Exhibit 9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of June 2, 1997 among SCIENTECH, INC., an Idaho corporation (the
"Company");PUBLIC SERVICE COMPANY OF OKLAHOMA, an Oklahoma corporation
(hereinafter referred to as "PSO" or "Holder"); and XX. X. X. XXXXXXXXX; the
XXXXXXXXX FAMILY TRUST C-2, Xx. X. X. Xxxxxxxxx Trustee; KR ACQUISITION CORP.,
a Delaware corporation; and XXXXX X. XXXXXXX (collectively with PSO, the
"Holders").
ARTICLE I
RECITALS
1.1 Xx. X. X. Xxxxxxxxx and his Related Trusts and certain of his
Family Members own or control an aggregate of 1,018,329 shares of Common Stock,
par value $.01 per share, of the Company, which ownership constitutes over 50%
of the outstanding voting stock of the Company. Upon the effectiveness of the
amendment to the Company's Articles of Incorporation contemplated by the Stock
Purchase Agreement, all such shares shall become shares of Class A Voting Common
Stock.
1.2 Xx. X. X. Xxxxxxxxx desires to reduce his ownership in the
Company.
1.3 The Company desires to accommodate and facilitate the sale of
a portion of Xx. X. X. Xxxxxxxxx'x stock in order to diversify its shareholder
base.
1.4 PSO has reached an agreement with Xx. X. X. Xxxxxxxxx to acquire
70,000 shares of Class A Voting Common Stock and 436,000 shares of Class B
Nonvoting Common Stock from Xx. X. X. Xxxxxxxxx and the Xxxxxxxxx Family Trust
C-2 (the "C-2 Trust") for consideration that Xx. X. X. Xxxxxxxxx and PSO have
mutually agreed upon.
1.5 The Company desires Xx. X. X. Xxxxxxxxx and the C-2 Trust to
convert 436,000 shares of Class A Voting Common Stock to Class B Nonvoting
Common Stock and to sell 70,000 shares of Class A Common Stock and 436,000
shares of Class B Nonvoting Common Stock to PSO to achieve its goal of
shareholder diversification and to obtain a working relationship with PSO, which
will provide certain synergistic opportunities to the Company as well as the
opportunity for the Company to expand into new geographic territories and new
market opportunities.
1.6 The Board of Directors of the Company has approved the sale by Xx.
X. X. Xxxxxxxxx and the C-2 Trust of 70,000 shares of Class A Voting Common
Stock and 436,000 shares of Class B Nonvoting Common Stock to PSO for all of the
foregoing reasons, has waived its Right of First Refusal under Article VII,
Section 4 of the Company's Bylaws, and has authorized and approved the execution
and delivery of this Agreement to PSO as a material understanding by the Company
of the benefit it will realize as a result of the above described transaction.
1.7 In consideration of the foregoing recitals which constitute
material consideration to the Company, the Company hereby makes the
representations, warranties and covenants contained herein to PSO, as an
inducement to PSO's acquisition of 70,000 shares of Class A Voting Common Stock
and 436,000 shares of Class B Nonvoting Common Stock from Xx. X. X. Xxxxxxxxx
and the C-2 Trust and upon which the Company recognizes that PSO will rely in
making its acquisition of such shares.
ARTICLE II
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" means, as applied to the Company or any other specified
Person, any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with the Company (or other specified Person)
and shall also include (a) any Person who is a director or beneficial owner of
at least 5% of the then outstanding equity securities of the Company (or other
specified Person) and Family Members of any such Person, (b) any Person of which
the Company (or other specified Person) or an Affiliate (as defined in clause
(a) above) of the Company (or other specified Person) shall, directly or
indirectly, either beneficially own at least 10% of the then outstanding equity
securities or constitute at least a 10% equity participant, and (c) in the case
of a specified Person who is an individual, any Family Member of such Person.
"Articles of Incorporation" means the Amended and Restated Articles of
Incorporation of the Company in the form of Exhibit A to the Stock Purchase
Agreement.
"Balance Sheet" means the balance sheet referred to in the definition
of "Financial Statements".
"Balance Sheet Date" means the date of the latest Balance Sheet.
"Broker Costs" means any and all costs, fees and expenses of any
broker, finder or placement agent incurred by the Sellers or PSO in connection
with the transactions contemplated herein.
"Capital Stock" means, as to any Person that is a corporation, the
authorized shares of such Person's capital stock, including all classes of
common, preferred, voting and nonvoting capital stock, and, as to any Person
that is not a corporation or an individual, the ownership interests in such
Person, including, without limitation, the right to share in profits and losses,
the right to receive distributions of cash and property, and the right to
receive allocations of items of income, gain, loss, deduction and credit and
similar items from such Person, whether or not such interests include voting or
similar rights entitling the holder thereof to exercise control over such
Person.
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"Class A Stock" means the Class A Voting Common Stock, par value $0.01
per share, of the Company.
"Class B Stock" means the Class B Nonvoting Common Stock, par value
$0.01 per share, of the Company.
"Closing" has the meaning given such term in Section 2.2 of the Stock
Purchase Agreement.
"Closing Date" has the meaning given such term in Section 2.2 of the
Stock Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Stock and the Class B Stock.
"Company" means SCIENTECH, Inc., an Idaho corporation. It shall also
include its predecessor companies and any Subsidiaries which may now exist or be
established in the future.
"Contracts" has the meaning set forth in Section 3.15 of this Agreement.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of ss.3(3) of ERISA maintained or contributed to by the Company or any
ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" has the meaning given such term in Section 3.22(c)
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, any
successor statute of similar import, and the rules and regulations thereunder,
collectively, and from time to time amended and in effect.
"ERISA Affiliate" means any Person which is treated as a single
employer with the Company under ss. 414 of the Code.
"Escrow Agreement" means that Escrow Agreement among Sellers, PSO and
the Escrow Agent named therein in the form of Exhibit B to the Stock Purchase
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute thereto, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.
"Family Member" means, as applied to any individual, such individual's
spouse, or such individual's child, and each trust created for the exclusive
benefit of one or more of them.
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"Financial Statements" means the audited balance sheet and statement of
income of the Company for the fiscal year ended January 31, 1997 and the
unaudited related balance sheet as of March 28, 1997 (the "Balance Sheet") and
statement of income for the period then ended for the Company.
"Founder" means Xx. X. X. Xxxxxxxxx, the Related Trusts and the Family
Members of Xx. X. X. Xxxxxxxxx who are shareholders of the Company.
"Generally accepted accounting principles" or "GAAP" means accounting
principles which are (a) consistent with the principles promulgated or adopted
by the Financial Accounting Standards Board and its predecessors and other
recognized principle setting bodies, in effect from time to time, (b) applied on
a basis consistent with prior periods, and (c) such that a certified public
accountant would, insofar as the use of accounting principles is pertinent, be
in a position to base an opinion as to financial statements in which such
principles have been properly applied.
"Guaranteed Pension Plan" means any employee pension benefit plan
within the meaning of ss.3(2) of ERISA maintained or contributed to by the
Company or any ERISA Affiliate, the benefits of which are guaranteed on
termination in full or in part by the Pension Benefit Guaranty Corporation
pursuant to Title IV of ERISA, other than a Multiemployer Plan.
"Hazardous Substance" has the meaning given such term in Section
3.22(b) of this Agreement.
"Holders" means Public Service Company of Oklahoma; Xx. X. X.
Xxxxxxxxx; the Xxxxxxxxx Family Trust C-2, Xx. X. X. Xxxxxxxxx, Trustee; KR
Acquisition Corp.; and Xxxxx X. Xxxxxxx; and any other Person(s) holding
Registrable Securities to whom the registration rights have been assigned
pursuant to Section 7.8 of this Agreement, and shall be the singular or plural
where the circumstances of the case so require; provided, however, that any such
assignee shall only be a "Holder" if it gives written notice to that effect to
the Company and agrees to be bound by the terms of this Agreement.
"Indebtedness" means all obligations, contingent and otherwise, which
in accordance with GAAP should be classified on the obligor's balance sheet as
liabilities, or to which reference should be made by footnotes thereto,
including without limitation, in any event and whether or not so classified: (a)
all debt and similar monetary obligations, whether direct or indirect; (b) all
liabilities secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; (c) all
guaranties, endorsements and other contingent obligations whether direct or
indirect in respect of Indebtedness or performance of others, including any
obligation to supply funds to or in any manner to invest in, directly or
indirectly, the debtor, to purchase Indebtedness, or to assure the owner of
Indebtedness against loss, through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment of the
Indebtedness held by such owner or otherwise, and (d) obligations to reimburse
issuers of any letters of credit.
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"Intangible Property" has the meaning given such term in Section 3.18
hereof.
"Licenses" has meaning given such term in Section 3.20 hereof.
"Lien" means (a) any encumbrance, mortgage, pledge, lien, charge or
other security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom; (b) any acquisition of or
agreement to have an option to acquire any property or assets upon conditional
sale or other title retention agreement, device or arrangement (including a
capitalized lease); or (c) any sale, assignment, pledge or other transfer for
security of any accounts, general intangibles or chattel paper, with or without
recourse.
"Material Adverse Effect" has the meaning given such term in Section
3.24 hereof.
"Multiemployer Plan" means a multiemployer plan within the meaning of
Section 3(37) of ERISA.
"Option" means the option granted to PSO by certain of the Sellers to
purchase shares of Common Stock owned by such Sellers, pursuant to Article VII
of the Stock Purchase Agreement.
"Option Securities" means the 206,000 shares of Common Stock PSO may
purchase upon exercise of the Option.
"Person" means an individual, partnership, corporation, association,
trust, joint venture, limited liability company or other unincorporated
organization, and any government, governmental department or agency or political
subdivision thereof.
"PSO" means Public Service Company of Oklahoma, an Oklahoma corporation.
"Purchased Securities" means the securities purchased by PSO from
Sellers pursuant to the Stock Purchase Agreement.
"Registrable Securities" means (a) all Common Stock held by the Holders
from time to time (whether now owned or hereafter acquired); (b) any Common
Stock or other securities issued or issuable pursuant to the conversion of, or
with respect to, any Common Stock held by the Holders upon any stock split,
stock dividend, recapitalization, merger, consolidation, reorganization or
similar event; and (c) securities issued in replacement or exchange of any of
the securities issued in clauses (a) or (b) above.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration, filing, listing and National Association of Securities
Dealers, Inc. ("NASD") fees, all fees and expenses of complying with securities
or blue sky laws, all word processing, duplicating and printing expenses, all
messenger and delivery expenses, the fees and expenses of the Company's legal
counsel and independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, and any fees and
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disbursements of underwriters customarily paid by issuers or sellers of
securities; provided, however, that Registration Expenses shall not include
underwriting discounts and commissions or any fees or expenses of legal counsel
or the independent public accountants of any Person other than the Company.
"Registration Rights Agreement" means this Agreement.
"Related Agreements" means the Stock Purchase Agreement and the
Exhibits thereto, including the Articles of Incorporation, Escrow Agreement,
Shareholders' Agreement, and Registration Rights Agreement.
"Related Trusts" shall mean, collectively, the Xxxxxxxxx Family Trust
B, the Xxxxxxxxx Family Trust C-1, and the Xxxxxxxxx Family Trust C-2, each with
Xx. X. X. Xxxxxxxxx as Trustee.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
"Sellers" shall mean the persons listed on Schedule 2.1 of the Stock
Purchase Agreement.
"Shareholders' Agreement" means the Shareholders' Agreement dated as of
the date hereof among the Sellers, the Company and Holder, in the form of
Exhibit C to the Stock Purchase Agreement.
"Stock Purchase Agreement" means that certain Agreement between Xx. X.
X. Xxxxxxxxx and Related Trusts and Family Members and Public Service Company of
Oklahoma, dated as of even date, as well as the Exhibits and Schedules thereto
when the circumstances so admit.
"Subsidiary" means any Person of which the Company now or hereafter
shall at the time own, directly or indirectly through a subsidiary, at least a
majority of the outstanding capital stock (or other beneficial interest)
entitled to vote generally; and the term "Subsidiaries" shall mean all of such
Persons collectively.
"Taxes" means (a) all net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or windfall
profits taxes, or other taxes of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) upon the Company with respect to all periods or
portions thereof ending on or before the date hereof and/or (b) any liability of
the Company for the payment of any amounts of the type described in the
immediately preceding clause (a) as a result of being a member of an affiliated
or combined group.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce PSO to enter into this Agreement, the Company hereby
makes the following representations and warranties:
3.1 Organization and Good Standing. The Company is duly organized,
validly existing and in good standing in its jurisdiction of incorporation and
is duly qualified as a foreign corporation and authorized to do business in all
other jurisdictions in which the nature of its business or property makes such
qualification necessary and where the failure to so qualify would have a
Material Adverse Effect.
3.2 Authorization. The execution, delivery and performance by the
Company of this Agreement and of each Related Agreement to which the Company is
a party: (a) are within the Company's power and authority; (b) have been duly
authorized by all necessary corporate, shareholder and other proceedings, as the
case may be; and (c) do not and will not result in the creation of any Lien upon
any of the property of the Company or conflict with or result in any breach of
any provision of the Articles of Incorporation or by-laws of the Company or any
law, regulation, order, judgment, writ, injunction, license, permit, agreement
or instrument to which the Company is subject.
3.3 Enforceability. The execution and delivery by the Company of this
Agreement and of each of the Related Agreements to which it is a party, will
result in legally binding obligations of the Company, enforceable against it in
accordance with the respective terms and provisions hereof and thereof.
3.4 Capitalization.
(a) As soon as is reasonably practicable after Closing, the
Company shall amend its Articles of Incorporation in the form of Exhibit A. Upon
the filing of Exhibit A with the Idaho Secretary of State, the authorized
capital stock of the Company shall consist solely of 7,000,000 shares of Common
Stock, $0.01 par value per share, consisting of 6,000,000 shares of Class A
Voting Common Stock and 1,000,000 shares of Class B Nonvoting Common Stock.
Schedule 3.4(a) sets forth a table indicating the capitalization of the Company
immediately prior to the execution of this Agreement. All of the issued shares
of Capital Stock of the Company are issued and owned by the Persons listed on
Schedule 3.4(a) and have been duly authorized, are validly issued and
outstanding and are fully paid and non-assessable.
(b) Except as set forth on Schedule 3.4(b), there are no
material outstanding rights (either preemptive or other) or options to subscribe
for or purchase from the Company, or any material warrants or other agreements
providing for or requiring the issuance or purchase by the Company of, any
Capital Stock or any securities convertible into or exchangeable, for, or
exercisable into, its Capital Stock or any material voting trusts, proxies or
agreements relating to the voting of the Company's Capital Stock. For purposes
of this Section 3.4(b), "material" shall mean any agreement or agreements which,
individually or in the aggregate, would affect more than 5,000 shares of capital
stock of the Company.
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3.5 Subsidiaries. All the Company's Subsidiaries are listed on
Schedule 3.5.
3.6 Consents. Except as set forth in Schedule 3.6 hereto, or except as
otherwise required under applicable federal and state securities law, the
execution, delivery and performance by the Company of this Agreement and of each
Related Agreement to which it is a party, and the execution, delivery and
performance by the Sellers of the Stock Purchase Agreement and of each Related
Agreement to which they are parties, and the sale of the Purchased Securities
and the grant of the Option or Option Securities under the Stock Purchase
Agreement and the issuance of any Common Stock upon conversion of any of the
Purchased Securities or Option Securities do not and will not require the
approval or consent of, or any filing with, any governmental authority or agency
or any other Person.
3.7 Reports and Financial Statement; Undisclosed Liabilities.
(a) Complete and correct copies of the Financial
Statements are attached hereto as Schedule 3.7.
(b) Except as otherwise specifically disclosed therein, each
of the audited Financial Statements as of January 31, 1997 and for the year then
ended was prepared in accordance with GAAP applied on a basis consistent with
prior periods except as otherwise stated therein; each of the balance sheets
included in the audited Financial Statements fairly presents the financial
condition of the Company as at the close of business on the date thereof; and
each of the statements of income included in the audited Financial Statements
fairly presents the results of operations of the Company for the fiscal period
then ended. The Company has no liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, which are not fully reflected or
reserved against in the audited Financial Statements, except for liabilities
that may have arisen in the ordinary and usual course of business and consistent
with past practice and that individually or in the aggregate do not have and
could not reasonably be expected to have a Material Adverse Effect.
(c) To the best of the Company's knowledge, except as
otherwise specifically disclosed therein, the Balance Sheet of the Company has
been prepared by management of the Company in good faith and in accordance with
GAAP, consistently applied. To the best of the Company's knowledge, the Company
will not have any material liabilities, contingent or otherwise, which are not
referred to in such Balance Sheet or in the notes thereto other than liabilities
incurred in the ordinary course of the Company's business since the Balance
Sheet Date, and liabilities not required to be disclosed in accordance with
GAAP.
(d) Since the Balance Sheet Date, there has been no material
adverse change in the business, assets, financial condition or prospects of the
Company.
3.8 Absence of Certain Developments. Except for entering into this
Agreement and Related Agreements, as applicable, and except as disclosed on
Schedule 3.8 hereof, since the
Balance Sheet Date:
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(a) Except for minor variations which do not, either
individually or in the aggregate, have a material adverse effect on PSO's
rights, the Company has not, whether or not in the ordinary course of business:
(i) issued any Capital Stock or other equity
interest or any right, options or warrants with respect thereto;
(ii) declared, set aside, paid to a reserve fund or
made any payment or distribution of cash or other property to its
stockholders or equity holders with respect to any class of its Capital
Stock or other equity interest or purchased or redeemed any shares of
its Capital Stock or other equity interests;
(iii) suffered any substantial loss to any of its
material assets;
(iv) made any increases in the base compensation,
bonuses, paid vacation time allowed or fringe benefits for its
directors, officers, partners, employees or consultants, except for
normal periodic increases in base compensation for employees made
pursuant to established compensation policies;
(v) suffered damage, destruction or other casualty
loss, or forfeiture of, any property or assets, whether or not covered
by insurance, which has had or may reasonably be expected to have a
Material Adverse Effect;
(vi) made any capital expenditures, additions or
improvements or commitments for the same, except those which do not
exceed $500,000 in the aggregate;
(vii) entered into any contract, commitment or
agreement under which it has outstanding Indebtedness for borrowed
money or for the deferred purchase price of property in excess of
$500,000, or has the right or obligation to incur any such indebtedness
or obligation, or made any loan or advance to any Person other than
advances to employees for business expenses not exceeding $20,000 in
the aggregate;
(viii) paid any bonuses, deferred or otherwise, or
deferred any compensation to any of its directors, officers, partners
or employees except as reflected in the Financial Statements;
(ix) made any material change in accounting
procedures, policies or practices;
(x) mortgaged or pledged any of its properties or
assets, tangible or intangible, or subjected them to any Lien, except
Liens for current property taxes not yet due and payable and Liens on
personal property created in connection with equipment leases,
installment purchase contracts, conditional sales contracts, purchase
money mortgages and the like to secure Indebtedness incurred to acquire
property not exceeding $500,000 in the aggregate;
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(xi) entered into any agreement or arrangement
granting any rights to purchase or lease any of its assets, properties
or rights or requiring the consent of any Person to the transfer,
assignment or lease of any such assets, properties or rights; or
(xii) entered into any agreement or understanding
to do any of the foregoing.
(b) Other than in the ordinary course of business
consistent with past practice, the Company has not:
(i) sold, leased, subleased, assigned or
transferred any of its tangible or intangible properties or assets, or
canceled, waived or compromised any debts or claims;
(ii) entered into any other material transaction,
or any amendment of any contract, lease, agreement or license which is
material to its business; or
(iii) entered into any agreement or understanding
to do any of the foregoing.
3.9 Liens. The Company has no Liens upon any of its properties other
than the Liens which are listed on Schedule 3.9 hereto and Liens on personal
property created in connection with equipment leases, installment purchase
contracts, conditional sales contracts, purchase money mortgages and the like to
secure Indebtedness incurred to acquire property not exceeding $500,000 in the
aggregate.
3.10 Indebtedness to and from Officers, Directors and Others. Except as
set forth on Schedule 3.10 hereto, the Company is not indebted to any Founder,
director, officer, partner, manager, employee or consultant of the Company, or
to any Affiliate of the Company, except for amounts due as normal salaries,
wages or reimbursement of ordinary business expenses or routine employee
advances for expenses, which business expenses and employee advances do not
exceed $100,000 in the aggregate for all such Founders, directors, officers,
partners, managers, employees and consultants and not exceeding $15,000 for any
such Person. Except as set forth on Schedule 3.10, no Founder, director,
officer, partner, manager, employee or consultant of the Company nor any
Affiliate of the Company, is now, or on the Closing Date will be, indebted to
the Company except for ordinary business expense advances.
3.11 Insurance. Certificates of insurance listing all policies of
title, liability, fire, worker's compensation and other forms of insurance
(including bonds) insuring the properties, assets and operations of the business
of the Company have been provided to PSO. Except as set forth on Schedule 3.11
hereto, all such policies are in full force and effect, have been underwritten
by unaffiliated insurers and are sufficient for all applicable requirements of
law. All such policies shall continue in full force and effect after the Closing
Date with respect to occurrences which would have been covered by such policies
prior to the Closing Date, except to the extent the Company's Board of Directors
determines that such policies or coverages should be changed.
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3.12 Tax Returns. The Company has filed all Tax returns and reports
which are required to be filed with any foreign, federal, state or local
governmental authority or agency and has paid all Taxes which have become due,
and made adequate provision for the payment of all Taxes that will become due,
under applicable foreign, federal, state or local governmental law or
regulations with respect to the periods in respect of which such returns and
reports were filed, and all assessments of Taxes. The Company and its management
knows of no additional assessments since the date of such returns and reports,
and there will be no additional assessments for which adequate reserves
appearing on the Balance Sheet have not been established. The Company and its
Subsidiaries, if any, has made adequate provisions for all current Taxes.
3.13 [This section is intentionally left blank].
3.14 Title to Assets. The Company owns all of its respective assets,
and has good and marketable title with respect thereto, reflected in the Balance
Sheet of the Company and its Subsidiaries, as at the Balance Sheet Date, subject
to changes in the ordinary course of business since the Balance Sheet Date,
subject to no Liens other than those granted to First Union Bank of Virginia.
3.15 Material Contracts and Obligations.
(a) Attached hereto as Schedule 3.15 is a true, complete and
accurate list, categorized by subject matter, of all of the following material
outstanding contracts, plans, leases, and commitments and other agreements
(collectively "Contracts") entered into by the Company, which are in writing or
have been orally agreed to by the Company:
(i) all Contracts for the purchase or sale of
services, materials, products or supplies which involve aggregate
payments by the Company of more than $750,000 or involve aggregate
payments to the Company of more than $750,000, or which were entered
into other than in the ordinary course of business of the Company;
(ii) all Contracts or arrangements providing for
stock options or stock purchases, bonuses, pensions, deferred or
incentive compensation, retirement or severance payments,
profit-sharing, insurance or other benefit plans or programs for the
Founder or any officer, consultant, director or employee of the
Company;
(iii) all Contracts for construction or for the
purchase of real estate, improvements, fixtures, equipment, machinery
and other items which under GAAP constitute capital expenditures and
which individually or in the aggregate for any related group of items
involve expenditures of the Company in excess of $500,000;
(iv) all Contracts relating to the rental or use of
equipment, vehicles, other personal property or fixtures, except for
Contracts individually involving payment of annual rentals or sums less
than $75,000 and in the aggregate for the Company less than $750,000;
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(v) all Contracts relating in any way to direct or
indirect indebtedness for borrowed money or evidenced by a bond,
debenture, note or other evidence of indebtedness (whether secured or
unsecured) of or to the Company, including but not limited to,
indebtedness by way of lease or installment purchase arrangement,
guarantee, reimbursement obligations pertaining to letters of credit,
purchase price discount obligations, undertakings on which others rely
in extending credit, or otherwise, and all mortgages, pledges,
conditional sales contracts, chattel and purchase-money mortgages and
other security arrangements with respect to any real estate,
improvements, equipment, other personal property or fixtures, used or
owned by the Company, except in each case for contracts individually
involving less than $100,000;
(vi) all Contracts substantially restricting the
Company from engaging in any line of business or competing with any
Person or in any geographical area, or from using or disclosing any
information in its possession (other than routine supplier and customer
confidentiality agreements);
(vii) all license agreements with annual costs in
excess of $250,000, either as licensor or licensee, other than licenses
for software;
(viii) all joint venture Contracts and other
Contracts involving a sharing of profits, revenue or cash flow;
(ix) all Contracts with any Affiliate of the
Company (other than the Related Agreements) and all Contracts not made
in the ordinary course of its business;
(x) all other Contracts, except those which are (A)
cancelable on 30 days' or less notice without any penalty or other
financial obligation or (B) if not so cancelable, involve annual
aggregate payments by or to the Company of $75,000 or less; or
(xi) all written Contracts of employment with any
officer, consultant, director or employee and any such oral Contracts
which are not terminable at will by the Company.
(b) Except as set forth on Schedule 3.15 hereto, all Contracts
required to be disclosed to PSO pursuant to this Section 3.15 are valid, binding
and in full force and effect as to the Company, and neither the Company nor, to
the best of the Company's knowledge, any other party thereto, is in material
breach or violation of, or material default under, nor is there any reasonable
basis for a claim of such breach or violation by the Company or such default by
the Company under, the terms of any such Contract, and no event has occurred
which constitutes or, with the lapse of time or the giving of notice or both,
would constitute, such a material breach, violation or default by the Company.
(c) Set forth on Schedule 3.15(c) is a list of all
Contracts having a funded remaining balance of $750,000 or more.
3.16 Real Property Owned. The Company does not own any real
property.
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3.17 Real and Personal Property - Leased. To the best of the Company's
knowledge, set forth in Schedule 3.17 hereto is a true and accurate description
of all real and material personal property leased by the Company, setting forth
(a) the name of the lessor and (b) a description of the property leased. With
respect to such leases, the property described in such leases is presently used
by the Company as indicated in Schedule 3.17 as lessee under the terms of such
leases, and such leases are in full force and effect, and will be free and clear
of all Liens created by the Company except as set forth in Schedule 3.17 hereto,
and neither the Company is in default of the terms of any such lease in any
material respect nor, to the best of the Company's knowledge, is any lessor in
default in any material respect under any such lease nor have any events
occurred which, with the giving of notice or the lapse of time, or both, would
be a default under any such lease. The Company has made available to PSO a true
and correct copy of all leases set forth on Schedule 3.17.
3.18 Proprietary Rights. To the best of the Company's knowledge, except
as set forth on Schedule 3.18, the Company owns all material patents,
trademarks, trade names, service marks, logos, copyrights, including
applications therefor, inventions, formulas, methods and processes (all such
items being hereinafter referred to as "Intangible Property") presently used by
the Company without any infringement upon the proprietary rights of others; all
material patents, patent applications, registered trademarks, trademark
applications, trade names, service marks, logos, licenses and copyrights used or
owned by the Company in connection with its respective businesses are set forth
on Schedule 3.18 hereto and have been duly registered in, filed in, or issued by
the United States Patent Office, United States Register of Copyrights or the
corresponding offices of other jurisdictions, to the extent necessary to effect
lawful ownership of such intellectual property rights in the name of the
Company, and have been properly maintained or renewed in accordance with all
applicable provisions of applicable law; and Schedule 3.18 accurately sets forth
with respect to each patent, patent application, registered trademark, trademark
application, trade name, service xxxx, logo, license and copyright owned or used
by the Company in the conduct of its businesses, (i) the date of expiration, if
any, (ii) whether such ownership rights are exclusive and (iii) any licensee of
such rights. No royalties or fees are payable by the Company to any Person by
reason of the ownership or use of any of the Intangible Property. All items of
Intangible Property are valid and in good standing, and they are adequate and
sufficient to permit the Company to conduct its business as presently conducted,
and to the best of the Company's knowledge no other rights of any kind with
respect to the Intangible Property are required by the Company for its
operations as presently conducted. Except as set forth on Schedule 3.18, the
Company has the sole and exclusive right to use the Intangible Property and the
Company has not entered into any licenses, sublicenses or agreements relating to
the use by any other Person of any Intangible Property now in effect, and no
infringement exists upon the Intangible Property by any other Person. Except as
disclosed on Schedule 3.18 hereto, no charge or claim is pending or threatened,
nor has any charge or claim been made against the Company within the past five
years to the effect that the sale of any of its respective products or services
infringes upon or conflicts in any way with any rights or properties of the type
enumerated above owned or held by any other Person.
3.19 Necessary Property; Condition of Property. To the best of the
Company's knowledge, the properties and assets owned, leased by or licensed to
the Company, and reflected in the Balance Sheet, constitute all of the real and
personal properties, tangible and intangible, which are necessary, used or
useful in the conduct of its business in the manner and to the extent
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presently conducted or as presently contemplated to be conducted. No other
material real or personal properties are required for the conduct of the
business of the Company as presently conducted.
3.20 Necessary Licenses. To the best of the Company's knowledge, except
as set forth on Schedule 3.20, the Company has all licenses, permits, consents,
concessions and other authorizations of governmental, regulatory or
administrative agencies or authorities, whether foreign, federal, state, or
local (collectively "Licenses"), required to own and lease its properties and
assets and to conduct its business as now conducted except where the failure to
have such Licenses would not have a Material Adverse Effect. Except as specified
in Schedule 3.20 hereto (or exempted by Schedule 3.6), no registrations,
filings, applications, notices, transfers, consents, approvals, audits,
qualifications, waivers or other action of any kind is required by virtue of the
execution and delivery of this Agreement, or of the consummation of the
transactions contemplated hereby (a) to avoid the loss of any such License or
any asset, property or right pursuant to the terms thereof, or the violation or
breach of any law applicable thereto or (b) to enable the Company to hold and
enjoy the same after the Closing Date in the conduct of its business as
conducted prior to the Closing Date.
3.21 Compliance with Law.
(a) To the best of the Company's knowledge, except as may be
set forth on Schedule 3.21(a) hereto, the Company is not in default under, or in
violation of, any law (including, without limitation, laws relating to the
issuance or sale of securities, antitrust, zoning and building codes and
ordinances, occupational safety, the protection of the environment,
transportation, storage or disposal of hazardous waste, anti-pollution and air
and water quality laws), or any licenses, franchises, permits, authorizations or
concessions granted by, or any judgment, decree, writ, injunction or order of,
any governmental or regulatory authority, applicable to its business or any of
its properties or assets, except where such defaults and violations would not,
in the aggregate, have a Material Adverse Effect. The Company has not received
any notification alleging any violations of any of the foregoing within the last
five years with respect to which adequate corrective action has not been taken.
(b) To the best of the Company's knowledge, no event has
occurred which (i) could result in the Company being found unqualified to hold,
or which permits, or after notice or lapse of time or both would permit, the
revocation or termination of any of the Licenses or the denial of an application
for the renewal thereof or (ii) would result in any impairment of the rights of
the Company as holder of any such License.
(c) To the best of the Company's knowledge, no present or
former stockholder, officer, director, employee or agent of the Company, has in
order to assist the Company in obtaining or retaining any License or any
business for or with, or directing business to Company offered, paid, promised
to pay or authorized the payment of the money, or offered, given, promised to
give, or authorized the giving of anything of value to (i) any officer or
employee of any government or any department, agency, instrumentality thereof,
or any person acting in an official capacity for or on behalf of any such
government or department, agency or instrumentality (such an officer or employee
being referred to as a "foreign official"), (ii) any foreign political party or
official thereof or any candidate for foreign political office, or (iii) any
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person, while knowing that all or a portion of such money or thing of value will
be offered, given, or promised, directly or indirectly, to any foreign official,
to any foreign political party or official thereof, or to any candidate for
foreign political office, in each case, for purposes of the following:
(A) illegally or corruptly influencing any act or
decision of any such foreign official, political party or official
thereof, or candidate in such person's official capacity, or (ii)
inducing such foreign official, political party or official thereof, or
candidate to do or omit to do any act in violation of the lawful duty
of such person, or
(B) illegally or corruptly inducing such foreign
official, political party or official thereof, or candidate to use such
person's influence with a foreign government or instrumentality thereof
to affect or influence any act or decision of such government or
instrumentality.
There is not now, nor has there ever been, any employment of
or beneficial ownership of the Company by any governmental or political official
in any country in the world.
3.22 Environmental Compliance.
(a) To the best of the Company's knowledge, (i) the Company
has not generated, used, transported, treated, stored, released or disposed of,
and has not suffered or permitted anyone else to generate, use, transport,
treat, store, release or dispose of any "Hazardous Substance" (as hereinafter
defined) in violation of any "Environmental Laws" (as hereinafter defined); (ii)
there has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous Substance resulting from the conduct of the
Company or the use of any property or facility by the Company or to the best of
the Company's knowledge, any nearby or adjacent properties or facilities, which
has created or might reasonably be expected to create any liability on the part
of the Company under the Environmental Laws or which would require reporting to
or notification by the Company to any governmental entity; (iii) no asbestos
which is or has some reasonable likelihood of becoming friable or
polychlorinated biphenyl or underground storage tank is contained in or located
at any facility owned, leased or used by the Company; and (iv) any Hazardous
Substance handled or dealt with in any way in connection with the business of
the Company, whether before or during the ownership of the Company, has been and
is being handled or dealt with in all respects in compliance with the
Environmental Laws in effect at the time such activities were being conducted.
(b) For purposes of this Agreement, the term "Hazardous
Substance" shall mean (but shall not be limited to) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable Environmental
Laws as "hazardous substances," "hazardous materials" "hazardous wastes" or
"toxic substances," or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
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(c) For purposes of this Agreement, the term "Environmental
Laws" shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resources Conservation and Recovery Act
of 1976, as amended, and any applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals, plans, authorizations,
concessions, and similar items of all governmental authorities and all
applicable judicial, administrative and regulatory decrees, judgments and
orders, any of which relate to the protection of human health or the environment
from the effects of Hazardous Substances, including, but not limited to, those
pertaining to reporting, licensing, permitting, investigating and remediating
emissions, discharges, releases or threatened releases of Hazardous Substances
into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
3.23 Litigation. To the best of the Company's knowledge, except as set
forth on Schedule 3.23 hereto, there is no suit, claim, action, proceeding or
investigation pending or threatened against the Company or any of its respective
assets or properties, including each Employee Benefit Plan at law or in equity
or before any governmental authority or instrumentality or before any arbitrator
of any kind, against the Founder, or any management director, officer, key
employee or the holder of more than five percent (5%) of the capital stock of
the Company, nor has there occurred any event or does there exist any condition
on the basis of which any litigation, proceeding or investigation might properly
be instituted and there is no reasonable basis for any such suit, claim, action,
proceeding or investigation. Except as set forth on Schedule 3.23 hereto,
neither the Company nor to the knowledge of the Company, any Founder, management
director, officer, key employee or the holder of more than five percent (5%) of
the Capital Stock of the Company, nor, to the best knowledge of the Company nor
any Employee Benefit Plan has been a party to any such suit, claim, action,
proceeding or investigation during the past two years involving its business,
assets or properties, nor has any such suit, claim, action, proceeding or
investigation been threatened by or against the Company.
3.24 No Material Adverse Changes. Except as set forth on Schedule 3.24
hereto, since the Balance Sheet Date, there has occurred no material adverse
change in the business, assets, properties (tangible and intangible),
operations, condition (financial or otherwise) or liabilities of the Company,
whether or not in the ordinary course of business, whether separately or in the
aggregate with other occurrences or developments, and whether insured against or
not (a "Material Adverse Effect"), and the Company has no knowledge of any
occurrence or development which might reasonably be expected to result in any
such Material Adverse Effect.
3.25 Employee Benefit Plans. Except as described on Schedule 3.25, the
Company does not maintain or operate any Employee Benefit Plan nor has any such
Plan been maintained or operated during the past three years. The Company does
not maintain or contribute to any Guaranteed Pension Plan or Multiemployer Plan.
With respect to each Employee Benefit Plan listed on Schedule 3.25, to the
extent applicable:
(a) Each such Employee Benefit Plan has been maintained and
operated in all material respects in compliance with its terms and with all
applicable provisions of ERISA, the Code and all applicable regulations, rulings
and other authority issued thereunder;
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(b) All contributions required by law to have been made under
each such Employee Benefit Plan (without regard to any waivers granted under
Section 412 of the Code) to any fund or trust established thereunder or in
connection therewith have been made by the due date thereof;
(c) Each such Employee Benefit Plan intended to qualify under
Section 401(a) of the Code is the subject of a favorable unrevoked determination
letter issued by the Internal Revenue Service as to its qualified status under
the Code, which determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that would adversely affect
qualified status of any such Employee Benefit Plan;
(d) No Employee Benefit Plan is subject to Title IV of ERISA;
(e) None of such Employee Benefit Plans that are "employee
welfare benefit plans" as defined in Section 3(1) of ERISA provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except as
required by applicable law, including section 4980B of the Code or Section 601
of ERISA; and
(f) Neither the Company nor any trade or business (whether or
not incorporated) under common control with the Company within the meaning of
Section 4001 of ERISA has, or at any time has had, any obligation to contribute
to any "multiemployer plan" as defined in Section 3(37) of ERISA.
3.26 Withholding, Contracts and Labor Relations. The Company has
withheld all amounts required by law or agreement to be withheld by it from the
wages, salaries and other payments to its employees and is not liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing. Except as set forth on Schedule 3.26 hereto, the Company is not a
party to any written employment agreement, arrangement or understanding with any
of its officers, employees, partners or shareholders. There are no collective
bargaining agreements covering any of the employees of the Company. The Company
has not breached or otherwise failed to comply in any material respect with any
provision of any collective bargaining agreement or other labor union contract
applicable to any of its employees. No consent of any union (or any similar
group or organization) is required in connection with the consummation of the
transactions contemplated hereby. There are no pending, threatened or
anticipated (a) employment discrimination charges or complaints against or
involving the Company before any federal, state, or local board, department,
commission or agency, (b) unfair labor practice charges or complaints, disputes
or grievances affecting the Company, (c) union representation petitions
respecting the employees of the Company, (d) efforts being made to organize any
of the employees of the Company or (e) strikes, slow downs, work stoppages, or
lockouts or threats thereof affecting the Company.
3.27 Governmental Regulations. The Company is not a "holding company",
or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended; nor is the Company an "investment company", or an "affiliated
person" or a "principal underwriter" of an "investment company", as such terms
are defined in the Investment Company Act of 1940,
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as amended. The Company is not now, nor has it been within the past five years,
a "United States real property holding corporation" as defined in Section 897 of
the Code.
3.28 Corporate Documents, Books and Records. Complete and correct
copies of the Articles of Incorporation and by-laws, and of all amendments
thereto, of the Company and each of the predecessor companies have been
previously made available to PSO, and no changes in said documents will be made
on or before the Closing Date other than as disclosed to, and concurred to in
writing by, PSO. The minute books of the Company and each of the predecessor
companies contain accurate records of all meetings and consents in lieu of
meetings of the Board (and its committees) and shareholders of each corporation
since incorporation. Except as reflected in such minute books, there are no
minutes of meetings or consents in lieu of meetings of the Board (or its
committees) or of the shareholders of the Company. The books and records of the
Company accurately reflect the transactions to which the Company is a party or
by which its properties are subject or bound, and such books and records have
been properly kept and maintained in all material respects.
3.29 Broker Costs. Neither the Company nor, to the best of the
Company's knowledge, the Sellers, is obligated for any Broker Costs relating to
the transactions contemplated by the Stock Purchase Agreement.
3.30 Disclosure. No representation, warranty or statement made in this
Agreement, any Related Agreement, or any agreement, certificate, statement or
document furnished by or on behalf of the Company in connection with the
purchase of the Purchased Securities or grant of the Option contains or will
contain any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances in which they were made, not misleading.
3.31 Certain Agreements of Officers and Employees.
(a) No officer or key employee of the Company is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, nonsolicitation agreement, or any other contract or agreement or
restrictive covenant relating to the right of any such officer or employee to be
an employee, to be employed by the Company, or because of the nature of the
business conducted or proposed to be conducted by the Company or relating to the
use of trade secrets or proprietary information of others, and to the Company's
best knowledge and belief, the continued employment of the Company's officers
and employees does not subject the Company or PSO to any liability with respect
to any of the foregoing matters.
(b) Except as set forth on Schedule 3.31(b), to the best
knowledge of the Company, no officer of the Company, nor any key employee of the
Company whose termination, either individually or in the aggregate, would have a
Material Adverse Effect on the Company, has any present intention of terminating
his or her employment with the Company.
(c) For purposes of this Agreement, "key employee" means
any of the Persons described on Schedule 3.31(c).
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3.32 Registration Rights. Except for the rights granted to the Holders
pursuant to this Agreement, no Person has demand or other registration rights to
cause the Company to file any registration statement under the Securities Act
relating to the securities of the Company or any right to participate in any
such registration statement.
ARTICLE IV
REGISTRATION RIGHTS
4.1 Registration.
(a) Requested Registration. At any time after February 1,
2001, and before February 1, 2011, upon written request by the Holders of the
minimum number of Registrable Securities stated below that the Company effect
the registration under the Securities Act of all or part of the Registrable
Securities (a "Requested Registration"), the Company will use its best efforts,
consistent with practices customary in agreements of this nature, to register
under the Securities Act the Registrable Securities which the Company has been
so requested to register by the Holders within one hundred twenty (120) days
after receipt of such request or within sixty (60) days after receipt of such
request if the Company is qualified to file a registration statement on
Commission Form S-3 or any successor short-form registration statement
(collectively, "Commission Form S-3"); provided, however, that the Company shall
not be obligated to effect a Requested Registration pursuant to this Section
4.1(a) during the one hundred eighty (180) day period immediately following the
commencement of the Company's public offering of equity securities; and
provided, further, that (i) the Company shall not be obligated to effect a
Requested Registration of all or part of the Registrable Securities under cover
of any form other than Commission Form S-3, unless (A) the Holders of at least
60% of the Registrable Securities make such request, and (B) the number of
Registrable Securities in the Requested Registration exceeds 500,000 shares,
(ii) the Company shall not be obligated to effect a Requested Registration of
all or part of the Registrable Securities under cover of Commission Form S-3
unless (A) the Holders of in excess of at least 50% of the Registrable
Securities make such request, and (B) the number of Registrable Securities in
the Requested Registration exceeds 100,000 shares, and (iii) the number of
shares specified in (i) and (ii) shall be proportionately adjusted to reflect
any merger, consolidation, reorganization, stock dividend, stock split,
combination of shares, reclassification, recapitalization, automatic conversion,
redemption or other similar event affecting the number or character of
outstanding shares of Common Stock. The Company must effect up to six (6)
registrations pursuant to this Section 4.1(a) to the extent such registrations
may be effected on Commission Form S-3, but the Company shall not be obligated
to effect more than one (1) Requested Registration hereunder other than on
Commission Form S-3. In the event that the Holders of at least 60% of the
Registrable Securities decide to effect a Requested Registration through an
underwritten offering, the Company may include in such Requested Registration
other securities of the Company for sale, for the Company's account or for the
account of any other Person, if and to the extent that the managing underwriter
determines that the inclusion of such additional shares will not interfere with
the orderly sale of the underwritten securities at a price range reasonably
acceptable to those Holders whose Registrable Securities are to be included in
the registration statement. If the Holders of at least 60% of the Registrable
Securities do not desire to effect the Requested
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Registration through an underwritten offering, the Company may include in such
Requested Registration other securities of the Company for sale, for the
Company's account or for the account of any other Person. Upon receipt of a
written request pursuant to this subsection (a), the Company shall promptly give
written notice of such request to other Holders and the Company will be
obligated to include in the Requested Registration such number of Registrable
Securities of any other Holders joining in such request as are specified in a
written request by such other Holders received by the Company within 20 days
after the Company gives such written notice.
(b) Incidental Registration. If the Company for itself or any
of its security holders shall at any time or times after the date hereof, but
before February 1, 2011, determine to register under the Securities Act any
shares of its capital stock (other than: (i) the registration of an offer, sale
or other disposition of securities solely to employees (or any of their
successors or assignees) of, or other Persons (or any of their successors or
assignees) providing services to the Company or any Subsidiary pursuant to an
employee or similar benefit plan; or (ii) relating to a merger, acquisition or
other transaction of the type described in Rule 145 under the Securities Act or
a comparable or successor rule, registered on Form S-4 or similar or successor
forms), on each such occasion the Company will notify the Holders of such
determination at least thirty (30) days prior to the anticipated filing date of
such registration statement, and upon the request of the Holders given in
writing within twenty (20) days after the Company gives such notice, the Company
will use best efforts, consistent with practices customary in agreements of this
nature, as soon as practicable thereafter to cause any of the Registrable
Securities specified by the Holders to be included in such registration
statement to the extent such registration is permissible under the Securities
Act and subject to the conditions of the Securities Act (an "Incidental
Registration").
(c) Registration Statement Form. The Company shall, if
permitted by law,effect any registration requested under Section 4.1 by the
filing of a registration statement on Commission Form S-3.
(d) Expenses. The Company shall pay all Registration Expenses
incurred in connection with any Incidental Registration and any Requested
Registrations, except that each Holder shall be required to pay its pro rata
share of underwriting discounts and commissions and any Commission filing fees
and NASD fees.
(e) Effective Registration Statement. A Requested Registration
or an Incidental Registration requested pursuant to Section 4.1(a) or Section
4.1(b), respectively, shall not be deemed to have been effected unless it has
become effective with the Commission. Notwithstanding the foregoing, a
registration statement will not be deemed to have been effected if: (i) after it
has become effective with the Commission, such registration is interfered with
by any stop order, injunction, or other order or requirement of the Commission
or other government agency or any court proceeding for any reason other than a
misrepresentation or omission by Holders; or (ii) the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied by reason of some act or
omission by the Company.
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(f) Priority in Incidental Registration. If an Incidental
Registration is an underwritten registration initiated by the Company, and the
managing underwriters shall give written advice to the Company that, in their
opinion, market conditions dictate that no more than a specified maximum number
of securities (the "Underwriter's Maximum Number") could successfully be
included in such Incidental Registration, then: (i) the Company shall be
entitled to include in such registration that number of securities which the
Company proposes to offer and sell for its own account in such registration and
which does not exceed the Underwriter's Maximum Number; and (ii) the Company
will be obligated and required to include in such registration that number of
shares of Registrable Securities which shall have been requested by the holders
of registration rights under this Agreement and any other agreement hereinafter
entered into by the Company, pro rata based upon the total number of shares
requested to be included by all such holders, to the full extent of the
remaining portion of the Underwriter's Maximum Number.
(g) Right to Delay. Notwithstanding anything in Sections
4.1(a) and (b), the Company shall have the right to delay any registration of
Registrable Securities requested pursuant to Sections 4.1(a) and (b), or to
suspend the right of the Holders to sell or offer securities under any
previously effective registration statement, for up to ninety (90) days if such
registration (or offers or sales) would, in the judgment of the Company's Board
of Directors, substantially interfere with any material transaction being
considered at the time of receipt of the request from the Holders.
4.2 Registration Procedures.
(a) Company Duties. If and whenever the Company is required to
use best efforts consistent with practices customary in agreements of this
nature to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 4.1, the Company, subject to the terms and
conditions of Section 4.1, will:
(i) prepare and file with the Commission the
requisite registration statement to effect such registration and use
best efforts consistent with practices customary in agreements of this
nature to cause such registration to become and remain effective for a
period of ninety (90) days;
(ii) permit the Holders to review such registration
statement and to provide for the insertion therein of material,
furnished to the Company in writing, which in the reasonable judgment
of the Holders and the Company and their counsel should be included;
(iii) 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 keep
such registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or the expiration of ninety (90)
days after such registration statement becomes effective;
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(iv) furnish to the Holders such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and
any other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as the purchaser or the Holders of Registrable Securities to
be sold under such registration statement may reasonably request;
(v) use best efforts consistent with practices
customary in agreements of this nature to register or qualify all
Registrable Securities covered by such registration statement under
such other United States state securities or blue sky laws of such
jurisdictions as the Holders of Registrable Securities to be sold under
registration statement shall reasonably request, to keep such
registration or qualification in effect for so long as such
registration under the Securities Act remains in effect, and take any
other action which may be reasonably necessary or advisable to enable
the Holders of Registrable Securities to be sold under such
registration statement to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holders,
except that the Company shall not for any such purpose be required to
(a) qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subdivision (v) be obligated to be so qualified, or (b) subject itself
to taxation in any such jurisdiction.
(vi) use best efforts consistent with practices
customary in agreements of this nature to cause all Registrable
Securities covered by such registration statement under the Securities
Act to be registered with or approved by such other United States state
governmental agencies or authorities as may be reasonably necessary to
enable the Holders of Registrable Securities to be sold under such
registration statement to consummate the intended disposition of such
Registrable Securities;
(vii) in the event of the issuance of any stop order
suspending the effectiveness of the registration statement under the
Securities Act, or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any Registrable
Securities included in such registration statement for sale in any
jurisdiction, the Company shall use best efforts consistent with
practices customary in agreements of this nature to obtain the
withdrawal of such order;
(viii) use best efforts consistent with practices
customary in agreements of this nature to furnish to the Holders of
Registrable Securities to be sold under such registration statement (1)
an opinion, dated the effective date of the registration statement, of
the independent counsel representing the Company for the purposes of
such registration (or, if there is no such independent counsel, the
opinion may be rendered by counsel who is an employee of the Company),
addressed to the underwriters, if any, and to the Holders making such
request, stating that such registration statement has become effective
under the Securities Act and that (a) to the knowledge of such counsel,
no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (b)
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the registration statement, the related prospectus, and each amendment
or supplement thereto, comply as to form in all material respects with
the requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder (except that such counsel need
express no opinion as to financial statements or other financial or
statistical data or information contained therein); (c) such counsel
has no reason to believe that either the registration statement or the
prospectus, or any amendment or supplement thereto, contains any untrue
statement of a material fact or omits a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; (d) the descriptions in the registration
statement or the prospectus, or any amendment or supplement thereto, of
all legal and governmental matters and contracts and other legal
documents or instruments are accurate in all material respects and
fairly present the information required to be presented; and (e) such
counsel does not know of any legal or governmental proceedings, pending
or contemplated, required to be described in the registration statement
or prospectus, or any amendment or supplement thereto, which are not
described as required nor of any contracts or documents or instruments
of a character required to be described in the registration statement
or prospectus, or any amendment or supplement thereto or to be filed as
exhibits to the registration statement which are not described and
filed as required; and (2) a letter, dated the effective date of the
registration statement, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and
to the Holders making such request, stating that they are independent
certified public accountants within the meaning of the Securities Act
and that in the opinion of such accountants, the financial statements
and other financial data of the Company included in the registration
statement or the prospectus, or any amendment or supplement thereto,
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act.
Such opinion of counsel shall additionally cover such legal
matters with respect to the registration in respect of which such
opinion is being given as the Holders may reasonably request. Such
letter from the independent certified public accountants shall
additionally cover such other financial matters (including information
as to the period ending not more than five business days prior to the
date of such letter) with respect to the registration in respect of
which such letter is being given as the Holders may reasonably request;
(ix) immediately notify the Holders of Registrable
Securities included in 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 result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
under which they were made, and at the request of the Holders promptly
prepare and furnish to the Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
-23-
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
(x) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder, and not file any amendment or supplement to such
registration statement or prospectus to which any Holder shall have
reasonably objected in writing on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder, having been furnished with a copy thereof at least two
business days prior to the filing thereof;
(xi) provide a transfer agent (which may be the
Company) for all Registrable Securities covered by such registration
statement not later than the effective date of such registration
statement; and
(xii) list all Registrable Securities covered by such
registration statement on any securities exchange on which any of the
Registrable Securities are then listed.
(b) Duty of Holders to Supply Information. The Company may
require the Holders of Registrable Securities to be sold under such registration
statement, at the Company's expense, to furnish the Company with such
information and undertakings as it may reasonably request regarding the Holders
and the distribution of such securities as the Company may from time to time
reasonably request in writing.
(c) Additional Duties of Holders. Each Holder, by execution of
this Agreement, agrees (A) that upon receipt of any notice of the Company of the
happening of any event of the kind described in Section 4.2(a)(ix), such Holder
will forthwith discontinue its disposition of Registrable Securities pursuant to
the registration statement relating to such Registrable Securities until the
receipt by such Holder of the copies of the supplemented or amended prospectus
contemplated by Section 4.2(a)(ix) and, if so directed by the Company, will
deliver to the Company all copies other than permanent file copies, then in
possession of the Holder of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice, and (B) that it will
immediately notify the Company, at any time when a prospectus relating to the
registration of such Registrable Securities is required to be delivered under
the Securities Act, of the happening of any event as a result of which
information previously furnished by such Holder to the Company for inclusion in
such prospectus contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made. In the event the Company shall give any such notice, the period
referred to in Section 4.2(a)(iii) shall be extended by a number of days equal
to the number of days during the period from and including the giving of notice
pursuant to Section 4.2(a)(ix) to and including the date when such Holder shall
have received the copies of the supplemented or amended prospectus contemplated
by Section 4.2(a)(ix).
-24-
4.3 Underwritten Offerings.
(a) Underwritten Offering. In connection with any underwritten
offering pursuant to a registration requested under Section 4.1(a), the Company
will enter into an underwriting agreement with the underwriters for such
offering, such agreement to be in form and substance reasonably satisfactory to
the Company and the Holders of at least 60% of the Registrable Securities
included in the registration in their reasonable judgment and to contain such
representations and warranties by the Company and the Holders and such other
terms as are customarily contained in agreements of that type, including,
without limitation, indemnities. The Holders shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of Holders and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of the Holders. The Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding the Holders and their intended method of distribution and any other
representations required by law or as are customarily contained in agreements of
that type.
(b) Selection of Underwriters. If a Requested Registration
pursuant to Section 4.1(a) involves an underwritten offering, then the Company
shall select the underwriter from underwriting firms of national reputation.
(c) Holdback Agreements. Each Holder agrees, if so reasonably
required by the managing underwriter in a registration pursuant to Section 4.1,
not to effect any public sale or distribution of Registrable Securities or sales
of such Registrable Securities pursuant to Rule 144 or Rule 144A under the
Securities Act, during the seven (7) days prior to and the one hundred eighty
(180) days after any firm commitment underwritten registration pursuant to
Section 4.1 has become effective (except as part of such underwritten
registration) or, if the managing underwriter advises the Company that, in its
opinion, no such public sale or distribution should be effected for a period of
not more than one hundred eighty (180) days after such underwritten registration
in order to complete the sale and distribution of securities included in such
registration or facilitate such sale and distribution and the Company gives
notice to such effect to the Holder of such advice, the Holder shall not effect
any public sale or distribution of Registrable Securities or sales of such
Registrable Securities pursuant to Rule 144 or Rule 144A under the Securities
Act during such period after such underwritten registration, except as part of
such underwritten registration, whether or not the Holder participates in such
registration.
4.4 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act,
the Company will give the Holders of Registrable Securities to be sold under
such registration statement, the underwriters, if any, and their respective
counsel and accountants, drafts and final copies of such registration statement,
each prospectus included therein or filed with the Commission and each amendment
thereof or supplement thereto, at least 5 business days (or shorter if not
reasonably practicable) prior to the filing thereof with the Commission, and
will give each of them such access (subject to reasonable and customary
confidentiality restrictions) to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent public
-25-
accountants who have certified its financial statements as shall be necessary,
in the opinion of the Holders and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
ARTICLE V
COVENANTS APPLICABLE TO THE COMPANY WHILE REGISTRABLE
SECURITIES ARE HELD BY THE HOLDERS
The Company covenants that, while any Registrable Securities are held
by the Holders, the Company will comply with the following provisions unless
otherwise approved by the Holders or otherwise specifically provided for in this
Article V.
5.1 Corporate Existence; Subsidiaries; Maintenance of Properties. The
Company will preserve and keep in full force and effect its corporate existence,
rights and franchises. The Company will not engage in any business other than
those presently conducted or now contemplated by such Persons and those
businesses substantially similar to the business now conducted or now
contemplated. The Company will maintain all of its properties used or useful in
the conduct of its business in good condition, repair and working order (normal
wear and tear excepted) and cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 5.1 shall prevent the Company from
discontinuing the operation and maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
such Person's business and does not cause a Material Adverse Effect.
5.2 Insurance. The Company will maintain with financially sound and
reputable insurance companies, funds or underwriters, insurance of the kinds,
covering the risks and in the relative proportionate amounts usually carried by
reasonable and prudent companies conducting businesses similar to that of the
Company except as otherwise determined by the Board.
5.3 Taxes. The Company will pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all Taxes, assessments and
other governmental charges imposed upon the Company and its respective real
properties, sales and activities, or any part thereof, or upon the income or
profits therefrom, as well as all claims for labor, materials, or supplies,
which if unpaid might by law become a Lien or charge upon any of its properties;
provided, however, that any such Tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if the Company shall have set aside on its
books adequate reserves with respect thereto; and provided, further, that the
Company will pay or cause to be paid all such taxes, assessments, charges,
levies or claims forthwith upon the commencement of foreclosure on any lien
which may have attached as security therefor.
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5.4 Inspection of Properties and Books. With respect to each Holder,
the Company shall permit the Holder or any of its designated representatives to
visit and inspect any of the properties of the Company, to examine the books of
account of the Company (and to make copies thereof and extracts therefrom), and
to discuss the affairs, finances and accounts of the Company with, and to be
advised as to the same by, officers or partners of such Persons, upon reasonable
prior notice and during normal business hours, in a manner calculated not to
disrupt ongoing business activities and at such intervals as the Holder may
reasonably request; and provided that adequate provisions are made to honor and
protect the Company's obligation to third parties to safeguard its confidential
information.
5.5 Compliance with Laws; Contracts and Licenses. The Company will (a)
comply in all material respects with all applicable laws and regulations
wherever its business is conducted, (b) comply with the provisions of its
Articles of Incorporation, as amended from time to time, and bylaws, (c) comply
in all material respects with all agreements and instruments by which it or any
of its properties may be bound, (d) comply with all applicable decrees, orders,
and judgments and (e) comply in all material respects with all required
approvals, permits and licenses. If at any time while any Registrable Security
is outstanding, any License from any officer, agency or instrumentality of any
government shall become necessary or required in order that any of the Company
or its Subsidiaries may fulfill any of its obligations hereunder, each of the
Company and its Subsidiaries will promptly take or cause to be taken all
reasonable steps within its power to obtain such License and furnish Holders
with evidence thereof.
5.6 Financial and Other Information. The Company shall deliver to each
Holder the following (provided, however, that the Company shall not be obligated
to provide information that it deems in good faith to be proprietary or
confidential unless the Holder provides reasonable assurances in writing that it
will maintain the confidentiality of the information):
(a) as soon as practicable, but in any event within one
hundred twenty (120) days after the end of each fiscal year, an audited balance
sheet as of the fiscal year-end and audited statements of operations, sources
and uses of funds, and stockholders' equity for the fiscal year;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three fiscal quarters, an unaudited
balance sheet of the Company as of the end of such fiscal quarter and an
unaudited statement of operations for such fiscal quarter;
(c) as soon as practicable, but in any event within thirty
(30) days after the end of each fiscal year of the Company, an annual budget and
business plan for the forthcoming year; and
(e) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the Holder
may from time to time reasonably request.
5.7 Covenants Relating to Rule 144. With a view to making available
the benefits of certain rules and regulations of the Commission which may at
any time permit the sale of
-27-
securities of the Company to the public without registration after such time as
the Company is subject to the reporting requirements of the Exchange Act, the
Company agrees:
(a) To make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date of the first registration under the Securities
Act filed by the Company for an offering of its securities to the general
public;
(b) To file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act, as amended (at any time after it has become, and so long as it is,
subject to such reporting requirements); and
(c) So long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has become,
and so long as it is, subject to such reporting requirements) a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
5.8 Dilutive Issuances.
(a) The Company agrees that it will not, without the consent
of PSO, issue any shares of Common Stock on a Fully Diluted Basis at a price
lower than $6.00 per share, proportionately adjusted to reflect any stock
dividend, stock split, combination of shares, reclassification,
recapitalization, automatic conversion, redemption or other similar event
affecting the number or character of outstanding shares of Common Stock;
provided, the provisions of this Section 5.8 shall not apply to (i) Options
issued to any employees of the Company pursuant to any Approved Management
Incentive Plan; (ii) Common Stock issued pursuant to the exercise of Options
granted under any Approved Management Incentive Plan; and (iii) shares of Class
A Stock issued to the holder of shares of Class B Stock upon the conversion of
any share of Class B Stock to Class A Stock, and vice versa.
(b) As used in this Section 5.8, (i) "Fully Diluted Basis"
shall mean with respect to any shares of Capital Stock of the Company the
aggregate of (A) all of such shares which consist of Common Stock, and (B) with
respect to any other shares which are not Common Stock, the number of shares of
Common Stock into which such shares are convertible at the time of determination
of such Fully Diluted Basis, and (C) with respect to any Options, the maximum
number of shares of Common Stock issuable at the time of such determination in
connection with the exercise or conversion of any such Options; (ii) "Options"
shall mean any rights, options, or warrants to purchase shares of Common Stock
from the Company, and securities of any type whatsoever that are, or may become,
convertible into, exercisable, exchangeable, or carry rights to subscribe for
any Common Stock of the Company; and (iii)
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"Approved Management Incentive Plan" shall mean any incentive stock plan or
other form of incentive compensation approved by the Company's Board of
Directors and PSO in writing.
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION
6.1 Representations, Warranties and Covenants.
(a) Notwithstanding any disclosures made in the Schedules
hereto, the Company hereby agrees to indemnify, exonerate and hold each Holder
and its shareholders, officers, directors, employees and agents (each, an
"Indemnitee") free and harmless from and against any and all actions, causes of
action, suits, claims, losses, liabilities, damages and expenses, including,
without limitation, reasonable attorneys' fees and disbursements (collectively,
"Damages") arising out of or resulting from any failure by the Company to comply
with any of its covenants or any breach by the Company of any of its
representations and warranties in this Agreement or any other agreement
contemplated hereby, except where such Damages are caused directly by the
actions of the Indemnitee in violation of its obligations under such agreements.
(b) The aggregate liability of the Company for claims made
under Section 6.1(a) shall not exceed $3,500,000. In addition to the foregoing,
the Company shall not be liable for any claim made under Section 6.1(a) unless
such claim exceeds $75,000; provided, when the cumulative claims under Section
6.1(a) exceed $250,000, the Company shall be liable for all such claims up to
the $3,500,000 general limitation.
(c) The parties acknowledge that PSO has a right of
indemnification against certain of the Sellers under Article VIII of the Stock
Purchase Agreement (referred to therein as the "Indemnitors") that is similar to
PSO's right of indemnification against the Company under Section 6.1 of this
Agreement. PSO agrees that its aggregate recovery of Damages under said Article
VIII of the Stock Purchase Agreement and Section 6.1 of this Agreement shall not
exceed $3,500,000; provided, however, the parties further agree that nothing
herein shall affect PSO's unconditional right to pursue indemnification against
the Company under Section 6.1 of this Agreement, the Indemnitors (jointly and
severally) under Article VIII of the Stock Purchase Agreement, or any
combination thereof, at PSO's sole discretion.
6.2 Registration Rights.
(a) Indemnification by the Company. In the event of any
registration under the Securities Act pursuant to Section 4.1 of any Registrable
Securities covered by such registration, the Company will, and hereby does,
indemnify and hold harmless each Holder of Registrable Securities to be sold
under such registration statement, and each Person, if any, who controls any
such Holder within the meaning of the Securities Act (collectively, the
"Indemnified Parties"), against any losses, claims, damages or liabilities,
joint or several, to which the Holder or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or
-29-
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
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein or any document incorporated therein by reference,
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 not misleading, or arise out of any violation by the
Company of any rule or regulation promulgated under the Securities Act or state
securities law applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, and the
Company will reimburse the Indemnified Parties for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable to any Indemnified Party in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Party.
(b) Indemnification by the Holders. The Holders will, and
hereby do, indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 6.2(a)) the Company, each director of the
Company, each officer of the Company and each other person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if, and
only if, such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with information furnished in writing to
the Company directly by such person or entity specifically for use therein.
(c) Other Indemnification. Indemnification similar to that
specified in Sections 6.2(a) and (b) (with appropriate modifications) shall be
given by the Company and each Holder of Registrable Securities included in any
registration statement with respect to any required registration or other
qualification of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
6.3 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 Sections 6.1 or 6.2, such Indemnified Party will, if a
claim in respect thereof is to be made against a party required to provide
indemnification (an "Indemnifying Party"), give written notice to the latter of
the commencement of such action or proceeding, provided, however, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under Section 6.1 and 6.2,
except to the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice. In case any such action or proceeding is brought against
an Indemnified Party, unless in such Indemnified Party's reasonable judgment a
conflict of interest between such Indemnified and Indemnifying Parties may exist
in respect of such claim, the Indemnifying Party shall be entitled to
participate in and to assume the
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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. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
6.4 Contribution. If the indemnification provided for in this Article
VI is unavailable or insufficient to hold harmless an Indemnified Party, other
than because such indemnification by its terms is inapplicable, then each
Indemnifying Party shall contribute to the amount paid or payable to such
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in this Article VI an amount or additional amount, as the case may
be, in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party or parties on the one hand and the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
losses, claims, demands or liabilities 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 parties on the one hand or the
Indemnified Party on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The parties agree that it would not be just and equitable
if contributions pursuant to this Section 6.4 were determined by pro rata
allocation or any other method of allocation which did not take into account the
equitable considerations referred to above. The amount payable to an Indemnified
Party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this Section 6.4 shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any action or claim which is the subject of this
Article VI. 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.
ARTICLE VII
MISCELLANEOUS
7.1 Specific Performance. The parties hereto acknowledge that there may
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of any other party under this Agreement
in accordance with the terms and conditions of this Agreement.
-31-
7.2 Notices.
(a) All demands, requests, notices and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
United States first class mail, postage prepaid, and to the parties hereto at
the following address or at such other address as any party hereto shall
hereafter specify by notice to the other party hereto:
if to the Company, addressed to:
SCIENTECH, Inc.
0000 Xxxxxxxxxxxxx Xxx
Xxxxx Xxxxx, Xxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxx, Xxxxxxx, Rock & Fields
000 Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxx Street
Tel: 000-000-0000
Fax: 000-000-0000
if to PSO, addressed to:
PUBLIC SERVICE COMPANY OF OKLAHOMA
c/o CSW Business Ventures
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Doerner, Saunders, Xxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: H. Xxxxx Xxxxxx
Tel: 000-000-0000
Fax: 000-000-0000
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if to any other Holder, addressed to:
c/o SCIENTECH, Inc.
0000 Xxxxxxxxxxxxx Xxx
Xxxxx Xxxxx, Xxxxx 00000
Attention: Xx. X. X. Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxx Xxxxxx Xxxxxx Xxxxxx
2300 City Center Bellevue
000 000xx Xxxxxx X.X.
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) Notices shall be deemed given upon the earlier to occur of
(i) receipt by the party to whom such notice is directed; (ii) if sent by
facsimile machine, on the day (other than a Saturday, Sunday or legal holiday in
the jurisdiction to which such notice is directed) such notice is sent if sent
(as evidenced by the facsimile confirmed receipt) prior to 4:00 p.m. Mountain
Time and, if sent after 4:00 p.m. Mountain Time, on the day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is
directed) after which such notice is sent; (iii) on the first business day
(other than a Saturday, Sunday or legal holiday in the jurisdiction to which
such notice is directed) following the day the same is deposited with the
commercial carrier if sent by commercial overnight delivery service; or (iv) the
fifth day (other than a Saturday, Sunday or legal holiday in the jurisdiction to
which such notice is directed) following deposit thereof with the U..S. Postal
Service as aforesaid. Each party, by notice duly given in accordance therewith
may specify a different address for the giving of any notice hereunder.
7.3 Survival and Termination of Covenants, Agreements, Representations
and Warranties. All covenants, agreements, representations and warranties made
herein or in any other document referred to herein or delivered to any party
pursuant hereto shall be deemed to have been relied on by each such party,
notwithstanding any investigation made by such party or on its behalf. All
representations and warranties made herein or in any of the Related Agreements
shall survive the execution and delivery of this Agreement and of the transfer
of the Purchased Securities, the Option, or Option Securities; provided, in no
event may PSO initiate an action for indemnification arising out of a breach of
any representation or warranty under Article III after the fifth anniversary of
the date of this Agreement.
7.4 Amendments and Waivers. Except as otherwise expressly provided
herein, any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively) only with the written consent of the
parties hereto; provided, any amendment to Article IV may
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be made pursuant to a writing signed by the Company and Holders of 60% of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 7.4 shall be binding upon any assignee of such party.
7.5 Entire Agreement. This Agreement and the Related Agreements, as
applicable, referred to herein constitute the whole and entire agreement between
the parties pertaining to the subject matter hereof, and supersedes all prior
agreements or understandings between the parties with respect thereto.
7.6 Governing Law. The validity, construction and enforcement of, and
the remedies under, this Agreement shall be governed in accordance with the laws
of Idaho, except any choice of law provision of Idaho law shall not apply if the
law of a state or jurisdiction other than Idaho would apply thereby.
7.7 Jurisdiction and Venue. The parties to this Agreement agree that
jurisdiction and venue of any action brought to enforce, or to construe or
determine the validity of, any term or provision contained in this agreement
shall properly lie in the District Court of Bonneville County, Idaho, or the
United States District Court for the District of Idaho, or the District Court of
Tulsa County, Oklahoma, or the United States District Court for the Northern
District of Oklahoma. Such jurisdiction and venue are merely permissive;
jurisdiction and venue shall also continue to lie in any court where
jurisdiction and venue would otherwise be proper. The parties further agree that
the mailing by certified mail, return receipt requested, or the delivery by any
recognized expedited delivery service, of any process required by any such court
shall, when received, constitute valid and lawful service of process against
them, without the necessity for service by any other means otherwise provided by
statute or rule of court.
7.8 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Registration rights under this
Agreement are assignable to any transferee of Registrable Securities. No party
may assign its obligations hereunder without the prior written consent of the
other parties; provided, notwithstanding any provision of this Agreement or any
Related Agreement to the contrary, without prior notice to or consent of the
Company, PSO may assign all of its rights and obligations under this Agreement,
or any or all of its Purchased Securities, Option, and Option Securities
purchased under the Stock Purchase Agreement, to any Affiliate under the direct
or indirect control of PSO's parent corporation, Central and South West
Corporation.
7.9 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
7.10 Attorneys' Fees. If any action is brought to enforce, or to
construe or determine the validity of, any term or provision of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees, costs, and
disbursements in addition to any other relief to which such party may be
entitled.
7.11 Severability. If any provision of this Agreement is held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of
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the Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
7.12 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
7.13 Further Action. The parties to this Agreement shall execute
and deliver all documents, provide all information and take or refrain from
taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
7.14 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
7.15 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. Any signature delivered by facsimile transmission shall be
deemed a valid and binding signature for all purposes hereof.
7.16 Construction. All parties hereto having participated actively in
the negotiation and drafting of this Agreement, and each party having been
represented by counsel, the terms of this Agreement shall not be construed
against, nor more favorably to, any party, regardless of their responsibility
for its preparation.
7.17 Expenses. The Company on the one hand, and each of the other
parties hereto on the other hand, agree to pay their separate costs and expenses
(such as travel, photocopy and telephone expenses and including the fees and
expenses of counsel) in connection with the documentation of the transactions
contemplated by this Agreement, and shall not be liable for the other's
expenses.
7.18 Escrow. The effectiveness of this Agreement is subject to and
contingent upon approval, as provided therein, of the Stock Purchase Agreement,
and all transactions contemplated thereby, by the Commission under the Public
Utility Holding Company Act, of 1935, as amended. Pending such approval, the
parties agree to execute, deliver, and deposit this Agreement with the Escrow
Agent (as such term is defined in the Stock Purchase Agreement) pursuant to the
terms of the Escrow Agreement.
(a) In the event the Commission disapproves of the
transactions contemplated by the Stock Purchase Agreement, or in the event no
approval, as provided therein, or denial is received from the Commission within
75 days from the date hereof (or such later date as may be agreed to in writing
by PSO and Xx. X. X. Xxxxxxxxx and communicated to the Escrow Agent) (i) this
Agreement shall be rescinded, and (ii) no party hereto shall have any liability
to any other party whatsoever.
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(b) In the event of Commission approval, as provided therein,
of the Stock Purchase Agreement, and all transactions contemplated thereby, this
Agreement shall be delivered by the Escrow Agreement to all parties and shall
continue in full force and effect.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"Company"
SCIENTECH, Inc.
By:
Name:
Title:
"Holders"
PUBLIC SERVICE COMPANY OF OKLAHOMA
By:
Name:
Title:
XXXXXXXXX FAMILY TRUST C-2
By:
Xx. X. X. Xxxxxxxxx, Trustee
XX. X. X. XXXXXXXXX
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KR ACQUISITION CORP.
By:
Xxxxx Xxxxxxxx, Chairman
XXXXX X. XXXXXXX
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