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