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EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
March 2, 1998 among Brooke Group Ltd., a Delaware corporation ("Brooke"), and
the entities listed on Exhibit A attached hereto (individually, together with
transferees, assignees or other successors, and including any Warrant Holder
following exercise of its warrant, in it capacity as a holder of Registrable
Securities, a "Warrant Holder" and collectively the "Warrant Holders").
RECITALS
A. Brooke has granted Warrant Holders warrants to the
Registrable Securities in the amounts specified on Exhibit A;
B. Brooke and the Warrant Holders desire that Brooke use
its reasonable best efforts to file, by September 15, 1999, with the SEC a
Registration Statement to register the resale by the Warrant Holders of the
Registrable Securities.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements set forth herein, and intending to
be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
Section 1.1 Definitions. As used in this Agreement,
the following terms shall have the following meanings:
"Brooke" has the meaning set forth in the Preamble.
"Effectiveness Period" has the meaning set forth in
Section 2.2.1.
"Exchange Act" means the Securities Exchange Act of
1934.
"Initial Shelf Registration" has the meaning set forth
in Section 2.2.1.
"Losses" has the meaning set forth in Section 4.1.
"Person" or "person" means an individual, trustee,
corporation, limited liability company, partnership, joint stock company,
trust, unincorporated association, union, business association, firm or other
entity.
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"Preliminary Prospectus" means any preliminary
prospectus that may be included in any Registration Statement.
"Prospectus" means the prospectus included in or related to
any Registration Statement (including a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means collectively the shares of
common stock of Brooke, $0.10 par value per share, which are subject to that
certain Warrant, dated March 2, 1998, granted by Brooke to the Warrant Holder,
including such share of common stock at any time following exercise of such
Warrant, in whole or in part. However, such common stock will cease to be a
Registrable Security when it (i) is sold in an open market transaction or in an
underwritten public offering, (ii) is sold to any person other than an
"affiliate" of Brooke (as defined under the Regulations) pursuant to a
Registration Statement, (iii) unless the Warrant Holder is an affiliate, such
common stock is eligible for resale without restriction pursuant to Rule 144(k)
of the Regulations or any similar rule or regulation hereafter adopted by the
SEC (provided, however, that if such Warrant Holder is an "affiliate", all
securities owned by it shall remain "Registrable Securities") or (iv) ceases to
be outstanding.
"Registration Statement" means any registration statement of
Brooke under the Securities Act that covers any of the Registrable Securities,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement and all material deemed part of such registration
statement by Rule 430A of the Regulations.
"Regulations" means the regulations of the SEC under
the Securities Act.
"Rule 415" means Rule 415 of the Regulations or any similar
rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933.
"Shelf Registration" has the meaning set forth in
Section 2.2.2.
"Subsequent Shelf Registration" has the meaning set
forth in Section 2.2.2.
"Underwritten registration" or "underwritten offering" means
a registration in which securities of Brooke are sold to one or more
underwriters or group or a syndicate of underwriters for offering to the
public.
"Warrant Holder" has the meaning set forth in the
Preamble.
Section 1.2 Usage. (a) References to Articles, Sections and
Exhibits are to articles and sections hereof and exhibits hereto, references to
a Person are also references to its successors and assigns, references to a
document are to it as amended, waived and otherwise modified from time to time,
and references to a statute or another governmental rule are to it as amended
and otherwise modified from time to time. The definitions set forth in Section
1.1 are equally applicable both to the singular and plural forms and the
feminine, masculine and neuter forms of the terms defined. "Including" and
correlative terms shall be deemed to be followed by "without limitation," if
not followed by such words or words of like import. The headings of Articles
and Sections and the table of contents relating hereto have been included
solely for convenience of references and shall not have any effect on the
construction hereof.
(b) This Agreement contemplates the filing of registration
statements under the Securities Act involving various offers and sales of
securities. In connection with such registration statements, there may be
identified therein one or more underwriters through which securities are to be
offered pursuant to either a "firm commitment" or "best-efforts" arrangement,
and, in the case where there is more than one underwriter, one or more of the
underwriters may be designated as the "manager" or "representative" or the
"co-managers" or "representatives" of the several underwriters. Accordingly,
all references herein to an "underwriter" or the "underwriters" are intended to
refer to a "principal underwriter" (as defined in Rule 405 of the Regulations)
and to provide for those transactions in which securities may be offered by or
through one or more underwriters, and not to imply that any of the transactions
contemplated hereby is conditioned in any manner whatsoever on the
participation therein by one or more underwriters on behalf of any party.
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ARTICLE 2
REGISTRATION OF REGISTRABLE SECURITIES UNDER SECURITIES ACT
Section 2.1 Required Registration of Registrable Securities.
Brooke shall use its reasonable best efforts to register the Registrable
Securities upon the terms, and subject to the limitations and conditions,
hereinafter set forth.
Section 2.2 Shelf Registration.
Section 2.2.1 Initial Shelf Registration. Prior
to September 15, 1999, Brooke shall prepare and file with the SEC a
Registration Statement for an offering to be made by the Warrant Holders on a
continuous basis under Rule 415 covering all the Registrable Securities (the
"Initial Shelf Registration"). The Initial Shelf Registration shall be on an
appropriate form permitting registration of all Registrable Securities for
resale by the Warrant Holders in the manner or manners reasonably designated by
them (including one or more underwritten offerings). Brooke shall cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or before October 31, 1999 and to keep the Initial Shelf Registration
continuously effective and the Prospectus current under the Securities Act
during the period (the "Effectiveness Period") ending on the earliest date on
which (x) all Registrable Securities have been sold other than to a Warrant
Holder, (y) a Subsequent Shelf Registration covering all the Registrable
securities has been declared effective under the Securities Act or (z) in the
opinion of Milbank, Tweed, Xxxxxx & XxXxxx or other nationally recognized
counsel to Brooke reasonably acceptable to the Warrant Holders, which opinion
shall be reasonably satisfactory in form, scope and substance to the Warrant
Holders, registration of the Registrable Securities is no longer required under
the Securities Act for the Warrant Holders to sell all remaining Registrable
Securities in the open market without limitations as to volume or manner of
sale and without being required to file any forms or reports with the SEC under
the Securities Act or the Regulations other than a notice of sale under Rule
144 under the Regulations. No Warrant Holders of Registrable Securities may
include any of its Registrable Securities in any Shelf Registration pursuant to
this Agreement unless and until such Warrant Holder furnishes to Brooke in
writing such information as Brooke may reasonably request pursuant to Section
6.2(b).
Section 2.2.2 Subsequent Shelf Registrations. If
the Initial Shelf Registration or any Subsequent Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness Period, Brooke
shall use its reasonable best efforts to (i) obtain the prompt withdrawal of
any order
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suspending the effectiveness thereof and (ii) in any event, within 45 days of
such cessation of effectiveness, amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof or file an additional Registration Statement covering all
of the Registrable Securities (a "Subsequent Shelf Registration," subject to
the last sentence of this Section 2.2.2) for an offering to be made by the
Warrant Holders on a delayed or continuous basis under Rule 415 in a manner
reasonably expected to be acceptable to the SEC. If a Subsequent Shelf
Registration is filed, Brooke shall use its reasonable best efforts to cause
the Subsequent Shelf Registration to be declared effective as soon as
practicable after such filing and keep such Registration statement continuously
effective and the Prospectus current until the end of the Effectiveness Period.
As used herein, the term "Shelf Registration" means the Initial Shelf
Registration and any Subsequent Shelf Registration. If by reason of the
Securities Act or the Regulations a Shelf Registration shall not permit the
resale by a Warrant Holder of Registrable Securities acquired from another
Warrant Holder, the obligations of Brooke shall extend to the filing of, and
other registration procedures with respect to, another registration statement
(which shall be a Subsequent Shelf Registration).
Section 2.2.3 Supplements and Amendments.
Subject to Section 2.3.1(q), Brooke shall promptly supplement and amend the
Registration Statement and the Prospectus (i) if required by the Regulations or
the instructions applicable to the registration form used for the Shelf
Registration, (ii) if required by the Securities Act or the Regulations, (iii)
if required to prevent the Registration Statement or the Prospectus from
containing any material misstatement or omitting to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iv) if reasonably requested by the Warrant Holders or by any
underwriter of the Registrable Securities.
Section 2.3 Registration Procedures.
Section 2.3.1 Shelf Registration. In connection
with a Shelf Registration, Brooke shall use its reasonable best efforts to
effect such registration to permit the sale of Registrable Securities in
accordance with the method or methods of disposition reasonably intended by the
Warrant Holders, and pursuant thereto Brooke shall:
(a) Filing of Registration Statement. Before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, furnish to and afford the Warrant Holders of the Registrable
Securities covered by such
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Registration Statement, and the managing underwriters, if any, a
reasonable opportunity to review and, if they desire, comment on all
such documents (including any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed.
(b) Compliance with Law. Comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to it with respect to the
disposition of all Registrable Secu rities covered by such
Registration Statement as amended or by such Prospectus as
supplemented.
(c) Notice. Notify the Warrant Holders owning the Registrable
Securities covered by the Registration Statement, and the managing
underwriters, if any, promptly, and confirm such notice in writing (i)
when a Registration Statement and an amendment thereto or a Prospectus
or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective
(including in such notice a written statement that any such Warrant
Holder may, upon request, obtain, without charge, one conformed copy
of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed
to be incor porated by reference and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the
use of any Preliminary Prospectus, the initiation of any proceedings
for that purpose or any other communication between the SEC and Brooke
or their rep resentatives related to a Shelf Registration, (iii) if at
any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Securities, the
representations and warranties of Brooke contained in any agreement
(including any underwriting agreement) contemplated by Section
2.3.1(m) cease to be true and correct, (iv) of the receipt by Brooke
of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration
Statement or any of the Registrable Securities for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, (v) of the happening of any event or any information
becoming known that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case
of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
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statements therein not misleading, and, in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
and (vi) of Brooke's determination that a post-effective amendment to
a Registration Statement would be necessary or advisable under
applicable law.
(d) Prevent Suspension of Effectiveness. Use its reasonable
best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing
or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities
for offers or sales in any jurisdiction, and, if any such order is
issued, use its reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible moment.
(e) Underwritten Offering. If the Registrable Securities are
to be sold in an underwritten offering, (i) as promptly as is
reasonably practicable incorporate in a prospectus supplement or
post-effective amendment to the Registration Statement such
information as is required by the Securities Act, Regulation S-K of
the Regulations, the Regulations and instructions applicable to the
registration form used for such Registration Statement to be disclosed
concerning, among other things, the terms of the underwritten
offering, the underwriters, and the plan of distribution and (ii) make
all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable.
(f) Copies of Filings. Furnish to the Warrant Holders owning
Registrable Securities that so request and each managing underwriter,
if any, without charge, one conformed copy of the Registration
Statement and each post-effective amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) Delivery of Prospectus. Deliver to the Warrant Holders
owning Registrable Securities, and the underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including
each form of Preliminary Prospectus) and each amendment or supplement
thereto and any documents incorporated or deemed to be incorporated by
reference therein as such Persons may reasonably request; and Brooke
hereby consents to the use of each such Prospectus and
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Preliminary Prospectus and each amendment or supplement thereto by
each of the selling Warrant Holders and the underwriters or agents, if
any, and dealers, if any, in connection with the offering and sale of
the registrable Securities covered by such Prospectus and any
amendment or supplement thereto in the manner set forth in the
relevant Registration Statement.
(h) Blue Sky Laws. Use its reasonable best efforts to
register or qualify, and to cooperate with the selling Warrant Holders
with respect to the Registrable Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification)
of such Registrable Securities for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States as
such Warrant Holders or the managing underwriters, if any, reasonably
request in writing; keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period; and do
any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement in the
manner set forth in such Registration Statement; provided, however,
that Brooke shall not be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B)
subject itself to general service of process in any such jurisdiction
where it is not then so subject or (C) subject itself to taxation in a
material amount in any such jurisdiction.
(i) Certificates. Cooperate with the selling Warrant Holders
with respect to Registrable Securities and the managing underwriters,
if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and
enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or
Warrant Holders may reasonably request.
(j) Governmental Agencies. Use its reasonable best efforts to
cause the Registrable Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies,
or authorities as may be necessary to enable the selling Warrant
Holders thereof or the underwriters, if any, to consummate the
disposition of
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such Registrable Securities in the manner set forth in such
Registration Statement, except as may be required solely as a
consequence of the nature of such selling Warrant Holder's business,
in which case Brooke will cooperate in all reasonable respects with
the filing of such Registration Statements and the granting of such
approvals.
(k) Amendments and Supplements. Subject to Sections 2.3.1(a)
and 2.3.1(q), upon the occurrence of any event contemplated by Section
2.3.1(c)(v) or 2.3.1(c)(vi), as promptly as practicable prepare and
file with the SEC a post- effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to
the purchasers of Registrable Securities being sold thereunder, the
Registration Statement and such Prospectus will not contain an untrue
statement of a material fact or omit to state 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.
(l) Listing on Securities Exchanges. Use its reasonable best
efforts to cause all Registrable Securities covered by a Registration
Statement to be (i) listed on each national securities exchange, if
any, on which Registrable Securities are then listed, or (ii)
authorized to be quoted on the NASDAQ Stock Market or the NASDAQ
National Market if similar securities of Brooke are so authorized.
(m) Underwriting Agreement. In connection with an
underwritten offering of Registrable Securities, enter into and
perform its obligations under an underwriting agreement in customary
form for underwritten offerings made by selling security holders on
the registration form utilized for the relevant Registration Statement
and take such other actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the
registration and the disposition of such Registrable Securities, and
in such connection, (i) make such representations and warranties to
the underwriters with respect to the business of Brooke and its
subsidiaries, and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein in each case as are customarily made by comparable
issuers to underwriters in underwritten offerings made by selling
security holders, and confirm the same if and when requested; (ii)
obtain opinions of counsel to Brooke and updates thereof (which
counsel and opinions shall be reasonably satisfactory to the managing
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underwriters and the selling Warrant Holders), addressed to the
underwriters covering the matters customarily covered in opinions
requested in underwritten offerings by selling security holders; (iii)
obtain "cold comfort" letters and updates thereof (which letters and
updates shall be reasonably satisfactory to the managing underwriters
and the selling Warrant Holders) from the independent certified public
accountants of Brooke (and, if necessary, any other independent
certified public accountants of any subsidiary of Brooke or of any
business acquired by Brooke for which financial statements and
financial data are, or are required to be, included in the
Registration Statement), addressed to each of the underwriters and the
holders of Registrable Securities included in such underwritten
offering (to the extent such accountants are permitted under
applicable law and accounting literature so to address "cold comfort"
letters), such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection
with underwritten offerings by selling security holders; and (iv) if
an underwriting agreement is entered into, undertake such
indemnification and contribution provisions and procedures as are
customarily undertaken in such agreements. The above shall be done in
connection with each closing under such underwriting agreement, or as
and to the extent required thereunder.
(n) Financial Records, Etc.. Make available for inspection by
any Warrant Holder, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Warrant Holder
or underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of Brooke
and its subsidiaries (collectively, the "Records") as shall be
necessary or advisable to enable them to exercise their due diligence
responsibilities, and cause the officers, directors and employees of
Brooke and its subsidiaries to supply all information reasonably
requested by any such Inspectors in connection with such Registration
Statement. Records which Brooke determines, in good faith, to be
confidential and as to 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
misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public.
Except as contemplated hereby, and
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subject to applicable law, each selling Warrant Holder agrees that
information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of Brooke or its affiliates
unless and until such information is made generally available to the
public. Warrant Holders shall not be prohibited from engaging in
market transactions if such information is not material, to the extent
permitted by applicable law. Each selling Warrant Holder further
agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to Brooke and
allow Brooke at its expense to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
(o) Earnings Statements. Comply with all applicable rules and
regulations of the SEC relating to the Shelf Registration and make
generally available earnings statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promulgated under the Securities Act) no later than 45
days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold
to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of Brooke
after the effective date of a Registration Statement which statements
shall cover such 12-month periods.
(p) Disposition of Registrable Securities. Cooperate with
each holder of Registrable Securities covered by any Registration
Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(q) Postponement or Suspension of Shelf Registration.
Notwithstanding anything contained in this Section 2, Brooke may
postpone, for a period of not in excess of 30 days in the aggregate in
any twelve month period, taking any action with respect to or suspend
the Shelf Registration if, in the good faith opinion of Brooke's board
of directors, effecting or continuing the Shelf Registration would
adversely affect a material financing, acquisition, disposition of
assets or stock, merger or other comparable transaction or would
require Brooke to make public disclosure of information the
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public disclosure of which would have a material adverse effect upon
Brooke.
(r) Delivery of Opinion. Upon the filing of any Registration
Statement, deliver to the Warrant Holders an opinion or opinions of
outside counsel to Brooke (which counsel shall be reasonably
satisfactory to the Warrant Holders), to the effect that nothing has
come to the attention of such counsel that causes such counsel to
believe that such Registration Statement contains, as of its effective
date, any untrue statement of a material fact necessary to make the
statements therein not misleading, it being understood that any such
opinion may contain customary limitations thereof.
(s) Further Assurances. Use its reasonable best efforts to
take all other steps necessary or advisable, requested by the Warrant
Holders, to effect the registration and distribution of the
Registrable Securities covered by the Registration Statement
contemplated hereby.
Section 2.3.2 Warrant Holder Covenants. In
addition to the covenants provided in Section 6.2, each Warrant Holder agrees
by acquisition of the Registrable Securities that, upon receipt of any notice
from Brooke of the happening of any event of the kind described in clause (ii),
(iv), (v) or (vi) of Section 2.3.1(c), such Warrant Holder shall forthwith
discontinue disposition of such Registrable Securities covered by such
Registration Statement or Prospectus until such Warrant Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section
2.3.1(k), or until it is advised in writing by Brooke that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto.
ARTICLE 3
REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance
with this Agreement by Brooke shall be borne by Brooke, whether or not a Shelf
Registration is filed or becomes effective, including (i) all registration and
filing fees (including (A) fees with respect to filings required to be made
with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including
reasonable fees and disbursements of counsel for Brooke or the underwriters, or
both, in connection with Blue Sky qualifications of the Registrable
Securities)), (ii) printing expenses (including expenses of printing
certificates for Registrable Securities, printing and distributing
Prospectuses,
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Preliminary Prospectuses and amendments or supplements thereto, the
Registration Statement and amendments thereto, and printing or preparing any
underwriting agreement, agreement among underwriters and related syndicate or
selling group agreements, pricing agreements and Blue Sky memoranda), (iii)
fees and disbursements of counsel for Brooke, (iv) fees and disbursements of
all independent certified public accountants for Brooke (including the expenses
of any "cold comfort" letters required by or incident to such performance), (v)
Securities Act liability insurance, if Brooke so desires such insurance, (vi)
internal expenses of Brooke (including all salaries and expenses of officers
and employees of Brooke performing legal or accounting duties), (vii) the fees
and expenses incurred in connection with the listing of the securities to be
registered and any national securities exchange or quoted on the NASDAQ Stock
Market or the NASDAQ National Market pursuant to section 2.3.1(1), and (viii)
the fees and expenses of any Person, including special experts, retained by
Brooke in its sole discretion.
Each selling Warrant Holder shall pay all underwriting
discounts and commissions or broker's commissions incurred in connection with
the sale or other disposition of Registrable Securities for or on behalf of
such Warrant Holder's account. Brooke shall pay all fees and disbursements of
legal counsel for such selling Warrant Holder, up to a maximum of $50,000.
ARTICLE 4
INDEMNIFICATION
Section 4.1 Indemnification by Brooke. Brooke shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Warrant Holder and its affiliates and any investment
funds managed thereby and their respective partners, officers, directors,
agents and employees, each Person who controls each such Warrant Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the partners, officers, directors, agents and employees of each such
controlling person, (individually, an "Indemnified Person") from and against
any and all losses, claims, damages, liabilities, costs (including costs of
investigating, preparing to defend, defending and appearing as a third-party
witness and attorneys' fees and disbursements reasonably incurred) and expenses
including any amounts paid in respect of any settlements (collectively,
"Losses"), without duplication, as incurred, arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of prospectus, or in any amendment
or supplements thereto or in any Preliminary Prospectus, or arising out of or
based upon, in the case of the Registration Statement or any amendments
thereto, any omission or
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alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, and, in the case of the
Prospectus or form of prospectus, or in any amendments or supplements thereto,
or in any Preliminary Prospectus, any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except (i), in either case, to the extent, but only to the extent,
that such untrue or alleged untrue statement or omission or alleged omission
has been made therein in reliance upon and in conformity with information
furnished in writing to Brooke by such Indemnified Person (or the person
controlling such Indemnified Person) expressly for use therein, (ii) to the
extent such Losses result from the failure of any Warrant Holder or any
underwriter in an underwritten offering to provide to any person purchasing
Registrable Securities from it any supplement to a Prospectus provided by
Brooke pursuant to Section 2.3.1(g), or (iii) to the extent such Losses result
from the sale of Registrable Securities by such Warrant Holder or underwriter
in an underwritten offering (a) under a Registration Statement or (b) using any
Prospectus, other than a Registration Statement or a Prospectus, as the case
may be, amended or supplemented by Brooke pursuant to Section 2.3.1(k) and
provided to such Warrant Holder or such underwriter pursuant to Section
2.3.1(g), after Brooke shall have notified such Warrant Holder or such
underwriter in an underwritten offering in writing of any event contemplated by
Section 2.3.1.(c)(v) or 2.3.1(c)(vi) pursuant to Section 2.3.1(c).
Section 4.2 Indemnification by Warrant Holder. In connection
with any Registration Statement in which a Warrant Holder is participating,
such Warrant Holder shall, without limitation as to time, indemnify and hold
harmless, to the fullest extent permitted by law, Brooke and its directors,
officers, agents and employees, each Person who controls Brooke (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
person, from and against, any and all Losses, joint or several, without
duplication, as incurred, arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any Registration Statement,
Prospectus or form of prospectus, or in any amendment or supplement thereto or
in any Preliminary Prospectus, or arising out of or based upon, in the case of
the Registration Statement or any amendments thereon, any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, and, in the case of the Prospectus or
form of prospectus, or in any amendments or supplements thereto, or in any
Preliminary Prospectus, any omission or alleged omission of a material fact
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necessary to make the statements therein, in the light of the circumstances
under the statements therein, in the light of the circumstances under which
they were made, not misleading; in either case, to the extent, but only to the
extent, that such untrue or alleged untrue statement or omission or alleged
omission has been made therein in reliance upon and in conformity with
information furnished in writing to Brooke by such Warrant Holder expressly for
use therein by notice referring to this Section 4.2. In no event shall the
liability of any selling Warrant Holder hereunder be, or be claimed by Brooke
to be greater in amount than the dollar amount of the proceeds actually
received by such Warrant Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
Section 4.3 Conduct of Indemnification Proceedings. If any
Person shall be entitled to indemnity or contribution hereunder (an
"indemnified party"), such indemnified party shall give prompt notice to the
party or parties from which such indemnity or contribution is sought (the
"indemnifying parties") of the commencement of any action or proceeding
(including any governmental investigation) (collectively "Proceedings" and
individually a "Proceeding") with respect to which such indemnification or
contribution is sought pursuant hereto; provided, however, that the failure so
to notify the indemnifying parties shall not relieve the indemnifying parties
from any obligation or liability except to the extent that the indemnifying
parties have been actually prejudiced by such failure. The indemnifying parties
shall have the right, exercisable by giving written notice to an indemnified
party promptly after the receipt of written notice from such indemnified party
of such Proceeding, to assume, at the indemnifying parties' expense, the
defense of any such Proceeding, with counsel reasonably satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such Proceeding; provided, however, that an indemnified
party or parties (if more than one such indemnified party is named in any
Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such indemnified party or parties
unless: (i) the indemnifying party or parties agree to pay such fees and
expenses; or (ii) the indemnifying parties fail promptly to assume the defense
of such Proceeding or fail to employ counsel reasonably satisfactory to such
indemnified party or parties; or (iii) counsel for the indemnified party
determines that one counsel may not properly represent both the indemnifying
party and such indemnified party in which case, if such indemnified party or
parties notifies the indemnifying parties in writing that it elects to employ
separate counsel at the expense of the indemnifying parties, the
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indemnifying parties shall not have the right to assume the defense thereof and
the fees and expenses of counsel retained by the indemnified party or parties
shall be at the expense of the indemnifying parties, it being understood,
however, that the indemnifying parties shall not, in connection with any one
such Proceeding, 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 (together with appropriate local counsel) at any time for such
indemnified party or parties. Whether or not such defense is assumed-by the
indemnifying parties, such indemnifying parties will not be subject to any
liability for any settlement made without its or their consent (but such
consent will not be unreasonably withheld). No indemnifying party shall be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent each indemnifying
party jointly and severally agrees, subject to the exception and limitations
set forth above, to indemnify and hold harmless each indemnified party from and
against any Losses by reason of such settlement.
Section 4.4 Contribution. If the indemnification provided for
in this Article 4 is unavailable to an indemnified party or is insufficient to
hold such indemnified party harmless for any Losses in respect to which this
Article 4 would otherwise apply by its terms, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall have an obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well an any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied
by, such indemnifying party or indemnified party, and the parties, relative
intent, knowledge, access to information and opportunity to correct or prevent
any such action, statement or omission. The amount paid or payable by a party
as a result of any Losses shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any Proceeding,
to the extent such party would have been indemnified for such expenses if the
applicable indemnification provided for in Section 4.1, 4.2 or 4.3 were
available to such party.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4.5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 4.5, an indemnifying
party that is a selling Warrant Holder shall not be required to contribute any
amount in excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and distributed to the
public were offered to the public (net of any underwriting discounts and
commissions and expenses) exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay or has paid by reason of
such untrue or alleged untrue statement or omission or alleged omission. 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 4.5 Remedies Cumulative. The indemnity, contribution
and expense reimbursement obligations under this Article 4 shall be in addition
to any liability that each indemnifying person may otherwise have and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party. Notwithstanding anything in this
Agreement to the contrary, an indemnified party- shall not be entitled to
receive duplicate indemnification or contribution for the same Losses (except
to the extent they are incurred more than once).
ARTICLE 5
UNDERWRITTEN REGISTRATION
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Warrant Holders holding at least 66 2/3% in interest of the applicable
Registrable Securities with the consent of Brooke (not to be unreasonably
withheld or delayed).
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.1 Representations and Warranties. Brooke
represents and warrants to, and agrees with, the Warrant Holders
that:
(a) Subject to the terms of Section 2.3.1(q), during the
Effectiveness Period, the Registration Statement (and
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any post-effective amendment thereto) and the Prospectus (as amended
or as supplemented if Brooke shall have filed with the SEC any
amendment or supplement to the Registration Statement or the
Prospectus) will contain all statements which are required to be
stated therein in accordance with the Securities Act and the
Regulations, and will not contain any untrue statement of a material
fact or omit to state any material fact (except such information which
is omitted from the Registration Statement pursuant to Rule 430A Of
the Regulations) required to be stated therein or necessary to make
the statements therein not misleading, and no event will have occurred
which is required to have been set forth in an amendment or supplement
to the Registration Statement or the Prospectus which has not then
been set forth in such an amendment or supplement; each Preliminary
Prospectus, as of the date filed with the SEC, will not include any
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, in light of the circumstances under which they
were made; except that no representation or warranty is made in this
Section 6.1(a) with respect to statements or omissions made in
reliance upon and in conformity with written information furnished to
Brooke pursuant to Section 6.2(b) by a Warrant Holder or on behalf of
a Warrant Holder expressly for inclusion in any Preliminary
Prospectus, the Registration Statement, or the Prospectus, or any
amendment or supplement thereto. Each of the documents filed pursuant
to the Exchange Act and incorporated or deemed to be incorporated by
reference in the Registration Statement will comply in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder.
(b) Brooke has all requisite power and authority to execute,
deliver and perform this Agreement. All necessary corporate
proceedings of Brooke have been duly taken by it to authorize the
execution, delivery, and performance of this Agreement by Brooke. This
Agreement has been duly authorized, executed, and delivered by Brooke,
is the legal, valid and binding obligation of Brooke, and is
enforceable as to Brooke in accordance with its terms. No consent,
authorization, approval, order, license, certificate, or permit of or
from, or declaration or filing with, any federal, state, local, or
other governmental authority or any court or other tribunal is
required by Brooke for the execution, delivery or performance of this
Agreement by Brooke (except filings under the Securities Act which
will be made and such consents consisting only of consents under Blue
Sky or state securities laws which will be obtained). No consent of
any party to any contract, agreement,
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instrument, lease, license, arrangement or understanding to which
Brooke is a party or to which any of its properties or assets are
subject, is required for the execution, delivery or performance of
this Agreement which has not been obtained; and the execution,
delivery, and performance of this Agreement will not violate, result
in a breach of, conflict with or (with or without the giving of notice
or the passage of time or both) entitle any party to terminate or call
a default under any such contract agreement, instrument, lease,
license, arrangement or understanding or violate or result in a breach
of any term of the charter or bylaws of Brooke, or violate, result in
a breach of, or conflict with any law, rule, regulation order,
judgment or decree binding on Brooke or to which any of its
operations, business, properties or assets are subject.
(c) Brooke shall not enter into any transaction involving (i)
any merger or consolidation in which it is not the surviving Person,
(ii) any sale, lease or other transfer of all or substantially all the
assets of Brooke or (iii) in the case of Brooke, any exchange or
conversion of any of the Registrable Securities for or into securities
of any other issuer, unless effective provision is made for (x) the
assumption by the survivor of the transaction or the transferee,
jointly and severally with Brooke if Brooke shall remain in existence,
of all the obligations of Brooke hereunder, and (y) in the case of
clause (iii), the entering into by such other issuer of an agreement
comparable hereto and reasonably satisfactory to the Warrant Holders
with respect to the registration of such securities of such other
issuer.
Section 6.2 Additional Warrant Holder Covenants. Each Warrant
Holder represents and warrants (severally) to (in the case of Section 6.2(a)),
and agrees with (severally) (in the case of Section 6.2(b)), Brooke, that:
(a) Such Warrant Holder is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization. Such Warrant Holder has all requisite power and
authority to execute, deliver and perform this Agreement. All
necessary proceedings of such Warrant Holder have been duly taken to
authorize the execution, delivery and performance of this Agreement by
such Warrant Holder. This Agreement has been duly authorized by such
Warrant Holder, executed and delivered by such Warrant Holder, is the
legal, valid and binding obligation of such Warrant Holder, and is
enforceable as to such Warrant Holder in accordance with its terms. No
consent, authorization, approval, order, license,
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certificate, or permit of or from, or declaration or filing with any
federal, state, local or other governmental authority or any court or
other tribunal is required by such Warrant Holder for (i) the
execution, delivery or performance of this Agreement by such Warrant
Holder or (ii) the sale of disposition of the Registrable Securities
by such Warrant Holder as contemplated by the Registration Statements
(except filings under the Securities Act and such consents consisting
only of consents under Blue Sky or state securities laws). No consent
of any party to any contract, agreement, instrument, lease, license,
arrangement or understanding to which such Warrant Holder is a party,
or to which any of such Warrant Holder's properties or assets are
subject, is required for the execution, delivery or performance of
this Agreement which has not been obtained; and the execution,
delivery and performance of this Agreement will not violate, result in
a breach of, conflict with or (with or without the giving of notice or
the passage of time or both) entitle any party to terminate or call a
default under any such contract, agreement, instrument, lease,
license, arrangement or understanding or violate or result in a breach
of any term of such Warrant Holder's certificate or articles of
incorporation (or similar controlling instrument) or bylaws (or, if
applicable, instrument corresponding thereto) or violate, result in a
breach of, or conflict with, any law, rule, regulation, order,
judgment or decree binding on such Warrant Holder or to which any such
Warrant Holder's operations, business, properties or assets are
subject.
(b) Each Warrant Holder shall promptly furnish to Brooke in
writing, upon Brooke's reasonable request, any and all information as
to such Warrant Holder and its plan of distribution as may be
necessary to comply with the provisions of the Securities Act, the
Regulations, the Exchange Act and the rules and regulations of the SEC
thereunder in connection with the preparation and filing of any
Registration Statement pursuant hereto, or any amendment or supplement
thereto, or any Preliminary Prospectus or Prospectus included therein.
All information to be furnished to Brooke by or on behalf of such
Warrant Holder expressly for use in connection with the preparation of
any Preliminary Prospectus, the Prospectus, the Registration
Statement, or any amendment or supplement thereto, will be accurate,
complete and correct.
Section 6.3 Survival of Representations and Agreements. All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the
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effective date of each Registration Statement contemplated by this Agreement,
and such representations, warranties, covenants, and agreements, including the
indemnity and contribution agreements contained in Article 4, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Brooke any Warrant Holder or any Person that is entitled to be
indemnified under Article 4, and shall survive termination of this Agreement
and the expiration of the Effectiveness Period.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Remedies . No failure or delay on the part of a
party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
Section 7.2 Amendments and Waivers. The provisions of
Articles 2, 3, 4 and 5 (and the provisions of this Section 7.2 as they apply
thereto) may not be amended, modified, supplemented, waived or departed from
without the express written consent of each affected party. The other
provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless Brooke has obtained the
written consent of the holders of at least 66 2/3% in interest of the
Registrable Securities or Warrant Holders, as applicable. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of the Warrant
Holders that are selling securities pursuant to a Registration Statement and
that does not directly or indirectly affect, impair, limit or compromise the
rights of other Warrant Holders may be given by the Warrant Holders selling at
least 66 2/3% of the Registrable Securities being sold by pursuant to such
Registration Statement; provided, however, that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
Section 7.3 Notices. All notices, consents and other
communications provided for hereunder shall be in writing (including facsimile,
telegraphic or cable communication) and telecopied, telegraphed, telexed,
cabled or delivered (x) (i) if to Brooke, to Brooke Group Ltd., 000 X.X. Xxxxxx
Xxxxxx, 00xx Xxxxx, Xxxxx, Xxxxxxx 00000, attention: Xxxxxxx X. XxXxx, telecopy
(000) 000-0000, with a copy to Milbank, Tweed, Xxxxxx & XxXxxx, 0 Xxxxx
Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
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attention: Xxxxxxx X. Xxxxxxxxxx, telecopy (000) 000-0000, and (ii) if to the
Warrant Holders, to the respective addresses and telecopier numbers set forth
in Exhibit A, with a copy to Apollo Advisors, 1999 Avenue of the Stars, Xxxxx
0000, Xxx Xxxxxxx, Xxxxxxxxxx, 00000, attention: Xxxxxxx Xxxxxx, telecopy (310)
201-4166, or (y) at such other address as shall be designated by any such party
in a written notice to the other parties. All such notices, consents and
communications shall be effective when received.
Section 7.4 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 7.5 Entire Agreement; No Third Party Beneficiaries;
Obligations of Brooke. This Agreement (including the documents and the
instruments expressly referred to herein or therein) (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (ii)
except as expressly set forth in Article 4 and in Section 7.8, is not intended
to confer upon any Person other than the parties hereto and the Warrant Holders
and holders of Registrable Securities any rights or remedies hereunder. The
obligations of Brooke pursuant hereto shall be limited to those obligations of
Brooke expressly set forth herein.
Section 7.6 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
Section 7.7 Severability. Wherever possible, each provision
hereof shall be interpreted in such a manner as to be valid, legal and
enforceable under applicable law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating or rendering unenforceable the remainder
of this Agreement, unless such a construction would be unreasonable or
materially impair the rights of any party hereto.
Section 7.8 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other
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parties, except by a Warrant Holder as follows: in connection with the transfer
of its Warrants or Registrable Securities in whole or in part to another
Person; provided that the transferee executes an appropriate document agreeing
to be bound hereby as a Warrant Holder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
"Brooke"
Brooke Group Ltd.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Its: Executive Vice President
"Warrant Holders"
AIF II, L.P.
By: APOLLO ADVISORS, L.P.
Managing General Partner
By: APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Title:
ARTEMIS AMERICA PARTNERSHIP
By: LION ADVISORS, L.P.
Attorney-in-Fact
By: LION CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ Xxxx X. Xxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxx
Title:
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EXHIBIT A
WARRANT HOLDERS
Artemis America Partnership
AIF II, L.P.
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