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EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is executed
on May 15, 1998 and effective as of May 3, 1998, among (i) Handleman Company,
a Michigan corporation (the "Company"), (ii) Xxxx Xxxxxxxx ("Xx.
Xxxxxxxx"), and (iii) Xxxx Xxxxxxx ("Xx. Xxxxxxx"). Xx. Xxxxxxxx and Xx.
Xxxxxxx are collectively referred to in this Agreement as the "Shareholders."
RECITALS
A. Pursuant to the Class A Common Stock Purchase Agreement dated as of
May 3, 1998, among the Company and the Shareholders (the "Purchase Agreement"),
the Shareholders have (i) acquired 213,904 shares (the "Issued Shares") of the
common stock, $0.01 par value (the "Common Stock"), of the Company, and (ii)
received warrants (the "Shareholder Warrants") to purchase up to 545,000 shares
of the Common Stock. Certain employees of The itsy bitsy Entertainment Company,
Inc. also received warrants ("Employee Warrants") to purchase up to 205,000
shares of the Common Stock. Together, the Shareholder Warrants and the Employee
Warrants are the "Warrants" and the Issued Shares and the shares underlying the
Warrants are the "Shares."
B. Subject to the terms of the Purchase Agreement and the Warrants,
the Shareholders are entitled, but are not obligated, to sell the Shares they
receive, in accordance with certain provisions specified in the Purchase
Agreement.
C. To facilitate such sales of the Shares, subject to the terms of the
Purchase Agreement and the Warrants, the Company has agreed to afford the
Shareholders certain registration rights with respect to the Shares.
THEREFORE, in consideration of the promises and the mutual covenants
and agreements that the Purchase Agreement contains and other good and valuable
consideration, receipt of which the parties hereby acknowledge, the parties
agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
Person. An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus. The prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement,
including post-effective amendments and all material incorporated by
reference in the prospectus.
Registration Statement. Any registration statement of the
Company which covers any of the Registrable Securities (as defined in
paragraph 2) pursuant to the provisions of
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this Agreement, including the registration statement and amendments
and post-effective amendments thereto, the Prospectus and supplements
thereto, all exhibits and all material incorporated by reference in
the registration statement.
SEC. The Securities and Exchange Commission.
Securities Act. The Securities Act of 1933, as amended.
2. Securities Subject to this Agreement. The securities entitled
to the benefit of this Agreement (the "Registrable Securities") are all of the
Shares; provided, however, that a Share shall be a Registrable Security only
for so long as the Share continues to be a Restricted Security. For purposes of
this Agreement, each Share shall be a Restricted Security at the date of this
Agreement. A Share shall cease to be a Restricted Security when (i) the Company
has effectively registered the Share under the Securities Act and the
Shareholder who owns it has disposed of the Share in accordance with the
Registration Statement covering the Share, (ii) the Shareholder who owns it
shall be eligible to sell the Share to the public pursuant to Rule 144 (or any
similar provisions then in force) under the Securities Act, without any volume
or manner of sale restrictions, or (iii) the Shareholder has otherwise
transferred the Share (except as otherwise provided in Paragraph 7(h)).
3. Registration of Registrable Securities. Within 60 days after
the date of this Agreement, the Company will use reasonable efforts to cause a
Registration Statement to be filed with the SEC covering the number of
Registrable Securities owned by the Shareholders. The Company shall also use
its reasonable efforts to cause such Registration Statement to become effective
as promptly as practicable (but in no event shall the effective date of such
Registration Statement be prior to the date of filing of the Company's Annual
Report on Form 10-K for the year ended May 2, 1998 with the SEC) and to remain
effective until the twenty-five (25) month anniversary of the date of this
Agreement. In the event that the SEC will not permit the registration of the
transfer of any Shares underlying the Warrants prior to the exercise of such
Warrants, the Company will use reasonable efforts to cause a Registration
Statement to be filed with the SEC covering the Shares acquired upon exercise
of any Warrant promptly upon the request of the Holder thereof following the
exercise of such Warrant.
4. Registration Procedures. For the registration of Registrable
Securities pursuant to Section 3 of this Agreement, the Company shall use
reasonable efforts to effect the registration to permit the sale of the
Registrable Securities in accordance with the method or methods of distribution
the participating Shareholders choose. The Company shall:
(a) furnish to the participating Shareholders, without
charge, at least one signed copy of the Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, all documents incorporated by reference therein and all
exhibits (including those incorporated by reference);
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(b) deliver to the participating Shareholders, without
charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as they may
reasonably request, but only while the Company is required to cause
the Registration Statement to remain effective.
(c) prior to any public offering of Registrable Securities,
register or qualify or cooperate with the participating Shareholders
and their respective counsel in connection with the registration or
qualification of the Registrable Securities for offer and sale under
the securities laws of the various states (the "Blue Sky Laws") and do
any and all other acts or things necessary or advisable to effect the
registration or qualification of the Registrable Securities covered by
the Registration Statement in the various states; provided, however,
that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now qualified or to take
any action which would subject it to the service of process in suits
other than those arising out of the offer or sale of the securities
covered by such Registration Statement in any jurisdictions where it
is not now so subject.
(d) cooperate with the participating Shareholders to prepare
and deliver timely certificates representing Registrable Securities to
be sold and not bearing any restrictive legends;
(e) use reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on the
New York Stock Exchange; and
(f) make available to the participating Shareholders and any
attorney or accountant retained by the participating Shareholders the
inspection of all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information that the
participating Shareholders, the Shareholders' representatives,
underwriter, attorneys or accountants may reasonably request in
connection with the registration; provided, that such Persons shall
keep confidential any records, information or documents that the
Company designates in writing as confidential unless a court or
administrative agency requires the disclosure of the records,
information or documents.
The Company may require the participating Shareholders to furnish to
the Company information regarding the participating Shareholders and the
distribution of the Registrable Securities as the Company may from time to time
reasonably request in writing and as necessary for the registration of the
Shares.
The Shareholders agree that, upon receipt of any notice from the
Company of the happening of any of the following: (i) the SEC's issuance of any
stop order denying or suspending the effectiveness of the Registration
Statement or the initiation or threatening of any proceeding for that purpose,
(ii) the Company's receipt of any stop order denying registration or suspending
the qualification of the Registrable Securities for sale or the initiation or
threatening
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of any proceeding for such purpose, (iii) the happening of any event
which makes any statement made in the Registration Statement, the Prospectus or
any document incorporated by reference therein untrue or which requires any
change in the Registration Statement, the Prospectus or any document
incorporated by reference therein to make the statements not include an untrue
statement of material fact or not omit any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, the Shareholders shall discontinue the
disposition of Registrable Securities until the participating Shareholders
receive a supplemented or amended Prospectus from the Company or until the
Company advises the participating Shareholders in writing that the
participating Shareholders may resume the use of the Prospectus, and have
received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus. If the Company so directs, the
Shareholders will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in the Shareholders' possession, of the
Prospectus covering the Registrable Securities at the time the Shareholders
received the notice.
5. Registration Expenses. Regardless of when the Registration
Statement becomes effective, the Company shall bear all costs and expenses
incident to the Company's performance of, or compliance with, this Agreement,
including without limitation all registration and filing fees, fees and
expenses of compliance with the Blue Sky Laws, printing expenses, messenger,
telephone and delivery expenses, and fees and disbursements of counsel for the
Company, all independent certified public accountants of the Company and fees
and expenses of other Persons retained by the Company relating to the
distribution of the Registrable Securities and fees and disbursements of one
counsel for the shareholder up to a maximum of $5,000 (all such expenses being
herein called "Registration Expenses"). The participating Shareholders shall
pay any brokerage fees or selling expenses, incident to the registration of the
participating Shareholders' Registrable Securities and any fees of more than
one attorney or accountant retained by the Shareholders.
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6. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, the
Shareholders against all losses, claims, damages, liabilities and
expenses, joint or several, to which the Shareholders, may become
subject under federal or state securities laws or otherwise which
arise out of, or are caused by, the Company's violation of any federal
or state securities laws, including, but not limited to, any untrue or
alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or in any
application or other request that the Company files, including any
application or request filed under the Blue Sky Laws or any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as the same are based upon an untrue or
alleged untrue statement or omission or alleged omission so made which
is contained in written information furnished to the Company by any of
the Shareholders expressly for use therein or by any Shareholder's
failure to deliver a copy of the Registration Statement or Prospectus
after the Company has furnished the participating Shareholders with a
sufficient number of copies of the same. The Company will reimburse
the Shareholders for any legal or other expense the Shareholders
reasonably incur in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding. The Company
will also indemnify the underwriter, selling brokers, dealer managers
and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who
controls such persons (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification
of the Shareholders, if requested.
(b) Indemnification by Shareholders. In connection with any
Registration Statement in which any Shareholder's Registrable
Securities are registered and sold, the participating Shareholders
shall furnish to the Company the information and affidavits as the
Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agree to indemnify and hold
harmless, to the full extent permitted by law, the Company, its
officer, directors and employees and each Person who controls the
Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in the Registration
Statement, Prospectus, preliminary Prospectus or any application filed
under the Blue Sky Laws or necessary to make the statements therein
not misleading, to the extent, but only to the extent, that the untrue
statement or omission is contained in any written information or
affidavit so furnished by the Shareholder to the Company expressly for
inclusion in the Registration Statement, Prospectus or application
filed under the Blue Sky Laws. 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 by the Persons specifically for inclusion
in any
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Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder shall (i) promptly notify the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any Person entitled to indemnification hereunder
shall have the right to employ separate counsel and to participate in
the defense of the claim, but the fees and expenses of the counsel
shall be at the expense of the Person unless (A) the indemnifying
party has agreed to pay the fees or expenses, (B) the indemnifying
party shall have failed to assume the defense of the claim and employ
counsel reasonably satisfactory to the Person, or (C) in the
reasonable judgment of the Person, based upon advice of its counsel, a
conflict of interest may exist between the Person and the indemnifying
party with respect to the claims (in which case, if the Person
notifies the indemnifying party in writing that the Person 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
the claim on behalf of the Person). If the indemnifying party assumes
the defense, the indemnifying party will not be subject to any
liability for any settlement made without its consent. The
indemnifying party, however, may not unreasonably withhold its
consent. No indemnifying party will be required to consent to the
entry of any judgment or to enter into any settlement which does not
include as an unconditional term the claimant's or plaintiff's release
of the indemnified party from all liability in respect to the claim or
litigation. An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay
the fees and expenses of more than one counsel in any jurisdiction for
all parties indemnified by the indemnifying party with respect to the
claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to the claim, in which
event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification
provided for in the preceding clauses (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless as contemplated
by the preceding clauses (a) and (b), then the indemnifying party
shall contribute to the amount paid or payable by the indemnified
party as a result of the loss, claim, damage liability or expense in
the proportion as is appropriate to reflect (i) the relative fault of
the indemnified party and the indemnifying party, and (ii) any other
relevant equitable considerations.
(e) Survival. The indemnities provided in this Section 6
shall survive the Shareholders' transfer of any Registrable
Securities.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not on or
after the date
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of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights it grants to the
Shareholders in this Agreement or otherwise conflicts with the
provisions of this Agreement. The rights granted to the Shareholders
under this Agreement do not in any way conflict with and are not
inconsistent with any rights granted under any other agreement
concerning the Company's securities.
(b) Amendments and Waivers. No amendment, modification,
supplement or waiver of any provision of this Agreement is binding on
any party unless the party consents in writing thereto.
(c) Notices. All notices and other communications that this
Agreement provides for or permits shall be made in writing by hand
delivery or registered or certified first-class mail:
(i) to the Shareholders, at the most current
address given by the Shareholders to the
Company.
(ii) To the Company at:
Handleman Company
000 Xxxxx Xxxxxxxxx
P. O. Xxx 0000
Xxxx, Xxxxxxxx 00000-0000
Attention: Secretary
All notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered;
five (5) business days after being deposited in the mail, postage
prepaid, if mailed.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of New York (regardless of the laws that might
otherwise govern under applicable Michigan principles of conflicts of
law) as to all matters, including, but not limited to, matters of
validity, construction, effect, performance and remedies.
(e) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(f) Interpretation. The Section headings contained in this
Agreement are for the purposes of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
(g) Severability. If any provision of this Agreement is
determined to be illegal or invalid, such illegality or invalidity
shall have no effect on the other provisions
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of this Agreement, and all other provisions of this Agreement shall
remain valid, operative and enforceable.
(h) Assignment. The rights granted to the Shareholders
pursuant to this Agreement shall be assignable on one occasion and
thereafter only with the prior written consent of the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
XXXXXXXXX COMPANY
By:/s/XXXXXXX X. XXXXXXXXXX
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Its: Vice President
/s/XXXX XXXXXXXX
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XXXX XXXXXXXX
/s/XXXX XXXXXXX
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XXXX XXXXXXX
