EXHIBIT 99.3
REGISTRATION RIGHTS AGREEMENT
by and between
THE FORTRESS GROUP, INC.
and
PROMETHEUS HOMEBUILDERS LLC
Dated as of
______________, 1997
TABLE OF CONTENTS
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PAGE
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1. DEFINITIONS.......................................................... 1
2. DEMAND REGISTRATIONS................................................. 3
(a) Timing Of Demand Registrations................................. 3
(b) Number of Demand Registrations................................. 4
(c) Required Thresholds............................................ 4
(d) Participation.................................................. 4
(e) Underwriter's Cutback.......................................... 4
(f) Managing Underwriter........................................... 5
3. PIGGYBACK REGISTRATIONS.............................................. 5
(a) Participation.................................................. 5
(b) Underwriter's Cutback.......................................... 5
(c) Company Control................................................ 6
4. HOLD BACK AGREEMENTS................................................. 6
(a) By Holders of Registrable Securities........................... 6
(b) By the Company and Others...................................... 6
5. REGISTRATION PROCEDURES.............................................. 7
6. REGISTRATION EXPENSES................................................ 10
(a) Demand Registrations........................................... 10
(b) Piggyback Registrations........................................ 11
(c) Company Expenses............................................... 11
7. INDEMNIFICATION...................................................... 11
(a) Indemnification by Company..................................... 11
(b) Indemnification Procedures..................................... 11
(c) Indemnification by Holder of Registrable Securities............ 12
(d) Contribution................................................... 13
8. EXCHANGE ACT REPORTING REQUIREMENTS.................................. 13
9. REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN OFFERINGS............. 14
10. SUSPENSION OF SALES................................................. 14
11. FUTURE REGISTRATION RIGHTS AGREEMENTS............................... 14
12. MISCELLANEOUS....................................................... 15
(a) Remedies....................................................... 15
(b) No Inconsistent Agreements..................................... 15
(c) Amendments and Waivers......................................... 16
(d) Notices........................................................ 16
(e) Successors and Assigns......................................... 16
(f) Counterparts................................................... 16
(g) Table of Contents and Headings................................. 17
(h) Governing Law.................................................. 17
(i) Severability................................................... 17
(j) Forms.......................................................... 17
(k) Entire Agreement............................................... 17
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This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of ___, 1997, by and between The Fortress Group, Inc., a
Delaware corporation (the "Company") and Prometheus Homebuilders LLC (the
"Investor"). In order to induce the Investor to enter into the that certain
Stock Purchase Agreement, dated as of _______, 1997 (the "Stock Purchase
Agreement"), the Company has agreed to provide the registration rights set forth
in this Agreement. The execution of this Agreement is a condition to the closing
under the Stock Purchase Agreement.
The parties hereby agree as follows:
1. Definitions.
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As used in this Agreement, the following capitalized terms shall have
the following meanings:
Board: The Board of Directors of the Company.
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Claim: Any loss, claim, damages, liability or expense (including the
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reasonable costs of investigation and legal fees and expenses).
Common Stock: The common stock, par value $0.01 per share, of the
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Company.
Demand Registration: A registration pursuant to Section 2 hereof.
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Equity Security: Any capital stock of the Company or any security
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convertible, with or without consideration, into any such stock, or any security
carrying any warrant or right to subscribe to or purchase any such stock, or any
such warrant or right.
Exchange Act: The Securities Exchange Act of 1934, as amended.
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Firm Commitment Underwritten Offering: An offering in which the
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underwriters agree to purchase securities for distribution pursuant to a
registration statement under the Securities Act and in which the obligation of
the underwriters is to purchase all the securities being offered if any are
purchased.
Holder: The beneficial owner of a security. For all purposes of this
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Agreement, the Company shall be entitled to treat the record owner of a security
as the beneficial owner of such security unless the Company has been given
written notice of the existence and identity of a different beneficial owner. A
Holder of Preferred Stock shall be deemed to be the Holder of the Common Stock
into which such Preferred Stock could be converted.
Indemnified Holder: Any Holder of Registrable Securities, any
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officer, director, employee or agent of any such Holder and any Person who
controls any such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act.
Misstatement: An untrue statement of a material fact or an omission
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to state a material fact required to be stated in a Registration Statement or
Prospectus or necessary to make the statements in a Registration Statement,
Prospectus or preliminary prospectus not misleading.
Person: A natural person, partnership, corporation, business trust,
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association, joint venture or other entity or a government or agency or
political subdivision thereof.
Piggyback Registration: A registration pursuant to Section 3 hereof.
----------------------
Preferred Stock: The Class AA Convertible Preferred Stock and the
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Class AB Convertible Redeemable Preferred Stock of the Company being issued and
sold pursuant to the Stock Purchase Agreement.
Prospectus: The prospectus included in any Registration Statement, as
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supplemented by any and all prospectus supplements and as amended by any and all
post-effective amendments and including all material incorporated by reference
in such prospectus.
Registration: A Demand Registration or a Piggyback Registration.
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Registration Expenses: The out-of-pocket expenses of a Registration,
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including:
(1) all registration and filing fees (including fees with respect
to filings required to be made with the National Association of Securities
Dealers);
(2) fees and expenses of compliance with securities or blue sky
laws (including fees and disbursements of counsel for the underwriters or
selling holders in connection with blue sky qualifications of the
Registrable Securities and determinations of their eligibility for
investment under the laws of such jurisdictions as the managing
underwriters or holders of a majority of the Registrable Securities being
sold may designate);
(3) printing, messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company and of not
more than one firm of attorneys for the sellers of the Registrable
Securities;
(5) fees and disbursements of all independent certified public
accountants of the Company incurred in connection with such Registration
(including the expenses of any special audit and "cold comfort" letters
incident to such registration);
(6) fees and disbursements of underwriters (excluding discounts,
commissions, fees or expenses of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Securities);
(7) premiums and other costs of securities acts liability
insurance if the Company so desires or if the underwriters or selling
holders of Registrable Securities so require; and
(8) fees and expenses of any other Persons retained by the
Company.
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Registration Statement: Any registration statement under the
----------------------
Securities Act on an appropriate form (which form shall be available for the
sale of the Registrable Securities in accordance with the intended method or
methods of distribution thereof and shall include all financial statements
required by the SEC to be filed therewith) which covers Registrable Securities
pursuant to the provisions of this Agreement, including the Prospectus included
in such registration statement, amendments (including post-effective amendments)
and supplements to such registration statement, and all exhibits to and all
material incorporated by reference in such registration statement.
Registrable Securities: (a) The shares of the Preferred Stock,
----------------------
whether or not owned by the Investor, (b) the shares of Common Stock issued or
issuable upon conversion of the Preferred Stock, whether or not owned by the
Investor, (c) the shares of Common Stock issued or issuable upon exercise of any
Warrants, whether or not owned by the Investor, and (d) any securities issued or
issuable with respect to such Common Stock by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or reorganization; provided that any such share or other security
shall be deemed to be Registrable Securities only if and so long as it is a
Transfer Restricted Security.
Securities Act: The Securities Act of 1933, amended.
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SEC: The Securities and Exchange Commission.
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Transfer Restricted Security: A security that has not been sold to or
----------------------------
through a broker, dealer or underwriter in a public distribution or other public
securities transaction or sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Rule 144
promulgated thereunder (or any successor rule). The foregoing notwithstanding,
a security shall remain a Transfer Restricted Security until (i) all stop
transfer instructions or notations and restrictive legends with respect to such
security have been lifted or removed and (ii) the Holder of such security has
received at Company expense an opinion of counsel to the Company (which counsel
and opinion are reasonably satisfactory to such Holder), to the effect that such
shares in such Holder's hands are freely transferable in any public or private
transaction without registration under the Securities Act (or such Holder has
waived receipt of such opinion).
Underwritten registration or underwritten offering: A registration in
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which securities of the Company are sold to an underwriter for distribution to
the public.
Warrants: The warrants to purchase Common Stock issued pursuant to
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that certain Warrant Agreement dated of even date herewith by and among the
Company and the Investor.
2. Demand Registrations.
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(a) Timing Of Demand Registrations.
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Holders of Registrable Securities constituting at least twenty percent
(20%) of the Registrable Securities then outstanding may request at any time
that the Company file a registration statement under the Securities Act on an
appropriate form (which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution
thereof
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and shall include all financial statements required by the SEC to be filed
therewith) covering the shares of Registrable Securities that are the subject of
such request.
(b) Number of Demand Registrations.
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The Company shall be obligated to prepare, file and cause to become
effective pursuant to this Section 2: (i) no more than two Registration
Statements in any two-year period and (ii) no more than three Registration
Statements in total; provided, however, that a Registration Statement shall not
be counted as one of the three Demand Registrations hereunder unless it becomes
effective and is maintained effective in accordance with the requirements
specified in Section 5(a).
(c) Required Thresholds.
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The Company shall not be obligated to prepare, file and cause to
become effective pursuant to this Section 2 a Registration Statement on Form S-1
unless the proposed aggregate public offering price of the securities to be
included in such Demand Registration is at least $5 million. Nor shall the
Company be obligated to prepare, file and cause to become effective such
Registration Statement upon a demand made by less than 50% of the Holders of the
Registrable Securities then outstanding if such demand is made less than 90 days
after the effective date of the Company's most recent registration statement for
shares of Common Stock (other than a Registration Statement on Form S-4 or Form
S-8 or any successor forms thereto).
(d) Participation.
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The Company shall promptly give written notice to all Holders of
Registrable Securities upon receipt of a request for a Demand Registration
pursuant to Section 2(a) above. The Company shall include in such Demand
Registration such shares of Registrable Securities for which it has received
written requests to register such shares within 30 days after such written
notice has been given.
(e) Underwriter's Cutback.
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If the public offering of Registrable Securities is to be underwritten
and, in the good faith judgment of the managing underwriter, the inclusion of
all the Registrable Securities requested to be registered hereunder would
interfere with the successful marketing of a smaller number of such shares of
Registrable Securities, the number of shares of Registrable Securities to be
included shall be reduced to such smaller number with the participation in such
offering to be pro rata among the Holders of Registrable Securities requesting
such registration, based upon the number of shares of Registrable Securities
owned by such Holders.
Any shares that are thereby excluded from the offering shall be
withheld from the market by the Holders thereof for a period (not to exceed 30
days prior to the effective date and 75 days thereafter) that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
The Company and, subject to the requirements of Section 11 hereof,
other Holders of securities of the Company may include such securities in such
Registration if, but only if, the managing
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underwriter concludes that such inclusion will not interfere with the successful
marketing of all the Registrable Securities requested to be included in such
registration.
(f) Managing Underwriter.
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The managing underwriter or underwriters of any underwritten public
offering covered by a Demand Registration shall be selected by the Holders of a
majority of the shares of Registrable Securities to be included in such
registration.
(g) Black-Out Periods of Investor.
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Notwithstanding anything herein to the contrary, (i) the Company shall
have the right, exercisable once per Demand Registration to require the Investor
not to sell under a Demand Registration or to suspend the effectiveness thereof
(but not for a period exceeding 90 days in any calendar year) if the Company
determines, in its good faith judgment, that such offering or continued
effectiveness would interfere with any material financing, acquisition,
disposition, corporate reorganization or other material transaction involving
the Company or any of its subsidiaries or public disclosure thereof would be
required prior to the time such disclosure might otherwise be required, or when
the Company is in possession of material information that it deems advisable not
to disclose in a registration statement.
3. Piggyback Registrations.
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(a) Participation.
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Each time the Company decides to file a registration statement under
the Securities Act (other than registrations on Forms S-4 or S-8 or any
successor form thereto, and other than a Demand Registration) covering the offer
and sale by it or any of its security holders of any of its securities for
money, the Company shall give written notice thereof to all Holders of
Registrable Securities. The Company shall include in such registration
statement such shares of Registrable Securities for which it has received
written requests to register such shares within 30 days after such written
notice has been given. If the registration statement is to cover an
underwritten offering, such Registrable Securities shall be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters.
(b) Underwriter's Cutback.
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Subject to the requirements of Section 11 hereof, if in the good faith
judgment of the managing underwriter of such offering the inclusion of all of
the shares of Registrable Securities and any other Common Stock requested to be
registered would interfere with the successful marketing of a smaller number of
such shares, then the number of shares of Registrable Securities and other
Common Stock to be included in the offering (except for shares of Registrable
Securities to be included in a Demand Registration in accordance with Section 2
hereof) shall be reduced to such smaller number with the participation in such
offering to be in the following order of priority: (1) first, the shares of
Registrable Securities requested to be included, and (2) second, any other
shares of Common Stock requested to be included. Any necessary allocation among
the Holders of shares within each of the
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foregoing groups shall be pro rata among such Holders requesting such
registration based upon the number of shares of Common Stock and Registrable
Securities owned by such Holders.
All shares so excluded from the underwritten public offering shall be
withheld from the market by the Holders thereof for a period (not to exceed 30
days prior to the effective date and 75 days thereafter) that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
(c) Company Control.
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The Company may decline to file a Registration Statement after giving
notice to any Holder pursuant to Section 3(a) above, or withdraw a Registration
Statement after filing and after such notice, but prior to the effectiveness
thereof, provided that the Company shall promptly notify each Holder in writing
of any such action and provided further that the Company shall bear all expenses
incurred by such Holder or otherwise in connection with such withdrawn
Registration Statement.
4. Hold-Back Agreements.
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(a) By Holders of Registrable Securities.
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Upon the written request of the managing underwriter of any
underwritten offering of the Company's securities, a Holder of Registrable
Securities shall not sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities (other than
those included in such registration) without the prior written consent of such
managing underwriter for a period (not to exceed 30 days before the effective
date and 75 days thereafter) that such managing underwriter reasonably
determines is necessary in order to effect the underwritten public offering;
provided that each of the officers and directors of the Company shall have
entered into substantially similar holdback agreements with such managing
underwriter covering at least the same period.
(b) By the Company and Others.
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The Company agrees:
not to effect any public or private sale or distribution of its
Equity Securities during the 30-day period prior to, and during the 75-day
period after, the effective date of each underwritten offering made
pursuant to a Demand Registration or a Piggyback Registration, if so
requested in writing by the managing underwriter (except as part of such
underwritten offering or pursuant to registrations on Forms S-4 or S-8 or
any successor forms thereto), and
not to issue any Equity Securities other than for sale in a
registered public offering unless each of the Persons to which such
securities are issued has entered a written agreement binding on its
transferees not to effect any public sale or distribution of such
securities during such period, including, without limitation, a sale
pursuant to Rule 144 under the Securities Act (except as part of such
underwritten registration, if and to the extent permitted hereunder).
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5. Registration Procedures.
-----------------------
If and whenever the Company is required to register Registrable
Securities in a Demand Registration or a Piggyback Registration, the Company
will use its best efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended plan of distribution
thereof, and pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the SEC as soon as practicable a
Registration Statement with respect to such Registrable Securities and use its
best efforts to cause such Registration Statement to become effective and remain
effective until the Registrable Securities covered by such Registration
Statement have been sold, provided that before filing a Registration Statement
or Prospectus or any amendments or supplements thereto, the Company shall
furnish to the Holders of the Registrable Securities covered by such
Registration Statement and the underwriters, if any, draft copies of all such
documents proposed to be filed, which documents will be subject to the review of
such Holders and underwriters, and the Company shall not file any Registration
Statement or amendment thereto or any Prospectus or any supplement thereto to
which the Holders of a majority of the Registrable Securities covered by such
Registration Statement or the underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be requested by any Holder of Registrable Securities or any
underwriter of Registrable Securities or as may be required by the rules,
regulations or instructions applicable to the registration form used by the
Company or by the Securities Act or rules and regulations thereunder to keep the
Registration Statement effective until all Registrable Securities covered by
such Registration Statement are sold in accordance with the intended plan of
distribution set forth in such Registration Statement or supplement to the
Prospectus;
(c) promptly notify the selling Holders of Registrable Securities and
the managing underwriter, if any, and (if requested by any such Person) confirm
such advice in writing,
when the Prospectus or any supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective,
of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information,
of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
if at any time the representations and warranties of the Company
contemplated by clause (1) of paragraph (o) below cease to be accurate in
all material respects,
of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and
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of the existence of any fact which results in the Registration
Statement, the Prospectus or any document incorporated therein by reference
containing a Misstatement;
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible time;
(e) if requested by the managing underwriter or a Holder of
Registrable Securities being sold in connection with an underwritten offering,
immediately incorporate in a supplement or post-effective amendment such
information as the managing underwriter and the Holders of a majority of the
Registrable Securities being sold agree should be included therein relating to
the sale of the Registrable Securities, including, without limitation,
information with respect to the number of shares of Registrable Securities being
sold to 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; and make all required
filings of such supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such supplement or post-effective amendment;
(f) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document to counsel to the selling Holders of Registrable Securities and to the
managing underwriter, if any, and make the Company's representatives available
for discussion of such document and make such changes in such document prior to
the filing thereof as counsel for such selling Holders or underwriters may
reasonably request;
(g) furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(h) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of each Prospectus (and
each preliminary prospectus) as such Persons may reasonably request (the Company
hereby consenting to the use of each such Prospectus (or preliminary prospectus)
by each of the selling Holders of Registrable Securities and the underwriters,
if any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus (or preliminary prospectus);
(i) prior to any public offering of Registrable Securities, register
or qualify or cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions in the United States
as such selling Holders or underwriters may designate in writing and do anything
else necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement; provided that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
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(j) cooperate with the selling Holders of Registrable Securities and
the 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 in
such denominations and registered in such names as the managing underwriter may
request at least three business days prior to any sale of Registrable Securities
to the underwriters;
(k) use its best efforts to cause the Registrable Securities covered
by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary to
enable the seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Securities;
(l) if the Registration Statement or the Prospectus contains a
Misstatement, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus will
not contain a Misstatement;
(m) use its best efforts to cause all registrable securities covered
by the Registration Statement to be listed on any national securities exchange
or authorized for quotation on NASDAQ or in the National Market System, if
requested by the Holders of a majority of such Registrable Securities or the
managing underwriter, if any;
(n) provide a CUSIP number for all Registrable Securities not later
than the effective date of the Registration Statement;
(o) enter into such agreements (including an underwriting agreement)
and do anything else necessary or advisable in order to expedite or facilitate
the disposition of such Registrable Securities, and in such connection:
make such representations and warranties to the Holders of such
Registrable Securities and the underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in primary
underwritten offerings;
obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriter, if any, and the
Holders of a majority of the Registrable Securities being sold) addressed
to each selling Holder and the underwriter, if any, covering the matters
customarily covered in opinions delivered to underwriters in primary
underwritten offerings and such other matters as may be reasonably
requested by such Holders or underwriters;
obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
Holders of Registrable Securities and the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings;
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if an underwriting agreement is entered into, cause the same to
include the indemnification and contribution provisions and procedures of
Section 7 hereof with respect to all parties to be indemnified pursuant to
said Section (or, with respect to the indemnification of such underwriters,
such similar indemnification and contribution provisions as such
underwriters shall customarily require); and
deliver such documents and certificates as may be requested by
the Holders of a majority of the Registrable Securities being sold and the
managing underwriter, if any, to evidence compliance with clause (1) above
and with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent otherwise reasonably requested by the Holders
of a majority of the Registrable Securities being sold;
(p) make available for inspection by representatives of the Holders
of a majority of the Registrable Securities being sold, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by the sellers or any such underwriter, all
financial and other records and pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with the Registration; provided that any
records, information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such Persons unless disclosure of
such records, information or documents is required by court or administrative
order; and
(q) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of any 12-month period (or
90 days, if such period is a fiscal year) (x) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in an
underwritten offering, or, if not sold to underwriters in such an offering, (y)
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover said 12-month periods.
6. Registration Expenses.
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(a) Demand Registrations.
--------------------
The Company shall bear all Registration Expenses incurred in
connection with the first two of the three Demand Registrations and of any
Registrations which do not become or are not maintained effective in accordance
with the requirements specified in Section 5(a) other than any Registration
terminated prior to effectiveness at the request of, or solely as a result of
the actions of holders whose Registrable Securities are included in such
registration. The Registration Expenses of the third Demand Registration
incurred by the Investor or any other holder whose Registrable Securities are
included in such Demand Registration shall be split proportionally between the
Investor, any such holder and the Company.
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(b) Piggyback Registrations.
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The Company shall bear all Registration Expenses incurred in
connection with all Piggyback Registrations.
(c) Company Expenses.
----------------
The Company also 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 expense of any annual
audit, the fees and expenses incurred in connection with any listing of the
securities to be registered on a securities exchange, and the fees and expenses
of any Person, including special experts, retained by the Company.
7. Indemnification.
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(a) Indemnification by Company.
--------------------------
The Company agrees to indemnify and hold harmless each Indemnified
Holder from and against all Claims arising out of or based upon any Misstatement
or alleged Misstatement, except insofar as such Misstatement or alleged
Misstatement was based upon information furnished in writing to the Company by
such Indemnified Holder expressly for use in the document containing such
Misstatement or alleged Misstatement. This indemnity shall not be exclusive and
shall be in addition to any liability which the Company may otherwise have.
The foregoing notwithstanding, the Company shall not be liable to the
extent that any such Claim arises out of or is based upon a Misstatement or
alleged Misstatement made in any preliminary prospectus if (i) such Indemnified
Holder failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Registrable Securities giving
rise to such Claim and (ii) the Prospectus would have corrected such untrue
statement or omission.
In addition, the Company shall not be liable to the extent that any
such Claim arises out of or is based upon a Misstatement or alleged Misstatement
in a Prospectus, (x) if such Misstatement or alleged Misstatement is corrected
in an amendment or supplement to such Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such Indemnified Holder thereafter fails to deliver
such Prospectus as so amended or supplemented prior to or concurrently with the
sale to the person who purchased a Registrable Security from such Indemnified
Holder and who is asserting such Claim.
The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in a
distribution covered by a Registration Statement, their officers and directors
and each Person who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Indemnified Holders of
Registrable Securities.
(b) Indemnification Procedures.
--------------------------
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or asserted against an Indemnified Holder in
respect of which indemnity may be sought
11
from the Company, such Indemnified Holder shall promptly notify the Company in
writing, and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Holder and the
payment of all expenses.
Such Indemnified Holder shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such separate counsel shall be the expense of such
Indemnified Holder unless (i) the Company has agreed to pay such fees and
expenses, (ii) the Company shall have failed to assume the defense of such
action or proceeding or has failed to employ counsel satisfactory to such
Indemnified Holder in any such action or proceeding or (iii) the named parties
to any such action or proceeding (including any impleaded parties) include both
such Indemnified Holder and the Company, and such Indemnified Holder shall have
been advised by counsel that there may be one or more legal defenses available
to such Indemnified Holder that are different from or additional to those
available to the Company.
If such Indemnified Holder notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company as permitted by
the provisions of the preceding paragraph, the Company shall not have the right
to assume the defense of such action or proceeding on behalf of such Indemnified
Holder. The foregoing notwithstanding, the Company shall not be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for such Indemnified Holder and any other Indemnified Holders (which firm
shall be designated in writing by such Indemnified Holders) in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances.
The Company shall not be liable for any settlement of any such action
or proceeding effected without its written consent, but if settled with its
written consent, or if there be a final judgment for the plaintiff in any such
action or proceeding, the Company agrees to indemnify and hold harmless such
Indemnified Holders from and against any loss or liability by reason of such
settlement or judgment.
(c) Indemnification by Holder of Registrable Securities.
---------------------------------------------------
Each Holder of Registrable Securities agrees to indemnify and hold
harmless the Company, its directors and officers and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Holder, but only with respect to information
relating to such Holder furnished in writing by such Holder expressly for use in
any Registration Statement, Prospectus or preliminary prospectus. In no event,
however, shall the liability hereunder of any selling Holder of Registrable
Securities be greater than the dollar amount of the proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
In case any action or proceeding shall be brought against the Company
or its directors or officers or any such controlling person, in respect of which
indemnity may be sought against a Holder of Registrable Securities, such Holder
shall have the rights and duties given the Company and the Company or its
directors or officers or such controlling person shall have the rights and
duties given to each Holder by Sections 7(a) and 7(b) above.
12
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement.
(d) Contribution.
------------
If the indemnification provided for in this Section 7 is unavailable
to an indemnified party under Section 7(a) or Section 7(c) above (other than by
reason of exceptions provided in those Sections) in respect of any Claims
referred to in such Sections, then each applicable indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Claims in such proportion
as is appropriate to reflect the relative fault of the Company on the one hand
and of the Indemnified Holder on the other in connection with the statements or
omissions which resulted in such Claims as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the Claims
referred to above shall be deemed to include, subject to the limitations set
forth in Section 7(b), any legal or other fees or expenses reasonably incurred
by such party in connection with investigating or defending any action or claim.
The relative fault of the Company on the one hand and of the
Indemnified Holder on the other shall be determined by reference to, among other
things, whether the Misstatement or alleged Misstatement relates to information
supplied by the Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Misstatement or alleged Misstatement.
The Company and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 7(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7(d), an Indemnified
Holder shall not be required to contribute any amount in excess of the amount by
which (i) the total price at which the securities that were sold by such
Indemnified Holder and distributed to the public were offered to the public
exceeds (ii) the amount of any damages which such Indemnified Holder has
otherwise been required to pay by reason of such Misstatement.
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.
8. Exchange Act Reporting Requirements.
-----------------------------------
From and after the date hereof, the Company shall (whether or not it
shall then be required to do so) timely file such information, documents and
reports as the Commission may require or prescribe under Section 13 or 15(d)
(whichever is applicable) of the Exchange Act. In addition, the Company shall
take such other measures and file such other information, documents and reports,
as
13
shall hereafter be required by the Commission as a condition to the availability
of Rule 144 under the Securities Act (or any successor provision) and the use of
Form S-3.
From and after the date hereof, the Company shall forthwith upon
request furnish any Holder of Registrable Securities (i) a written statement by
the Company that it has complied with such reporting requirements, (ii) a copy
of the most recent annual or quarterly report of the Company, and (iii) such
other reports and documents filed by the Company with the Commission as such
Holder may reasonably request in availing itself of an exemption for the sale of
Registrable Securities without registration under the Securities Act.
The purpose of the foregoing requirements are (x) to enable any such
Holder to comply with the current public information requirements contained in
paragraph (c) of Rule 144 under the Securities Act (or any successor provision)
and (y) to qualify the Company for the use of registration statements on Form S-
3.
9. Requirements for Participation in Underwritten Offerings.
--------------------------------------------------------
No Person may participate in any underwritten offering pursuant to a
Registration hereunder unless such Person (a) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
10. Suspension of Sales.
-------------------
Upon receipt of written notice from the Company that a Registration
Statement or Prospectus contains a Misstatement, each Holder of Registrable
Securities shall forthwith discontinue disposition of Registrable Securities
until such Holder has received copies of the supplemented or amended Prospectus
required by Section 5(1) hereof, or until such Holder is advised in writing by
the Company that the use of the Prospectus may be resumed, and, if so directed
by the Company, such Holder shall deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.
11. Future Registration Rights Agreements.
-------------------------------------
Except for an underwriting agreement between the Company and one or
more professional underwriters of securities, the Company shall not agree after
the date hereof to register any Equity Securities under the Securities Act
unless such agreement specifically provides that:
(a) the Holder of such Equity Securities may not participate in any
Demand Registration without the consent of the Holders of a majority of the
shares of the Registrable Securities included in such registration unless:
(i) the offering of the Registrable Securities is to be a Firm
Commitment Underwritten Offering and the managing underwriter concludes
that the public offering or sale
14
of such Equity Securities would not interfere with the successful marketing
of all Registrable Securities requested to be sold and
(ii) the Holders of Registrable Securities shall have the right
to participate, to the extent they may request, in any registration
statement initiated under a demand registration right exercised by the
Holder of such Equity Securities, except that if the managing underwriter
of a public offering made pursuant to such a demand registration limits the
number of shares of Common Stock to be sold, the participation of the
Holders of the Registrable Securities and the Holders of all other Common
Stock (other than the Equity Securities held by such Holder of Equity
Securities) shall be determined as set forth in Section 3 hereof.
(b) the Holder of such Equity Securities may not participate in any
Piggyback Registration if the sale of Registrable Securities is to be
underwritten unless, if the managing underwriter limits the total number of
shares to be sold, the Holders of such Equity Securities and the Holders of
Registrable Securities are entitled to participate in such underwritten
distribution based on the order of priority set forth in Section 3 hereof, and
(c) all Equity Securities excluded from any Registration as a result
of the foregoing limitations may not be publicly offered or sold for a period
(not to exceed at least 30 days prior to the effective date and 75 days
thereafter) that the managing underwriter reasonably determines is necessary in
order to effect the underwritten public offering of Registrable Securities
registered pursuant to this Agreement.
12. Miscellaneous.
-------------
(a) Remedies.
--------
Each Holder of Registrable Securities, in addition to being entitled
to exercise all rights provided herein, in the Stock Purchase Agreement and
granted by law, including recovery of damages, shall be entitled to specific
performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements.
--------------------------
The Company shall not on or after the date of this Agreement enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
Other than as disclosed on Schedule I attached hereto, the Company has
not previously entered into any agreement with respect to its securities
granting any registration rights to any Person. The rights granted to the
Holders of Registrable Securities hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any such agreements.
15
(c) Amendments and Waivers.
----------------------
The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company has
obtained the written consent of the Holders of at least a majority of the
outstanding shares of Registrable Securities. The foregoing notwithstanding, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders of shares of Registrable Securities whose
shares are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders of shares of
Registrable Securities may be given by the Holders of a majority of the shares
of Registrable Securities being sold.
(d) Notices.
-------
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder of Registrable Securities, at the most
current address given by such Holder to the Company in accordance with the
provisions hereof, which address initially is, with respect to the
Investor, the address set forth on the Investor's signature page of the
Stock Purchase Agreement, with a copy to Xxxxxx & Xxxxxxx, 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attention: R. Xxxxxx
Xxxxxxxxx, Esq.; and
(ii) if to the Company, initially at its address set forth in the
Stock Purchase Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions hereof, with a copy to
Arent Fox Xxxxxxx Xxxxxxx & Xxxx, 0000 Xxxxxxxxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000, Attention: Xxxxxxx X. Xxxxxx, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery. The Company shall promptly provide a list of the most current
addresses of the Holders of Registrable Securities given to it in accordance
with the provisions hereof to any such Holder for the purpose of enabling such
Holder to communicate with other Holders in connection with this Agreement.
(e) Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
(f) Counterparts.
------------
This Agreement may be executed in one or more of counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same agreement.
16
(g) Table of Contents and Headings.
------------------------------
The table of contents and headings in this Agreement are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
(h) Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
(i) Severability.
------------
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(j) Forms.
-----
All references in this Agreement to particular forms of registration
statements are intended to include all successor forms which are intended to
replace, or to apply to similar transactions as, the forms herein referenced.
(k) Entire Agreement.
----------------
This Agreement and the Stock Purchase Agreement are intended by the
parties as the 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, warranties or undertakings, other than those set forth or referred to
herein or therein with respect to the registration rights granted by the Company
with respect to the securities sold pursuant to the Stock Purchase Agreement.
This Agreement and the Stock Purchase Agreement supersede all prior agreements
and understandings between the parties with respect to such subject matter.
[Signature Page Follows]
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE FORTRESS GROUP, INC.
By: _________________________________________
Name:____________________________________
Title:___________________________________
PROMETHEUS HOMEBUILDERS LLC
By: Prometheus Homebuilders Funding Corp.
Managing Member
By: _________________________________________
Name:____________________________________
Title:___________________________________
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