Exhibit 10.12
EXECUTION COPY
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (this "Agreement") is entered
into as of September 7, 2004, by and between XXXXXXXX'X INC., a Delaware
corporation (the "Company"), and JEWELRY INVESTORS II, L.L.C., a Delaware
limited liability company (the "Investor").
RECITALS
WHEREAS, the Investor is participating in a restructuring
(the "Restructuring") of the Company's Amended and Restated Credit Agreement,
dated as of August 28, 2002, as amended, by and among the lending institutions
parties thereto, The CIT Group/Business Credit, Inc., PNC Bank, N.A., Bank of
America, N.A., the Company and certain of its subsidiaries, pursuant to which
it is providing to the Company a term loan in the amount of $67,500,000 (the
"Term Loan");
WHEREAS, as a condition to the closing of the Restructuring
(the "Closing"), and pursuant to the terms of the Restructuring, the Company
will, at the Closing, issue Warrants (as defined below) to the Investor;
WHEREAS, the Company has agreed to register the shares of
Common Stock (as defined below) issued or issuable upon exercise of the
Warrants and to grant certain other rights to the Investor or the Holders (as
defined below), as more fully set forth herein.
AGREEMENT
In consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Additional Warrants" shall have the meaning assigned in
Section 7(c).
"Affiliate" shall mean with respect to any Person, any other
Person that is directly or indirectly controlling, controlled by or under
common control with such Person and the term "control" (including (with
correlative meanings) the terms "controlling," "controlled by" and "under
common control with") means having, directly or indirectly, the power to
direct or cause the direction of the management or policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York or the State of Georgia.
"Class B Common Stock" shall mean the share of Class B
Common Stock, par value $0.01 per share, of the Company.
"Commission" shall mean the Securities and Exchange
Commission or any other Federal agency at the time administering the
Securities Act.
"Common Stock" shall mean all of the shares of the Class A
Common Stock, par value $0.01 per share, of the Company, and any other
securities issued in replacement of or exchange for such shares in any
reclassification, recapitalization, reorganization, merger, consolidation,
share exchange, business combination or similar transaction.
"Common Stock Equivalents" shall mean any options, warrants,
rights or convertible securities exercisable or exchangeable for or
convertible into shares of Common Stock, including, without limitation, Class
B Common Stock, but excluding rights to acquire preferred stock of the Company
that are issued pro-rata to all holders of Common Stock and Class B Common
Stock pursuant to a shareholders' rights plan; provided, however, that such
shares of preferred stock or Common Stock Equivalents issuable upon the
conversion of or the exercise of rights under such preferred stock shall be
Common Stock Equivalents.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor Federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
"Holder" shall mean any Person that is a holder of
Registrable Securities, including for this purpose any holder of a Warrant,
with the number of shares of Registrable Securities held by such holder being
equal to the number of shares of Registrable Securities for which such Warrant
is exercisable.
"Initial Warrants" shall mean warrants to acquire an
aggregate of 3,000,000 shares of Common Stock issued to the Investor on the
date of the making of the Term Loan and any warrant or other right issued in
substitution or exchange therefore.
"Initiating Holders" shall mean any Holder or Holders of
shares of Common Stock that request registration thereof hereunder and who
own, in the aggregate, at least 10% of the Registrable Securities at the time
of such request.
"Person" shall mean an individual, proprietorship, trust,
estate, personal representative, partnership, limited liability company, joint
venture, association, company, corporation, government agency or other entity.
"Registrable Securities" shall mean the shares of Common
Stock or other securities issued or issuable upon exercise of the Warrants and
any other securities issued or issuable with respect to, upon exercise or
conversion of, or in exchange for Registrable Securities; provided, however,
that no securities shall be deemed Registrable Securities following (i) such
time as they have been sold pursuant to an effective registration statement
under the Securities Act or pursuant to Rule 144, or (ii) the eighth
anniversary of the date of this Agreement.
The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or
ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 2, 3 and 5, including, without
limitation, all registration and filing fees, printing, mailing and
distribution expenses, all fees and disbursements of the accountants and
counsel for the Company, blue sky fees and expenses for state qualifications
or registrations, the expense of the preparation and any audit of the
Company's financial statements incident to or required by any such
registration, and, as provided in Section 4, the fees and disbursements of one
counsel for the Holders participating in such registration.
"Regulation S-X" shall mean regulation S-X under the federal
securities laws, as it may be amended from time to time, and any successor
rule or regulation.
"Rule 144" shall mean Rule 144 under the Securities Act, as
it may be amended from time to time, and any successor rule or regulation.
"Rule 145" shall mean Rule 145 under the Securities Act, as
it may be amended from time to time, and any successor rule or regulation.
"Rule 415" shall mean Rule 415 under the Securities Act, as
it may be amended from time to time, and any successor rule or regulation.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor Federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and expense allowances applicable to the sale of
Registrable Securities in any specified public offering and, other than as
provided in Section 4, the fees and expenses of counsel for the Holders
participating in such public offering.
"Warrants" shall mean the Initial Warrants and the
Additional Warrants.
2. Demands for Registration.
(a) Requested Registrations.
(i) Upon the written request (a "Registration Request")
of the Initiating Holders that the Company effect the registration (a "Demand
Registration") of all or part of such Initiating Holders' Registrable
Securities, the Company shall use its commercially reasonable efforts to
effect, pursuant to Section 2(b), the registration of (x) the Registrable
Securities which the Company has been so requested to register by such
Initiating Holders, and (y) such Registrable Securities as are specified in
Demand Inclusion Notices of other Holders pursuant to Section 2(b)(ii);
provided, however, that (A) the Initiating Holders may not make a Registration
Request prior to three (3) months after the first date on which the Company
has available audited financial statements meeting the requirements of
Regulation S-X for inclusion in the registration statement to be filed
pursuant to such Registration Request; (B) the Company shall not be obligated
to effect a Demand Registration for fewer than 500,000 shares of Registrable
Securities (subject to adjustment for stock splits, reverse stock splits,
dividends, reclassifications, recapitalizations, or reorganizations); and (C)
the Company shall not be obligated to (1) effect more than an aggregate of two
Demand Registrations pursuant to this Section 2, or (2) effect a Demand
Registration within nine (9) months following the effective date of any prior
Demand Registration.
(ii) The Initiating Holders may, at any time prior to
the filing of a registration statement with the Commission in connection with
a Registration Request made pursuant to this Section 2, revoke such
Registration Request by providing a written notice to the Company revoking
such Registration Request and may, any time after the filing of such
registration statement and prior to the effective date thereof, request the
Company to withdraw such registration statement by providing a written notice
to the Company, whereupon the Company shall withdraw such registration
statement as promptly as practicable. If the Initiating Holders revoke any
Registration Request or the registration statement filed with the Commission
in connection with such Registration Request is withdrawn as aforesaid or
otherwise fails to become effective, the Registration Request made in
connection with such registration statement will not constitute a Demand
Registration for purposes of determining the number of Demand Registrations to
which the Holders are entitled hereunder.
(b) Obligations of the Company. Upon receipt by the
Company of a Registration Request pursuant to Section 2(a), the Company shall:
(i) give written notice ("Demand Notice") within 10
Business Days after receipt of the Registration Request and proposed
registration to all other Holders of Registrable Securities;
(ii) use its commercially reasonable efforts to file,
within ninety (90) days of the receipt of such Registration Request, a
registration statement on such form of the Commission as selected by the
Company in its good faith, and thereafter use its commercially reasonable
efforts (x) if the Company has been reviewed by the Commission in the three
(3) years preceding the date of filing of such registration statement, to
cause such registration statement to become and remain effective as soon as
practicable, but in no event later than sixty (60) days after the filing by
the Company of such registration statement, and (y) if the Company has not
been reviewed by the Commission in the three (3) years preceding the date of
filing of such registration statement, to cause such registration statement to
become and remain effective as soon as practicable, but in no event later than
ninety (90) days after the filing by the Company of such registration
statement, to permit the sale and distribution of the Registrable Securities
requested to be registered by the Initiating Holders and by the Holders of
Registrable Securities that give notice ("Demand Inclusion Notice") to the
Company that they desire to include Registrable Securities in such
registration, which notice shall state the number of Registrable Securities
requested to be so included and shall be given within thirty (30) days after
receipt of such Demand Notice from the Company; provided, however, that if at
the time a Registration Request is sent to the Company, the Company has
available audited financial statements meeting the requirements of Regulation
S-X and has filed an annual report on Form 10-K incorporating such financial
statements, the Company shall use its commercially reasonable efforts to file
such registration statement within forty five (45) days of receipt of such
Registration Request. If the Company shall receive a Demand Inclusion Notice,
it shall promptly inform the Initiating Holders of the Holders that gave such
Demand Inclusion Notice and the number of Registrable Securities stated in
such Demand Inclusion Notice; and
(iii) use its commercially reasonable efforts to
maintain the effectiveness of a registration statement filed pursuant to this
Section 2 for the period ending on the earlier of (x) two hundred seventy
(270) days following the effective date of such registration statement and (y)
the date on which all Registrable Securities covered by such registration
statement have been sold and the distribution contemplated thereby has been
completed.
(c) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwritten public offering, they shall so advise the Company in the
Registration Request and the Company shall include such information in the
Demand Notice. The Company, together with all Holders of Registrable
Securities proposing to distribute their securities through such underwritten
public offering, shall enter into an underwriting agreement in customary form
with the managing underwriter(s) selected for such underwritten public
offering by the Initiating Holders holding a majority of the Registrable
Securities proposed to be included in the Demand Registration, which
underwriter(s) shall be reasonably acceptable to the Company; provided,
however, that: (i) no Holder of Registrable Securities shall be required to
make any representations, warranties or indemnities except as they relate to
such Holder's ownership of Registrable Securities, any encumbrances thereon
created on permitted by such Holder, the authority of such Holder to enter
into, and perform its obligations under, the underwriting agreement, such
Holder's intended method of distribution and other information about such
Holder that the Company reasonably believes is necessary to comply with the
Securities Act; and (ii) the liability of such Holder under such underwriting
agreement shall be limited to an amount equal to the net proceeds from such
public offering received by such Holder.
Notwithstanding any other provision of this Section 2, if the
managing underwriter informs the Company in writing that in such underwriter's
good faith determination the total number of Registrable Securities which the
Holders intend to include in such underwritten public offering is such as to
affect adversely the success of such underwritten public offering, including
the price at which such securities can be sold, then the Company shall so
advise all Holders who requested to include Registrable Securities in such
offering and the number of shares of Registrable Securities that shall be
included in such underwritten public offering shall be reduced to the number
determined by the managing underwriting and such number shall be allocated
among all Holders requesting registration thereof in proportion (as nearly as
practicable) to the amount of Registrable Securities owned by each such Holder
at the time of the filing of the registration statement; provided, however,
that neither the Company nor any other Person shall be permitted to include any
shares of Common Stock in such underwritten offering unless the Registrable
Securities of all Holders who have elected to participate in such offering are
so included and in the determination of the managing underwriter can be sold in
such offering.
If any Holder participating in the registration in its sole
discretion disapproves of the terms of such underwritten public offering, such
Holder may elect to withdraw therefrom by written notice to such effect to
such managing underwriter, the Company and the Initiating Holders given not
later than 5 days prior to proposed effective date of the applicable
registration statement; provided, however, that no such withdrawal shall
prejudice such Holder's rights under this Agreement with respect to any other
registration of Registrable Securities. The securities so withdrawn shall also
be withdrawn from registration.
3. Piggyback Registration.
(a) If, at any time, the Company determines to register
any of its equity securities either for its own account or the account of a
security holder, other than (i) a registration relating solely to employee
benefit plans, or (ii) a registration relating solely to a Rule 145
transaction involving the acquisition of a business (but not a Rule 145
transaction designed solely to exchange restricted securities for registered
securities in a manner that is the functional equivalent of registration
rights), or (iii) a registration relating solely to options or warrants, or to
securities issuable in respect of options or warrants, which options or
warrants are sold in connection with an offering or issuance of debt
securities, the Company will: (x) promptly give to each Holder written notice
thereof, and (y) include in such registration (and any related qualification
under blue sky laws), and in any underwriting involved therein, all of the
Registrable Securities specified in a notice or notices to such effect given
by a Holder (a "Piggyback Inclusion Notice") within 30 days after receipt of
the written notice from the Company described in clause (x) of this Section
3(a), except to the extent set forth in Section 3(b). Such written request may
specify all or a part of a Holder's Registrable Securities.
(b) If a registration statement for which the Company
gives notice under Section 3(a)(x) is for an underwritten public offering, and
if the managing underwriter of such underwritten public offering has informed
the Company in writing, that in such underwriter's good faith determination
the total number of securities which the Company, such Holders and any other
persons desiring to participate in such registration intend to include in such
public offering is such as to adversely affect the success of such public
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration, only the number of
securities which it is so advised should be included in such registration and
the priority of securities that will be included in such registration and
underwriting shall be allocated as follows:
(i) first, if the notice provided by the Company in
Section 3(a)(x) resulted from the Company's determination to issue and sell
Common Stock in a public offering or pursuant to the demand registration
rights of any other security holder, then the shares of Common Stock which the
Company or such other security holder proposed to issue and sell as stated in
such notice;
(ii) second, the Registrable Securities which have been
requested to be included in such registration by the Holders in Piggyback
Inclusion Notices in proportion (as nearly as practicable) to the number of
Registrable Securities specified by Holders in such Piggyback Inclusion
Notices.
(iii) third, provided that no securities sought to be
included by the Holders of Registrable Securities have been excluded from such
registration, the securities of other Persons entitled to exercise "piggyback"
registration rights pursuant to contractual commitments of the Company (in
proportion (as nearly as practicable) to the number of securities or sought to
be registered by such Persons); and
(iv) fourth, provided that no securities of any other
Person have been excluded from such registration, any other securities which
the Company proposes to register, if any.
(c) If a registration statement for which the Company
gives notice under Section 3(a)(x) is for an underwritten public offering, the
Holders participating therein shall enter into the underwriting agreement for
such offering; provided, however, that (i) no Holder shall be required to make
any representations, warranties or indemnities except as they relate to such
Holder's ownership of Registrable Securities, any encumbrances thereon created
on permitted by such Holder, the authority of such Holder to enter into, and
perform its obligations under, the underwriting agreement, such Holder's
intended method of distribution and other information about such Holder that
the Company reasonably believes is necessary to comply with the Securities
Act; and (ii) the liability of such Holder under such underwriting agreement
shall be limited to an amount equal to the net proceeds from such public
offering received by such Holder.
(d) The Company may determine not to file or may
withdraw any registration statement of which the Company has given notice
pursuant to Section 3(a)(x)
4. Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with the registration and
qualification of Registrable Securities and the compliance by the Company with
applicable securities laws and all underwriting discounts, selling commissions
and expense allowances applicable to the sale of any securities by the Company
for its own account in any registration. All Selling Expenses applicable to
the sale of Registrable Securities shall be borne by the Holders, if any,
whose securities are included in such registration pro rata on the basis of
the number of their Registrable Securities so registered; provided, however,
that without limiting the foregoing, (i) the Company shall pay for (x) all of
the fees and disbursements of the Company's accountants and counsel, (y) all
expenses of its own employees and (z) all of the reasonable fees and
disbursements of one counsel for the Holders participating in such public
offering chosen by the majority-in-interest of such Holders; and (ii) if, in
such registration, the Company pays any expenses other than those included in
Selling Expenses for any of the other security holders, the Company will pay
such expenses for all of the Holders of Registrable Securities in such
registration.
5. Registration on Form S-3.
(a) As soon as the Company is entitled to register the
Registrable Securities for resale on Form S-3 (or any similar successor Form)
under the Securities Act, the Company shall file a registration statement on
Form S-3 (or any similar successor Form) for the resale of the Registrable
Securities from time to time pursuant to Rule 415 in such manner of
distribution as the Holders shall request, in the open market or in privately
negotiated transactions (including hedging or similar transactions), but not
for the purpose of resale in an underwritten public offering. The Company
shall cause such registration statement to become effective as soon as
reasonable practicable thereafter as possible and shall use its commercially
reasonable efforts to maintain the effectiveness of such registration
statement until all of the Registrable Securities can be publicly distributed
without registration pursuant to paragraph (k) of Rule 144.
6. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will inform in
writing each Holder who is entitled to registration rights hereunder as to the
initiation of each registration and as to the completion thereof. The Company
will, at its expense:
(a) Prepare and file with the Commission such amendments
and supplements, including, without limitation, post-effective amendments, to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the distribution of securities covered by
such registration statement and, subject to Section 6(l)(i), prepare and file
all necessary documents in order to qualify the sale of such Registrable
Securities under the blue sky law or other state securities laws for each
state in the United States reasonably requested by such Holders or
underwriter;
(b) Furnish such reasonable number of prospectuses and
other documents incident thereto, including supplements and amendments, as a
Holder may reasonably request;
(c) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances then
existing (in which case each Holder who can sell securities under such
registration statement will immediately suspend use of such registration
statement until it is supplemented or amended as provided herein), and at the
request of any such Holder, prepare and furnish to such Holder a reasonable
number of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchaser of such shares,
such prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;
(d) Use its commercially reasonable efforts to cause all
such Registrable Securities to be listed on each securities exchange or
interdealer quotation system on which the same securities issued by the
Company are then listed or, if none, such exchange or quotation system
determined by the Company;
(e) 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;
(f) Make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney or accountant
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney or
accountant in connection with such registration statement; provided, however,
that such seller, underwriter, attorney or accountant shall agree to hold in
confidence all information so provided;
(g) Whether or not the registration is for an
underwritten public offering, furnish to each selling Holder a signed
counterpart, addressed to the selling Holder, of (1) an opinion of counsel for
the Company, dated the effective date of the registration statement, and (2)
"comfort" letters signed by the Company's independent public accountants who
have examined and reported on the Company's financial statements included in
the registration statement, to the extent permitted by the standards of the
AICPA or other relevant authorities, covering substantially the same matters
with respect to the registration statement (and the prospectus included
therein) and (in the case of the accountants' "comfort" letters, with respect
to events subsequent to the date of the financial statements), in each case as
are customarily covered in opinions of issuer's counsel and in accountants'
"comfort" letters delivered to the underwriters in underwritten public
offerings of securities;
(h) Furnish to each selling Holder a copy of all
documents filed with and all correspondence from or to the Commission in
connection with any such offering other than nonsubstantive cover letters and
the like;
(i) Otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first month after the effective date
of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(j) In connection with any underwritten public offering,
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Registrable Securities, provided such underwriting agreement
contains customary underwriting provisions and provided further that if the
underwriter so requests the underwriting agreement will contain customary
indemnification and contribution provisions;
(k) From and after the date of this Agreement, not enter
into any agreement with any holder or prospective holder of any securities of
the Company giving such holder or prospective holder rights that adversely
affect, or are inconsistent with, the rights of the Holders of Registrable
Securities hereunder to require the Company to initiate registration of any
securities of the Company or to require the Company, upon registration of any
of its securities, to include, among the securities that the Company is then
registering, Registrable Securities owned by such Holder; and
(l) Notwithstanding the foregoing, the Company shall not
be obligated to take any action:
(i) pursuant to Sections 2, 3 or 5 (x) in any particular
non-U.S. jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service
in such jurisdiction and except as may be required by the Securities Act, (y)
in any non-U.S. jurisdiction in which the Company would be required to qualify
as a foreign corporation eligible to do business in such jurisdiction, if the
Company shall not then be so qualified in that jurisdiction or (z) in any
non-U.S. jurisdiction that would subject the Company to taxation where it
would not otherwise be subject to tax;
(ii) pursuant to Section 2 with respect to any request
for registration made by Initiating Holders during the period starting with
the date of filing of, and ending on the date ninety (90) days immediately
following the effective date of, any registration statement pertaining to an
underwritten public offering of equity securities by the Company, provided
that the Company is actively employing in good faith, commercially reasonable
efforts to cause such registration statement to become effective; or the
Company gives notice to the Holders of its bona fide intention to file such a
registration statement with the Commission within sixty (60) days of receipt
of such request and such registration statement is filed within such time
period;
(iii) pursuant to Section 2 or 5 if the Company shall
furnish to the Holders a certificate signed by the President or Chief
Executive Officer of the Company stating that the negotiation or consummation
of a transaction by the Company is pending or an event has occurred, which
negotiation, consummation or event in the reasonable judgment of the Company
would require additional disclosure by the Company in a registration statement
of material information which the Company (in the good faith judgment of its
Board of Directors) has a bona fide business purpose for keeping confidential
and the nondisclosure of which in the registration statement would cause the
registration statement to fail to comply with the disclosure requirements of
the Securities Act or the Exchange Act, in which case the Company's obligation
hereunder to file a registration statement, pursue its effectiveness or
maintain its effectiveness, shall be deferred for a period or periods not to
exceed forty-five (45) consecutive days or a total of ninety (90) days in any
12-month period, provided, however, that the Company may suspend the use of
any effective registration statement filed pursuant to Section 2 or 5 during
any period the Company's obligation to file a registration statement or to
pursue or maintain its effectiveness is deferred as provided in this Section
6(l)(iii);
(m) The Company shall take such other actions as shall
reasonably be requested by any Holder in connection with any registration
statement filed or required to be filed hereunder; and
(n) For avoidance of doubt, except where another
performance standard is specifically provided for in this Section 6, the
Company shall be required to act promptly using commercially reasonable
efforts.
7. Preemptive Rights; Additional Warrants.
(a) If the Company proposes to issue shares of Common
Stock or Common Stock Equivalents, then the Company shall first offer such
shares of Common Stock or Common Stock Equivalents to the Holders of
Registrable Securities, then outstanding, by notice stating the terms and
conditions of the proposed issuance. Each Holder shall have the right, but not
the obligation, to subscribe, on the aforesaid terms and conditions, for up to
that number of shares of Common Stock or Common Stock Equivalents that would
result in such Holder maintaining its proportionate interest in the Common
Stock represented by the Registrable Securities such Holder holds, determined
in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 as in
effect on the date of this Agreement.
(b) The provisions of Section 7(a) shall not apply to
the issuance of (i) shares of Common Stock or Common Stock Equivalents (A) as
compensation to directors, officers, employees and agents of and consultants
to the Company or any of its subsidiaries; (B) in connection with any merger,
reorganization, acquisition or similar business combination transaction; (C)
upon exercise, conversion or exchange of any Common Stock Equivalent; or (D)
in settlement of any claim or cause of action against the Company or any of
its subsidiaries, or (ii) rights to acquire preferred stock of the Company
that are issued pro-rata to all holders of Common Stock and Class B Common
Stock pursuant to a shareholders' rights plan; provided, however, that the
provisions of Section 7(a) shall apply to the issuance of such preferred stock
and shares of Common Stock or Common Stock Equivalents issued upon the
conversion of or the exercise of rights under such preferred stock.
(c) If the Term Loan remains outstanding on the third
(3rd) Business Day following the date which is the one year anniversary of the
date of the Closing, the Company will issue to the Investor or its assign an
additional warrant or warrants (the "Additional Warrants") to acquire an
aggregate of 1,000,000 shares of Common Stock having substantially the same
terms as the Initial Warrants, except that the expiration date of the
Additional Warrants shall be the date which is the fifth year anniversary of
the date of issuance of the Additional Warrants. The number and kind of
securities issuable upon exercise of the Additional Warrants shall be
appropriately adjusted to account for any recapitalization, reclassification,
stock split, sub-division, reverse stock split, stock dividend or similar
transaction involving the Common Stock or any merger, consolidation, share
exchange, reorganization sale of assets or similar transaction involving the
Company occurring following the date of this Agreement and prior to the
issuance of the Additional Warrants.
8. Indemnification.
(a) The Company shall indemnify each Holder, each of
their respective officers, managers, directors, agents, employees, partners
and members and each person "controlling" (within the meaning of the
Securities Act) the Investor or such Holder (each, a "Holder Indemnified
Party") with respect to each registration or qualification of Registrable
Shares effected pursuant to this Agreement, against all claims, losses,
damages and liabilities (or actions, proceedings or settlements in respect
thereto ("Claims or Damages")) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement or prospectus incident to any such registration or qualification, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Holder Indemnified Party for any legal and
any other expenses as they are incurred in connection with investigating and
defending any Claims or Damages, provided that the Company will not be liable
in any such case to the extent that any such Claims or Damages arise out of or
are based on any untrue statement (or alleged untrue statement) or omission
(or alleged omission) made in such registration statement or prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Party and stated to be specifically for use
therein.
(b) Each Holder whose Registrable Securities are
included in any registration or qualification effected pursuant to this
Agreement will, severally and not jointly, indemnify the Company, each of its
directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement and each person who
controls (within the meaning of the Securities Act) the Company or such
underwriter (each, a "Company Indemnified Party") and each other Holder
Indemnified Party against all Claims or Damages arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement or prospectus incident to any such
registration or qualification, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each Company
Indemnified Party and each such other Holder Indemnified Party for any legal
or any other expenses as they are incurred in connection with investigating or
defending any such Claims or Damages, in each case, to the extent, but only to
the extent, that any such Claims of Damages arise out of or are based upon any
untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in such registration statement or prospectus in reliance upon
and in conformity with written information furnished to the Company by such
Holder and stated to be specifically for use therein; provided, however, that
the obligations of a Holder hereunder shall be limited to an amount equal to
the net proceeds to such Holder from shares sold in such public offering.
(c) Each party entitled to indemnification under this
Section 8 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any Claims or Damages as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at the Indemnified Party's
expense; and provided, further that if any Indemnified Party reasonably
concludes that there may be one or more legal defenses available to it that
are not available to the Indemnifying Party, or that such claim or litigation
involves or could have an effect on matters beyond the scope of this
Agreement, then the Indemnified Party may retain its own counsel and defend
such claim or litigation at the expense of the Indemnifying Party; and
provided, further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement unless and only to the extent that such failure to give
notice results in material prejudice to the Indemnifying Party. In no event
shall an Indemnifying Party be liable for fees and expenses of more than one
counsel (in addition to one local counsel for each relevant jurisdiction)
separate from its own counsel for all Indemnified Parties in connection with
any one action or separate but similar or related actions. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation. Each Indemnified
Party shall furnish such information regarding itself or the claim in question
as an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(d) If the indemnification provided for in this Section
8 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any claim, loss, damage, liability or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such claim, loss,
damage, liability or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions
which resulted in such claim, loss, damage, liability or expense as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding anything to the contrary in this
Section 8, no Holder that is an Indemnifying Party shall be required, pursuant
to this Section 8, to indemnify or contribute any amount in excess of the net
proceeds received by such Indemnifying Party from the sale of securities in
the public offering to which the claims, losses, damages, liabilities or
expenses of the Indemnified Party relate.
9. Information by Holder. Each Holder of Registrable
Securities to be included in a registration referred to in this Agreement
shall furnish in writing to the Company such information regarding such
Holder, the securities to be offered and sold and the intended plan of
distribution of the securities by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration or qualification of any securities by the Company and shall
promptly advise the Company in writing of any material changes to such
information while any such registration or qualification is in effect. If any
such registration statement or qualification refers to a Holder or any of its
Affiliates, by name or otherwise, as the holder of any securities of the
Company then, unless counsel to the Company advises the Company that the
Securities Act requires that such reference be included in any such statement,
each such Holder shall have the right to require the deletion of such
reference to itself and its Affiliates.
10. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit
the sale of the Registrable Securities to the public without registration, the
Company agrees to:
(a) Use commercially reasonable efforts to make and keep
public information available, as those terms are understood and defined in
Rule 144;
(b) Use its commercially reasonable efforts to file with
the Commission in a timely manner all reports and other documents required to
be filed by the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of the Exchange
Act, a copy of the most recent annual or quarterly financial statements of the
Company, and such other reports and documents as an investor may reasonably
request in availing itself of any rule or regulation of the Commission
allowing an investor to sell any such securities without registration under
the Securities Act.
11. Transfer of Rights; Termination of Rights. The rights to
cause the Company to register a Holder's securities granted by the Company
under this Agreement may be transferred or assigned by a Holder to a
transferee of some or all of such Holder's Registrable Securities, provided
that: (i) the Company is given notice of such transfer, stating the name and
address of said transferee or assignee and identifying the Registrable
Securities with respect to which such registration rights are being
transferred or assigned, and (ii) such transfer of Registrable Securities is
not prohibited under the certificate of incorporation and by-laws of the
Company or applicable law.
12. Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of New York applicable to contracts
made and to be performed entirely in such State.
13. Entire Agreement. This Agreement supersedes and
terminates all prior agreements between any of the parties hereto with respect
to the subject matter contained herein, and this Agreement embodies the entire
understanding between the parties relating to such subject matter, and any and
all prior correspondence, conversations and memoranda are merged herein and
shall be without effect hereon.
14. Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto. Notwithstanding the foregoing, the Company shall not assign
any of its rights or obligations hereunder except by operation of law.
15. Notices, etc. All notices given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), facsimile or
overnight air courier guaranteeing next Business Day delivery:
(a) if to the Company:
Xxxxxxxx'x Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
and General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Four Times Square
New York, New York
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
or such other address or facsimile number
(or person's attention) as the Company may
designate in a notice to the Investor and
the Holders.
(b) if to the Investor:
Jewelry Investors II, L.L.C.
c/o Farallon Capital Management, LLC
Xxx Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
with a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
or such other address or facsimile number
(or person's attention) as the Investor
may designate in a notice to the Company.
(c) if to any Holder, to such address as such Holder shall
designate in a notice to the Company.
(d) Except as otherwise provided in this Agreement, each such
notice shall be deemed given at the time delivered by hand, if personally
delivered; five (5) Business Days after being deposited in the mail, postage
prepaid, if mailed; when properly transmitted, if delivered by facsimile; and
the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next Business Day delivery.
16. Amendments or Waivers. This Agreement, and any provision
hereof, may be amended, waived, discharged or terminated only by written
instrument signed by the Company and either (a) the Investor and a majority in
interest of the Holders, or (b) if the Investor no longer owns any Registrable
Securities, a majority in interest of the Holders.
17. Further Assurances. Each party hereto shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other waivers, agreements, certificates,
instruments and documents as any other party hereto may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
18. Non-Waiver. No delay on the part of any party in
exercising any right hereunder shall operate as a waiver thereof, nor shall
any waiver, express or implied, by any party of any right hereunder or of any
failure to perform or breach hereof by any other party constitute or be deemed
a waiver of any other right hereunder or of any other failure to perform or
breach hereof by the same or any other Holder, whether of a similar or
dissimilar nature thereof.
19. Injunctive Relief. Each of the parties hereto hereby
acknowledges that in the event of a breach by any of them of any provision of
this Agreement, the aggrieved party may be without an adequate remedy at law.
Each of the parties therefore agrees that in the event of such a breach or
threatened breach hereof, the aggrieved party may elect to institute and
prosecute proceedings in any court of competent jurisdiction and shall be
entitled to specific performance or to enjoin the breach hereof without the
requirement of posting any bond or security or proving that damages would be
inadequate. By seeking or obtaining any such relief, the aggrieved party will
not be precluded from seeking or obtaining any other relief to which it may be
entitled, and all remedies hereunder or at law or in equity shall be
cumulative.
20. 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 successful party shall be entitled to
recover reasonable attorneys' fees and all disbursements in addition to any
other available remedy.
21. Consent to Jurisdiction. All actions and proceedings
arising out of, or relating to, this Agreement may be heard and determined in
any state or federal court sitting in the county of Los Angeles in the State
of California. The undersigned, by execution and delivery of this Agreement,
expressly and irrevocably (a) consent and submit to the personal jurisdiction
of any of such courts in any such action or proceeding; (b) consent to the
service of any complaint, summons, notice or other process relating to any
such action or proceeding by delivery thereof to such party by hand or by
certified mail, delivered or addressed as set forth in Section 15; and (c)
waive any claim or defense in any such action or proceeding based on any
alleged lack of personal jurisdiction, improper venue or forum non conveniens
or any similar basis.
22. Severability. If any provision of this Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to the other parties or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
applicable law.
23. Miscellaneous.
(a) Section headings are for convenience of reference
only and shall not be used to construe the meaning of any provision of this
Agreement.
(b) This Agreement may be executed in counterparts, each
of which shall be an original, and all of which shall together constitute one
agreement.
(c) Any word or term used in this Agreement in any form
shall be masculine, feminine, neuter, singular or plural, as proper reading
requires. The words "herein," "hereof," "hereunder," "hereby" or "hereto"
shall refer to this Agreement as a whole unless otherwise expressly provided.
Any reference herein to a Section shall be a reference to a Section of this
Agreement unless the context otherwise requires.
24. WAIVER OF JURY TRIAL. THE COMPANY, THE INVESTOR AND ANY
HOLDER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER IN
CONTRACT, STATUE, TORT (SUCH AS NEGLIGENCE) OR OTHERWISE) ARISING UNDER OR
RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
XXXXXXXX'X INC.
By: /s/ Xxx Xxxxxx
----------------------------------
Name: Xxx Xxxxxx
Title: Chief Executive Officer
JEWELRY INVESTORS II, L.L.C.
By: Farallon Capital Management, LLC
its member
By: /s/ Xxxxx Xxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxx
Title: Managing Member
