EXHIBIT 10.20
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of this
___ day of ______________, 1997, by and among EPI Technologies, Inc., a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx ("Xxxxxx"),
Xxxxxx Xxxxx ("Xxxxx"), MNP Corporation, a Michigan corporation ("MNP"), and
Xxxxx Xxxxxxxx ("Mendogni" and, collectively with Xxxxxx, Xxxxx and MNP, the
"Investors").
PREAMBLE
WHEREAS, each of Xxxxxx, Xxxxx and MNP (collectively, the "Minority
Stockholders") own 83,333.33 shares of the Company's common stock, par value
$.01 per share ("Common Stock"), and warrants to purchase 50,000 shares of
Common Stock ("Minority Stockholder Warrants") and Mendogni owns warrants to
purchase 500,000 shares of Common Stock ("Bridge Warrants");
WHEREAS, the Minority Stockholders, among other things, have waived
certain registration rights with respect to their shares of Common Stock in
connection with the Company's initial public offering of shares of Common
Stock (the "IPO");
WHEREAS, effective upon the completion of the IPO, the warrants held by
Mendogni automatically convert into warrants being offered by the Company in
the IPO; and
WHEREAS, the Company desires to extend certain registration rights with
respect to the Registerable Securities (as hereinafter defined) to the
Investors.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the Company and the Investors agree as follows:
Section 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "business day" shall mean any day which is not a Saturday,
Sunday or public holiday under the laws of the United States of America or
the State of Ohio.
(b) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
(c) "Holder" shall mean each of the Investors and anyone who
holds outstanding Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with this
Agreement.
(d) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
(e) "Registrable Securities" shall mean all of the following to
the extent the same have not been sold to the public: (i) any and all shares
of Common Stock held by a Minority Stockholder on the date of this Agreement;
(ii) the Minority Stockholder Warrants; (iii) the shares of Common Stock
underlying the Minority Stockholder Warrants; (iv) the Bridge Warrants; (v)
the shares of Common Stock underlying the Bridge Warrants; (vi) shares of
capital stock issued in respect of shares of Common Stock referred to in (i),
(iii) and (v) above in any reorganization; and (vii) shares of capital stock
issued in respect of the shares of Common Stock referred to in (i) through
(vi) as a result of a stock split, stock dividend, recapitalization or
combination. Notwithstanding the foregoing, Registrable Securities shall not
include otherwise Registrable Securities (1) sold by a person in a
transaction in which his, her or its rights under this Agreement are not
properly assigned; (2) (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof, in
either case such that all transfer restrictions, and restrictive legends with
respect thereto, if any, are removed upon the consummation of such sale; or
(3) the registration rights associated with such securities have been
terminated pursuant to Section 8 of this Agreement.
(f) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
Section 2. PIGGYBACK REGISTRATION.
(a) If, at any time during the term of this Agreement, the
Company proposes to prepare and file any registration statement or
post-effective amendments thereto covering equity or debt securities of the
Company, or any such securities of the Company held by its stockholders
(other than pursuant to a Form S-4 relating to a merger or acquisition or
pursuant to a Form S-8 or successor form) (for purposes of this Agreement,
collectively, a "Registration Statement"), it will give written notice of its
intention to do so at least thirty (30) days prior to the filing of each such
Registration Statement, to all Holders of Registrable Securities. Upon the
written request of such a Holder (a "Requesting Holder"), made within twenty
(20) business days after receipt of notice from the Company of its intention
to file a Registration Statement, that the Company include any of the
Requesting Holder's Registrable Securities in the proposed Registration
Statement, the Company shall, as to each such Requesting Holder, use its best
efforts to effect the registration under the Securities Act of the
Registrable Securities which it has been so requested to register; PROVIDED,
HOWEVER, that the Company shall in any event be entitled to withdraw such
Registration Statement prior to its effectiveness if such Registration
Statement is withdrawn as to all securities proposed to be registered
thereunder.
(b) If the Registration Statement is for a registered public
offering involving an underwriting, the Company shall so advise the Holders
as a part of the Notice given pursuant to subsection 2(a). In such event,
the right of any Requesting Holder to registration pursuant to this Section 2
shall be conditioned upon such Requesting Holder's participation in such
underwriting and the inclusion of such Requesting Holder's Registrable
Securities in the underwriting to the extent provided herein. All Requesting
Holders proposing to distribute their securities through such
2
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 2, if the managing underwriter(s) determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter(s) may limit the number of Registrable
Securities to be included in the proposed Registration Statement and
underwriting, or may exclude Registrable Securities entirely from such
Registration Statement. The Company shall so advise all Requesting Holders
and the other holders distributing their securities through such underwriting
pursuant to piggyback registration rights similar to this Section 2, and the
number of shares of Registrable Securities and other securities that may be
included in the proposed Registration Statement and underwriting shall be
allocated among all Requesting Holders and other holders in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities
sought to be registered held by such Requesting Holders and other securities
held by other holders which such holders seek to register in connection with
the proposed Registration Statement. If any Requesting Holder disapproves of
the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. If, by the
withdrawal of such Registrable Securities, a greater number of Registrable
Securities held by other Requesting Holders may be included in such
registration (up to the limit imposed by the underwriters), the Company shall
offer to all Requesting Holders and the other holders the right to include
additional Registrable Securities in the Registration Statement on a PRO RATA
basis. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such Registration Statement.
(c) Notwithstanding anything to the contrary in this Agreement,
in no event shall a Holder be permitted to exercise registration rights with
respect to a Registration Statement filed by the Company with the Commission
pursuant to a demand registration under the terms of that certain
Underwriter's Warrant Agreement dated as of _______________, 1997 between the
Company and Duke & Co., Inc., a Florida corporation ("Duke"), without the
prior written consent of the person or persons making such demand
registration request.
(d) Notwithstanding anything to the contrary in this Agreement,
none of the Minority Stockholders shall be permitted to exercise the
piggyback registration rights set forth in Section 2.1(a) of this Agreement
for a period of three (3) years commencing on the date first written above.
Section 3. EXPENSES OF REGISTRATION. All expenses incurred in
connection with registrations pursuant to Section 2 hereof, including without
limitation all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company and expenses of
any special audits of the Company's financial statements incidental to or
required by such registration, shall be borne by the
3
Company, except that the Company shall not be required to pay underwriters'
fees, discounts or commissions relating to Registrable Securities or fees of
separate legal counsel of a Holder.
Section 4. REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep
each Requesting Holder participating therein advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense the Company will:
(a) promptly prepare and file with the Commission such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Securities Act;
(b) furnish such number of prospectuses and other documents
incident thereto as a Requesting Holder from time to time may reasonably
request;
(c) use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of
any suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction, at the earliest possible moment;
(d) register or qualify such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions as the
underwriter(s), if any, reasonably requires;
(e) cause all Registrable Securities covered by such
registrations to be listed on each securities exchange or quotation system,
including the Nasdaq Small Cap Market, on which similar securities issued by
the Company are then listed or quoted;
(f) use reasonable efforts to cause its accountants to issue to
the underwriter, if any, or the Requesting Holders, if there is no
underwriter, comfort letters and updates thereof, in customary form and
covering matters of the type customarily covered in such letters with respect
to underwritten offerings;
(g) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
Requesting Holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities (including, without
limitation, effecting a stock split or a combination of shares);
(h) make available for inspection by any Requesting Holder, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
Requesting Holder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such Requesting Holder, underwriter,
attorney, accountant or agent in connection with such Registration Statement;
4
(i) deliver promptly to each Requesting Holder whose securities
are included in a Registration Statement copies of all correspondence between
the Commission and the Company, its counsel or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to the
Registration Statement;
(j) if the offering is underwritten, at the request of any
Requesting Holder to use its reasonable efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration an opinion in the customary form of counsel representing
the Company for the purposes of such registration; and
(k) notify each Requesting Holder, at any time a prospectus
covered by such Registration Statement is required to be delivered under the
Securities Act, of the happening of any event of which it has knowledge as a
result of which the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
Section 5. INDEMNIFICATION.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 2, the Company will
indemnify and hold harmless each Holder of such Registrable Securities
thereunder, each underwriter of such Registrable Securities thereunder and
each other person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Holder, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Securities were registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
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 any rule or regulation promulgated under the
Securities Act or any state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any
reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability
or action, provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company, each
of its directors and officers, each underwriter, if any, of the Company's
5
securities covered by such a Registration Statement, each person who controls
the Company and each underwriter within the meaning of the Securities Act,
and each other such Holder, each of its officers, directors and partners and
each person controlling such Holder, against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement or alleged untrue statement of any material
fact contained in any such Registration Statement, prospectus, offering
circular or other document, or 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, and will reimburse the Company, such
Holders, such directors, officers, partners, persons or underwriters for any
reasonable legal or any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability
or action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) 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 such Holder specifically for use
therein; provided, however, the aggregate amount for which any Holder, its
officers, directors and partners, and any person controlling such Holder,
shall be liable under this Section 5(b) shall not in any event exceed the
aggregate proceeds received by such Holder from the sale of Registrable
Securities sold by such Holder in such registration.
(c) Each party entitled to indemnification under this Section 5
(the "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 claims 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
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such 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 hereunder, unless such failure
resulted in actual detriment to the Indemnifying Party. 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 of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that the
provisions on indemnification contained in the underwriting agreements
entered into among the selling Holders, the Company and the underwriters in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall be
controlling as to the Registrable Securities included in the public offering.
(e) If the indemnification provided for in this Section 5 is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred
to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim, damage
or expense in such proportion as
6
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other hand in connection with
the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations.
The relevant fault of the Indemnifying Party and the Indemnified Party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder shall be obligated to
contribute pursuant to this Section 5(e) shall be limited to an amount equal
to the proceeds to such Holder of the Registrable Securities sold pursuant to
the Registration Statement which gives rise to such obligation to contribute
(less the aggregate amount of any damages which the Holder has otherwise been
required to pay in respect of such loss, claim, damage, liability or action
or any substantially similar loss, claim, damage, liability or action arising
from the sale of such Registrable Securities).
(f) The indemnification provided by this Section 5 shall be a
continuing right to indemnification and shall survive the registration and
sale of any securities by any Person entitled to indemnification hereunder
and the expiration or termination of this Agreement.
Section 6. INFORMATION BY HOLDER. Any Requesting Holder shall promptly
furnish to the Company such information regarding such Requesting Holder and
the distribution proposed by such Requesting Holder as the Company may
request in writing and as shall be required in connection with any
registration referred to herein.
Section 7. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities of a Holder and keep information
available granted to a Holder by the Company under Section 2 may be assigned
by a Holder to any partner or shareholder of such Holder, to any other
Holder, or to a transferee or assignee of an Investor who receives at least
25,000 shares of Registrable Securities (as adjusted for stock splits and the
like); PROVIDED, HOWEVER, that the Company is given written notice by the
Holder at the time of or within a reasonable time after said transfer,
stating the name and address of said transferee or assignee and identifying
the securities with respect to which such registration rights are being
assigned.
Section 8. TERMINATION OF RIGHTS. The rights of any particular Holder
to cause the Company to register securities under Section 2 shall terminate
with respect to such Holder at the earlier of (i) at such time as such
Holder who is not an affiliate of the Company (within the meaning of Rule 405
under the Securities Act) is able to dispose of all of his Registrable
Securities in a three-month period pursuant to the provisions of Rule 144
under the Securities Act, and (ii) the date that is the eighth anniversary
of the date hereof.
Section 9. MISCELLANEOUS.
(a) This Agreement may be amended only by a writing signed by the
Company and Holders of at least seventy-five percent (75%) of the Registrable
Securities (including shares of Common Stock underlying the Minority
Stockholder Warrants and the Bridge Warrants) held by such Holders, as
7
constituted from time to time. The Holders hereby consent to future
amendments to this Agreement that permit future investors, other than
employees, officers or directors of the Company, to be made parties hereto
and to become Holders of Registrable Securities; PROVIDED, HOWEVER, that no
such future amendment may materially impair the rights of the Holders
hereunder without obtaining the requisite consent of the Holders, as set
forth above.
(b) Nothing contained in this Agreement shall be construed as
requiring any Holder to exercise his, her or its Minority Stockholder
Warrants or Bridge Warrants, as the case may be, prior to the initial filing
of any Registration Statement or the effectiveness thereof.
(c) This Agreement may be executed in any number of counterparts,
all of which shall constitute a single instrument.
(d) All notices to be given to any party shall be in writing and
delivered by hand in person, or by express overnight courier service, or by
electronic facsimile transmission (with a copy sent by first-class mail,
postage prepaid), or by registered or certified mail, return receipt
requested, postage prepaid, addressed (a) if to a Holder, at such Holder's
address set forth on the books of the Company, or at such other address as
such Holder shall have furnished to the Company in writing, or (b) if to any
other holder of any Registrable Securities, at such address as such holder
shall have furnished the Company in writing, or, until any such Holder so
furnishes an address to the Company, then to and at the address of the last
Holder of such securities who has so furnished an address to the Company, or
(c) if to the Company, at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000 (Attention:
President), or at such other address as the Company shall have furnished to
the Holders, with a copy to Benesch, Friedlander, Xxxxxx & Aronoff LLP, 0000
XX Xxxxxxx Xxxxxxxx, 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000 (Attention:
Xxxxxxxx X. Xxxx). Any notice given by (i) electronic facsimile will be
effective when confirmed if given prior to 6:00 p.m., local time, on a
business day, otherwise it will be effective on the next succeeding business
day; (ii) overnight courier or personal delivery will be effective on the day
delivered, unless such day is not a business day, in which case it will be
effective on the next succeeding business day; and (iii) registered or
certified mail will be effective three business days after deposit in the
mails, all fees prepaid.
(e) Any other provisions of this Agreement to the contrary
notwithstanding, the Company's obligation to file a Registration Statement,
or cause such Registration Statement to become effective, shall be suspended
for such a period that there exists at the time material non-public
information relating to the Company which, in the reasonable opinion of the
Company, should not be disclosed.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any
manner affect or render illegal, invalid or unenforceable any other provision
of this Agreement, and this Agreement shall be carried out as if any such
illegal, invalid or unenforceable provision were not contained herein.
8
(g) If, and as often as, there is any change in the Common Stock
by way of a stock split, stock dividend, combination or reclassification, or
through a merger, consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in the provisions
hereof so that the rights and privileges granted hereby shall continue with
respect to the Common Stock as so changed.
(h) This Agreement shall be governed by and construed in
accordance with the procedural and substantive laws of the State of Delaware
without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the Company and the Investors have executed this
Registration Rights Agreement as of the date first above specified.
EPI TECHNOLOGIES, INC.
___________________________________________
By: Real Xxxxxxxxx, Chief Financial Officer
___________________________________________
XXXXXXX X. XXXXXX
___________________________________________
XXXXXX XXXXX
MNP CORPORATION
___________________________________________
By:___________________, ___________________
___________________________________________
XXXXX XXXXXXXX
9
