REGISTRATION RIGHTS AGREEMENT
Dated as of October 1, 1997
of
ROYALE INVESTMENTS, INC.
for the benefit of
HOLDERS OF LIMITED PARTNERSHIP UNITS AND PREFERRED UNITS
of
FCO, L.P.
and
HOLDERS OF COMMON STOCK
of
ROYALE INVESTMENTS, INC.
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of October 1, 1997 by Royale Investments, Inc., a Minnesota corporation
(the "Company"), for the benefit of (w) the persons who own limited partnership
units ("Partnership Units") and/or preferred units ("Preferred Units"), whether
owned as of the date hereof or hereafter acquired, of FCO, L.P., a limited
partnership formed under the Delaware Revised Uniform Limited Partnership Act
(the "Partnership"), (x) Xxxxxx Xxxx, Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxx III, Xxxx
Xxxxxxxx and Xxx X. Xxxxxxx, (y) persons issued shares of Common Stock of the
Company ("Common Stock") pursuant to the Contribution Agreement (as defined
below), and (z) the respective successors. assigns, transferees and estates of
the persons identified in clauses (w), (x) and (y) (herein referred to
collectively as the "Holders" and individually as a "Holder"). The Partnership
Units and Preferred Units are herein sometimes collectively called the "Units."
WHEREAS, on the date hereof certain Holden have become the owner of Units
in connection with the contributions (the "Contributions") of certain general
and limited partnership interests and other assets to the Partnership pursuant
to the Formation/Contribution Agreement dated as of September 7, 1997 by and
among the Company, H/SIC Corporation, Strategic Facility Investors, Inc., South
Brunswick Investment Company, LLC, Comcourt investment Corporation and Gateway
Xxxxxxx Development Corporation, as the same may at any time be amended,
modified and supplemented and in effect (the "Contribution Agreement");
WHEREAS, pursuant to the Partnership Agreement the Holders of Preferred
Units have the right to convert them into Partnership Units;
WHEREAS, on the date hereof, the Company has become the sole general
partner of the Partnership;
WHEREAS, on the date hereof. certain Holders have become the owner of
Common Stock pursuant to the Contribution Agreement in consideration of assets
transferred to the Company;
WHEREAS, on the date hereof, the Common Stock is publicly held and traded
and the Company is an issuer which is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act");
WHEREAS, in connection with the foregoing, the Company has agreed, subject
to the terms, conditions and limitations set forth in this Agreement, to provide
the Holders with certain registration rights in respect of shares of Common
Stock either (x) issued pursuant to the Contribution Agreement or (y) upon
redemption of Partnership Units as and to the extent set forth in that certain
Limited Partnership Agreement of the Partnership dated October 14, 1997 among
the sole general and initial limited parties party thereto, as the same may be
amended. modified or supplemented from time to time and in effect (the
"Partnership Agreement").
NOW, THEREFORE, the Company and the Partnership for the benefit of the
Holders each agrees as follows:
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Section 1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
Commission: The Securities and Exchange Commission.
Common Stock: Shares of common stock, $.01 par value, of the Company.
Contribution Agreement: As set forth in the preamble.
Contributions: As set forth in the preamble.
Exchange Act: As set forth in the preamble.
Holder or Holders: As set forth in the preamble.
Holders Entitled to Registration Rights: As set forth in Section 2(b).
Majority Holders: At any time, Holders of Registrable Securities, Preferred
Units then convertible into Units and Units then redeemable for Registrable
Securities who, if all such Preferred Units were converted and all such Units
were so redeemed, would then hold a majority of the Registrable Securities.
Minimum Registrable Amount: At any date of determination, Registrable
Securities having an aggregate fair market value of at least $3 million.
NASD: The National Association of Securities Dealers, Inc.
Partnership: As set forth in the preamble.
Partnership Agreement: As set forth in the preamble.
Person: Any individual, partnership, corporation, trust or other legal
entity.
Preferred Units: As set forth in the Partnership Agreement.
Prospectus: A prospectus included in a Registration Statement, including
any preliminary prospectus, and any such prospectus as amended or supplemented
by any prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement,
and by all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
Registrable Securities: The Shares, excluding (i) Shares as to which a
Registration Statement shall have become effective under the Securities Act
pursuant to Section 2, 3 or Section 4 of this Agreement and which shall have
been disposed of under such Registration Statement, (ii) Shares sold or
otherwise distributed pursuant to Rule 144 under the Securities Act and (iii)
Shares as to which registration under the Securities Act is not required to
permit the sale thereof to the public.
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Sale Period: The 45-day period immediately following the filing with the
Commission by the Company of an annual report of the Company on Form 10-K or a
quarterly report of the Company on Form 10-Q or such other period as the Company
may determine.
Securities Act: The Securities Act of 1933, as amended from time to time.
Shares: The shares of Common Stock issued to Holders of Units upon
redemption or exchange of their Units pursuant to the Partnership Agreement Or
to Holders pursuant to the Contribution Agreement.
Shelf Registration Statement: shall mean a "shelf" registration statement
of the Company and any other entity required to be a registrant with respect to
such shelf registration statement pursuant to the requirements of the Securities
Act which covers all of the Registrable Securities then issued and outstanding
or which may thereafter be issued in redemption or exchange of any Units
(including, without limitation, Units issuable upon conversion of Preferred
Units) on an appropriate form under Rule 415 under the Securities Act, Or any
similar rule that may be adopted by the Commission, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all materials incorporated by reference therein.
Units: Limited partnership interests in the Partnership issued to Holders
in connection with the Contributions.
Section 2. Shelf Registration Under the Securities Act.
(a) Filing of Shelf Registration Statement. Within ten months following the
date hereof, the Company shall cause to be filed a Shelf Registration Statement
providing for the sale by the Holders of all of the Registrable Securities in
accordance with the terms hereof and will use its reasonable best efforts to
cause such Shelf Registration Statement to be declared effective by the SEC as
soon as reasonably practicable. The Company agrees to use its reasonable best
efforts to keep the Shelf Registration Statement continuously effective under
the Securities Act until such time as the aggregate number of Registrable
Securities outstanding (computed for this purpose as if all outstanding
Preferred Units have been converted into Units and all thereafter outstanding
Units have been redeemed or exchanged for Common Stock) is less than 5% of the
aggregate number of Registrable Securities outstanding on the date hereof (after
giving effect to the Contributions, including, without limitation, in respect of
Retained Interests (as defined in the Contribution Agreement), and further
agrees to supplement or amend the Shelf Registration Statement, if and as
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or by any other rules and regulations thereunder for Shelf
Registration. Each Holder who sells Shares as part of the Shelf Registration
shall be deemed to have agreed to all of the terms and conditions of this
Agreement and to have agreed to perform any an all obligations of a Holder
hereunder.
(b) Inclusion in Shelf Registration Statement. Not later than 30 days prior
to filing the Shelf Registration Statement with the Commission, the Company
shall notify each Holder (including any Person who is then entitled to become a
Holder pursuant to the Partnership Agreement by reason of owning Units or
Preferred Units, including, without limitation, Persons holding Retained
Interests) ("Holders Entitled to Registration Rights") of its intention to make
such filing and request advice from each such Holder as to whether such Holder
desires to have Registrable Securities held by it or which it is entitled to
receive not later than the last day of the first Sale Period occurring in whole
or in part after the date of such notice included in
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the Shelf Registration Statement at such time. Any such Holder who does not
provide the information reasonably requested by the Company in connection with
the Shelf Registration Statement as promptly as practicable after receipt of
such notice, but in no event later than 20 days thereafter, shall not be
entitled to have its Registrable Securities included in the Shelf Registration
Statement at the time it becomes effective, but shall have the right thereafter
to deliver to the Company a Registration Notice as contemplated by Section 3(b).
Section 3. Shelf Registration Procedures.
In connection with the obligations of the Company with respect to the Shelf
Registration Statement pursuant to Section 2 hereof, the Company shall:
(a) prepare and file with the SEC, within the time period set forth in
Section 2(a) hereof, a Shelf Registration Statement, which Shelf
Registration Statement (i) shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distril4ion by the selling Holders thereof and (ii) shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the Commission to be filed
therewith.
(b) subject to the last three sentences of this Section 3(b) and to
Section 3(i) hereof, (i) prepare and file with the Commission such
amendments and post-effective amendments to the Shelf Registration
Statement as may be necessary to keep the Shelf Registration Statement
effective for the applicable period; (ii) cause each Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 or any similar rule that may be adopted
under the Securities Act; (iii) respond promptly to any comments received
from the Commission with respect to the Shelf Registration Statement, or
any amendment, post-effective amendment or supplement relating thereto; and
(iv) comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Shelf Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof. Notwithstanding
anything to the contrary contained herein, the Company shall not be
required to take any of the actions described in clauses (i), (ii) or (iii)
above with respect to each particular Holder of Registrable Securities
unless and until the Company has received either a written notice (a
"Registration Notice") from a Holder that such Holder intends to make
offers or sales under the Shelf Registration Statement as specified in such
Registration Notice or a written response from such Holder of the type
contemplated by Section 2(b); provided, however, that the Company shall
have 7 business days to prepare and file any such amendment or supplement
after receipt of a Registration Notice. Once a Holder has delivered such a
written response or a Registration Notice to the Company, such Holder shall
promptly provide to the Company such information as the Company reasonably
requests in order to identify such Holder and the method of distribution in
a post-effective amendment to the Shelf Registration Statement or a
supplement to a Prospectus. Offers or sales under the Shelf Registration
Statement may be made only during a Sale Period. Such Holder also shall
notify the Company in writing upon completion of such offer or sale or at
such time as such Holder no longer intends to make offers or sales under
the Shelf Registration Statement.
(c) furnish to each Holder of Registrable Securities that has
delivered a Registration Notice to the Company, without charge, as many
copies of each applicable Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other
documents as such Holder may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities; the Company
consents to the use of such Prospectus, including each preliminary
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Prospectus, by each such Holder of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus or the preliminary Prospectus.
(d) use its reasonable best efforts to register or qualify the
Registrable Securities by the time the Shelf Registration Statement is
declared effective by the SEC under all applicable state securities or
"blue sky" laws of such jurisdictions as any Holder of Registrable
Securities covered by the Shelf Registration Statement shall reasonably
request in writing, keep each such registration or qualification effective
during the period the Shelf Registration Statement is required to be kept
effective or during the period offers or sales are being made by a Holder
that has delivered a Registration Notice to the Company, whichever is
shorter, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the disposition
in each such jurisdiction of such Registrable Securities owned by such
Holder; provided, however, that the Company shall not be required (i) to
qualify generally to do business in any jurisdiction or to register as a
broker or dealer in such jurisdiction where it would not be required so to
qualify or register but for this Section 3(d), (ii) to subject itself to
taxation in any such jurisdiction or (iii) to submit to the general service
of process in any such jurisdiction.
(e) notify each Holder when the Shelf Registration Statement has
become effective and notify each Holder of Registrable Securities that has
delivered a Registration Notice to the Company promptly and, if requested
by such Holder, confirm such advice in writing (i) when any post-effective
amendments and supplements to the Shelf Registration Statement become
effective, (ii) of the issuance by the Commission or any state securities
authority of any stop order suspending the effectiveness of the Shelf
Registration Statement or the initiation of any proceedings for that
purpose, (iii) if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose and
(iv) of the happening of any event during the period the Shelf Registration
Statement is effective as a result of which the Shelf Registration
Statement or a related Prospectus contains any 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 the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading.
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Shelf Registration Statement at the
earliest possible moment.
(g) furnish to each Holder of Registrable Securities that has
delivered a Registration Notice to the Company, without charge, at least
one conformed copy of the Shelf Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested).
(h) cooperate with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act
legend; and enable certificates for such Registrable Securities to be
issued for such numbers of shares and registered in such names as the
selling Holders may reasonably request at least two business days prior to
any sale of Registrable Securities.
(i) subject to the last three sentences of Section 3(b) hereof, upon
the occurrence of any event contemplated by Section 3(e)(iv) hereof, use
its reasonable best efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to the
Shelf
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Registration Statement or a related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any 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 the light of the circumstances under which they
were made, not misleading.
(j) make available for inspection by representatives of the Holders of
the Registrable Securities and any counsel or accountant retained by such
Holders, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by
any such representative, counsel or accountant in connection with the Shelf
Registration Statement; provided, however, that such records, documents or
information which the Company determines in good faith to be confidential,
and notifies such representatives, counsel or accountants in writing that
such records, documents or information are confidential, shall not be
disclosed by the representatives, counsel or accountants unless (i) the
disclosure of such records, documents or information is necessary to avoid
or correct a material misstatement or omission in the Shelf Registration
Statement, (ii) the release of such records, documents or information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) such records, documents or information have been
generally made available to the public otherwise than in violation of this
Agreement.
(k) a reasonable time prior to the filing of any Prospectus, any
amendment to the Shelf Registration Statement or amendment or supplement to
a Prospectus, provide copies of such document (not including any documents
incorporated by reference therein unless requested) to the Holders of
Registrable Securities that have provided a Registration Notice to the
Company.
(l) use its reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(m) obtain a CUSIP number for all Registrable Securities, not later
than the effective date of the Shelf Registration Statement.
(n) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Commission and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
at least 12 months which shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.
(o) use its reasonable best efforts to cause the Registrable
Securities covered by the Shelf Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of the Company to
enable Holders that have delivered Registration Notices to the Company to
consummate the disposition of such Registrable Securities.
The Company may require each Holder of Registrable Securities to furnish to
the Company in writing such information regarding the proposed distribution by
such Holder of such Registrable Securities as the Company may from time to time
reasonably request in writing.
In connection with and as a condition to the Company's obligations with
respect to the Shelf Registration Statement pursuant to Section 2 hereof and
this Section 3, each Holder agrees that (i) it will not
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offer or sell its Registrable Securities under the Shelf Registration Statement
until (A) it has either (1) provided a Registration Notice pursuant to Section
3(b) hereof or (2) had Registrable Securities included in the Shelf Registration
Statement at the time it became effective pursuant to Section 2(b) hereof and
(B) it has received copies of the supplemented or amended Prospectus
contemplated by Section 3(b) hereof and receives notice that any post-effective
amendment has become effective; (ii) upon receipt of any notice from the Company
of the happening of anv event of the kind described in Section 3(b)(iv) hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the Shelf Registration Statement until such Holder receives copies
of the supplemented or amended Prospectus contemplated by Section 3(i) hereof
and receives notice that any post-effective amendment has become effective, and,
if so directed by the Company, such Holder will deliver to the Company (at the
expense of the Company) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
registrable Securities current at the time of receipt of such notice; and (iii)
all offers and sales under the Shelf Registration statement shall be completed
within forty-five (45) days after the first date on which offers or sales can be
made pursuant to clause (i) above, and upon expiration of such forty-five (45)
day period the Holder will not offer or sell its Registrable Securities under
the Shelf Registration Statement until it has again complied with the provisions
of clauses (i)(A)(1) and (B) above, except that if the applicable Registration
Notice was delivered to the Company at a time which was not part of a Sale
Period, such forty-five (45) day period shall be the next succeeding Sale
Period.
Section 4. Piggyback Registration.
(a) Right to Piggyback. Whenever (x) the Company proposes to register any
shares of its Common Stock (or securities convertible into or exchangeable or
exercisable for such Common Stock) under the Securities Act for its own account
or the account of any shareholder of the Company (other than offerings pursuant
to employee plans, or noncash offerings in connection with a proposed
acquisition, exchange offer, recapitalization or similar transaction) and (y)
the registration form may be used for the registration of Registrable Securities
(a "Piggyback Registration"), the Company will give prompt written notice to all
of the Holders Entitled to Registration Rights of its intention to effect such a
registration and will, subject to Section 4(b) and Section 10 hereof, include in
such registration all Registrable Securities with respect to which such Holders
request in writing to be so included within 20 days after the receipt of the
Company's notice.
(b) Priority. If a registration pursuant to this Section 4 involves an
underwritten offering and the managing underwriter advises the Company in good
faith that in its opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering without
having an adverse effect on such offering, including the price at which such
securities can be sold, then the Company will be required to include in such
registration the maximum number of shares that such underwriter advises can be
so sold, allocated (x) first, to the securities the Company proposes to sell,
(y) second, among the shares of Common Stock requested to be included in such
registration by the Holders Entitled to Registration Rights, considered in the
aggregate (if such registration was initiated by the Company), and any other
shareholder of the Company with shares of Common Stock eligible for
registration, pro rata, on the basis of the number of shares of Common Stock
such holder requests be included in such registration, and (z) third, among
other securities, if any, requested and otherwise eligible to be included in
such registration.
(c) Nothing contained herein shall prohibit the Company from determining,
at any time, not to file a registration statement or, if filed, to withdraw such
registration or terminate or abandon the registration related thereto.
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Section 5. Requested Registration.
(a) Right to Request Registration. Upon the written request of Holders
Entitled to Registration Rights owning 6% or more of the outstanding Registrable
Securities then owned in the aggregate by such Holders (the "Requesting
Holders") (computed for these purposes as if all Preferred Units have been
converted into Units and an thereafter outstanding Units have been redeemed or
exchanged for Common Stock), requesting that the Company effect the registration
under the Securities Act of at least the Minimum Registration Amount, the
Company shall use its best efforts to effect, as expeditiously as possible,
following the prompt (but in no event later than 15 days following the receipt
of such written request) delivery of notice to all Holders Entitled to
Registration Rights, the registration under the Securities Act of such number of
shares of Registrable Securities owned by the Requesting Holders and requested
by the Requesting Holders to be so registered (subject to Section 5(c) hereof),
together with (x) all other shares of Common Stock entitled to registration, and
(y) securities of the Company which the Company elects to register and offer for
its own account; provided, however, that the Company shall not be required to
(i) subject to Section 5(b) below, effect more than a total of three such
registrations pursuant to this Agreement or (ii) file a registration statement
relating to a registration request pursuant hereto within a period of six months
after the effective date of any other registration statement of the Company
requested hereunder (other than pursuant to Section 2) or pursuant to which the
Requesting Holders shall have been given an opportunity to participate pursuant
to Section 4 hereof and which opportunity they declined or which registration
statement under Section 4 hereof included shares of Registrable Securities owned
by Holders Entitled to Registration Rights (so long as such registration
statement became and was effective for sufficient, time to permit the sales
contemplated thereby); provided further, that the Company shall not be required
to file a registration statement relating to an offering of Common Stock on a
delayed or continuous basis pursuant to Rule 415 (or any successor rule to
similar effect) promulgated under the Securities Act if the Company is not, at
the time, eligible to register shares of Common Stock on form S-3 (or a
successor form).
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in its good faith judgment, (x) after consultation with a nationally
recognized investment banking fim, that there will be an adverse effect on a
then contemplated public offering of the Company's securities, (y) that the
disclosures that would be required to be made by the Company in connection with
such registration would be materially harmful to the Company because of
transactions then being considered by, or other events then concerning, the
Company, or (z) the registration at the time would require the inclusion of pro
forma or other information, which requirements the Company is reasonably unable
to comply with, then the Company may defer the filing (but not the preparation)
of the registration statement which is required to effect any registration
pursuant to this Section 5 for a reasonable period of time, but not in excess of
90 calendar days (or any longer period agreed to by the Holders Entitled to
Registration Rights), provided that at all times the Company is in good faith
using all reasonable efforts to file such registration statement as soon as
practicable.
(b) Effective Registration. A registration requested pursuant to this
Section 5 shall not be deemed to have been effected (and, therefore, not
requested for purposes of Section 5(a) above) (w) unless the registration
statement relating thereto has become effective under the Securities Act, (x) if
after it has become effective such registration is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason other than a misrepresentation or an
omission by a Holder and, as a result thereof, the shares of Registrable
Securities requested to be registered cannot be completely distributed in
accordance with the plan of distribution, (y) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied or waived other than by
reason of some act or omission by a participating Holder or (z) if with respect
to what would otherwise be deemed the fourth, or last, request under Section
5(a) hereof, less
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than all of the shares of Common Stock that the Holders Entitled to Registration
Rights requested be registered were actually registered due to the operation of
Section 5(c) hereof; provided that clause (z) above may not be invoked by the
Holders Entitled to Registration Rights unless (I) such request includes at
least the Minimum Registration Amount or (II) if such request includes an amount
that is less than the Minimum Registration Amount, Rule 144 under the Securities
Act is not available to the Holders for the sale of all of the shares of Common
Stock owned by the Holders; and provided further that clause (z) above may be
invoked only at the request of Holders meeting the foregoing requirements and
owning more than 10% of the shares of Registrable then owned (computed as
aforesaid) in the aggregate by the Holders.
(c) Priority. If a requested registration pursuant to this Section 5
involves an underwritten offering and the managing underwriter shall advise the
Company that in its opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering without
having an adverse effect on such offering, including the price at which such
securities can be sold, then the Company will be required to include in such
registration the maximum number of shares that such underwriter advises can be
so sold, allocated (x) first, among all shares of Common Stock requested by the
Holders Entitled to Registration Rights to be included in such registration, pro
rata on the basis of the number of shares of Common Stock then owned by each of
them (or, if such holder requests that less than all of the shares of Common
Stock owned by such holder be included in such registration, such lesser number
of shares) (y) second, to any securities requested to be included in such
registration by any other shareholder of the Company having registration rights
and (z) third, to any securities the Company proposes to sell.
Section 6. Registration Procedures. If and whenever the Company is required
to use its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement pursuant to
Section 4 or 5 hereof, the Company shall:
(a) prepare and file with the Commission as expeditiously as possible
but in no event later than 90 days after receipt of a request for
registration with respect to such Registrable Shares, a registration
statement on any form for which the Company then qualifies or which counsel
for the Company shall deem appropriate, which form shall be available for
the sale of the Registrable Securities in accordance with the intended
methods of distribution thereof, and use its best efforts to cause such
registration statement to become effective; provided that before filing
with the Commission a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by
reference after the initial filing of any registration statement, the
Company shall (x) furnish to each participating Holder and to one firm of
attorneys selected collectively by the participating Holders and the
holders of other securities covered by such registration statement, but in
no event to more than one such counsel for all such selling
securityholders, copies of all such documents proposed to be filed, which
documents shall be subject to the review of the participating Holders and
such counsel, and (y) notify the participating Holders of any stop order
issued or threatened by the Commission and take all reasonable actions
required to prevent the entry of such stop order or to remove it if
entered;
(b) prepare and file with the Commission 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 for a period of not less than 180 days or such shorter
period which shall terminate when all Registrable Securities covered by
such registration statement have been sold (but not before the expiration
of the 90-day period referred to in Section 4(3) of the Securities Act and
Rule 174, or any successor thereto, thereunder, if applicable), and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registra-
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tion statement during such period in accordance with the intended methods
of disposition by the sellers thereof set forth in such registration
statement;
(c) furnish, without charge, to the participating Holders and each
underwriter, if any, such number of copies of such registration statement,
each amendment and supplement thereto (including one conformed copy to each
participating Holder and one signed copy to each managing underwriter and
in each case including all exhibits thereto), and the prospectus included
in such registration statement (including each preliminary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents as the participating Holders may reasonably request in order to
facilitate the disposition of the Registrable Securities registered
thereunder;
(d) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdiction as the participating
Holders, and the managing underwriter, if any, reasonably requests and do
any and all other acts and things which may be reasonable necessary or
advisable to enable the participating Holders and each underwriter, if any,
to consummate the disposition in such jurisdiction of the Registrable
Securities registered thereunder; provided that the Company shall not be
required to (x) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 6(d),
(y) subject itself to taxation in any such jurisdiction or (z) consent to
general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by such
insurance regulatory authorities may be necessary by virtue of the business
and operations of the Company to enable the participating Holders and other
holders, if any, of securities covered by such registration statement to
consummate the disposition of Registrable Securities registered thereunder;
(f) immediately notify the managing underwriter, if any, and the
Company at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event which
comes to the Company's attention if as a result of such event the
prospectus included in such registration statement contains 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 not
misleading, and the Company shall promptly prepare and furnish to the
participating Holders and any other holder of securities covered by such
registration statement and prospectus a supplement or amendment to such
prospectus so that as thereafter delivered, such prospectus shall 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; provided, however, that if the Company
determines in good faith that the disclosure that would be required to be
made by the Company would be materially harmful to the Company because of
transactions then being considered by, or other events then concerning, the
Company, or a supplement or amendment to such prospectus at such time would
require the inclusion of pro forma or other information, which requirement
the Company is reasonably unable to comply with, then the Company may defer
for a reasonable period of time, not to exceed 90 days, furnishing to the
participating Holders and any other holder of securities covered by such
registration statement and prospectus a supplement or amendment to such
prospectus; provided, further, that at all times the Company is in good
faith using all reasonable efforts to file such amendment as soon as
practicable,
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(g) use its best efforts to cause all such securities being registered
to be listed on each securities exchange on which similar securities issued
by the Company are then listed, and enter into such customary agreements
including a listing application and indemnification agreement in customary
form (provided that the applicable listing requirements are satisfied), and
to provide a transfer agent and register for such Registrable Shares
covered by such registration statement no later than the effective date of
such registration statement;
(h) make available for inspection by any of the participating Holders
and any holder of securities covered by such registration statement, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such
persons (collectively, the "Inspectors"), all financial and other records
of the Company and its subsidiaries (collectively, "Records"), if any, as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's and its subsidiaries'
officers, directors and employees to supply all information and respond to
all inquiries reasonably requested by any such Inspector in connection with
such registration statement. Notwithstanding the foregoing, the Company
shall have no obligation to disclose any Records to the Inspector in the
event the Company determines that such disclosure is reasonably likely to
have an adverse effect on the Company's ability to assert the existence of
an attorney-client privilege with respect thereto;
(i) if requested, use its best efforts to obtain a "cold comfort"
letter and a "bring-down cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters
of the type customarily covered by such letters;
(j) enter into a form of underwriting agreement that contains
customary terms and provisions for similar securities offerings;
(k) make available senior management personnel to participate in, and
cause them to cooperate with the underwriters in connection with, "road
show" and other customary marketing activities, including "one-on-one"
meetings with prospective purchasers of the Registrable Securities; and
(l) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earning statement covering a
period of at least 12 months, beginning with the first month after the
effective date of the registration statement (as the term "effective date"
is defined in Rule 158(c) under the Securities Act), which earning
statement shall satisfy the provisions of Section 11 (a) of the Securities
Act and Rule 158 thereunder.
It shall be a condition precedent to the obligation of the Company to take
any action pursuant to this Agreement in respect of Registrable Securities which
are to be registered at the request of any of the participating Holders that the
participating Holders shall fumish to the Company such information regarding the
securities held by the participating Holders and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action taken by the Company.
Each of the Holders agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 6(f)
hereof, the Holders shall discontinue disposition of Registrable Shares pursuant
to the registration statement covering such Registrable Securities until receipt
of the copies of the supplemented or amended prospectus contemplated by Section
5(c)(vi) hereof or until other-
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wise notified by the Company, and, if so directed by the Company, the
participating Holders shall deliver to the Company (at the Company's expense)
all copies (including, without limitation, any and all drafts), other than
permanent file copies, then in any participating Holder's possession, of the
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
specified in Section 6(b) hereof shall be extended by the greater of (x) three
months of (y) the number of days during the period from and including the date
of the giving of such notice pursuant to Section 6(f) hereof to and including
the date when each of the participating Holders shall have received the copies
of the supplemented or amended prospectus contemplated by, Section 6(f) hereof.
Section 7. Selection or Underwriters. If any offering pursuant to a
registration statement is to be an underwritten offering, the Company will
select a managing underwriter or underwriters to administer the offering,
provided that in the case of a registration statement pursuant to Section 5
hereof, the Holders holding more than 50% of the shares of Registrable
Securities held by the Holders to be included in such underwritten offering
shall select the managing underwriter or underwriters, subject to the consent of
the Company which shall not be unreasonably withheld.
Section 8. Registration Expenses. The Company shall pay, in connection with
any registration pursuant to Section 2, 4 or 5, the following registration
expenses incurred in connection there with: (i) all Commission, stock exchange
or NASD registration and filing fees, (ii) all fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with the blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) internal expenses (including without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) the fees and expenses incurred in connection
with the listing of the Registrable Securities on any national securities
exchange or interdealer quotation system, (vi) the reasonable fees and
disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort
letters), (vii) the reasonable fees and disbursements of not more than one firm
of attorneys acting as legal counsel for (x) all of the selling shareholders,
collectively, in respect of a registration pursuant to Section 3 hereof or (y)
all of the participating Holders, collectively, in respect of a registration
pursuant to Section 4 hereof, (viii) the fees and expenses of any registrar and
transfer agent for the Common Stock, (ix) the underwriting fees, discounts and
commissions applicable to any shares of Common Stock sold for the account of the
Company and (x) all expenses of any Person in preparing or assisting in
preparing, word processing, printing and distributing any registration
statement, prospectus, certificates and other documents relating to the
performance of and compliance with this Agreement. Except as otherwise provided
in clause (ix) of this Section 4(e), the Company shall have no obligation to pay
any underwriting fees, discounts or commissions attributable to the sale of
Registrable Shares.
Section 9. Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless each Indemnitee from
and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
prepricing prospectus, registration statement or prospectus or in any amendment
or supplement thereto, 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 not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to a participating Holder furnished in writing to
the Company by or
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on behalf of a participating Holder expressly for use in connection therewith.
The foregoing indemnity agreement shall be in addition to any liability which
the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Indemnitee in respect of which indemnity may be sought against the Company, such
Indemnitee shall promptly notify the Company, and the Company shall assume the
defense thereof, including the employment of counsel and payment of all fees and
expenses. "The Indemnitee shall have the right to employ separate counsel in any
such action, suit or proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Indemnitee
unless (x) the Company has agreed in writing to pay such fees and expenses, (y)
the Company has failed to assume the defense and employ counsel, or (z) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both such Indemnitce and the Company, and such Indemnitee shall
have been advised by its counsel that representation of such Indemnitee and the
Company by the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the Company shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Indemnitee). It is understood,
however, that the Company shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnitees not having actual or potential differing interests among
themselves, and that all such fees and expenses shall be reimbursed as they are
incurred. The Company shall not be liable for any settlement of any such action,
suit or proceeding effected without its written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the Company agrees to indemnify and hold
harmless such Indemnitee, to the extent provided in the preceding paragraph,
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) Each of the participating Holders, severally and not jointly, agree to
indemnify and hold harmless the Company, its directors, its officers who sign
the registration statement, and any person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
to the same extent as the foregoing indemnity from the Company to an Indemnitee,
but only with respect to information relating to such Holder furnished in
writing by or on behalf of such Holder expressly for use in the registration
statement, prospectus or any prepricing prospectus, or any amendment or
supplement thereto. If any action, suit or proceeding shall be brought against
the Company, any of its directors, any such officer, or any such controlling
person based on the registration statement, prospectus or any prepricing
prospectus, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against any Holder pursuant to this Section 9(c), such
Holder shall have the rights and duties given to the Company by Section 9(b)
hereof (except that if the Company shall have assumed the defense thereof such
Holder shall not be required to do so, but may employ separate counsel therein
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the Holder's expense), and the Company, its directors, any
such officer, and any such controlling person shall have the rights and duties
given to an Indemnitee by Section 9(b) hereof. The foregoing indemnity agreement
shall be in addition to any liability which the participating Holders may
otherwise have.
(d) If the indemnification provided for in this Section 9 is unavailable to
an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein. then an
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
-15-
or expenses in such proportion as is appropriate to reflect the relative fault
of the Company and of the participating Holders in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses. The relative fault of the Company on the one hand and a
participating Holder on the other hand 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 Company on the one hand or by such participating
Holder on the other hand and the parties' relative intent, knowledge, access or
information and opportunity to correct or prevent such statement or omission.
(e) The Company and the participating Holders agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 9(d) hereof. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 9(d) hereof
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no participating
Holder shall be required to contribute any amount in excess of the amount by
which the proceeds to such participating Holder exceeds the amount of any
damages which such participating Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. 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.
(f) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of an Indemnitee, the Company, its directors or officers, or any
person controlling the Company, and (ii) any termination of this Agreement.
Section 10. Participation in Underwritten Registrations. A Holder may not
participate in any underwritten offering pursuant to Section 4 or 5 hereof
unless such Holder (i) agrees to sell its Registrable Securities on the basis
provided in any underwriting arrangements which, to the extent applicable solely
to the participating Holders, are approved by the participating Holders in their
reasonable discretion or which, to the extent applicable to the Company and the
participating Holders, are approved by the Company in its reasonable discretion
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents (including lock-up
agreements) reasonably required under the terra of such underwriting
arrangements which are not inconsistent with the terms of this Agreement.
Section 11. Other Registration Rights. The Company agrees that it shall not
enter into any agreement which provides registration rights to any Person that
are inconsistent with the provisions contained in this Agreement. If the Company
does become a party to such an agreement, the Company agrees
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that to the extent that the provisions of such agreement conflict with this
Agreement, the provisions of this Agreement shall control.
Section 12. Rule 144 Sales.
(a) The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act, so as to
enable any Holder to sell Registrable Securities pursuant to Rule 144 under the
Securities Act.
(b) In connection with any sale, transfer or other disposition by any
Holder of any Registrable Securities pursuant to Rule 144 under the Securities
Act, the Company shall cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any Securities Act legend, and enable certificates for
such Registrable Securities to be for such number of shares and registered in
such names as the selling Holders may reasonably request at least two business
days prior to any sale of Registrable Securities. ,
Section 13. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of the Company and Holders constituting Majority
Holders; provided, however, that no amendment, modification or supplement or
waiver or consent to the departure with respect to the provisions of Sections 1
through 12, inclusive, hereof or which would impair the rights of any Holder
under such provisions, shall be effective as against any Holder of Registrable
Securities, Preferred Units or Units unless consented to in writing by such
Holder of Registrable Securities, Preferred Units or Units. Notice of any
amendment, modification or supplement to this Agreement adopted in accordance
with this Section 13(a) shall be provided by Company to each Holder of
Registrable Securities, Preferred Units or Units at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
(b) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, registered first-class
mail, telex, telecopier or any courier guaranteeing overnight delivery, (i) if
to a Holder, at the most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of this Section 13(b),
which address initially is, with respect to each Holder, the address set forth
in the Partnership Agreement, or (ii) if to the Company, at .
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 when answered
back, if telexed; when receipt is acknowledged, if telecopied; or at the time
delivered if delivered 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, assigns and transferees of each of the
Company and the Holders, including without limitation and without the need for
an express assignment, subsequent Holders. If any successor, assignee or
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking
-17-
and holding such Registrable Securities such Person shall be entitled to receive
the benefits hereof and shall be conclusively deemed to have agreed to be bound
by all of the terms and provisions hereof.
(d) Headings. The headings in this Agreement are for the convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
(f) Specific Performance. The Company and the Holders acknowledge that
there would be no adequate remedy at law if any party fails to perform any of
its obligations hereunder, and accordingly agree that the Company and each
Holder, in addition to any other remedy to which it may be entitled at law or in
equity, shall be entitled to compel specific performance of the obligations of
another under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(g) Entire Agreement. This Agreement is intended by the Company as a final
expression of its agreement and is intended to be a complete and exclusive
statement of the agreement and understanding of the Company in respect of the
subject matter contained herein. This Agreement supersedes all prior agreements
and understandings of the Company with respect to such subject matter.
IN WITNESS WHEREOF, the Company has executed this Agreement as of the date
first written above.
ROYALE INVESTMENTS, INC.
By:
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Name:
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Title:
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