EXHIBIT 10.3
Execution Copy
REGISTRATION RIGHTS AND SHAREHOLDERS AGREEMENT
This REGISTRATION RIGHTS AND SHAREHOLDERS AGREEMENT, dated as of July
16, 2007 (this "Agreement"), is made among NovaStar Financial, Inc., a Maryland
corporation (the "Company"), Massachusetts Mutual Life Insurance Company, a
mutual life insurance company ("MassMutual"), Jefferies Capital Partners IV
L.P., Jefferies Employee Partners IV LLC and JCP Partners IV LLC (collectively
"Jefferies"; and together with MassMutual, collectively, the "Investors").
RECITALS:
A. The Company has agreed to issue and sell, and the Investors have agreed
to purchase, pursuant to the Securities Purchase Agreement, dated as of July 16,
2007 (the "Securities Purchase Agreement"), by and among the Company and the
Investors, an aggregate of 2,100,000 shares of 9.00% Series D-1 Mandatory
Convertible Preferred Stock, par value $0.01 per share and initial liquidation
preference of $25 per share, of the Company (the "Convertible Shares").
B. The Board of Directors of the Company has approved the distribution to
holders of its Common Shares and holders of the Convertible Shares to be
purchased by the Investors under the Securities Purchase Agreement certain
non-transferable rights (the "Rights Offering") to subscribe for and purchase,
in connection with the Rights Offering, certain shares of 9.00% Series D-2
Mandatory Convertible Preferred Stock (the "Series D-2 Preferred Shares").
C. On or prior to the date hereof, the Company and the Investors shall
execute and deliver a Standby Purchase Agreement (the "Standby Purchase
Agreement"), providing, among other things, for the Investors, on the terms and
subject to the conditions set forth therein, (i) to exercise the
non-transferable subscription rights distributed to the Investors in connection
with the Rights Offering and subscribe for and purchase the Series D-2 Preferred
Shares which are the subject of such subscription rights (but not to participate
in the over-subscription option granted to other subscribing shareholders) and
(ii) to purchase the Series D-2 Preferred Shares that are subject to similar
subscription rights distributed to holders of Common Shares, to the extent such
Series D-2 Preferred Shares are not otherwise subscribed for and purchased by
holders of Common Shares pursuant to the exercise of such subscription rights.
D. In satisfaction of certain conditions to the obligations of the parties
to the Securities Purchase Agreement, the parties are entering into this
Agreement.
E. Capitalized terms used in this Agreement and not otherwise defined are
used as defined in Section 16.
Now, therefore, the parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time following the date hereof, the
Required Investor Holders, may request in writing that the Company effect the
registration (a "Demand Registration") of all or any part of the Registrable
Securities held by such Required Investor Holders, specifying the intended
method of disposition thereof (a "Registration Request") by filing with the
Commission a Demand Registration Statement. Promptly after its receipt of any
Registration Request, but no later than 10 days after receipt of such
Registration Request, the Company will give written notice of such request to
all other Holders of, and will use its reasonable best efforts to register, as
expeditiously as practicable following a Registration Request in accordance with
the provisions of this Agreement, all Registrable Securities (subject to any
reduction pursuant to Section 1(f)) that have been requested to be registered by
the Initiating Holders in the Registration Request or by any other Holders by
written notice to the Company given within 20 days after the date the Company
has given such Holders notice of the Registration Request to the extent
necessary to permit the disposition of such Registrable Securities so to be
registered in accordance with the intended methods of disposition thereof
specified in such Registration Request or further requests (including, without
limitation, only with respect to a Registration Request of the Required Investor
Holders, by means of a shelf registration pursuant to Rule 415 under the
Securities Act (a "Shelf Registration") if so requested and if the Company is
then eligible to use such a registration). The Company shall use its reasonable
best efforts to have such Demand Registration Statement declared effective by
the Commission as soon as practicable after the filing thereof and to keep such
Demand Registration Statement continuously effective for the period specified in
Section 3. Notwithstanding anything in this Section 1(a) to the contrary, the
Company will not be required to effect a registration pursuant to this Section
1(a) unless the aggregate gross proceeds resulting from such Demand Registration
could reasonably be expected to equal or exceed the lesser of (x) $15,000,000 or
(y) all of the Registrable Securities then held by the Required Investor
Holders. The Company will pay all Registration Expenses incurred in connection
with any registration pursuant to this Section 1.
(b) Limitation on Demand Registrations. Other than as provided in Section
1(c), the Company will not be obligated to effect or pay the Registration
Expenses of more than two registrations requested by each of MassMutual
(together with its Affiliates) and Jefferies (together with its Affiliates)
pursuant to this Section 1, provided, however that such number shall be
increased to the extent the Company does not include in what would otherwise be
the final registration for which the Company is required to pay Registration
Expenses the number of Registrable Securities requested to be registered by the
Holders by reason of Section 1(f); provided, further, that a request for
registration will not count for the purposes of this limitation if (i) the
Majority Holders of the Registration determine in good faith to withdraw (x)
such Registration Request prior to the filing of a Demand Registration Statement
or (y) such Demand Registration Statement (prior to the effective date of the
Demand Registration Statement relating to such request) due to (1) regulatory
reasons, (2) because of a material adverse change in the business, financial
condition or prospects of the Company or (3) due to the exercise by the Company
of its rights under Section 1(d) hereof, (ii) the Registration Statement
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relating to such request is not declared effective within 90 days (in any case
where the Commission has no comments on the Registration Statement) or 180 days
(in any case where the Commission has comments on the Registration Statement) of
the date such registration statement is first filed with the Commission (other
than solely by reason of Holders refusing to proceed) and the Majority Holders
of the Registration withdraw such Registration Request prior to the effective
date of the Demand Registration Statement relating to such request, (iii) prior
to the sale of at least 90% of the Registrable Securities included in the
registration relating to such request, such registration is adversely affected
by any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason and the Company fails to have
such stop order, injunction or other order or requirement removed, withdrawn or
resolved to the reasonable satisfaction of the Majority Holders of the
Registration within 30 days of the date of such order, (iv) more than 10% of the
Registrable Securities requested by the Required Investor Holders to be included
in the registration are not so included pursuant to Section 1(f), or (v) the
conditions to closing specified in the underwriting agreement or purchase
agreement entered into in connection with the registration relating to such
request are not satisfied (other than as a result of a material default or
breach thereunder by the Required Investor Holders). Notwithstanding the
foregoing, the Company will pay all Registration Expenses in connection with any
request for registration pursuant to Section 1(a) regardless of whether or not
such request counts toward the limitation set forth above until such limit is
reached.
(c) Short-Form Registrations.
(i) S-3 Registration. If at any time (A) one or more Holders of
Registrable Securities request that the Company file a registration
statement on Form S-3 or any successor form thereto for a public offering
of all or any portion of the shares of Registrable Securities held by such
Holder or Holders, the reasonably anticipated aggregate price to the public
of which would exceed $20,000,000, and (B) the Company is a registrant
entitled to use Form S-3 or any successor form thereto to register such
securities, then the Company shall, as expeditiously as practicable
following such request, use its reasonable best efforts to register under
the Securities Act on Form S-3 or any successor form thereto, for public
sale in accordance with the intended methods of disposition specified in
such request or any related subsequent requests (including, without
limitation, by means of a Shelf Registration) the Registrable Securities
specified in such request and any related subsequent requests; provided,
that if such registration is for an Underwritten Offering, the terms of
Sections 1(e) and 1(f) shall apply (and any reference to "Demand
Registration" therein shall, for purposes of this Section 1(c), instead be
deemed a reference to "S-3 Registration"). Whenever the Company is required
by this Section 1(c) to use its reasonable best efforts to effect the
registration of Registrable Securities, each of the procedures and
requirements of Sections 1(a) and 1(g) (including but not limited to the
requirements that the Company (A) notify all Holders of Registrable
Securities from whom such request for registration has not been received
and provide them with the opportunity to participate in the offering and
(B) use its reasonable best efforts to have a Registration Statement in
connection with such S-3 Registration
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declared and remain effective for the time period specified herein) shall
apply to such registration (and any reference in such Sections 1(e) and
1(f) to "Demand Registration" shall, for purposes of this Section 1(c)(i),
instead be deemed a reference to "S-3 Registration"). Notwithstanding
anything to the contrary contained herein, no request may be made under
this Section 1(c) within 90 days after the effective date of a Registration
Statement filed by the Company covering a firm commitment Underwritten
Offering in which the Holders of Registrable Securities shall have been
entitled to join pursuant to this Agreement in which there shall have been
effectively registered all shares of Registrable Securities as to which
registration shall have been requested (subject to any reduction pursuant
to Section 1(f)). There is no limitation on the number of S-3 Registrations
that the Company is obligated to effect in response to Holders' requests
for S-3 Registrations, and S-3 Registrations shall not count as Demand
Registrations for purposes of Section 1(a) or otherwise reduce the number
of Demand Registrations to which the Holders are entitled. The Company will
pay all Registration Expenses incurred in connection with any S-3
Registration.
(ii) Shelf Registration. If a request made pursuant to Section 1(a) or
1(c) is for a Shelf Registration, the Company shall use its reasonable best
efforts to keep the Shelf Registration continuously effective through the
date on which all of the Registrable Securities covered by such Shelf
Registration may be sold pursuant to Rule 144(k) under the Securities Act
(or any successor provision having similar effect); provided, however, that
prior to the termination of such Shelf Registration, the Company shall
first furnish to each Holder of Registrable Securities participating in
such Shelf Registration (i) an opinion, in form and substance satisfactory
to the Majority Holders of the Registration, of counsel for the Company
satisfactory to the Majority Holders of the Registration stating that such
Registrable Securities are freely saleable pursuant to Rule 144(k) under
the Securities Act (or any successor provision having similar effect) or
(ii) a "No-Action Letter" from the staff of the Commission stating that the
Commission would not recommend enforcement action if the Registrable
Securities included in such Shelf Registration were sold in a public sale
other than pursuant to an effective registration statement.
(d) Restrictions on Demand Registrations. The Company may postpone for a
reasonable period of time the filing of a Prospectus or the effectiveness of a
Registration Statement for a Demand Registration or S-3 Registration if the
Company furnishes to the Holders a certificate signed by the Chief Executive
Officer of the Company, following consultation with, and after obtaining the
good faith approval of, the board of directors (the "Board") of the Company,
stating that the Company believes that such Demand Registration or S-3
Registration would have a material adverse effect on any proposal by the Company
to engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction, or
otherwise would require disclosure of a material corporate development that the
Company is not otherwise required to disclose, and which disclosure would be
detrimental to the Company and its shareholders or would have a material adverse
effect on the business, assets, operations, prospects or financial condition of
the Company. The Company may
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only delay a Demand Registration or an S-3 Registration pursuant to this Section
1(d) by delivery of a Blackout Notice (as defined below) within 30 days of
delivery of the request for such Registration under Section 1(a) or (c), as
applicable, and may delay a Demand Registration or an S-3 Registration and
require the Holders of Registrable Securities to discontinue the disposition of
their securities covered by a Shelf Registration only for a reasonable period of
time not to exceed 60 days (or such earlier time as such transaction is
consummated or no longer proposed) (the "Blackout Period"). There shall not be
more than two Blackout Periods in any 12 month period and the aggregate length
of such Blackout Periods shall not exceed 120 days in any 12 month period. The
Company shall promptly notify the Holders in writing (a "Blackout Notice") of
any decision to postpone a Demand Registration or an S-3 Registration or to
discontinue sales of Registrable Securities covered by a Shelf Registration
pursuant to this Section 1(d) and shall include a general statement of the
reason for such postponement, an approximation of the anticipated delay and an
undertaking by the Company promptly to notify the Holders as soon as a Demand
Registration or an S-3 Registration may be effected or sales of Registrable
Securities covered by a Shelf Registration may resume. If the Company shall
postpone the filing of a Demand Registration Statement or an S-3 Registration
Statement, the Majority Holders of the Registration who were to participate
therein shall have the right to withdraw the request for registration. Any such
withdrawal shall be made by giving written notice to the Company within 30 days
after receipt of the Blackout Notice. Such withdrawn registration request shall
not be treated as a request for a Demand Registration effected pursuant to
Section 1(a) (and shall not be counted towards the number of Demand
Registrations effected), and the Company shall pay all Registration Expenses in
connection therewith.
(e) Selection of Underwriters. If the Initiating Holders holding a majority
of the Registrable Securities for which registration was requested intend to
distribute the Registrable Securities covered by their Registration Request by
means of an Underwritten Offering, they will so advise the Company as a part of
the Registration Request, and the Company will include such information in the
notice sent by the Company to the other Holders with respect to such
Registration Request and the offering of such Registrable Securities pursuant to
such Demand Registration shall be in the form of a firm commitment Underwritten
Offering. In such event, the Initiating Holders holding a majority of the
Registrable Securities for which registration was requested will have the right
to select the Underwriters or other investment banker(s) and manager(s) to
administer the offering, subject to the Company's approval which will not be
unreasonably withheld, conditioned or delayed. If the offering is an
Underwritten Offering, the Company will use reasonable best efforts to ensure
that the right of any Person (including other Holders) to participate in such
registration will be conditioned upon such Person's participation in such
underwriting at the same price and on the same terms of underwriting applicable
to the Initiating Holders and the inclusion of such Person's Registrable
Securities in the Underwritten Offering (unless otherwise agreed by the Majority
Holders of the Registration), and each such Person will (together with the
Company and the other Holders distributing their securities through such
Underwritten Offering) enter into an underwriting agreement in customary form
with the Underwriter or Underwriters selected for such Underwritten Offering. If
any Holder disapproves of the terms of the Underwritten Offering, such Holder
may elect to withdraw therefrom by
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written notice to the Company, the managing Underwriter and the Majority Holders
of the Registration.
(f) Priority on Demand Registrations. The Company will not include in any
underwritten registration pursuant to Sections 1(a) or (c) any securities that
are not Registrable Securities without the prior written consent of the
Initiating Holders holding a majority of the Registrable Securities for which
registration was requested, which consent will not be unreasonably withheld,
conditioned or delayed. Other than in connection with a Shelf Registration, if
the managing Underwriter advises the Company that in its opinion the number of
Registrable Securities (and, if permitted hereunder, other securities requested
to be included in such offering) exceeds the number of securities that can be
sold in such offering without materially adversely affecting the successful
marketability of the offering (including a material adverse effect on the per
share offering price), the Company will include in such offering only such
number of securities that in the opinion of such Underwriters can be sold
without materially adversely affecting the successful marketability of the
offering, which securities will be so included in the following order of
priority: (i) first, Registrable Securities, pro rata among the respective
Holders thereof on the basis of the aggregate number of Registrable Securities
requested to be included in such registration by each of them, and (ii) second,
any other securities of the Company that have been requested to be so included.
Notwithstanding the foregoing, no employee of the Company or any subsidiary
thereof will be entitled to participate, directly or indirectly, in any such
registration to the extent that the managing Underwriter determines in good
faith that the participation of such employee in such registration would
adversely affect the marketability or offering price of the securities being
sold in such registration. In the event the Company shall not, by virtue of this
Section 1(f), include in any Demand Registration all of the Registrable
Securities of any Holder requesting to be included in such Demand Registration,
such Holder may, upon written notice to the Company given within five days of
the time such Holder first is notified of such matter, reduce the amount of
Registrable Securities it desires to have included in such Demand Registration,
whereupon only the Registrable Securities, if any, it desires to have included
will be so included and the Holders not so reducing shall be entitled to a
corresponding increase in the amount of Registrable Securities to be included in
such Demand Registration.
(g) Registration of Other Securities. Whenever the Company shall effect a
Demand Registration, securities other than the Registrable Securities may be
covered by such registration only to the extent the inclusion of such other
securities is made in compliance with the provisions of Section 1(f).
(h) Registration Statement Form. Registrations under this Section 1 shall
be on such appropriate registration form of the Commission (i) as shall be
selected by the Initiating Holders holding a majority of the Registrable
Securities for which registration was requested in the Registration Request, and
(ii) which shall be available for the sale of Registrable Securities in
accordance with (A) the intended method or methods of disposition specified in
the requests for registration and (B) applicable law. The Company agrees to
consult with any selling Holder with respect to any information
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which such selling Holder, upon advice of counsel, has reasonably requested to
be included in such Registration Statement.
(i) Conversions; Exercises. Notwithstanding anything to the contrary
herein, in order for any Registrable Securities that are issuable upon the
exercise of conversion rights, options or warrants to be included in any
registration pursuant to Section 1 or 2 hereof, the exercise of such conversion
rights, options or warrants must be effected no later than immediately prior to
the closing of any sales under the Registration Statement pursuant to which such
Registrable Securities are to be sold.
(j) Exclusive Rights. The registration rights granted pursuant to the
provisions of this Section 1 shall be in addition to the registration rights
granted pursuant to the provisions of Section 2 hereof.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any of
its securities (including in response to a demand of a shareholder not party
hereto, but excluding a registration pursuant to Section 1, relating solely to
employee benefit plans, or relating solely to the sale of debt or convertible
debt instruments) and the registration form to be filed may be used for the
registration or qualification for distribution of Registrable Securities, the
Company will give prompt written notice to all Holders of its intention to
effect such a registration and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within fifteen (15) days after the date of the Company's
notice (a "Piggyback Registration"). Any Holder that has made such a written
request may withdraw its Registrable Securities from such Piggyback Registration
by giving written notice to the Company and the managing Underwriter, if any, on
or before the thirtieth (30th) day prior to the planned effective date of such
Piggyback Registration. The Company may delay, terminate or withdraw any
registration under this Section 2 prior to the effectiveness of such
registration, whether or not any Holder has elected to include Registrable
Securities in such registration, and except for the obligation to pay
Registration Expenses pursuant to Section 2(c) the Company will have no
liability to any Holder in connection with such delay, termination or
withdrawal; provided, however, that if such delay shall extend beyond 120 days
from the date the Company received a request to include Registrable Securities
in such Piggyback Registration, then the Company shall again give all Holders
the opportunity to participate therein and shall follow the notification
procedures set forth in this Section 2(a). There is no limitation on the number
of such Piggyback Registrations pursuant to this Section 2 which the Company is
obligated to effect. The registration rights granted pursuant to the provisions
of this Section 2 shall be in addition to the registration rights granted
pursuant to the other provisions of Section 1 hereof.
(b) Underwritten Registration. If any Piggyback Registration involves an
Underwritten Offering, the Company will so advise the Holders as a part of the
written notice given pursuant to Section 2(a). In such event, the Company will
use reasonable best efforts to ensure that the right of any Holder to
registration pursuant to this Section 2 will be conditioned upon such Holder's
participation in such Underwritten Offering and
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the inclusion of such Holder's Registrable Securities in the Underwritten
Offering, and each such Holder will (together with the Company and the other
Holders distributing their securities through such Underwritten Offering) enter
into an underwriting agreement in customary form with the Underwriter or
Underwriters selected for such Underwritten Offering by the Company. If any
Holder disapproves of the terms of the Underwritten Offering, such Holder may
elect to withdraw therefrom by written notice to the Company, the managing
Underwriter and the Holders participating in the Underwritten Offering.
(c) Piggyback Registration Expenses. The Company will pay all Registration
Expenses in connection with any Piggyback Registration, whether or not any
registration or Prospectus becomes effective or final.
(d) Priority on Primary Registrations. If a Piggyback Registration relates
to an underwritten primary offering on behalf of the Company, and the managing
Underwriters advise the Company (a copy of such notice if in writing or prompt
communication of the content of such notice, if oral, to be provided by the
Company to each Holder requesting registration) that in their opinion the number
of securities requested to be included in such registration exceeds the number
which can be sold without materially adversely affecting the successful
marketability of such offering, the Company will include in such registration or
Prospectus only such number of securities that in the opinion of such
Underwriters can be sold without materially adversely affecting the successful
marketability of the offering, which securities will be so included in the
following order of priority: (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the Holders of such Registrable Securities on the
basis of the number of Registrable Securities so requested to be included
therein owned by each such Holder, and (iii) third, other securities requested
to be included in such registration; provided, however, that in the event the
Company will not, by virtue of this Section 2(d), include in any such
registration all of the Registrable Securities of any Holder requested to be
included in such registration, such Holder may, upon written notice to the
Company given within three days of the time such Holder first is notified of
such matter, reduce the amount of Registrable Securities it desires to have
included in such registration, whereupon only the Registrable Securities, if
any, it desires to have included will be so included and the Holders not so
reducing shall be entitled to a corresponding increase in the amount of
Registrable Securities to be included in such registration. Notwithstanding the
foregoing, any employee of the Company or any subsidiary thereof will not be
entitled to participate, directly or indirectly, in any such registration to the
extent that the managing Underwriter determines in good faith that the
participation of such employee in such registration would adversely affect the
marketability or offering price of the securities being sold in such
registration.
(e) Priority on Secondary Registrations. If a Piggyback Registration
relates to an underwritten secondary registration on behalf of holders of the
Company's securities other than the Holders of Registrable Securities, and the
managing Underwriters advise the Company (a copy of such notice if in writing or
prompt communication of the content of such notice, if oral, to be provided by
the Company to each Holder requesting
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registration) that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold without
materially adversely affecting the successful marketability of the offering, the
Company will include in such registration only such number of securities that in
the opinion of such Underwriters can be sold without materially adversely
affecting the successful marketability of the offering, which securities will be
so included in the following order of priority: (i) first, the securities
requested to be included therein by the holders requesting such registration and
the Registrable Securities requested to be included in such registration, pro
rata among the holders of such securities and Registrable Securities on the
basis of the number of securities so requested to be included therein owned by
each such holder, and (ii) second, other securities requested to be included in
such registration; provided, however, that in the event the Company will not, by
virtue of this Section 2(e), include in any such registration all of the
Registrable Securities of any Holder requested to be included in such
registration, such Holder may, upon written notice to the Company given within
three days of the time such Holder first is notified of such matter, reduce the
amount of Registrable Securities it desires to have included in such
registration, whereupon only the Registrable Securities, if any, it desires to
have included will be so included and the Holders not so reducing shall be
entitled to a corresponding increase in the amount of Registrable Securities to
be included in such registration. Notwithstanding the foregoing, any employee of
the Company or any subsidiary thereof will not be entitled to participate,
directly or indirectly, in any such registration to the extent that the managing
Underwriter determines in good faith that the participation of such employee in
such registration would adversely affect the marketability or offering price of
the securities being sold in such registration.
(f) Other Registrations. If the Company receives a Registration Request or
files a Registration Statement with respect to Registrable Securities pursuant
to Section 1 or Section 2, and if such registration has not been withdrawn or
abandoned, the Company will not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-4 or S-8 or any successor or similar forms), whether on
its own behalf or at the request of any holder or holders of such securities,
from a period beginning on the date of a Registration Request and ending at
least 120 days from the effective date of the effectiveness of such Registration
Statement, and shall not be required to do so notwithstanding any other
provision of this Agreement.
3. Registration Procedures. Subject to Section 1(d), whenever the Holders
of Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company will use its reasonable best
efforts to effect the registration and sale of such Registrable Securities in
accordance with the intended method of disposition thereof. Without limiting the
generality of the foregoing, the Company will, as expeditiously as practicable:
(a) prepare and (within 60 days after the end of the thirty-day period
within which requests for registration may be given to the Company pursuant
hereto) file with the Commission a Registration Statement with respect to such
Registrable Securities which Registration Statement shall comply as to form in
all material respects with the
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requirements of the applicable form and include all financial statements
required by the Commission to be filed therewith, make all required filings with
the National Association of Securities Dealers, Inc. (the "NASD") and thereafter
use its reasonable best efforts to cause such Registration Statement to become
effective, provided that before filing a Registration Statement or any
amendments or supplements thereto, the Company will furnish to the Holders'
counsel copies of all such documents proposed to be filed, which documents will
be subject to review of such counsel at Holders' expense and the Company shall
provide the Holders' counsel and any attorney, accountant or other agent
retained by any such seller or any Underwriter (each, an "Inspector" and,
collectively, the "Inspectors") with a reasonable opportunity, in light of the
circumstances, to participate in the preparation of such Registration Statement
and each Prospectus included therein (and each amendment or supplement thereto
or comparable statement) to be filed with the Commission. Unless such Holders'
counsel has reasonably objected in writing to the filing of such Registration
Statement, amendment or supplement prior thereto, the Company will file such
Registration Statement, Prospectus, amendment or supplement or comparable
statement as required by this Agreement. The Company will not file any
Registration Statement or amendment or post-effective amendment or supplement to
such Registration Statement to which such Holders' counsel has reasonably
objected in writing on the grounds that (and explaining why) 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;
(b) 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 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; provided, that except with respect to any Shelf Registration, such
period need not extend beyond nine months after the effective date of the
Registration Statement; and provided further, that with respect to any Shelf
Registration, such period need not extend beyond the time period provided in
Section 1(c), and which periods, in any event, shall terminate when all
Registrable Securities covered by such Registration Statement have been sold
(but not before the expiration of the 90 day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable);
(c) furnish to each seller of Registrable Securities and each Underwriter,
if any, such number of copies, without charge, of such Registration Statement,
each amendment and supplement thereto, including each preliminary Prospectus,
final Prospectus, all exhibits and other documents filed therewith and such
other documents as such seller may reasonably request including in order to
facilitate the disposition of the Registrable Securities owned by such seller;
(d) use its reasonable best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller or the sole or lead managing Underwriter, if any, reasonably
requests, to continue such
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registration or qualification in effect in each such jurisdiction for as long as
such Registration Statement remains in effect (including through new filings or
amendments or renewals) and do any and all other acts and things that may be
necessary or reasonably advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subsection, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) use its reasonable best efforts to cause all Registrable Securities
covered by such Registration Statement to be registered with or approved by such
other governmental agencies, authorities or self-regulatory bodies as may be
necessary or reasonably advisable in light of the business and operations of the
Company to enable the seller or sellers thereof to consummate the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition thereof;
(f) promptly notify the Holders' counsel, the sole or lead managing
Underwriter, if any, and each seller of such Registrable Securities, at any time
when a Registration Statement related thereto is required to be amended or
supplemented or a Prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the discovery of the happening
of any event as a result of which, the Registration Statement or the Prospectus
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made, and, as promptly as practicable, prepare and furnish
to such seller a reasonable number of copies of a supplement or amendment to
such Registration Statement or Prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such Registration Statement or
Prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(g) notify each seller of any Registrable Securities covered by such
Registration Statement (i) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed and, with respect to such Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the Commission or any state securities or blue sky
authority for amendments or supplements to the Registration Statement or the
Prospectus related thereto or for additional information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of such
Registration Statement or the initiation or threat (of which the Company has
actual knowledge) of any proceedings for any of such purposes or (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation of any proceeding for such
purpose;
(h) if so requested by the Majority Holders of the Registration, use its
reasonable best efforts to cause all such Registrable Securities to be listed on
each
11
securities exchange on which similar securities issued by the Company are then
listed or, if no similar securities issued by the Company are then listed on any
securities exchange (or if the listing of Registrable Securities is not
permitted under the rules of each national securities exchange on which the
Company's securities are then listed), use its reasonable best efforts to cause
all such Registrable Securities to be listed on The New York Stock Exchange or
Nasdaq Stock Market (as determined by the Company in consultation with the
Majority Holders of the Registration);
(i) provide a CUSIP number for all Registrable Securities and provide and
cause to be maintained a transfer agent and registrar for all such Registrable
Securities not later than the effective date of, or date of final receipt, for
such Registration Statement;
(j) enter into and perform such customary agreements (including
underwriting agreements with customary provisions) and provide officers'
certificates and other customary closing documents and take all such other
actions as the Majority Holders of the Registration or the Underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a share split
or a combination of shares);
(k) make available for inspection by any seller of Registrable Securities,
Holders' counsel, any Underwriter participating in any disposition pursuant to
such Registration Statement and any Inspector, all financial and other records,
pertinent corporate documents and documents relating to the business of the
Company, and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such seller,
Holders' counsel, Underwriter, or Inspector in connection with such Registration
Statement; provided that each Holder will, and will use its commercially
reasonable efforts to cause each such Underwriter or Inspector to (i) enter into
a confidentiality agreement in form and substance reasonably satisfactory to the
Company and (ii) minimize the disruption to the Company's business in connection
with the foregoing; provided, further, that the Company shall not be required to
make available for inspection any documents containing material non-public
information or otherwise provide such material non-public information to any
person unless permitted under applicable securities laws (in particular
Regulation F-D) without also making public disclosure thereof;
(l) otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission and any other governmental agency or
authority having jurisdiction over the offering, and make available to its
security holders, as soon as reasonably practicable earnings statements covering
such 12-month periods beginning after the "effective date of the registration
statement" (as defined in Rule 158(c) of the Securities Act) in a manner which
satisfies the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(m) in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending or
preventing the use of any related Prospectus or ceasing trading of any
securities included in such Registration
12
Statement for sale in any jurisdiction, use its reasonable best efforts promptly
to obtain the withdrawal of such order;
(n) cooperate with each selling Holder of Registrable Securities and each
Underwriter participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be made with
the NASD and make reasonably available its employees and personnel and otherwise
provide reasonable assistance to the Underwriters (taking into account the needs
of the Company's businesses and the requirements of the marketing process) in
the marketing of Registrable Securities in any Underwritten Offering, including,
without limitation, preparing for and participating in such number of "road
shows" and all such other customary selling efforts as the Underwriters
reasonably request in order to expedite or facilitate such disposition; and
enter into such agreements and take such other actions as the sellers of
Registrable Securities or the Underwriters reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(o) if requested by the sole or lead managing Underwriter or any selling
Holder of Registrable Securities, obtain one or more comfort letters, addressed
to the sellers of Registrable Securities, dated the effective date of such
Registration Statement (and, if such registration includes an underwritten
public offering dated the date of the closing under the underwriting agreement
for such offering), signed by the Company's independent public accountants in
customary form and covering such matters of the type customarily covered by
comfort letters as the Holders of a majority of the Registrable Securities being
sold in such offering reasonably request;
(p) if requested by the sole or lead managing Underwriter or any selling
Holder of Registrable Securities, provide legal opinions of the Company's
outside counsel and a "negative assurance" letter from counsel, in each case,
addressed to the Holders of the Registrable Securities being sold, dated the
effective date of such Registration Statement, each amendment and supplement
thereto (and, if such registration includes an underwritten public offering,
dated the date of the closing under the underwriting agreement), with respect to
the Registration Statement, each amendment and supplement thereto (including the
preliminary Prospectus) and such other documents relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
and "negative assurance" letters of such nature;
(q) cooperate with the selling Holders of Registrable Securities and the
sole or lead managing Underwriter, if any, to facilitate the timely preparation
and delivery of certificates not bearing any restrictive legends representing
the Registrable Securities to be sold, and cause such Registrable Securities to
be issued in such denominations and registered in such names in accordance with
the underwriting agreement prior to any sale of Registrable Securities to the
Underwriters or, if not an Underwritten Offering, in accordance with the
instructions of the selling Holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities;
(r) if requested by the sole or lead managing Underwriter or any selling
Holder of Registrable Securities, immediately incorporate in a prospectus
supplement or
13
post-effective amendment such information concerning such Holder of Registrable
Securities, the Underwriters or the intended method of distribution as the sole
or lead managing Underwriter or the selling Holder of Registrable Securities
reasonably requests to be included therein and as is appropriate in the
reasonable judgment of the Company, including, without limitation, information
with respect to the number of shares of the Registrable Securities being sold to
the Underwriters, the purchase price being paid therefor by such Underwriters
and with respect to any other terms of the Underwritten Offering of the
Registrable Securities to be sold in such offering; make all required filings of
such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment; and supplement or make amendments to any Registration Statement if
requested by the sole or lead managing Underwriter of such Registrable
Securities; and
(s) use its reasonable best efforts to take or cause to be taken all other
actions, and do and cause to be done all other things, necessary or reasonably
advisable to effect the registration of such Registrable Securities contemplated
hereby.
The Company agrees not to file or make any amendment to any Registration
Statement with respect to any Registrable Securities, or any amendment of or
supplement to the Prospectus used in connection therewith, that refers to any
Holder covered thereby by name, or otherwise identifies such Holder as the
holder of any securities of the Company, without the consent of such Holder,
such consent not to be unreasonably withheld or delayed, unless and to the
extent such disclosure is required by law. If any Registration Statement or
comparable statement under "blue sky" laws refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance satisfactory to such Holder and the Company, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, and
(ii) in the event that such reference to such Holder by name or otherwise is not
in the judgment of the Company, as advised by counsel, required by the
Securities Act or any similar federal statute or any state "blue sky" or
securities law then in force, the deletion of the reference to such Holder.
The Company may require each Holder of Registrable Securities as to which any
registration is being effected to furnish the Company with such information
regarding such Holder and pertinent to the disclosure requirements relating to
the registration and the distribution of such securities as the Company may from
time to time reasonably request in writing.
The Company represents and agrees that, unless it obtains the prior consent of
the Majority Holders of the Registration or Holders' counsel, and each of the
Holders represents and agrees that, unless it obtains the prior consent of the
Company, it will not make any offer relating to Registrable Securities that
would constitute a "free writing prospectus" as defined in Rule 433 under the
Securities Act (an "Issuer Free Writing Prospectus"), or that would otherwise
constitute a "free writing prospectus," as defined in
14
Rule 405 under the Securities Act, required to be filed with the Commission. The
Company represents that any Issuer Free Writing Prospectus will not include any
information that conflicts with the information contained in the Registration
Statement or Prospectus and that any Issuer Free Writing Prospectus, when taken
together with the information in the Registration Statement and the Prospectus,
will not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4. Registration Expenses.
(a) Except for Selling Expenses and as otherwise provided for herein, all
expenses incidental to the Company's performance of or compliance with this
Agreement whether or not any Registration Statement becomes effective and
whether or not all Registrable Securities originally requested to be included in
such registration are withdrawn or otherwise ultimately not included in such
registration, including, without limitation, all registration, listing and
filing fees, fees and expenses of compliance with securities or blue sky laws
and the rules of any stock exchange, word processing, duplicating, distributing
and printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company, all independent certified public
accountants (including the expenses of any audit and/or "cold comfort" letters),
Underwriters and other Persons retained by the Company, the reasonable
out-of-pocket expenses incurred in connection with making road show
presentations and holding meetings with potential investors to facilitate the
distribution and sale of Registrable Securities which are customarily borne by
the issuer (all such expenses, "Registration Expenses"), will be borne as
provided in this Agreement, except that the Company will, in any event, pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit or quarterly review, the expenses of its liability insurance
and the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on The New York Stock Exchange or Nasdaq Stock Market. All Selling
Expenses will be borne by the holders of the securities so registered pro rata
on the basis of the number of their securities so registered.
(b) In connection with each registration pursuant to Section 1 and each
Piggyback Registration whether or not any Registration Statement becomes
effective and whether or not all Registrable Securities originally requested to
be included in such registration are withdrawn or otherwise ultimately not
included in such registration, the Company will reimburse the holders of
Registrable Securities covered by such registration or qualification for the
reasonable fees and disbursements of one United States counsel, which counsel
shall be selected (i) in the case of a Demand Registration or an S-3
Registration by the Initiating Holders holding a majority of the Registrable
Securities for which registration was requested in the Registration Request, and
(ii) in all other cases, by the Majority Holders of the Registration, and in
each case in consultation with the Company.
15
(c) To the extent Registration Expenses are not required to be paid by the
Company pursuant to this Agreement, each holder of securities included in any
registration or qualification hereunder will pay those Registration Expenses
allocable to the registration or qualification of such holder's securities so
included, and any Registration Expenses not so allocable will be borne by all
sellers of securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered or qualified.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless, and hereby does
indemnify and hold harmless, each Holder, its Affiliates and their respective
officers, directors and partners, members, shareholders, employees, and agents
(each, an "Agent") and each Person who "controls" such Holder (within the
meaning of the Securities Act and Section 20 of the Exchange Act) against, and
pay and reimburse such Holder, Agent or controlling person for any losses,
claims, damages, liabilities, joint or several, to which such Holder, Agent 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 threatened, in respect thereof) arise out of
or are based upon (i) any untrue or alleged untrue statement of material fact
contained in any Registration Statement, Prospectus, preliminary Prospectus or
Issuer Free Writing Prospectus or any amendment thereof or supplement thereto,
(ii) any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iii) any
violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities laws applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, and the Company will pay and reimburse such Holder and each
such Agent and controlling person for any legal or any other expenses actually
and reasonably incurred by them in connection with investigating, defending or
settling any such loss, claim, liability, action or proceeding, provided that
the Company will not be liable 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 an untrue statement or alleged untrue
statement, or omission or alleged omission, made in such Registration Statement,
any such Prospectus, preliminary Prospectus or Issuer Free Writing Prospectus or
any amendment or supplement thereto, or in any application, in reliance upon,
and in conformity with, written information prepared and furnished to the
Company by such Holder or its Affiliates for use therein. In connection with an
Underwritten Offering, the Company, if requested, will indemnify such
Underwriters, their officers and directors and each Person who controls such
Underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Holders.
(b) In connection with any Registration Statement in which a Holder is
participating, each such Holder will furnish to the Company in writing such
information, affidavits and officer's certificates as the Company reasonably
requests for use in connection with any such Registration Statement, Prospectus
or preliminary Prospectus and, will indemnify and hold harmless the Company, its
directors and officers, each
16
Underwriter and each other Person who "controls" the Company (within the meaning
of the Securities Act and Section 20 of the Exchange Act) and each such
Underwriter against any losses, claims, damages, liabilities, joint or several,
to which the Company or any such director or officer, any such Underwriter 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 threatened, in respect thereof) arise out of
or are based upon (i) any untrue or alleged untrue statement of material fact
contained in the Registration Statement, Prospectus or preliminary Prospectus or
any amendment thereof or supplement thereto or in any application or (ii) any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is made in such Registration Statement,
any such Prospectus or preliminary Prospectus or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information prepared and furnished to the Company by such Holder for use
therein, and such Holder will reimburse the Company and each such director,
officer, Underwriter and controlling Person for any legal or any other expenses
actually and reasonably incurred by them in connection with investigating,
defending or settling any such loss, claim, liability, action or proceeding,
provided that the obligation to indemnify and hold harmless will be individual
and several to each Holder and will be limited to the proceeds received by such
Holder from the sale of Registrable Securities pursuant to such Registration
Statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the registration and sale of any securities
by any Person entitled to any indemnification hereunder and the expiration or
termination of this Agreement.
(e) If the indemnification provided for in this Section 5 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, will contribute to the amount
17
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other hand in connection with the statements or omissions which
resulted in such loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relevant fault of the indemnifying party
and the indemnified party will be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount any Holder will
be obligated to contribute pursuant to this Section 5(e) will be limited to an
amount equal to the proceeds to such Holder of the Registrable Securities sold
pursuant to the registration statement which gives rise to such obligation to
contribute (less the aggregate amount of any damages which the Holder has
otherwise been required to pay in respect of such loss, claim, damage, liability
or action or any substantially similar loss, claim, damage, liability or action
arising from the sale of such Registrable Securities). The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
5(e) were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in the
immediately preceding sentence. 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.
6. Participation in Underwritten Registrations.
(a) No Holder may participate in any registration hereunder that is
underwritten unless such Holder (i) agrees to sell its Registrable Securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing Underwriter(s), provided that no Holder will be
required to sell more than the number of Registrable Securities that such Holder
has requested the Company to include in any registration), (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) cooperates with the Company's reasonable
requests in connection with such registration or qualification (it being
understood that the Company's failure to perform its obligations hereunder,
which failure is caused by such Holder's failure to cooperate, will not
constitute a breach by the Company of this Agreement). Notwithstanding the
foregoing, no Holder will be required to agree to any indemnification
obligations on the part of such Holder that are greater than its obligations
pursuant to Section 5(b).
(b) Each Holder that is participating in any registration hereunder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 3(f) above, such Holder will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
Registration Statement until such Holder
18
receives copies of a supplemented or amended Prospectus as contemplated by such
Section 3(f). In the event the Company gives any such notice, the applicable
time period mentioned in subsection 3(b) during which a Registration Statement
is to remain effective will be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to this
Section 6(b) to and including the date when each seller of a Registrable
Security covered by such Registration Statement will have received the copies of
the supplemented or amended Prospectus contemplated by Section 3(f).
7. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its reasonable best efforts to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times,
(b) 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,
and
(c) take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such rules may be amended from time to time, or (ii) any
other rule or regulation now existing or hereafter adopted by the Commission.
Upon the request of any Holder of Registrable Securities, the Company shall
deliver to such Holder a written statement as to whether it has complied with
such requirements.
8. Lock Up Agreements. In consideration for the Company agreeing to its
obligations under this Agreement, each Holder agrees in connection with any
registration of the Company's securities (whether or not such Holder is
participating in such registration) upon the timely request of the Company and
the Underwriters managing any Underwritten Offering of the Company's securities,
not to effect (other than pursuant to such registration) any public sale or
distribution of Registrable Securities, including, but not limited to, any sale
pursuant to Rule 144 or Rule 144A, or make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities,
any other equity securities of the Company or any securities convertible into or
exchangeable or exercisable for any equity securities of the Company without the
prior written consent of the Company or such Underwriters, as the case may be,
for such period of time (not to exceed 90 days) from the effective date of such
registration as the Company and the Underwriters may specify, such consent not
to be unreasonably withheld, delayed or conditioned, in the case of the Company,
so long as all Holders or shareholders holding more than five percent (5%) of
the outstanding Common Shares and all officers and directors of the Company are
bound by a comparable obligation, provided that nothing herein will prevent any
Holder that is a partnership or corporation from
19
making a distribution of Registrable Securities to the partners or shareholders
thereof that is otherwise in compliance with applicable securities laws, so long
as such distributees agree to be so bound. The Company agrees that (i) if timely
requested in writing by the sole or lead managing Underwriter in an Underwritten
Offering of any Registrable Securities, not to make any short sale of, loan,
grant any option for the purchase of or effect any public sale or distribution
of any of the Company's equity securities (or any security convertible into or
exchangeable or exercisable for any of the Company's equity securities) during
the time period reasonably requested by the sole or lead managing Underwriter
not to exceed 90 days, beginning on the effective date of the applicable
Registration Statement (except as part of such underwritten registration or
pursuant to registrations on Forms S-4 or S-8 or any successor form to such
forms), and (ii) it will cause each holder of equity securities (or any security
convertible into or exchangeable or exercisable for any of its equity
securities) of the Company purchased from the Company at any time after the date
of this Agreement (other than in a registered public offering) to so agree.
9. Term. This Agreement will be effective as of the date hereof and will
continue in effect thereafter until the earliest of (a) its termination by the
consent of the Company and the holders of not less than 66 2/3% of the
Registrable Securities, (b) the dissolution, liquidation or winding up of the
Company and (c) the date on which no Registrable Securities remain outstanding;
provided, that Sections 5, 10, 12, 13, 14 and 15 shall survive any such
termination, in accordance with their terms.
10. Voting Rights. (a) The Company and each Holder shall take all necessary
and desirable actions within its control (including, without limitation, calling
special board or shareholder meetings to seek approval of amendments and/or
restatements of the Company's Charter or Bylaws, proposing a slate of director
nominees and voting in favor of such nominees, as applicable in each case), so
that:
(i) For so long as the Investors have the right to designate one or
more individuals for election to the Board in accordance with this Section
10, the total authorized number of members of the Board shall be fixed at
eight, subject to adjustment as is necessary to implement the provisions
set forth below.
(ii) For so long as any Investor (or its Affiliates) beneficially owns
Convertible Shares, Common Shares or Common Share Equivalents, such
Investor shall be entitled to designate for election to the Board such
number of individuals (and such designated individuals shall be elected as
members of the Board) determined from time to time, as follows:
(A) Effective upon the closing of the issuance and sale by the
Company, and the purchase by such Investor, of Convertible Shares
pursuant to the Securities Purchase Agreement (the "Closing"), such
Investor (or its respective Affiliates) shall be entitled to designate
for election to the Board one individual;
20
(B) Effective upon the closing of the Rights Offering, the
Investors shall be entitled to designate for election to the Board
such total number of individuals (and such designated individuals
shall be elected as members of the Board) determined from time to
time, as follows (and including any individuals designated to the
Board pursuant to clause (A) above): (1) if the Investors Voting
Shares Percentage is equal to or less than 22%, two individuals, one
of whom shall be designated by MassMutual and one of whom shall be
designated by Jefferies, (2) if the Investors Voting Shares Percentage
is greater than 22% and equal to or less than 30%, three individuals,
two of whom shall be designated by Jefferies for the initial Board
Class Term and one of whom shall be designated by MassMutual for the
initial Board Class Term (and in conformity with Section 10(a)(i), the
total number of members of the Board shall then be fixed at nine);
provided, that following the expiration of the initial Board Class
Term, MassMutual shall have the right to designate two individuals for
the next Board Class Term and Jefferies shall have the right to
designate one individual for the next Board Class Term, and Jefferies
and MassMutual shall thereafter alternate having the right to
designate two and one individuals to the Board, respectively, for each
successive Board Class Term and (3) if the Investors Voting Shares
Percentage is more than 30%, four individuals, two of whom shall be
designated by MassMutual and two of whom shall be designated by
Jefferies (and in conformity with Section 10(a)(i), the total number
of members of the Board shall then be fixed at ten); provided,
however, that, notwithstanding the foregoing, following the closing of
the Rights Offering (x) for so long as the Investors (or their
Affiliates) in the aggregate own at least 25% but less then 50% of the
Purchased Shares, the Investors shall be entitled to retain the right
to designate for election to the Board two individuals (including any
individuals designated pursuant to clause (A) above), one of whom
shall be designated by MassMutual and one of whom shall be designed by
Xxxxxxxx, (y) for so long as the Investors (or their Affiliates) in
the aggregate beneficially own at least 10% but less than 25% of the
Purchased Shares, the Investors shall be entitled to designate for
election to the Board one individual (in lieu of any individual
designated pursuant to clause (A) above) who shall be designated by
MassMutual for the initial Board Class Term and by Jefferies for the
next Board Class Term, and MassMutual and Jefferies shall thereafter
alternate having the right to designate one individual to the Board
for each successive Board Class Term and (z) if the Investors (or
their Affiliates) in the aggregate beneficially own less than 10% of
the Purchased Shares all rights under this Section 10 of the Investors
(including rights pursuant to clause (A) above) to designate
individuals for election to the Board shall terminate; provided,
further, that until the Financial Services Consents set forth on Annex
I attached hereto are obtained, the Investors shall not be entitled to
designate any Investor Directors other than pursuant to clause (A)
above.
21
(iii) Subject to applicable law and exchange rules and regulations,
each Investor shall be entitled to designate the number of members of each
committee of the Company established by the Board that is proportionate to
such Investor's representation on the Board; provided, however, that any
individual who is designated by an Investor to serve on the Audit Committee
of the Board in accordance with this Section 10(a)(iii) may be appointed to
such Audit Committee only if such designee, at the time of such
appointment, meets the applicable "independence" standards for audit
committee members as then required by the applicable rules of The New York
Stock Exchange or Nasdaq Stock Market or any other United States securities
exchange or association, as the case may be, on which the Common Shares are
then listed.
(iv) For so long as Investors have the right to designate directors
for election to the Board, such Investor shall also have the right to
notify the Company of its intent to remove from the Board or such
committees thereof the Investor Directors so designated by such Investor,
and the Company shall use its reasonable best efforts to take all actions
necessary to effect such removal. If a vacancy is to occur on the Board or
any such committee thereof arising from the removal, resignation, death or
incapacity of a director designated by any Investor, such Investor shall
have the sole right to designate a director to fill such vacancy. The
Company shall take all actions necessary to fill such a vacancy promptly
upon notice by Investors of their designation of a replacement director.
(v) For so long as the holders of 8.90% Series C Cumulative Redeemable
Preferred Stock and/or holders of any other preferred stock having similar
voting rights, have the right to designate in the aggregate two additional
directors to the Board pursuant to Section 6(c) of the 8.90% Series C
Cumulative Redeemable Preferred Stock Articles Supplementary of the Company
(or similar provision of the articles supplementary governing such other
preferred stock), the Company shall have the right to increase the size of
the Board by 2 directorships, which directorships shall be filled by the
holders of 8.90% Series C Cumulative Redeemable Preferred Stock and/or
holders of any other preferred stock having similar voting rights. No such
designation shall reduce the total number of Directors that may be
designated by the Board or the Investors as provided in this Section 10.
(vi) The Company agrees that it shall use its reasonable best efforts
to take all actions necessary to cause any Investor Director to be elected
to the Board as promptly as practicable following such designation by an
Investor pursuant to this Section 10.
(b) In addition to the rights set forth in Section 10(a), the Investors
shall otherwise have the right to participate in the election of the Board on
the same terms as other holders of Voting Shares of the Company.
22
(c) So long as any Investor Director serves on the Board, the Company shall
maintain directors and officers indemnity insurance coverage for the Investor
Directors on the same basis as which it is provided to other members of the
Board.
(d) Notwithstanding the foregoing, during any period in which the Investors
shall have the right to designate one or more individuals for election to the
Board in accordance with this Section 10, (i) the Investors shall have the right
to designate one or more individuals, as appropriate, to act as a "Board
Observer" in lieu of serving as a director and (ii) each Investor shall have the
right to designate up to two individuals, as appropriate, to act as a board
observer (a "Subsidiary Board Observer") on the boards of directors of
Subsidiaries of the Company (each, a "Subsidiary Board"). The number of Board
Observers appointed by any Investors shall count against the number of Investor
Directors that such Investor may designate. The designation of any individual to
act as a Board Observer or Subsidiary Board Observer shall be made in writing
delivered to the Company, identifying the Board Observer or Subsidiary Board
Observer, as the case may be, and in the case of any Board Observer, the
particular directorship that such Board Observer will act in lieu of. Any Board
Observer may be re-designated for election as an Investor Director at any time
by the Investors delivering a written notice of such re-designation to the
Company, which notice shall identify the Board Observer and the identity of the
individual nominated for election as Investor Director (which may or may not be
the same person as the identified Board Observer). The Company will provide any
Board Observer or Subsidiary Board Observer with prior notice of the time and
place of any proposed meeting of the Board or Subsidiary Board, as applicable,
and any proposed action by written consent of the Board or such Subsidiary
Board. In addition, the Company will provide any Board Observer or Subsidiary
Board Observer, as the case may be, with copies of any documents that are
provided by the Company or any of the Company's Affiliates to members of the
Board or Subsidiary Board, as applicable, in connection with any meeting of the
Board or any Subsidiary Board or action by written consent of the Board or any
Subsidiary Board. All such notices of meetings and written materials shall be
delivered to the Board Observers and Subsidiary Board Observers at the same time
and in the same format as the notice of meetings and written materials delivered
to applicable members of the Board or Subsidiary Board, as the case may be. The
Board Observers and Subsidiary Board Observers shall be entitled to attend any
Board or Subsidiary Board meeting, as applicable, or if a meeting is to be held
by telephone conference, to participate therein, but the foregoing right of
attendance or participation shall not include the right to vote on any matter
presented to the Board or any such Subsidiary Board. Any information provided to
a Board Observer or Subsidiary Board Observer as a result of the rights under
this Section 10(d) shall be treated by such Board Observer or Subsidiary Board
Observer in the same manner as if such Board Observer or Subsidiary Board
Observer had obtained such information as a member of the Board or Subsidiary
Board, as the case may be. A Board Observer or Subsidiary Board Observer shall
be entitled to attend or participate in meetings or telephone conferences of
committees of the Board or such Subsidiary Board, and to receive information
delivered to such committees, to the same extent that such Board Observer or
Subsidiary Board Observer would have been entitled if serving as a member of the
Board or Subsidiary Board, as applicable, instead of acting only as a Board
Observer or Subsidiary Board Observer. Notwithstanding the foregoing, the
Company reserves the
23
right to withhold any information, documents or notices and to exclude any Board
Observer or Subsidiary Board Observer from any Board or Subsidiary Board meeting
or committee meeting or any portion thereof if access to such information or
documents or attendance at such meeting could adversely affect the
attorney-client privilege between the Company and its counsel or result in the
disclosure of trade secrets or a conflict of interest. The Company shall
reimburse any Investor Director, Board Observer or Subsidiary Board Observer for
the reasonable expenses incurred by such Investor Director, Board Observer or
Subsidiary Board Observer in connection with the attendance of meetings of the
Board or Subsidiary Board (or any committee thereof) in a manner that is
consistent with the Company's policy for reimbursement for members of the Board
or any such Subsidiary Board, as applicable, provided such reimbursements shall
only include cash. Notwithstanding any Company policy regarding the payment of
non-cash compensation to its directors, the Investor Directors shall not be
eligible to receive any non-cash compensation, including stock or stock options;
provided, however, that this limitation shall not apply to to the extent that
(x) any such Investor Director requests payment of non-cash compensation in the
same manner that the Company pays non-cash compensation to its other directors
and (y) the payment of such non-cash compensation by the Company to any such
Investor Director would not violate applicable laws (including applicable
regulatory laws) or the rules and regulations of The New York Stock Exchange or
impair the net operating losses of the Company (for federal income tax
purposes). Prior to the designation of any individual to act as a Board Observer
or Subsidiary Board Observer, such individual shall enter into a confidentiality
agreement with the Company on terms reasonably acceptable to the Investors.
(e) Notwithstanding anything herein to the contrary, the rights granted to
the Investors in this Section 10 or otherwise in this Agreement are subject to
(i) the rules and regulations of the New York Stock Exchange or such other
securities exchange on which the Common Shares may be listed, including without
limitation Rule 303A.01 of the New York Stock Exchange Listed Company Manual,
which requires that companies listed on the New York Stock Exchange must have a
majority of independent directors and (ii) the corporate governance matters set
forth in Annex A of the Stipulation of Settlement.
(f) For the avoidance of doubt, for purposes of this Section 10, MassMutual
(and its Affiliates) shall be deemed one Investor and Jefferies (and its
Affiliates) shall be deemed another (and separate) Investor.
(g) For so long as any Convertible Shares are outstanding, in addition to
any other vote of members or shareholders of the Company required under
applicable law or the Charter or Bylaws of the Company, the holders of the
Convertible Shares will have the rights set forth in Section 5(b) of the
Articles Supplementary applicable to such Convertible Shares and the Company
shall not take any action or fail to take any action that, in any event, would
be inconsistent with, or would otherwise impede or frustrate the rights of such
holders of Convertible Shares under Section 5(b) of the applicable Articles
Supplementary.
(h) For so long as any Investor (or its respective Affiliates) beneficially
owns at least 25% of the Convertible Shares purchased at the Closing, in
addition to any other
24
vote of shareholders of the Company required under applicable law (including,
without limitation, the Maryland General Corporation Law) or the Charter or
Bylaws of the Company, the prior approval or written consent, of the Investors,
will be required for the Company to (i) effect, consummate or permit to occur
any Change of Control or Liquidation Event, or for any voluntary bankruptcy,
insolvency or receivership (other than a Liquidation Event) (or agree to do any
of the foregoing), or permit any of its Subsidiaries to do any of the foregoing,
unless any such transaction referred to in this Section 10(g) results in the
payment to the Investors of cash or other property with an aggregate Fair Market
Value per Convertible Share of not less than (A) 1.75 multiplied by (B) (1) the
Initial Stated Value of a Convertible Share (subject to appropriate adjustment
in the event of an Extraordinary Stock Event) less (2) all cash dividends
previously paid per Convertible Share, (ii) create, issue, authorize or increase
(including by way of a recapitalization) the authorized amount of, or create,
issue or authorize any obligation or security convertible into, or exercisable
or exchangeable for, or evidencing a right to purchase any Series D-1 Preferred
Shares, Series D-2 Preferred Shares, Parity Shares or Capital Stock of any
Subsidiary of the Company, whether any such creation or authorization shall be
by means of amendment of the applicable charter (whether by way of an articles
supplementary, certificate of designations or otherwise) or by merger,
consolidation or otherwise, except for (x) the issuance of Series E Preferred
Shares in satisfaction of the 2007 Section 858 Dividend, (y) the issuance of
Series D-1 Preferred Shares pursuant to the Securities Purchase Agreement or (z)
the issuance of Series D-2 Preferred Shares upon conversion of the Series D-1
Preferred Shares, in connection with the Rights Offering or pursuant to the
Standby Purchase Agreement; provided, that the consent rights of the Investors
pursuant to this Section 10(h)(ii) shall not be applicable with respect to the
Capital Stock of any Subsidiary of the Company created, issued or authorized by
the Company (1) in connection with bona fide commercial transactions or
securitizations to which such Subsidiary of the Company is a party or in
connection with the Company's formation of a new joint venture or (2) for
issuance to the Company or any of its wholly owned Subsidiaries, (iii) approve
or make any amendment to the terms of the Series D-1 Preferred Shares or the
Series D-2 Preferred Shares, (iv) reclassify any authorized shares of the
Company into any Series D-1 Preferred Shares, Series D-2 Preferred Shares or
Parity Shares, or any obligation or security convertible into or exercisable
for, or evidencing a right to purchase any Series D-1 Preferred Shares, Series
D-2 Preferred Shares or Parity Shares, (v) except as specifically contemplated
by this Section 10, increase or decrease the number of directors constituting
the Board of Directors or any committee of the Board of Directors or change the
method of electing members of the Board of Directors or board committee members,
(vi) enter into or amend any transactions with Affiliates of the Company other
than wholly owned Subsidiaries of the Company that are not on an arms-length
basis, (vii) consummate any transaction that could or could reasonably be
expected to, individually or in the aggregate, adversely affect or impair the
rights, privileges or preferences of the Holders in such capacity, and (viii)
enter into any contract, agreement, commitment or understanding with respect to
any of the foregoing.
(i) If at any time or from time to time there shall be a recapitalization
of the Common Shares (other than a subdivision, combination or merger or sale of
assets transaction provided for elsewhere in this Agreement) provision shall be
made so that the
25
Investors shall thereafter be entitled to receive upon conversion of any
Convertible Shares the number of shares of stock or other securities or property
of the Company or otherwise, to which a holder of Common Shares deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made to the Convertible Shares and the Company's
organizational documents relating to such Convertible Shares (including
adjustment of the Conversion Price then in effect and the number of shares
issuable upon conversion of such Convertible Shares) such that after the
recapitalization, the securities outstanding shall be as nearly equivalent as
practicable to the Convertible Shares immediately prior to such
recapitalization.
(j) The Company will not, by amendment of its Charter or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder or under the Articles Supplementary by the Company, but
will at all times in good faith assist in the carrying out of all the provisions
of this Agreement and the Articles Supplementary and in the taking of all such
action as may be necessary or appropriate in order to protect the Investors
against dilution or other impairment. The provisions of this Section 10(j) will
similarly apply to successive reorganizations, recapitalizations, transfers of
assets, consolidations, mergers, dissolutions, issuances or sales of securities
or other voluntary actions.
11. Transfer Restrictions; Register; Transfer Agent Instructions.
(a) The Investors shall and shall cause their Affiliates to give prior
notice to the Company of any transfer of Convertible Shares to any Person,
including an Affiliate of an Investor. Such notice shall include the identity of
the transferee.
(b) The Company acknowledges and agrees that the Convertible Shares and the
Common Shares issuable upon conversion of the Convertible Shares may be pledged
by an Investor in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by such securities. The pledge of
Convertible Shares or the Common Shares issuable upon conversion of the
Convertible Shares shall not be deemed to be a transfer, sale or assignment of
such securities hereunder, and no Investor effecting a pledge of such securities
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any of the Other
Agreements, unless otherwise required by applicable law. The Company hereby
agrees to execute and deliver such documentation as a pledgee of the Convertible
Shares or the Common Shares issuable upon conversion of the Convertible Shares
may reasonably request in connection with a pledge of such securities to such
pledgee by an Investor.
(c) The Company shall (or shall cause its transfer agent to) maintain at
its principal executive offices (or such other office or agency of the Company
as it may designate by notice to each holder of Convertible Shares), a register
for the Convertible Shares, in which the Company shall record the name and
address of the person in whose name the Convertible Shares have been issued
(including the name and address of each
26
transferee), the principal amount of Convertible Shares held by such person, and
the number of Common Shares issuable upon conversion of the Convertible Shares
held by such person. The Company or its transfer agent shall keep the register
open and available at all times during business hours for inspection of any
Investor or its legal representatives.
(d) The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company ("DTC"), registered
in the name of each Investor or its respective nominee(s) or transferee(s), for
the Convertible Shares issued at the Closing or for Common Shares issued
pursuant to or upon conversion of the Convertible Shares or transfer thereof in
such amounts as specified from time to time by each Investor to the Company upon
conversion or transfer of the Convertible Shares in the form of Exhibit A
attached hereto (the "Irrevocable Transfer Agent Instructions"). The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 11(d), and stop transfer instructions
to give effect to Section 6.9 of the Securities Purchase Agreement, will be
given by the Company to its transfer agent, and that the Convertible Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Other Agreements,
subject to applicable law. If an Investor effects a sale, assignment or transfer
of the Convertible Shares or Common Shares issuable upon conversion of the
Convertible Shares, in each case, in accordance with this Agreement, the Other
Agreements and applicable law, the Company shall permit the transfer and shall
promptly instruct its transfer agent to issue one or more certificates or credit
shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Investor to effect such sale, assignment or
transfer. In the event that such sale, assignment or transfer involves the
Convertible Shares or Common Shares issuable upon conversion of the Convertible
Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act, the transfer agent
shall issue such securities to Investor, assignee or transferee, as the case may
be, without any restrictive legend. Immediately prior to the execution of this
Agreement, the Company has delivered to each Investor a copy of the Irrevocable
Transfer Agent Instructions, which instructions have been delivered to and
acknowledged in writing by the Company's transfer agent.
12. Preemptive Rights.
(a) For so long as such Preemptive Rights Holder owns no less than 25% of
the Convertible Shares purchased at the Closing, if the Company proposes to
issue or sell any Common Shares, Common Share Equivalents or Debt Securities to
any Person or Persons other than the Holders other than (i) an issuance of
securities registered on Form S-8 or any successor form thereto or otherwise
issued under any employee benefits plan approved by the Compensation Committee
of the Board, (ii) any securities registered on Form S-4 or any successor form
thereto or otherwise issued in an exchange offer or business combination
transaction, (iii) any securities issued in connection with the Company's
financing facilities or securitization transactions, in each case in the
ordinary course of the Company's business operations, (iv) any securities issued
as a dividend or
27
distribution upon any shares of capital stock of the Company, (v) any securities
issued pursuant to the conversion or exercise of securities that are outstanding
as of the date hereof and (vi) any securities to be issued pursuant to the
Rights Offering and the Standby Purchase Agreement (a "New Issuance"), the
Company shall (A) give each of the Preemptive Rights Holders 30 days' prior
written notice of the proposed issuance or sale and (B) offer to sell to the
Preemptive Rights Holders, on the same terms and conditions as the proposed sale
to such Person or Persons, the respective numbers of such securities which, if
all such securities were purchased, would result in the Preemptive Rights
Holders holding that percentage of such securities equal to the percentage of
Common Shares on a fully diluted basis owned by the Preemptive Rights Holders
immediately prior to such sale. Such offer shall remain open for 15 days after
notice of such New Issuance has been received by such Preemptive Rights Holder.
If requested by the Preemptive Rights Holders, the Company will issue to the
Preemptive Rights Holders (or any Affiliate designated by such Preemptive Rights
Holders) a different class of equity or debt securities (as the case may be),
which shall be identical to those to be issued except that they will be
non-voting and convertible into those equity or debt securities (as the case may
be) to be issued.
(b) Notwithstanding the provisions of Section 12(a), in the event a
Preemptive Rights Holder has purchased Common Shares or any securities
convertible into Common Shares in the open market after the date of this
Agreement and if at the time of the exercise by such Preemptive Rights Holder of
the preemptive rights granted pursuant to Section 12(a), the securities issued
pursuant to Section 12(a) would result in an issuance of securities to such
Preemptive Rights Holder that would exceed the Maximum Preemptive Rights Amount,
then the amount of securities such Preemptive Rights Holder shall be permitted
to purchase shall be reduced to the extent necessary to comply with the Maximum
Preemptive Right Amount; provided, however, that this limitation shall not apply
(and such Preemptive Rights Holder shall not be restricted from exercising its
preemptive rights pursuant to this Section 12(a)) if, at the time that such
Preemptive Rights Holder is or would otherwise be entitled to exercise its
rights under this Section 12(a), there is occurring with respect to the
Indebtedness of the Company or any of its Subsidiaries (x) any default in the
payment of principal, premium or interest of such Indebtedness, (y) any
continuing default in the performance of any financial covenant by the Company
or any of its Subsidiaries under any loan, credit agreement, note, bond,
mortgage, indenture or similar instrument evidencing such Indebtedness or (z)
any acceleration of such Indebtedness or enforcement action by the holders of
such Indebtedness, in any such case so long as such Indebtedness is in excess of
$5,000,000.
(c) Upon the expiration of the offering period described above, the Company
shall be entitled to sell such securities that the Holders have not elected to
purchase during the 90-day period following such expiration at a price and on
terms and conditions no more favorable to the purchasers thereof than those
offered to the Preemptive Rights Holders. Any such securities offered or sold by
the Company after such 90-day period must be reoffered to the Holders pursuant
to the terms of this Section 12. The closing of any purchase by the Holders
pursuant to Section 12(a) shall be held at the time and place of the closing of,
and on the same terms and conditions as, the New Issuance, or at such other time
and place as the parties to the transaction may agree. At such closing, the
28
participating Holders shall deliver, by certified or official bank check or wire
transfer, so much of the purchase price for its portion of the New Issuance as
is payable in cash and shall pay the balance in accordance with the agreed upon
terms of the transaction, and all parties to the transaction shall execute such
documents as are otherwise customary and appropriate.
13. No Restriction on Ability to Engage in Competing Businesses.
The parties acknowledge that the Investors and their Affiliates are
engaged, and may in the future engage, in a variety of financial services
businesses, including businesses that may relate to or involve mortgage lending,
mortgage portfolio management or loan servicing, and may make investments in,
and have investments in, other businesses from time to time similar to and that
may compete with the businesses of the Company and its direct and indirect
subsidiaries ("Competing Businesses"). The Investors and their Affiliates
reserve the right to make additional investments in other Competing Businesses
independent of their investments in the Company. In addition, by virtue of an
Investor holding equity or other interests in the Company or by having
individuals designated by or affiliated with such Investor serving on or
observing at meetings of the Board (or committees thereof) or otherwise (an
"Investor Director"), no Investor nor any of the Investor's respective
Affiliates, including without limitation, any Investor Director (to the extent
not prohibited by the Investor Director's non-waivable fiduciary duties under
Maryland law), shall have any obligation to the Company or any Subsidiary of the
Company to refrain from competing with the Company or any Subsidiary of the
Company, making investments in Competing Businesses, or otherwise engaging in
any commercial activity; and none of the Company or any Subsidiary of the
Company shall have any right with respect to any such other investments or
activities undertaken by such Investor or such Affiliates. Without limitation of
the foregoing, each Investor or any Affiliates thereof, including, without
limitation, any Investor Director (to the extent not prohibited by the Investor
Director's non-waivable fiduciary duties under Maryland law), may engage in or
possess an interest in other business ventures of any nature of description,
independently or with others, similar or dissimilar to the business of the
Company or any Subsidiary of the Company, and none of the Company, any
Subsidiary of the Company or any Investor (other than such Investor) shall have
any rights or expectancy by virtue of such Investor's relationships with the
Company, this Agreement or otherwise in and to such independent ventures or the
income or profits derived therefrom; and the pursuit of any such venture, even
if such investment is in a Competing Business shall not be deemed wrongful or
improper. No Investor nor any of their respective Affiliates, including, without
limitation, any Investor Director, shall be obligated to present any particular
investment or business opportunity to the Company or any Subsidiary of the
Company even if such opportunity is of a character that, if presented to the
Company or a Subsidiary of the Company, could be taken by the Company, and the
Investors and their respective Affiliates shall continue to have the right to
take for their own respective accounts or to recommend to others any such
particular investment or business opportunity.
14. Change of Control.
29
(a) In addition to the rights of the Investors under Section 14(b) upon a
Change of Control, each Investor shall have the right, at such Investor's
option, to require the Company to redeem all or a portion of such Investor's
Convertible Shares at a price per share equal to the Change of Control
Redemption Price. No sooner than 20 Business Days nor later than 10 Business
Days prior to the consummation of a Change of Control, but not prior to the
public announcement of such Change of Control, the Company shall deliver written
notice thereof via facsimile and overnight courier (a "Notice of Change of
Control") to each Investor. At any time during the period beginning after
receipt by an Investor of a Notice of Change of Control and ending on the date
that is ten days after the consummation of such Change of Control, any Investor
may require the Company to redeem all or a portion of such Investor's
Convertible Shares then outstanding by delivering written notice thereof via
facsimile and overnight courier (a "Notice of Redemption Upon Change of
Control") to the Company, which Notice of Redemption Upon Change of Control
shall indicate the number of Convertible Shares that such Investor is submitting
for redemption. Upon the Company's receipt of a Notice(s) of Redemption Upon
Change of Control from any Investor, the Company shall promptly, but in no event
later than one (1) Business Day following such receipt, notify each Investor by
facsimile of the Company's receipt of such Notice(s) of Redemption Upon Change
of Control and of the Company's calculation of the applicable Change of Control
Redemption Price. The Company shall deliver the applicable Change of Control
Redemption Price simultaneously with the consummation of the Change of Control
and the relevant Convertible Shares shall thereupon be redeemed and cancelled.
Payments provided for in this Section 14(a) shall be made prior to any payments
to other shareholders (other than holders of shares of the Company's capital
stock ranking senior or pari passu to the Convertible Shares as to distribution
of assets upon a Liquidation Event; provided, that in the case of any pari passu
securities, that such pari passu securities were not created by the Company in
anticipation of a Change of Control) in connection with a Change of Control.
(b) In addition to the rights of the Investors under Section 14(a) and to
the extent an Investor elects not to exercise all or any portion of its rights
under Section 14(a) upon the occurrence of a Change of Control, if at any time
there shall occur any (A) sale of all or substantially all of the Company's
assets to an acquiring Person or (B) other Change of Control following which the
Company is not the surviving entity, then, as part of and as a condition to the
effectiveness of such asset sale or other Change of Control, the Company will
secure from the Person purchasing such assets or the successor, or, if
applicable, the parent of the successor, resulting from such Change of Control
(in each case, the "Acquiring Entity") a written agreement (in form and
substance reasonably satisfactory to Investors holding at least a majority of
the Convertible Shares then outstanding that have not elected to exercise their
rights under Section 14(a)) to deliver to each Investor in exchange for such
shares, a security of the Acquiring Entity evidenced by a written instrument
substantially similar in form and substance to the Convertible Shares,
including, without limitation, having a ranking, stated value, liquidation
preference, rights and privileges equal or equivalent to the ranking, stated
value, redemption rights, Liquidation Preference, conversion, voting and other
rights and privileges of the Convertible Shares held by such Investor at the
time of exchange, and otherwise reasonably satisfactory to the Investors holding
at least a majority of the Convertible Shares then outstanding that have not
elected to exercise their rights under Section 14(a). In addition to the rights
of the Investors under this Section 14, prior to the consummation of any Change
of Control, the Company shall make appropriate provision (in form and substance
reasonably satisfactory to the Investors holding at least a majority of the
30
Convertible Shares then outstanding) to insure that each of the Investors will
thereafter have the right to acquire and receive in lieu of or in addition to
(as the case may be) the Common Shares immediately theretofore acquirable and
receivable upon the conversion of such Investor's Convertible Shares such shares
of stock, securities or assets that would have been issued or payable in such
Change of Control with respect to or in exchange for the number of Common Shares
which would have been acquirable and receivable upon the conversion of such
Investor's Convertible Shares as of the date of such Change of Control (without
taking into account any limitations or restrictions on the convertibility of the
Convertible Shares). The provisions of this Section 14(b) will similarly apply
to successive Change of Control transactions.
15. Waiver of Transfer Restrictions.
(a) The Company represents and warrants that in accordance with Section
9(b) of the Articles Supplementary for the 9.00% Series D-1 Mandatory
Convertible Preferred Stock and Section 7(b) of the Articles Supplementary for
the 9.00% Series D-2 Mandatory Convertible Preferred Stock (collectively, the
"Transfer Restrictions"), the Board has irrevocably waived the provisions of the
Transfer Restrictions with respect to each of the Investors and their respective
Affiliates, provided, however, that there shall be no such waiver of the
Transfer Restrictions with respect to an Investor or its respective Affiliates
to the extent that a Substantial Stockholder Transfer with respect to such
Investor or its Affiliates occurs with the actual knowledge of the Investor or
the Affiliate that such Substantial Stockholder Transfer would result in a
substantial limitation on the ability of the Company to use otherwise available
Tax Benefits.
(b) Notwithstanding the provisions of Section 15(a), the Company represents
and warrants that the Board has also irrevocably waived the provisions of the
Transfer Restrictions with respect to each Investor and its Affiliates for:
(i) any Transfer of Stock of the Company effected by such Investor or
its Affiliates in connection with a Public Sale;
(ii) any Transfer of Stock of the Company by such Investor or its
Affiliates to an Affiliate of such Investor or its Affiliates;
(iii) any Transfer of Stock of the Company by such Investor or its
Affiliates pursuant to a transaction authorized by the Board; and
(iv) any Transfer of Stock of the Company to such Investor or its
Affiliates pursuant to the Rights Offering or under the Standby Purchase
Agreement.
(c) The Board has acknowledged and agreed to irrevocably waive, and has
irrevocably waived, with respect to the Investors and their respective
Affiliates, the
31
application of any other restrictions (except as may be required by law) on the
transfer, sale or other disposition of shares of Capital Stock of the Company
(or any interest therein) that are of a similar nature (or otherwise comparable)
to the Transfer Restrictions that may be in effect from time to time, whether or
not such restrictions are set forth in the Charter or any other agreement,
contract or document. The Company covenants and agrees, at the request of the
Investors, to enter into all such agreements, documents or arrangements to
confirm, reaffirm and/or ratify the Board's acknowledgment and agreement set
forth in the immediately preceding sentence; provided, that the failure of the
Investors to request any such agreement, document or arrangement, or the failure
of the Company to enter into any such agreement, document or arrangement, shall
not invalidate, impair, limit or otherwise make ineffective the waiver set forth
in the immediately preceding sentence (it being understood that such waiver is
an effective, valid and enforceable waiver on and at all times after the date of
this Agreement).
(d) For purposes of this Section 15, "Public Sale" means any sale of Stock
to the public pursuant to a public offering registered under the Securities Act,
or to the public through a broker, dealer or market-maker pursuant to the
provisions of Rule 144 (or any successor rule) adopted under the Securities Act.
Capitalized terms used in this Section 15 and not otherwise defined in this
Agreement shall have the meanings ascribed to them for purposes of the Transfer
Restrictions.
16. Defined Terms. Capitalized terms when used in this Agreement have the
following meanings:
"Acquiring Entity" has the meaning set forth in Section 14(b).
"Affiliate" of any Person means another Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person. The Affiliates of Investors shall
be deemed to include one or more funds under common management and their
respective limited partners and Affiliates.
"Agent" has the meaning set forth in Section 5(a).
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Articles Supplementary" means the Articles Supplementary for the 9.00%
Series D-1 Mandatory Convertible Preferred Stock and the Articles
Supplementary for the 9.00% Series D-2 Mandatory Convertible Preferred
Stock, as applicable.
"Blackout Notice" has the meaning set forth in Section 1(d).
"Blackout Period" has the meaning set forth in Section 1(d).
"Board" has the meaning set forth in Section 1(d).
"Board Class Term" means the term of office for a director determined in
accordance with the provisions of Article VII of the Company's Charter.
32
"Board Observer" has the meaning set forth in Section 10(d).
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents however designated of corporate stock,
capital stock or other equity participations, including partnership
interests (whether general or limited), membership interests or other
equivalents (however designated), of such Person and any rights, warrants,
options or other securities to acquire an equity interest in such Person.
"Change of Control" means (i) the consolidation, merger, takeover,
conversion, recapitalization, reorganization, reclassification,
consolidation or other business combination of the Company with or into
another Person (other than (A) a consolidation, merger or other business
combination in which holders of the Company's voting power immediately
prior to the transaction continue after the transaction to hold, directly
or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities,
or (B) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company), (ii) the sale,
conveyance or exchange or transfer of all or substantially all of the
assets, property or business of the Company (including by or through the
issuance, sale or other disposition of the capital stock or other equity
interests or assets of, or a merger, consolidation or other business
combination involving, any Subsidiary of the Company) (other than in
connection with the voluntary or involuntary liquidation, dissolution or
winding-up of the Company), (iii) a purchase, tender or exchange offer made
to and accepted by the holders of more than 50% of the aggregate voting
power of the outstanding Common Shares, (iv) a scheme of arrangement,
change to the capital structure or other reorganization of the Company
resulting in a change of control (whether by ownership of voting
securities, board representation, by contract or otherwise) of the Company,
(v) the occurrence under any financing agreement, indenture or other
instrument evidencing indebtedness of the Company or any of its
Subsidiaries of any "change of control", "change in control" or terms of
similar import or similar descriptive nature, which requires the Company or
such Subsidiary to repurchase, redeem or repay all or any part of the
indebtedness provided for therein, or (vi) any other transaction which is
effected in such a way that holders of Common Shares are entitled to
receive (either directly or upon subsequent liquidation) stock, securities,
property (cash or otherwise) or assets with respect to or in exchange for
Common Shares, except for pro rata distributions of dividends and any of
the transactions contemplated by this Agreement.
"Change of Control Redemption Price" means, with respect to any Convertible
Share an amount equal to the greater of (i) the aggregate Liquidation
Preference (as defined in the Articles Supplementary) attributable to a
Convertible Share, or (ii) (A) the Initial Stated Value (subject to
appropriate adjustment in the event of an Extraordinary Stock Event)
multiplied by 150% less (B) all cash dividends paid on such Convertible
Share.
33
"Closing" has the meaning set forth in Section 10(a)(ii)(A).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any other
federal agency administering the Securities Act.
"Common Share Equivalents" means (i) any evidences of indebtedness, shares
of the capital of the Company or other securities directly or indirectly
convertible into or exchangeable for Common Shares, and (ii) any right,
option or warrant to subscribe for, purchase or otherwise acquire, directly
or indirectly, Common Shares; provided, that unless otherwise specified
herein, for the purposes of computing the number of Common Shares either
outstanding or held by an Investor, the Common Share Equivalents
outstanding or held by such Investor shall be deemed to be converted,
exercised or exchanged for Common Shares, whether or not such conversion,
exercise or exchange has actually been effected, and whether or not then
convertible, exercisable or exchangeable or vested.
"Common Shares" means shares of Common Stock of the Company, par value
$0.01 per share.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Competing Businesses" has the meaning set forth in Section 13.
"Conversion Price" has the meaning set forth in the Articles Supplementary.
"Convertible Shares" has the meaning set forth in the recitals. For
avoidance of doubt, the term "Convertible Shares," as used in this
Agreement, also shall be deemed to include any Series D-2 Preferred Shares
purchased by the Investors in connection with the Rights Offering or under
the Standby Purchase Agreement, or, if and when issued, any Series E
Preferred Shares received by the Investors in connection with the REIT
Dividends.
"Debt Securities" means any note, bond, debenture or other evidence of
indebtedness for money borrowed, whether secured or unsecured and whether
senior or subordinated.
"Demand Registration" has the meaning set forth in Section 1(a).
"Demand Registration Statement" means a registration statement of the
Company that covers the Registrable Securities requested to be included
therein pursuant to the provisions of Section 1(a) (as such amount may be
reduced in accordance with the provisions of Section 1(f)) and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
(or deemed to be incorporated by reference) therein.
34
"DTC" has the meaning set forth in Section 11(d).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute and the rules and regulations thereunder, as in
effect from time to time.
"Extraordinary Stock Event" means any stock split or combination of the
Convertible Shares.
"Fair Market Value" means the amount of any cash received and the fair
market value of any property received, as determined in good faith by the
Board.
"Financial Services Consent" has the meaning set forth in the Securities
Purchase Agreement.
"Holder" means any holder of outstanding Registrable Securities who is a
party to this Agreement or to whom the benefits of this Agreement have been
validly assigned and such of its respective heirs, successors and permitted
assigns (including any permitted transferees of Registrable Securities) who
acquire or are otherwise the transferee of Registrable Securities, directly
or indirectly, from such holder, for so long as such heirs, successors and
permitted assigns own any Registrable Securities.
"Indebtedness" means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person evidenced by any loan, credit agreement, note,
bond, mortgage, indenture or similar instrument, (c) all obligations,
contingent or otherwise, of such Person under acceptance, letter of credit
or similar facilities, (d) all obligations of such Person under any lease
of property by such Person that would, in accordance with generally
accepted accounting principles, be required to be accounted for as a
capital lease on the balance sheet of such Person, (e) all Indebtedness of
others referred to in clauses (a) through (d) above guaranteed directly or
indirectly in any manner by such Person, and (f) all obligations secured by
a lien on any asset of such Person, whether or not such obligation is
otherwise any obligation of such Person.
"Initial Stated Value" means $25.00 per Convertible Share.
"Initiating Holders" means, with respect to a particular registration, the
Holders who initiated the request for such registration.
"Inspectors" has the meaning set forth in Section 3(a).
"Investor Directors" means the individuals designated for election to the
Board by the Investors.
"Investors" has the meaning set forth in the first paragraph of this
Agreement.
35
"Investors Voting Shares Percentage" means, as of any time of calculation,
the quotient expressed as a percentage obtained by dividing (i) the
aggregate number of votes that the Voting Shares beneficially owned by the
Holders as of such time of calculation are entitled to cast in the election
of directors of the Company pursuant to the Company's Charter or Bylaws by
(ii) the aggregate number of votes that holders of all Voting Shares then
issued and outstanding of the Company as of such time of calculation are
entitled to cast in the election of directors of the Company pursuant to
the Company's Charter or Bylaws.
"Issuer Free Writing Prospectus" has the meaning set forth in the last
paragraph of Section 3.
"Irrevocable Transfer Agent Instructions" has the meaning set forth in
Section 11(d).
"Jefferies" has the meaning set forth in the first paragraph of this
Agreement.
"Liquidation Event" means any voluntary or involuntary liquidation (in
bankruptcy or otherwise), dissolution or winding-up of the Company.
"Liquidation Preference" means the Initial Stated Value per Convertible
Share, as adjusted from time to time for (i) the accumulation of dividends
pursuant to Section 3 of the Articles Supplementary and (ii) any
Extraordinary Stock Event.
"Majority Holders of the Registration" means, with respect to a particular
registration, one or more Holders of Registrable Securities who would hold
a majority of the Registrable Securities to be included in such
registration.
"MassMutual" has the meaning set forth in the first paragraph of this
Agreement.
"Maximum Preemptive Rights Amount" means the maximum number of securities
that can be issued by the Company to a Preemptive Rights Holder pursuant to
Section 12(a) without causing an "ownership change" (within the meaning of
such term for the purposes of Section 382(g) of the Code), with respect to
the Company or any of its Subsidiaries.
"NASD" has the meaning set forth in Section 3(a).
"New Issuance" has the meaning set forth in Section 12(a).
"New York Court" has the meaning set forth in Section 17(l).
"Notice of Change of Control" has the meaning set forth in Section 14(a).
"Notice of Redemption Upon Change of Control" has the meaning set forth in
Section 14(a).
"Other Agreements" has the meaning set forth in Section 17(j).
36
"Parity Shares" means any class or series of shares of the Company, the
terms of which expressly provide that such class or series ranks pari passu
with the Convertible Shares as to payment of dividends and distribution of
assets upon a Liquidation Event.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a government or department or agency thereof.
"Piggyback Registration" has the meaning set forth in Section 2(a).
"Preemptive Rights Holders" means Jefferies and MassMutual (and their
respective Affiliates).
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, any preliminary prospectus and any
prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), and any such
Prospectus as amended or supplemented by any prospectus supplement, and all
other amendments and supplements to such Prospectus, including
post-effective amendments, and in each case including all material
incorporated by reference (or deemed to be incorporated by reference)
therein.
"Purchased Shares" means (i) the Convertible Shares, (ii) any Common Shares
issued upon conversion of the Convertible Shares, (iii) any other shares or
securities that the holders of the Convertible Shares may have received
pursuant to such Holders' ownership of the Convertible Shares and (iv) any
securities of the Company (or any successor or assign of the Company,
whether by merger, consolidation, sale of assets or otherwise) issued
directly or indirectly with respect to the securities referred to in the
foregoing clause (i), (ii) or (iii) by way of conversion or exchange
thereof or share dividend or share split or in connection with a
combination of shares.
"register," "registered" and "registration" refers to a registration
effected by preparing and filing a Registration Statement in compliance
with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement, and compliance with
applicable state securities laws of such states in which Holders notify the
Company of their intention to offer Registrable Securities.
"Registrable Securities" means (i) any Convertible Shares, (ii) any Common
Shares issued or issuable upon conversion of the Convertible Shares, (iii)
any other shares or securities that the holders of the Convertible Shares
may be entitled to receive, or will have received, pursuant to such
holders' ownership of the Convertible Shares, (iv) any Common Shares
otherwise or hereafter purchased or acquired by the Investors or their
Affiliates, and (v) any securities of the
37
Company (or any successor or assign of the Company, whether by merger,
consolidation, sale of assets or otherwise) issued or issuable directly or
indirectly with respect to the securities referred to in the foregoing
clause (i), (ii), (iii) or (iv) by way of conversion or exchange thereof or
share dividend or share split or in connection with a combination of
shares, recapitalization, reclassification, merger, consolidation or other
reorganization, sale of assets or similar transactions. As to any
particular securities constituting Registrable Securities, such securities
will cease to be Registrable Securities when (x) they have been effectively
registered or qualified for sale by Prospectus filed under the Securities
Act and disposed of in accordance with the Registration Statement contained
therein, (y) they can be sold to the public through a broker, dealer or
market maker pursuant to Rule 144 or other exemption from registration
under the Securities Act, or (z) they can be sold by such Holder without
restriction as to volume or manner of sale pursuant to Rule 144(k) under
the Securities Act. For purposes of this Agreement, a Person will be deemed
to be a Holder whenever such Person holds an option to purchase, or a
security convertible into or exercisable or exchangeable for, Registrable
Securities, whether or not such purchase, conversion, exercise or exchange
has actually been effected and disregarding any legal restrictions upon the
exercise of such rights. Registrable Securities issuable upon exercise of
an option or upon conversion, exchange or exercise of another security
shall be deemed outstanding for the purposes of this Agreement.
"Registration Expenses" has the meaning set forth in Section 4.
"Registration Request" has the meaning set forth in Section 1(a). The term
Registration Request will also include, where appropriate, a S-3
Registration request made pursuant to Section 1(c).
"Registration Statement" means the registration statement, Prospectus and
other documents filed with the Commission to effect a registration under
the Securities Act.
"Required Investor Holders" means one or more shareholders or members who
would hold in the aggregate 50% or more of the outstanding Registrable
Securities held by Investors or their permitted assignees and transferees.
"REIT Dividends" means the dividend by NFI of the Series E Preferred Shares
and/or Common Shares, as elected by the holders of the Common Shares,
issued to satisfy NFI's Section 856 Trust distribution requirements.
"Rights Offering" has the meaning set forth in the recitals.
"Rule 144" means Rule 144 under the Securities Act or any successor or
similar rule as may be enacted by the Commission from time to time, as in
effect from time to time.
38
"Rule 144A" means Rule 144A under the Securities Act or any successor or
similar rule as may be enacted by the Commission from time to time, as in
effect from time to time.
"S-3 Registration" means a registration required to be effected by the
Company pursuant to Section 1(c).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations thereunder, as in
effect from time to time.
"Securities Purchase Agreement" has the meaning set forth in the recitals.
"Selling Expenses" means all underwriting discounts, selling commissions
and transfer taxes applicable to the sale of Registrable Securities
hereunder.
"Series D-2 Preferred Shares" has the meaning set forth in the recitals.
"Series E Preferred Shares" means the 9.00% Series E mandatory convertible
preferred stock of the Company, par value $0.01 per share, and having such
other terms as are consistent with the provisions of Section 6.8(a) of the
Securities Purchase Agreement.
"Shelf Registration" has the meaning set forth in Section 1(a).
"Standby Purchase Agreement" has the meaning set forth in the recitals.
"Stipulation of Settlement" means the stipulation of settlement entered
into as of May 31, 2007 by the Company and certain plaintiffs, acting
derivatively on behalf of the Company.
"Subsidiary" of any person means another person 50% or more of the total
combined voting power of all classes of capital stock or other voting
interests of which, or 50% or more of the equity securities of which, is
owned directly or indirectly by such first person.
"Subsidiary Board" has the meaning set forth in Section 10(d).
"Subsidiary Board Observer" has the meaning set forth in Section 10(d).
"Underwriters" means the underwriters, if any, of the offering being
registered under the Securities Act.
"Underwritten Offering" means a sale of securities of the Company to an
Underwriter or Underwriters for reoffering to the public.
39
"Voting Shares" means the Common Shares and the Convertible Shares, and any
other securities of the Company that are entitled to vote in the election
of the Board.
17. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities that is directly inconsistent with
or violates the rights granted to the holders of Convertible Shares and Holders
of Registrable Securities in this Agreement. Except as provided in this
Agreement, the Company will not grant to any holder or prospective holder of any
securities of the Company registration rights with respect to such securities
that are the same as or more favorable from the perspective of such Person as or
than, the registration rights granted hereunder without the prior written
consent of the Required Investor Holders, unless such rights are also offered to
the Required Investor Holders.
(b) Adjustments Affecting Registrable Securities. Except as may be required
by applicable law, the Company will not take any action, or permit any change to
occur, with respect to its securities which would materially and adversely
affect the ability of the holders of Registrable Securities to include such
Registrable Securities in a registration or qualification for sale by Prospectus
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration or
qualification (including, without limitation, effecting a share split or a
combination of shares).
(c) Remedies. The parties hereto acknowledge that money damages would not
be an adequate remedy at law if any party fails to perform in any material
respect any of its obligations hereunder, 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 seek to compel specific performance of the obligations of
any other party under this Agreement, without the posting of any bond, in
accordance with the terms and conditions of this Agreement in any court of the
United States or any State thereof having jurisdiction, and if any action should
be brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law. Except as otherwise provided by law, a delay or omission by a party hereto
in exercising any right or remedy accruing upon any such breach shall not impair
the right or remedy or constitute a waiver of or acquiescence in any such
breach. No remedy shall be exclusive of any other remedy. All available remedies
shall be cumulative.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company (upon the approval of the independent directors
of the Board, which shall not include the representatives of the Investors), the
Required Investor Holders and, for so long as any Investor continues to own at
least 25% of such Investor's Purchased Shares, such Investor; provided, however,
that in the event that such amendment or waiver would treat a Holder or group of
Holders in a manner different
40
from any other Holders, then such amendment or waiver will require the consent
of such Holder or the Holders of a majority of the Registrable Securities of
such group adversely treated.
(e) Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
heirs, successors and assigns (including any permitted transferee of Registrable
Securities). Except as otherwise provided in this Agreement, any Holder may
assign to any permitted (as determined under the Securities Purchase Agreement
and this Agreement) transferee of its Registrable Securities (other than a
transferee that acquires such Registrable Securities in a registered public
offering or pursuant to a sale under Rule 144 of the Securities Act (or any
successor rule)), its rights and obligations under this Agreement. In addition,
and whether or not any express assignment will have been made, the provisions of
this Agreement which are for the benefit of the holders of the Convertible
Shares and/or the Holders of the Registrable Securities (or any portion thereof)
as such will be for the benefit of and enforceable by any permitted transferee
that is a subsequent holder of any Convertible Shares and/or Registrable
Securities (or of such portion thereof), as applicable, subject to the
provisions respecting the minimum numbers or percentages of shares of
Convertible Shares and/or Registrable Securities (or of such portion thereof),
as applicable, required in order to be entitled to certain rights, or take
certain actions, contained herein. For purposes of this Agreement, "successor"
for any entity other than a natural person shall mean a successor to such entity
as a result of such entity's merger, consolidation, sale of substantially all of
its assets, or similar transaction. For the avoidance of doubt, the rights under
Section 10 may not be assigned by either Investor to any third party, other than
to its Affiliates or the other Investor, provided that in the case of any such
assignment to an Affiliate or the other Investor, at all times voting and
disposition control of such Convertible Shares and/or Registrable Securities and
the right to exercise such rights under Section 10 shall remain with the
Investors pursuant to appropriate proxies or other similar methods.
(f) Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
(g) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
41
(i) Governing Law. This Agreement and the rights and duties of the parties
hereto hereunder shall be governed by and construed in accordance with laws of
the State of New York, without giving effect to its principles or rules of
conflict of laws to the extent such principles or rules are not mandatorily
applicable by statute and would require or permit the application of the laws of
another jurisdiction.
(j) Entire Agreement. This Agreement, the Securities Purchase Agreement and
the Standby Purchase Agreement (the Securities Purchase Agreement and the
Standby Purchase Agreement, together, the "Other Agreements") are intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants or undertakings
relating to such subject matter, other than those set forth or referred to
herein or in the Other Agreements. This Agreement and the Other Agreements
supersede all prior agreements and understandings between the Company and the
other parties to this Agreement with respect to such subject matter.
(k) Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company (and countersigned by the nominee), be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities and the nominee's consent to
such.
(l) Consent to Jurisdiction. Each party to this Agreement hereby
irrevocably and unconditionally agrees that any legal action, suit or proceeding
arising out of or relating to this Agreement or any agreements or transactions
contemplated hereby may be brought in any federal court or any state court which
in either case is located in the City and County of New York (any such federal
or state court, a "New York Court"). In addition, each party to this Agreement
hereby irrevocably and unconditionally expressly (i) submits to the personal
jurisdiction and venue of any New York Court in the event any dispute arises out
of this Agreement or any of the transactions contemplated by this Agreement and
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction or venue by motion or other request for leave from any such New
York Court.
(m) Further Assurances. Each party hereto shall do and perform or cause to
be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
42
(n) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, by facsimile (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to MassMutual, to
Massachusetts Mutual Life Insurance Company
0000 Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Port
and
Babson Capital Management LLC
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
with a copy to:
Sidley Austin LLP
Xxx Xxxxx Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
(ii) if to Jefferies, to
Jefferies Capital Partners
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
with a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
(iii) if to the Company, to:
43
NovaStar Financial, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, SVP,
General Counsel and Corporate Secretary
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxxx, Esq.
[the remainder of this page left intentionally blank]
44
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
written above.
NOVASTAR FINANCIAL, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and Chief Executive
Officer
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: Babson Capital Management LLC,
its investment adviser
By: /s/ Xxxxx X. Port
--------------------------------------
Name: Xxxxx X. Port
Title: Managing Director
JEFFERIES CAPITAL PARTNERS IV X.X.
XXXXXXXXX EMPLOYEE PARTNERS IV LLC
JCP PARTNERS IV LLC
By: Jefferies Capital Partners IV LLC,
as Manager
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Member
45
ANNEX I
FINANCIAL SERVICES CONSENTS
NovaStar Mortgage, Inc.
Pre-Closing/Prior Approval Required
1. Approval of the Georgia Department of Banking and Finance for the ownership
of 10% or more of the voting Capital Stock of the Corporation under the Mortgage
Lender License. GA. CODE XXX. §§ 7-1-1008, 7-1-1000(18).
2. Approval of the Kentucky Office of Financial Institutions for the ownership
of 10% or more of the voting Capital Stock of the Corporation under the Mortgage
Loan Company License. KY. REV. STAT. Xxx. § 294.075.
3. Approval of the Michigan Office of Financial and Insurance Services for the
ownership of 12.6% or more of the voting Capital Stock of the Corporation under
the First Mortgage Broker, Lender and Servicer License. Mich. Comp. Xxxx Xxx.
§ 445.1659.
4. Approval of the Michigan Office of Financial and Insurance Services for the
ownership of 12.6% or more of the voting Capital Stock of the Corporation under
the Secondary Mortgage Broker, Lender and Servicer Registration. Mich. Comp.
Xxxx Xxx. § 493.63.
5. Approval of the New York Banking Department for the ownership of 10% or more
of the voting Capital Stock of the Corporation under the Mortgage Banker
License. N.Y. BANKING LAW § 594-b.
Pre-Closing Notification Required
1. Notification to the Federal National Mortgage Association for the ownership
of voting Capital Stock of the Corporation under the Federal National Mortgage
Association Seller/Servicer Approval. FNMA Seller Guide Part I, § 201.05; FNMA
Servicer Guide Part I, § 204.
2. Notification to the Federal Home Loan Mortgage Corporation for the ownership
of voting Capital Stock of the Corporation under the Federal Home Loan Mortgage
Corporation Seller/Servicer Approval. FHLMC Seller/Servicer Guide, Ch. 4-11.
3. Notification to the California Department of Corporations for the ownership
of 10% or more of the voting Capital Stock of the Corporation under the
Residential Mortgage Lender License. CAL. FIN. CODE §§ 50206, 50003.
46
4. Notification to the Connecticut Department of Banking for the ownership of
10% or more of the voting Capital Stock of the Corporation under the First
Mortgage Lender/Broker Licenses. CONN. GEN. STAT. XXX. §§ 36a-490(b).
5. Notification to the Connecticut Department of Banking for the ownership of
voting Capital Stock of the Corporation under the Secondary Mortgage
Lender/Broker License. CONN. GEN. STAT. XXX. § 36a-515.
6. Notification to the Delaware Office of the State Bank Commissioner for the
ownership of voting Capital Stock of the Corporation under the Licensed Lender
License. DEL. CODE XXX. tit. 5, § 2206.
7. Notification to the Illinois Department of Financial and Professional
Regulation, Division of Banking, at least 10 days prior to closing, for the
ownership of 10% or more of the voting Capital Stock of the Corporation under
the Residential Mortgage License. ILL. ADMIN. CODE tit. 38, §§ 1050.110,
1050.480.
8. Notification to the Massachusetts Division of Banks, at least 15 days prior
to closing, for ownership of 10% or more of the voting Capital Stock of the
Corporation under the Mortgage Lender and Broker License. 209 MASS. CODE REGS.
§ 42.12(3).
9. Notification to the Massachusetts Division of Banks, at least 15 days prior
to closing, for ownership of 10% or more of the voting Capital Stock of the
Corporation under the Third Party Loan Servicer Registration. 209 MASS. CODE
REGS. § 18.08(2).
10. Notification to the Nevada Division of Mortgage Lending for the ownership of
5% or more of the voting Capital Stock of the Corporation under the Mortgage
Banker License. NEV. REV. STAT. XXX. § 645E.390.
11. Notification to the Nevada Division of Mortgage Lending for the ownership of
5% or more of the voting Capital Stock of the Corporation under the Mortgage
Broker License. NEV. REV. STAT. XXX. §645B.095.
12. Notification to the Washington State Department of Financial Institutions,
at least 10 days prior to closing, for the ownership of 10% or more of the
voting Capital Stock of the Corporation under the Consumer Loan License. WASH.
ADMIN. CODE § 208-620-490(1).
HomeView Lending, Inc.
Pre-Closing/Prior Approval Required
1. Approval of the Georgia Department of Banking and Finance for the ownership
of 10% or more of the voting Capital Stock of the Corporation under the Mortgage
Lender License. GA. CODE XXX. §§ 7-1-1008, 7-1-1000(18).
47
2. Approval of the Kentucky Office of Financial Institutions for the ownership
of 10% or more of the voting Capital Stock of the Corporation under the Mortgage
Loan Company License. KY. REV. STAT. Xxx. § 294.075.
3. Approval of the Oklahoma Department of Consumer Credit for the ownership of
voting Capital Stock of the Corporation under the Supervised Lender License.
OKLA. ADMIN. CODE § 160:65-3-4.
Pre-Closing Notification Required
1. Notification to the Connecticut Department of Banking for the ownership of
10% or more of the voting Capital Stock of the Corporation under the First
Mortgage Lender/Broker Licenses. CONN. GEN. STAT. XXX. §§ 36a-490(b).
2. Notification to the Connecticut Department of Banking for the ownership of
voting Capital Stock of the Corporation under the Secondary Mortgage
Lender/Broker License. CONN. GEN. STAT. XXX. § 36a-515.
3. Notification to the Delaware Office of the State Bank Commissioner for the
ownership of voting Capital Stock of the Corporation under the Licensed Lender
License. DEL. CODE XXX. tit. 5, § 2206.
4. Notification to the Illinois Department of Financial and Professional
Regulation, Division of Banking, for the ownership of 10% or more of the voting
Capital Stock of the Corporation under the Residential Mortgage License. ILL.
ADMIN. CODE tit. 38, §§ 1050.130, 1050.480.
5. Notification to the Washington State Department of Financial Institutions, at
least 10 days prior to closing, for the ownership of 10% or more of the voting
Capital Stock of the Corporation under the Consumer Loan License. WASH. ADMIN.
CODE § 208-620-490(1).
48
