REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of October 22, 1997 between
FIDELITY HOLDINGS, INC., a corporation organized under the laws of the State of
Nevada (the "Company"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual residing at ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇").
The Company, ▇▇▇▇▇▇▇, Major Automotive Group, Inc. ("Major Auto"),
and Major Acquisition Corp. ("Major Acquisition") are parties to a Plan and
Agreement of Merger (the "Merger Agreement") pursuant to which, among other
things, Major Acquisition will acquire from ▇▇▇▇▇▇▇ all of the issued and
outstanding shares of Major Auto in exchange for 900,000 shares of the Company's
1997-MAJOR Series of Convertible Preferred Stock (the "1997-Major Series"). The
shares of the 1997-Major Series will be convertible into shares of the Company's
Common Stock on the terms and conditions set forth in the Certificate of
Designation of the Powers, Preferences, Limitations, Restrictions, and Relative
Rights of the 1997-MAJOR Series of Convertible Preferred Stock attached hereto
as Exhibit A (the "Certificate of Designation").
In order to induce ▇▇▇▇▇▇▇ to enter into the Merger Agreement and to
consummate the acquisition contemplated thereby, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company has agreed to grant to ▇▇▇▇▇▇▇ certain registration rights with respect
to the shares of Common Stock into which the shares of the 1997-Major Series are
convertible. Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. As used herein, the following terms have the
following respective meanings:
"Certificate of Designation" has the meaning assigned to such term
in the second paragraph of this Agreement.
"Commission" means the Securities and Exchange Commission, and any
successor entity.
"Company" has the meaning assigned to such term in the first
paragraph of this Agreement.
"Cutback Registration" means any registration to be effected as an
underwritten Public Offering in with the Managing Underwriter with respect
thereto advises the Company and the Requesting Holders in writing that, in its
opinion, the number of securities requested to be included in such registration
(including the Company's securities that are not Registrable Securities) exceeds
the number which can be sold in such offering without a material reduction in
the selling price anticipated to be received for the securities to be sold in
such Public Offering.
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"Indemnified Party" means a Person entitled to indemnification in
accordance with Section 2.04 hereof.
"Indemnifying Party" means a Person obligated to provided
indemnification in accordance with Section 2.04 hereof.
"Losses" has the meaning assigned to such term in paragraph 2.04(a)
hereof.
"Major Acquisition" has the meaning assigned to such term in the
second paragraph of this Agreement.
"Major Auto" has the meaning assigned to such term in the second
paragraph of this Agreement.
"Managing Underwriter" means, with respect to any Public Offering,
the underwriter or underwriters managing such Public Offering.
"Merger Agreement" has the meaning assigned to such term in the
second paragraph of this Agreement.
"1997-Major Series" has the meaning assigned to such term in second
paragraph of this Agreement.
"Notice of Piggyback Registration" has the meaning assigned to such
term in Section 2.01(a) hereof.
"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated association or
government (or any agency, instrumentality or political subdivision thereof).
"Public Offering" means any offering by the Company of any of its
securities to the public, either on behalf of the Company or any of its
securityholders, pursuant to an effective registration statement under the
Securities Act.
"Registrable Securities" means any shares of Common Stock issued
upon a conversion of shares of the 1997-Major Series in accordance with the
Certificate of Designation, provided that such Common Stock shall cease to be
Registrable Securities to the extent that (a) a registration statement with
respect to the sale of such Common Stock shall have become effective under the
Securities Act and such Common Stock shall have been disposed of in accordance
with such registration statement, (b) the shares of such Common Stock shall have
been distributed to the public pursuant to Rule 144 promulgated under the
Securities Act or (c) such Common Stock shall cease to be outstanding.
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"Registration Expenses" means all expenses incident to the Company's
performance or compliance with its obligations hereunder to effect the
registration of Registrable Securities, including, without limitation, all
registration, filing, securities exchange listing and National Association of
Securities Dealers' fees, all registration, filing, qualification and other fees
and expenses of complying with the securities or blue sky laws, all duplicating
and printing expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits or comfort letters required by or incident to such performance and
compliance, and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable Securities,
which transfer taxes shall be paid by each holder thereof.
"Requesting Holders" means, with respect to any registration of the
Company's securities, the holders of Registrable Securities requesting to have
Registrable Securities included in such registration in accordance with the
terms hereof.
"Securities Act" means the Securities Act of 1933, as amended.
Section 2. Piggyback Registration Rights.
2.01 Registrations.
(a) Right to Include Registrable Securities. If at any time the
Company proposes to register any of its securities under the Securities Act, it
will each such time give prompt written notice (a "Notice of Piggyback
Registration"), at least 30 days prior to the anticipated filing date, to all
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.01(a), which Notice of Piggyback Registration shall
include a description of the intended method of disposition of such securities.
Upon the written request of the holders of all, but not less than all, of the
Registrable Securities made within 15 days after receipt of a Notice of
Piggyback Registration (which request shall specify the Registrable Securities
intended to be disposed of and the intended method of disposition thereof), the
Company will use its best efforts to include in the registration statement
relating to such registration all Registrable Securities which the Company has
been so requested to register. Notwithstanding the foregoing, if, at any time
after giving a Notice of Piggyback Registration 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 or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to each holder of Registrable Securities and, thereupon, (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), and (ii) in the case of a determination to delay
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registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities.
(b) Registration Expenses. The Company will pay all Registration
Expenses incurred in connection with each registration of securities.
(c) Priority in Cutback Registrations. If any such registration of
securities becomes a Cutback Registration, the Company will include in such
registration to the extent of the amount of the securities which the Managing
Underwriter advises the Company can be sold in such offering:
(i) if such registration as initially proposed by the Company was
solely a primary registration of its securities, (x) first the securities
proposed by the Company to be sold for its own account, and (y) second,
any Registrable Securities requested to be included in such registration
by the Requesting Holders and any other securities of the Company proposed
to be included in such registration, allocated among the holders thereof
in accordance with the priorities then existing among the Company and such
holders; and
(ii) if such registration as initially proposed by the Company was
in whole or in part requested by holders of securities of the Company,
other than holders of Registrable Securities in their capacities as such,
pursuant to demand registration rights, (x) first, such securities held by
the holders initiating such registration and, if applicable, any
securities proposed by the Company to be sold for its own account,
allocated in accordance with the priorities then existing among the
Company and such holders, and (y) second, any Registrable Securities
requested to be included in such registration by the Requesting Holders
and any other securities of the Company proposed to be included in such
registration, allocated among the holders thereof in accordance with the
priorities then existing among the Company and such holders;
and any securities so excluded shall be withdrawn from and shall not be included
in such registration.
2.02 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 2.01 hereof, the Company
will use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended methods of disposition
thereof specified by the Requesting Holders. Without limiting the foregoing, the
Company in such case will, as expeditiously as possible notify each holder of
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which any prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
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therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The Company may require each holder of Registrable Securities as to
which any registration is being effected to, and each such holder, as a
condition to including Registrable Securities in such registration, shall,
furnish the Company with such information and affidavits regarding such holder
and the distribution of such securities as the Company may from time to time
reasonably request in writing in connection with such registration.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the second sentence of this
Section 2.02, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of a
supplemented or amended prospectus and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
2.03 Underwritten Offerings. If the Company at any time proposes to
register any of its securities and such securities are to be distributed by or
through one or more underwriters, the Company will, subject to the provisions of
paragraph 2.01(c), use its best efforts, if requested by the holders of all of
the Registrable Securities, to arrange for such underwriters to include the
Registrable Securities to be offered and sold by such holders among the
securities to be distributed by such underwriters, and such holders shall be
obligated to sell their Registrable Securities in such registration through such
underwriters on the same terms and conditions as apply to the other Company
securities to be sold by such underwriters in connection with such registration.
The holders of Registrable Securities shall be parties to the underwriting
agreement between the Company and such underwriter or underwriters. No
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom.
2.04 Indemnification.
(a) Indemnification by the Company. The Company shall, to the full
extent permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with the
registration of the Company's securities, its directors and officers, and each
other Person, if any, who controls any such seller within the meaning of the
Securities Act, against any losses, claims, damages, expenses or liabilities,
joint or several (together, "Losses"), to which such seller or any
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such director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (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 such registration statement, 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 the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, and the Company will reimburse such seller
and each such director, officer and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such Loss (or action or proceeding in respect thereof); provided
that the Company shall not be liable in any such case to the extent that any
such Loss (or action or proceeding in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer or controlling Person, and shall
survive the transfer of such securities by such seller. The Company shall also
indemnify each other Person who participates (including as an underwriter) in
the offering or sale of Registrable Securities, their officers and directors and
each other Person, if any, who controls any such participating Person within the
meaning of the Securities Act to the same extent as provided above with respect
to sellers of Registrable Securities.
(b) Indemnification by the Sellers. Each holder of Registrable
Securities which are included or are to be included in any registration
statement filed in connection with a registration of the Company's securities,
as a condition to including Registrable Securities in such registration
statement, shall, to the full extent permitted by law, indemnify and hold
harmless the Company, its directors and officers, and each other Person, if any,
who controls the Company within the meaning of the Securities Act, against any
Losses 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 (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 such registration statement, 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 the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such seller for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the obligation to
provide indemnification pursuant to this paragraph (b) shall be several, and not
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joint and several, among such Indemnifying Parties on the basis of the number of
Registrable Securities included in such registration statement and the aggregate
amount which may be recovered from any holder of Registrable Securities pursuant
to the indemnification provided for in this paragraph (b) in connection with any
registration and sale of Registrable Securities shall be limited to the total
proceeds received by such holder from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such securities by such
seller. Such holders shall also indemnify each other Person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors and each other Person, if any, who controls any
such participating Person within the meaning of the Securities Act to the same
extent as provided above with respect to the Company.
(c) Notices of Claims, Etc. Promptly after receipt by an
Indemnified Party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraph (a) or (b) of this
Section 2.04, such Indemnified Party will, if a claim in respect thereof is to
be made against an Indemnifying Party pursuant to such paragraphs, give written
notice to the latter 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 the paragraph (a) or (b)
of this Section 2.04, as the case may be, 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, the Indemnifying
Party shall be entitled to participate in and, unless, in the reasonable
judgment of any Indemnified Party, a conflict of interest between such
Indemnified Party and any Indemnifying Party exists with respect to such claim,
to assume the defense thereof, jointly with any other Indemnifying Party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, 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 other than reasonable costs of
investigation; provided that the Indemnified Party may participate in such
defense at the Indemnified Party's expense; and provided further that the
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party or Indemnified Parties, it is advisable for it or them to be
represented by separate counsel by reason of having legal defenses which are
different from or in addition to those available to the Indemnifying Party, and
in that event the reasonable fees and expenses of such one counsel shall be paid
by the Indemnifying Party. If the Indemnifying Party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the Indemnified Parties with
respect to such claim, unless in the reasonable judgment of any Indemnified
Party a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel for the Indemnified Parties or counsels. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
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without the consent of the Indemnified Party. No Indemnifying Party shall be
subject to any liability for any settlement made without its consent, which
consent shall not be unreasonably withheld.
(d) Contribution. If the indemnity and reimbursement obligation
provided for in any paragraph of this Section 2.04 is unavailable or
insufficient to hold harmless an Indemnified Party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault 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 the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this paragraph were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of
this paragraph. The amount paid by an Indemnified Party as a result of the
Losses referred to in the first sentence of this paragraph shall be deemed to
include any legal and other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any Loss which is the
subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
the Indemnifying Party if the Indemnifying Party was not guilty of such
fraudulent misrepresentation.
(e) Other Indemnification. The provisions of this Section 2.04 shall
be in addition to any other rights to indemnification or contribution which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
Section 3. Representations and Warranties of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇
represents and warrants to the Company that:
3.01 Investment. ▇▇▇▇▇▇▇ will purchase the 1997-Major Series only
for his own account, for investment purposes and not with a view to resale or
distribution, and not on behalf of any other Person.
3.02 No Agreement to Transfer. ▇▇▇▇▇▇▇ is not a party to any
agreement, arrangement or understanding concerning the transfer of the
1997-Major Series or any interest therein to any other Person.
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3.03 Knowledge and Experience. ▇▇▇▇▇▇▇ has (a) adequate knowledge
and experience in financial and business matters to be able to evaluate the
merits and risks of his investment in the Company and the 1997-Major Series or
(b) the advice or representation of a Person having such knowledge or
experience.
3.04 Access to Information. ▇▇▇▇▇▇▇ has had, and continues to have
access to sufficient information regarding the Company in order to evaluate the
merits and risks of his investment in the Company and the 1997-Major Series.
3.05 Risk. ▇▇▇▇▇▇▇ is able to bear the economic risk of its
investment in the Company and the 1997-Major Series and to hold the 1997-Major
Series for investment.
3.06. Restrictions on Transfer. The 1997-Major Series (i) will not
be registered by reason of an exemption from registration under Section 3(b) or
4(2) of the Securities Act, or Regulation D promulgated thereunder, and (ii) is
not publicly traded, no market exists for the 1997-Major Series and, except for
the conversion of the shares thereof into the Company's Common Stock in
accordance with the terms and conditions set forth in the Certificate of
Designation, ▇▇▇▇▇▇▇ must hold the 1997-Major Series indefinitely unless a
subsequent transfer or other disposition is registered under the Securities Act
or is exempt from registration thereunder at the time of such transfer or other
disposition.
Section 4. Miscellaneous.
4.01 Waiver. No failure on the part of either party hereto to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
4.02 Notices. All notices, requests and other communications
provided for herein shall be given or made in writing (including, without
limitation, by telecopy) by the close of business on the day the notice is given
or delivered to the intended recipient at (a) in the case of the Company, ▇▇-▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopy: ▇▇▇-▇▇▇-▇▇▇▇,
attention: President and (b) in the case of ▇▇▇▇▇▇▇, ▇▇-▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopy: ▇▇▇-▇▇▇-▇▇▇▇, attention: ▇▇▇▇▇
▇▇▇▇▇▇▇; or, as to either party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
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4.03 Amendments. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Company and ▇▇▇▇▇▇▇ and any provision
of this Agreement may be waived only by an instrument in writing signed by the
party waiving such provision.
4.04 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
4.05 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
4.06 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
4.07 Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the law of the State of New
York.
4.08 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
applicable law, (a) the other provisions hereof shall remain in full force and
effect in such jurisdiction in order to carry out the intentions of the parties
hereto as nearly as may be possible and (b) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision hereof in any other jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly execute and delivered as of the date first above written.
FIDELITY HOLDINGS, INC.
By__________________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President, Chief Executive Officer
and Treasurer
▇▇▇▇▇ ▇▇▇▇▇▇▇
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