REGISTRATION RIGHTS AGREEMENT dated as of December 23, 1999,
between QAD INC., a Delaware corporation (the "COMPANY") and RECOVERY EQUITY
INVESTORS II, L.P., a Delaware limited partnership (together with its permitted
successors, transferees and assigns hereunder, "REI"). Capitalized terms are
used as defined in Article X hereto.
RECITALS
WHEREAS, pursuant to that certain Stock Purchase Agreement (as
the same may be amended, supplemented or otherwise modified from time to time,
the "STOCK PURCHASE AGREEMENT") dated as of December 23, 1999, among REI, the
Company, Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxx and The Lopker Living Trust dated
Xxxxx 00, 0000, XXX is acquiring an aggregate of 2,777,778 shares of Common
Stock of the Company for an aggregate purchase price equal to $12,500,000;
WHEREAS, pursuant to the Stock Purchase Agreement, the Company
is issuing to REI a warrant exercisable for an aggregate of 225,000 shares of
Common Stock (as such amount may be adjusted from time to time pursuant to the
anti-dilution provisions of such warrant);
WHEREAS, each of REI and the Company desires to enter into
this Agreement to provide for registration rights with respect to the Common
Stock, including shares issuable upon exercise of the aforementioned warrant;
WHEREAS, the Purchase Agreement provides, among other things,
that the execution and delivery of an agreement in substantially the form hereof
is a condition to the consummation of the other transactions contemplated by the
Stock Purchase Agreement.
NOW THEREFORE, in connection with the Stock Purchase Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEMAND REGISTRATIONS
1.1 REQUESTS FOR REGISTRATION. (a) Subject to Sections 1.2 and
1.7, at any time after the date hereof, any or all of the Required REI
Stockholders may request in writing registration under the Securities Act of all
or part of their Registrable Securities (i) on Form S-1 or Form S-2 or any
similar or successor long-form registration statement (any such registration, a
"LONG-FORM REGISTRATION") or (ii) on Form S-3 or any similar or successor
short-form registration statement (any such registration, a "SHORT-FORM
REGISTRATION") if the Company qualifies to use such short form. Within 10 days
after its receipt of any such request, the Company will give written notice of
such request to all other Participating Stockholders. Thereafter, the Company
will use all reasonable efforts to effect the registration under the
Securities Act on the form requested by the Requesting Investors, and to
include in such registration, (i) all Registrable Securities which the
Requesting Investors have so requested to be included therein, and (ii) all
other Registrable Securities with respect to which the Company has received
written requests for inclusion therein by the Participating Stockholders
within 30 days after their receipt of the Company's notice, subject in each
case to the provisions of Section 1.4. Each Long-Form Registration or
Short-Form Registration requested in accordance with this Section 1.1 is
referred to herein as a "DEMAND REGISTRATION."
(b) The Requesting Investors which request a Demand
Registration pursuant to this Section 1.1 may, at any time prior to the
effective date of the registration statement relating to such Demand
Registration, revoke such request by providing written notice to the Company;
PROVIDED, HOWEVER, that notwithstanding such revocation, such Demand
Registration shall be deemed a request for purposes of Section 1.2 unless, after
consultation with the Company and any proposed underwriter, the Requesting
Investors in good faith determine that more than 25% of the amount of
Registrable Securities which they have requested to be registered (before giving
effect to any cutback pursuant to Section 1.4) would not be sold pursuant to
such Demand Registration within a reasonable amount of time or at a price
reasonably acceptable to such Requesting Investors.
(c) Any request for a Demand Registration pursuant to Section
1.1 shall specify the number of Registrable Securities proposed to be sold by
the Requesting Investors and the intended method of disposition thereof.
1.2 DEMAND REGISTRATIONS. The Required REI Stockholders will
be entitled to request pursuant to Section 1.1 two Demand Registrations. The
Company will pay all Registration Expenses in connection with any such Demand
Registration. All Demand Registrations (unless otherwise requested by the
Requisite Registration Participants) shall be underwritten registrations.
1.3 EFFECTIVE REGISTRATION STATEMENT. No Demand Registration
shall be deemed to have been requested or effected for purposes of Section
1.1(a) or 1.2:
(i) unless a registration statement with respect
thereto has been declared effective by the Commission (other
than in connection with a revocation notice delivered pursuant
to Section 1.1(b)) and the Company has complied in all
material respects with all obligations required to be
performed by it on or prior to the date of such declaration in
connection with such Demand Registration;
(ii) if after such registration statement has become
effective, any stop order, injunction or other order or
requirement of the Commission or any other Governmental or
Regulatory Authority affecting any of the Registrable
Securities covered by such registration statement, is for any
reason threatened in writing or issued by the Commission or
such other Governmental or Regulatory Authority and, as a
result thereof, none of the Registrable Securities covered
thereby have been sold;
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(iii) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in
connection with such Demand Registration are not satisfied by
reason of a failure by or inability of the Company to satisfy
any of such conditions to closing;
(iv) if the Company declines to effect such Demand
Registration pursuant to Section 1.7(a) or delivers a
Black-Out Notice with respect to such Demand Registration;
(v) if the Requesting Investors have made the
determination contemplated by the PROVISO to Section 1.1(b)
with respect to such Demand Registration and have notified the
Company of such determination in accordance with Section
1.1(b);
(vi) if the Requesting Investors are not able to
register and sell at least 75% of the amount of Registrable
Securities which they requested (before giving effect to any
cutback effected pursuant to Section 1.4) to be included in
such registration; or
(vii) if the registration statement with respect to
such Demand Registration does not remain effective for a
period of at least 180 days beyond the effective date thereof
or, in the case of any Demand Registration that constitutes an
underwritten offering of Registrable Securities, until 45 days
after the commencement of the distribution by the holders of
the Registrable Securities included in such Demand
Registration, in each case unless all of the Registrable
Securities included in such Demand Registration have been sold
to the public prior thereto in accordance with the plan of
distribution specified in such registration statement.
If a Demand Registration requested pursuant to this Article I
is deemed not to have been requested or effected as provided in this Section
1.3, then the Company shall continue to be obligated to effect the number of
Demand Registrations set forth in Section 1.2 without giving effect to such
requested Demand Registration and will pay all Registration Expenses in
connection with such Demand Registration.
1.4 PRIORITY ON DEMAND REGISTRATIONS. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities of the Participating Stockholders without the written consent of the
Requisite Registration Participants. If the Requesting Investors and other
holders of Registrable Securities request Registrable Securities to be included
in a Demand Registration which is an underwritten offering and the managing
underwriter advises the Company in writing that in its opinion the number of
Registrable Securities requested to be included exceeds the number of
Registrable Securities which can be sold in such offering within a price range
acceptable to the Requisite Requesting Investors, the Company will include any
securities to be sold in such Demand Registration in the following
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order: (i) FIRST, the Registrable Securities requested to be included in such
registration by the Requesting Investors in accordance with Section 1.1(a);
(ii) SECOND, the Registrable Securities requested to be included in such
registration by other Participating Stockholders in accordance with Section
1.1(a); (iii) THIRD, the securities which the Company proposes to sell; and
(iv) FOURTH, any securities other than Registrable Securities to be sold by
persons other than the Company included in such registration in compliance
with Section 1.6.
1.5 SELECTION OF UNDERWRITERS. The Requisite Registration
Participants with respect to any Demand Registration will have the right to
select the underwriters and the managing underwriter to administer such Demand
Registration (which underwriters and managing underwriters shall be reasonably
acceptable to the Company).
1.6 OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, without the written consent of the Participating Stockholders which
then hold Registrable Securities representing at least a majority (by number of
shares) of the Registrable Securities (on a Fully-Diluted Basis) then held by
all Participating Stockholders, the Company will not grant to any Person the
right to request the Company to register any equity securities of the Company,
or any securities convertible, exchangeable or exercisable for or into such
securities, other than piggyback registration rights entitling the holder
thereof to participate in Company-initiated registrations, subject to the prior
rights of Participating Stockholders to include their Registrable Securities in
Company-initiated registrations in accordance with Section 2.3; PROVIDED,
HOWEVER, that this Section 1.6 shall not apply to any grant of registration
rights that is made by the Company after the Participating Stockholders cease to
hold shares of Common Stock and Equity Equivalents representing (on a
Fully-Diluted Basis) at least 50% of REI's Original Ownership Level.
1.7 BLACK-OUT RIGHTS AND POSTPONEMENT. (a) The Company shall
not be required to effect a Demand Registration if the Company, within the
120-day period preceding the date of a request for a Demand Registration, has
effected a registration of securities in which the Participating Stockholders
were able to register and sell at least 75% of the amount of Registrable
Securities which they requested (before giving effect to any cutback effected
pursuant to Section 1.4, 2.3 or 2.4) to be included in such registration
pursuant to Demand Registration rights under Article I or Piggyback Registration
rights under Article II.
(b) The Company may, upon written notice (a "BLACK-OUT
NOTICE") to the Requesting Investors requesting a Demand Registration, require
such Requesting Investors to withdraw such Demand Registration upon the good
faith determination by the Company that such postponement is necessary (i) to
avoid disclosure of material non-public information or (ii) as a result of a
pending material financing or acquisition transaction, and in each case, each of
the REI Stockholders may not request another Demand Registration for a period of
up to 120 days, as specified by the Company in such Black-Out Notice. The
Company may only give a Black-Out Notice where the giving of such notice has
been specifically approved by the Board of Directors of the Company. Upon
receipt of a Black-Out Notice, the related Demand Registration shall be deemed
to be rescinded and retracted and shall not be counted as a Demand Registration
for any purpose hereunder. The Company may not deliver more than three Black-Out
Notices in
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any 12-month period; PROVIDED, HOWEVER, that the aggregate number of days
covered by Black-Out Notices in any 12-month period shall not under any
circumstances exceed 120.
ARTICLE II
PIGGYBACK REGISTRATIONS
2.1 RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its equity securities under the Securities Act (other than
pursuant to a Demand Registration and other than on Forms S-4 or S-8 or any
successor forms), whether for the Company's own account or for the account of
any other Person, and the registration form to be used may be used for the
registration of Registrable Securities (a "PIGGYBACK Registration"), the Company
will give prompt written notice (in any event within 10 days after its receipt
of notice of any exercise of other demand registration rights) to all
Participating Stockholders of its intention to effect such a registration. Such
notice shall offer each Participating Stockholder the opportunity to register,
on the same terms and conditions, such number of such Participating
Stockholder's Registrable Securities as such Participating Stockholder may
request. The Company will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein by Participating Stockholders within 30 days after their
receipt of the Company's notice, subject to the provisions of Sections 2.3 and
2.4. Such requests for inclusion shall specify the number of Registrable
Securities intended to be disposed of and the intended method of distribution
thereof.
2.2 PIGGYBACK EXPENSES. The Registration Expenses of the
Participating Stockholders will be paid by the Company in all Piggyback
Registrations.
2.3 PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriter advises the Company in writing that in its opinion
the number of securities requested to be included in such registration is such
that the success of the Company's offering will be materially and adversely
affected, then the Company will include any securities to be sold in such
Piggyback Registration in the following order: (i) FIRST, the securities the
Company proposes to sell; (ii) SECOND, the Registrable Securities requested to
be included in such registration by the Participating Stockholders in accordance
with Section 2.1, PROVIDED that if the managing underwriter in good faith
determines that a lower number of Registrable Securities of the Participating
Stockholders should be included, then the Company shall be required to include
in such registration only that lower number of Registrable Securities, and the
Participating Stockholders shall participate in such registration on a pro rata
basis in accordance with the number of Registrable Securities requested to be
included in such registration by each Participating Stockholder; and (iii)
THIRD, if all Registrable Securities requested to be included in such
registration by the Participating Stockholders in accordance with Section 2.1
are included in such registration, any other securities requested to be included
in such registration in compliance with Section 1.6.
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2.4 PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriter advises the Company in
writing that in its opinion the number of securities requested to be included in
such registration is such that the success of such holders' offering would be
materially and adversely affected, then the Company will include any securities
to be sold in such Piggyback Registration in the following order: (i) FIRST, the
securities which such holders propose to sell in compliance with Section 1.6;
(ii) SECOND, the Registrable Securities requested to be included in such
registration by the Participating Stockholders in accordance with Section 2.1,
PROVIDED that if the managing underwriter determines in good faith that a lower
number of Registrable Securities of the Participating Stockholders should be
included, then the Company shall be required to include in such registration
only that lower number of Registrable Securities, and the Participating
Stockholders shall participate in such registration on a pro rata basis in
accordance with the number of Registrable Securities requested to be included in
such registration by each; and (iii) THIRD, any other securities proposed to be
included in such registration in compliance with Section 1.6.
ARTICLE III
HOLDBACK AGREEMENTS
3.1 HOLDER'S HOLDBACK OBLIGATIONS. Each Participating
Stockholder agrees not to effect any public sale or distribution of Registrable
Securities, or any securities convertible, exchangeable or exercisable for or
into Registrable Securities during the seven days prior to, and the 180-day
period beginning on, the effective date of any underwritten Demand Registration
or any underwritten Piggyback Registration in which such Participating
Stockholder had an opportunity to participate without cutback under Article II
hereof (in each case except as part of such underwritten registration), unless
the managing underwriter of such underwritten registration otherwise agrees.
3.2 COMPANY'S HOLDBACK OBLIGATIONS. Unless the managing
underwriter of the relevant underwritten Demand Registration or an underwritten
Piggyback Registration otherwise agrees, the Company agrees (i) not to effect
any public sale or distribution of its equity securities, or any securities
convertible, exchangeable or exercisable for or into such securities, during the
14 days prior to, and during the 90-day period beginning on, the effective date
of any underwritten Demand Registration or any underwritten Piggyback
Registration in which holders of Registrable Securities are selling stockholders
(except as part of such underwritten registration or pursuant to registrations
on Form S-4 or S-8 or any successor forms), and (ii) to use all reasonable
efforts to cause each holder of at least 5% (on a Fully-Diluted Basis) of its
equity securities to agree not to effect any public sale or distribution of any
such equity securities or any securities convertible, exchangeable or
exercisable for into such equity securities during the 180-day period beginning
on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration in which holders of Registrable Securities
are selling stockholders (except as part of such underwritten registration, if
otherwise permitted).
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ARTICLE IV
REGISTRATION PROCEDURES
Whenever Participating Stockholders have requested that any
Registrable Securities be registered in accordance with Article I or II, the
Company will use all reasonable efforts to effect the registration and the sale
of such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as reasonably
expeditiously as possible (or, in the case of clause (p) below, will not):
(a) promptly prepare and file with the Commission a
registration statement with respect to such Registrable Securities (such
registration statement to include all information which the Participating
Stockholders holding the Registrable Securities to be registered thereby shall
reasonably request) and use all reasonable efforts to cause such registration
statement to become effective, PROVIDED, that as promptly as practicable before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will (i) furnish to one counsel selected by the Requisite
Registration Participants copies of all such documents proposed to be filed, and
the Company shall not file any such document to which such counsel shall have
reasonably objected on the grounds that such document does not comply in all
material respects with the requirements of the Securities Act, and (ii) notify
each Participating Stockholder holding Registrable Securities covered by such
registration statement of (x) any request by the Commission to amend such
registration statement or amend or supplement any prospectus, or (y) 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 promptly remove it if
entered;
(b) (i) 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 at all times during the period commencing on the effective date of
such registration statement and ending on the first date as of which all
Registrable Securities of the Participating Stockholders covered by such
registration statement are sold in accordance with the intended plan of
distribution set forth in such registration statement and (ii) comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each Participating Stockholder holding
Registrable Securities covered by such registration statement, without charge,
such number of conformed copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus and, in each case, including all exhibits
thereto and documents incorporated by reference therein) and such other
documents as such Participating Stockholder may reasonably request in order to
facilitate the disposition of the Registrable Securities covered thereby that
are held by such Participating Stockholder;
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(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as any
Participating Stockholder holding any such Registrable Securities shall
reasonably request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect and to do any and all
other acts and things which may be reasonably necessary or advisable to enable
such Participating Stockholder to consummate the disposition in such
jurisdictions of any such Registrable Securities held by such Participating
Stockholder; PROVIDED, HOWEVER, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this clause (d), (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction;
(e) furnish to each Participating Stockholder holding
Registrable Securities covered by such registration statement a signed copy,
addressed to such Participating Stockholder (and the underwriters, if any), of
an opinion of counsel for the Company or special counsel to such Participating
Stockholder dated the effective date of such registration statement (and, if
such registration statement includes an underwritten public offering, dated the
date of the closing under the underwriting agreement), reasonably satisfactory
in form and substance to the Requisite Registration Participants, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) as are customarily covered in opinions of
issuer's counsel delivered to the underwriters in underwritten public offerings,
and such other legal matters as the Requisite Registration Participants (or the
underwriters, if any) may reasonably request;
(f) notify each Participating Stockholder holding Registrable
Securities covered by such registration statement, at a time when a prospectus
relating to such Registrable Securities is required to be delivered under the
Securities Act, of the occurrence of any event known to the Company as a result
of which the prospectus included in such registration statement, as then in
effect, 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 in light of the circumstances under which they were made,
and, at the request of any such Participating Stockholder, (i) the Company will
prepare and furnish such Participating Stockholder a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made and (ii) the Company shall extend the period during which such
registration statement shall be maintained effective by the number of days
during the period from and including the date of the giving of such notice to
such Participating Stockholder to the date when the Company made available to
such Participating Stockholder an appropriately amended or supplemented
prospectus;
(g) cause all Registrable Securities of the Participating
Stockholders covered by such registration statement to be listed on each
securities exchange and quotation system on which similar securities issued by
the Company are then listed and to enter into such customary
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agreements as may be required in furtherance thereof, including listing
applications and indemnification agreements in customary form;
(h) provide a transfer agent and registrar for the Registrable
Securities of the Participating Stockholders covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary arrangements and take all such
other actions as the Requisite Registration Participants or the underwriters, if
any, for the offering of the Registered Securities covered by such registration
statement reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(j) make available for inspection by any Participating
Stockholder holding Registrable Securities covered by such registration
statement, any underwriter participating in any disposition of securities
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such Participating Stockholder or underwriter, all
pertinent financial and other records, corporate documents and properties of the
Company and all correspondence between the Commission and the Company or its
counsel or auditors and all memoranda relating to discussions with the
Commission or its staff in connection with such registration statement, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such Participating
Stockholder, underwriter, attorney, accountant or agent in connection with such
registration statement;
(k) subject to other provisions hereof, use all reasonable
efforts to cause the Registrable Securities of the Participating Stockholders
covered by such registration statement to be registered with or approved by such
Governmental or Regulatory Authorities or self-regulatory organizations as may
be necessary to enable such Participating Stockholders to consummate the
disposition of such Registrable Securities;
(l) use all reasonable efforts to obtain a "cold comfort"
letter, dated the effective date of such registration statement (and, if such
registration includes an underwritten offering, dated the date of the closing
under the underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
registration statement, addressed to the Company, to each Participating
Stockholder holding Registrable Securities covered by such registration
statement, and to the underwriters, if any, covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) and with respect to events subsequent to the date of such financial
statements, as are customarily covered in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and such other
financial matters as the Requisite Registration Participants (or the
underwriters, if any) may reasonably request;
(m) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the Commission and make available to its
security holders, in each case as soon as practicable, an earnings statement
covering a period of at least 12 months, beginning with the
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first month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(n) permit any Participating Stockholder holding Registrable
Securities covered by such registration statement, which Participating
Stockholder, in its sole judgment exercised in good faith, might be deemed to be
a controlling person of the Company (within the meaning of the Securities Act or
the Exchange Act) to participate in the preparation of such registration
statement and to include therein material, furnished to the Company in writing,
which in the reasonable judgment of such Participating Stockholder should be
included and which is reasonably acceptable to the Company;
(o) promptly notify the Participating Stockholders holding the
Registrable Securities covered by such registration statement of the issuance by
any state securities commission or other Governmental or Regulatory Authority of
any order suspending the qualification or exemption from qualification of any
such Registrable Securities under any state securities or "blue sky" law, and
use every reasonable effort to obtain the lifting at the earliest possible time
of any stop order (whether issued by the Commission or otherwise) suspending the
effectiveness of such registration statement or of any order preventing or
suspending the use of any preliminary prospectus included therein;
(p) at any time file or make any amendment to such
registration statement, or any amendment of or supplement to the prospectus
included therein (including amendments of the documents incorporated by
reference into the prospectus), (i) of which each Participating Stockholder
holding Registrable Securities covered by such registration statement or the
managing underwriter, if any, shall not have previously been advised and
furnished a copy or (ii) to which the Requisite Registration Participants, the
managing underwriter (if any) or counsel for the Requisite Registration
Participants or any such managing underwriter shall reasonably object;
(q) make such representations and warranties (subject to
appropriate disclosure schedule exceptions) to the Participating Stockholders
holding Registrable Securities covered by such registration statement and the
underwriters, if any, in form, substance and scope as are customarily made by
issuers to underwriters and selling holders, as the case may be, in underwritten
public offerings of substantially the same type;
(r) during the period when the prospectus included in such
registration statement is required to be delivered under the Securities Act,
promptly file all documents required to be filed with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act; and
(s) if such registration statement refers to any Participating
Stockholder holding Registrable Securities covered thereby by name or otherwise
as the holder of any securities of the Company, then (whether or not, in the
sole judgment, exercised in good faith, of such Participating Stockholder, such
Participating Stockholder is or might be deemed to be a controlling person of
the Company), (i) at the request of such Participating Stockholder, insert
therein language, in form and substance reasonably satisfactory to such
Participating
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Stockholder, the Company and the managing underwriter (if any), to the effect
that the holding by such Participating Stockholder of such securities is not
to be construed as a recommendation by such Participating Stockholder of the
investment quality of the Company's Registrable Securities or the Company's
other securities covered thereby and that such holding does not imply that
such Participating Stockholder will assist in meeting any future financial
requirements of the Company, or (ii) in the event that such reference to such
Participating Stockholder by name or otherwise is not required by the
Securities Act, any similar Federal or state statute, or any rule or
regulation of any Governmental or Regulatory Authority having jurisdiction
over the offering, then in force, the Company shall be required at the
request of such Participating Stockholder to delete the reference to such
Participating Stockholder.
ARTICLE V
REGISTRATION EXPENSES
5.1 FEES AND EXPENSES GENERALLY. Subject to the next
succeeding sentence, all expenses incident to the Company's performance of or
compliance with this Agreement, including internal expenses (including all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual or special audit or quarterly
review, the expense of any liability insurance, the expenses and fees for
listing securities on one or more securities exchanges or quotation systems
pursuant to clause (g) of Article IV, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding underwriting fees,
discounts and commissions) and other Persons retained by the Company (all such
expenses being herein called "REGISTRATION EXPENSES"), will be borne by the
Company. Notwithstanding anything in this Agreement to the contrary, each
Participating Stockholder shall pay any underwriting fees, discounts or
commissions attributable to the sale of its Registrable Securities.
5.2 COUNSEL FEES. In connection with each Demand Registration,
the Company will reimburse the Participating Stockholders for the reasonable
fees and disbursements of one counsel selected by the Requisite Registration
Participants.
ARTICLE VI
UNDERWRITTEN OFFERINGS
6.1 DEMAND UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a Demand Registration, the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to be consistent with
the terms hereof, to contain such representations and warranties by the Company
and such other terms as are generally included in agreements of this type,
including indemnities customarily included in such agreements, and to be
otherwise
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reasonably satisfactory in form and substance to the Requisite Registration
Participants, the Company and the underwriters. The Participating
Stockholders holding the Registrable Securities to be distributed by such
underwriters will cooperate in good faith with the Company in the negotiation
of the underwriting agreement. The Participating Stockholders holding the
Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement and may, at the option of the
Requisite Registration Participants, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such Participating Stockholders and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement also be conditions precedent to the obligations of
such Participating Stockholders. The Company shall cooperate as reasonably
requested by any such Participating Stockholder in order to limit (a) any
representations or warranties to, or agreements with, the Company or the
underwriters to be made by such Participating Stockholder only to
representations, warranties or agreements regarding such Participating
Stockholder, such Participating Stockholder's Registrable Securities and such
Participating Stockholder's intended method of distribution and any other
representation required by applicable law and (b) such Participating
Stockholder's maximum liability in respect of its indemnification and
contribution obligations under such underwriting agreement to an amount equal
to the net proceeds actually received by such Participating Stockholder
(after deducting any underwriting fees, discounts and expenses) from the sale
of Registrable Securities pursuant to such Demand Registration.
6.2 INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any
time proposes to register any of its equity securities under the Securities Act
as contemplated by Article II and such equity securities are to be distributed
by or through one or more underwriters, the Company will, if requested by any
Participating Stockholder as provided in Article II, arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such Participating Stockholder, subject to the limitations set forth in Article
II, among the securities to be distributed by such underwriters. The
Participating Stockholders holding Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between the
Company and such underwriters (provided that such underwriting agreement is
consistent with the terms hereof), and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such Participating Stockholders and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement also be conditions precedent to the obligations of
such Participating Stockholders. The Company shall cooperate as reasonably
requested by any such Participating Stockholder in order to limit (a) any
representations or warranties to, or agreements with, the Company or the
underwriters to be made by such Participating Stockholder only to
representations, warranties or agreements regarding such Participating
Stockholder, such Participating Stockholder's Registrable Securities and such
Participating Stockholder's intended method of distribution and any other
representation required by applicable law and (b) such Participating
Stockholder's maximum liability in respect of its indemnification and
contribution obligations under such underwriting agreement to an amount equal to
the net proceeds actually received by such Participating Stockholder (after
deducting any
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underwriting fees, discounts and expenses) from the sale of Registrable
Securities pursuant to the applicable Piggyback Registration.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each of the
Participating Stockholders holding any Registrable Securities covered by a
registration statement that has been filed with the Commission pursuant to this
Agreement, each underwriter for such Participating Stockholder in connection
therewith, each other Person, if any, who controls such Participating
Stockholder or any such underwriter within the meaning of the Securities Act or
the Exchange Act, and each of their respective managers, partners, officers,
directors, employees and general partners, as follows:
(i) against any and all loss, liability, claim,
damage or expense (other than amounts paid in settlement)
incurred by such Person arising out of or based upon an untrue
statement or alleged untrue statement of a material fact
contained in such registration statement (or any amendment or
supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or
prospectus included therein (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense incurred by such Person to the extent of
the aggregate amount paid in settlement of any litigation,
investigation or proceeding by any Governmental or Regulatory
Authority, in each case whether commenced or threatened, or of
any claim whatsoever, that is based upon any such untrue
statement or omission or any such alleged untrue statement or
omission, if such settlement is effected with the written
consent of the Company (which consent shall not be
unreasonably withheld or delayed); and
(iii) against any and all expense incurred by such
Person in connection with investigating, preparing or
defending against any litigation or any investigation or
proceeding by any Governmental or Regulatory Authority, in
each case whether commenced or threatened in writing, or
against any claim whatsoever, that is based upon any such
untrue statement or omission or any such alleged untrue
statement or omission, to the extent that any such expense is
not paid under clause (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of or based upon an untrue
statement or alleged untrue statement
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or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Participating Stockholder expressly for use in the preparation of such
registration statement (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or in any preliminary
prospectus or prospectus included therein (or any amendment or supplement
thereto); and PROVIDED FURTHER, HOWEVER, that the Company will not be liable
to any Participating Stockholder (or any other indemnified Person) under the
indemnity agreement in this Section 7.1, with respect to any preliminary
prospectus or the final prospectus or the final prospectus as amended or
supplemented, as the case may be, to the extent that any such loss,
liability, claim, damage or expense of such Participating Stockholder (or
other indemnified Person) results from the fact that such Participating
Stockholder sold Registrable Securities to a Person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy
of the final prospectus or of the final prospectus as then amended or
supplemented, whichever is most recent, if the Company has previously and
timely furnished copies thereof to such Participating Stockholder. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Participating Stockholder or any
other Person eligible for indemnification under this Section 7.1, and shall
survive the transfer of the relevant Registrable Securities by the
Participating Stockholder who theretofore held them.
7.2 INDEMNIFICATION BY A SELLING SHAREHOLDER. In connection
with any registration statement which covers Registrable Securities of a
Participating Stockholder pursuant to this Agreement, each such Participating
Stockholder agrees to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 7.1 of this Agreement), to the extent
permitted by law, the Company and each underwriter for the Company or any such
Participating Stockholder in connection therewith, each other Person who
controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, and each of their respective managers,
officers, directors and general partners, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto or to any such prospectus, if such statement
or alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information that relates only to such
Participating Stockholder and its affiliates or the plan of distribution and
that is furnished to the Company by or on behalf of such Participating
Stockholder expressly for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any other Person eligible under this
Section 7.2, and shall survive the transfer of Registrable Securities by such
Participating Stockholder. The obligations of each Participating Stockholder
pursuant to this Section 7.2 are to be several and not joint. Additionally, with
respect to each claim pursuant to this Section 7.2 and each corresponding claim
for contribution under Section 7.5, each such Participating Stockholder's
maximum aggregate liability under this Section 7.2 and Section 7.5 shall be
limited to an amount equal to the net proceeds actually received by such
Participating Stockholder (after deducting any underwriting fees, discounts and
expenses) from the sale of Registrable Securities being sold pursuant to such
registration statement or prospectus by such Participating Stockholder.
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7.3 INDEMNIFICATION PROCEDURE. Within 10 days after receipt by
an indemnified party hereunder of written notice of the commencement of any
action or proceeding involving a claim referred to in Section 7.1 or 7.2, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; PROVIDED, HOWEVER, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under Section 7.1 or 7.2, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action or proceeding is brought against an indemnified party, the indemnifying
party will be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, with counsel
reasonably satisfactory to such indemnified party; and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal fees and expenses subsequently incurred by the latter in
connection with the defense thereof, unless in such indemnified party's
reasonable judgment an actual or potential conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, in
which case the indemnifying party shall not assume the defense of such claim but
also shall not be liable for the fees and expenses of (i) in the case of a claim
referred to in Section 7.1, more than one counsel (in addition to any local
counsel) for all indemnified parties selected by the holders of a majority (by
number of shares) of the Registrable Securities held by such indemnified
parties, or (ii) in the case of a claim referred to in Section 7.2, more than
one counsel (in addition to any local counsel) for the Company, in each case in
connection with any one action or separate but similar or related actions or
proceedings. An indemnifying party who is not entitled to (pursuant to the
immediately preceding sentence), or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel (in
addition to any local counsel) for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable judgment of any
indemnified party an actual or potential conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect to
such claim, in which event the indemnifying party shall be obligated to pay the
fees and expenses of such additional counsel or counsels as may be reasonable in
light of such conflict. The indemnifying party will not, without the prior
written consent of each indemnified party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit,
investigation or proceeding in respect of which indemnification may be sought
hereunder (whether or not such indemnified party or any Person who controls such
indemnified party is a party to such claim, action, suit, investigation or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of such indemnified party from all liability arising out
of such claim, action, suit, investigation or proceeding. An indemnified party
will not settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit, investigation or proceeding in
respect of which it is then seeking (or thereafter seeks) indemnification
hereunder, in each case without the prior written consent of the indemnifying
party (which consent shall not be unreasonably withheld or delayed).
Notwithstanding anything to the contrary set forth herein, and without limiting
any of the rights set forth above, an indemnified party hereunder will have the
right to retain, at its own expense, counsel with respect to the defense of a
claim.
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7.4 UNDERWRITING AGREEMENT. The Company and each
Participating Stockholder requesting registration of all or any part of its
Registrable Securities pursuant to Article I or II, shall provide for the
foregoing indemnity (with appropriate modifications) in any underwriting
agreement entered into in connection with a Demand Registration or a
Piggyback Registration with respect to any required registration or other
qualification of Registrable Securities under any Federal or state law or
regulation of any Governmental or Regulatory Authority.
7.5 CONTRIBUTION. If the indemnification provided for in
Sections 7.1 and 7.2 of this Agreement is unavailable to hold harmless an
indemnified party under such Section, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to
in Section 7.1 or 7.2, as the case may be, in such proportion as is
appropriate to reflect the relative fault of such indemnifying party, on the
one hand, and such indemnified party, on the other hand, in connection with
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations,
including the relative benefits received by each party from the offering of
the securities covered by the relevant registration statement, the parties'
relative knowledge and access to information concerning the matter with
respect to which the relevant claim was asserted and the parties' relative
opportunities to correct and prevent any relevant statement or omission.
Without limiting the generality of the foregoing, the parties' relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to relevant information and opportunity to correct or
prevent such alleged untrue or untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions
pursuant to this Section 7.5 were to be determined by pro rata or per capita
allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the first and second sentences of
this Section 7.5. The amount paid by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses referred to in the first
sentence of this Section 7.5 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending the relevant action or proceeding and shall be
limited as provided in Section 7.3 if the indemnifying party has assumed the
defense of the relevant action or proceeding in accordance with the
provisions of Section 7.3. Promptly after receipt by an indemnified party
under this Section 7.5 of notice of the commencement of any action or
proceeding against such party in respect of which a claim for contribution
may be made against an indemnifying party under this Section 7.5, such
indemnified party shall notify the indemnifying party in writing of the
commencement thereof if the notice specified in Section 7.3 has not been
given with respect to such action or proceeding; PROVIDED, HOWEVER, that the
omission to so notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may otherwise have to any
indemnified party under this Section 7.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. The
Company and the Participating Stockholders agree with each other, and will
agree with and the
16
underwriters of Registrable Securities registered pursuant to Article I or
II, if requested by such underwriters, that (i) the underwriters' portion of
the contribution paid to the Participating Stockholders pursuant to this
Section 7.5 shall not exceed the total underwriting fees, discounts and
commissions in connection with the relevant offering of Registrable
Securities and (ii) the total amount of such Participating Stockholder's
contributions under this Section 7.5 and any amounts paid by such
Participating Stockholder in respect of corresponding claims for
indemnification under Section 7.2 shall not exceed an amount equal to the net
proceeds actually received by such Participating Stockholder from the sale of
Registrable Securities in the offering to which the losses, liabilities,
claims, damages or expenses of the indemnified parties relate. 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.
7.6 PERIODIC PAYMENTS. The indemnification required by this
Article VII shall be made by periodic payments of the amount thereof during
the course of the relevant investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred; PROVIDED,
HOWEVER, that if it is finally determined by a court of competent
jurisdiction that the relevant indemnified party was not entitled to
indemnification hereunder in respect of such investigation or defense, such
indemnified party shall repay to the indemnifying party, on demand, all
amounts received by it in respect of such investigation or defense pursuant
to this Section 7.6, together with interest thereon at a rate per annum equal
to the "prime rate" (as published from time to time in the Wall Street
Journal) for the period from and including the date on which the indemnified
party received the relevant amount to but excluding the date on which it
repaid such amount to the indemnifying party.
ARTICLE VIII
RULE 144
The Company shall file all reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Participating
Stockholder, make publicly available other information), and it will take
such further action as any Participating Stockholder may reasonably request,
all to the extent required from time to time to enable such Participating
Stockholder to sell shares of Registrable Securities without registration
under the Securities Act in compliance with (i) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (ii) any similar rule
or regulation hereafter adopted by the Commission. Upon the request of any
Participating Stockholder, the Company will deliver to such Participating
Stockholder a written statement as to whether it has complied with such
requirements.
ARTICLE IX
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Participating Stockholder may participate in any
underwritten registration
17
hereunder unless such Participating Stockholder (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, escrow agreements and other
documents reasonably required under the terms of such underwriting
arrangements and consistent with the provisions of this Agreement. If the
Requesting Investors with respect to any Demand Registration are subsequently
not entitled to participate in such Demand Registration solely by reason of
their failure to comply with any material requirement of this Article IX
then, notwithstanding anything in Section 1.1(b) or 1.3 to the contrary, the
request by such Requesting Investors for such Demand Registration shall
continue to be counted for purposes of Section 1.2.
ARTICLE X
DEFINITIONS
10.1 TERMS. As used in this Agreement, the following
defined terms shall have the meanings set forth below:
"ADDITIONAL STOCKHOLDER" means any person to whom the
Company has granted registration rights in compliance with Section 1.6 and
who has executed a Registration Rights Joinder Agreement in substantially the
form of Exhibit A, so long as any such person shall hold Registrable
Securities.
"BUSINESS DAY" means a day other than Saturday, Sunday or
any day on which banks located in the State of New York or California are
authorized or obligated to close.
"COMMISSION" means the U.S. Securities and Exchange
Commission.
"COMMON STOCK" means the Common Stock, par value $.001 per
share, of the Company, any securities into which such Common Stock shall have
been changed and any securities resulting from any reclassification or
recapitalization of such Common Stock, and all other securities of any class
or classes (however designated) of the Company the holders of which have the
right, without limitation as to amount, after payment on any securities
entitled to a preference on dividends or other distributions upon any
dissolution, liquidation or winding up, either to all or to a share of the
balance of payments upon such dissolution, liquidation or winding up.
"EQUITY EQUIVALENTS" means any securities (other than
employee options) which, by their terms, are or may be exercisable,
convertible or exchangeable for or into Common Stock at the election of the
holder thereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, or any similar Federal statute then in effect, and any reference
to a particular section thereof shall include a reference to a comparable
section, if any, of any such similar Federal statute, and the rules and
regulations thereunder.
18
"FULLY-DILUTED BASIS" means with respect to the calculation
of the number of shares of Common Stock, (i) all shares of Common Stock
outstanding at the time of determination, (ii) all shares of Common Stock
issuable upon the exercise, conversion or exchange of any Equity Equivalents
outstanding at the time of determination and (iii) all shares of Common Stock
issuable upon the exercise, conversion or exchange of any securities that are
issuable upon the exercise, conversion or exchange of any Equity Equivalents
outstanding at the time of determination.
"ORIGINAL OWNERSHIP LEVEL" has the meaning ascribed to it
in the Stockholders' Agreement.
"PARTICIPATING STOCKHOLDERS" means the REI Stockholders and
any Additional Stockholders or transferee of any of the foregoing persons who
has acquired Registrable Securities and who has executed a Registration
Rights Joinder Agreement.
"PERMITTED TRANSFEREE" means:
(i) with respect to any Stockholder who is a natural
person, the spouse or any lineal descendant (including by adoption and
stepchildren) of such Stockholder, or any trust of which such Stockholder is
the trustee and which is established solely for the benefit of any of the
foregoing individuals and whose terms are not inconsistent with the terms of
this Agreement;
(ii) with respect to any Stockholder who is not a natural
person, (A) any Affiliate of such Stockholder and any trustee, officer,
director or employee of such Stockholder or any such Affiliate, (B) any
spouse, lineal descendant (including by adoption and stepchildren) of the
trustees, officers, directors and employees referred to in clause (A) above,
and any trust where a majority in interest of the beneficiaries thereof are
one or more of the persons described in this clause (B) and the trustees,
officers, directors and employees described in clause (A) above and whose
terms are not inconsistent with the terms of this Agreement; and
(iii) as to any REI Stockholder, (w) any other REI
Stockholder, (x) any general partner or limited partner of REI (and any
subsequent transferee of such partner), (y) any partner, member, director,
officer, employee or investment advisor of any such general partner or
limited partner, (z) any Affiliate of any such general partner or limited
partner, (ww) any director, officer, employee, investment advisor, partner or
member of any such Affiliate, and (xx) any liquidating trust or similar
entity established by REI or any of the foregoing entities for the benefit of
its partners or interest holders and their Permitted Transferees for the
purpose of holding Restricted Securities.
"PRO RATA" means, with respect to one or more Participating
Stockholders, in proportion to the number of shares of Common Stock on a
Fully-Diluted Basis owned by such Participating Stockholder or Stockholders
or which may be acquired by any such Participating Stockholder or
Stockholders upon exercising any rights under any Equity Equivalent owned by
such Participating Stockholder or Stockholders.
19
"REGISTRABLE SECURITIES" means, at any time of
determination, (i) the shares of Common Stock then issued and outstanding or
which are issuable upon the conversion, exercise or exchange of Equity
Equivalents, (ii) any then outstanding securities into which shares of Common
Stock shall have been changed and (iii) any then outstanding securities
resulting from any reclassification or recapitalization of Common Stock;
PROVIDED, HOWEVER, that "REGISTRABLE SECURITIES" shall not include any shares
of Common Stock or other securities obtained or transferred pursuant to an
effective registration statement under the Securities Act or in a Rule 144
Transaction; and PROVIDED FURTHER, HOWEVER, that "REGISTRABLE SECURITIES"
shall not include any shares of Common Stock or other securities which are
held by a Person who is not a Participating Stockholder.
"REI STOCKHOLDERS" means REI and its Permitted Transferees
who have executed a Registration Rights Joinder Agreement in substantially
the form of Exhibit A, so long as any such person shall hold Registrable
Securities.
"REQUESTING INVESTORS" means, with respect to any Demand
Registration, the Required REI Stockholders that have requested such Demand
Registration in accordance with Section 1.1.
"REQUISITE REGISTRATION PARTICIPANTS" means, with respect
to any Demand Registration or Piggyback Registration, Participating
Stockholders which then hold Registrable Securities representing at least a
majority (by number of shares) of the Registrable Securities requested to be
included in such Demand Registration (whether as Requesting Investors or
otherwise) or Piggyback Registration pursuant to Section 1.1 or 2.1, as
applicable.
"REQUIRED REI STOCKHOLDERS" means, as of the date of any
determination thereof, REI Stockholders which then hold Registrable
Securities representing at least a majority (by number of shares) of the
Registrable Securities on a Fully-Diluted Basis, then held by all REI
Stockholders.
"REQUISITE REQUESTING INVESTORS" means, as of the date of
any determination thereof with respect to any Demand Registration, Requesting
Investors which then hold a majority (by number of shares) of the Registrable
Securities, on a Fully-Diluted Basis, then held by all Requesting Investors
of such Demand Registration.
"RESTRICTED SECURITIES" means the Common Stock, any Equity
Equivalents and any securities issued with respect to any of the foregoing as
a result of any stock dividend, stock split, reclassification,
recapitalization, reorganization, merger, consolidation or similar event or
upon the conversion, exchange or exercise thereof.
"RULE 144 TRANSACTION" means a transfer of Common Stock (a)
complying with Rule 144 under the Securities Act (or any successor statute or
rule) as such Rule (or such successor statute or rule, as the case may be) is in
effect on the date of such transfer (but not including a sale other than
pursuant to a "brokers transaction" as defined in clauses (1) and (2) of
paragraph (g) of such Rule as in effect on the date hereof) and (b) occurring at
a time when
20
shares of Common Stock are registered pursuant to Section 12 of the Exchange
Act (or any successor to such Section).
"SECURITIES ACT" means the Securities Act of 1933, as
amended, or any similar Federal statute then in effect, and any reference to
a particular section thereof shall include a reference to a comparable
section, if any, of any such similar Federal statute, and the rules and
regulations thereunder.
"STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement
dated as of the date hereof among the parties to the Stock Purchase
Agreement, as such Stockholders' Agreement may be amended, supplemented or
otherwise modified from time to time.
"TRANSFER" means any direct or indirect sale, transfer,
assignment, grant of a participation in, gift, hypothecation, pledge or other
disposition of any Restricted Security or any interest therein or, as the
context may require, to sell, transfer, assign, grant a participation in,
give as a gift, hypothecate, pledge or otherwise dispose of, directly or
indirectly, any Restricted Security or any interest therein.
10.2 OTHER DEFINED TERMS. Unless otherwise defined herein,
capitalized terms used in this Agreement shall have the respective meanings
assigned to them in the Stock Purchase Agreement.
10.3 DEFINED TERMS IN CORRESPONDING SECTIONS. The following
defined terms, when used in this Agreement, shall have the meaning ascribed
to them in the corresponding Sections of this Agreement listed below:
"Black-Out Notice" -- Section 1.7(b)
"Company" -- Preamble
"Demand Registration" -- Section 1.1
"Investment Agreements" -- Recitals
"Long-Form Registration" -- Section 1.1(a)
"Piggyback Registration" -- Section 2.1
"Registration Expenses" -- Section 5.1
"REI" -- Preamble
"Short-Form Registration" -- Section 1.1(a)
"Stock Purchase Agreement" -- Recitals
ARTICLE XI
MISCELLANEOUS
11.1 NO INCONSISTENT AGREEMENTS. The Company represents and
warrants that it does not currently have, and covenants that it will not
hereafter enter into any Contract which is inconsistent with, or would otherwise
restrict the performance by the Company of, its obligations hereunder.
21
11.2 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES.
The Company will use all reasonable efforts not to take any
action, and not to fail to take any action which it may properly take, with
respect to its securities if such action or failure to act would adversely
affect (a) the ability of the holders of Registrable Securities to include
Registrable Securities in a registration undertaken pursuant to this
Agreement or (b) to the extent within the Company's control, would adversely
affect the marketability of such Registrable Securities in any such
registration (it being understood that the actions referred to in this
Section 11.2 include effecting a stock split or a combination of shares).
11.3 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
hereto shall be entitled to specific performance of the terms hereof, in
addition to any other remedy that may be available to any of them at law or
equity; PROVIDED, HOWEVER, that each of the parties hereto agrees to provide
the other parties hereto with written notice at least two Business Days prior
to filing any motion or other pleading seeking a temporary restraining order,
a temporary or permanent injunction, specific performance, or any other
equitable remedy and to give the other parties hereto and their counsel a
reasonable opportunity to attend and participate in any judicial or
administrative hearing or other proceeding held to adjudicate or rule upon
any such motion or pleading.
11.4 AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this
Agreement will be effective against the Company or any holder of Registrable
Securities or Restricted Securities, unless such modification, amendment or
waiver is approved in writing by the Company and the Required REI
Stockholders. Each of the Participating Stockholders and the Company shall be
bound by each modification, amendment or waiver authorized in accordance with
this Section 11.4, regardless of whether the certificates evidencing the
Registrable Securities or the Restricted Securities shall have been marked to
indicate such modification, amendment or waiver. The failure of any party
hereto to enforce any of the provisions of this Agreement will in no way be
construed as a waiver of such provisions and will not affect the right of
such party thereafter to enforce each and every provision of this Agreement
in accordance with its terms.
11.5 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns. In addition,
whether or not any express assignment has been made, the provisions of this
Agreement which are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities, except to the extent reserved to or by the
transferor in connection with any such transfer; PROVIDED, HOWEVER, that the
benefits of this Agreement shall inure to and be enforceable by any
transferee of Registrable Securities only if such transferee shall have
executed a Registration Rights Joinder Agreement substantially in the form of
Exhibit A hereto.
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11.6 NOTICES. All notices, requests and other
communications hereunder must be in writing and will be deemed to have been
duly given only if delivered personally against written receipt or by
facsimile transmission or mailed by prepaid first class certified mail,
return receipt requested or mailed by reputable overnight courier, fee
prepaid, to the parties at the following addresses or facsimile numbers:
(a) if to the Company, to:
QAD Inc.
0000 Xxx Xxxx
Xxxxxxxxxxx, XX 00000-0000
Facsimile No: (805)
Attn: Chief Financial Officer
with a copy to
10,000 Midlantic, #000 Xxxx
Xx. Xxxxxx, XX 00000-0000
Facsimile No: (000) 000-0000
Attn: General Counsel
And a copy to
Nida & Xxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000-0000
Facsimile No: (000) 000-0000
Attn: Xxxxxx X. Xxxx, Esq.
(b) if to any REI Stockholder, to:
Recovery Equity Investors II, L.P.
000 Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Facsimile No: (000) 000-0000
Attn: Xxxxxx X. Xxxx-Xxxx
Xxxxxxx X. Xxxxxx
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxxx, Esq.
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All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 11.6, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section 11.6, be deemed given upon receipt, (iii)
if delivered by mail in the manner described above to the address as provided
in this Section 11.6, be deemed given on the earlier of the third full
Business Day following the day of mailing or upon receipt, and (iv) if
delivered by overnight courier to the address provided in this Section 11.6,
be deemed given on the earlier of the first Business Day following the date
sent by such overnight courier or upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this
Section 11.6). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by
giving notice specifying such change to the other parties hereto.
11.7 HEADINGS, CERTAIN CONVENTIONS. The headings used in
this Agreement have been inserted for convenience of reference only and do
not define or limit any terms or provisions hereof. Unless the context
otherwise expressly requires, all references herein to Articles, Sections and
Exhibits are to Articles and Sections of, and Exhibits to, this Agreement.
The words "herein," "hereunder" and "hereof" and words of similar import
refer to this Agreement as a whole and not to any particular Section or
provision. The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation."
11.8 GENDER. Whenever the pronouns "he" or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the singular shall be read and construed as
though in the plural and words in the plural shall be construed as though in
the singular in all cases where they would so apply.
11.9 INVALID PROVISIONS. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future
law, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom and (iv) in
lieu of such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
11.10 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York.
24
11.11 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH
OF THE PARTIES HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT
MAY BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES
HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTY
AT THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE
15 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS,
SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS
AGAINST ANY OF THE OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS, AND IN
SUCH MANNER, AS MAY BE PERMITTED BY ANY APPLICABLE LAW.
11.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. EACH OF THE PARTIES
HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT,
BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE PARTIES HERETO FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
25
[Signature Page Follows]
26
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
QAD INC.
By:___________________________________
Name:
Title:
RECOVERY EQUITY INVESTORS II, L.P.
By: RECOVERY EQUITY PARTNERS II, L.P.,
its General Partner
By: _____________________________
Name: Xxxxxx X. Xxxx-Xxxx
Title: General Partner
By: _____________________________
Name: Xxxxxxx X. Xxxxxx
Title: General Partner
[Signature Page to Registration Rights Agreement]
EXHIBIT A
Form of Registration Rights Joinder Agreement
QAD Inc.
0000 Xxx Xxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Chief Financial Officer
Ladies & Gentlemen:
In consideration of the transfer to the undersigned of ____
shares of Common Stock of QAD Inc., a Delaware corporation (the "COMPANY"), by
[INSERT NAME OF TRANSFEROR], the undersigned agrees that, as of the date written
below, [HE][SHE][IT] shall become a party to that certain Registration Rights
Agreement dated as of December 23, 1999, as such agreement may have been amended
from time to time (the "AGREEMENT"), among the Company and the persons named
therein, and shall be fully bound by, and subject to, all of the covenants,
terms and conditions of the Agreement that were applicable to the undersigned's
transferor, as though an original party thereto, and shall be deemed an
Additional Stockholder for all purposes thereof.
Executed as of the day of , .
SIGNATORY:
Address:
ACKNOWLEDGED AND
ACCEPTED:
QAD INC.
By
Name:
Title:
