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EXHIBIT 10.15
FORM OF
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
CROWN BOOKS CORPORATION
AND
THE INVESTORS LISTED ON
SCHEDULE A
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND USAGE......................................................................1
Section 1.1 Definitions...........................................................................1
Section 1.2 Usage.................................................................................4
ARTICLE II DEMAND REGISTRATION STATEMENTS.............................................................5
Section 2.1 Demand Registration Statements........................................................5
Section 2.2 Limitation on Demand Registration.....................................................6
Section 2.3 Manner of Sale........................................................................6
Section 2.4 Withdrawal............................................................................6
ARTICLE III PIGGYBACK REGISTRATION STATEMENTS..........................................................7
Section 3.1 Piggyback Registration Statements.....................................................7
Section 3.2 Priority in Registrations.............................................................7
ARTICLE IV REGISTRATION PROCEDURES AND EXPENSES.......................................................8
Section 4.1 Registration Procedures...............................................................8
Section 4.2 Holders' Obligations.................................................................11
Section 4.3 Registration Expenses................................................................12
ARTICLE V INDEMNIFICATION AND CONTRIBUTION..........................................................12
Section 5.1 Indemnification by the Company.......................................................12
Section 5.2 Indemnification by the Selling Holders...............................................13
Section 5.3 Notice of Claims, etc................................................................13
Section 5.4 Contribution.........................................................................14
Section 5.5 Survival.............................................................................15
ARTICLE VI RULE 144..................................................................................15
Section 6.1 Reports, etc.........................................................................15
Section 6.2 Rule 144 Information.................................................................15
ARTICLE VII MISCELLANEOUS.............................................................................16
Section 7.1 Amendment, Modification and Waivers; Further Assurances..............................16
Section 7.2 Assignment...........................................................................16
Section 7.3 Invalid Provisions...................................................................16
Section 7.4 Nominees for Beneficial Owners.......................................................17
Section 7.5 Governing Law........................................................................17
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TABLE OF CONTENTS
(continued)
PAGE
Section 7.6 Notices..............................................................................17
Section 7.7 Entire Agreement; Integration........................................................18
Section 7.8 Injunctive Relief....................................................................18
Section 7.9 Section Headings.....................................................................18
Section 7.10 Counterparts.........................................................................18
Section 7.11 Filing...............................................................................18
Section 7.12 Termination..........................................................................18
Section 7.13 Attorneys' Fees......................................................................18
Section 7.14 No Third Party Beneficiaries.........................................................18
Section 7.15 Requisite Holders....................................................................18
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REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of __________________ by and
between Crown Books Corporation, a Delaware corporation (the "Company"), and the
investors listed on Schedule A hereto (the "Investors").
RECITALS
WHEREAS, each Investor has, pursuant to the terms of a certain
Subscription Agreement, by and among the Company, Xxxxxxxxxx.xxx, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company ("XX.xxx"),
and the Investor, subscribed to purchase units ("Units"), each Unit consisting
of (i) a three-year 6% subordinated promissory note in the principal amount of
$500,000 issued by XX.xxx, and (ii) a three-year warrant to purchase 183,324
shares of the Company's common stock, $.01 par value (the "Warrants"); and
WHEREAS, the Company has agreed to grant the Investors certain
registration rights with respect to the Shares (as defined below) underlying the
Warrants on the terms and subject to the conditions herein set forth;
NOW, THEREFORE, in consideration of good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Section 1.1 Definitions. As used in this Agreement:
Affiliate. "Affiliate" shall mean (a) when used with reference to any
partnership, any Person that, directly or indirectly through one or more
intermediaries, owns or controls 10% or more of either the capital or profit
interests of such partnership or is a general partner of such partnership or is
a Person in which such partnership has a 10% or greater direct or indirect
equity interest, and (b) when used with reference to any corporation, any Person
that, directly or indirectly, owns or controls 10% or more of the outstanding
voting securities of such corporation or is a Person in which such corporation
has a 10% or greater direct or indirect equity interest. In addition, the term
"Affiliate," when used with reference to any Person, also means any other Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person. As used in the
preceding sentence, (i) the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the entity referred to, whether through ownership of voting
securities, by contract, or otherwise, and (ii) the terms "controlling" and
"controls" shall have meanings correlative to the foregoing.
Agreement. "Agreement" shall mean this Registration Rights Agreement,
as the same may be amended from time to time.
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Commission. "Commission" shall mean the United States Securities and
Exchange Commission, or any successor governmental agency or authority thereto.
Common Stock. "Common Stock" shall mean (a) the common stock, par value
$0.01 per share, of the Company, and (b) shares of capital stock of the Company
issued by the Company in respect of or in exchange for shares of such common
stock in connection with any stock dividend or distribution, stock split-up,
recapitalization, recombination or exchange by the Company generally of shares
of such common stock.
Demand Registration Request. "Demand Registration Request" shall have
the meaning set forth in Section 2.1(a).
Demand Registration Statement. "Demand Registration Statement" shall
have the meaning set forth in Section 2.1(a).
Demanding Holders. "Demanding Holders" shall have the meaning set forth
in Section 2.1(a).
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Holders. "Holders" shall mean the Investors and any Person to whom the
rights granted under this Agreement are validly transferred by the Investors,
and their Permitted Transferees (as defined in Section 7.2 hereof) pursuant to
Section 7.2 hereof.
Person. "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or other agency or political
subdivision thereof.
Piggyback Registration Statement. "Piggyback Registration Statement"
shall have the meaning set forth in Section 3.1.
Register, Registered and Registration. "Register", "registered", and
"registration" shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering by the Commission of effectiveness of such
registration statement or document.
Registrable Securities. "Registrable Securities" shall mean (a) the
Shares issuable upon exercise of the Warrants; and (b) any shares of Common
Stock or other securities issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Company generally for, or in
replacement by the Company generally of, such Shares. As to any particular
Registrable Securities, once issued, such securities will cease to be
Registrable Securities (a) when a registration statement with respect to the
resale of such securities has become effective under the Securities Act and such
securities shall have been disposed of in accordance with the plan of
distribution set forth in such registration statement, or (b) when such
securities are eligible to be sold to the public in compliance with Rule 144 or
any similar rule promulgated by the Commission pursuant to the Securities Act,
and such securities shall have been transferred
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pursuant to Rule 144 to a third party who is not an Affiliate of the Company,
and new certificates evidencing such securities without legends restricting
further transfer shall have been delivered by the Company, or the Holders shall
have received an opinion of Company counsel that, in the opinion of such
counsel, subsequent public distribution of such securities shall neither require
registration under the Securities Act or qualification (or any similar filing)
under any state securities or blue sky law then in effect nor the use of an
applicable exemption from such registration qualification.
Registration Expenses. "Registration Expenses" shall mean all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all registration, filing, securities exchange
listing, rating agency and National Association of Securities Dealers, Inc.
fees, (b) all registration, filing, qualification and other fees and expenses of
complying with securities or blue sky laws of all jurisdictions in which the
securities are to be registered and the reasonable legal fees and expenses
incurred in connection with the blue sky qualifications of the Registrable
Securities and the determination of their eligibility for investment under the
laws of all such jurisdictions, (c) all word processing, duplicating, printing,
messenger and delivery expenses incurred by the Company, (d) the fees and
disbursements of counsel for the Company and of its independent public
accountants, including, without limitation, the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, (e) premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered to the extent the Company elects to obtain such insurance, (f)
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (but excluding underwriting discounts, concessions,
allowances and commissions and transfer taxes, if any, relating to the
Registrable Securities being registered), and (g) fees and expenses of other
Persons retained or employed by the Company.
Requisite Holders. "Requisite Holders" shall mean any Holder or Holders
of a majority in interest of the Registrable Securities requested to be included
in a registration or other relevant action, as the case may be.
Rule 144. "Rule 144" shall mean Rule 144 promulgated by the Commission
under the Securities Act, and any successor provision thereto.
Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
Selling Holders. "Selling Holders" shall mean, with respect to a
specified registration pursuant to this Agreement, Holders whose Registrable
Securities are included in such registration.
Shares. "Shares" shall mean the shares of Common Stock issued by the
Company pursuant to the exercise of the Warrants.
Transfer. "Transfer" shall mean and include the act of selling, giving,
transferring, creating a trust (voting or otherwise), assigning or otherwise
disposing of (other than pledging, hypothecating or otherwise transferring as
collateral security for an underlying obligation)(and
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correlative words shall have correlative meanings); provided, however, that any
transfer or other disposition upon foreclosure or other exercise of remedies of
a secured creditor after an event of default under or with respect to a pledge,
hypothecation or other transfer as collateral security shall constitute a
"Transfer."
Underwriters' Representative. "Underwriters' Representative" shall mean
the managing underwriter, or, in the case of a co-managed underwriting, the lead
manager, within the meaning of Rule 12b-2 under the Exchange Act.
Violation. "Violation" shall have the meaning set forth in Section 5.1.
Section 1.2 Usage. (a) References to a Person are also references to
its assigns and successors in interest (by any means whatever, including merger,
consolidation or sale of all or substantially all the assets of such Person or
otherwise, as the case may be).
(b) References to Registrable Securities "owned" by a Holder
shall include Registrable Securities beneficially owned by such Person but which
are held of record in the name of a nominee, trustee, custodian, or other agent,
but shall exclude shares of Common Stock held by a Holder in a fiduciary
capacity for customers of such Person.
(c) References to a document are to it as amended, waived and
otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).
(d) References to Sections, Articles or Schedules are to
sections or articles hereof or schedules hereto, unless the context otherwise
requires.
(e) The definitions set forth herein are equally applicable
both to the singular and plural forms and the feminine, masculine and neuter
forms of the terms defined.
(f) The term "including" and correlative terms shall be deemed
to be followed by "without limitation" whether or not followed by such words or
words of like import.
(g) The term "hereof" and similar terms refer to this Agreement
as a whole.
(h) The "date of" any notice or request given pursuant to this
Agreement shall be determined in accordance with Section 7.6.
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ARTICLE II
DEMAND REGISTRATION STATEMENTS
Section 2.1 Demand Registration Statements. (a) At any time or from time
to time, during the period commencing one year after the Company's Common Stock
is listed on a national securities exchange or quoted on the Nasdaq National
Market or The Nasdaq SmallCap Market and ending on the third anniversary of the
date hereof, Holders representing in excess of 50% of the Registrable Securities
outstanding on the date of this Agreement (the "Demanding Holder") may at their
option make a written request (a "Demand Registration Request") to the Company
requesting that the Company file with the Commission a registration statement on
an appropriate form under the Securities Act (a "Demand Registration Statement")
to register all or such number of such Demanding Holders' Registrable Securities
as the Demanding Holders shall request in writing.
After an effective Demand Registration Request is made, the Company
shall, within 90 days of the date of such Demand Registration Request (unless
the Company's financial statements would otherwise be "stale" under Rule 3-12 of
Regulation S-X), file with the Commission the Demand Registration Statement. Any
Demand Registration Statement shall provide for an underwritten offering
(whether on a "firm," "best efforts" or "all reasonable efforts" basis or
otherwise) or an offering on a delayed or continuous basis pursuant to Rule 415
under the Securities Act. Any Demand Registration Request made pursuant to this
Section 2.1 shall be addressed to the attention of the Secretary of the Company
and shall specify the number of Registrable Securities to be registered, the
intended methods of disposition thereof and that the request is for a Demand
Registration Statement pursuant to this Section 2.1. The Company shall use its
reasonable best efforts to keep any Demand Registration Statement current for a
period of 270 days following the execution date thereof.
(b) The Company shall be entitled to postpone the filing of any
Demand Registration Statement otherwise required to be prepared and filed
pursuant to this Section 2.1 for up to 120 days if (i) the Board of Directors of
the Company determines, in good faith, that such registration and the Transfer
of Registrable Securities contemplated thereby would materially interfere with,
or require the premature disclosure of, any financing, acquisition or
reorganization or other material transaction involving the Company or any of its
subsidiaries or would otherwise require the premature disclosure of any other
material nonpublic information as to which the Company has a bona fide business
purpose for maintaining its confidentiality, and (ii) the Company promptly gives
the Demanding Holders notice of such determination (which notice need not
disclose the fact, event or information); provided, however, that the Company
shall not have, within the twelve months prior to the date of the postponement,
postponed pursuant to this Section 2.1(b) the filing of any other Demand
Registration Statement that was subsequently abandoned because the Demand
Registration Request relating thereto was withdrawn.
(c) Whenever the Company receives a demand pursuant to Section
2.1(a) to effect the registration of any Registrable Securities, the Company
shall promptly give written notice of such proposed registration to all Holders.
Any such Holder may, within ten days after
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receipt of such notice, request in writing that all of such Holder's Registrable
Securities, or any portion thereof designated by such Holder, be included in the
registration.
Section 2.2 Limitation on Demand Registration. The Company shall be
obligated to effect no more than one Demand Registration Statement pursuant to
this Agreement for the Holders of the Registrable Securities. For purposes of
the preceding sentence, a Demand Registration Statement shall not be deemed to
have been effected (a) unless a registration statement with respect thereto has
become effective, (b) if after such registration statement has become effective,
such registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason not attributable to any of the Selling Holders and such interference
is not thereafter eliminated, or (c) if the conditions to closing specified in
any underwriting agreement containing usual and customary terms entered into in
connection with such registration are not satisfied or waived, other than by
reason of a failure on the part of any of the Selling Holders. The Company's
obligation to effect a given Demand Registration pursuant to Section 2.1 shall
be deemed to have been satisfied upon the earlier of (i) the date as of which
all of the Registrable Securities included therein shall have been disposed of
pursuant to the Demand Registration Statement, and (ii) the date as of which
such Demand Registration Statement shall have been continuously effective for a
period of 270 days.
Section 2.3 Manner of Sale. The Holders shall, in connection with a
Demand Registration Statement, be entitled, in their sole and absolute
discretion, to select the manner in which their Registrable Securities are sold,
including, but not limited to, the selection of underwriters or brokers through
whom such securities will be sold and the purchasers for such securities,
subject solely in the case of underwriters, to the Company's prior approval of
such underwriters or brokers. In connection therewith, the Company shall take
such actions as are reasonably requested by such underwriters or brokers in
order to facilitate the registration and disposition of the Registrable
Securities in accordance with this Agreement, including, but not limited to,
cooperating in the performance of any reasonable due diligence investigation by
a Holder or Holders' representative or any underwriter, including making
available for inspection and discussion, respectively, necessary corporate
documents and records and company personnel, subject to the receipt of an
executed confidentiality agreement in a form reasonably satisfactory to the
Company.
Section 2.4 Withdrawal. Any Holder participating in a registration
pursuant to this Agreement shall be permitted to withdraw all or part of its
Registrable Securities from such registration at any time (but not later than
two business days) prior to the effective date of the registration statement
covering such securities; provided that, in the event of a withdrawal from a
registration effected pursuant to Section 2.1 hereof, such registration shall be
deemed to have been effected for purposes of the first sentence of Section 2.2
hereof except as otherwise provided in Section 2.2 hereof.
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ARTICLE III
PIGGYBACK REGISTRATION STATEMENTS
Section 3.1 Piggyback Registration Statements. (a) If at any time until
the third anniversary of the date hereof the Company proposes to register equity
securities or securities convertible or exchangeable into equity securities
under the Securities Act in connection with a public offering solely for cash
(other than by a registration on Form S-4 or S-8 or any successor or similar
forms or filed in connection with an exchange offer or any offering of
securities solely to the Company's existing stockholders or otherwise pursuant
to a dividend reinvestment plan or a dividend reinvestment and stock purchase
plan, and other than pursuant to Article II), the Company shall promptly give
each Holder of Registrable Securities written notice of such proposed
registration (a "Piggyback Registration Statement"). Upon the written request of
each Holder receiving such notice given within twenty days following the date of
such notice (which request shall state the number of Registrable Securities to
be registered and the intended method of distribution of such Registrable
Securities), the Company shall cause to be included in such registration
statement and use its reasonable best efforts to be registered under the
Securities Act all the Registrable Securities that each such Holder shall have
requested to be registered; provided, however, that the Company shall have the
right to postpone or withdraw any registration effected pursuant to this Section
3.1 without obligation or liability to any Holder, subject to Section 3.1(b)
hereof.
(b) If at any time after giving written notice of its intention
to register any of its securities pursuant to Section 3.1(a), and prior to the
effective date of the Piggyback Registration Statement filed in connection with
such Registration, the Company shall determine for any reason not to register or
to delay the Registration of such securities, the Company shall also give
written notice of such determination to each Holder of Registrable Securities
contemplated to be included in such registration. If the Company shall elect not
to register such securities, the Company shall be relieved of its obligation to
register any Registrable Securities in connection therewith (but not from its
obligation, if any, to pay the Registration Expenses in connection therewith).
(c) Until the third anniversary of the date hereof, each Holder
shall be entitled to have its Registrable Securities included in an unlimited
number of Piggyback Registration Statements pursuant to this Section 3.1.
Section 3.2 Priority in Registrations. (a) If the Company's offering
pursuant to which a Piggyback Registration Statement is proposed to be filed is
underwritten, the Holders shall sell the Registrable Securities to be sold
pursuant to such offering to or through the underwriter or underwriters of the
securities being registered for the account of the Company upon terms generally
comparable to the terms applicable to the Company and for the account of the
Holders, and if the lead underwriter reasonably determines in writing that the
number of securities included in the registration statement exceeds the number
(the "Saleable Number") that can be sold in an orderly fashion within a price
range reasonably acceptable to the Company, then the number of securities that
the Company and the Holders will be permitted to include in such
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Registration Statement will be allocated as follows: (i) first, all the
securities to be sold by the Company for its own account pursuant to Section
3.1(a), and (ii) second, the difference between the Saleable Number and the
number, if any, to be included pursuant to clause (i) hereof, allocated among
the Holders pro rata on the basis of the relative number of Registrable
Securities held by each of them.
(b) If as a result of the proration provisions of this Section
3.2, any Holder of Registrable Securities is not entitled to include all such
Registrable Securities in such registration (a "Cutback"), such Holder may,
subject to Section 2.4 hereof, elect in writing to withdraw his, her or its
request to include any Registrable Securities in such registration (a
"Withdrawal Election"); provided, however, that a Withdrawal Election shall be
irrevocable and any Holder of Registrable Securities who has made a Withdrawal
Election shall no longer have any right to include any Registrable Securities in
the registration as to which such Withdrawal Election was made. The number of
securities required to satisfy any underwriters' overallotment option shall be
allocated pro rata among the Company and all Holders on the basis of the
relative number of securities otherwise to be included by each of them in the
registration.
ARTICLE IV
REGISTRATION PROCEDURES AND EXPENSES
Section 4.1 Registration Procedures. Whenever required under Article II
or Article III to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as practicable (but in the case of Article II
subject to the 90 day periods set forth in Sections 2.1(a)):
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use the Company's
reasonable best efforts to cause such registration statement to become
effective, in each instance giving due regard to the need to prepare current
financial statements, conduct due diligence and complete other actions that are
reasonably necessary to effect a registered public offering.
(b) (i) Use the Company's reasonable best efforts to keep
Demand Registration Statement continuously effective for up to 270 days or until
such earlier date as of which all the Registrable Securities under the Demand
Registration Statement shall have been disposed of in the manner described in
the Demand Registration Statement.
(ii) Each Holder agrees by acquisition of a Registrable
Security that, upon receipt of any notice from the Company of the existence of
any fact or event of the kind described in Section 2.1(b) (which notice need not
disclose the fact, event or information), such Holder will forthwith discontinue
the disposition of any Registrable Securities pursuant to the Demand
Registration Statement, until it is advised in writing by the Company that the
use of the prospectus related to such Demand Registration Statement may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in such prospectus. If so directed by the Company,
each Holder will deliver to the Company all copies,
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other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities that was current at the time of
receipt of such notice.
(iii) Notwithstanding the foregoing, if the filing of a
registration statement is postponed as permitted by Section 2.1(b), the period
for filing a Demand Registration Statement pursuant to Section 2.1(a), shall be
extended by the aggregate number of days of such postponement.
(c) Prepare and file with the Commission such amendments,
supplements or incorporated documents to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement. If the
registration statement is for an underwritten offering, the Company shall amend
the registration statement or supplement the prospectus whenever required by the
terms of the underwriting agreement entered into pursuant to Section 4.1(f). In
the event that any Registrable Securities included in a registration statement
subject to, or required by, this Agreement remain unsold at the end of the
period during which the Company is obligated to use its reasonable best efforts
to maintain the effectiveness of such registration statement, the Company may
file a post-effective amendment to the registration statement for the purpose of
removing such securities from registered status.
(d) Furnish to each Selling Holder of Registrable Securities,
upon request, copies of the registration statement, any pre-effective or
post-effective amendment thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each case in conformity
with the requirements of the Securities Act.
(e) Use the Company's reasonable best efforts (i) to register
and qualify the securities covered by such registration statement under the
securities or Blue Sky laws of such states or jurisdictions as shall be
reasonably requested by the Underwriters' Representative (or if inapplicable,
the Requisite Holders), and (ii) to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the offer
and transfer of any of the Registrable Securities in any jurisdiction, at the
earliest practicable moment; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business, subject itself to taxation or to file a general consent to service of
process in any states or Jurisdictions where it is not now so subject.
(f) In the event of a Demand Registration Statement in
connection with a firm commitment or best efforts offering, enter into and
perform the Company's obligations under an underwriting or agency agreement
(including indemnification and contribution obligations of underwriters or
agents), in usual and customary form, with the managing underwriter or
underwriters of or agents for such offering. The Company shall also cooperate
with the Requisite Holders and the Underwriters' Representative for such
offering in the marketing of the Registrable Securities, including making
reasonably available the Company's officers, accountants, counsel, premises, and
books and records for such purpose.
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(g) Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission in connection therewith (and
take all actions required to prevent the entry of such stop order or to remove
it if entered).
(h) Make generally available to the Company's security holders
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 90 days following the end of the 12-month period
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of each registration statement filed pursuant to this
Agreement.
(i) Make reasonably available for inspection by any Selling
Holder, any underwriter participating in such offering and the representatives
of such Selling Holder and Underwriter (but not more than one firm of legal
counsel to such Selling Holders), all financial and other information as shall
be reasonably requested by them, and provide the Selling Holder, any underwriter
participating in such offering and the representatives of such Selling Holder
and Underwriter the opportunity to discuss the business affairs of the Company
with its principal executives and independent public accountants who have
certified the audited financial statements included in such registration
statement, in each case to the extent necessary to enable them to exercise their
due diligence responsibility under the Securities Act; provided, however, that
information that the Company determines, in good faith, to be confidential and
which the Company advises such Person in writing, is confidential shall not be
disclosed unless such Person signs a confidentiality agreement reasonably
satisfactory to the Company.
(j) In the event a Demand Registration Statement is in
connection with a firm commitment offering, use the Company's reasonable best
efforts to obtain a "comfort letter" from its independent public accountants and
legal opinions of counsel to the Company addressed to the Selling Holders and
each underwriter or agent, in customary form and covering such matters of the
type customarily covered by such letters. In such event, the Company shall
furnish to each Selling Holder and each underwriter or agent a signed
counterpart of any such comfort letter or legal opinion. Delivery of any comfort
letter shall be subject to the recipient furnishing such written representations
or acknowledgments as are customarily provided by selling stockholders,
underwriters or agents who receive such comfort letters under SAS No. 72.
Nothing in the immediately preceding sentence shall be deemed to require a
Selling Holder, underwriter or agent to make representations and warranties if
the Selling Holder, underwriter or agent is willing to receive a letter in the
form to be provided to selling stockholders, underwriters or agents not making
representations and warranties under SAS No. 76.
(k) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement.
(l) Use all reasonable efforts to cause the Registrable
Securities, if the Common Stock is then listed on a national securities exchange
or included for quotation in a recognized trading market, to continue to be so
listed or included to ensure that the Registrable Securities are freely tradable
thereon.
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(m) Provide a CUSIP number for all Registrable Securities
covered by such registration statement not later than the effective date of such
registration statement.
Section 4.2 Holders' Obligations. (a) Each Selling Holder shall:
(i) furnish to the Company such information regarding
such Selling Holder and its affiliates, the number of Registrable Securities
owned and proposed to be sold by it, the intended method of disposition of such
securities and any other information as shall be required to effect the
registration of such Selling Holder's Registrable Securities, and cooperate with
the Company in preparing such registration statement and in complying with the
requirements of the Securities Act;
(ii) agree to sell its Registrable Securities to the
underwriters at the same price and on substantially the same terms and
conditions as the Company or the other Persons on whose behalf the registration
statement was being filed have agreed to sell their securities, and execute the
underwriting agreement agreed to by the Company and customary custody
arrangements, lock-up letters, indemnities, questionnaires and other documents
reasonably required by the underwriters or agents.
(b) In the event that a Demand Registration Statement or a
Piggyback Registration Statement becomes effective, if and to the extent
requested by the managing underwriter or lead agent for the offering relating
thereto, no Holder shall offer, sell or agree to sell or otherwise dispose of or
transfer any Registrable Securities or securities convertible into or
exchangeable or exercisable for any Registrable Securities (other than, in the
case of the Selling Holders under the Demand Registration Statement or Piggyback
Registration Statement, pursuant to such Demand Registration Statement or
Piggyback Registration Statement, as the case may be), or exercise any right to
register any such securities, during the period commencing ten days prior to the
anticipated effective date of such registration statement and ending 180 days
from the effective date of such registration statement. In order to enforce the
foregoing agreement, the Company shall be entitled to impose stop-transfer
instructions with respect to the Registrable Securities of each Holder until the
end of such period.
(c) Each Selling Holder of Registrable Securities agrees that,
upon receipt of any notice from the Company of (i) any request by the Commission
for amendments or supplements to a Registration Statement or related prospectus
covering any of such Selling Holder's Registrable Securities, (ii) the issuance
by the Commission of any stop order suspending the effectiveness of a
registration statement covering any of such Selling Holder's Registrable
Securities or the initiation of any proceedings for that purpose, (iii) the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (iv) the happening
of any event that requires the making of any changes in the registration
statement covering any of such Selling Holder's Registrable Securities so that
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or that any related prospectus will not contain any
untrue statement of a material fact
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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, and (v) the Company's good faith reasonable determination that a
post-effective amendment to a registration statement covering any of such
Selling Holder's Registrable Securities or a supplement to any related
prospectus is required under the Securities Act; such Selling Holder will
forthwith discontinue disposition of such Registrable Securities until it is
advised in writing by the Company that the use of the applicable prospectus (as
amended or supplemented, as the case may be) and disposition of the Registrable
Securities covered thereby pursuant thereto may be resumed; provided, however,
(x) that such Selling Holder shall not resume its disposition of Registrable
Securities pursuant to such registration statement or related prospectus unless
it has received notice from the Company that such registration statement or
amendment has become effective under the Securities Act and has received a copy
or copies of the related prospectus (as then amended or supplemented, as the
case may be) and (y) if so directed by the Company, such Selling Holder will
deliver to the Company all copies, other than permanent file copies then in such
Selling Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
Section 4.3 Registration Expenses. Expenses in connection with
registrations pursuant to this Agreement shall be allocated and paid as follows:
(a) With respect to the Demand Registration Statement, the
Company shall bear and pay all of the Registration Expenses incurred in
connection with the registration and offering of Registrable Securities;
provided, however, that the Selling Holders shall pay (i) underwriting discounts
and commissions relating to the Registrable Securities sold by them pursuant to
any such registration statement and (ii) all fees and disbursements of counsel
to the Selling Holders or any other advisors.
(b) The Company shall bear and pay all Registration Expenses
incurred in connection with any Piggyback Registration Statements pursuant to
Article III, other than (i) underwriting discounts and commissions relating to
Registrable Securities, (ii) the portion of any filing fees allocable to the
Registrable Securities included in such registration by the Selling Holders, and
(iii) the fees and disbursements of counsel to the Selling Holders and any other
advisors (each of which expenses in clauses (i) and (ii) shall be paid on a pro
rata basis by the Selling Holders of Registrable Securities included in such
Piggyback Registration Statement and which expenses in clause (iii) shall be
paid on a pro rata basis by the Selling Holders for which the expenses are
incurred).
ARTICLE V
INDEMNIFICATION AND CONTRIBUTION
Section 5.1 Indemnification by the Company. If any Registrable
Securities are included in a registration statement under this Agreement, to the
extent permitted by applicable law, the Company shall indemnify and hold
harmless each Selling Holder, its directors, officers, shareholders, employees,
investment advisors, agents and Affiliates, either direct or indirect (and
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each such Affiliate's directors, officers, shareholders, employees, investment
advisors and agents) and each other Person, if any, who controls such Selling
Holder (within the meaning of the Securities Act) against any and all losses,
claims, damages, liabilities and expenses, including reasonable attorneys' fees
and disbursements and reasonable expenses of investigation, incurred by such
party pursuant to any actual or threatened action, suit, proceeding or
investigation, to which any of the foregoing Persons may become subject under
the Securities Act, the Exchange Act or other federal or state laws, insofar as
such losses, claims, damages, liabilities and expenses arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein, or any amendments or supplements thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not misleading
(collectively, a "Violation"); provided, however, that the indemnification
required by this Section 5.1 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or expense if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability or expense to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished to the Company by the indemnified party
expressly for use in connection with such registration.
Section 5.2 Indemnification by the Selling Holders. If any Registrable
Securities are included in a registration statement under this Agreement, to the
extent permitted by applicable law, each Selling Holder shall indemnify and hold
harmless the Company, its directors, officers, shareholders, employees,
investment advisors, agents and Affiliates, either direct or indirect (and each
such Affiliate's directors, officers, shareholders, employees, investment
advisors and agents) and each other Person, if any, who controls the Company
within the meaning of the Securities Act, any other Selling Holder and any
controlling Person of any such other Selling Holder against any and all losses,
claims, damages, liabilities and expenses, including reasonable attorneys' fees
and disbursements and reasonable expenses of investigation, incurred by such
party pursuant to any actual or threatened action, suit, proceeding or
investigation, to which any of the foregoing Persons may otherwise become
subject under the Securities Act, the Exchange Act or other federal or state
laws, insofar as such losses, claims, damages, liabilities and expenses arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
information furnished by such Selling Holder for use in connection with such
registration statement; provided, however, that (a) the indemnification required
by this Section 5.2 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which consent
shall not be unreasonably withheld, (b) in no event shall the amount of any
indemnity under this Section 5.2 and of the contribution obligation of a Selling
Holder under Section 5.4 exceed the net proceeds from the applicable offering
received by such Selling Holder, and (c) the obligation to provide
indemnification hereunder shall be several, and not joint and several, among the
indemnifying parties.
Section 5.3 Notice of Claims, etc. Promptly after receipt by an
indemnified party under this Article V of notice of the commencement of any
action, suit, proceeding, investigation
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or threat thereof made in writing for which such indemnified party may make a
claim under this Article V, such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof. The failure to
deliver written notice to the indemnifying party shall not relieve such
indemnifying party of any liability to the indemnified party under this Article
V. Any fees and expenses incurred by the indemnified party (including any fees
and expenses incurred in connection with investigating or preparing to defend
such action or proceeding) shall be paid to the indemnified party, as incurred,
within thirty days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified party is
not entitled to indemnification hereunder). Any such indemnified party shall
have the right to employ separate counsel in any such action, claim or
proceeding, and to participate in the defense thereof, but the fees and expenses
of such counsel shall be the expenses of such indemnified party unless (a) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding, or (b) the named parties to any such action, claim
or proceeding (including any impleaded parties) include both such indemnified
party and the indemnifying party, and such indemnified party shall have been
advised by its counsel that there may be one or more legal defenses available to
it which are different from or in addition to those available to the
indemnifying party and that the assertion of such defenses would create a
conflict of interest such that counsel employed by the indemnifying party could
not represent the indemnified party (in which case, if such indemnified party
notifies the indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such action, claim or proceeding on
behalf of such indemnified party; it being understood, however, that the
indemnifying party shall not, in connection with any one such action, claim or
proceeding or separate but substantially similar or related actions, claims or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such indemnified parties, unless the indemnified party shall have
been advised by its counsel that a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
action, claim or proceeding such that the counsel could not represent the
indemnified party and any other of such indemnified parties, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). No indemnifying party shall be liable to an
indemnified party for any settlement of any action, proceeding or claim without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld.
Section 5.4 Contribution. If the indemnification required by this
Article V from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to in this Article V:
(a) The 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 losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been
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committed by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Violation. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 5.1 and Section 5.2, any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.4 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 Section 5.4(a). No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
Section 5.5 Survival. The obligations of the Company and the Selling
Holders of Registrable Securities under this Article V shall survive the
completion of any offering of Registrable Securities pursuant to a registration
statement under this Agreement.
ARTICLE VI
RULE 144
Section 6.1 Reports, etc. As long as the Common Stock is then listed on
a national securities exchange or included for quotation on Nasdaq, the Company
will use reasonable efforts to file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations
promulgated by the Commission thereunder and will take such further action as
any Holder may reasonably request, to the extent required from time to time to
enable the Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144, or
any similar rule or regulation hereafter adopted by the Commission. Upon the
written request of any Holder, the Company will deliver to that Holder a written
statement as to whether it has complied with such requirements, a copy of the
most recent annual or quarterly report of the Company, and such other reports or
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
Section 6.2 Rule 144 Information. If at any time the Company is not
required to file reports in compliance with either Section 13 or Section 15(d)
of the Exchange Act, the Company at its expense will, forthwith upon the written
request of any Holder, make available adequate current public information with
respect to the Company within the meaning of paragraph (c)(2) of Rule 144.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Amendment, Modification and Waivers; Further Assurances.
(a) This Agreement may be amended with the consent of the Company, and the
Company may amend this Agreement or take any action herein prohibited, or omit
to perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission to
act of Holders owning Registrable Securities possessing two-thirds in number of
the Registrable Securities then outstanding.
(b) No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the provisions
being waived, and no such waiver in any instance shall constitute a waiver in
any other instance or for any other purpose or impair the right of the party
against whom such waiver is claimed in all other instances or for all other
purposes to require full compliance with such provision.
(c) Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
Section 7.2 Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns of Registrable Securities. The rights and
obligations of a Holder under this Agreement may collectively be transferred or
assigned (in whole or in part) to one or more Persons who is a transferee of
Registrable Securities; provided, however, that any such transferee of
Registrable Securities agrees in writing, in form and substance satisfactory to
the Company, to be bound by all of the terms and provisions hereof and to join
this Agreement as a party hereto; and provided, further, that no such assignment
of rights and obligations shall be effective with respect to Registrable
Securities that, as a result of such transfer, have ceased to be Registrable
Securities by reason of the second sentence of the definition of Registrable
Securities set forth in Section 1.1 (such transferee, a "Permitted Transferee").
Section 7.3 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
(a) such provision will be fully severable, (b) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom, and (d) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
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Section 7.4 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, be treated as the Holder of
such Registrable Securities for purposes of request or other action by any
Holder or Holders pursuant to this Agreement or any determination of any amount
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. For purposes of this Agreement, "beneficial ownership" and
"beneficial owner" refer to beneficial ownership as defined in Rule 13d-3
(without regard to the 60-day provision in paragraph (d)(1)(i) thereof) under
the Exchange Act.
Section 7.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 7.6 Notices. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day:
(a) If to the Company, to:
Crown Books Corporation
0000 00xx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Facsimile Number: (000) 000-0000
Attention: President and Chief Executive Officer
With a copy to:
Xxxxxxxx X. Xxxxx, Esq.
Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile Number: (000) 000-0000
If to Holders, to the addresses given in their
Subscription Agreements.
(b) If to a Permitted Transferee, to the address for such
Permitted Transferee as provided to the Company.
Except as otherwise provided in this Agreement, the date of each such notice and
request shall be deemed to be, and the date on which each such notice and
request shall be deemed given shall be: (i) at the time delivered, if personally
delivered or mailed; (ii) when receipt is acknowledged,
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if sent by facsimile; and (iii) the next business day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next business day
delivery.
Section 7.7 Entire Agreement; Integration. This Agreement supersedes
all prior agreements between or among any of the parties hereto with respect to
the subject matter contained herein, and this Agreement embodies the entire
understanding among the parties relating to such subject matter.
Section 7.8 Injunctive Relief. Each of the parties hereto acknowledges
that in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the parties therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach hereof. By seeking or obtaining any such relief, the aggrieved
party shall not be precluded from seeking or obtaining any other relief to which
it may be entitled.
Section 7.9 Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
Section 7.10 Counterparts. This Agreement maybe executed in any number
of counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
Section 7.11 Filing. A copy of this Agreement and of all amendments
thereto shall be filed at the principal executive office of the Company with the
Secretary of the Company.
Section 7.12 Termination. This Agreement may be terminated at any time
by a written instrument signed by the Company and all of the Holders of
Registrable Securities. Unless sooner terminated in accordance with the
immediately preceding sentence, the parties' obligations under this Agreement
(other than Article V) shall terminate in their entirety on the fifth
anniversary of the date hereof.
Section 7.13 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorneys' fees (including any fees incurred in any
appeal) in addition to its costs and expenses and any other available remedy.
Section 7.14 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended to confer upon any Person, other than the parties hereto or
their respective permitted assigns, successors, heirs and legal representatives,
or any indemnified party hereunder, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 7.15 Requisite Holders. Each of the parties hereto agrees that
the Company may, in connection with the taking of any action permitted to be
taken hereunder with the
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consent or approval of the Requisite Holders of the Registrable Securities, rely
in good faith on a certificate from any such holder or holders stating that it
holds or is acting on behalf of a majority in interest of the Registrable
Securities.
IN WITNESS WHEREOF, this Registration Rights Agreement has been duly
executed by the parties hereto as of the date first written above.
Crown Books Corporation
By:
----------------------------------
Name:
Title:
Investor:
-------------------------------
Name:
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SCHEDULE A
Schedule A
Xxxxxx X. Xxxxxxxx
Xxxx Marks & Xxxxx LLP
Xxxxxxxx Xxxxxx and Xxxxx X. Xxxxxxxxx
Xxxx Xxxxxxxxx
BNE Associates
Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Dauanne Realty Co.
Xxxxxxx Xxxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxx Xxxxxxx
The Xxxxxx Xxxx Family Fund
KOA Holdings, Inc.
Xxxx X. Xxxxxx
Xxxxx Xxxxxx
P.A.W. Offshore Fund, Ltd.
P.A.W. Partners, LP
RoseLink Investors LLC
Xxxxxxxx Capital Management, LLC
Syncsort, Inc.
Xxxxxxx Xxxx
Xxxxx Xxxxxx LLC
