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EXHIBIT 2.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made and
entered into as of ________ __, 1999, between Daisytek International
Corporation, a Delaware corporation ("Daisytek International"), Daisytek,
Incorporated, a Delaware corporation and wholly-owned subsidiary of Daisytek
International ("Daisytek"), and PFSweb, Inc., a Delaware corporation and
wholly-owned subsidiary of Daisytek (the "Company").
WHEREAS, the Board of Directors of Daisytek has determined that it
would be appropriate and desirable to completely separate the Company's
business from Daisytek;
WHEREAS, Daisytek has caused the Company to be incorporated in order
to effect such separation;
WHEREAS, Daisytek, Daisytek International and the Company have entered
into a Master Separation Agreement and certain ancillary agreements, pursuant
to which Daisytek has contributed and transferred to the Company, and the
Company has received and assumed, the assets and liabilities then associated
with the Company's business as described therein;
WHEREAS, Daisytek, Daisytek International and the Company intend that
this contribution qualify as a tax-free reorganization under Section
368(a)(1)(D) of the Internal Revenue Code;
WHEREAS, Daisytek currently owns all of the issued and outstanding
shares of the Company's common stock (the "Common Stock");
WHEREAS, the Company is offering and selling to the public (the "IPO")
by means of a Registration Statement (File No. 333- ) filed with the Securities
and Exchange Commission (the "SEC") on Form S-1 (the "Registration Statement")
shares of its Common Stock;
WHEREAS, immediately following the consummation of the IPO, Daisytek
shall own not less than 80% of the outstanding shares of Common Stock;
WHEREAS, within 12 months following the IPO, Daisytek intends to
divest itself of its entire ownership of the Company through a tax-free
distribution to Daisytek International, to be immediately followed by a
tax-free distribution by Daisytek International to the holders of Daisytek
International common stock (the "Distribution");
WHEREAS, Daisytek, Daisytek International and the Company intend that
the Distribution will be tax-free to Daisytek, Daisytek International and its
stockholders under Section 355 of the Code; and
WHEREAS, Daisytek, Daisytek International and the Company are entering
into an Initial Public Offering and Distribution Agreement to set forth certain
agreements with respect to the IPO and the Distribution; and
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WHEREAS, if Daisytek or Daisytek International determine not to
complete the Distribution, or the Distribution is abandoned without Daisytek or
Daisytek International divesting itself of 100% of the Common Stock it owns,
the Company desires to make certain arrangements to provide Daisytek and
Daisytek International with registration rights with respect to shares of
Common Stock it then holds;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and intending to be legally bound
hereby, the parties hereby agree as follows:
Section 1. Effectiveness of Agreement; Term.
1.1 Effective Date. This Agreement shall become effective upon the
date that Daisytek or Daisytek International provides to the Company written
notice (the "Abandonment Notice") that it no longer intends to proceed with or
complete the Distribution (the "Effective Date").
1.2 Shares Covered. This Agreement covers those shares of Common Stock
that are held by Daisytek immediately following the IPO and continue to be held
by Daisytek or Daisytek International as of the date of the Abandonment Notice
(subject to the provisions of Section 7, the "Shares"). The "Shares" shall
include any securities issued or issuable with respect to the Shares by way of
a stock dividend or a stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
Daisytek, Daisytek International and any Permitted Transferees (as
defined in Section 2.5) are each referred to herein as a "Holder" and
collectively as the "Holders" and the Holders of Shares proposed to be included
in any registration under this Agreement are each referred to herein as a
"Selling Holder" and collectively as the "Selling Holders."
Section 2. Demand Registration.
2.1 Notice. Upon the terms and subject to the conditions set forth
herein, upon written notice of any Holder requesting that the Company effect
the registration under the Securities Act of 1933, as amended (the "Securities
Act"), of any or all of the Shares held by it, which notice shall specify the
intended method or methods of disposition of such Shares (which methods may
include, without limitation, a Shelf Registration, a Convertible Registration
or an Exchange Registration (as such terms are defined in Section 2.6)), the
Company will promptly give written notice of the proposed registration to all
other Holders and will use its best efforts to effect (at the earliest
reasonable date) the registration under the Securities Act of such Shares (and
the Shares of any other Holders joining in such request as are specified in a
written notice received by the Company within 20 days after receipt of the
Company's written notice of the proposed registration) for disposition in
accordance with the intended method or methods of disposition stated in such
request (each registration request pursuant to this Section 2.1 is sometimes
referred to herein as a "Demand Registration"); provided, however, that:
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(a) the Company shall not be obligated to effect registration
with respect to Shares pursuant to this Section 2 within 90 days after the
effective date of a previous registration, other than a Shelf Registration,
effected with respect to Shares pursuant to this Section 2;
(b) if, while a registration request is pending pursuant to this
Section 2, the Company determines in the good faith judgment of counsel of the
Company that such registration would reasonably be expected to have a material
adverse effect on any existing proposal or plans by the Company or any of its
subsidiaries to engage in any material acquisition, merger, consolidation,
tender offer, other business combination, reorganization, securities offering
or other material transaction, the Company may postpone for up to 90 days the
filing or effectiveness of such registration; provided, however, that the
Company may delay a Demand Registration hereunder only once in any 12 month
period;
(c) except in the case of a Convertible Registration or an
Exchange Registration, the number of the Shares registered pursuant to any
registration requested pursuant to this Section 2 shall have an aggregate
expected offering price of at least $10 million; and
(d) if a Demand Registration is an underwritten offering and the
managing underwriters advise the Company in writing that in their opinion the
number of Shares requested to be included in such offering exceeds the number
of Shares which can be sold in an orderly manner in such offering within a
price range acceptable to the Holders of a majority of the Shares initially
requesting such registration or without materially adversely affecting the
market for the Common Stock, the Company shall include in such registration the
number of Shares requested to be included therein which in the opinion of such
underwriters can be sold in an orderly manner within the price range of such
offering and without materially adversely affecting the market for the Common
Stock, pro rata among the respective Holders thereof on the basis of the amount
of Shares owned by each Holder requesting inclusion of Shares in such
registration.
2.2 Registration Expenses. All Registration Expenses (as defined in
Section 8) for any registration requested pursuant to this Section 2 (including
any registration that is delayed or withdrawn) shall be paid by the Company.
2.3 Selection of Professionals. The Holders of a majority of the
Shares included in any Demand Registration shall have the right to select the
investment banker(s) and manager(s) to administer the offering; provided,
however, that if such Holders select an investment banker or manager that was
not one of the managers of the IPO, such investment banker or manager shall not
administer such offering if the Company reasonably objects thereto. The Holders
of a majority of the Shares included in any Demand Registration shall have the
right to select the financial printer, the solicitation and/or exchange agent
(if any) and one counsel for the Selling Holders. The Company shall select its
own outside counsel and independent auditors.
2.4 Third Person Shares. The Company shall have the right to cause the
registration of securities for sale for the account of any Person (including
the Company) other than the Selling Holders (the "Third Person Shares") in any
registration of the Shares requested pursuant to this Section 2 so long as the
Third Person Shares are disposed of in accordance with the intended
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method or methods of disposition requested pursuant to this Section 2;
provided, however, that the Company shall not have the right to cause the
registration of such securities of such other Persons if the registration
requested pursuant to this Section 2 is a Convertible Registration or an
Exchange Registration.
If a Demand Registration in which the Company proposes to include
Third Person Shares is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Shares and
Third Person Shares requested to be included in such offering exceeds the
number of Shares and Third Person Shares which can be sold in an orderly manner
in such offering within a price range acceptable to the Holders of a majority
of the Shares initially requesting such registration or without materially
adversely affecting the market for the Common Stock, the Company shall not
include in such registration any Third Person Shares unless all of the Shares
initially requested to be included therein are so included.
2.5 Permitted Transferees. As used in this Agreement, "Permitted
Transferees" shall mean any transferee, whether direct or indirect, of Shares
designated by Daisytek or Daisytek International (or a subsequent holder) in a
written notice to the Company as provided for in Section 9.7. Any Permitted
Transferees of the Shares shall be subject to and bound by all of the terms and
conditions herein applicable to Holders. The notice required by this Section
2.5 shall be signed by both the transferring Holder and the Permitted
Transferees so designated and shall include an undertaking by the Permitted
Transferees to comply with the terms and conditions of this Agreement
applicable to Holders.
2.6 Shelf Registration; Convertible Registration; Exchange
Registration. With respect to any Demand Registration, the requesting Holders
may request the Company to effect a registration of the Shares (a) under a
registration statement pursuant to Rule 415 under the Securities Act (or any
successor rule) (a "Shelf Registration"); (b) in connection with such Holders'
registration under the Securities Act of securities (the "Convertible
Securities") convertible into, exercisable for or otherwise related to the
Shares (a "Convertible Registration"); or (c) in connection with such Holders'
offer to exchange the Shares for any debt or equity securities of such Holders,
a subsidiary or affiliate thereof or any other Person (an "Exchange
Registration").
2.7 SEC Form. The Company shall use its best efforts to cause Demand
Registrations to be registered on Form S-3 (or any successor form), and if the
Company is not then eligible under the Securities Act to use Form S-3, Demand
Registrations shall be registered on Form S-1 (or any successor form). If a
Demand Registration is a Convertible Registration or an Exchange Registration,
the Company shall effect such registration on the appropriate Form under the
Securities Act for such registrations. The Company shall use its best efforts
to become eligible to use Form S-3 and, after becoming eligible to use Form
S-3, shall use its best efforts to remain so eligible.
2.8 Other Registration Rights. The Company shall not grant to any
Persons the right to request the Company to register any equity securities of
the Company, or any securities
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convertible or exchangeable into or exercisable for such securities unless such
rights are consistent with the rights granted under this Agreement.
Section 3. Piggyback Registrations.
3.1 Notice and Registration. If the Company proposes to register any
of its securities for public sale under the Securities Act (whether proposed to
be offered for sale by the Company or any other Person), on a form and in a
manner which would permit registration of the Shares for sale to the public
under the Securities Act (a "Piggyback Registration"), it will give prompt
written notice to the Holders of its intention to do so, and upon the written
request of any or all of the Holders delivered to the Company within 20 days
after the giving of any such notice (which request shall specify the Shares
intended to be disposed of by such Holders), the Company will use its best
efforts to effect, in connection with the registration of such other
securities, the registration under the Securities Act of all of the Shares
which the Company has been so requested to register by such Holders (which
shall then become Selling Holders), to the extent required to permit the
disposition (in accordance with the same method of disposition as the Company
proposes to use to dispose of the other securities) of the Shares to be so
registered; provided, however, that:
(a) if, at any time after giving such written notice of its
intention to register any of its other securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such other
securities, the Company may, at its election, give written notice of such
determination to the Selling Holders (or, if prior to delivery of the Holders'
written request described above in this Section 3.1, the Holders) and thereupon
the Company shall be relieved of its obligation to register such Shares in
connection with the registration of such other securities (but not from its
obligation to pay Registration Expenses to the extent incurred in connection
therewith as provided in Section 3.3), without prejudice, however, to the
rights (if any) of any Selling Holders immediately to request (subject to the
terms and conditions of Section 2) that such registration be effected as a
registration under Section 2;
(b) the Company shall not be required to effect any registration
of the Shares under this Section 3 incidental to the registration of any of its
securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
employee benefit plans of the Company;
(c) if a Piggyback Registration is an underwritten primary
registration on behalf of the Company and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without materially adversely affecting the marketability of the
offering or the market for the Common Stock, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Shares requested to be included in such registration, pro rata
among the Holders of such Shares on the basis of the number of Shares owned by
each such Holder, and (iii) third, any other securities requested to be
included in such registration; and
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(d) if a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities entitled to
demand registration thereof and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
without materially adversely affecting the marketability of the offering or the
market for the Common Stock, the Company shall include in such registration (i)
first, the securities requested to be included therein by the holders
requesting such registration and the Shares requested to be included in such
registration, pro rata among the holders of such securities on the basis of the
number of securities owned by each such holder, and (ii) second, any other
securities requested to be included in such registration.
No registration of the Shares effected under this Section 3 shall relieve the
Company of its obligation to effect a registration of Shares pursuant to
Section 2.
3.2 Selection of Professionals. If any Piggyback Registration is an
underwritten offering and any of the investment banker(s) or manager(s)
selected to administer the offering was not one of the managers of the IPO,
such investment banker or manager shall not administer such offering if the
Holders of a majority of the Shares included in such Piggyback Registration
reasonably object thereto. The Holders of a majority of the Shares included in
any Piggyback Registration shall have the right to select one counsel for the
Selling Holders. The Company shall select its own outside counsel and
independent auditors.
3.3 Registration Expenses. The Company will pay all of the
Registration Expenses in connection with any registration pursuant to this
Section 3.
Section 4. Registration Procedures.
4.1 Registration and Qualification. If and whenever the Company is
required to use its best efforts to effect the registration of any of the
Shares under the Securities Act as provided in Sections 2 and 3, including an
underwritten offering pursuant to a Shelf Registration, the Company will as
promptly as is practicable:
(a) prepare and file with the SEC a registration statement with
respect to such Shares and use its best efforts to cause such registration
statement to become effective; provided that before filing a registration
statement or prospectus or any amendments or supplement thereto, the Company
shall furnish to the counsel selected by the Holders of a majority of the
Shares covered by such registration statement copies of all such documents
proposed to be filed (which documents shall be subject to the review and
reasonable comment of such counsel);
(b) except in the case of a Shelf Registration, Convertible
Registration or Exchange Registration, prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith 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 of the Shares until the earlier of (i)
such time as all of such
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Shares have been disposed of in accordance with the intended methods of
disposition set forth in such registration statement or (ii) the expiration of
nine months after such registration statement becomes effective;
(c) in the case of a Shelf Registration (but not including any
Convertible Registration), prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith 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 Shares subject thereto for a period ending on the
earlier of (i) 18 months after the effective date of such registration
statement and (ii) the date on which all the Shares subject thereto have been
sold pursuant to such registration statement (the "Shelf Effective Period");
(d) in the case of a Convertible Registration or an Exchange
Registration, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith 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 of the Shares subject thereto until such time as the rules, regulations and
requirements of the Securities Act and the terms of the Convertible Securities
no longer require such Shares to be registered under the Securities Act (the
"Convertible Effective Period");
(e) furnish to the Selling Holders and to any underwriter of such
Shares such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act, such
documents incorporated by reference in such registration statement or
prospectus, and such other documents as the Selling Holders or such underwriter
may reasonably request;
(f) use its best efforts to register or qualify all of the Shares
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as the Selling Holders or any underwriter of such
Shares shall reasonably request, and do any and all other acts and things which
may be necessary or advisable to enable the Selling Holders or any underwriter
to consummate the disposition in such jurisdictions of the Shares covered by
such registration statement, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction where it is not so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction;
(g) (i) furnish to the Selling Holders, addressed to them, an
opinion of counsel for the Company and (ii) use its best efforts to furnish to
the Selling Holders, addressed to them, a "cold comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in such registration statement, covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters
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delivered to underwriters in underwritten public offerings of securities and
such other matters as the Selling Holders may reasonably request, in each case,
in form and substance and as of the dates reasonably satisfactory to the
Selling Holders;
(h) immediately notify the Selling Holders, at any time when a
prospectus relating to a registration pursuant to Section 2 or 3 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
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,
not misleading, and at the request of the Selling Holders prepare and furnish
to the Selling Holders 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 purchasers 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, in
light of the circumstances under which they are made, not misleading.
(i) permit any Selling Holder which Selling Holder, 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;
(j) to make available members of management of the Company, as
selected by the Holders of a majority of the Shares included in such
registration, for assistance in the selling effort relating to the Shares
covered by such registration, including, but not limited to, the participation
of such members of the Company's management in road show presentations.
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company shall use it best efforts promptly to obtain the
withdrawal of such order; and
(l) use its best efforts to cause Shares covered by such
registration statement to be registered with or approved by such other
government agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Shares.
The Company may require the Selling Holders to furnish the Company
with such information regarding the Selling Holders and the distribution of
such Shares as the Company may from time to time reasonably request in writing
and as shall be required by law, the SEC or any securities exchange on which
any shares of Common Stock are then listed for trading in connection with any
registration.
4.2 Underwriting. If requested by the underwriters for any
underwritten offering in connection with a registration requested hereunder
(including any registration under Section 3
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which involves, in whole or in part, an underwritten offering), the Company
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution to the effect and to the
extent provided in Section 6 and the provision of opinions of counsel and
accountants' letters to the effect and to the extent provided in Section
4.1(g). The Company may require that the Shares requested to be registered
pursuant to Section 3 be included in such underwriting on the same terms and
conditions as shall be applicable to the Other Securities being sold through
underwriters under such registration; provided, however, that no Selling Holder
shall be required to make any representations or warranties to the Company or
the underwriters (other than representations and warranties regarding such
Holder and such Holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in Section 6 hereof. The Selling Holders
shall be parties to any such underwriting agreement, and the representations
and warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to and for the benefit
of such Selling Holders.
4.3 Blackout Periods for Shelf Registrations.
(a) At any time when a Shelf Registration effected pursuant to
Section 2 relating to the Shares is effective, upon written notice from the
Company to the Selling Holders that the Company determines in the good faith
judgment of the general counsel of the Company that the Selling Holders' sale
of the Shares pursuant to the Shelf Registration would require disclosure of
material information which the Company has a bona fide business purpose for
preserving as confidential and the disclosure of which would have a material
adverse effect on the Company or the Company is unable to comply with SEC
requirements (an "Information Blackout"), the Selling Holders shall suspend
sales of the Shares pursuant to such Shelf Registration until the earlier of
(i) the date upon which such material information is disclosed to the public or
ceases to be material, (ii) 90 days after counsel of the Company makes such
good faith determination or (iii) such time as the Company notifies the Selling
Holders that sales pursuant to such Shelf Registration may be resumed (the
number of days from such suspension of sales of the Selling Holders until the
day when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period").
(b) If there is an Information Blackout and the Selling Holders
do not notify the Company in writing of their desire to cancel such Shelf
Registration, the period set forth in Section 4.1(c)(i) shall be extended for a
number of days equal to the number of days in the Sales Blackout Period.
4.4 Listing. In connection with the registration of any offering of
the Shares pursuant to this Agreement, the Company agrees to use its best
efforts to effect the listing of such Shares on any securities exchange on
which any shares of the Common Stock are then listed or otherwise facilitate
the public trading of such Shares.
4.5 Holdback Agreements.
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(a) The Company shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any registration statement in
connection with a Demand Registration (other than a Shelf Registration) or a
Piggyback Registration, except pursuant to registrations on Form S-8 or any
successor form or unless the underwriters managing any such public offering
otherwise agree.
(b) If the Holders of Shares notify the Company in writing that
they intend to effect an underwritten sale of Shares registered pursuant to a
Shelf Registration pursuant to Section 2 hereof, the Company shall not effect
any public sale or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for its equity securities,
during the seven days prior to and during the 90-day period beginning on the
date such notice is received, except pursuant to registrations on Form S-8 or
any successor form or unless the underwriters managing any such public offering
otherwise agree.
(c) If the Company completes an underwritten registration with
respect to any of its securities (whether offered for sale by the Company or
any other Person) on a form and in a manner that would have permitted
registration of the Shares and no Holder requested the inclusion of any Shares
in such registration, the Holders shall not effect any public sales or
distributions of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, until the
termination of the holdback period required from the Company by any
underwriters in connection with such previous registration, but in no event
more than 90 days from the effective date of such registration.
Section 5. Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering the
Shares under the Securities Act and each sale of the Shares thereunder, the
Company will give the Selling Holders and the underwriters, if any, and their
respective counsel and accountants, access to its financial and other records,
pertinent corporate documents and properties of the Company and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of the Selling Holders and such underwriters
or their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
Section 6. Indemnification and Contribution.
(a) In the event of any registration of any of the Shares
hereunder, the Company will enter into customary indemnification arrangements
to indemnify and hold harmless each of the Selling Holders, each of their
respective directors and officers, each Person (as defined in (e) below) who
participates as an underwriter in the offering or sale of such securities, each
officer and director of each underwriter, and each Person, if any, who controls
each such Selling Holder or any such underwriter within the meaning of the
Securities Act (collectively, the "Covered Persons") against any losses,
claims, damages, liabilities and expenses, joint or several, to which such
Person may be subject under the Securities Act or otherwise insofar as such
losses, claims,
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damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any related registration statement
filed under the Securities Act, any preliminary prospectus or final prospectus
included therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) 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 the Company will reimburse each
such Covered Person, as incurred, for any legal or any other expenses
reasonably incurred by such Covered Person in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus or final prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Selling Holder or such underwriter
specifically for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
any such Covered Person and shall survive the transfer of such securities by
the Selling Holders. The Company also shall agree to provide for contribution
as shall reasonably be requested by the Selling Holders or any underwriters in
circumstances where such indemnity is held unenforceable.
(b) Each of the Selling Holders, by virtue of exercising its
respective registration rights hereunder, agree and undertake to enter into
customary indemnification arrangements to indemnify and hold harmless (in the
same manner and to the same extent as set forth in clause (a) of this Section
6) the Company, its directors and officers, each Person who participates as an
underwriter in the offering or sale of such securities, each officer and
director of each underwriter, and each Person, if any, who controls the Company
or any such underwriter within the meaning of the Securities Act, with respect
to any statement in or omission from such registration statement, any
preliminary prospectus or final prospectus included therein, or any amendment
or supplement thereto, if such statement or omission is contained in written
information furnished by such Selling Holder to the Company specifically for
inclusion in such registration statement or prospectus; provided, however, that
the obligation to indemnify shall be individual, not joint and several, for
each Selling Holder and shall be limited to the net amount of proceeds received
by such Selling Holder from the sale of Shares pursuant to such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or Person and shall survive the transfer of the registered securities
by the Selling Holders.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided, however, that the failure to give
prompt notice shall not impair any Person's rights to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the
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indemnified party. If such defense is assumed, the indemnifying party shall 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). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) Indemnification and contribution similar to that specified in
the preceding subdivisions of this Section 6 (with appropriate modifications)
shall be given by the Company and the Selling Holders with respect to any
required registration or other qualification of such Shares under any federal
or state law or regulation of governmental authority other than the Securities
Act.
(e) "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity, or any
department, agency or political subdivision thereof.
Section 7. Benefits and Termination of Registration Rights. The
Holders may exercise the registration rights granted hereunder in such manner
and proportions as they shall agree among themselves. The registration rights
hereunder shall cease to apply to any particular Shares and such securities
shall cease to be Shares when: (a) a registration statement with respect to the
sale of such Shares shall have become effective under the Securities Act and
such Shares shall have been disposed of in accordance with such registration
statement; (b) such Shares shall have been sold to the public pursuant to Rule
144 under the Securities Act (or any successor provision); (c) such Shares
shall have been otherwise transferred, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company
and subsequent public distribution of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force; (d) such Shares shall have ceased to be outstanding and (e) in the case
of Shares held by a Permitted Transferee, when such Shares become eligible for
sale pursuant to Rule 144(k) under the Securities Act (or any successor
provision).
Section 8. Registration Expenses. As used in this Agreement, the term
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (a) all
registration and filing fees; (b) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares to be disposed of under the Securities Act; (c) the reasonable fees,
disbursements and expenses of the Selling Holders' counsel and advisors in
connection with the registration of the Shares to be disposed of under the
Securities Act; (d) all expenses in connection with the preparation, printing
and filing of the registration statement, any preliminary prospectus or final
prospectus, any other offering document and amendments and supplements thereto
and the mailing and delivering of copies thereof to the underwriters and
dealers and directly to securityholders in the case of an Exchange
Registration; (e) the cost of printing and producing any agreements among
underwriters,
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underwriting agreements, and blue sky or legal investment memoranda, any
selling agreements and any amendments thereto or other documents in connection
with the offering, sale or delivery of the Shares to be disposed of; (f) all
expenses in connection with the qualification of the Shares to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(g) the filing fees incident to securing any required review by any securities
exchange on which the Common Stock is then traded or listed of the terms of the
sale of the Shares to be disposed of and the trading or listing of all such
Shares on each such exchange; (h) the costs of preparing stock certificates;
(i) the costs and charges of the Company's transfer agent and registrar; and
(j) the fees and disbursements of any custodians, solicitation agents,
information agents and/or exchange agents. Registration Expenses shall not
include underwriting discounts and underwriters' commissions attributable to
the Shares being registered for sale on behalf of the Selling Holders, which
shall be paid by the Selling Holders.
Section 9. Miscellaneous.
9.1 No Inconsistent Agreements. The Company shall not on or after the
date of this Agreement enter into any agreement with respect to its securities
that violates or subordinates the rights expressly granted to the Holders in
this Agreement. The Company shall not take any action, or permit any change to
occur, with respect to its securities which would adversely affect the ability
of the Holders of Shares to include such Shares in a registration undertaken
pursuant to this Agreement.
9.2 Complete Agreement. Except as otherwise set forth in this
Agreement, this Agreement shall constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and shall supersede
all prior agreements and understandings, whether written or oral, between the
parties with respect to such subject matter.
9.3 Authority. Each of the parties hereto represents to the other that
(i) it has the corporate power and authority to execute, deliver and perform
this Agreement, (ii) the execution, delivery and performance of this Agreement
by it has been duly authorized by all necessary corporate action, (iii) it has
duly and validly executed and delivered this Agreement, and (iv) this Agreement
is a legal, valid and binding obligation, enforceable against it in accordance
with its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.
9.4 Assignment. This Agreement shall be binding on and inure to the
benefit of and be enforceable by the parties hereto and with respect to the
Company, its respective successors and assigns, and any Permitted Transferees.
9.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (other than the laws
regarding conflicts of laws) as to all matters of validity, construction,
effect, performance and remedies, executed in and to be performed in that
State.
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9.6 Severability. In the event that any part of this Agreement is
declared by a court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in
full force and effect.
9.7 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given: (i) on the date of service if served personally on the party to whom
notice is to be given; (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number of the recipient's principal executive
office, and telephonic confirmation of receipt is obtained promptly after
completion of transmission; (iii) on the day after delivery to Federal Express
or similar overnight courier or the Express Mail service maintained by the
United States Postal Service; or (iv) on the fifth day after mailing, if mailed
to the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid and properly addressed, to any party at its
principal executive office or at such other office as any party shall give by
notice in accordance with the terms hereof, and if to any other Holder, the
address indicated for such Holder in the Company's stock transfer records with
a copy, so long as Daisytek owns any Shares, to Daisytek. Any party may change
its address for the purpose of this Section 9.7 by giving the other party
written notice of its new address in the manner set forth above.
9.8 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.9 Remedies. Each of Daisytek, Daisytek International and the Company
shall be entitled to enforce its rights under this Agreement specifically, to
recover damages and costs (including reasonable attorneys' fees) caused by any
breach of any provision of this Agreement and to exercise all other rights
existing in its favor. Each of Daisytek, Daisytek International and the Company
acknowledges and agrees that under certain circumstances the breach by it or
any of its affiliates of a term or provision of this Agreement will materially
and irreparably harm the other party, that money damages will accordingly not
be an adequate remedy for such breach and that the non-defaulting party, in its
sole discretion and in addition to its rights under this Agreement and any
other remedies it may have at law or in equity, may apply to any court of law
or equity of competent jurisdiction (without posting any bond or deposit) for
specific performance and/or other injunctive relief in order to enforce or
prevent any breach of the provisions of this Agreement.
9.10 Waivers. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively
or prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if it is in writing signed by the Company and the
Holders of a majority of the Shares. Unless otherwise expressly provided in
this Agreement, no delay or omission on the part of any party in exercising any
right or privilege
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under this Agreement shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right or privilege under this Agreement operate as
a waiver of any other right or privilege under this Agreement nor shall any
single or partial exercise of any right or privilege preclude any other or
further exercise thereof or the exercise of any other right or privilege under
this Agreement. No failure by either party to take any action or assert any
right or privilege hereunder shall be deemed to be a waiver of such right or
privilege in the event of the continuation or repetition of the circumstances
giving rise to such right unless expressly waived in writing by the party
against whom the existence of such waiver is asserted.
9.11 Amendment and Modification. This Agreement may not be amended or
modified in any respect except by a written agreement signed by the Company and
the Holders of a majority of the Shares.
9.12 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only, are not part of the
agreement of the parties hereto, and shall not affect the meaning or
interpretation of this Agreement. All references to days or months shall be
deemed references to calendar days or months. All references to "$" shall be
deemed references to United States dollars. Unless the context otherwise
requires, any reference to a "Section" shall be deemed to refer to a section of
this Agreement. The words "hereof," "herein" and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, unless
otherwise specifically provided, they shall be deemed to be followed by the
words "without limitation." This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpretation against the
party drafting or causing the document to be drafted.
9.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date and year first written above.
DAISYTEK INTERNATIONAL CORPORATION
By:
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DAISYTEK, INCORPORATED
By:
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PFSWEB, INC.
By:
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