Exhibit 10.17
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EQUITYHOLDERS AGREEMENT
by and among
THANE INTERNATIONAL, INC.
and
THE SEVERAL STOCKHOLDERS AND
WARRANTHOLDERS LISTED IN SCHEDULE I
HERETO FROM TIME TO TIME
dated as of
June 10, 1999
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EQUITYHOLDERS AGREEMENT
THIS EQUITYHOLDERS AGREEMENT (as amended, modified and
supplemented from time to time, this "Agreement") is dated as of June 10, 1999
and entered into by and among Thane International, Inc., a Delaware corporation
(the "Company"), the stockholders and warrantholders listed in Schedule I
hereto and, without duplication, the stockholders and warrantholders becoming a
party hereto by execution of a Joinder Agreement (as defined below)
(collectively, the "Equityholders" and each, individually, an "Equityholder").
Unless otherwise defined herein, certain capitalized terms used herein have the
respective meanings given such terms in Section 4.
WITNESSETH:
WHEREAS, pursuant to the terms of the Credit Agreement, the
Paribas Group acquired the Paribas Securities;
WHEREAS, pursuant to the terms of the Subordinated Loan
Documents, the PCF Group acquired the PCF Securities;
WHEREAS, the Company and the Equityholders desire to enter
into this Agreement for the purpose, among others, of providing certain
registrations rights, restrictions on transfer, participation and drag-along
rights in the event of certain transfers of Company Equity Securities; and
WHEREAS, the execution and delivery of this Agreement is a
condition to the purchase by the Paribas Group and the PCF Group of the Company
Equity Securities to be purchased by such Investors on the date hereof;
NOW THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows;
SECTION 1. TRANSFER RESTRICTIONS OF COMPANY EQUITY
SECURITIES
(a) General.
(i) Transfer of Securities. Subject to subparagraph (d)
below, no Equityholder shall directly or indirectly Transfer (whether
with or without consideration and whether voluntarily or involuntarily
or by operation of law) any interest in its Company Equity Securities
except pursuant to the provisions of this Section 1 or Section 2;
provided that in no event shall any Transfer of Company Equity
Securities pursuant to this Section 1 (other than in accordance with
either of paragraphs (c) or (d)) be made for any consideration other
than Marketable Securities and/or cash payable upon consummation of
such Transfer. No Equityholder shall consummate any Transfer (other
than a Permitted Transfer) until 30 days after the later of the
delivery to the Company and the other Equityholders required to be
notified pursuant to the provisions hereof of such Equityholder's
Initial Notice or Sale Notice (as applicable), unless the parties to
the Transfer have been finally determined pursuant to this Section 1
prior to the expiration of such 30-day period (the "Election Period").
(ii) Transferees and Future Equityholders Bound. It shall
be a condition to the effectiveness of any Transfer of Equityholder
Securities other than in a Public Sale or pursuant to Section 2 below
that (i) if such Transfer is pursuant to a Permitted Transfer, such
Equityholder gives notice to the Company of such Transfer, (ii) if the
Transfer is made pursuant to Section 1(b) or (c), all of the
requirements of such Sections have been complied with and (iii) in all
such cases such Transferee shall execute and deliver a joinder
agreement substantially in the form attached as Exhibit A hereto (a
"Joinder Agreement"). For all purposes of this Agreement, any
Transferee of Equityholder Securities of an Equityholder (other than a
Transferee which is a member of another Equityholder Group) shall be
deemed to be a member of the same Equityholder Group as the Transferor
with respect to the Equityholder Securities so Transferred. The
Company shall not issue any Equityholder Securities unless, as a
condition to the receipt of such Equityholder Securities, the
recipient executes and delivers a Joinder Agreement. The Company shall
cause Schedule I hereto to be amended from time to time to reflect the
addition of any party executing a Joinder Agreement after the date
hereof.
(iii) HIG Restricted Equity Securities. Notwithstanding
anything to the contrary set forth herein, HIG may not Transfer any
HIG Restricted Equity Securities, unless the Transferee agrees in
writing to be bound by the provisions of the Redemption Agreement and
this Agreement with respect to such HIG Restricted Equity Securities.
(iv) Effect of Prohibited Transfers. If any Transfer is
made or attempted contrary to the provisions of this Agreement, such
purported Transfer shall be void ab initio; the Company and the
remaining Equityholders shall have, in addition to any other legal or
equitable remedies which they may have, the right to enforce the
provisions of this Agreement by actions for specific performance; and
the Company shall refuse to recognize any purported Transferee as a
holder of its Company Equity Securities for any purpose. Without
limitation to the foregoing, each Equityholder further agrees that the
provisions of Section 6.2 shall apply in the event of any violation or
threatened violation of this Agreement.
(b) First Offer Rights.
(i) At least 30 days prior to making any Transfer of any
of its Company Equity Securities (other than a Permitted Transfer or
pursuant to clause (c) below), the Paribas Group or PCF Group, as the
case may be (the "Transferring Equityholder") shall deliver a written
notice (an "Initial Notice") to the Company. The Initial Notice shall
disclose in reasonable detail the proposed number and class of
Equityholder Securities to be transferred and may specify proposed
terms and conditions for such Transfer.
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(ii) The Company may offer to purchase all (but not less
than all) of the Equityholder Securities specified in the Initial
Notice by delivering an Offer Notice (as defined below) to the
Transferring Equityholder as soon as practical but in any event within
30 days after the delivery of the Initial Notice to the Company (the
"30-Day Period"). For purposes of this Agreement, an "Offer Notice"
must set forth the price and other terms (and reasonable evidence of
ability to perform) on which the Company proposes to purchase all (but
not less than all) of the Equityholder Securities specified in the
Initial Notice and shall constitute an offer to purchase such
Equityholder Securities on such terms (it being understood that,
unless otherwise stated in the Offer Notice, any terms specified in
the Initial Notice will be binding on the Company), which offer shall
be irrevocable for the 90 day period commencing on the first business
day as of which the Transferring Equityholder shall be in actual
receipt of the Offer Notice (the "Offer Period").
(iii) If the Company has delivered to the Transferring
Equityholder an Offer Notice in accordance with subparagraph (ii)
within the 30-Day Period provided for therein, the Transferring
Equityholder may accept or reject such offer. If the Transferring
Equityholder accepts any such offer, the Transfer of such Equityholder
Securities shall be consummated as soon as practical after the
delivery of the Offer Notice to the Transferring Equityholder, but in
any event within 30 days after acceptance of the offer contained in
the Offer Notice.
(iv) If the Company has not delivered an Offer Notice to
the Transferring Equityholder in accordance with subparagraph (ii)
within the 30-Day Period provided for therein or the Transferring
Equityholder rejects such offer, the Transferring Equityholder may,
during the Offer Period, enter into an agreement to transfer such
Equityholder Securities to one or more Persons (provided that any
Transfer of Company Equity Securities pursuant to such agreement shall
be consummated not later than 90 days after expiration of the Offer
Period (the "Transfer Period")); provided, that if the Company has
delivered an Offer Notice to the Transferring Equityholder in
accordance with subparagraph (ii) within the 30-Day Period provided
for therein (and such Offer Notice sets forth reasonable nonprice
terms of purchase), the Transferring Equityholder may not enter into
an agreement during the Offer Period providing for a Transfer of such
Equityholder Securities at a price which is less than or equal to the
price set forth therefor in such Offer Notice, unless the Transferring
Equityholder first reoffers such Equityholder Securities to the
Company at such lower price and the Company does not accept such offer
by delivering a written notice of such acceptance within 5 business
days after receiving written notice of such re-offer. Except as
otherwise provided in this Agreement, Transfers of Equityholder
Securities following the Transfer Period shall be subject to this
paragraph 1(b).
(v) Notwithstanding any other provisions hereof, any
offer made by the Company pursuant to an Offer Notice, or otherwise
pursuant to subparagraph (iv) above, will be deemed to be binding and
irrevocable by the Company through the Offer Period. If the
Transferring Equityholder accepts such offer and such Transfer is not
consummated within 30 days after acceptance of such offer, and the
failure of such Transfer to be so consummated is not due to any breach
by the Transferring Equityholder of any of its obligations hereunder,
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then the Transferring Equityholder may pursue any and all remedies
available at law or in equity and, in addition, all restrictions
contained in this clause 1(b) shall automatically terminate and be of
no force or effect solely with respect to such Transferring
Equityholder.
(c) Participation Rights. At least 30 days, and not more
than 90 days, prior to any Transfer of Other Equityholder Securities (other
than pursuant to a Permitted Transfer), the holder thereof (the "Transferring
Other Equityholder") shall deliver a written notice (the "Sale Notice") to the
Company and each of the holders of Paribas Securities and PCF Securities,
specifying in reasonable detail the identity of the prospective transferee(s),
the number of Other Equityholder Securities to be transferred and the terms and
conditions of the Transfer. The holders of Paribas Securities and PCF
Securities may elect to participate in the contemplated Transfer at the same
price per share (whether voting or non-voting interests) and on the same terms
and conditions (except as provided in the last sentence of this clause (c)) by
delivering written notice to the Transferring Other Equityholder within 15 days
after delivery of the Sale Notice. If no holder of Paribas Securities or PCF
Securities delivers any such written notice within such period, the
Transferring Other Equityholder may Transfer, on the terms and subject to the
conditions set forth in the Sale Notice, and in the amounts and to the
prospective transferee(s) identified therein, the Other Equityholder Securities
designated therein, on or prior to the 15th day after initial delivery of the
Sale Notice. If any holder of Paribas Securities or PCF Securities has elected
to participate in such Transfer, the Transferring Other Equityholder and each
such electing holder of Paribas Securities or PCF Securities shall be entitled
to sell in the contemplated Transfer, at the same price and on the same terms
and conditions (except as provided in the last sentence of this clause 1(c)),
a number of Company Equity Securities equal to the product of (i) the quotient
determined by dividing the number of Company Equity Securities held by such
Person and requested to be included in such Transfer by the aggregate number of
Company Equity Securities proposed to be sold in such Transfer which are held
by the Transferring Other Equityholder and all holders of Paribas Securities
and PCF Securities electing to participate in such Transfer and all other
holders of Company Equity Securities electing to participate in such Transfer
to the extent permitted pursuant to the Stockholders Agreement (such
calculation to be made assuming for purposes of this calculation that the
Company has redeemed (whether or not in fact such redemption has or will occur)
from the HIG Group a number of Company Equity Securities equal to the number of
Warrant Shares outstanding as of the date of such calculation and (ii) the
number of Company Equity Securities to be sold in the contemplated Transfer.
Each Transferring Other Equityholder shall use its reasonable best efforts to
obtain the agreement of the prospective transferee(s) to the participation of
the holders of Paribas Securities or PCF Securities in any contemplated
Transfer and to the inclusion (in the case of holders of Warrants) of the
Warrants in the contemplated Transfer, and no Transferring Other Equityholder
shall transfer any of its Company Equity Securities to any prospective
transferee if such prospective transferee(s) declines to allow the
participation of the holders of Paribas Securities or PCF Securities or the
inclusion of the Warrants. If any portion of the Warrants is included in any
Transfer of Company Shares under this clause 1(c), the purchase price for the
Warrants, as the case may be, shall be equal to the full purchase price
determined hereunder for the Company Shares covered by the portion of the
Warrants, as the case may be, to be transferred less the Exercise Price (as
defined in the applicable Warrant) for such Warrants. To the extent that the
Company pays the expenses of any Equityholder transferring Company Equity
Securities pursuant to this clause 1(c), then the Company shall pay the
reasonable expenses of all Equityholders transferring Company Equity Securities
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pursuant to this clause 1(c). Notwithstanding any other provision of this
Agreement, it is understood and agreed that any holder of Paribas Securities or
PCF Securities transferring Company Equity Securities pursuant to this clause
1(c) shall not be obligated to make any representations or warranties or
provide any indemnification or other obligations that the Transferring Other
Equityholder agrees to provide in connection with such Transfer except
customary representations and warranties regarding such holder's title to,
authority to sell, and ownership of such Paribas Securities or PCF Securities,
as the case may be ("Title Representations") proposed to be sold and customary
indemnification obligations on a several (and not joint) basis relating solely
and specifically to such Title Representations given by such holder; provided
that no holder shall be obligated in connection with such Transfer to agree to
indemnify or hold harmless the transferees with respect to an amount in excess
of the net cash proceeds paid to such holder in connection with such Transfer.
(d) Permitted Transfers. The restrictions set forth in
this Section 1 shall not apply with respect to any Transfer of Company Equity
Securities (other than the HIG Restricted Equity Securities) (1) pursuant to a
Public Sale, (2) pursuant to Section 2, (3) in the case of any member of the
Paribas Group, PCF Group or HIG Group, among its respective Affiliates,
officers, directors or employees, (4) in the case of any Equityholder who is a
natural person, pursuant to the laws of descent and distribution or among such
Equityholder's Family Group, including pursuant to the personal representative
of such Equityholder upon such Equityholder's death, (5) in the case of the
Paribas Group or PCF Group, if required or requested by any governmental or
regulatory authority or if it has a Regulatory Problem, (6) any Transfer of
Warrants or Warrant Shares to a holder of loans or commitments under the
Subordinated Loan Documents or the Credit Agreement, (7) in the case of the HIG
Group, to any Person, provided that any member of the HIG Group may not sell
more than 5% of the Company Equity Securities owned by the HIG Group on the
date hereof pursuant to this Section 1(d) or (8) pursuant to a pledge by any
Equityholder of its Company Equity Securities to the Company's lenders or any
Transfer by means of a foreclosure action pursuant to any such pledge
(collectively referred to herein as "Permitted Transfers"), provided that the
restrictions contained in this Section 1 shall continue to be applicable to the
Company Equity Securities after any such Transfer except pursuant to a Public
Sale or pursuant to Section 2, and provided further that the transferees of
such Company Equity Securities shall have executed a Joinder Agreement as
required in Section 1(a).
Notwithstanding the foregoing, no party hereto shall avoid
the provisions of this Agreement by making one or more transfers to one or more
Permitted Transferees and then disposing of all or any portion of such party's
interest in any such Permitted Transferee.
(e) Termination of Rights and Restrictions. The
restrictions on the Transfer of Company Equity Securities set forth in this
Section 1 shall continue with respect to all Company Equity Securities until
the consummation of a Qualified Public Offering, except that the restrictions
on Transfer set forth in this Section 1 shall terminate with respect to any
particular Company Equity Security upon such earlier date on which such Company
Equity Security has been transferred in a Public Sale or pursuant to Section 2
below.
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SECTION 2. DRAG-ALONG RIGHTS.
(a) If at any time the Majority Holders determine to
transfer to an Independent Third Party all of the Company Equity Securities in
a sale, whether by sale of stock, merger, consolidation or otherwise, and in a
bona fide negotiated transaction conducted on an arm's length basis, then such
Majority Holders (the "Triggering Majority Holders") shall have the right to
require both the Paribas Group and the PCF Group to sell to the proposed
transferee all but not less than all of their Company Equity Securities for the
same amount and type (and relative proportions of each amount and type) of
consideration received by the Triggering Majority Holders, per Company Share,
provided, however, that (i) any options as to the type of consideration offered
to the Triggering Majority Holders or to any other Equityholder of the Company
must be offered to all Equityholders; (ii) at least 90% of the value of the
consideration payable to each of the Equityholders, shall be payable in cash;
(iii) any non-cash consideration (which shall not exceed 10% of the total
consideration) shall constitute Marketable Securities (unless otherwise waived
by the Equityholder receiving such non-cash consideration); (iv) any
consideration that includes Marketable Securities must provide an option to
receive non-voting securities convertible into voting securities on the same
terms as the Class B Common Stock are convertible into Class A Common Stock and
are otherwise identical to the securities distributed; (v) each holder of then
currently exercisable rights to acquire Company Shares will be given an
opportunity to exercise such rights prior to the consummation of a sale
approved pursuant to this Section 2(a) and participate in such sale as a holder
of Company Shares; (vi) no consideration of any type will be payable in
connection with such sale, directly or indirectly, to any Equityholder or any
Affiliate thereof or any entity in which any such person owns any beneficial
interest, except consideration payable to such Equityholder of the same type
and amount per share (and relative proportions of each amount and type)
available to each Equityholder pursuant to this Section 2; (vii) each
Equityholder shall transfer all of its respective securities of the Company in
such transaction; (viii) all amounts owing with respect to the Credit Agreement
and the Subordinated Loan Documents shall have been indefeasibly paid in full
in cash at or prior to the consummation of such sale; and (ix) if such sale is
structured other than as a sale of stock (i.e., is a merger, consolidation or
other transaction), such sale shall have been approved by the Company's Board
of Directors.
(b) To exercise the drag-along right provided in this
Section 2, the Triggering Majority Holders shall first give to each member of
the Paribas Group and PCF Group a written notice not less than 20 days nor more
than 90 days prior to the consummation thereof containing (i) the name and
address of the proposed transferee and (ii) the proposed purchase price, terms
of payment and other material terms and conditions of the proposed transferee's
offer. Each member of the Paribas Group and PCF Group shall thereafter be
obligated, subject to the terms and conditions of Sections 2(a) and 2(b), to
sell to the proposed transferee, simultaneously with the Triggering Majority
Holders' sale, its Company Equity Securities.
(c) At the closing of any purchase of Company Equity
Securities pursuant to this Section 2, each of the Equityholders and other
holders of Company Equity Securities shall enter into agreements with the
purchaser of the Company Equity Securities which are (i) in form and substance
customary for transactions of such type, but in no event containing any
representations, warranties, covenants or indemnities by any member of the
Paribas Group or the PCF Group other than (A) Title
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Representations by each such Equityholder relating only to such Equityholder's
own Company Equity Securities, and (B) several (but not joint) indemnification
obligations by such Equityholder solely in respect of such Equityholder's own
Title Representations, with liability under such indemnification obligations
limited to an amount no greater than the net proceeds received by such
Equityholder; provided however, that notwithstanding anything contained in this
Agreement to the contrary, no such Equityholder shall be required to make any
such representation or warranty or any covenant or indemnity unless (a) all
other sellers in such sale are required to make the same representations,
warranties, covenants and indemnities as such Equityholders, (b) each of such
Equityholder's liability for breach thereof or otherwise thereunder is
expressly limited to the amount of net proceeds actually received by such
person in connection with such sale and (c) each of such Equityholder's
liability is expressly stated to be several and pro rata with all other sellers
and in no event shall any such Equityholders be jointly liable for any breaches
of representations, warranties or covenants or with respect to any
indemnification obligations, and (ii) are otherwise no less favorable to such
Equityholder than the terms applicable to the Triggering Majority Holders.
(d) The Company shall pay the reasonable costs and
expenses of each member of the Paribas Group and PCF Group in connection with a
sale of its Company Equity Securities pursuant to this Section 2.
(e) The rights and the obligations contained in this
Section 2 shall automatically terminate upon the consummation of the Initial
Public Offering.
(f) For purposes hereof "Independent Third Party" means
any Person who, immediately prior to the contemplated transaction, is not an
Equityholder or an Affiliate of any Equityholder, the Company or any subsidiary
of the Company.
SECTION 3. REGISTRATION RIGHTS.
Section 3.1 Demand Registrations.
(a) Registration on Request.
(i) At any time following 180 days after the Initial
Public Offering upon the written request of the holders of a majority
of the Paribas Securities or the holders of a majority of the PCF
Securities for a registration of Registrable Securities (a "Demand
Request"), the Company will promptly give written notice of such
requested registration to all registered holders of Registrable
Securities, and thereupon the Company, in accordance with the
provisions of Section 3.4 hereof, will use its best efforts to effect
the registration under the Securities Act of:
(A) the Registrable Securities of the Demanding
Investor Group which the Company has been so requested to
register in accordance with such Demand Request for
disposition in accordance with the intended method or methods
of disposition stated in such request, and
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(B) all other Registrable Securities which the
Company has been requested to register by the holders thereof
by written request given to the Company within 20 days after
the giving of such written notice by the Company,
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. No Investor Group may request the Company to effect registration of
Registrable Securities pursuant to this Section 3.1 on more than one occasion;
provided that a registration shall not count as having been requested by an
Investor Group (i) until it has become effective and (ii) unless at least 90%
of the Registrable Securities requested to be included in such registration by
such Investor Group are registered and sold. Each Demand Request shall specify
the approximate number of Registrable Securities of such Demanding Investor
Group requested to be registered and the intended method or methods of
disposition of such Registrable Securities.
(ii) Effective Registration Statement. A registration
requested pursuant to this Section 3.1 shall not be deemed to be
effected (A) if a Registration Statement with respect thereto shall
not have become effective, (B) if, after it has become effective, such
registration is interfered with for any reason by any stop order,
injunction or other order or requirement of the Commission or any
other governmental agency or any court, and the result of such
interference is to prevent the holders of Registrable Securities to be
sold thereunder from disposing thereof in accordance with the intended
methods of disposition, (C) if the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in
connection with any underwritten registration shall not be satisfied
or waived with the consent of the underwriters of such Registrable
Securities that were to have been sold thereunder, other than as a
result of any breach by any such holder of its obligations thereunder
or hereunder or (D) if the registration statement with respect thereto
shall not have remained effective for a period of 180 days unless all
of the Registrable Securities requested to be registered by the
Investors have been sold prior to the expiration of such 180-day
period.
(iii) Registration Statement Form. Registrations under
this Section 3.1 shall be on such appropriate registration form of the
Commission, including an offering on a continuous or delayed basis in
the future of all or some portion of the Registrable Securities to the
extent and under the terms and conditions set forth in the Securities
Act (a "Shelf Registration"), as shall be selected by the Company and
as shall permit the disposition of the Registrable Securities so to be
registered in accordance with the intended method or methods of
disposition specified in the Demand Request of the Demanding Investor
Group. The Company agrees to include in any such registration
statement all information which the holders of Registrable Securities
being registered shall reasonably request. In the event the Company is
not permitted to file a Demand Registration as a Shelf Registration or
on Form S-3 because it is not current with its Commission filings or
for any other reason, then the Company shall file such Demand
Registration on Form S-1. If a Demand Registration is filed as a Shelf
Registration, then the Company will use its best efforts keep such
Shelf Registration filed pursuant to this Section 3.1 continuously
effective for the period beginning on the date on which the Shelf
Registration is declared effective and ending on the earlier of
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(a) the first date that there are no Registrable Securities and (b)
the date as of which the Shelf Registration Statement has been
effective for 180 days. During the period during which the Shelf
Registration is effective, the Company shall supplement or make
amendments to the Shelf Registration, if required by the Securities
Act and the policies, rules and regulations of the Commission as
announced from time to time, or if reasonably requested by any holder
of Registrable Securities or an underwriter of Registrable Securities,
relating to any specific plan of distribution or method of sale, and
shall use its best efforts to have such supplements and amendments
declared effective, if required, as soon as practicable after filing.
(iv) Selection of Underwriters. If a requested
registration pursuant to this Section 3.1 involves an underwritten
offering, the managing underwriter or underwriters shall be selected
by the Demanding Investor Group, such underwriter to be reasonably
satisfactory to the Company.
(v) Priority in Requested Registrations. If a Demand
Registration involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy to each
Person requesting registration of Registrable Securities) that, in its
opinion, the number of securities requested to be included in such
Demand Registration exceeds the number which can be sold in such
offering within a price range acceptable to the Demanding Investor
Group, the Company will include in such Demand Registration to the
extent of the number which the Company is so advised can be sold in
such offering such securities in the following order: (w) first,
Registrable Securities which are proposed to be included in such
registration by the Demanding Investor Group (pro rata among such
members of such Investor Group on the basis of the number of
Registrable Securities owned by the members of such Investor Group);
(x) second Registrable Securities which are proposed to be included in
such registration by the Investors (other than the Demanding Investor
Group) pro rata among such Investors on the basis of the ratio which
the amount of Registrable Securities requested to be included in such
registration by each such Investor bears to the total amount of
Registrable Securities requested to be included in such registration
by all of such Investors (determined on a Fully Diluted Basis); (y)
third all other Company Equity Securities requested to be included in
such registration by holders of Company Equity Securities on the date
hereof with registration rights granted under the Stockholders
Agreement exercising piggyback rights pro rata among such holders on
the basis of the ratio which the amount of such Company Equity
Securities requested to be included in such registration by each such
holder thereof bears to the total amount of Company Equity Securities
requested to be included in such registration by all of such holders;
and (z) fourth, all other Company Equity Securities requested by other
Persons to be included such registration.
(vi) Restrictions on Demand Registration. If, while a
Demand Request is pending pursuant to this Section 3.1, (x) the
Company shall have received another Demand Request from a different
Investor Group or Equityholder pursuant to the terms of the
Stockholders Agreement and either such first Demand Request has not
been abandoned or the 90-day period (or, in the case of the Initial
Public Offering, the 180-day period) beginning on the effective date
of the related Demand Registration with respect to such first Demand
Request
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shall not have elapsed or (y) the Company has been advised by legal
counsel that the filing of a registration statement would require the
disclosure of a material transaction and the Company (as determined by
its Board of Directors) reasonably determines in good faith that such
disclosure would have a material adverse effect on the Company, then
the Company shall not be required to effect a registration pursuant to
this Section 3.1 in accordance with the terms of the subsequent Demand
Request in the case of clause (x) above or to effect (but shall be
required to prepare) a registration pursuant to this Section 3.1 in the
case of clause (y), in any such case until (1) in the case of clause
(x) above, the earlier of (A) the abandonment of such first offering
and (B) the end of such 90-day period (or, in the case of the Initial
Public Offering, such 180-day period) referred to therein, and (2) in
the case of clause (y) above, the earlier of (A) the date upon which
such material transaction is otherwise disclosed to the public or
ceases to be material and (B) ninety (90) days after the Company makes
such good faith determination, provided that the Company shall not be
permitted to delay a requested registration in reliance on clause (y)
above more than once in any 12-month period and provided, further, that
in the event the Company exercises its rights under clause (y) above,
the registration shall not be counted as a Demand Registration for
purposes of Section 3.1(a)(i) hereof until actually effected. The
Company shall be obligated to pay all Registration Expenses in
connection with all such withdrawn or delayed registrations.
(b) Rescission. A requested registration under this
Section 3.1 may be rescinded by written notice to the Company by the Demanding
Investor Group. Such rescinded registration shall not count as a registration
statement initiated pursuant to this Section 3.1 for purposes of clause (a)(i)
above, provided that, subject to the following provisions of this clause (b) and
as otherwise provided in Section 3.1(a)(vi), the Company shall not be required
to pay the Registration Expenses of any registration proceeding begun pursuant
to Section 3.1, the request of which has been subsequently withdrawn by the
Demanding Investor Group. In such case, (i) the Demanding Investor Group shall
bear all such Registration Expenses, and (ii) the Company shall be deemed not to
have effected a registration pursuant Section 3.1; unless, however, the
Demanding Investor Group agrees to forfeit its right to one Demand Request
pursuant to Section 3.1, in which case all Registration Expenses shall be borne
by the Company. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Demanding Investor Group has learned of a material adverse
change in the condition or business of the Company from that known to the
Demanding Investor Group at the time of its Demand Request, then the Demanding
Investor Group shall not be required to pay any of said Registration Expenses
(and shall not forfeit any of its Demand Requests) and the Company shall pay all
such Registration Expenses.
Section 3.2 Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to
register any of its equity securities under the Securities Act (other than
pursuant to a transaction described in Rule 145 of the Securities Act or on Form
S-4 or S-8), whether or not for sale for its own account, the Company will each
time give prompt written notice of such proposed filing to all Investors (i) in
all cases at least 20 days before the anticipated filing date and (ii) in the
case of a proposed registration in connection with the exercise of any demand
registration rights (other than the demand registration rights under Section 3.1
hereof) within five (5) Business Days after the Company receives notice of
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such demand. Such notice shall offer such Investors the opportunity to register
such amount of their Registrable Securities as they shall request (a "Piggyback
Registration") subject to Sections 3.2(b) and 3.2(c) hereof. Subject to Sections
3.2(b) and 3.2(c) hereof, the Company shall include in each such Piggyback
Registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within fifteen (15) days after
such notice has been given by the Company to the Investors; provided that the
Company (as determined by the Board of Directors of the Company) may at any time
withdraw or cease proceeding with any such registration if it shall at the same
time withdraw or cease proceeding with the registration of all other securities
originally proposed to be registered thereunder (but shall still be obligated to
pay all Registration Expenses in connection therewith), provided, however, that
any such withdrawal or termination shall be without prejudice to the rights of
any Investor Group to cause such registration to be effected pursuant to a
registration under Section 3.1 hereof. If the Registration Statement relating to
the Piggyback Registration is to cover an underwritten offering, such
Registrable Securities shall be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
The Investors shall be permitted to withdraw all or part of the Registrable
Securities from a Piggyback Registration at any time prior to the effective time
of such Piggyback Registration.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company by
or through one or more underwriters and the managing underwriters thereof advise
the Company in writing that in their good faith judgment the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without materially and adversely affecting
the marketability of the offering, then the Company will include in the
Registration Statement relating to such registration (i) first, the securities
the Company proposes to sell, (ii) second, the Registrable Securities requested
to be included in such registration by the Investors and Company Equity
Securities (other than Registrable Securities) requested to be included in such
registration by holders of Company Equity Securities on the date hereof with
registration rights granted under the Stockholders Agreement, reduced, if
necessary, on a pro rata basis, based on the ratio which the amount of such
Company Equity Securities requested to be included in such registration by each
such Investor or other securityholder bears to the total amount of Company
Equity Securities requested to be included in such registration by all such
securityholders and (iii) third, all other Company Equity Securities requested
by other Persons to be included in such registration provided that, if such
registration contemplates an "over-allotment option" on the part of
underwriters, to the extent such over-allotment option is exercised and the
Investors were excluded from registering any of the Registrable Securities they
requested be included in such registration (the "Excluded Registrable
Securities") pursuant to the priority provisions of Section 3.2(b) or 3.2(c),
then the over-allotment option shall be fulfilled through the registration and
sale of the Excluded Registrable Securities, subject to the priority provisions
of Section 3.2(b)(ii) above.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of any holders
of the Company's securities (other than the holders of Registrable Securities),
by or through one or more underwriters and the managing underwriters advise the
Company in writing that in their good faith judgment the number of securities
requested to be included in such registration exceeds the number which can be
sold in such
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offering without materially and adversely affecting the marketability of the
offering, the Company will include in such registration, (i) first, the
securities proposed to be sold by the Person initiating such registration, (ii)
second, the Registrable Securities requested to be included in such
registration by the Investors and Company Equity Securities owned by such other
securityholders exercising the piggyback rights granted by the Company to such
securityholders pursuant to the Stockholders Agreement, based on the ratio
which the amount of such Company Equity Securities requested to be included in
such registration by each such Investor or other securityholder bears to the
total amount of Company Equity Securities requested to be included in such
registration by all such securityholders and (iii) third, all other Company
Equity Securities requested by other Persons to be included in such
registration.
Section 3.3 Holdback Agreements; Participation in Underwritten
Registration.
(a) Holdback Agreement of Equityholders of Registrable
Securities. If the Company shall at any time register securities under the
Securities Act (whether or not for its own account and including any
registration pursuant to Sections 3.1 and 3.2 hereof), each Equityholder agrees,
if so requested (pursuant to timely notice) by the managing underwriter of an
underwritten registration not to effect any public sale or public distribution
of any Company Equity Securities, other than those securities included in a
registration pursuant Sections 3.1 or 3.2 hereof which originally triggered the
obligations under this Section 3.3(a) without the prior written consent of such
managing underwriter, during the thirty (30) days prior to the effective date of
such registration and until the earlier of (i) the end of the 90-day period or,
in the case of the Initial Public Offering, 180-day period, beginning on the
effective date of such registration and (ii) the abandonment of such offering.
Notwithstanding the provisions of the preceding sentence, a Holder may sell any
or all of its Registrable Securities in a private sale. The Company may legend
and impose stop transfer instructions on any certificate evidencing securities
relating to the restrictions provided in this Section 3.3(a).
None of the foregoing provisions of this Section 3.3(a) shall
apply to any Investor if such Investor is prevented by applicable statute or
regulation from entering into any such agreement or must otherwise dispose of
its securities as a consequence of a regulatory issue; provided, that any such
Investor shall undertake not to effect any public sale or public distribution of
the applicable class of Registrable Securities unless it has provided 45 days'
prior written notice of such sale or distribution to the underwriter or
underwriters.
(b) Holdback Agreement of the Company. During the period
(x) beginning 30 days prior to the effective date of any registration statement
filed with respect to Registrable Securities pursuant to a Demand Registration
or Piggyback Registration and such registration is an underwritten public
offering and (y) ending 90 days or, in the case of the Initial Public Offering,
180-day period, after the effective date of any such registration statement (if
such lock-up period is required by the underwriters), the Company shall not
(except as part of such registration) effect any public sale or public
distribution of any of its Company Equity Securities for its own account (other
than in connection with any employee stock option or other benefit plan). The
Company shall use its reasonable best efforts to cause each of its directors,
members of management, other employees
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and other stockholders who are not a party hereto to agree in writing to be
bound to provisions substantially similar to those set forth in this Section
3.3(b).
(c) Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (ii) timely completes and
executes all questionnaires, customary powers of attorney, customary
indemnities, customary underwriting agreements and other customary documents
required under the terms of such underwriting arrangements; provided, that no
Investor included in any underwritten registration shall be required to make any
representations or warranties to the Company or the underwriters other than
representations and warranties, on a several but not joint basis, regarding such
Investor and such Investor's intended method of distribution.
(d) Holdback Agreement of Holder of HIG Restricted Equity
Securities. No HIG Restricted Equity Securities may be the subject of any
registration whether implemented pursuant to the terms of this Agreement, the
Stockholders Agreement or otherwise.
Section 3.4 Registration Procedures. Whenever the Company is
required to register Registrable Securities pursuant to this Agreement, the
Company will use its best efforts to effect the registration to permit the sale
of such Registrable Securities in accordance with the intended method or methods
of disposition thereof, and pursuant thereto the Company will as expeditiously
as possible:
(a) prepare and file with the Commission as soon as
practicable a Registration Statement with respect to such Registrable Securities
as prescribed by Section 3.1 or 3.2 on a form available for the sale of the
Registrable Securities by the holders thereof in accordance with the intended
method or methods of distribution thereof and use its best efforts to cause each
such Registration Statement to become and remain effective for up to 180 days;
provided, however, that before filing a Registration Statement, the Company will
furnish to the holders of the Registrable Securities covered by such
Registration Statement, the underwriters, if any, and any attorney, accountant
or other agent retained by any such holder of Registrable Securities or
underwriters (i) copies of all such documents proposed to be filed, which
documents will be subject to the review and comment of such holders, their
counsel and underwriters, if any, and (ii) if requested, financial and other
information required by the Commission to be included in such Registration
Statement and all financial and other records, pertinent corporate documents and
properties of the Company customarily reviewed in connection with an
underwritten registration; and shall cause the officers, directors and employees
of the Company, counsel to the Company and independent certified public
accountants of the Company, to respond to such inquiries and supply all
information, as shall be necessary, in the opinion of respective counsel to such
holders and underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act, and in the case of a Demand Registration, will
not file any Registration Statement to which the Demanding Investor Group or the
underwriters, if any, shall reasonably object;
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(b) prepare and file with the Commission such amendments,
post-effective amendments and prospectus supplements to such Registration
Statement as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement until such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such Registration Statement; provided, that the Company shall be deemed not to
have used its best efforts to keep a Registration Statement effective during the
applicable period if it voluntarily takes any action that results in the selling
holders of the Registrable Securities covered thereby not being able to sell
such Registrable Securities during that period;
(c) furnish to each selling holder of Registrable
Securities covered by a registration statement and to each underwriter, if any,
such number of copies of such registration statement, each amendment and
post-effective amendment thereto, the prospectus included in such registration
statement (including each preliminary prospectus and any supplement to such
prospectus and any other prospectus filed under Rule 424 of the Securities Act),
in each case including all exhibits, and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller or to be disposed of by such underwriter (the
Company hereby consenting to the use in accordance with all applicable law of
each such registration statement (or amendment or post-effective amendment
thereto) and each such prospectus (or preliminary prospectus or supplement
thereto) by each such seller and the underwriters, if any, in connection with
the offering and sale of the Registrable Securities covered by such registration
statement or prospectus);
(d) use its best efforts to register or qualify and, if
applicable, to cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, the securities to be included in a Registration Statement for
offer and sale under the securities or blue sky laws of such jurisdictions
within the United States of America as any such selling holder or managing
underwriters (if any) shall reasonably request, to keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the securities covered by the applicable Registration
Statement; 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 paragraph or (ii) consent to general service of
process in any such jurisdiction;
(e) cause all such Registrable Securities to be listed on
each securities exchange on which securities of the same class as the
Registrable Securities are then listed and, if not so listed, to be listed on
the NASD automated quotation system and, if listed on the NASD automated
quotation system, use its best efforts to secure designation of all such
Registrable Securities covered by such Registration Statement as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 under the
Exchange Act or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the foregoing, to
use its best efforts to
-14-
arrange for at least two market makers to register as such with respect to such
Registrable Securities with the NASD;
(f) provide a transfer agent and registrar for all such
Registrable Securities and a CUSIP number for all such Registrable Securities
not later than the effective date of such Registration Statement;
(g) comply with all applicable rules and regulations of
the Commission, and make available to its security holders an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (or in each case within
such extended period of time as may be permitted by the Commission for filing
the applicable report with the Commission) (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in an
underwritten offering or (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company after the
effective date of a Registration Statement, which earnings statement shall cover
said 12-month periods;
(h) permit any holder of Registrable Securities which, in
its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(i) use its best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or suspending the
qualification (or exemption from qualification) of any of the securities
included therein for sale in any jurisdiction within the United States of
America, and, in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending the
qualification of any securities included in such Registration Statement for sale
in any jurisdiction within the United States of America, the Company will use
its best efforts promptly to obtain the withdrawal of such order at the earliest
possible moment;
(j) if the Piggyback Registration or Demand Registration
is an underwritten registration, obtain "cold comfort" letters and updates
thereof (which letters and updates (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and counsel to the
selling holders of Registrable Securities) from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each of
the underwriters, if any, and each selling holder of Registrable Securities,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings and such other matters as the underwriters, if any, or the holders of
a majority of the Registrable Securities being sold may reasonably request;
-15-
(k) obtain opinions of independent counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any, and
counsel to the selling holders of the Registrable Securities being sold),
addressed to each selling holder and each of the underwriters, if any, covering
the matters customarily covered in opinions of issuer's counsel requested in
underwritten offerings, such as the effectiveness of the Registration Statement
and such other matters as may be reasonably requested by such counsel and
underwriters, if any;
(1) promptly (but in any event, within two (2) business
days) notify the selling holders of Registrable Securities, their counsel and
the managing underwriters, if any, and confirm such notice in writing,
(i) when a prospectus or any supplement or post-effective
amendment to such prospectus has been filed, and, with respect to a
Registration Statement or any post-effective amendment thereto, when
the same has become effective,
(ii) of any request by the Commission or any other Federal
or state governmental authority for amendments or supplements to a
Registration Statement or related prospectus or for additional
information,
(iii) 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 prospectus or the
initiation of any proceedings by any Person for that purpose,
(iv) if at any time the representations and warranties of
the Company contemplated by clause (i) of paragraph (q) below cease to
be true and correct in any respect,
(v) 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
Securities for offer or sale under the securities or blue sky laws of
any jurisdiction, or the contemplation, initiation or threatening, of
any proceeding for such purpose,
(vi) of the happening of any event that makes any
statement made in such Registration Statement untrue in any material
respect or that requires the making of any changes in such Registration
Statement 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, in light of the
circumstances under which they were made (in the case of any
prospectus), not misleading, and
(vii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate;
(m) if requested by the managing underwriters, if any, or
a holder of Registrable Securities being sold, promptly incorporate in a
prospectus, supplement or post-effective amendment
-16-
such information as the managing underwriters, if any, and the holders of the
Registrable Securities being sold reasonably request to be included therein
relating to the sale of the Registrable Securities, including, without
limitation, information with respect to the number of shares of Registrable
Securities being sold to underwriters, the purchase price being paid therefor by
such underwriters and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering, and make all
required filings of such prospectus, supplement or post-effective amendment
promptly following notification of the matters to be incorporated in such
supplement or post-effective amendment;
(n) furnish to each selling holder of Registrable
Securities and the managing underwriter, without charge, at least one signed
copy of the Registration Statement;
(o) cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing the Registrable Securities
not bearing any restrictive legends and in a form eligible for deposit with The
Depository Trust Company to be sold and cause such Registrable Securities to be
in such denominations and registered in such names as the managing underwriters,
if any, or each holder of Registrable Securities may request at least three (3)
business days prior to any sale of Registrable Securities to the underwriters;
(p) as promptly as practicable upon the occurrence of any
event contemplated by clause (vi) of paragraph (1) above, prepare a supplement
or post-effective amendment to the Registration Statement, or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold hereunder, the prospectus will not contain an
untrue statement of a material fact or an omission to state a material fact
required to be stated in a Registration Statement or prospectus or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading;
(q) enter into such agreements (including underwriting
agreements in customary form, scope and substance) and take all such other
actions in connection therewith as the holders of a majority of the Registrable
Securities being sold (or in the case of a Demand Registration, the Demanding
Investor Group) or the underwriters, if any, reasonably request in order to
expedite or facilitate the registration or the disposition of such Registrable
Securities, and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration:
(i) make such representations and warranties to the
holders of such Registrable Securities and the underwriters, if any,
with respect to the business of the Company and the Registration
Statement, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm the same,
if and when requested;
(ii) if an underwriting agreement is entered into, cause
the same to include the indemnification and contribution provisions and
procedures substantially similar to (and no less favorable to the
selling holders of Registrable Securities and the underwriters than)
those contained in Section 3.6 hereof with respect to all parties to be
indemnified pursuant to said
-17-
Section (or, with respect to the indemnification of such underwriters,
such similar indemnification and contribution provisions as such
underwriters shall customarily require); and
(iii) deliver such documents and certificates as may be
requested by the Holders of Registrable Securities being sold and
managing underwriters, if any, to evidence compliance with clause (i)
above and with any conditions contained in the underwriting agreement
or other similar agreement entered into by the Company, it being
understood that the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent otherwise
reasonably requested by the holders of a majority of the Registrable
Securities being sold (or in the case of a Demand Registration, the
Demanding Investor Group).
(r) cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
NASD;
(s) use its best efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered by
the Registration Statement contemplated hereby; and
(t) cause its employees and personnel to use their
commercially reasonable efforts to support the marketing of the Registrable
Securities (including, without limitation, the participation in one (1) "road
show" as requested by the Demanding Investor Group) to the extent possible
taking into account the Company's business needs and the requirements of the
marketing process.
Each holder agrees by acquisition of such Registrable
Securities that, upon receipt of written notice from the Company of the
happening of any event of the kind described in Section 3.4(l)(ii), 3.4(l)(iii),
3.4(l)(v), 3.4(l)(vi) or 3.4(l)(vii), such holder will forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement until such holder's receipt of the copies of the supplemented or
amended Registration Statement contemplated by Section 3.4(p), or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such prospectus, 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 Securities current at the time of receipt of such
notice. If the Company shall give any such notice, the time periods mentioned in
Section 3.1 hereof shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement receives (x) the copies of the supplemented or amended prospectus
contemplated by Section 3.4(p) hereof or (y) the Advice, as the case may be.
-18-
Section 3.5 Registration Expenses.
All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation (i) all
registration, filing fees and expenses (including fees with respect to filings
made with NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter", as may be required by the rules and
regulations of the NASD), (ii) fees and expenses of compliance with all Federal
securities and State "blue sky" laws (including reasonable fees and
disbursements of one blue sky counsel for the underwriters and selling holders
of Registrable Securities (excluding local counsel) in connection with blue sky
qualifications of the Registrable Securities and determinations of their
eligibility for investment under the laws of such jurisdiction as the managing
underwriters or holders of a majority of the Registrable Securities being sold
(or in the case of a Demand Registration, the Demanding Investor Group) may
designate), (iii) printing expenses (including printing certificates for the
Registrable Securities to be sold and the Registration Statements), messenger
and delivery expenses, duplication, word processing, and telephone expenses,
(iv) fees and disbursements of counsel for the Company, and (v) fees and
disbursements of all independent certified public accountants of the Company
incurred in connection with such registration (including the expenses of any
special audit and "cold comfort" letters incident to such registration),
underwriters (excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the distribution of the Registrable Securities) and other Persons retained by
the Company (all such expenses being herein called "Registration Expenses"),
will be borne by the Company regardless of whether a Registration Statement
becomes effective; provided that the Company will, in any event, pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit or quarterly review, the fees and expenses of any Person,
including special experts, retained by the Company, the expense of any liability
insurance and the reasonable fees and expenses of one special counsel for the
holders of Registrable Securities being sold chosen by the holders of a majority
of Registrable Securities being sold (or in the case of a Demand Registration,
the Demanding Investor Group), and expenses and fees for listing the securities
to be registered on each securities exchange on which similar securities issued
by the Company are then listed or on the NASD automated quotation system.
Section 3.6 Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the fullest extent permitted by law, each Investor and each
officer, director, employee, counsel, agent and representative of such Investor
and each Person who controls any such Person (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act) against, and
hold it and them harmless from, all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and attorneys' fees and
disbursements) and expenses, including expenses of investigation (collectively,
"Losses") arising out of, caused by or based upon any untrue or alleged untrue
statement of material fact contained in any Registration Statement or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading (a
"Misstatement/Omission"), except that the Company shall not be liable (i)
insofar as such Misstatement/Omission is based upon and in conformity with
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information furnished in writing to the Company by an Investor expressly for use
therein and (ii) to the extent that any such claim arises out of or is based
upon a Misstatement/Omission made in any preliminary prospectus, (x) to the
extent such Misstatement/Omission is corrected in the final prospectus and (y)
having previously been timely furnished by or on behalf of the Company with
sufficient copies of the final prospectus, such indemnified Person thereafter
fails to deliver such prospectus prior to or concurrently with the sale to the
Person who purchased a Registrable Security from such indemnified Person and who
is asserting such claim. In connection with an underwritten offering, the
Company will indemnify such underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution,
their officers and directors and each Person who controls (within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act) such
underwriters to the same extent as provided above with respect to the
indemnification of the Investors. This indemnity shall be in addition to any
other indemnification arrangements to which the Company may otherwise be party.
(b) Indemnification by Investors. In connection with any
Registration Statement in which an Investor is participating, each such Investor
will furnish to the Company in writing such powers of attorney, custody
agreements and letters of direction and other information and affidavits as the
Company reasonably requests for use in connection with any such Registration
Statement, and each such Investor agrees to indemnify, to the fullest extent
permitted by law, the Company, its directors, officers, employees, counsel,
agents or representatives and each Person who controls the Company (within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act) against, and hold it and them harmless from, any Losses resulting from any
Misstatement/Omission, but only to the extent that such Misstatement/Omission is
based upon and in conformity with information furnished in writing by such
Investor expressly for use in such Registration Statement; provided that the
obligation to indemnify will be individual (several and not joint) to each
Investor and will be limited to the net amount of proceeds (net of payment of
all expenses) received by such Investor from the sale of Registrable Securities
pursuant to such Registration Statement giving rise to such indemnification
obligation.
(c) In case any action, claim or proceeding shall be
brought against any Person entitled to indemnification hereunder, such
indemnified party shall promptly notify each indemnifying party in writing, and
such indemnifying party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses incurred in connection with the defense
thereof. The failure to so notify such indemnifying party shall not affect any
obligation it may have to any indemnified party under this Agreement or
otherwise except to the extent that (as finally determined by a court of
competent jurisdiction (which determination is not subject to review or appeal))
such failure materially and adversely prejudiced such indemnifying party. Each
indemnified party shall have the right to employ separate counsel in such
action, claim or proceeding and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of each indemnified party
unless: (i) such indemnifying party has agreed to pay such expenses; (ii) such
indemnifying party has failed promptly to assume the defense and employ counsel
reasonably satisfactory to such indemnified party; or (iii) the named parties to
any such action, claim or proceeding (including any impleaded parties) include
both such indemnified party and such indemnifying party or an Affiliate or
controlling person of such indemnifying party, and such indemnified party shall
have been advised
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in writing by counsel that either (x) there may be one or more legal defenses
available to it which are different from or in addition to those available to
such indemnifying party or such Affiliate or controlling person or (y) a
conflict of interest may exist if such counsel represents such indemnified party
and such indemnifying party or its Affiliate or controlling person; provided,
however, that such indemnifying party 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 responsible hereunder for the fees and expenses
of more than one separate firm of attorneys (in addition to any local counsel),
which counsel shall be designated by such indemnified party. If such defense is
assumed by the indemnified party as permitted hereunder, the indemnifying party
will not be subject to any liability for any settlement made by the indemnified
party without its consent (but such consent shall not be unreasonably withheld).
No indemnified party shall be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld). Each indemnifying party agrees, jointly and severally, that it will
not, without the indemnified party's prior written consent (which consent shall
not be unreasonably withheld), consent to entry of any judgment or settle or
compromise any pending or threatened claim, action or proceeding in respect of
which indemnification or contribution may be sought hereunder unless the
foregoing contains an unconditional release, in form and substance reasonably
satisfactory to the indemnified parties, of the indemnified parties from all
liability and obligation arising therefrom.
(d) The indemnifying party's liability to any such
indemnified party hereunder shall not be extinguished solely because any other
indemnified party is not entitled to indemnity hereunder.
(e) The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party, and will survive the transfer of securities.
(f) Contribution. If the indemnification provided for in
this Section 3.6 is unavailable to, or insufficient to hold harmless, an
indemnified party under Section 3.6(a) or Section 3.6(b) above in respect of any
Losses referred to in such Sections, then each applicable indemnifying party
shall have an obligation to contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Company, on the one hand, and
of such Investor, on the other, in connection with the Misstatement/Omission
which resulted in such Losses, taking into account any other relevant equitable
considerations. The amount paid or payable by a party as a result of the Losses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 3.6(c) above, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation, lawsuit or legal or
administrative action or proceeding.
The relative fault of the Company, on the one hand, and of
such Investor, on the other, shall be determined by reference to, among other
things, whether the relevant
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Misstatement/Omission relates to information supplied by the Company or by such
Investor and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such Misstatement/Omission.
The Company and each Investor agree that it would not be just
and equitable if contribution pursuant to this Section 3.6(f) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 3.6(f), an Investor shall not be required to
contribute any amount in excess of the amount such Investor would have been
required to pay to an indemnified party if the indemnity under Section 3.6(b)
was available.
No Person who has been determined by a court of competent
jurisdiction in a final non-appealable decision to be 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 been found by a
court competent jurisdiction to be guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 3.6 are in addition to any liability that the indemnifying parties may
have to the indemnified parties.
Section 3.7 Rules 144 and 144A.
After the Initial Public Offering the Company shall timely
file the reports required to be filed by it under the Securities Act and the
Exchange Act (including but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by
the Commission under the Securities Act) and the rules and regulations adopted
by the Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable Securities, make
publicly available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as
such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the filing requirements of this
Section 3.7.
SECTION 4. DEFINITIONS.
"Advice" shall have the meaning provided in Section 3.4.
"Affiliate" shall mean, as applied to any Person, any other
Person directly or indirectly controlling (including, but not limited to, all
directors and officers of such Person), controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to "control"
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise.
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"Bank Holding Company shall Act" mean the Bank Holding Company
Act of 1956, as amended and any rules and regulations or interpretations
promulgated thereunder (including without limitation, Regulation Y or any
successor to such Regulations) by the Board of Governors of the Federal Reserve
System.
"Charter" shall mean the Amended and Restated Articles of
Incorporation of the Company.
"Class A Common Stock" shall mean the "Class A Common Stock"
as defined in the Charter.
"Class B Common Stock" shall mean the "Class B Common Stock"
as defined in the Charter.
"Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Company" shall have the meaning provided in the first
paragraph of this Agreement.
"Company Equity Securities" means any and all Company Shares,
the Warrants, a" other shares of capital stock or membership interests of the
Company, and any securities convertible into or exchangeable for capital stock
of the Company, and all options, warrants or other rights to purchase or acquire
capital stock of the Company or securities convertible into or exchangeable for
such capital stock, now or hereafter issued by the Company (including any
Company Equity Securities issued or issuable with respect thereto, whether by
dividend, split, combination of shares, recapitalization, merger, consolidation
or other corporate reorganization, or upon conversion or exchange therefor).
"Company Shares" means, the Class A Common Stock, the Class B
Common Stock and any other equity of the Company which is not limited to a fixed
sum or stated value in respect to the rights of the holders thereof to
participate in dividends or distributions or in the distribution of assets upon
any liquidation, dissolution or winding up of the Company or any other
securities of the Company into which such Company Shares or such other
securities shall be reclassified or changed, including, by reason of a merger,
consolidation, reorganization or recapitalization. If the Company Shares have
been so reclassified or changed, or if the Company pays a dividend or makes a
distribution on the Company Shares in shares of capital stock or other
securities, or subdivides (or combines) its outstanding Company Shares into a
greater (or smaller) number of Company Shares, a Company Share shall be deemed
to be such number of shares of stock and amount of other securities to which a
holder of a Company Share outstanding immediately prior to such change,
reclassification, exchange, dividend, distribution, subdivision or combination
would be entitled. For purposes of this Agreement only, any Person who holds
Warrants shall be deemed to be the holder of the Company Shares obtainable upon
exercise of the Warrants, as the case may be, regardless of any restriction or
limitation on the exercise of the Warrants and references herein to Company
Shares include the Warrants.
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"Credit Agreement" shall mean the Credit Agreement, dated as
of the date hereof, by and among the Company, the various financial institutions
a party thereto and Paribas, as Agent, as amended and restated, supplemented,
restructured or otherwise modified from time to time (in whole or in part and
without limitation as to terms, conditions or covenants and without regard to
the principal amount thereof) and in effect, including without limitation the
Warrant Documents (as defined therein) and all related notes, collateral
documents, guaranties, instruments and agreements entered into in connection
therewith, and any successive restructurings, renewals, extensions or
refinancings thereof.
"Demand Request" has the meaning set forth in Section 3.1(a).
"Demand Registration" shall mean any registration requested
pursuant to Section 3.1 by any Investor Group.
"Demanding Investor Group" shall mean the Investor Group
making a Demand Request pursuant to Section 3.1 hereof.
"Equityholder Group" means each of the Paribas Group, PCF
Group, Executive Group and HIG Group.
"Equityholder Securities" means any Company Equity Securities
held by an Equityholder; provided that Equityholder Securities shall cease to be
Equityholder Securities when they have been transferred in a Public Sale.
"Equivalent Nonvoting Security" shall mean, with respect to
any security issued or to be issued by any Person, a security of such Person
that is identical in rights and benefits to such first security, except that (a)
the equivalent security shall not be entitled to vote on any matter on which
holders of voting securities of such Person are entitled to vote, other than as
required by applicable law or with respect to any amendment or repeal of any
provision of the organizational documents of such Person or any other agreement
or instrument pursuant to which the equivalent security was issued which
provision specifically affects such equivalent security, (b) subject to such
reasonable restrictions as any affected Regulated Holder may request (including
any restriction necessary to prevent the violation by such Regulated Holder of
any provision of applicable law with respect to its ownership of voting
securities), the equivalent security shall be convertible in a one-to-one ratio
into the first security and (c) the terms of the equivalent security shall
include such provisions requested by any affected Regulated Holder as are
reasonable and equitable to ensure that (i) the equivalent security is treated
comparably to the first security with respect to dividends, distributions, stock
or unit splits, reclassifications, capital reorganizations, mergers,
consolidations and other similar events and transactions, (ii) the conversion
right provided in clause (b) above is equitably protected and (iii) the
acquisition of the equivalent security will not cause such Regulated Holder to
violate applicable law.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any similar Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
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"Executive Group" means, collectively, Xxxxxxx X. Xxx and
Xxxxxx XxXxxxx Hay and any Transferee of any of the Equityholder Securities held
by the Executive Group during the term hereof (other than a member of the HIG
Group, the Paribas Group or the PCF Group) excluding any Transferee of
Equityholders Securities sold in any Public Sale.
"Family Group" means a Person's spouse, siblings, parents and
lineal descendants (whether natural or adopted) and the trustee of any trust
solely for the benefit of or a custodian under the Uniform Gifts to Minors Act
for, such Person and/or such Person's spouse, siblings, parents and/or lineal
descendants.
"Fully Diluted Basis" means, as applied to the calculation of
the total number of Company Shares outstanding at any time, after giving effect
to (a) all Company Shares outstanding at the time of determination and (b)
without duplication, the additional amount of Company Shares that would be
issuable if all outstanding rights, as of the time of calculation, to purchase,
exchange or convert Company Equity Securities were exercised (without regard to
any conditions, vesting, restrictions or other contingencies to exercise),
including the Warrants.
"HIG" means HIG Infomercial Company, a Cayman Islands company.
"HIG Group" means, collectively, HIG and any Transferee of any
of the Equityholder Securities held by a member of the HIG Group during the term
hereof (other than a member of the Executive Group, Paribas Group or PCF Group)
excluding any Transferee of Equityholders sold in a Public Sale.
"HIG Restricted Equity Securities" shall mean initially
103,450 shares of Common Stock (as adjusted for stock splits, dividends,
reclassifications and similar adjustments) initially issued to HIG and which
are then subject to redemption under the Redemption Agreement. As to any
particular HIG Restricted Equity Security, such security shall cease to be an
HIG Restricted Equity Security when a corresponding PCF Warrant exercisable into
the same number of such securities is redeemed by the Company.
"Independent Third Party" shall have the meaning provided for
in Section 2(f) hereof.
"Initial Public Offering" means the Company's first
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Company Equity
Securities to the public.
"Investor Group" means each of the Paribas Group and the PCF
Group.
"Investors" shall mean those Persons which are included within
any Investor Group.
"Losses" shall have the meaning provided in Section 3.6(a).
"Majority Holders " means holders of at least fifty-one
percent (51%) of the aggregate amount of all Company Equity Securities
determined on a Fully Diluted Basis.
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"Marketable Securities" shall mean equity securities that are
actively traded on a national securities exchange located in the United States
or on the Nasdaq Stock Market that are part of an issue with a pre-transaction
public capitalization in excess of $500 million and that may be freely traded
without any restriction under contract, law, rule or otherwise, including,
without limitation, any restriction as to volume on such exchange or the Nasdaq
Stock Market immediately following receipt thereof or at any time thereafter by
each holder of Company Equity Securities.
"Misstatement/Omission" shall have the meaning provided in
Section 3.6(a).
"NASD" means the National Association of Securities Dealers,
Inc.
"Other Equityholder Securities" means any Company Equity
Securities held by any members of the HIG Group or the Executive Group; provided
that Other Equityholder Securities shall cease to be Other Equityholder
Securities when they have been Transferred in a Public Sale.
"Other Equityholders" means all Equityholders other than the
Paribas Group and the PCF Group.
"Paribas Group" means, collectively, the Equityholders
identified in Schedule I hereto as the Paribas Group, and any Transferee of any
of the Equityholder Securities held by any member of the Paribas Group during
the term hereof (other than a member of the Executive Group, the HIG Group or
the PCF Group) excluding any Transferee of Equityholder Securities sold in any
Public Sale.
"Paribas Registrable Securities" means (i) any and all of the
Company Shares issued or issuable upon the exercise of the Warrants pursuant to
the Paribas Warrant Agreement, (ii) all Company Shares and Company Equity
Securities acquired by, or issued or issuable to, any Person included within the
Paribas Group or any of its respective Affiliates on or after the date hereof,
and (iii) any securities issued or issuable with respect to such Company Shares
and Company Equity Securities referred to in clauses (i) and (ii) above by way
of dividends or splits or in connection with a combination of units, membership
interests, securities, shares, recapitalization, merger, consolidation, or other
reorganization or otherwise. As to any particular Paribas Registrable
Securities, such securities will cease to be Paribas Registrable Securities when
they have been distributed to the public pursuant to an offering registered
under the Securities Act even if thereafter they are reacquired by such Person
included within the Paribas Group or any of its respective Affiliates or sold to
the public through a broker, dealer or market maker in compliance with Rule
144(k) under the Securities Act or any successor rule. The foregoing
notwithstanding, a security will not cease to be a Paribas Registrable Security
until all stop transfer instructions or notations and, if requested by the
registered Investor, restrictive legends with respect to such security have been
lifted or removed. For purposes of this Agreement, a Person will be deemed to be
a holder of Paribas Registrable Securities whenever such Person has the rights
to acquire directly or indirectly such Paribas Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected and such
Person shall be entitled to exercise the rights of a holder of Paribas
Registrable Securities hereunder.
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"Paribas Securities" means any Company Equity Securities held
by a Person included within the Paribas Group; provided that Paribas Securities
shall cease to be Paribas Securities and Equityholder Securities when they have
been transferred in a Public Sale.
"Paribas Warrant Agreement" means the Warrant Agreement dated
as of the date hereof by and between the Company and Paribas North America, Inc.
as amended, modified and supplemented from time to time.
"PCF Group" means, collectively, the Equityholders identified
in Schedule I hereto as the PCF Group, and any Transferee of any of the
Equityholder Securities held by any member of the PCF Group during the term
hereof (other than the Executives, HIG or a member of the Executive Group, the
HIG Group or the Paribas Group) excluding any Transferee of Equityholder
Securities sold in any Public Sale.
"PCF Registrable Securities" means (i) any and all of the
Company Shares issued or issuable upon the exercise of the Warrants pursuant to
the PCF Warrant Agreement, (ii) all Company Shares and Company Equity Securities
acquired by, or issued or issuable to, any Person included within the PCF Group
or any of its respective Affiliates on or after the date hereof, and (iii) any
securities issued or issuable with respect to such Company Shares and Company
Equity Securities referred to in clauses (i) and (ii) above by way of dividends
or splits or in connection with a combination of units, membership interests,
securities, shares, recapitalization, merger, consolidation, or other
reorganization or otherwise. As to any particular PCF Registrable Securities,
such securities will cease to be PCF Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act even if thereafter they are reacquired by such Person included
within the PCF Group or any of its respective Affiliates or sold to the public
through a broker, dealer or market maker in compliance with Rule 144(k) under
the Securities Act or any successor rule. The foregoing notwithstanding, a
security will not cease to be a PCF Registrable Security until all stop transfer
instructions or notations and, if requested by the registered Investor,
restrictive legends with respect to such security have been lifted or removed.
For purposes of this Agreement, a Person will be deemed to be a holder of PCF
Registrable Securities whenever such Person has the rights to acquire directly
or indirectly such PCF Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected and such Person shall be entitled to
exercise the rights of a holder of PCF Registrable Securities hereunder.
"PCF Securities" means any Company Equity Securities held by a
Person included within the PCF Group; provided that PCF Securities shall cease
to be PCF Securities and Equityholder Securities when they have been Transferred
in a Public Sale.
"PCF Warrant" shall mean the warrants issued pursuant to the
PCF Warrant Agreement.
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"PCF Warrant Agreement" means the Warrant Agreement dated as
of the date hereof by and between the Company and Paribas Capital Funding LLC,
as amended, modified and supplemented from time to time.
"Permitted Transferee" means any Transferee of Company Equity
Securities pursuant to a Permitted Transfer.
"Permitted Transfers" has the meaning set forth in Section
1(d).
"Person" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency, limited liability
company or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Piggyback Registration" shall have the meaning provided in
Section 3.2(a).
"Public Sale" means any sale of Company Equity Securities to
the public (i) pursuant to an offering registered under the Securities Act or
(ii) through a broker, dealer or market maker pursuant to the provisions of Rule
144 adopted under the Securities Act (or any similar rule then in effect).
"Qualified Public Offering" shall mean the date of any
underwritten public offering pursuant to an effective registration statement
under the Securities Act (other than an offering made in connection with a
business combination or acquisition or an employee benefit plan) covering the
offer and sale of Company Shares to the public with gross proceeds to the
Company of at least $25,000,000, and such Company Shares are listed on the New
York Stock Exchange, Inc. or quoted or listed on any other national securities
exchange or the National Market System of the Nasdaq Stock Market.
"Redemption Agreement" shall mean the Redemption Agreement,
dated as of the date hereof, between the Company and HIG.
"Registrable Securities" means, collectively, the PCF
Registrable Securities and the Paribas Registrable Securities.
"Registration Expenses" shall have the meaning provided in
Section 3.5(a).
"Registration Statement" means any registration statement
(including a shelf registration) under the Securities Act of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the related prospectus, all amendments and supplements to
such registration statement, including pre- and post-effective amendments, all
exhibits thereto and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
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"Regulated Holder" means any Equityholder (i) that, directly
or indirectly because of its ownership by an entity that is subject to
Regulation Y, is subject to the provisions of Regulation Y and (ii) that holds
Company Equity Securities.
"Regulation Y" means Regulation Y of the Board of Governors of
the Federal Reserve System, 12 C.F.R. Part 225 (or any successor to such
Regulation).
"Regulatory Problem" shall mean, with respect to any Investor,
any set of facts, events or circumstances the existence of which would cause
such Investor to believe that there is a substantial risk of assertion by a
governmental entity (which belief shall be reasonable in connection with the
prevailing regulatory environment) that such Investor is or would be in
violation of any law, regulation, rule or other requirement of any governmental
authority (including without limitation, the Bank Holding Company Act).
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any similar Federal statute, and the rules and regulations
of the Commission promulgated thereunder, all as the same shall be in effect at
the time.
"Shelf Registration" shall have the meaning set forth in
Section 3.1(a)(iii) of this Agreement.
"Stockholders Agreement" shall mean that certain Stockholders
Agreement of the Company, dated as of the date hereof by and among the Company
and the stockholders a party thereto.
"Subordinated Loan Documents" shall mean the Senior
Subordinated Loan Agreement dated as of June 10, 1999 among the Company and the
financial institutions party thereto from time to time, as amended and restated,
supplemented, restructured or otherwise modified from time to time (in whole or
in part and without limitation as to terms, conditions or covenants and without
regard to the principal amount thereof) and in effect, including without
limitation the Warrant Documents (as defined therein) and all related notes,
collateral documents, guaranties, instruments and agreements entered into in
connection therewith, and any successive restructurings, renewals, extensions or
refinancings thereof.
"Transfer" means any direct or indirect transfer, donation,
sale, assignment, pledge, hypothecation, grant of a security interest in or
other disposal or attempted disposal of all or any portion of a security
(including, without limitation, transfers pursuant to the laws of descent and
distribution). "Transferred" means the accomplishment of a Transfer, and
"Transferee" means the recipient of a Transfer.
"Warrant Shares" means (a) the Company Shares issued or
issuable upon exercise of a Warrant in accordance with the Paribas Warrant
Agreement and/or the PCF Warrant Agreement, as the case may be, or upon exchange
of a Warrant in accordance with the Paribas Warrant Agreement or the PCF Warrant
Agreement, as the case may be, and Company Shares issuable upon a future
exercise or exchange, (b) all other securities or other property issued or
issuable upon any
-29-
such exercise or exchange in accordance with the Paribas Warrant Agreement
and/or the PCF Warrant Agreement, as the case may be and (c) any securities of
the Company distributed with respect to, or issued upon the conversion of, the
securities referred to in the preceding clauses (a) and (b).
"Warrantholder" means any holder of Warrants or Warrant
Shares.
"Warrants" shall mean the warrants to purchase Warrant Shares
initially issued pursuant to the Paribas Warrant Agreement or the PCF Warrant
Agreement, as the case may be, and all such warrants issued in exchange or
replacement thereof.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Each party hereto,
individually and not jointly, hereby represents, warrants and covenants to the
remaining parties as follows: (a) such party has full authority and power under
its charter, bylaws, governing partnership or limited liability company
agreement or comparable document to enter into this Agreement (and, in the case
of individuals, such individual has full capacity to execute, deliver and
perform this Agreement); (b) this Agreement constitutes the valid and binding
obligation of such party except (i) as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the application of
equitable principles, whether applied by a court of equity or law; and (c) the
execution, delivery and performance by such party of this Agreement: (i) does
not and will not violate any laws, rules or regulations of the United States or
any state or other jurisdiction applicable to such party, or require such party
to obtain any approval, consent or waiver of, or to make any filing with, any
Person that has not been obtained or made; and (ii) does not and will not result
in a breach of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of any indenture or loan or credit agreement
or any other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which such party is a party or by which the property of
such party is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the assets or properties of such party, except as provided herein. No
Equityholder is a party to, or shall enter into, any agreement or other
arrangement of any kind with any Person with respect to Company Equity
Securities inconsistent with the provisions of this Agreement or which may
impair its ability to comply with this Agreement.
SECTION 6. MISCELLANEOUS.
Section 6.1 No Inconsistent Agreement. The registration rights
granted to the Investors hereby do not and shall not conflict with any other
registration rights granted by the Company, including without limitation, those
rights granted pursuant to the Stockholders Agreement. The Company shall not,
after the date hereof, grant any demand registration rights and shall not grant
any other registration rights which conflict with, impair or are otherwise
senior to or pari passu with the registration rights granted hereby.
Section 6.2 Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights specifically
to recover damages caused by reason
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of any breach of any provision of this Agreement and to exercise all other
rights provided in the Charter, the Credit Agreement the Subordinated Loan
Documents, the Paribas Warrant Agreement, the PCF Warrant Agreement or granted
by law. The parties hereto agree and acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and hereby
agree to waive the defense in any action for specific performance or injunctive
relief that a remedy at law would be adequate. Accordingly, any party may in its
sole discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
Section 6.3 Amendments and Waivers of this Agreement the
Stockholders Agreement and the Redemption Agreement. Except as otherwise
provided herein, the provisions of this Agreement, including the provisions of
this sentence, may be amended, modified, supplemented or waived only upon the
prior written consent of the Company and each of the Equityholder Groups. The
Company, HIG and the Executives shall not amend, modify or supplement any
provision of the Stockholders Agreement in a manner that is inconsistent with
the terms hereof or would adversely affect any rights of the Investors hereunder
without the prior written consent of the Investors. The Company and HIG shall
not amend, modify or supplement any provision of the Redemption Agreement.
Section 6.4 Successors and Assigns. All covenants and
agreements in this Agreement by or on behalf of any of the parties hereto will
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. In addition, the provisions of this
Agreement which are for the benefit of any Equityholder are also for the benefit
of, and enforceable by, any subsequent Equityholder which has executed a Joinder
Agreement. The Company may not assign its rights or obligations hereunder
without prior written consent of each Equityholder except by operation of law.
Section 6.5 Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any way
impaired or affected, it being intended that the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
Section 6.6 Counterparts. This Agreement may be executed in
any number of counterparts, any one of which need not contain the signatures of
more than one party, but each of which when so executed shall be deemed to be an
original and all such counterparts taken together shall constitute one and the
same Agreement.
Section 6.7 Descriptive Headings: Interpretation. The
descriptive headings of this Agreement are inserted for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. The use of the
word "including" in this Agreement shall be by way of example rather than by
limitation.
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Section 6.8 Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by reputable air
courier guaranteeing overnight delivery (charges prepaid), mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid or sent by facsimile. Such notices, demands and other communications
shall be sent to the Company and each Equityholder at the address indicated on
the signature pages hereto, or to such other address or to the attention of such
other person as the recipient party has specified by prior written notice to the
sending party. Any notice, demand or other communication given hereunder will be
deemed to have been given as of the date so delivered; as of the first business
day after being delivered to an overnight air courier guaranteeing overnight
delivery; on the fifth business day after being mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; as the case may be.
Section 6.9 GOVERNING LAW, SUBMISSION TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND THE REGISTRABLE SECURITIES, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
Section 6.10 Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
Section 6.11 Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the prevailing party, as determined by
the court, shall be entitled to recover attorneys' fees in addition to any other
available remedy.
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Section 6.12 Legend. Each certificate evidencing Equityholder
Securities and each certificate issued in exchange for or upon the transfer of
any Equityholder Securities (if such Equityholder Securities remain Equityholder
Securities subject to the restrictions of this Agreement after such transfer)
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
The securities evidenced hereby were originally issued in a
transaction exempt from registration under Section 5 of the
United States Securities Act of 1933, as amended, and the
security evidenced hereby may not be offered, sold or otherwise
transferred in the absence of such registration or an
applicable exemption therefrom. The securities represented by
this certificate are subject to an Equityholders Agreement
dated as of June 10, 1999, among the issuer of such securities
(the "Company") and certain investors, as amended and modified
from time to time. A copy of such agreement shall be furnished
without charge by the Company to the holder hereof upon written
request.
The Company shall imprint such legend on certificates evidencing Company Equity
Securities outstanding as of the date hereof. The first sentence of the legend
set forth above may (at the request of the holder thereof) be removed from the
certificates evidencing Company Equity Securities which cease to be Registrable
Securities in accordance with the definitions in Section 4 hereof and the second
sentence of the legend set forth above may (at the request of the holder
thereof) be removed from the certificates evidencing Company Equity Securities
which cease to be Equityholder Securities in accordance with the definitions in
Section 4 hereof.
Section 6.13 Conflict. In the event of any conflict between
the terms of this Agreement and the Charter, the terms and provisions of this
Agreement shall control and govern in all respects.
Section 6.14 New Equityholders. Notwithstanding anything to
the contrary contained in the Charter, immediately upon the exercise of a
Warrant, the holders of Company Shares to be issued pursuant to such Warrant
shall have become equityholders of the Company upon such Persons' compliance
with the terms of such Warrant alone (and no further action shall be required by
any Person) and shall not be subject to any requirement or consents or approvals
other than those contained in the Warrant itself.
* * * * *
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IN WITNESS WHEREOF the parties hereto have or have caused this
Agreement to be duly executed as of the date first above written.
Notice Address: THANE INTERNATIONAL, INC.
00-000 Xxxxx Xxxxxxx
Xx Xxxxxx, Xxxxxxxxxx 00000 By: /s/
Attention: Xxxxxxx Xxx ------------------------------------
Telephone: Name:
Facsimile: Title:
with a copy to:
HIG Infomercial Company
c/o HIG Capital Management, Inc.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Notice Address: PARIBAS CAPITAL FUNDING LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 By /s/
Attention: Xxxxxx Xxxxxxx --------------------------------------
Telephone: 000-000-0000 Name:
Facsimile: 000-000-0000 Title:
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
[Equityholders Agreement signature page]
Notice Address: PARIBAS NORTH AMERICA, INC.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 By /s/ Xxxx X. Xxxxxxxx
Attention: Xxxxxxx Xxxxxxx --------------------------------------
Telephone: 000-000-0000 Name: Xxxx X. Xxxxxxxx
Facsimile: 000-000-0000 Title: Financial Controller
with a copy to:
O'Melveny & Xxxxx LLP
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxx Xxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Notice Address: HIG INFOMERCIAL COMPANY
c/o HIG Capital Management, L.L.C.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000 By: /s/
Xxxxx, Xxxxxxx 00000 -------------------------------------
Attention: Xxxxxxxx Xxxxxxx Name:
Telephone: 000-000-0000 Title:
Facsimile: 000-000-0000
with a copy to:
White & Case LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
[Equityholders Agreement signature page]
Notice Address:
49-455 Cochella /s/ Xxxxxxx X. Xxx
Xx Xxxxxxx, Xxxxxxxxxx 00000 -----------------------------------------
XXXXXXX X. XXX
Notice Address:
49-455 Cochella /s/ Xxxxxx Xxxxxxx Hay
Xx Xxxxxxx, Xxxxxxxxxx 00000 -----------------------------------------
XXXXXX XXXXXXX HAY
[Equityholders Agreement signature page]
SCHEDULE 1
Paribas Group
Paribas North America, Inc.
PCF Group
Paribas Capital Funding LLC
Executive Group
Xxxxxxx X. Xxx
Xxxxxx XxXxxxx Hay
HIG Group
HIG Infomercial Company
EXHIBIT A
Form of Joinder Agreement
The undersigned hereby becomes a party to the Equityholders Agreement
(the "Agreement") dated June 10, 1999 among Thane International, Inc. and the
several parties thereto from time to time, and agrees to be subject to and
fully bound by the terms of the Agreement from and after the date hereof. As of
the date hereof, the undersigned makes each of the representations and
warranties set forth in Section 5 of the Agreement as to itself.
[Date]
----------------------------------------
[NAME OF UNDERSIGNED]
Address for Notices:
----------------------------------------
----------------------------------------
Equityholder Group Designation, if any:
----------------------------------------
Accepted this ____ day of
___________ , _____
THANE INTERNATIONAL, INC.
By: ----------------------------
Name:
Title:
