of such counsel, and (ii) notify each
Holder of Registrable Securities covered by such registration statement of any
stop order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered;
(b) if a registration statement is subject to review by the Commission,
promptly respond to all comments and diligently pursue resolution of any
comments to the satisfaction of the Commission;
(c) 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 during the
Effectiveness Period (but in any event at least until expiration of the 90-day
period referred to in Section 4(3) of the Securities Act and Rule 174, or any
successor thereto, thereunder, if applicable), and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the intended
method(s) of disposition by the sellers thereof set forth in such registration
statement;
(d) furnish, without charge, to each Holder of Registrable Securities
covered by such registration statement (i) one (1) signed copy of such
registration statement (including any exhibits thereto other than exhibits
incorporated by reference), each amendment and supplement thereto, (ii) two (2)
conformed copies of each such registration statement, amendment and supplement
(in each case including all exhibits thereto), (iii) such number of copies of
the prospectus included in such registration statement (including each
preliminary prospectus and any other prospectus filed under Rule 424 under the
Securities Act) as such Holders may request, in conformity with the requirements
of the Securities Act, and (iv) such other documents as such Holder may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Holder, but only during the Effectiveness Period;
(e) use its commercially reasonable best efforts to register or qualify
such Registrable Securities under such other applicable securities or blue sky
laws of such jurisdictions as any Holder of Registrable Securities covered by
such registration statement reasonably requests as may be necessary for the
marketability of the Registrable Securities (such request to be made by the time
the applicable registration statement is deemed effective by the Commission) and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder; PROVIDED that
the Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (e), (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(f) immediately notify each Holder of such Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event which comes to the Company's
attention if as a result of such event the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and the Company shall promptly prepare and
furnish to such Holder a supplement or amendment to such prospectus (or prepare
and file appropriate reports under the Exchange Act) so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, unless suspension of the use of such prospectus
otherwise is authorized herein or in the event of an S-3 Blackout Period, in
which case no supplement or amendment need be furnished (or Exchange Act filing
made) until the termination of such suspension or S-3 Blackout Period;
(g) comply, and continue to comply during the period that such
registration statement is effective under the Securities Act, in all material
respects with the Securities Act and the Exchange Act and with all applicable
rules and regulations of the Commission with respect to the disposition of all
securities covered by such registration statement, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
(18) 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.
(h) as promptly as practicable after becoming aware of such event, notify
each Holder of Registrable Securities being offered or sold pursuant to the
Registration Statement of the issuance by the Commission of any stop order or
other suspension of effectiveness of the Registration Statement at the earliest
possible time;
(i) permit the Holders of Registrable Securities being included in the
Registration Statement and their legal counsel, at such Holders' sole cost and
expense (except as otherwise specifically provided in Section 6) to review and
have a reasonable opportunity to comment on the Registration Statement and all
amendments and supplements thereto at least three Business Days prior to their
filing with the Commission and shall not file any such document to which any
Holder reasonably objects;
(j) make available for inspection by any Holder and any Inspector retained
by such Holder, at such Holder's sole expense, all Records as shall be
reasonably necessary to enable such Holder to exercise its due diligence
responsibility, and cause the Company's officers, directors, and employees to
supply all information which such Holder or any Inspector may reasonably request
for purposes of such due diligence; PROVIDED, HOWEVER, that such Holder shall
hold in confidence and shall not make any disclosure of any record or other
information which the Company determines in good faith to be confidential, and
of which determination such Holder is so notified at the time such Holder
receives such information, unless (i) the disclosure of such record is necessary
to avoid or correct a misstatement or omission in the Registration Statement and
a reasonable time prior to such disclosure the Holder shall have informed the
Company of the need to so correct such misstatement or omission and the Company
shall have failed to correct such misstatement of omission, (ii) the release of
such record is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction or (iii) the information in such
record has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such records to any Inspector until
and unless such Inspector shall have entered into a confidentiality agreement
with the Company with respect thereto, substantially in the form of this Section
4(j), which agreement shall permit such Inspector to disclose records to the
Holder who has retained such Inspector. Each Holder agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning an Holder provided
to the Company pursuant to this Agreement unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
disclosure of such information is necessary to avoid or correct a misstatement
or omission in the Registration Statement, (iii) release of such information is
ordered pursuant to a subpoena or other order from a court or governmental body
of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning a Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Holder and allow such Holder, at such Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information;
(k) use its best efforts to cause all the Registrable Securities covered
by the Registration Statement to be quoted on the Nasdaq National Market or such
other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded;
(l) provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities at all times;
(m) cooperate with the Holders of Registrable Securities being offered
pursuant to the Registration Statement to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts as the Holders
may reasonably request and registered in such names as the Holders may request;
(n) during the Registration Period, refrain from bidding for or purchasing
any Common Stock or any right to purchase Common Stock or attempting to induce
any Person to purchase any such security or right if such bid, purchase or
attempt would in any way limit the right of the Holders to sell Registrable
Securities by reason of the limitations set forth in Regulation M under the 1934
Act; and
(o) take all other reasonable actions necessary to expedite and facilitate
disposition by the Holders of the Registrable Securities pursuant to the
Registration Statement.
5. SUSPENSION OF OFFERS AND SALES. 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 Section 4(f) hereof or of the commencement of an
S-3 Blackout Period, such Holder shall discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4(f) hereof or notice of the end of
the S-3 Blackout Period, and, if so directed by the Company, such Holder shall
deliver to the Company (at the Company's expense) all copies (including, without
limitation, any and all drafts), 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 period mentioned in Section 4(a)(iii) hereof shall be
extended by the greater of (i) ten business days or (ii) the number of days
during the period from and including the date of the giving of such notice
pursuant to Section 4(f) hereof to and including the date when each Holder of
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 4(f) hereof.
6. REGISTRATION EXPENSES. The Company shall pay all expenses in
connection with any registration, including, without limitation, all
registration, filing, stock exchange and NASD fees, printing expenses, all fees
and expenses of complying with securities or blue sky laws, the fees and
disbursements of counsel for the Company and of its independent accountants, and
the reasonable fees and disbursements of a Holders Counsel; provided that, in
any underwritten registration, each party shall pay for its own underwriting
discounts and commissions and transfer taxes. Except as provided above in this
Section 6 and Section 9, the Company shall not be responsible for the expenses
of any attorney or other advisor employed by a Holder of Registrable Securities.
7. ASSIGNMENT OF RIGHTS. No Holder may assign its rights under this
Agreement to any party without the prior written consent of the Company;
PROVIDED, HOWEVER, that a Holder may assign its rights under this Agreement
without such restrictions to a Permitted Assignee.
8. INFORMATION BY HOLDER. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as the Company may request in writing.
9. INDEMNIFICATION.
(a) In the event of the offer and sale of Registrable Securities held by
Holders under the Securities Act, the Company shall, and hereby does, indemnify
and hold harmless, to the fullest extent permitted by law, each Holder, its
directors, officers, partners, each other person who participates as an
underwriter in the offering or sale of such securities, and each other person,
if any, who controls or is under common control with such Holder or any such
underwriter within the meaning of Section 15 of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, and expenses to which
the Holder or any such director, officer, partner or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (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 shares were registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company shall
reimburse the Holder, and each such director, officer, partner, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating, defending or settling any such loss,
claim, damage, liability, action or proceeding; provided that the Company shall
not be liable in any such case (i) 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 in or
omission or alleged omission from 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
Holder specifically stating that it is for use in the preparation thereof or
(ii) if the person asserting any such loss, claim, damage, liability (or action
or proceeding in respect thereof) who purchased the Registrable Securities that
are the subject thereof did not receive a copy of an amended preliminary
prospectus or the final prospectus (or the final prospectus as amended or
supplemented) at or prior to the written confirmation of the sale of such
Registrable Securities to such person because of the failure of such Holder or
underwriter to so provide such amended preliminary or final prospectus and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact made in such preliminary prospectus was corrected in the amended
preliminary or final prospectus (or the final prospectus as amended or
supplemented). Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Holders, or any such director,
officer, partner, underwriter or controlling person and shall survive the
transfer of such shares by the Holder.
(b) As a condition to including any Registrable Securities to be offered
by a Holder in any registration statement filed pursuant to this Agreement, each
such Holder agrees to be bound by the terms of this Section 9 and to indemnify
and hold harmless, to the fullest extent permitted by law, the Company, its
directors and officers, and each other person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which the Company or any
such director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information about such Holder as a Holder of the
Company furnished to the Company, and such Holder shall reimburse the Company,
and each such director, officer, and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating,
defending, or settling and such loss, claim, damage, liability, action, or
proceeding; PROVIDED, HOWEVER, that such indemnity agreement found in this
Section 8(b) shall in no event exceed the gross proceeds from the offering
received by such Holder. 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 by any
Holder of such shares.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Section 9(a) or (b) hereof (including any governmental action), such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the commencement of such
action; provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 9(a) or (b) hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in the reasonable
judgment of counsel to such indemnified party a conflict of interest between
such indemnified and indemnifying parties may exist or the indemnified party may
have defenses not available to the indemnifying party in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defenses thereof or the indemnifying party fails to defend
such claim in a diligent manner, other than reasonable costs of investigation.
Neither an indemnified nor an indemnifying party shall be liable for any
settlement of any action or proceeding effected without its 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 of such claim or
litigation. Notwithstanding anything to the contrary set forth herein, and
without limiting any of the rights set forth above, in any event any party shall
have the right to retain, at its own expense, counsel with respect to the
defense of a claim.
(d) In the event that an indemnifying party does or is not permitted to
assume the defense of an action pursuant to Section 9(c) or in the case of the
expense reimbursement obligation set forth in Section 9(a) and (b), the
indemnification required by Section 9(a) and (b) hereof shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills received or expenses, losses, damages, or
liabilities are incurred.
(e) If the indemnification provided for in this Section 9 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall (i) contribute to the amount paid or payable by such indemnified party as
a result of such loss, liability, claim, damage or expense as is appropriate to
reflect the proportionate relative fault of the indemnifying party on the one
hand and the indemnified party on the other (determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, not only the proportionate relative
fault of the indemnifying party and the indemnified party, but also the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, as well as any other relevant equitable considerations. No
indemnified party guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
indemnifying party who was not guilty of such fraudulent misrepresentation.
(f) OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding subsections of this Section 9 (with appropriate modifications)
shall be given by the Company and each Holder of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation or governmental authority other than the
Securities Act.
10. MISCELLANEOUS
(a) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and the United States of America,
both substantive and remedial. Any judicial proceeding brought against either of
the parties to this agreement or any dispute arising out of this Agreement or
any matter related hereto may be brought in the courts of the State of Texas or
in the United States District Court for the Southern District of Texas and, by
its execution and delivery of this agreement, each party to this Agreement
accepts the jurisdiction of such courts. The foregoing consent to jurisdiction
shall not be deemed to confer rights on any person other than the parties to
this Agreement.
(b) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, Permitted Assigns, executors and administrators of the parties
hereto. In the event the Company merges with, or is otherwise acquired by, a
direct or indirect subsidiary of a publicly traded company, the Company shall
condition the merger or acquisition on the assumption by such parent company of
the Company's obligations under this Agreement.
(c) ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
(d) NOTICES, ETC. All notices or other communications which are required
or permitted under this Agreement shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, or by courier or overnight carrier, to the persons at the
addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
If to the Company: Factory 2-U Stores, Inc.
0000 Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Executive Officer
If to the Purchasers: To each Purchaser at the address
set forth on Exhibit A
with a copy to: Xxxxxxx Xxxxxx Xxxxxx Inc.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: President
or at such other address as any party shall have furnished to the other parties
in writing.
(e) DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to any Holder of any Registrable Securities, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy of such Holder nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereunder occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any Holder of any breach or default under this
Agreement, or any waiver on the part of any Holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(g) SEVERABILITY. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
(h) AMENDMENTS. The provisions of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the holders of an 80% majority of the number of shares of
Registrable Securities outstanding as of the date of such amendment or waiver.
The Purchasers acknowledge that by the operation of this Section 10(h), the
holders of an 80% majority of the outstanding Registrable Securities may have
the right and power to diminish or eliminate all rights of the Purchasers under
this Agreement.
(i) LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of at least a majority of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights senior to those
granted to the Holders hereunder.
This Registration Rights Agreement is hereby executed as of the date first
above written.
COMPANY:
FACTORY 2-U STORES, INC.
By:
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Name:
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Its:
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PURCHASERS:
The Purchasers listed on Exhibit A
attached hereto
BY: XXXXXXX XXXXXX XXXXXX INC., AGENT
AND ATTORNEY-IN-FACT
By:
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Name:
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Its:
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