REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is
made and entered into as of January 31, 1997 by WEI ACQUISITION
CO., a Delaware corporation (the "COMPANY"), and A&M INVESTMENT
ASSOCIATES #3, LLC, (the "AFFILIATE") as the holders of the
Registrable Shares (as defined below) and for the benefit of any
Eligible Transferee (as defined below). Unless otherwise
indicated, all capitalized terms used in this Agreement shall have
the meanings given thereto in Section 1 of this Agreement, or if
not defined in Section 1, in the section in which such term is
used.
RECITALS
WHEREAS, pursuant to the Debtors' First Amended Chapter
11 Plan, as Revised for Technical Corrections dated October 4, 1996
and Supplemental Amendments on December 2, 1996 and December 13,
1996 (the "POR") and an Asset Purchase Agreement dated as of
January 31, 1997 (the "ASSET PURCHASE AGREEMENT"), the Company will
acquire substantially all of the assets of Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession (collectively, the
"DEBTORS"), in Case Xx. 00-000 (XXX) (Xxxxxxx Administered) in the
Bankruptcy Court for the District of Delaware; and
WHEREAS, the Company, Xxxxxxx & Marsal, Inc. ("A&M"), of
which the Affiliate is an affiliate, and certain of A&M's employees
have entered into a Management Services Agreement dated as of
January 31, 1997 (the "MANAGEMENT SERVICES AGREEMENT"), which will
become effective on the Effective Date (as defined therein);
WHEREAS, pursuant to the terms of the Management Services
Agreement, the Company and the Affiliate entered into the Stock
Subscription Agreement, pursuant to which the Affiliate agreed to
purchase from Company, and Company agreed to sell to the Affiliate
a number of shares of the New Common Stock, upon the terms and
subject to the conditions set forth therein;
WHEREAS, pursuant to the terms of the Management Services
Agreement, the Company and the Affiliate entered into the A&M
Option Agreement, pursuant to which the Company granted to A&M the
A&M Options upon the terms and conditions set forth in the A&M
Option Agreement; and
WHEREAS, pursuant to the terms of the Management Services
Agreement, the Company agreed to grant to the Affiliate the
registration rights set forth in this Agreement in respect of the
Registrable Shares.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable considerations, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
The terms set forth below are used herein as so defined:
"A&M OPTIONS" means the options granted to the Affiliate
and evidenced by the A&M Option Agreement.
"A&M OPTION AGREEMENT" means the Non-Transferable Stock
Option Agreement dated as of the date hereof between the Company
and the Affiliate pursuant to which the A&M Options were granted.
"ANTI-DILUTIVE ADJUSTMENTS" has the meaning given thereto
in Section 2(b).
"ASSET PURCHASE AGREEMENT" has the meaning given thereto
in the first WHEREAS paragraph of the Recitals hereto.
"COMMISSION" means the Securities and Exchange
Commission, or any other federal agency at the time administering
the Exchange Act or the Securities Act.
"COMPANY" means WEI ACQUISITION CO., a Delaware
corporation.
"DEMAND REGISTRATION" means a registration requested
pursuant to the terms of Section 2 hereof.
"EFFECTIVE DATE" means the date the POR becomes
effective.
"ELIGIBLE TRANSFEREE" means any successor or permitted
transferee, in a single transaction or series of related
transactions, of all, but not less than all, of the Registrable
Shares.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from
time to time.
"EXPIRATION DATE" means the date that is two years after
the later of (i) the expiration of the holding period under Rule
144 in respect of the Registrable Shares or (ii) the payment in
full or cancellation of the Promissory Notes.
"HOLDER" means the Affiliate or the Eligible Transferee.
"INDEMNIFIED PERSON" has the meaning assigned to that
term in Section 8(a) hereof.
"INSPECTORS" has the meaning assigned to that term in
Section 6(e) hereof.
"MANAGEMENT SERVICES AGREEMENT" has the meaning given
thereto in the second WHEREAS paragraph of the Recitals hereto.
"NEW COMMON STOCK" means the common stock, par value
$0.01 per share, of the Company.
"PARTICIPATING HOLDER" means any Holder that has
Registrable Shares registered for sale pursuant to a Registration
Statement.
"PERSON" means any individual, partnership, joint
venture, corporation, trust, unincorporated organization, or other
entity.
"PIGGY-BACK REGISTRATION" has the meaning assigned to
that term in Section 3(a) of this Agreement.
"POR" has the meaning given thereto in the first WHEREAS
paragraph of the Recitals hereto.
"PROMISSORY NOTES" means the Secured Non-Recourse
Promissory Note in the aggregate principal amount of $5,005,000
issued by the Affiliate in favor of the Company and the Secured
Recourse Promissory Note in the aggregate principal amount of
$335,000 issued by the Affiliate in favor of the Company.
"RECORDS" has the meaning assigned to that term in
Section 6(e) hereof.
"REGISTRABLE SHARES" means the shares of New Common Stock
purchased by the Affiliate pursuant to the Stock Subscription
Agreement and the shares of New Common Stock issued or issuable
upon exercise of an A&M Option and held by a Holder from time to
time. A share of New Common Stock will cease to be a Registrable
Share when (a) a registration statement covering a Registrable
Share has been declared effective by the Commission and such share
has been disposed of by a Holder pursuant to such effective
registration statement, (b) the Registrable Share or an A&M Option
(in respect thereof) is transferred to a Person other than an
Eligible Transferee, or (c) such share (after initial issuance) or
an A&M Option (in respect thereof) is held by the Company or one of
its subsidiaries or otherwise ceases to be outstanding.
"REGISTRATION EXPENSES" has the meaning assigned that
term in Section 7 hereof.
"REGISTRATION STATEMENT" means any registration statement
or comparable document under the Securities Act through which a
public sale or disposition of the Registrable Shares may be
registered, including the prospectus, amendments and supplements to
such registration statement, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference
in such Registration Statement.
"REQUESTING HOLDERS" has the meaning assigned to that
term in Section 2(a) of this Agreement.
"REQUISITE HOLDERS" means Holders holding at least 25% of
the total number of Registrable Shares of New Common Stock that
were issued or issuable pursuant to the Stock Subscription
Agreement or upon exercise of any A&M Option.
"RULE 144" means Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule
(other than Rule 144A) or regulation hereafter adopted by the
Commission providing for offers and sales of securities made in
compliance therewith resulting in offers and sales by subsequent
holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements
of the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be
in effect from time to time.
"SELLING HOLDER" means a Holder who is selling Regis-
trable Shares pursuant to a Registration Statement under this
Agreement.
"STOCK SUBSCRIPTION AGREEMENT" means the Stock
Subscription Agreement dated as of the date hereof between the
Company and the Affiliate pursuant to which the Affiliate purchased
a number of shares of New Common Stock from the Company.
SECTION 2. DEMAND REGISTRATION RIGHTS.
(a) At any time after any shares of New Common Stock
shall have been registered under the Securities Act but prior to
the Expiration Date, Requisite Holders may by written notice to the
Company request that the Company register all or a portion of the
Registrable Shares held by such Holders under the Securities Act
and register or qualify under applicable state securities laws and,
subject to the provisions of this Agreement, the Company shall use
its reasonable best efforts to effect such demand registration
promptly; provided, however, that the Company shall have no
obligation under this Section 2(a) if the public sale of the shares
by the Holders is then covered under any other Registration
Statement (including, pursuant to Section 3 hereof) that includes
such shares on a continuing basis.
Each notice to the Company shall set forth (i) the names
of the Requisite Holders requesting registration ("REQUESTING
HOLDERS") and the number of shares to be sold by each and (ii) the
proposed manner of sale. Within ten (10) days after receipt of
notice from the Requisite Holders, the Company shall notify any
Holder who is not a party to the written notice served on the
Company and offer to them the opportunity to include their shares
in such registration. Each such Holder shall have 20 days
following delivery of such notice to elect, by notice to the
Company, to have such Holder's Registrable Shares included in such
registration. The Company shall have no obligation to effect any
Demand Registration under this Section 2 unless the number of
Registrable Shares in such Demand Registration shall be equal to at
least 250,000 shares or, if lesser, the remaining Registrable
Shares (including shares subject to the A&M Options) but not less
than 125,000 shares, each of such numbers to be subject to
adjustment as contemplated by Section 8 of the A&M Option Agreement
(the "ANTI-DILUTIVE ADJUSTMENTS"). The maximum number of such
demands under this Section 2 shall be one (1); provided, however,
that no such demand may be made after the Expiration Date. A
Registration Statement will not count as a Demand Registration
hereunder unless it is declared effective by the Commission and
remains effective for at least ninety (90) days or such shorter
period which shall terminate when all of the Registrable Shares
covered by such Demand Registration have been sold pursuant to such
Demand Registration; provided, however, that in the event a
Registration Statement is withdrawn at the request of the
Requesting Holders (other than a withdrawal pursuant to Section
2(c) of this Agreement), such Requesting Holders will forfeit the
demand registration rights granted pursuant to this Section 2.
These rights are in addition to, and shall not limit, the
registration rights of the Holders of Registrable Shares granted
pursuant to Section 3 hereunder.
(b) If the managing underwriter of an underwritten
offering under this Section 2 advises the Company in writing that
in its opinion the number of shares requested to be included in
such registration (including, without limitation, shares to be
included in such registration pursuant to "piggyback" rights
heretofore or hereafter granted by the Company) exceeds the number
which can be sold in such offering, the Company will include in
such registration only the number of shares which in the opinion of
such underwriter can be sold. If the number of shares which can be
sold is less than the number of shares proposed to be registered,
the amount to be so registered shall be allocated pro rata among
the Holders of Registrable Shares desiring to participate in such
registration and among other holders of shares of New Common Stock
requested to be included in such registration, based on the numbers
of shares initially proposed to be registered by all such holders.
(c) The Company shall not be obligated to effect any
Demand Registration within three (3) months after the effective
date of a previous registration for an underwritten offering under
which the Holders had piggyback rights pursuant to Section 3 hereof
(irrespective of whether such rights were exercised). The Company
may (i) postpone for up to 60 days the filing or the effectiveness
of a Registration Statement for a Demand Registration if, based on
the good faith judgment of the Company's Board of Directors, such
registration and offering would materially interfere with any
material financing, acquisition, corporate reorganization, security
offering or other material transaction, or such postponement or
withdrawal is necessary in order to avoid premature disclosure of
a matter the Board of Directors of the Company has determined would
not be in the best interest of the Company to be disclosed at such
time or (ii) postpone the filing of a Demand Registration for a
period of not more than 60 days in the event the Company shall be
required to prepare audited financial statements as of a date other
than its fiscal year end (unless the Holders requesting such
registration agree to pay the expenses of such an audit); provided,
however, that in no event shall the Company withdraw a Registration
Statement under clause (i) after such Registration Statement has
been declared effective; and provided, further, that in any of the
events described in clause (i) or (ii) above, the Holders
initiating the request for such Demand Registration shall be
entitled to withdraw such request (without expense to such Holders)
and, if such request is withdrawn, such Demand Registration shall
not count as a permitted Demand Registration. The Company shall
provide prompt written notice to the Requesting Holders of (x) any
postponement or withdrawal of the filing or effectiveness of a
Registration Statement pursuant to this paragraph (c), (y) the
Company's decision to file or seek effectiveness of such
Registration Statement following such withdrawal or postponement
and (z) the effectiveness of such Registration Statement.
(d) If any of the Registrable Shares covered by a Demand
Registration are to be sold in an underwritten offering, the
Company shall have the right to select the managing underwriter(s)
to administer the offering, subject to the approval of the Holders
of a majority in interest of the Registrable Shares initiating the
request for registration, which approval shall not be unreasonably
withheld.
SECTION 3. PIGGY-BACK REGISTRATION RIGHTS.
(a) If the Company, at any time prior to the Expiration
Date, proposes to register any New Common Stock under the
Securities Act (other than pursuant to Section 2 of this Agreement
or pursuant to a registration statement on a form exclusively for
the sale or distribution of securities by the Company to employees
of the Company or its subsidiaries or for use exclusively in
connection with a business combination) whether or not for sale for
its own account, and the registration form to be used may be used
for the registration of Registrable Shares, it will give prompt
written notice to all Holders of the Company's intention to effect
such a registration and include in such registration all
Registrable Shares with respect to which the Company has received
written notice from a Holder for inclusion therein within 20 days
after the date of the Company's notice; provided, that:
(i) if, at any time after giving written notice of
its intention to register any shares and, prior to the
effective date of the Registration Statement filed in
connection with such registration, the Company shall determine
for any reason not to register such shares, the Company may,
at its election, give written notice of such determination to
each Holder requesting inclusion therein, and, thereupon, the
Company shall be relieved of its obligation to register any
Registrable Shares in connection with such withdrawn of
unfiled registration (but not of its obligation to pay the
Registration Expenses in connection therewith);
(ii) if such registration shall be in connection
with an underwritten public offering and the managing
underwriter shall advise the Company in writing that in its
opinion the number of shares requested to be included in such
registration exceeds the number of such securities which can
be sold in such offering or would have an adverse impact on
the price of such securities, the amount to be registered
shall be allocated first, to the Company if such registration
is not being effected as a result of the exercise of any
demand registration rights by a holder of the Company's
securities, and second, pro rata among the Requesting Holders
desiring to participate in such registration and the other
holders of the Company's securities requested to be included
in such registration, based on the numbers of shares initially
proposed to be included by such holders. If such registration
is being effected as a result of the exercise of any demand
registration rights by a holder of the Company's securities,
the amount of securities to be included in such registration
shall be allocated pro rata among the Holders of Registrable
Shares desiring to participate in such registration, the
Company and among other holders of the Company's securities
requested and entitled to be included in such registration,
based on the numbers of shares initially proposed to be
registered by the Company and all such holders;
(iii) with respect to any unissued shares to be
included therein, the Holder delivers a commitment to timely
exercise the A&M Options prior to the effective date of the
registration for inclusion therein of such shares, if the
Registration Statement does not otherwise contemplate a
continuing or "shelf" registration of shares issuable under
the A&M Options; and
(iv) the number of shares to be sold by the Holders
is not less than 50,000 (subject to Anti-Dilutive
Adjustments).
(b) If any Registration pursuant to this Section 3 is an
underwritten primary offering, the Holders shall not have the right
to select the managing underwriter to administer such offering.
(c) The maximum number of Piggy-Back Registrations under
this Section 3 shall be two.
SECTION 4. SUSPENSION OF EFFECTIVENESS.
The Company's obligations under Section 2(a) and Section
3(a) shall not restrict its ability to suspend the effectiveness
of, or direct Holders not to offer or sell securities under, any
Demand Registration or a Piggy-Back Registration, at any time, for
such reasonable period of time not to exceed 60 days which the
Company believes is necessary to prevent the premature disclosure
of any events or information having a material effect on the
Company. In addition, the Company shall not be required to keep a
Piggy-Back Registration or any Demand Registration, effective, or
may, without suspending such effectiveness, instruct the holders of
Registrable Shares included in a Piggy-Back Registration or any
Demand Registration, not to sell such securities, during any period
during which the Company is instructed, directed, ordered or
otherwise requested by any governmental agency or self-regulatory
organization to stop or suspend such trading or sales.
SECTION 5. HOLDBACK AGREEMENT.
(a) In the event of any filing of a prospectus
supplement or the commencement of an underwritten public
distribution of New Common Stock under a Registration Statement,
whether or not Registrable Shares are included, each Holder agrees
not to effect any public sale or distribution of New Common Stock
(except as part of such underwritten public distribution),
including a sale pursuant to Rule 144 or Rule 144A under the
Securities Act, during a period designated by the Company in a
written notice duly given to the Holders in accordance with Section
10(b), which period shall commence approximately 14 days prior to
the effective date of any such filing of such prospectus supplement
or the commencement of such underwritten public distribution of New
Common Stock under a Registration Statement and shall continue for
up to 134 consecutive days.
(b) The foregoing provisions shall not apply to any
Holder to the extent such Holder is prohibited by applicable law
from agreeing to withhold from sale pursuant to a binding
commitment entered into prior to receipt of the notice contemplated
by Section 5(a).
SECTION 6. REGISTRATION PROCEDURES.
Except as otherwise expressly provided herein and subject
to Section 7, in connection with any registration of Registrable
Shares pursuant to this Agreement, the Company shall, as
expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement on the appropriate form with respect to such Registrable
Shares and use its reasonable best efforts to cause such
Registration Statement to become effective as soon as practicable
thereafter; and before filing a Registration Statement or
prospectus or any amendments or supplements thereto, furnish to
each Selling Holder copies of such Registration Statement and such
other documents as proposed to be filed (including copies of any
document to be incorporated by reference therein), and thereafter
furnish to each Selling Holder such number of copies of such
Registration Statement, each amendment and supplement thereto
(including copies of any document to be incorporated by reference
therein), at the written request of the Selling Holder, including
all exhibits thereto, the prospectus included in such registration
statement (including each preliminary prospectus), and, promptly
after the effectiveness of a Registration Statement, the definitive
final prospectus filed with the Commission, and such other
documents as such Selling Holder may reasonably request in order to
facilitate the disposition of the Registrable Shares owned by such
Selling Holder;
(b) use its reasonable best efforts to register or
qualify such Registrable Shares under such other securities or blue
sky laws of such jurisdictions within the United States as any
Selling Holder reasonably (in light of such Selling Holder's
intended plan of distribution) requests; provided that the Company
will 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 Section 6(b), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in
any such jurisdiction;
(c) notify each Selling Holder of such Registrable
Shares, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the occurrence of any
event as a result of which the prospectus included in such
Registration Statement (including any document to be incorporated
by reference therein) contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Selling Holder, the
Company shall prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will 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 and promptly make available to each Selling
Holder any such supplement or amendment;
(d) in connection with an underwritten public offering,
enter into customary agreements (including, if requested, an
underwriting agreement), reasonably satisfactory in form and
substance to the Company, and take such other actions in connection
therewith as the Holders of at least a majority in interest of the
Registrable Shares being sold or the underwriter shall reasonably
request in order to consummate the disposition of such Registrable
Shares;
(e) make available for inspection during business hours
on reasonable advance notice by any Selling Holder of such
Registrable Shares, any underwriter participating in any
disposition pursuant to a Registration Statement, and any attorney,
accountant or other professional retained by any such Selling
Holder or underwriter (collectively, the "INSPECTORS"), all
financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "RECORDS") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any
such Inspector in connection with such Registration Statement.
Records which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a material
misstatement or omission in the Registration Statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction. Each Selling Holder
of such Registrable Shares further agrees that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give written notice to the Company, and
allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records it deemed
confidential. Each Selling Holder of such Registrable Shares
further agrees that information obtained by it as a result of such
inspections which is deemed confidential by the Company shall not
be used or disclosed by it, and it shall cause each of its
Inspectors not to use or disclose such confidential information, as
the basis for any market transactions in securities of the Company
or for any purpose other than any due diligence review with respect
to decisions regarding such Selling Holder's investment in the
Registrable Shares, unless and until such information is made
generally available to the public;
(f) in the event such sale is pursuant to an under-
written offering, use its reasonable best efforts to obtain (i) a
comfort letter or comfort letters from the Company's independent
public accountants in customary form and covering such financial
and accounting matters of the type customarily covered by comfort
letters as the Selling Holders of a majority in interest of the
Registrable Shares being sold or the managing underwriter
reasonably request, and (ii) an opinion or opinions from counsel
for the Company, addressed to the underwriters, covering the
matters customarily covered in opinions given by counsel in similar
transactions; and
(g) notify the Selling Holders and the managing under-
writers, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (i) when the Registration
Statement, 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, (ii) of the issuance by the Commission
of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for
that purpose and the Company shall promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued and (iii) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of
a Registration Statement or any of the Registrable Shares for offer
or sale in any jurisdiction, or the initiation or threatening of
any proceeding for such purpose.
The Company may require each Selling Holder of Regis-
trable Shares as to which any registration is being effected to
furnish to the Company such information regarding the Selling
Holder and the distribution of such Registrable Shares as the
Company may from time to time reasonably request in writing and
such other information as may be legally required in connection
with such registration. Each Selling Holder agrees, by its
acquisition of Registrable Shares and its acceptance of the
benefits provided to it hereunder, to furnish promptly to the
Company all information required to be disclosed in order to make
the information previously furnished to the Company by such Selling
Holder not materially misleading.
Each Holder agrees that upon receipt of any notice from
the Company of the happening of any event of the kind described in
Sections 4, 6(c), (g)(ii) or (g)(iii) hereof, such Holder will
forthwith discontinue disposition of Registrable Shares pursuant to
the Registration Statement covering such Registrable Shares until
such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 6(c) hereof, or until it is
advised in writing by the Company that the use of the prospectus
may be resumed, 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 Shares current at the
time of receipt of such notice. In the event the Company shall
give any such notice under Section 6(c), (g)(ii) or (g)(iii), the
Company shall extend the period during which such Registration
Statement shall be maintained effective by the number of days
during the period from and including the date of the giving of such
notice pursuant to Section 6(c) hereof to and including the date
when each Holder of Registrable Shares covered by such Registration
Statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 6(c) hereof.
SECTION 7. REGISTRATION EXPENSES.
All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all
registration and filing fees, fees and expenses of compliance with
securities or "blue sky" laws (including reasonable fees and
disbursements of counsel of the Company and counsel for the
underwriters in connection with "blue sky" qualifications of the
Registrable Shares), fees and expenses associated with filings
required to be made with the National Association of Securities
Dealers, Inc., and with listing on any national securities exchange
or exchanges in which listing may be sought, printing expenses,
messenger and delivery expenses, fees and expenses of counsel for
the Company and its independent certified public accountants
(including the expenses of any special audit or "cold comfort"
letters required by or incident to such performance), securities
acts liability insurance (if the Company elects to obtain such
insurance), the fees and expenses of any special experts retained
by the Company in connection with such registration, and fees and
expenses of other persons retained by the Company (all such
expenses being herein called "REGISTRATION EXPENSES") will be borne
(i) by the Company in respect of a Piggy-Back Registration and (ii)
by the Selling Holders in respect of any Demand Registration, in
each case whether or not any registration statement becomes
effective; provided that in no event shall Registration Expenses
payable by the Company include any (A) underwriting discounts,
commissions, or fees attributable to the sale of the Registrable
Shares, (B) fees and expenses of any counsel, accountants, or other
persons retained or employed by the Holders or underwriters, or (C)
transfer taxes, if any.
SECTION 8. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY COMPANY. The Company agrees to
indemnify and hold harmless each Selling Holder of Registrable
Shares, its officers, directors, partners and agents and each
Person, if any, who controls such Selling Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such person being sometimes hereinafter referred
to as an "INDEMNIFIED PERSON") from and against any and all losses,
claims, damages, liabilities and judgments (including, the
reasonable legal expenses incurred in connection with any action,
suit or proceeding) arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained
in any Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a
registration hereunder or arising out of or based upon 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 under which they were made, not misleading, or
(ii) any violation by the Company of any federal, state or common
law rule or regulation applicable to Company and relating to action
or inaction required by the Company in connection with any such
registration; provided, however, that the Company shall not be
liable for any losses, claims, damages, liabilities or judgments
arise out of, or are based upon, any such untrue statement or
omission or allegation thereof based upon information furnished in
writing to the Company by such Selling Holder or on such Selling
Holder's behalf for use therein, or by any Holder's failure to
deliver a copy of the Registration Statement or prospectus or any
amendment or supplement thereto after being furnished with a
sufficient number of copies thereof by the Company.
(b) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
action or proceeding (including any governmental investigation)
shall be brought or asserted against any Indemnified Person in
respect of which indemnity may be sought from the Company, such
Indemnified Person shall promptly notify the Company in writing,
and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified
Person and the payment of all reasonable expenses. Such Indemni-
fied Person shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Company has agreed to pay such
fees and expenses or (ii) the named parties to any such action or
proceeding (including any impleaded parties) include both such
Indemnified Person and the Company, and such Indemnified Person
shall have been advised in writing by the counsel employed by the
Company in accordance with the provisions of this Section 8(b) that
there exists a conflict of interest between such Indemnified Person
and the Company with respect to such claim (in which case, if such
Indemnified Person notifies the Company in writing that it elects
to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Person, it being
understood, however, that the Company shall not, in connection with
any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for such Indemnified Person
and any other Indemnified Persons, which firm shall be designated
in writing by a majority of such Indemnified Persons and be
reasonably acceptable to the Company). The Company shall not be
liable for any settlement of any such action or proceeding effected
without the Company's prior written consent, but if settled with
its prior written consent, or if there be a final, unappealable
judgment for the plaintiff in any such action or proceeding, the
Company agrees to indemnify and hold harmless such Indemnified
Persons from and against any loss or liability (to the extent
stated above) by reason of such settlement or judgment.
(c) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SHARES.
Each Selling Holder agrees severally and not jointly to indemnify
and hold harmless the Company, its directors, officers and agents
and each Person, if any, who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from
the Company to such Selling Holder, but only with respect to
information furnished in writing by such Selling Holder or on such
Selling Holder's behalf for use in any Registration Statement or
prospectus or any amendment or supplement thereto, or any
preliminary prospectus or by any Holder's failure to deliver a copy
of the Registration Statement or prospectus or any amendment or
supplement thereto after being furnished with a sufficient number
of copies thereof by the Company. In case any action or proceeding
shall be brought against the Company or its directors, officers or
agents or any such controlling person, in respect of which indem-
nity may be sought against such Selling Holder, such Selling Holder
shall have the rights and duties given to the Company, and the
Company or its directors, officers or agents or such controlling
person shall have the rights and duties given to such Selling
Holder by the preceding Section 8(b).
(d) CONTRIBUTION. If the indemnification provided for
in this Section 8 is unavailable to or unenforceable by the Company
or the Indemnified Persons in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each
such indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities and judgments in such proportions as is appropriate to
reflect the relative fault of the Company and the Indemnified
Persons in connection with the actions or inactions which resulted
in such losses, claims, damages, liabilities and judgments, as well
as any other relevant equitable considerations (including the
relative fault and indemnification or contribution obligations of
other relevant parties). The relative fault of the indemnifying
party on the one hand and of the indemnified person on the other
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the
indemnified party, and by such party's relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Indemnified Persons agree that it
would not be just and equitable if contribution pursuant to this
Section 8(d) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Person may participate in any underwritten
registration hereunder unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve
such arrangements, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements and (c) agrees to pay such Person's pro rata portion
of all underwriting discounts, commissions and fees.
SECTION 10. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of
Holders of at least a majority in interest of the Registrable
Shares. Notwithstanding the foregoing, (i) if a waiver or consent
to departure from the provisions hereof does not adversely affect
the rights of all of the Holders, the Company shall not be required
to obtain the consent of any such Holder not adversely affected
thereby, and (ii) if such waiver or consent to departure relates
exclusively to the rights of Holders whose Registrable Shares are
being sold pursuant to a Registration Statement and does not
directly or indirectly affect the rights of other Holders, such
waiver or consent to departure may be given by Holders of a least
a majority in interest of the Registrable Shares being sold by such
Holders pursuant to such Registration Statement; provided that the
provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
(b) NOTICES. All notices and other communications
provided for or permitted hereunder shall be in writing and shall
be delivered personally or by first-class mail, telecopier or
overnight courier:
(i) if to a Holder of Registrable Shares, at the
most current address set forth on the books of the Company,
and
(ii) if to the Company, initially at 00000 Xxxxxxxx
Xxxxxx; Xxxxxxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxx
Del Xxxxxxxx, and thereafter at such other address, notice of
which is given in accordance with the provisions of this
Section 10(b).
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail
(postage prepaid), if mailed; upon receipt of a telecopy
confirmation sheet, if telecopied; and on the day delivered if sent
by an air courier guaranteeing overnight delivery.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure
to the benefit of and be binding upon the successors and, to the
extent set forth herein, the assigns of each of the parties,
including without limitation and without the need for an express
assignment, Eligible Transferees.
(d) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one
and the same agreement.
(e) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED UNDER AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
(g) SEVERABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable any such provision in any other
jurisdiction.
(h) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and is intended to
be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred
to herein with respect to the registration rights granted by the
Company with respect to the Registrable Shares. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(i) EFFECTIVENESS. This Agreement shall become
effective on the Effective Date.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the Company and the Holder have
executed this Agreement as of the date first written above.
COMPANY:
WEI ACQUISITION CO.
/s/ Xxx Xxxxxxxxx
By ______________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Financial Officer and
Secretary
HOLDER:
A&M INVESTMENT ASSOCIATES #3, LLC
/s/ Xxxxxxx X. Xxxxxxx
By ______________________________
Name: Xxxxxxx X. Xxxxxxx XX
Title: Manager
