TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (this "Agreement") is made and entered into
on this 7th day of July, 2004, by and among Gexa Corp., a Texas corporation (the
"Company"), The Catalyst Fund, Ltd., a Texas limited partnership ("Catalyst"),
Southwest/Catalyst Capital, Ltd., a Texas limited partnership ("SWCC"),
Catalyst/Hall Growth Capital, LP, a Texas limited partnership ("CHGC"), Xxxx X.
Xxxxxxx, an individual ("Xxxxxxx"), Xxxxxx X. Xxx, an individual ("Xxx"), Xxx
Xxxx, an individual ("Xxxx"), and Xxxxxx Investment Trust Partnership, a Texas
partnership ("Xxxxxx"). All capitalized terms not herein defined shall have the
respective meanings given to them in that certain Loan Agreement dated as of
July 16, 203 (the "Loan Agreement"), between the Company and Catalyst.
RECITALS
WHEREAS, pursuant to the Loan Agreement, Catalyst, SWCC, CHGC, Leibman,
Orr, Aron, Gaylor and JTS Enterprises, Inc., a Texas corporation ("JTS"), have
made a loan (the "Loan") to the Company in the original principal amount of
$3,650,000, upon and subject to the terms and conditions of the Loan Agreement;
WHEREAS, in connection with the Loan, the Company and Catalyst entered
into that certain Commercial Security Agreement dated as of July 16, 2003 (the
"Security Agreement"), that certain Consulting Agreement dated as of July 16,
2003 (the "Consulting Agreement"), and that certain Registration Rights
Agreement dated as of July 16, 2003 (the "Registration Rights Agreement");
WHEREAS, in connection with the Loan, the Company issued Catalyst,
SWCC, CHGC, Leibman, Orr, Xxxx and Xxxxxx warrants (the "Warrants") to purchase
up to 550,000 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), upon and subject to the terms and conditions contained
therein;
WHEREAS, in connection with the Loan, the Company, Catalyst, SWCC,
CHGC, Leibman, Orr, Aron, Gaylor and JTS entered into that certain Non-Recourse
Loan Participation and Collateral Agency Agreement dated as of July 16, 2003
(the "Participation Agreement"), pursuant to which, Leibman, Orr, Xxxx and
Xxxxxx (collectively, the "Company Related Parties") contributed $500,000 of the
Loan for the rights described therein, including the right to shares in the
Warrants on a pro rata basis according to their respective Agreed Interests (as
defined in the Participation Agreement);
WHEREAS, a credit facility (the "Credit Facility") not to exceed
$15,000,000 has been proposed and negotiated among the Company, each of the
lenders from time to time party thereto (the "Lenders"), and Highbridge/Xxxxx
Special Opportunities Fund, L.P., as administrative agent for the Lenders (the
"Administrative Agent");
WHEREAS, in connection with the consummation of the Credit Facility,
the Company will satisfy in full all of the indebtedness and obligations of the
Company evidenced by the Lender Notes, the JTS Note and the other Subject
Documents, and the Company and Catalyst desire to terminate the Loan Agreement,
the Security Agreement, the Consulting Agreement and the Registration Rights
Agreement;
WHEREAS, in connection with termination of the Consulting Agreement,
the Company has agreed to pay to Leibman, Orr, Xxxx and Xxxxxx one-time cash
payments equal to $9,166.50, $9,166.50, $18,334.00 and $9,166.50, respectively;
WHEREAS, in order to induce the Lenders and the Administrative Agent to
consummate the Credit Facility, Catalyst, SWCC and CHGC (collectively, the
"Sellers") desire to sell and the Company desires to purchase, the pro rata
share of the Warrants of the Sellers in accordance with their Agreed Interests
as provided in the Participation Agreement, or 458,333 of the Warrants (the
"Sellers Warrants"), for an aggregate purchase price of $1,629,832 (the
"Purchase Price");
WHEREAS, the Company also desires to grant Catalyst a look back right
that will protect the Purchase Price, on a per share basis, for a period of one
year from the date hereof;
WHEREAS, the Company Related Parties will indirectly benefit from the
consummation of the Credit Facility;
WHEREAS, in order to induce the Lenders and the Administrative Agent to
consummate the Credit Facility, the Company and the Company Related Parties have
agreed to cancel the pro rata share of the Warrants of the Company Related
Parties in accordance with their Agreed Interests (as defined in the
Participation Agreement), or 91,667 of the Warrants (the "Company Related
Parties Warrants"), and the Company has agreed to issue to Leibman, Orr, Xxxx
and Xxxxxx replacement warrants (the "Replacement Warrants") to purchase 18,333,
18,333, 36,668 and 18,333 shares of Common Stock, respectively, in the form
attached hereto as Exhibit A;
WHEREAS, the Company has agreed to grant the Company Related Parties
certain piggy-back registration rights in connection with the Replacement
Warrants; and
WHEREAS, in connection with the consummation of the Credit Facility,
the Company, Catalyst, SWCC, CHGC, Leibman, Orr, Xxxx and Xxxxxx desire to
terminate the Participation Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Termination of Agreements. Subject to the consummation of the Credit
Facility and the satisfaction in full all of the indebtedness and obligations of
the Company evidenced by the Lender Notes, the JTS Note and the other Subject
Documents, the parties hereto terminate the Loan Agreement, the Security
Agreement, the Consulting Agreement, the Registration Rights Agreement and the
Participation Agreement by mutual consent.
2. Consulting Agreement Payments. Upon the termination of the Consulting
Agreement, the Company agrees to pay to Leibman, Orr, Xxxx and Xxxxxx one-time
cash payments equal to $9,166.50, $9,166.50, $18,334.00 and $9,166.50,
respectively.
3. Purchase of Warrants. The Company agrees to purchase and acquire from
the Sellers, and the Sellers agree to sell, assign, transfer and convey to the
Company, the Sellers Warrants for the Purchase Price. The Purchase Price shall
be payable to the Sellers in cash or by wire transfer or other immediately
available funds. The Sellers further agree to transfer and deliver to the
Company, upon receipt by Catalyst of the Purchase Price, certificates, properly
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endorsed in blank or accompanied by a properly executed stock power,
representing the Sellers Warrants. The Sellers, jointly and severally, represent
and warrant (i) the Sellers Warrants are owned beneficially or of record by the
Sellers, (ii) the Sellers hold good, valid and marketable title to the Sellers
Warrants, free and clear of all liens, charges and encumbrances, (iii) each
Seller possesses full authority and legal right to sell, transfer and assign to
the Company the entire legal and beneficial ownership of the Sellers Warrants,
free and clear of all liens, charges and encumbrances, and (iv) upon transfer to
the Company by the Sellers of the Sellers Warrants, the Company will own the
entire legal and beneficial interest in the Sellers Warrants free and clear of
all liens, charges and encumbrances, and subject to no legal, equitable,
transfer or other restrictions of any kind, except transfer restrictions imposed
by operation of applicable securities laws, and any of all liens, charges or
encumbrances imposed or created by the Company.
4. Cancellation and Issuance of Warrants. The Company and the Company
Related Parties agree to cancel the Company Related Parties Warrants. The
Company Related Parties further agree to transfer and deliver to the Company
certificates, property endorsed in blank or accompanied by a properly executed
stock power, representing the Company Related Parties Warrants. The Company
agrees to issue and deliver to Leibman, Orr, Xxxx and Gaylor the Replacement
Warrants to purchase 18,333, 18,333, 36,668 and 18,333 shares of Common Stock,
respectively, in the form attached hereto as Exhibit A.
5. Grant of Registration Rights. The Company grants the Company Related
Parties the piggy-back registration rights set forth on Exhibit B hereto.
6. Look Back Right. In the event the Company consummates within one year of
the date hereof, the disposition, by way of a sale, business combination, merger
or other transaction by a corporation or other business entity, of all or part
of the Company's outstanding capital stock or all or substantially all of the
Company's assets (each such transaction being herein called a "Transaction"),
and the price per share of Common Stock actually received by the Company's
shareholders or the Company pursuant to the terms of the Transaction is greater
than $4.00, then, upon the consummation of the Transaction, the Company shall
pay to Catalyst a one-time payment equal to the product of (a) 458,333 and (b)
the difference between (i) the price per share of Common Stock actually received
by the Company's shareholders or the Company pursuant to the terms of the
Transaction and (ii) $4.00. The Company represents and warrants that, as of the
date hereof, it is not presently involved in any discussions or negotiations
with an underwriter concerning the underwritten registered public offering of
the Common Stock.
7. Release by Leibman, Orr, Xxxx and Xxxxxx. Leibman, Orr, Xxxx and Gaylor,
on behalf of themselves, their successors, assigns, heirs, affiliates, parents,
subsidiaries, representatives, officers, directors, employees and agents, hereby
release, acquit, and forever discharge Catalyst, SWCC and CHGC, their
successors, assigns, affiliates, parents, subsidiaries, representatives,
officers, directors, employees and agents from any and all actions, causes of
action, choses in action, claims, demands, rights, damages, costs, expenses,
compensation, liabilities or suits of any nature whatsoever, whether at law or
in equity, whether or not now or heretofore known, unknown, suspected, accrued,
alleged, or claimed, in contract or in tort, past, present or future, arising
out of any act, occurrence, omission, cause, matter, activity, transaction or
other thing whatsoever, which occurred prior to the date hereof and up to and
including the date of execution of this Agreement, including, but not limited
to, any such claim or action arising out of the negotiation, existence,
performance or non performance of the Participation Agreement.
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8. Release by Catalyst, SWCC and CHGC. Catalyst, SWCC and CHGC, on behalf
of themselves, their successors, assigns, affiliates, parents, subsidiaries,
representatives, officers, directors, employees and agents, hereby release,
acquit, and forever discharge Leibman, Orr, Xxxx and Gaylor, their successors,
assigns, heirs, affiliates, parents, subsidiaries, representatives, officers,
directors, employees and agents from any and all actions, causes of action,
choses in action, claims, demands, rights, damages, costs, expenses,
compensation, liabilities or suits of any nature whatsoever, whether at law or
in equity, whether or not now or heretofore known, unknown, suspected, accrued,
alleged, or claimed, in contract or in tort, past, present or future, arising
out of any act, occurrence, omission, cause, matter, activity, transaction or
other thing whatsoever, which occurred prior to the date hereof and up to and
including the date of execution of this Agreement, including, but not limited
to, any such claim or action arising out of the negotiation, existence,
performance or non performance of the Participation Agreement.
9. Further Assurances. Each party to this Agreement hereby agrees that it
will at any time and from time to time upon the request of any other party (and
at the expense of such other party), execute and deliver such instruments and
other documents (in appropriate form for recording or filing, as requested) as
such other party may deem reasonably necessary in order to fully implement or
further evidence or give effect to the understandings and agreements contained
in this Agreement.
10. Headings. The headings of sections in this Agreement have been included
for convenience only and should not be construed in interpreting this Agreement.
11. Severability. If any part of this Agreement is for any reason found to
be unenforceable, all other portions nevertheless remain enforceable.
12. Successors and Assigns. This Agreement binds and inures to the benefit
of the parties and their respective successors and assigns.
13. Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document. All counterparts must be construed together to constitute one and the
same instrument.
14. Governing Law. This Agreement must be construed, and its performance
enforced, under Texas law.
[Signature Pages Follow]
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IN WITNESS WHEREOF, this Agreement is duly executed by the undersigned
as of the date set forth above.
COMPANY:
Gexa Corp.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxx
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
CATALYST:
The Catalyst Fund, Ltd.
By: RDR Management I, Inc.,
its general partner
By: /s/ Xxx Xxxxx
-----------------------------------------
Name: Xxx Xxxxx
---------------------------------------
Title: Vice President
--------------------------------------
SWCC:
Southwest/Catalyst Capital, Ltd
By: SWC Management, Inc.,
its general partner
By: /s/ Xxx Xxxxx
--------------------------------------------
Name: Xxx Xxxxx
-----------------------------------------
Title: Vice President
-----------------------------------------
CHGC:
Catalyst/Hall Growth Capital, LP
By: Catalyst/Hall Growth Management
Company, LLC, its general partner
By: /s/ Xxx Xxxxx
--------------------------------------
Name: Xxx Xxxxx
------------------------------------
Title: Vice President
-----------------------------------
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XXXXXXX:
/s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx
XXX:
/s/ Xxxxxx X. Xxx
--------------------------------------------
Xxxxxx X. Xxx
XXXX:
/s/ Xxx Xxxx
--------------------------------------------
Don Xxxx
XXXXXX:
Xxxxxx Investment Trust Partnership
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
---------------------------------------
Title: General Partner
--------------------------------------
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EXHIBIT A
FORM OF REPLACEMENT WARRANT
EXHIBIT B
PIGGY-BACK REGISTRATION RIGHTS
1. Piggyback Registration Rights. At any time prior to the second
anniversary of this Agreement, whenever the Company proposes to register any
Common Stock under the Securities Act of 1933, as amended (the "Securities
Act"), for its own account or for the account of a shareholder of the Company,
other than a registration relating to the offering or issuance of shares in
connection with (i) employee compensation or benefit plans or (ii) one or more
acquisition transactions under a Registration Statement on Form S-4 or Form S-1
under the Securities Act (or a successor to Form S-4 or Form S-1) (any such
offering or issuance being an "Exempt Offering"), the Company will give Leibman,
Orr, Xxxx and Xxxxxx (each a "Holder") written notice of its intent to do so (a
"Registration Notice") at least 20 days prior to the filing of the related
registration statement with the United States Securities and Exchange Commission
(the "SEC"). Such notice shall specify the approximate date on which the Company
proposes to file such registration statement and shall contain a statement that
the Holder is entitled to participate in such offering and shall set forth the
number of shares of Common Stock underlying the Holder's Replacement Warrant
(the "Registrable Common") that represents the best estimate of the lead
managing underwriter (or if not known, the Company) that will be available for
sale by the holders of Registrable Common in the proposed offering. If the
Company shall have delivered a Registration Notice, the Holder shall be entitled
to participate on the same terms and conditions as the Company in the public
offering to which the Registration Notice relates and to offer and sell shares
of Registrable Common therein only to the extent provided in this Section 1. The
Holder desiring to participate in such offering shall notify the Company no
later than 10 days following receipt of the Registration Notice of the aggregate
number of shares of Registrable Common that such Holder then desires to sell in
the public offering. The Holder desiring to participate in the public offering
may include shares of Registrable Common in the registration statement relating
to such offering, to the extent that the inclusion of such shares shall not
reduce the number of shares of Common Stock to be offered and sold by the
Company to be included therein. If the lead managing underwriter selected by the
Company for a public offering determines that marketing factors require a
limitation on the number of shares of Registrable Common to be offered and sold
in such offering, there shall be included in the offering only that number of
shares of Registrable Common, if any, requested to be included in the offering
that such lead managing underwriter reasonably and in good faith believes will
not jeopardize the success of the offering, provided, however, that if the lead
managing underwriter determines that marketing factors require a limitation on
the number of shares of Registrable Common to be offered and sold as aforesaid
and so notifies the Company and the requesting Holder in writing, the number of
shares of Registrable Common to be offered and sold by holders desiring to
participate in the offering, shall be allocated among such holders on a pro rata
basis based on their holdings of Registrable Common.
2. Registration Procedures. In connection with registrations under Section
1, and subject to the terms and conditions contained therein, the Company shall:
(a) use its best efforts to prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect to the Registrable
Common and use its commercially reasonable best efforts to cause such
registration to promptly become effective;
(b) prepare and file with the SEC such amendments (including post-effective
amendments) to such registration statement and supplements to the related
prospectus to reflect appropriately the plan of distribution of the securities
registered thereunder until the completion of the distribution contemplated by
such registration statement or for so long thereafter as a dealer is required by
law to deliver a prospectus in connection with the offer and sale of the shares
of Registrable Common covered by such registration statement and/or as shall be
necessary so that neither such registration statement nor the related prospectus
shall 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 not misleading and so that such registration statement and the related
prospectus will otherwise comply with applicable legal requirements;
(c) use its commercially reasonable best efforts to register and qualify
the Registrable Common covered by such registration statement under applicable
securities or "Blue Sky" laws of such jurisdictions as the holders shall
reasonably request for the distribution of the Registrable Common;
(d) take such other actions as are reasonable and necessary to comply with
the requirements of the Securities Act;
(e) furnish such number of prospectuses (including preliminary
prospectuses) and documents incident thereto as the Holder from time to time may
reasonably request;
(f) provide to the Holder requesting to include Registrable Common in such
registration statement and any managing underwriter participating in any
distribution thereof, and to any attorney, accountant or other agent retained by
such Holder or managing underwriter, reasonable access to appropriate officers
and directors of the Company to ask questions and to obtain information
reasonably requested by such Holder, managing underwriter, attorney, accountant
or other agent in connection with such registration statement or any amendment
thereto; provided, however, that (i) in connection with any such access or
request, any such requesting persons shall cooperate to the extent reasonably
practicable to minimize any disruption to the operation by the Company of its
business and (ii) any records, information or documents shall be kept
confidential by such requesting persons, unless (A) such records, information or
documents are in the public domain or otherwise publicly available or (B)
disclosure of such records, information or documents is required by court or
administrative order or by applicable law (including, without limitation, the
Securities Act);
(g) notify the Holder and the managing underwriters participating in the
distribution pursuant to such registration statement promptly (i) when the
Company is informed that such registration statement or any post-effective
amendment to such registration statement becomes effective, (ii) of any request
by the SEC for an amendment or any supplement to such registration statement or
any related prospectus, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of such registration statement or of any order
preventing or suspending the use of any related prospectus or the initiation or
threat of any proceeding for that purpose, (iv) of the suspension of the
qualification of any shares of Registrable Common included in such registration
statement for sale in any jurisdiction or the initiation or threat of a
proceeding for that purpose, (v) of any determination by the Company that any
event has occurred which makes untrue any statement of a material fact made in
such registration statement or any related prospectus or which requires the
making of a change in such registration statement or any, related prospectus in
order that the same 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 not misleading, and (vi) of the completion of the
distribution contemplated by such registration statement if it relates to an
offering by the Company;
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(h) in the event of the issuance of any stop order suspending the
effectiveness of such registration statement or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any shares of Registrable Common included in such registration statement for
sale in any jurisdiction, use its commercially reasonable best efforts to obtain
its withdrawal;
(i) otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, but not later than fifteen
months after the effective date of such registration statement, an earnings
statement covering the period of at least twelve months beginning with the first
full fiscal quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(j) use reasonable diligence to cause all shares of Registrable Common
included in such registration statement to be listed on any securities exchange
on which the Common Stock is then listed at the initiation of the Company;
(k) provide a transfer agent and registrar for all such Registrable Common
not later than the effective date of such registration statement; and
(l) enter into such customary agreement (including an underwriting
agreement in customary form) as the underwriters, if any, may reasonably request
in order to expedite or facilitate the disposition of such shares of Registrable
Common.
3. Underwriting Agreement. In connection with each registration pursuant to
Section 1 covering an underwritten registered public offering, the Company and
the participating Holder agree to enter into a written agreement with the
managing underwriter in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature,
including provisions for indemnification by the Company and the Selling Holder
as more fully described in Section 9.
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4. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may permit the sale of the shares
of Registrable Common held by the Holder to the public without registration, the
Company agrees to:
(a) make and keep public information available (as those terms are
understood and defined in Rule 144) at all times;
(b) use its commercially reasonable best efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), at any time that it is subject to such reporting requirements;
(c) so long as the Holder owns any shares of Registrable Common, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, the Securities Act and
the Exchange Act (at any time that it is subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents filed in accordance with such
reporting requirements as the Holder may reasonably request in availing itself
of any rule or regulation of the SEC allowing the Holder to sell any such
securities without registration; and
(d) if required by the transfer agent and registrar for the Common Stock,
use reasonable diligence to obtain an opinion from legal counsel (which may
include the General Counsel of the Company) addressed to such transfer agent and
registrar, with respect to any sale of shares of Registrable Common pursuant to
Rule 144 (or, at the option of the Company, pay the reasonable fees and expenses
of legal counsel retained by the Holder to provide such an opinion).
5. Market Standoff. In consideration of the granting to the Holder of the
registration rights pursuant to this Agreement, Holder agrees that, for so long
as such Holder holds shares of Registrable Common which are not part of a
registration as permitted by Section 1, such Holder will not sell, transfer or
otherwise dispose of, including without limitation through put or short sale
arrangements, such shares of Registrable Common in the 30 days prior to the
effectiveness of any registration (other than relating to an Exempt Offering) of
Common Stock for sale to the public and for up to 90 days following the
effectiveness of such registration.
6. Registration Expenses. All expenses incurred in connection with any
registration, qualification and compliance under this Agreement (including,
without limitation, all registration, filing, qualification, legal, printing and
accounting fees) shall be borne by the Company. All underwriting commissions and
discounts applicable to shares of Registrable Common included in the
registrations under this Agreement and all legal fees for counsel acting on
behalf of the holders shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. Subject
to the foregoing, all expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all filing fees,
fees and expenses of compliance with securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Common), printing expenses, messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties), the fees and expenses applicable to shares of Registrable
Common included in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed at the initiation of the Company, registrar and transfer
agents' fees and fees and disbursements of counsel for the Company and its
independent certified public accountants, Securities Act liability insurance of
the Company and its officers and directors (if the Company elects to obtain such
insurance), the fees and expenses of any special experts retained by the Company
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in connection with such registration and fees and expenses of other persons
retained by the Company and incurred in connection with each registration
hereunder (but not including, without limitation, any underwriting fees,
discounts or commissions attributable to the sale of Registrable Common, and
transfer taxes, if any), will be borne by the Company.
7. Participation in Underwritten Registrations. No holder of Registrable
Common may participate in any underwritten registration hereunder unless such
holder (a) agrees to sell such holder's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, custody agreement, indemnities, underwriting agreement and other
documents reasonably required under the terms of such underwriting arrangements.
8. Transfer of Registration Rights; Additional Grants of Registration
Rights. The registration rights provided to the holders of Registrable Common
under Section 1 hereof may not be transferred to any other person or entity,
except pursuant to the laws of descent and distribution; provided, however, that
such transferees are bound by and subject to the terms and conditions contained
herein. The Company may, without the prior consent of the Holder, extend the
registration rights provided for in this Agreement to additional persons or
entities who become holders of Common Stock subsequent to the date of this
Agreement by entering into one or more addenda to this Agreement with any such
stockholders, and, upon execution of any such addenda, any stockholder that is a
party thereto shall thereafter be a "Holder" for purposes of this Agreement and
any shares of Common Stock referred to therein as such shall be shares of
"Registrable Common" for purposes of this Agreement. Nothing herein shall limit
the ability of the Company to grant to any person or entity any registration or
similar rights in the future with respect to Common Stock or other securities of
the Company (whether pursuant to the foregoing provision or otherwise).
9. Indemnification and Contribution.
(a) Indemnification by the Company. To the extent permitted by law, the
Company agrees to indemnify and hold harmless the Holder who sells shares of
Registrable Common in a registered offering pursuant to Section 1 (the "Selling
Holder"), from and against any and all losses, claims, damages, liabilities and
expenses (including reasonable legal expenses) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Common or in
any amendment or supplement thereto or in any related preliminary prospectus, 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 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
expressly for use therein. Notwithstanding the foregoing, the Company's
indemnification obligations with respect to any preliminary prospectus shall not
inure to the benefit of the Selling Holder or underwriter with respect to any
loss, claim, damage, liability (or actions in respect thereof) or expense
arising out of or based on any untrue statement or alleged untrue statement or
omission or alleged omission to state a material fact in such preliminary
prospectus, in any case where (i) a copy of the prospectus used to confirm sales
of shares of Registrable Common was not sent or given to the person asserting
such loss, claim, damage or liability at or prior to the written confirmation of
the sale to such person and (ii) such untrue statement or alleged untrue
statement or omission or alleged omission was corrected in such prospectus.
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(b) Conduct of Indemnification Proceedings. Promptly after receipt by the
Selling Holder of notice of any claim or the commencement of any action or
proceeding brought or asserted against such Selling Holder in respect of which
indemnity may be sought from the Company, such Selling Holder shall notify the
Company in writing of the claim or the commencement of that action or
proceeding; provided, however, that the failure to so notify the Company shall
not relieve the Company from any liability that it may have to the Selling
Holder otherwise than pursuant to the indemnification provisions of this
Agreement. If any such claim or action or proceeding shall be brought against
the Selling Holder and such Selling Holder shall have duly notified the Company
thereof, the Company shall have the right to assume the defense thereof,
including the employment of counsel. Such Selling Holder 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 Selling Holder unless (i) the Company has agreed to pay such fees and
expenses or (ii) the named parties to any such action or proceeding include both
such Selling Holder and the Company, and such Selling Holder shall have been
advised by counsel that there may be one or more legal defenses available to
such Selling Holder which are different from or additional to those available to
the Company, in which case, if such Selling Holder 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 Selling Holder. The Company shall not be liable for
any settlement of any such action or proceeding effected without the Company's
written consent.
(c) Indemnification by the Holder of Registrable Common. In connection with
any registration in which the Selling Holder is participating, such Selling
Holder will furnish to the Company in writing such information and affidavits as
the Company reasonably requests for use in connection with any related
registration statement or prospectus. To the extent permitted by law, the
Selling Holder agrees to indemnify and hold harmless the Company, its directors
and officers who sign the registration statement relating to shares of
Registrable Common offered by such Selling Holder 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 foregoing
indemnity from the Company to such Selling Holder, but only with respect to
information concerning such Selling Holder furnished in writing by such Selling
Holder or on such Selling Holder's behalf expressly for use in any registration
statement or prospectus relating to shares of Registrable Common offered by such
Selling Holder, or any amendment or supplement thereto, or any related
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its directors or officers, 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 or officers or such controlling persons shall have
the rights and duties given to such Selling Holder, by the preceding paragraph.
B-6
The Selling Holder also agrees to indemnify and hold harmless any underwriters
of the Registrable Common, their partners, officers and directors and each
person who controls such underwriters (within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act) on substantially the
same basis as that of the indemnification of the Company provided in this
Section 9(c). Notwithstanding anything to the contrary herein, in no event shall
the amount paid or payable by the Selling Holder under this Section 9(c) exceed
the amount of proceeds received by such Selling Holder from the offering of the
Registrable Common.
(d) Contribution. If the indemnification provided for in this Section 9 is
unavailable to any indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each 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 expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and the indemnified parties
in connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
such indemnified party or indemnified parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The Company and the Selling Holder agree that it would not be just and
equitable if contribution pursuant to this Section 9(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in this Section 9(d). 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. If indemnification is available
under this Section 9, the indemnifying parties shall indemnify each indemnified
party to the full extent provided in Sections 9(a) and 9(c) without regard to
the relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 9(d).
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