TEMTEX INDUSTRIES, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "Agreement") is made
and entered into as of the 19th day of July, 2002 by and among
Temtex Industries, Inc., a Delaware corporation (the "Company"),
and the persons identified on the signature page(s) hereof
(individually, an "Investor" and collectively, the "Investors").
Recitals
WHEREAS, the Investors hold all of the Company's Convertible
Subordinated Notes due July 19, 2007 (the "Notes"); and
WHEREAS, the Investors are parties to the Note Purchase
Agreement dated as of the date hereof between the Company and the
Investors (the "Note Purchase Agreement"), under which certain of
the Company's and such Investors' obligations are conditioned
upon the execution and delivery of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto further agree as
follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION
RIGHTS.
1.1 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and
the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(c) "Holder" shall mean any Investor who holds Registrable
Securities and any holder of Registrable Securities to whom the
registration rights conferred by this Agreement have been
transferred in compliance herewith.
(d) "Other Stockholders" shall mean persons other than Holders
who, by virtue of agreements with the Company, are entitled to
include their securities in certain registrations to be made by
the Company.
(e) "Registrable Securities" shall mean (i) shares of Common
Stock issued or issuable pursuant to the conversion of the Notes
and (ii) any Common Stock issued as a dividend or other
distribution with respect to or in exchange for or in replacement
of the shares referenced in clause (i) above, provided, however,
that Registrable Securities shall not include any shares of
Common Stock which have previously been registered or which have
been sold to the public either pursuant to a registration
statement or Rule 144, or which have been sold in a private
transaction in which the transferor's rights under this Agreement
are not assigned.
(f) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration
or ordering of the effectiveness of such registration statement.
(g) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including,
without limitation, all registration, qualification, and filing
fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and expenses
of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses, or
fees and disbursements of counsel for the Holders, which shall be
paid in any event by the Holders.
(h) "Restricted Securities" shall mean any Registrable
Securities required to bear a restrictive legend under the
Securities Act.
(i) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended
from time to time, or any similar successor rule that may be
promulgated by the Commission.
(j) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules
and regulations thereunder, all as the same shall be in effect
from time to time.
(k) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the
sale of Registrable Securities and fees and disbursements of
counsel for any Holder.
(l) "Voting Agreement" shall mean that certain Voting Agreement
entered into as of even date herewith among the Company, Xxxxx X.
Upfield and the Investors providing, among other things, for the
selection of certain directors of the Company.
1.2 Company Registrations.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a
security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to
employee benefit plans, or a registration relating to a corporate
reorganization or other transaction on Form S-4 (or other similar
form then in effect relating to such transactions), or a
registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
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(ii) use its best efforts to include in such registration (and
any related qualification under blue sky laws or other
compliance) and in any underwriting involved therein, all the
Registrable Securities specified in a written request or
requests, made by any Holder and received by the Company within
ten (10) days after the written notice from the Company described
in clause (i) above is mailed or delivered by the Company. Such
written request may specify all or a part of a Holder's
Registrable Securities.
(b) If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written
notice given pursuant to Section l.2(a)(i). In such event, the
right of any Holder to registration pursuant to this Section 1.2
shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other
holders of securities of the Company with registration rights to
participate therein distributing their securities through such
underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters
selected by the Company.
(c) Notwithstanding any other provision of this Section 1.2, if
the representative of the underwriters advises the Company in
writing that marketing factors require a limitation on the number
of shares to be underwritten, the representative may (subject to
the limitations set forth below) exclude all Registrable
Securities from, or limit the number of Registrable Securities to
be included in, the registration and underwriting. The Company
shall so advise all Holders of securities requesting
registration, and the amount of securities that are entitled to
be included in the registration and underwriting shall be
allocated: first to the Company for securities being sold for
its own account, second to the Holders for securities being sold
for their own account (or, pro rata to the extent less than the
entire amount can be sold) and third, to the Other Stockholders.
The Company agrees that it shall not grant any registration
rights inconsistent with this ranking without the prior written
consent of the Investors holding more than one-half of the
Registrable Securities. If any person does not agree to the terms
of any such underwriting, he shall be excluded therefrom by
written notice from the Company or the underwriter. Any
Registrable Securities or other securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
(d) If securities are so withdrawn from the registration and if
the number of shares of Registrable Securities to be included in
such registration was previously reduced as a result of marketing
factors, the Company shall then offer to all persons who have
retained the right to include securities in the registration the
right to include additional securities in the registration in an
aggregate amount equal to the number of shares so withdrawn, with
such shares to be allocated among the persons requesting
additional inclusion in accordance with the terms hereof.
1.3 Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance
pursuant to Section 1.2 hereof shall be borne by the Company. All
Selling Expenses relating to securities so registered shall be
borne by the Holders of such securities pro rata on the basis of
the number of shares of securities so registered on their behalf,
as shall any other expenses in connection with the registration
required to be borne by the Holders of such securities.
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1.4 Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company
will keep each Holder advised as to the initiation of each
registration and as to the completion thereof. At its expense,
the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed
the distribution described in the registration statement relating
thereto, whichever first occurs; provided, however, that (i) such
120-day period shall be extended for a period of time equal to
the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-
3 which are intended to be offered on a continuous or delayed
basis, such 120-day period shall be extended, if necessary, to
keep the registration statement effective until all such
Registrable Securities are sold, however in no event longer than
one year from the effective date of the registration statement;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(d) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed;
(e) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and
a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration; and
(f) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to this Agreement, the
Company will enter into an underwriting agreement in form
reasonably necessary to effect the offer and sale of the
Registrable Securities, provided such underwriting agreement
contains reasonable and customary provisions.
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1.5 Indemnification.
(a) To the extent permitted by applicable law, the Company will
indemnify each Holder, each of its officers, directors and
partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to each registration, qualification,
or compliance that has been effected pursuant to this Agreement,
and each underwriter, if any, and each person who controls within
the meaning of Section 15 of the Securities Act any underwriter,
against all expenses, claims, losses, damages, and liabilities
(or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus,
offering circular, or other document (including any related
registration statement, notification, or the like) incident to
any such registration, qualification, or compliance, or based on
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, or any violation by the
Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such
registration, qualification, or compliance, and will reimburse
each such Holder, each of its officers, directors, partners,
legal counsel, and accountants and each person controlling such
Holder, each such underwriter, and each person who controls any
such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company
by such Holder or underwriter and stated to be specifically for
use therein. It is agreed that the indemnity agreement contained
in this Section 1.5(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld).
(b) To the extent permitted by applicable law, each Holder will,
if Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its
directors, officers, partners, legal counsel, and accountants and
each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the
Company or such underwriter within the meaning of Section 15 of
the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each
person controlling such Holder or Other Stockholder, against all
claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
such registration statement, prospectus, offering circular, or
other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse the Company and such Holders, Other Stockholders,
directors, officers, partners, legal counsel, and accountants,
persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be
specifically for use therein. It is agreed that the indemnity
agreement contained in this section 1.5(b) shall not apply to
amounts paid in settlement of any such claims, losses, damages,
or liabilities (or actions in respect thereof) if such settlement
is effected without the consent of such Holder (which consent
shall not be unreasonably withheld) and that in no event shall
any indemnity under this Section 1.5(b) exceed the gross proceeds
from the offering received by such Holder.
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(c) Each party entitled to indemnification under this Section
1.5 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its
obligations under this Section 1.5, to the extent such failure is
not prejudicial. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to
such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim
and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.5 is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one
hand and of the Indemnified Party on the other in connection with
the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied
by the Indemnifying Party or by the Indemnified Party and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
1.6 Information by Holder. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be
reasonably required in connection with any registration,
qualification, or compliance referred to in this Agreement.
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1.7 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register securities granted to a Holder by
the Company under this Agreement may be transferred or assigned
by a Holder only to a transferee or assignee of not less than
120,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits, and the like),
provided that the Company is given written notice at the time of
or within a reasonable time after said transfer or assignment,
stating the name and address of the transferee or assignee and
identifying the securities with respect to which such
registration rights are being transferred or assigned, and,
provided further, that the transferee or assignee of such rights
assumes in writing the obligations of such Holder under this
Agreement.
1.8 Delay of Registration. No Holder shall have any right to
take any action to restrain, enjoin, or otherwise delay any
registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this
Agreement.
1.9 Termination of Registration Rights. The right of any Holder
to request registration or inclusion in any registration pursuant
to this Agreement shall terminate on the fifth (5th) anniversary
hereof or earlier upon such date as all shares of Registrable
Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day
period.
2. ACKNOWLEDGMENT.
2.1 Public Status. Each of the Holders hereof expressly
acknowledges and agrees that nothing contained herein shall be
construed to imply that the Company will remain a reporting
corporation under the Exchange Act or that a "public market" of
any kind will exist for the shares of Common Stock issuable upon
conversion of the Convertible Notes.
3. MISCELLANEOUS.
3.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware.
3.2 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit
of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
3.3 Entire Agreement; Amendment; Waiver. This Agreement
constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof. Neither
this Agreement nor any term hereof may be amended, waived,
discharged or terminated, except by a written instrument signed
by the Company and the holders of more than one-half of the
Registrable Securities and any such amendment, waiver, discharge
or termination shall be binding on all the Holders.
3.4 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by
United States first-class mail, postage prepaid, sent by
facsimile or delivered personally by hand or nationally
recognized courier addressed (a) if to a Holder, as indicated on
the signature page hereto, or at such other address or facsimile
number as such Holder or permitted assignee shall have furnished
to the Company in writing, or (b) if to the Company, at the
principal executive offices of the Company. All such notices and
other written communications shall be effective on the date of
mailing, confirmed facsimile transfer or delivery.
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3.5 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any Holder, upon any breach or
default of the Company under this Agreement shall impair any such
right, power or remedy of such Holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default
be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Holder of any breach or
default under this Agreement or any waiver on the part of any
Holder of any provisions or conditions of this Agreement must be
made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any
Holder, shall be cumulative and not alternative.
3.6 Rights; Separability. Unless otherwise expressly provided
herein, a Holder's rights hereunder are several rights, not
rights jointly held with any of the other Holders. In case any
provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
3.7 Information Confidential. Each Holder acknowledges that the
information received pursuant hereto may be confidential and for
its use only, and it will not use such confidential information
in violation of the Exchange Act or reproduce, disclose or
disseminate such information to any other person (other than its
employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the
exercise of rights under this Agreement, unless the Company has
made such information available to the public generally or such
Holder is required to disclose such information by law.
3.8 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference
only and are not to be considered in construing or interpreting
this Agreement.
3.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this
Investors' Rights Agreement effective as of the day and year
first above written.
TEMTEX INDUSTRIES, INC.
By:
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Name:
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Title:
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INVESTORS:
XXXXXXX X. XXXXXXXX
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Address: 000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, XX 00000-0000
XXXXXXX XXX LIVING TRUST
By: Xxxxxxx Xxx, as Sole Trustee
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Address: 000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, XX 00000-0000
XXXXXXX XXXXXXXX
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Address: 00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
XXXXX XXXXXX
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Address: 0000 Xxxxxxx Xxxxx
Xxxxxx Xxx Xxx, Xxxxxxxxxx 00000
