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EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
March 2, 1998 among Brooke Group Ltd., a Delaware corporation ("Brooke"), and
the entities listed on Exhibit A attached hereto (individually, together with
transferees, assignees or other successors, and including any Warrant Holder
following exercise of its warrant, in its capacity as a holder of Registrable
Securities, a "Warrant Holder" and collectively the "Warrant Holders").
RECITALS
A. Brooke has granted Warrant Holders warrants to the
Registrable Securities in the amounts specified on
Exhibit A;
B. Brooke and the Warrant Holders desire that Brooke use
its reasonable best efforts to file, on or before May 1, 1998, with the SEC a
Registration Statement to register the resale by the Warrant Holders of the
Registrable Securities.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements set forth herein, and intending to be
legally bound, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Brooke" has the meaning set forth in the Preamble.
"Effectiveness Period" has the meaning set forth in Section
2.2.1.
"Exchange Act" means the Securities Exchange Act of 1934.
"Initial Shelf Registration" has the meaning set forth
in Section 2.2.1.
"Losses" has the meaning set forth in Section 4.1.
"Person" or "person" means an individual, trustee,
corporation, limited liability company, partnership, joint stock company, trust,
unincorporated association, union, business association, firm or other entity.
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"Preliminary Prospectus" means any preliminary prospectus that
may be included in any Registration Statement.
"Prospectus" means the prospectus included in or related to
any Registration Statement (including a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means collectively the shares of
common stock of Brooke, $0.10 par value per share, which are subject to that
certain Warrant, dated March 2, 1998, granted by Brooke to the Warrant Holder,
including such shares of common stock at any time following exercise of such
Warrant, in whole or in part. However, such common stock will cease to be a
Registrable Security when it (i) is sold in an open market transaction or in an
underwritten public offering, (ii) is sold to any person other than an
"affiliate" of Brooke (as defined under the Regulations) pursuant to a
Registration Statement, (iii) unless the Warrant Holder is an affiliate, such
common stock is eligible for resale without restriction pursuant to Rule 144(k)
of the Regulations or any similar rule or regulation hereafter adopted by the
SEC (provided, however, that if such Warrant Holder is an "affiliate", all
securities owned by it shall remain "Registrable Securities") or (iv) ceases to
be outstanding.
"Registration Statement" means any registration statement of
Brooke under the Securities Act that covers any of the Registrable Securities,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement and all material deemed part of such registration
statement by Rule 430A of the Regulations.
"Regulations" means the regulations of the SEC under the
Securities Act.
"Rule 415" means Rule 415 of the Regulations or any similar
rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933.
"Shelf Registration" has the meaning set forth in Section
2.2.2.
"Subsequent Shelf Registration" has the meaning set forth in
Section 2.2.2.
"Underwritten registration" or "underwritten offering" means a
registration in which securities of Brooke are sold to one or more underwriters
or group or a syndicate of underwriters for offering to the public.
"Warrant Holder" has the meaning set forth in the Preamble.
Section 1.2 Usage. (a) References to Articles, Sections and
Exhibits are to articles and sections hereof and exhibits hereto, references to
a Person are also references to its successors and assigns, references to a
document are to it as amended, waived and otherwise modified from time to time,
and references to a statute or another governmental rule are to it as amended
and otherwise modified from time to time. The definitions set forth in Section
1.1 are equally applicable both to the singular and plural forms and the
feminine, masculine and neuter forms of the terms defined. "Including" and
correlative terms shall be deemed to be followed by "without limitation," if not
followed by such words or words of like import. The headings of Articles and
Sections and the table of contents relating hereto have been included solely for
convenience of references and shall not have any effect on the construction
hereof.
(b) This Agreement contemplates the filing of registration
statements under the Securities Act involving various offers and sales of
securities. In connection with such registration statements, there may be
identified therein one or more underwriters through which securities are to be
offered pursuant to either a "firm commitment" or "best-efforts" arrangement,
and, in the case where there is more than one underwriter, one or more of the
underwriters may be designated as the "manager" or "representative" or the
"co-managers" or "representatives" of the several underwriters. Accordingly, all
references herein to an "underwriter" or the "underwriters" are intended to
refer to a "principal underwriter" (as defined in Rule 405 of the Regulations)
and to provide for those transactions in which securities may be offered by or
through one or more underwriters, and not to imply that any of the transactions
contemplated hereby is conditioned in any manner whatsoever on the participation
therein by one or more underwriters on behalf of any party.
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ARTICLE 2
REGISTRATION OF REGISTRABLE SECURITIES UNDER SECURITIES ACT
Section 2.1 Required Registration of Registrable Securities.
Brooke shall use its reasonable best efforts to register the Registrable
Securities upon the terms, and subject to the limitations and conditions,
hereinafter set forth.
Section 2.2 Shelf Registration.
Section 2.2.1 Initial Shelf Registration. On or
before May 1, 1998, Brooke shall prepare and file with the SEC a Registration
Statement for an offering to be made by the Warrant Holders on a continuous
basis under Rule 415 covering all the Registrable Securities (the "Initial Shelf
Registration"). The Initial Shelf Registration shall be on an appropriate form
permitting registration of all Registrable Securities for resale by the Warrant
Holders in the manner or manners reasonably designated by them (including one or
more underwritten offerings). Brooke shall use its reasonable best efforts to
cause the Initial Shelf Registration to be declared effective under the
Securities Act within sixty (60) days following the date of filing of the
Registration Statement with the SEC and to keep the Initial Shelf Registration
continuously effective and the Prospectus current under the Securities Act
during the period (the "Effectiveness Period") ending on the earliest date on
which (x) all Registrable Securities have been sold other than to a Warrant
Holder, (y) a Subsequent Shelf Registration covering all the Registrable
securities has been declared effective under the Securities Act or (z) in the
opinion of Milbank, Tweed, Xxxxxx & XxXxxx or other nationally recognized
counsel to Brooke reasonably acceptable to the Warrant Holders, which opinion
shall be reasonably satisfactory in form, scope and substance to the Warrant
Holders, registration of the Registrable Securities is no longer required under
the Securities Act for the Warrant Holders to sell all remaining Registrable
Securities in the open market without limitations as to volume or manner of sale
and without being required to file any forms or reports with the SEC under the
Securities Act or the Regulations other than a notice of sale under Rule 144
under the Regulations. No Warrant Holders of Registrable Securities may include
any of its Registrable Securities in any Shelf Registration pursuant to this
Agreement unless and until such Warrant Holder furnishes to Brooke in writing
such information as Brooke may reasonably request pursuant to Section 6.2(b).
Section 2.2.2 Subsequent Shelf Registrations. If the Initial
Shelf Registration or any Subsequent Shelf Registration ceases to be effective
for any reason at any time during the Effectiveness Period, Brooke shall use its
reasonable best efforts to (i) obtain the prompt withdrawal of any order
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suspending the effectiveness thereof and (ii) in any event, within 45 days of
such cessation of effectiveness, amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof or file an additional Registration Statement covering all
of the Registrable Securities (a "Subsequent Shelf Registration," subject to the
last sentence of this Section 2.2.2) for an offering to be made by the Warrant
Holders on a delayed or continuous basis under Rule 415 in a manner reasonably
expected to be acceptable to the SEC. If a Subsequent Shelf Registration is
filed, Brooke shall use its reasonable best efforts to cause the Subsequent
Shelf Registration to be declared effective as soon as practicable after such
filing and keep such Registration statement continuously effective and the
Prospectus current until the end of the Effectiveness Period. As used herein,
the term "Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration. If by reason of the Securities Act or the
Regulations a Shelf Registration shall not permit the resale by a Warrant Holder
of Registrable Securities acquired from another Warrant Holder, the obligations
of Brooke shall extend to the filing of, and other registration procedures with
respect to, another registration statement (which shall be a Subsequent Shelf
Registration).
Section 2.2.3 Supplements and Amendments. Subject to Section
2.3.1(q), Brooke shall promptly supplement and amend the Registration Statement
and the Prospectus (i) if required by the Regulations or the instructions
applicable to the registration form used for the Shelf Registration, (ii) if
required by the Securities Act or the Regulations, (iii) if required to prevent
the Registration Statement or the Prospectus from containing any material
misstatement or omitting to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iv) if
reasonably requested by the Warrant Holders or by any underwriter of the
Registrable Securities.
Section 2.3 Registration Procedures.
Section 2.3.1 Shelf Registration. In connection with a Shelf
Registration, Brooke shall use its reasonable best efforts to effect such
registration to permit the sale of Registrable Securities in accordance with the
method or methods of disposition reasonably intended by the Warrant Holders, and
pursuant thereto Brooke shall:
(a) Filing of Registration Statement. Before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, furnish to and afford the Warrant Holders of the Registrable
Securities covered by such Registration Statement, and the managing
underwriters, if
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any, a reasonable opportunity to review and, if they desire, comment on
all such documents (including any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed.
(b) Compliance with Law. Comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to it with respect to the
disposition of all Registrable Secu rities covered by such Registration
Statement as amended or by such Prospectus as supplemented.
(c) Notice. Notify the Warrant Holders owning the Registrable
Securities covered by the Registration Statement, and the managing
underwriters, if any, promptly, and confirm such notice in writing (i)
when a Registration Statement and an amendment thereto or a Prospectus
or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective (including
in such notice a written statement that any such Warrant Holder may,
upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incor
porated by reference and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of any Preliminary
Prospectus, the initiation of any proceedings for that purpose or any
other communication between the SEC and Brooke or their rep
resentatives related to a Shelf Registration, (iii) if at any time when
a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities, the
representations and warranties of Brooke contained in any agreement
(including any underwriting agreement) contemplated by Section 2.3.1(m)
cease to be true and correct, (iv) of the receipt by Brooke of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Securities for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of
the happening of any event or any information becoming known that
requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and, in the
case of the Prospectus, it will not contain any untrue statement of a
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material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of Brooke's determination that a
post-effective amendment to a Registration Statement would be necessary
or advisable under applicable law.
(d) Prevent Suspension of Effectiveness. Use its reasonable
best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Securities for
offers or sales in any jurisdiction, and, if any such order is issued,
use its reasonable best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) Underwritten Offering. If the Registrable Securities are
to be sold in an underwritten offering, (i) as promptly as is
reasonably practicable incorporate in a prospectus supplement or
post-effective amendment to the Registration Statement such information
as is required by the Securities Act, Regulation S-K of the
Regulations, the Regulations and instructions applicable to the
registration form used for such Registration Statement to be disclosed
concerning, among other things, the terms of the underwritten offering,
the underwriters, and the plan of distribution and (ii) make all
required filings of such prospectus supplement or such post-effective
amendment as soon as practicable.
(f) Copies of Filings. Furnish to the Warrant Holders owning
Registrable Securities that so request and each managing underwriter,
if any, without charge, one conformed copy of the Registration
Statement and each post-effective amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) Delivery of Prospectus. Deliver to the Warrant Holders
owning Registrable Securities, and the underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including
each form of Preliminary Prospectus) and each amendment or supplement
thereto and any documents incorporated or deemed to be incorporated by
reference therein as such Persons may reasonably request; and Brooke
hereby consents to the use of each such Prospectus and Preliminary
Prospectus and each amendment or supplement thereto by each of the
selling Warrant Holders and the underwriters or agents, if any, and
dealers, if any, in
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connection with the offering and sale of the registrable Securities
covered by such Prospectus and any amendment or supplement thereto in
the manner set forth in the relevant Registration Statement.
(h) Blue Sky Laws. Use its reasonable best efforts to register
or qualify, and to cooperate with the selling Warrant Holders with
respect to the Registrable Securities, the underwriters, if any, and
their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United States as such
Warrant Holders or the managing underwriters, if any, reasonably
request in writing; keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period; and do
any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement in the
manner set forth in such Registration Statement; provided, however,
that Brooke shall not be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B)
subject itself to general service of process in any such jurisdiction
where it is not then so subject or (C) subject itself to taxation in a
material amount in any such jurisdiction.
(i) Certificates. Cooperate with the selling Warrant Holders
with respect to Registrable Securities and the managing underwriters,
if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Securities to be in such denominations and registered
in such names as the managing underwriters, if any, or Warrant Holders
may reasonably request.
(j) Governmental Agencies. Use its reasonable best efforts to
cause the Registrable Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies,
or authorities as may be necessary to enable the selling Warrant
Holders thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities in the manner set forth in
such Registration Statement, except as may be required solely as a
consequence of the nature of such selling Warrant Holder's business, in
which case Brooke will cooperate in all
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reasonable respects with the filing of such Registration Statements and
the granting of such approvals.
(k) Amendments and Supplements. Subject to Sections 2.3.1(a)
and 2.3.1(q), upon the occurrence of any event contemplated by Section
2.3.1(c)(v) or 2.3.1(c)(vi), as promptly as practicable prepare and
file with the SEC a post- effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file
any other required document so that, as thereafter delivered to the
purchasers of Registrable Securities being sold thereunder, the
Registration Statement and such Prospectus will not contain 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, in
light of the circumstances under which they were made, not misleading.
(l) Listing on Securities Exchanges. Use its reasonable best
efforts to cause all Registrable Securities covered by a Registration
Statement to be (i) listed on each national securities exchange, if
any, on which Registrable Securities are then listed, or (ii)
authorized to be quoted on the NASDAQ Stock Market or the NASDAQ
National Market if similar securities of Brooke are so authorized.
(m) Underwriting Agreement. In connection with an underwritten
offering of Registrable Securities, enter into and perform its
obligations under an underwriting agreement in customary form for
underwritten offerings made by selling security holders on the
registration form utilized for the relevant Registration Statement and
take such other actions as are reasonably requested by the managing
underwriters in order to expedite or facilitate the registration and
the disposition of such Registrable Securities, and in such connection,
(i) make such representations and warranties to the underwriters with
respect to the business of Brooke and its subsidiaries, and the
Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein in each case as are
customarily made by comparable issuers to underwriters in underwritten
offerings made by selling security holders, and confirm the same if and
when requested; (ii) obtain opinions of counsel to Brooke and updates
thereof (which counsel and opinions shall be reasonably satisfactory to
the managing underwriters and the selling Warrant Holders), addressed
to the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings by selling security
holders; (iii) obtain "cold comfort" letters and updates thereof (which
letters and updates shall be
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reasonably satisfactory to the managing underwriters and the selling
Warrant Holders) from the independent certified public accountants of
Brooke (and, if necessary, any other independent certified public
accountants of any subsidiary of Brooke or of any business acquired by
Brooke for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to
each of the underwriters and the holders of Registrable Securities
included in such underwritten offering (to the extent such accountants
are permitted under applicable law and accounting literature so to
address "cold comfort" letters), such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings by selling security
holders; and (iv) if an underwriting agreement is entered into,
undertake such indemnification and contribution provisions and
procedures as are customarily undertaken in such agreements. The above
shall be done in connection with each closing under such underwriting
agreement, or as and to the extent required thereunder.
(n) Financial Records, Etc.. Make available for inspection by
any Warrant Holder, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Warrant Holder
or underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of Brooke
and its subsidiaries (collectively, the "Records") as shall be
necessary or advisable to enable them to exercise their due diligence
responsibilities, and cause the officers, directors and employees of
Brooke and its subsidiaries to supply all information reasonably
requested by any such Inspectors in connection with such Registration
Statement. Records which Brooke determines, in good faith, to be
confidential and as to which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public. Except
as contemplated hereby, and subject to applicable law, each selling
Warrant Holder agrees that information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of Brooke
or its affiliates unless and until such information is made generally
available to the public.
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Warrant Holders shall not be prohibited from engaging in market
transactions if such information is not material, to the extent
permitted by applicable law. Each selling Warrant Holder further agrees
that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to Brooke and allow
Brooke at its expense to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
(o) Earnings Statements. Comply with all applicable rules and
regulations of the SEC relating to the Shelf Registration and make
generally available earnings statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promulgated under the Securities Act) no later than 45
days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold
to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of Brooke after
the effective date of a Registration Statement which statements shall
cover such 12-month periods.
(p) Disposition of Registrable Securities. Cooperate with each
holder of Registrable Securities covered by any Registration Statement
and each underwriter, if any, participating in the disposition of such
Registrable Securities and their respective counsel in connection with
any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD").
(q) Postponement or Suspension of Shelf Registration.
Notwithstanding anything contained in this Section 2, Brooke may
postpone, for a period of not in excess of 30 days in the aggregate in
any twelve month period, taking any action with respect to or suspend
the Shelf Registration if, in the good faith opinion of Brooke's board
of directors, effecting or continuing the Shelf Registration would
adversely affect a material financing, acquisition, disposition of
assets or stock, merger or other comparable transaction or would
require Brooke to make public disclosure of information the public
disclosure of which would have a material adverse effect upon Brooke.
(r) Delivery of Opinion. Upon the filing of any Registration
Statement, deliver to the Warrant Holders an opinion or opinions of
outside counsel to Brooke (which counsel shall be reasonably
satisfactory to the Warrant Holders), to the effect that nothing has
come to the
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attention of such counsel that causes such counsel to believe that such
Registration Statement contains, as of its effective date, any untrue
statement of a material fact necessary to make the statements therein
not misleading, it being understood that any such opinion may contain
customary limitations thereof.
(s) Further Assurances. Use its reasonable best efforts to
take all other steps necessary or advisable, requested by the Warrant
Holders, to effect the registration and distribution of the Registrable
Securities covered by the Registration Statement contemplated hereby.
Section 2.3.2 Warrant Holder Covenants. In
addition to the covenants provided in Section 6.2, each Warrant Holder agrees by
acquisition of the Registrable Securities that, upon receipt of any notice from
Brooke of the happening of any event of the kind described in clause (ii), (iv),
(v) or (vi) of Section 2.3.1(c), such Warrant Holder shall forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement or Prospectus until such Warrant Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 2.3.1(k), or until it
is advised in writing by Brooke that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto.
ARTICLE 3
REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance with
this Agreement by Brooke shall be borne by Brooke, whether or not a Shelf
Registration is filed or becomes effective, including (i) all registration and
filing fees (including (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including reasonable fees
and disbursements of counsel for Brooke or the underwriters, or both, in
connection with Blue Sky qualifications of the Registrable Securities)), (ii)
printing expenses (including expenses of printing certificates for Registrable
Securities, printing and distributing Prospectuses, Preliminary Prospectuses and
amendments or supplements thereto, the Registration Statement and amendments
thereto, and printing or preparing any underwriting agreement, agreement among
underwriters and related syndicate or selling group agreements, pricing
agreements and Blue Sky memoranda), (iii) fees and disbursements of counsel for
Brooke, (iv) fees and disbursements of all independent certified public
accountants for Brooke (including the expenses of any "cold comfort" letters
required by or incident to such performance), (v) Securities Act liability
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insurance, if Brooke so desires such insurance, (vi) internal expenses of Brooke
(including all salaries and expenses of officers and employees of Brooke
performing legal or accounting duties), (vii) the fees and expenses incurred in
connection with the listing of the securities to be registered and any national
securities exchange or quoted on the NASDAQ Stock Market or the NASDAQ National
Market pursuant to section 2.3.1(1), and (viii) the fees and expenses of any
Person, including special experts, retained by Brooke in its sole discretion.
Each selling Warrant Holder shall pay all underwriting
discounts and commissions or broker's commissions incurred in connection with
the sale or other disposition of Registrable Securities for or on behalf of such
Warrant Holder's account. Brooke shall pay all fees and disbursements of legal
counsel for such selling Warrant Holder, up to a maximum of $50,000.
ARTICLE 4
INDEMNIFICATION
Section 4.1 Indemnification by Brooke. Brooke shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Warrant Holder and its affiliates and any investment
funds managed thereby and their respective partners, officers, directors, agents
and employees, each Person who controls each such Warrant Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the partners, officers, directors, agents and employees of each such
controlling person, (individually, an "Indemnified Person") from and against any
and all losses, claims, damages, liabilities, costs (including costs of
investigating, preparing to defend, defending and appearing as a third-party
witness and attorneys' fees and disbursements reasonably incurred) and expenses
including any amounts paid in respect of any settlements (collectively,
"Losses"), without duplication, as incurred, arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of prospectus, or in any amendment or
supplements thereto or in any Preliminary Prospectus, or arising out of or based
upon, in the case of the Registration Statement or any amendments thereto, any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, in the case of the
Prospectus or form of prospectus, or in any amendments or supplements thereto,
or in any Preliminary Prospectus, any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except (i), in either case, to the extent, but only to the extent, that such
untrue or alleged untrue statement or omission or alleged omission has been made
therein
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in reliance upon and in conformity with information furnished in writing to
Brooke by such Indemnified Person (or the person controlling such Indemnified
Person) expressly for use therein, (ii) to the extent such Losses result from
the failure of any Warrant Holder or any underwriter in an underwritten offering
to provide to any person purchasing Registrable Securities from it any
supplement to a Prospectus provided by Brooke pursuant to Section 2.3.1(g), or
(iii) to the extent such Losses result from the sale of Registrable Securities
by such Warrant Holder or underwriter in an underwritten offering (a) under a
Registration Statement or (b) using any Prospectus, other than a Registration
Statement or a Prospectus, as the case may be, amended or supplemented by Brooke
pursuant to Section 2.3.1(k) and provided to such Warrant Holder or such
underwriter pursuant to Section 2.3.1(g), after Brooke shall have notified such
Warrant Holder or such underwriter in an underwritten offering in writing of any
event contemplated by Section 2.3.1.(c)(v) or 2.3.1(c)(vi) pursuant to Section
2.3.1(c).
Section 4.2 Indemnification by Warrant Holder. In connection
with any Registration Statement in which a Warrant Holder is participating, such
Warrant Holder shall, without limitation as to time, indemnify and hold
harmless, to the fullest extent permitted by law, Brooke and its directors,
officers, agents and employees, each Person who controls Brooke (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling person,
from and against, any and all Losses, joint or several, without duplication, as
incurred, arising out of or based upon any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, Prospectus or form of
prospectus, or in any amendment or supplement thereto or in any Preliminary
Prospectus, or arising out of or based upon, in the case of the Registration
Statement or any amendments thereon, any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, in the case of the Prospectus or form of
prospectus, or in any amendments or supplements thereto, or in any Preliminary
Prospectus, any omission or alleged omission of a material fact necessary to
make the statements therein, in the light of the circumstances under the
statements therein, in the light of the circumstances under which they were
made, not misleading; in either case, to the extent, but only to the extent,
that such untrue or alleged untrue statement or omission or alleged omission has
been made therein in reliance upon and in conformity with information furnished
in writing to Brooke by such Warrant Holder expressly for use therein by notice
referring to this Section 4.2. In no event shall the liability of any selling
Warrant Holder hereunder be, or be claimed by Brooke to be greater in amount
than the dollar amount of the proceeds actually
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received by such Warrant Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
Section 4.3 Conduct of Indemnification Proceedings. If any
Person shall be entitled to indemnity or contribution hereunder (an "indemnified
party"), such indemnified party shall give prompt notice to the party or parties
from which such indemnity or contribution is sought (the "indemnifying parties")
of the commencement of any action or proceeding (including any governmental
investigation) (collectively "Proceedings" and individually a "Proceeding") with
respect to which such indemnification or contribution is sought pursuant hereto;
provided, however, that the failure so to notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent that the indemnifying parties have been actually prejudiced by such
failure. The indemnifying parties shall have the right, exercisable by giving
written notice to an indemnified party promptly after the receipt of written
notice from such indemnified party of such Proceeding, to assume, at the
indemnifying parties' expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such Proceeding; provided,
however, that an indemnified party or parties (if more than one such indemnified
party is named in any Proceeding) shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless: (i) the indemnifying party or parties agree
to pay such fees and expenses; or (ii) the indemnifying parties fail promptly to
assume the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such indemnified party or parties; or (iii) counsel for the
indemnified party determines that one counsel may not properly represent both
the indemnifying party and such indemnified party in which case, if such
indemnified party or parties notifies the indemnifying parties in writing that
it elects to employ separate counsel at the expense of the indemnifying parties,
the indemnifying parties shall not have the right to assume the defense thereof
and the fees and expenses of counsel retained by the indemnified party or
parties shall be at the expense of the indemnifying parties, it being
understood, however, that the indemnifying parties shall not, in connection with
any one such Proceeding, arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any time
for such indemnified party or parties. Whether or not such defense is assumed-by
the indemnifying parties, such indemnifying parties will not be subject to any
liability for any settlement made without its or
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their consent (but such consent will not be unreasonably withheld). No
indemnifying party shall be liable for any settlement of any such action or
proceeding effected without its written consent, but if settled with its written
consent each indemnifying party jointly and severally agrees, subject to the
exception and limitations set forth above, to indemnify and hold harmless each
indemnified party from and against any Losses by reason of such settlement.
Section 4.4 Contribution. If the indemnification provided for
in this Article 4 is unavailable to an indemnified party or is insufficient to
hold such indemnified party harmless for any Losses in respect to which this
Article 4 would otherwise apply by its terms, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall have an obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well an any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties, relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any Proceeding, to the
extent such party would have been indemnified for such expenses if the
applicable indemnification provided for in Section 4.1, 4.2 or 4.3 were
available to such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4.5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 4.5, an indemnifying
party that is a selling Warrant Holder shall not be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities sold by such indemnifying party and distributed to the public were
offered to the public (net of any underwriting discounts and commissions and
expenses) exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay or has
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paid by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Section 4.5 Remedies Cumulative. The indemnity, contribution
and expense reimbursement obligations under this Article 4 shall be in addition
to any liability that each indemnifying person may otherwise have and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party. Notwithstanding anything in this
Agreement to the contrary, an indemnified party-shall not be entitled to receive
duplicate indemnification or contribution for the same Losses (except to the
extent they are incurred more than once).
ARTICLE 5
UNDERWRITTEN REGISTRATION
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Warrant Holders holding at least 66 2/3% in interest of the applicable
Registrable Securities with the consent of Brooke (not to be unreasonably
withheld or delayed).
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.1 Representations and Warranties. Brooke
represents and warrants to, and agrees with, the Warrant Holders
that:
(a) Subject to the terms of Section 2.3.1(q), during the
Effectiveness Period, the Registration Statement (and any
post-effective amendment thereto) and the Prospectus (as amended or as
supplemented if Brooke shall have filed with the SEC any amendment or
supplement to the Registration Statement or the Prospectus) will
contain all statements which are required to be stated therein in
accordance with the Securities Act and the Regulations, and will not
contain any untrue statement of a material fact or omit to state any
material fact (except such information which is omitted from the
Registration Statement pursuant to Rule 430A Of the Regulations)
required to be stated therein or necessary to make the statements
therein not misleading, and no event will have occurred which is
required to have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not then been set
forth in such
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an amendment or supplement; each Preliminary Prospectus, as of the date
filed with the SEC, will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in light of
the circumstances under which they were made; except that no
representation or warranty is made in this Section 6.1(a) with respect
to statements or omissions made in reliance upon and in conformity with
written information furnished to Brooke pursuant to Section 6.2(b) by a
Warrant Holder or on behalf of a Warrant Holder expressly for inclusion
in any Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto. Each of the
documents filed pursuant to the Exchange Act and incorporated or deemed
to be incorporated by reference in the Registration Statement will
comply in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder.
(b) Brooke has all requisite power and authority to execute,
deliver and perform this Agreement. All necessary corporate proceedings
of Brooke have been duly taken by it to authorize the execution,
delivery, and performance of this Agreement by Brooke. This Agreement
has been duly authorized, executed, and delivered by Brooke, is the
legal, valid and binding obligation of Brooke, and is enforceable as to
Brooke in accordance with its terms. No consent, authorization,
approval, order, license, certificate, or permit of or from, or
declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by
Brooke for the execution, delivery or performance of this Agreement by
Brooke (except filings under the Securities Act which will be made and
such consents consisting only of consents under Blue Sky or state
securities laws which will be obtained). No consent of any party to any
contract, agreement, instrument, lease, license, arrangement or
understanding to which Brooke is a party or to which any of its
properties or assets are subject, is required for the execution,
delivery or performance of this Agreement which has not been obtained;
and the execution, delivery, and performance of this Agreement will not
violate, result in a breach of, conflict with or (with or without the
giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract agreement,
instrument, lease, license, arrangement or understanding or violate or
result in a breach of any term of the charter or bylaws of Brooke, or
violate, result in a breach of, or conflict with any law, rule,
regulation order, judgment or decree binding on Brooke or to which any
of its operations, business, properties or assets are subject.
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(c) Brooke shall not enter into any transaction involving (i)
any merger or consolidation in which it is not the surviving Person,
(ii) any sale, lease or other transfer of all or substantially all the
assets of Brooke or (iii) in the case of Brooke, any exchange or
conversion of any of the Registrable Securities for or into securities
of any other issuer, unless effective provision is made for (x) the
assumption by the survivor of the transaction or the transferee,
jointly and severally with Brooke if Brooke shall remain in existence,
of all the obligations of Brooke hereunder, and (y) in the case of
clause (iii), the entering into by such other issuer of an agreement
comparable hereto and reasonably satisfactory to the Warrant Holders
with respect to the registration of such securities of such other
issuer.
Section 6.2 Additional Warrant Holder Covenants. Each Warrant
Holder represents and warrants (severally) to (in the case of Section 6.2(a)),
and agrees with (severally) (in the case of Section 6.2(b)), Brooke, that:
(a) Such Warrant Holder is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization. Such Warrant Holder has all requisite power and authority
to execute, deliver and perform this Agreement. All necessary
proceedings of such Warrant Holder have been duly taken to authorize
the execution, delivery and performance of this Agreement by such
Warrant Holder. This Agreement has been duly authorized by such Warrant
Holder, executed and delivered by such Warrant Holder, is the legal,
valid and binding obligation of such Warrant Holder, and is enforceable
as to such Warrant Holder in accordance with its terms. No consent,
authorization, approval, order, license, certificate, or permit of or
from, or declaration or filing with any federal, state, local or other
governmental authority or any court or other tribunal is required by
such Warrant Holder for (i) the execution, delivery or performance of
this Agreement by such Warrant Holder or (ii) the sale of disposition
of the Registrable Securities by such Warrant Holder as contemplated by
the Registration Statements (except filings under the Securities Act
and such consents consisting only of consents under Blue Sky or state
securities laws). No consent of any party to any contract, agreement,
instrument, lease, license, arrangement or understanding to which such
Warrant Holder is a party, or to which any of such Warrant Holder's
properties or assets are subject, is required for the execution,
delivery or performance of this Agreement which has not been obtained;
and the execution, delivery and performance of this Agreement will not
violate, result in a breach of, conflict
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with or (with or without the giving of notice or the passage of time or
both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement or
understanding or violate or result in a breach of any term of such
Warrant Holder's certificate or articles of incorporation (or similar
controlling instrument) or bylaws (or, if applicable, instrument
corresponding thereto) or violate, result in a breach of, or conflict
with, any law, rule, regulation, order, judgment or decree binding on
such Warrant Holder or to which any such Warrant Holder's operations,
business, properties or assets are subject.
(b) Each Warrant Holder shall promptly furnish to Brooke in
writing, upon Brooke's reasonable request, any and all information as
to such Warrant Holder and its plan of distribution as may be necessary
to comply with the provisions of the Securities Act, the Regulations,
the Exchange Act and the rules and regulations of the SEC thereunder in
connection with the preparation and filing of any Registration
Statement pursuant hereto, or any amendment or supplement thereto, or
any Preliminary Prospectus or Prospectus included therein. All
information to be furnished to Brooke by or on behalf of such Warrant
Holder expressly for use in connection with the preparation of any
Preliminary Prospectus, the Prospectus, the Registration Statement, or
any amendment or supplement thereto, will be accurate, complete and
correct.
Section 6.3 Survival of Representations and Agreements. All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the effective date of each Registration Statement contemplated by
this Agreement, and such representations, warranties, covenants, and agreements,
including the indemnity and contribution agreements contained in Article 4,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of Brooke any Warrant Holder or any Person
that is entitled to be indemnified under Article 4, and shall survive
termination of this Agreement and the expiration of the Effectiveness Period.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Remedies . No failure or delay on the part of a
party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude
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any other or further exercise thereof or the exercise of any other right, power
or remedy.
Section 7.2 Amendments and Waivers. The provisions of Articles
2, 3, 4 and 5 (and the provisions of this Section 7.2 as they apply thereto) may
not be amended, modified, supplemented, waived or departed from without the
express written consent of each affected party. The other provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless Brooke has obtained the written
consent of the holders of at least 66 2/3% in interest of the Registrable
Securities or Warrant Holders, as applicable. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of the Warrant Holders that are selling
securities pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Warrant
Holders may be given by the Warrant Holders selling at least 66 2/3% of the
Registrable Securities being sold by pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
Section 7.3 Notices. All notices, consents and other
communications provided for hereunder shall be in writing (including facsimile,
telegraphic or cable communication) and telecopied, telegraphed, telexed, cabled
or delivered (x) (i) if to Brooke, to Brooke Group Ltd., 000 X.X. Xxxxxx Xxxxxx,
00xx Xxxxx, Xxxxx, Xxxxxxx 00000, attention: Xxxxxxx X. XxXxx, telecopy (305)
579-8001, with a copy to Milbank, Tweed, Xxxxxx & XxXxxx, 0 Xxxxx Xxxxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, attention: Xxxxxxx X. Xxxxxxxxxx, telecopy
(000) 000-0000, and (ii) if to the Warrant Holders, to the respective addresses
and telecopier numbers set forth in Exhibit A, with a copy to Apollo Advisors,
1999 Avenue of the Stars, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx, 00000, attention:
Xxxxxxx Xxxxxx, telecopy (000) 000-0000, or (y) at such other address as shall
be designated by any such party in a written notice to the other parties. All
such notices, consents and communications shall be effective when received.
Section 7.4 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
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Section 7.5 Entire Agreement; No Third Party Beneficiaries;
Obligations of Brooke. This Agreement (including the documents and the
instruments expressly referred to herein or therein) (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (ii)
except as expressly set forth in Article 4 and in Section 7.8, is not intended
to confer upon any Person other than the parties hereto and the Warrant Holders
and holders of Registrable Securities any rights or remedies hereunder. The
obligations of Brooke pursuant hereto shall be limited to those obligations of
Brooke expressly set forth herein.
Section 7.6 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
Section 7.7 Severability. Wherever possible, each provision
hereof shall be interpreted in such a manner as to be valid, legal and
enforceable under applicable law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective to the extent,
but only to the extent, of such invalidity, illegality or unenforceability
without invalidating or rendering unenforceable the remainder of this Agreement,
unless such a construction would be unreasonable or materially impair the rights
of any party hereto.
Section 7.8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except by a Warrant Holder as follows: in
connection with the transfer of its Warrants or Registrable Securities in whole
or in part to another Person; provided that the transferee executes an
appropriate document agreeing to be bound hereby as a Warrant Holder. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
"Brooke"
Brooke Group Ltd.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Its: Executive Vice President
"Warrant Holders"
AIF II, L.P.
By: APOLLO ADVISORS, L.P.
Managing General Partner
By: APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Name: Xxxx X. Xxxxxx
Title:
ARTEMIS AMERICA PARTNERSHIP
By: LION ADVISORS, L.P.
Attorney-in-Fact
By: LION CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Name: Xxxx X. Xxxxxx
Title:
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EXHIBIT A
WARRANT HOLDERS
Artemis America Partnership
AIF II, L.P.
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