EXHIBIT 99.5
REGISTRATION RIGHTS AGREEMENT
THIS is a Registration Rights Agreement (the "Agreement") dated as of
August __, 1998, between TUMBLEWEED, INC., a Delaware corporation (the
"Company"), and TUMBLEWEED, LLC, a Kentucky limited liability company ("LLC").
RECITALS
A. The Company and LLC have entered into a merger agreement (the "Merger
Agreement") pursuant to which (i) LLC will merge with and into the Company (the
"Merger"), and (ii) the outstanding units of membership interest in LLC will be
converted into 5,145,000 Shares of the Company's Common Stock.
B. The Company and LLC wish to establish an orderly initial trading
market for the Common Stock following the currently planned initial public
offering, while providing a more liquid investment for LLC Members who receive
Shares in the Merger.
Therefore, in consideration of the mutual premises, representations,
warranties, covenants and conditions set forth in this Agreement, the Company
and LLC agree as follows:
AGREEMENT:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, $.01 par value per
share.
"IPO" shall mean an initial public offering in which the Company sells
shares of the Company's Common Stock for an aggregate offering price of not less
than $7,000,000.
"Member" shall mean an owner of Class A, Class B, Class C and/or Common
membership interests in LLC.
"Prospectus" shall mean the form of prospectus most recently filed with
the Commission pursuant to Rule 424(b).
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and the reasonable expenses of any
special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company, and excluding all underwriting discounts
and selling commissions applicable to the sale of the Shares).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Shares and all fees and disbursements of
counsel for the selling holders of Shares.
"Shares" shall mean the shares of Common Stock to be issued to Members in
the Merger and subject to registration pursuant to this Agreement; provided,
however, that shares of Common Stock will no longer be treated as Shares if (A)
the Member to whom the Shares are issued fails to enter into an agreement with
the Company as provided in paragraph 3 of this Agreement, (B) they have been
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction, (C) they have been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon consummation of such sale, or (D) the shares are available for
sale under the Securities Act (including Rule 144 thereunder), in the opinion of
counsel to the Company, without compliance with the registration and prospectus
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto may be removed upon the
consummation of such sale.
2. REGISTRATION.
(a) AGREEMENT TO REGISTER. Subject to the conditions of this
Agreement, the Company agrees to include the Shares in the Form S-1
Registration Statement to be filed with the Commission in connection with the
IPO, to use its good faith efforts to cause such registration statement to
become effective promptly thereafter and to sell the minimum number of shares
of Common Stock to consummate the IPO, and to do all other things reasonably
necessary to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky and other state securities laws in
such states where the Company or its franchisees currently operate Tumbleweed
restaurants to the extent feasible, and appropriate compliance with
applicable regulations issued under the Securities Act) and as would permit
or facilitate the sale and distribution of the Shares.
(b) SUSPENSION OF REGISTRATION. Notwithstanding anything to the
contrary contained herein, if (x) the Board determines in good faith that the
registration and distribution of Shares would interfere with any proposed or
pending material corporate transaction involving the Company or any of its
subsidiaries, including, without limitation, an underwritten public offering
of the Common Stock
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by the Company on a firm commitment basis, or would require premature
disclosure thereof or would require the Company to disclose information that
the Company has not otherwise made public and that the Company reasonably
determines is in the best interests of the Company not to disclose at such
time, and (y) the Company notifies the holders of the Shares included in the
registration statement in writing a reasonable time not to exceed five (5)
business days following such determination (such notice a "Blackout Notice"),
the Company may elect that such registration statement not be usable for a
reasonable period of time (a "Blackout Period").
(c) UNDERWRITING. If Members holding a minimum of 50% of the Shares
then outstanding agree to attempt to distribute the Shares by means of an
underwriting, such Members shall so advise the Company and shall select an
underwriter reasonably acceptable to the Company.
3. AGREEMENTS WITH MEMBERS. As a condition to the Company's obligation
to register the Shares to be issued in the Merger to a Member, that Member shall
have entered into an agreement with the Company (a "Registration Agreement") on
or before the date the Merger takes effect, which provides that Member may sell
not more than 15% of the Member's Shares during the period beginning on the date
on which the Company terminates its sale of shares of Common Stock in the IPO
and ending nine months thereafter (the "Restricted Period"). The Registration
Agreement shall also include such other terms and conditions as may be
appropriate for compliance with applicable securities laws or are otherwise
customary for secondary sales of securities, including the following:
(a) Without the prior written consent of the Company, Member shall
sell Shares only in accordance with the plan of distribution described under the
heading "Selling Stockholders" or "Plan of Distribution" (whichever shall be
applicable) in the Prospectus.
(b) Member will deliver a Prospectus to each buyer of Shares and
otherwise sell Shares in compliance with the Securities Act and the Rules and
Regulations of the Commission.
(c) Member agrees to the placement to a legend on the stock
certificates representing the Member's Shares that are subject to the
restriction on sales during the Restricted Period.
(d) The Company shall bear all Registration Expenses incurred in
connection with any registration, qualification or compliance of the Shares
pursuant to this Agreement. All Selling Expenses incurred by a Member shall be
borne by that Member. With respect to any underwritten offering of Shares, all
Selling Expenses shall be borne by the holders of the securities so registered
pro rata on the basis of the number of their shares so registered.
(e) Each Member shall furnish to the Company such information
regarding the distribution proposed by such Member as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration referred to in this Agreement.
(f) The Company will keep Members advised in writing as to the status
of the registration of their Shares and will use good faith efforts to keep such
registration effective for a period
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ending on the earlier of the second anniversary of the date on which the
Merger takes effect or until the Members have completed the distribution of
Shares described in the registration statement.
(g) The Company will prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of Shares, and will furnish such number of prospectuses and other
documents incidental thereto, including any amendment of or supplement to the
prospectus, as a Member may reasonably request from time to time.
4. INDEMNIFICATION. Each Registration Agreement shall provide for
indemnification in connection with the registration and distribution of
Shares substantially as follows:
(a) The Company will indemnify the holder of Shares, each of its
officers, directors and partners, and each person controlling such holder of
Shares, with respect to which registration has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter, and their respective counsel against all claims, losses, damages
and liabilities (or actions, proceedings or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, or other document incident to
any such registration, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company
of the Securities Act or any rule or regulation thereunder applicable to the
Company in connection with any such registration and will reimburse each such
holder of Shares, each of its officers, directors and partners, and each
person controlling such holder of Shares, each such underwriter and each
person who controls any such underwriter, for any legal and any other
expenses as they are reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action; provided,
however, that the indemnity contained in this Section 6(a) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability or
expense that arises out of or is based on any untrue statement or omission
based upon written information furnished to the Company by such holder of
Shares or underwriter. The foregoing indemnity agreement is further subject
to the condition that insofar as it relates to any untrue statement, alleged
untrue statement, omission or alleged omission made in a prospectus, such
indemnity agreement shall not inure to the benefit of the foregoing
indemnified parties if copies of a supplemental prospectus correcting the
misstatement, or alleged misstatement, omission or alleged omission upon
which such loss, liability, claim or damage is based is timely delivered to
such indemnified party and a copy thereof was not furnished to the person
asserting the loss, liability, claim or damage.
(b) The holder or any transferee of the Shares, severally and not
jointly, will indemnify the Company, each of its directors and officers, each
other holder of Shares and each person who controls the Company or holder of
Shares within the meaning of the Securities Act and the rules and regulations
thereunder, and each underwriter, if any, and each person who controls any
underwriter, and their respective counsel against all claims, losses, damages
and liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any prospectus or other document incident to any
such registration or based upon any omission (or alleged omission) to state
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therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation of the Securities Act or any
rule or regulation thereunder applicable to the Company and will reimburse the
Company, any other holder of Shares and their respective directors, officers,
partners, persons, underwriters or control persons for any legal or any other
expense reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, and
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) relating to such holder is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by LLC and stated to be specifically for use therein; provided, however,
that the obligations of LLC shall be limited to an amount equal to the proceeds
to LLC and provided further that such indemnification obligations shall not
apply if the Company modifies or changes to a material extent the written
information furnished by LLC.
(c) Each party entitled to indemnification under this Section 5 (an
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld or delayed), and the Indemnified Party may participate
in such defense at such Indemnified Party's expense; and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If for any reason the indemnification provided for in this
section is unavailable to an Indemnified Party or is insufficient to hold it
harmless as contemplated by this Agreement, then the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnified Party and the Indemnifying Party, but also the relative fault of the
Indemnified Party and the Indemnifying Party, as well as any other relevant
equitable considerations.
5. TERMINATION. This Agreement shall terminate at the earlier of (i) the
SECOND anniversary of the date on which the Merger takes effect, (ii) the date
the Members have completed the distribution of Shares described in the
registration statement, and (iii) the termination of the Merger Agreement;
provided, however, that the provisions of Section 4 shall survive the
termination of this Agreement.
6. MISCELLANEOUS.
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(a) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
conflict of laws principles.
(b) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
(c) ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof.
(d) NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or delivered by hand or by messenger or courier delivery
service, addressed (a) if to LLC, 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000, or at such address as LLC shall have furnished to the Company in writing,
or (b) if to the Company, at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000,
or at such other address as the Company shall have furnished to LLC in writing.
This Registration Rights Agreement is hereby executed as of the date set
forth in the preamble hereto.
TUMBLEWEED, INC.
By:
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Xxxx X. Xxxxxxx, Xx.
President and Chief Executive Officer
TUMBLEWEED, LLC
By:
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Name:
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Title:
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