Exhibit 5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is made and entered into as of January 31, 1997 by WEI
ACQUISITION CO., a Delaware corporation (the "Company"), and A&M
INVESTMENT ASSOCIATES #3, LLC, (the "Affiliate") as the holders
of the Registrable Shares (as defined below) and for the benefit
of any Eligible Transferee (as defined below). Unless otherwise
indicated, all capitalized terms used in this Agreement shall
have the meanings given thereto in Section 1 of this Agreement,
or if not defined in Section 1, in the section in which such term
is used.
RECITALS
WHEREAS, pursuant to the Debtors' First Amended Chapter
11 Plan, as Revised for Technical Corrections dated October 4,
1996 and Supplemental Amendments on December 2, 1996 and December
13, 1996 (the "POR") and an Asset Purchase Agreement dated as of
January 31, 1997 (the "Asset Purchase Agreement"), the Company
will acquire substantially all of the assets of Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession (collectively,
the "Debtors"), in Case Xx. 00-000 (XXX) (Xxxxxxx Administered)
in the Bankruptcy Court for the District of Delaware; and
WHEREAS, the Company, Xxxxxxx & Marsal, Inc. ("A&M"),
of which the Affiliate is an affiliate, and certain of A&M's
employees have entered into a Management Services Agreement dated
as of January 31, 1997 (the "Management Services Agreement"),
which will become effective on the Effective Date (as defined
therein);
WHEREAS, pursuant to the terms of the Management
Services Agreement, the Company and the Affiliate entered into
the Stock Subscription Agreement, pursuant to which the Affiliate
agreed to purchase from Company, and Company agreed to sell to
the Affiliate a number of shares of the New Common Stock, upon
the terms and subject to the conditions set forth therein;
WHEREAS, pursuant to the terms of the Management
Services Agreement, the Company and the Affiliate entered into
the A&M Option Agreement, pursuant to which the Company granted
to A&M the A&M Options upon the terms and conditions set forth in
the A&M Option Agreement; and
WHEREAS, pursuant to the terms of the Management
Services Agreement, the Company agreed to grant to the Affiliate
the registration rights set forth in this Agreement in respect of
the Registrable Shares.
NOW, THEREFORE, in consideration of the premises and
for other good and valuable considerations, the receipt and
adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. DEFINITIONS.
The terms set forth below are used herein as so
defined:
"A&M Options" means the options granted to the
Affiliate and evidenced by the A&M Option Agreement.
"A&M Option Agreement" means the Non-Transferable Stock
Option Agreement dated as of the date hereof between the Company
and the Affiliate pursuant to which the A&M Options were granted.
"Anti-Dilutive Adjustments" has the meaning given
thereto in Section 2(b).
"Asset Purchase Agreement" has the meaning given
thereto in the first WHEREAS paragraph of the Recitals hereto.
"Commission" means the Securities and Exchange
Commission, or any other federal agency at the time administering
the Exchange Act or the Securities Act.
"Company" means WEI Acquisition Co., a Delaware
corporation.
"Demand Registration" means a registration requested
pursuant to the terms of Section 2 hereof.
"Effective Date" means the date the POR becomes
effective.
"Eligible Transferee" means any successor or permitted
transferee, in a single transaction or series of related
transactions, of all, but not less than all, of the Registrable
Shares.
"Exchange Act" means the Securities Exchange Act of
1934, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect from time to time.
"Expiration Date" means the date that is two years
after the later of (i) the expiration of the holding period under
Rule 144 in respect of the Registrable Shares or (ii) the payment
in full or cancellation of the Promissory Notes.
"Holder" means the Affiliate or the Eligible
Transferee.
"Indemnified Person" has the meaning assigned to that
term in Section 8(a) hereof.
"Inspectors" has the meaning assigned to that term in
Section 6(e) hereof.
"Management Services Agreement" has the meaning given
thereto in the second WHEREAS paragraph of the Recitals hereto.
"New Common Stock" means the common stock, par value
$0.01 per share, of the Company.
"Participating Holder" means any Holder that has
Registrable Shares registered for sale pursuant to a Registration
Statement.
"Person" means any individual, partnership, joint
venture, corporation, trust, unincorporated organization, or
other entity.
"Piggy-Back Registration" has the meaning assigned to
that term in Section 3(a) of this Agreement.
"POR" has the meaning given thereto in the first
WHEREAS paragraph of the Recitals hereto.
"Promissory Notes" means the Secured Non-Recourse
Promissory Note in the aggregate principal amount of $5,005,000
issued by the Affiliate in favor of the Company and the Secured
Recourse Promissory Note in the aggregate principal amount of
$335,000 issued by the Affiliate in favor of the Company.
"Records" has the meaning assigned to that term in
Section 6(e) hereof.
"Registrable Shares" means the shares of New Common
Stock purchased by the Affiliate pursuant to the Stock
Subscription Agreement and the shares of New Common Stock issued
or issuable upon exercise of an A&M Option and held by a Holder
from time to time. A share of New Common Stock will cease to be
a Registrable Share when (a) a registration statement covering a
Registrable Share has been declared effective by the Commission
and such share has been disposed of by a Holder pursuant to such
effective registration statement, (b) the Registrable Share or an
A&M Option (in respect thereof) is transferred to a Person other
than an Eligible Transferee, or (c) such share (after initial
issuance) or an A&M Option (in respect thereof) is held by the
Company or one of its subsidiaries or otherwise ceases to be
outstanding.
"Registration Expenses" has the meaning assigned that
term in Section 7 hereof.
"Registration Statement" means any registration
statement or comparable document under the Securities Act through
which a public sale or disposition of the Registrable Shares may
be registered, including the prospectus, amendments and
supplements to such registration statement, all exhibits, and all
material incorporated by reference or deemed to be incorporated
by reference in such Registration Statement.
"Requesting Holders" has the meaning assigned to that
term in Section 2(a) of this Agreement.
"Requisite Holders" means Holders holding at least 25%
of the total number of Registrable Shares of New Common Stock
that were issued or issuable pursuant to the Stock Subscription
Agreement or upon exercise of any A&M Option.
"Rule 144" means Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule
(other than Rule 144A) or regulation hereafter adopted by the
Commission providing for offers and sales of securities made in
compliance therewith resulting in offers and sales by subsequent
holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery
requirements of the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect from time to time.
"Selling Holder" means a Holder who is selling Regis-
trable Shares pursuant to a Registration Statement under this
Agreement.
"Stock Subscription Agreement" means the Stock
Subscription Agreement dated as of the date hereof between the
Company and the Affiliate pursuant to which the Affiliate
purchased a number of shares of New Common Stock from the
Company.
Section 2. DEMAND REGISTRATION RIGHTS.
(a) At any time after any shares of New Common Stock
shall have been registered under the Securities Act but prior to
the Expiration Date, Requisite Holders may by written notice to
the Company request that the Company register all or a portion of
the Registrable Shares held by such Holders under the Securities
Act and register or qualify under applicable state securities
laws and, subject to the provisions of this Agreement, the
Company shall use its reasonable best efforts to effect such
demand registration promptly; provided, however, that the Company
shall have no obligation under this Section 2(a) if the public
sale of the shares by the Holders is then covered under any other
Registration Statement (including, pursuant to Section 3 hereof)
that includes such shares on a continuing basis.
Each notice to the Company shall set forth (i) the
names of the Requisite Holders requesting registration
("Requesting Holders") and the number of shares to be sold by
each and (ii) the proposed manner of sale. Within ten (10) days
after receipt of notice from the Requisite Holders, the Company
shall notify any Holder who is not a party to the written notice
served on the Company and offer to them the opportunity to
include their shares in such registration. Each such Holder
shall have 20 days following delivery of such notice to elect, by
notice to the Company, to have such Holder's Registrable Shares
included in such registration. The Company shall have no
obligation to effect any Demand Registration under this Section 2
unless the number of Registrable Shares in such Demand
Registration shall be equal to at least 250,000 shares or, if
lesser, the remaining Registrable Shares (including shares
subject to the A&M Options) but not less than 125,000 shares,
each of such numbers to be subject to adjustment as contemplated
by Section 8 of the A&M Option Agreement (the "Anti-Dilutive
Adjustments"). The maximum number of such demands under this
Section 2 shall be one (1); provided, however, that no such
demand may be made after the Expiration Date. A Registration
Statement will not count as a Demand Registration hereunder
unless it is declared effective by the Commission and remains
effective for at least ninety (90) days or such shorter period
which shall terminate when all of the Registrable Shares covered
by such Demand Registration have been sold pursuant to such
Demand Registration; provided, however, that in the event a
Registration Statement is withdrawn at the request of the
Requesting Holders (other than a withdrawal pursuant to Section
2(c) of this Agreement), such Requesting Holders will forfeit the
demand registration rights granted pursuant to this Section 2.
These rights are in addition to, and shall not limit, the
registration rights of the Holders of Registrable Shares granted
pursuant to Section 3 hereunder.
(b) If the managing underwriter of an underwritten
offering under this Section 2 advises the Company in writing that
in its opinion the number of shares requested to be included in
such registration (including, without limitation, shares to be
included in such registration pursuant to "piggyback" rights
heretofore or hereafter granted by the Company) exceeds the
number which can be sold in such offering, the Company will
include in such registration only the number of shares which in
the opinion of such underwriter can be sold. If the number of
shares which can be sold is less than the number of shares
proposed to be registered, the amount to be so registered shall
be allocated pro rata among the Holders of Registrable Shares
desiring to participate in such registration and among other
holders of shares of New Common Stock requested to be included in
such registration, based on the numbers of shares initially
proposed to be registered by all such holders.
(c) The Company shall not be obligated to effect any
Demand Registration within three (3) months after the effective
date of a previous registration for an underwritten offering
under which the Holders had piggyback rights pursuant to Section
3 hereof (irrespective of whether such rights were exercised).
The Company may (i) postpone for up to 60 days the filing or the
effectiveness of a Registration Statement for a Demand
Registration if, based on the good faith judgment of the
Company's Board of Directors, such registration and offering
would materially interfere with any material financing,
acquisition, corporate reorganization, security offering or other
material transaction, or such postponement or withdrawal is
necessary in order to avoid premature disclosure of a matter the
Board of Directors of the Company has determined would not be in
the best interest of the Company to be disclosed at such time or
(ii) postpone the filing of a Demand Registration for a period of
not more than 60 days in the event the Company shall be required
to prepare audited financial statements as of a date other than
its fiscal year end (unless the Holders requesting such
registration agree to pay the expenses of such an audit);
provided, however, that in no event shall the Company withdraw a
Registration Statement under clause (i) after such Registration
Statement has been declared effective; and provided, further,
that in any of the events described in clause (i) or (ii) above,
the Holders initiating the request for such Demand Registration
shall be entitled to withdraw such request (without expense to
such Holders) and, if such request is withdrawn, such Demand
Registration shall not count as a permitted Demand Registration.
The Company shall provide prompt written notice to the Requesting
Holders of (x) any postponement or withdrawal of the filing or
effectiveness of a Registration Statement pursuant to this
paragraph (c), (y) the Company's decision to file or seek
effectiveness of such Registration Statement following such
withdrawal or postponement and (z) the effectiveness of such
Registration Statement.
(d) If any of the Registrable Shares covered by a
Demand Registration are to be sold in an underwritten offering,
the Company shall have the right to select the managing
underwriter(s) to administer the offering, subject to the
approval of the Holders of a majority in interest of the
Registrable Shares initiating the request for registration, which
approval shall not be unreasonably withheld.
Section 3. PIGGY-BACK REGISTRATION RIGHTS.
(a) If the Company, at any time prior to the
Expiration Date, proposes to register any New Common Stock under
the Securities Act (other than pursuant to Section 2 of this
Agreement or pursuant to a registration statement on a form
exclusively for the sale or distribution of securities by the
Company to employees of the Company or its subsidiaries or for
use exclusively in connection with a business combination)
whether or not for sale for its own account, and the registration
form to be used may be used for the registration of Registrable
Shares, it will give prompt written notice to all Holders of the
Company's intention to effect such a registration and include in
such registration all Registrable Shares with respect to which
the Company has received written notice from a Holder for
inclusion therein within 20 days after the date of the Company's
notice; provided, that:
(i) if, at any time after giving written notice
of its intention to register any shares and, prior to the
effective date of the Registration Statement filed in
connection with such registration, the Company shall
determine for any reason not to register such shares, the
Company may, at its election, give written notice of such
determination to each Holder requesting inclusion therein,
and, thereupon, the Company shall be relieved of its
obligation to register any Registrable Shares in connection
with such withdrawn of unfiled registration (but not of its
obligation to pay the Registration Expenses in connection
therewith);
(ii) if such registration shall be in connection
with an underwritten public offering and the managing
underwriter shall advise the Company in writing that in its
opinion the number of shares requested to be included in
such registration exceeds the number of such securities
which can be sold in such offering or would have an adverse
impact on the price of such securities, the amount to be
registered shall be allocated first, to the Company if such
registration is not being effected as a result of the
exercise of any demand registration rights by a holder of
the Company's securities, and second, pro rata among the
Requesting Holders desiring to participate in such
registration and the other holders of the Company's
securities requested to be included in such registration,
based on the numbers of shares initially proposed to be
included by such holders. If such registration is being
effected as a result of the exercise of any demand
registration rights by a holder of the Company's securities,
the amount of securities to be included in such registration
shall be allocated pro rata among the Holders of Registrable
Shares desiring to participate in such registration, the
Company and among other holders of the Company's securities
requested and entitled to be included in such registration,
based on the numbers of shares initially proposed to be
registered by the Company and all such holders;
(iii) with respect to any unissued shares to
be included therein, the Holder delivers a commitment to
timely exercise the A&M Options prior to the effective date
of the registration for inclusion therein of such shares, if
the Registration Statement does not otherwise contemplate a
continuing or "shelf" registration of shares issuable under
the A&M Options; and
(iv) the number of shares to be sold by the
Holders is not less than 50,000 (subject to Anti-Dilutive
Adjustments).
(b) If any Registration pursuant to this Section 3 is
an underwritten primary offering, the Holders shall not have the
right to select the managing underwriter to administer such
offering.
(c) The maximum number of Piggy-Back Registrations
under this Section 3 shall be two.
Section 4. SUSPENSION OF EFFECTIVENESS.
The Company's obligations under Section 2(a) and
Section 3(a) shall not restrict its ability to suspend the
effectiveness of, or direct Holders not to offer or sell
securities under, any Demand Registration or a Piggy-Back
Registration, at any time, for such reasonable period of time not
to exceed 60 days which the Company believes is necessary to
prevent the premature disclosure of any events or information
having a material effect on the Company. In addition, the
Company shall not be required to keep a Piggy-Back Registration
or any Demand Registration, effective, or may, without suspending
such effectiveness, instruct the holders of Registrable Shares
included in a Piggy-Back Registration or any Demand Registration,
not to sell such securities, during any period during which the
Company is instructed, directed, ordered or otherwise requested
by any governmental agency or self-regulatory organization to
stop or suspend such trading or sales.
Section 5. HOLDBACK AGREEMENT.
(a) In the event of any filing of a prospectus
supplement or the commencement of an underwritten public
distribution of New Common Stock under a Registration Statement,
whether or not Registrable Shares are included, each Holder
agrees not to effect any public sale or distribution of New
Common Stock (except as part of such underwritten public
distribution), including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act, during a period designated by the
Company in a written notice duly given to the Holders in
accordance with Section 10(b), which period shall commence
approximately 14 days prior to the effective date of any such
filing of such prospectus supplement or the commencement of such
underwritten public distribution of New Common Stock under a
Registration Statement and shall continue for up to 134
consecutive days.
(b) The foregoing provisions shall not apply to any
Holder to the extent such Holder is prohibited by applicable law
from agreeing to withhold from sale pursuant to a binding
commitment entered into prior to receipt of the notice
contemplated by Section 5(a).
Section 6. REGISTRATION PROCEDURES.
Except as otherwise expressly provided herein and
subject to Section 7, in connection with any registration of
Registrable Shares pursuant to this Agreement, the Company shall,
as expeditiously as possible:
(a) prepare and file with the Commission a
Registration Statement on the appropriate form with respect to
such Registrable Shares and use its reasonable best efforts to
cause such Registration Statement to become effective as soon as
practicable thereafter; and before filing a Registration
Statement or prospectus or any amendments or supplements thereto,
furnish to each Selling Holder copies of such Registration State-
ment and such other documents as proposed to be filed (including
copies of any document to be incorporated by reference therein),
and thereafter furnish to each Selling Holder such number of
copies of such Registration Statement, each amendment and
supplement thereto (including copies of any document to be
incorporated by reference therein), at the written request of the
Selling Holder, including all exhibits thereto, the prospectus
included in such registration statement (including each
preliminary prospectus), and, promptly after the effectiveness of
a Registration Statement, the definitive final prospectus filed
with the Commission, and such other documents as such Selling
Holder may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by such Selling
Holder;
(b) use its reasonable best efforts to register or
qualify such Registrable Shares under such other securities or
blue sky laws of such jurisdictions within the United States as
any Selling Holder reasonably (in light of such Selling Holder's
intended plan of distribution) requests; provided that the
Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6(b), (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
(c) notify each Selling Holder of such Registrable
Shares, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the
occurrence of any event as a result of which the prospectus
included in such Registration Statement (including any document
to be incorporated by reference therein) contains an untrue
statement of a material fact or omits any fact necessary to make
the statements therein not misleading and, at the request of any
such Selling Holder, the Company shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Shares, such prospectus will
not contain an 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 and
promptly make available to each Selling Holder any such
supplement or amendment;
(d) in connection with an underwritten public
offering, enter into customary agreements (including, if
requested, an underwriting agreement), reasonably satisfactory in
form and substance to the Company, and take such other actions in
connection therewith as the Holders of at least a majority in
interest of the Registrable Shares being sold or the underwriter
shall reasonably request in order to consummate the disposition
of such Registrable Shares;
(e) make available for inspection during business
hours on reasonable advance notice by any Selling Holder of such
Registrable Shares, any underwriter participating in any
disposition pursuant to a Registration Statement, and any
attorney, accountant or other professional retained by any such
Selling Holder or underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably
requested by any such Inspector in connection with such
Registration Statement. Records which the Company determines, in
good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary
to avoid or correct a material misstatement or omission in the
Registration Statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Each Selling Holder of such Registrable
Shares further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction,
give written notice to the Company, and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Records it deemed confidential. Each Selling
Holder of such Registrable Shares further agrees that information
obtained by it as a result of such inspections which is deemed
confidential by the Company shall not be used or disclosed by it,
and it shall cause each of its Inspectors not to use or disclose
such confidential information, as the basis for any market
transactions in securities of the Company or for any purpose
other than any due diligence review with respect to decisions
regarding such Selling Holder's investment in the Registrable
Shares, unless and until such information is made generally
available to the public;
(f) in the event such sale is pursuant to an under-
written offering, use its reasonable best efforts to obtain (i) a
comfort letter or comfort letters from the Company's independent
public accountants in customary form and covering such financial
and accounting matters of the type customarily covered by comfort
letters as the Selling Holders of a majority in interest of the
Registrable Shares being sold or the managing underwriter
reasonably request, and (ii) an opinion or opinions from counsel
for the Company, addressed to the underwriters, covering the
matters customarily covered in opinions given by counsel in
similar transactions; and
(g) notify the Selling Holders and the managing under-
writers, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (i) when the Registration
Statement, the prospectus or any prospectus 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, (ii) of the issuance by the Commission
of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for
that purpose and the Company shall promptly use its reasonable
best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued and
(iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the
Registrable Shares for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose.
The Company may require each Selling Holder of Regis-
trable Shares as to which any registration is being effected to
furnish to the Company such information regarding the Selling
Holder and the distribution of such Registrable Shares as the
Company may from time to time reasonably request in writing and
such other information as may be legally required in connection
with such registration. Each Selling Holder agrees, by its
acquisition of Registrable Shares and its acceptance of the
benefits provided to it hereunder, to furnish promptly to the
Company all information required to be disclosed in order to make
the information previously furnished to the Company by such
Selling Holder not materially misleading.
Each Holder agrees that upon receipt of any notice from
the Company of the happening of any event of the kind described
in Sections 4, 6(c), (g)(ii) or (g)(iii) hereof, such Holder will
forthwith discontinue disposition of Registrable Shares pursuant
to the Registration Statement covering such Registrable Shares
until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6(c) hereof, or until
it 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 will 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 Shares current at the time of receipt of such notice.
In the event the Company shall give any such notice under Section
6(c), (g)(ii) or (g)(iii), the Company shall extend the period
during which such Registration Statement shall be maintained
effective by the number of days during the period from and
including the date of the giving of such notice pursuant to
Section 6(c) hereof to and including the date when each Holder of
Registrable Shares covered by such Registration Statement shall
have received the copies of the supplemented or amended
prospectus contemplated by Section 6(c) hereof.
Section 7. REGISTRATION EXPENSES.
All 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 securities or "blue sky" laws (including reasonable fees and
disbursements of counsel of the Company and counsel for the
underwriters in connection with "blue sky" qualifications of the
Registrable Shares), fees and expenses associated with filings
required to be made with the National Association of Securities
Dealers, Inc., and with listing on any national securities
exchange or exchanges in which listing may be sought, printing
expenses, messenger and delivery expenses, fees and expenses of
counsel for the Company and its independent certified public
accountants (including the expenses of any special audit or "cold
comfort" letters required by or incident to such performance),
securities acts liability insurance (if the Company elects to
obtain such insurance), the fees and expenses of any special
experts retained by the Company in connection with such
registration, and fees and expenses of other persons retained by
the Company (all such expenses being herein called "Registration
Expenses") will be borne (i) by the Company in respect of a
Piggy-Back Registration and (ii) by the Selling Holders in
respect of any Demand Registration, in each case whether or not
any registration statement becomes effective; provided that in no
event shall Registration Expenses payable by the Company include
any (A) underwriting discounts, commissions, or fees attributable
to the sale of the Registrable Shares, (B) fees and expenses of
any counsel, accountants, or other persons retained or employed
by the Holders or underwriters, or (C) transfer taxes, if any.
Section 8. INDEMNIFICATION; CONTRIBUTION.
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless each Selling Holder of Registrable
Shares, its officers, directors, partners and agents and each
Person, if any, who controls such Selling Holder within the
meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act (each such person being sometimes hereinafter
referred to as an "Indemnified Person") from and against any and
all losses, claims, damages, liabilities and judgments
(including, the reasonable legal expenses incurred in connection
with any action, suit or proceeding) arising out of or based upon
(i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or
prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a registration hereunder or
arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, or (ii)
any violation by the Company of any federal, state or common law
rule or regulation applicable to Company and relating to action
or inaction required by the Company in connection with any such
registration; provided, however, that the Company shall not be
liable for any losses, claims, damages, liabilities or judgments
arise out of, or are based upon, any such untrue statement or
omission or allegation thereof based upon information furnished
in writing to the Company by such Selling Holder or on such
Selling Holder's behalf for use therein, or by any Holder's
failure to deliver a copy of the Registration Statement or
prospectus or any amendment or supplement thereto after being
furnished with a sufficient number of copies thereof by the
Company.
(b) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation)
shall be brought or asserted against any Indemnified Person in
respect of which indemnity may be sought from the Company, such
Indemnified Person 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
Person and the payment of all reasonable expenses. Such Indemni-
fied Person 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 counsel shall be at the expense of
such Indemnified Person unless (i) the Company has agreed to pay
such fees and expenses or (ii) the named parties to any such
action or proceeding (including any impleaded parties) include
both such Indemnified Person and the Company, and such
Indemnified Person shall have been advised in writing by the
counsel employed by the Company in accordance with the provisions
of this Section 8(b) that there exists a conflict of interest
between such Indemnified Person and the Company with respect to
such claim (in which case, if such Indemnified Person notifies
the Company in writing that it elects to employ separate counsel
at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on
behalf of such Indemnified Person, it being understood, however,
that the Company shall not, 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, be liable
for the reasonable fees and expenses of more than one separate
firm of attorneys at any time for such Indemnified Person and any
other Indemnified Persons, which firm shall be designated in
writing by a majority of such Indemnified Persons and be
reasonably acceptable to the Company). The Company shall not be
liable for any settlement of any such action or proceeding
effected without the Company's prior written consent, but if
settled with its prior written consent, or if there be a final,
unappealable judgment for the plaintiff in any such action or
proceeding, the Company agrees to indemnify and hold harmless
such Indemnified Persons from and against any loss or liability
(to the extent stated above) by reason of such settlement or
judgment.
(c) Indemnification by Holders of Registrable Shares.
Each Selling Holder agrees severally and not jointly to indemnify
and hold harmless the Company, its directors, officers and agents
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 Selling Holder, but only with respect to
information furnished in writing by such Selling Holder or on
such Selling Holder's behalf for use in any Registration
Statement or prospectus or any amendment or supplement thereto,
or any preliminary prospectus or by any Holder's failure to
deliver a copy of the Registration Statement or prospectus or any
amendment or supplement thereto after being furnished with a
sufficient number of copies thereof by the Company. In case any
action or proceeding shall be brought against the Company or its
directors, officers or agents or any such controlling person, in
respect of which indemnity may be sought against such Selling
Holder, such Selling Holder shall have the rights and duties
given to the Company, and the Company or its directors, officers
or agents or such controlling person shall have the rights and
duties given to such Selling Holder by the preceding Section
8(b).
(d) Contribution. If the indemnification provided for
in this Section 8 is unavailable to or unenforceable by the
Company or the Indemnified Persons in respect of any losses,
claims, damages, liabilities or judgments referred to herein,
then each such 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 and judgments in such proportions as is
appropriate to reflect the relative fault of the Company and the
Indemnified Persons in connection with the actions or inactions
which resulted in such losses, claims, damages, liabilities and
judgments, as well as any other relevant equitable considerations
(including the relative fault and indemnification or contribution
obligations of other relevant parties). The relative fault of
the indemnifying party on the one hand and of the indemnified
person on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying
party or by the indemnified party, and by such party's relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Indemnified Persons agree that it
would not be just and equitable if contribution pursuant to this
Section 8(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 in the immediately preceding
paragraph. 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 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Person may participate in any underwritten
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, (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the
terms of such underwriting arrangements and (c) agrees to pay
such Person's pro rata portion of all underwriting discounts,
commissions and fees.
Section 10. MISCELLANEOUS.
(a) Amendments and Waivers. The provisions of this
Agreement 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 Holders of at least a majority in interest of the Registrable
Shares. Notwithstanding the foregoing, (i) if a waiver or
consent to departure from the provisions hereof does not
adversely affect the rights of all of the Holders, the Company
shall not be required to obtain the consent of any such Holder
not adversely affected thereby, and (ii) if such waiver or
consent to departure relates exclusively to the rights of Holders
whose Registrable Shares are being sold pursuant to a
Registration Statement and does not directly or indirectly affect
the rights of other Holders, such waiver or consent to departure
may be given by Holders of a least a majority in interest of the
Registrable Shares being sold by such Holders pursuant to such
Registration Statement; provided that the provisions of this
sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding
sentence.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and shall
be delivered personally or by first-class mail, telecopier or
overnight courier:
(i) if to a Holder of Registrable Shares, at the
most current address set forth on the books of the Company,
and
(ii) if to the Company, initially at 00000
Xxxxxxxx Xxxxxx; Xxxxxxxx, Xxxxxxxxxx 00000-0000,
Attention: Xxxxx Del Xxxxxxxx, and thereafter at such other
address, notice of which is given in accordance with the
provisions of this Section 10(b).
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if person-
ally delivered; five business days after being deposited in the
mail (postage prepaid), if mailed; upon receipt of a telecopy
confirmation sheet, if telecopied; and on the day delivered if
sent by an air courier guaranteeing overnight delivery.
(c) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and,
to the extent set forth herein, the assigns of each of the
parties, including without limitation and without the need for an
express assignment, Eligible Transferees.
(d) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED UNDER AND INTERPRETED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES.
(g) Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall
not invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable any such provision in any
other jurisdiction.
(h) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and is
intended to be a complete and exclusive statement of the agree-
ment 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 with respect to the registration rights
granted by the Company with respect to the Registrable Shares.
This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(i) Effectiveness. This Agreement shall become
effective on the Effective Date.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the Company and the Holder have
executed this Agreement as of the date first written above.
COMPANY:
WEI ACQUISITION CO.
By ______________________________
Name:
Title:
HOLDER:
A&M INVESTMENT ASSOCIATES #3, LLC
By ______________________________
Name:
Title:
