EXHIBIT 10.42
WARRANTHOLDERS RIGHTS AGREEMENT
WARRANTHOLDERS RIGHTS AGREEMENT dated as of October 30, 2003
among SOURCE INTERLINK COMPANIES, INC., a Missouri corporation (together with
its successors, "Source"), HILCO CAPITAL LP, a Delaware limited partnership
("Hilco") (Hilco and such other warrantholders of Source as may, from time to
time, become parties to this Agreement in accordance with the provisions hereof,
the "Warrantholders").
WHEREAS, as of October 27, 2003, Source has issued and
outstanding 18,770,391 shares of Common Stock (as defined herein), there are
outstanding options to purchase 5,049,689 shares of Common Stock and there are
outstanding warrants or outstanding commitments to issue warrants to purchase
258,644 shares of Common Stock, and Hilco purchased and is the beneficial owner
of the Warrants (as defined herein) to purchase 400,000 shares of Common Stock;
and
WHEREAS, Source wishes to provide to the Warrantholders and
the holders of the Warrant Shares the rights described herein;
NOW THEREFORE the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions.
Unless otherwise defined herein, the following terms used in
this Agreement shall have the meanings specified below.
"Affiliate" means, with respect to any Person, any of (i) a
director or executive officer of such Person, (ii) a spouse, parent, sibling or
descendant of such Person (or a spouse, parent, sibling or descendant of any
director or executive officer of such Person) and (iii) any other Person that,
directly or indirectly, controls, or is controlled by or is under common control
with such Person. For the purpose of this definition, "control" (including the
terms controlling", "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
agency or otherwise.
"BHC Act" means the Bank Holding Company Act of 1956, as
amended.
"Blackout Period" means (i) the period commencing on the date
hereof and ending on February 28, 2004 and (ii) the 90 day period occurring
after the date of the initial sale of any Common Stock pursuant to the Proposed
Offering.
"Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, par value $0.01 per
share, of Source.
"Debt" of a Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all capital leases of such Person, (v) all obligations of such
Person to purchase securities (or other property) which arise out of or in
connection with the sale of the same or substantially similar securities (or
property), (vi) all non-contingent obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (vii) all equity securities of such Person (other than the
Warrants) subject to repurchase or redemption otherwise than at the sole option
of such Person, (viii) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person, and (ix) all
Debt of others Guaranteed by such Person.
"Exchange Act" means the Securities Exchange Act of 1934, or
any successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such successor Federal
statute.
"Initiating Holders" has the meaning set forth in Section 3.1
hereof.
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or otherwise.
"Loan Agreement" means the Loan Agreement dated as of October
30, 2003, between Source and certain of its Affiliates and Hilco as agent for
the Lender from time to time party thereto, as amended or otherwise modified
from time to time.
"Other Shares" has the meaning set forth in Section 3.1.
"Person" means a corporation, an association, a partnership, a
trust, a limited liability company, an organization, a business, an individual,
a government or a subdivision thereof or a governmental agency.
"Proposed Offering" shall mean an underwritten public offering
of Common Stock by Source occurring on or prior to February 28, 2004.
"Public Sale" means any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
(or any successor provision then in effect) adopted under the Securities Act.
"Registrable Securities" means any Warrant Shares until the
date (if any) on which such Warrant Shares shall have been transferred or
exchanged and new certificates for them not bearing a legend restricting further
transfer shall have been delivered by Source and subsequent disposition of them
shall not require registration or qualification of them under the Securities Act
or any similar state law then in force.
2
"Registration Expenses" means all expenses incident to
Source's performance of or compliance with Sections 3.1 through 3.5 hereof,
including (i) all registration, filing and NASD fees, (ii) all fees and expenses
of complying with securities or blue sky laws, (iii) all word processing,
duplicating and printing expenses, (iv) all messenger and delivery expenses, (v)
the fees and disbursements of counsel for Source and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, (vi) the
fees and disbursements of any one counsel and any one accountant retained by the
holder or holders of more than 50% of the Registrable Securities being
registered or, in the case of any registration effected pursuant to Section 3.1,
as the Initiating Holders shall have selected to represent all holders of the
Registrable Securities being registered), (vii) premiums and other costs of
policies of insurance (if any) against liabilities arising out of the public
offering of the Registrable Securities being registered if Source desires such
insurance and (viii) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but not including underwriting discounts
and commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by Source, such expenses shall not
include (i) salaries of Source personnel or general overhead expenses of Source,
(ii) auditing fees, (iii) premiums or other expenses relating to liability
insurance required by underwriters of Source or (iv) other expenses for the
preparation of financial statements or other data, to the extent that any of the
foregoing either is normally prepared by Source in the ordinary course of its
business or would have been incurred by Source had no public offering taken
place.
"Regulated Holder" means any holder of Warrants or Warrant
Shares, if such holder is effectively restricted or prohibited from holding,
exercising or transferring, in whole or in part, the Warrants or Warrant Shares
by reason of any Regulatory Requirement, including without limitation if such
holder is a bank holding company within the meaning of the BHC Act or a
subsidiary thereof subject to Regulation Y under the BHC Act.
"Regulatory Change" means, with respect to any Regulated
Holder, (i) any change on or after the date hereof in United States federal or
state or foreign laws or regulations (including the BHC Act and Regulation Y
thereunder); (ii) the adoption on or after the date hereof of any interpretation
or ruling applying to such Regulated Holder, individually or as a member of a
class, under any United States federal or state or foreign laws or regulations
by any court or governmental or regulatory authority charged with the
interpretation or administration thereof; or (iii) the modification on or after
the date hereof of any agreement or commitment with any such governmental or
regulatory authority that is applicable to or binding upon such Regulated
Holder.
"Regulatory Requirement" means any existing or future Federal
or state statute, rule, regulation, guideline, order, request or directive
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful), including without limitation, the BHC Act and the
regulations thereunder.
"Restricted Payment" means (i) any dividend or other
distribution on any shares of Source' capital stock (except dividends payable
solely in shares of its capital stock of the same class) or (ii) any payment on
account of the purchase, redemption, retirement or acquisition of
3
(a) any shares of the Source' capital stock or (b) any warrant or other right to
acquire shares of Source' capital stock.
"Restricted Securities" means the Warrants, the Warrant Shares
and any securities obtained upon exchange for or upon exercise or transfer of or
as a distribution on Warrants, the Warrant Shares or any such securities;
provided that particular securities shall cease to be Restricted Securities when
such securities shall have (x) been disposed of pursuant to a Public Sale, (y)
been otherwise transferred or exchanged and new certificates for them not
bearing a legend restricting further transfer shall have been delivered by
Source and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force or (z) ceased to be outstanding. Whenever any particular securities cease
to be Restricted Securities, the holder thereof shall be entitled to receive
from the issuer thereof or its transfer agent, without expense (other than
transfer taxes, if any), new securities of like tenor not bearing a legend of
the character set forth in Section 2.2.
"Securities Act" means the Securities Act of 1933, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar Federal statute.
"Stockholders" means the holders of the Common Stock of
Source.
"Subsidiary" means any partnership or corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by Source.
"Warrant Securityholder" means at any time any Warrantholder
or any holder of Warrant Shares.
"Warrantholders" has the meaning set forth in the introductory
paragraph.
"Warrants" means the Warrant or Warrants originally issued to
HILCO, as such Warrants may be transferred or otherwise assigned, but only to
the extent not theretofore exercised, redeemed or expired in accordance with
their respective terms.
"Warrant Shares" means (i) any shares of Common Stock or other
securities issued or issuable upon the exercise of any Warrants and (ii) any
securities issued or issuable with respect to any of such shares or other
securities referred to in clause (i) upon the conversion or exchange thereof
into other securities or by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise.
All references herein to "days" shall mean calendar days
unless otherwise specified.
4
ARTICLE II.
TRANSFER OF SHARES; PAYMENTS TO WARRANT SECURITYHOLDERS
Section 2.1 General. Except as otherwise provided in this Agreement or
by law, each Stockholder may transfer its shares of Common Stock at any time to
any Person.
Section 2.2 Restrictions on Transfer; Legend on Certificates.
(a) Except as otherwise provided in this Agreement,
Restricted Securities shall not be transferable except (i) pursuant to an
effective registration statement under the Securities Act, (ii) pursuant to Rule
144 or 144A (or any successor provisions) under the Securities Act or (iii)
pursuant to a transaction that is otherwise exempt from the registration
requirements of the Securities Act.
(b) Unless otherwise expressly provided herein, each
certificate for Restricted Securities and each certificate issued in exchange
for or upon transfer of any thereof shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED
IN CERTAIN COMMON STOCK PURCHASE WARRANT ISSUED BY THE COMPANY
PURSUANT TO THE LOAN AGREEMENT, DATED AS OF OCTOBER 30, 2003,
BETWEEN THE COMPANY AND CERTAIN OF THE COMPANY'S SUBSIDIARIES,
THE HOLDER AND CERTAIN OTHER LENDERS FROM TIME TO TIME PARTY
THERETO. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO AND HAVE THE BENEFIT OF A WARRANTHOLDERS
RIGHTS AGREEMENT DATED AS OF OCTOBER 30, 2003 BETWEEN THE
COMPANY AND THE HOLDER. COMPLETE AND CORRECT COPIES OF SUCH
WARRANT AND WARRANTHOLDERS RIGHTS AGREEMENT ARE AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE AND WILL BE FURNISHED TO
THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND WITHOUT
CHARGE."
(c) Any other provision of this Agreement to the contrary
notwithstanding, no transfer of any Restricted Securities other than pursuant to
a Public Sale may be made to any Person unless such Person shall have agreed in
writing that such Person, as a holder of Restricted Securities, and the
Restricted Securities it acquires shall be bound by and be entitled to the
benefits of all the provisions of this Agreement applicable to such Restricted
Securities (and
5
upon such agreement such Person shall be entitled to such benefits). Any
purported transfer of Restricted Securities without compliance with the
applicable provisions of this Agreement shall be void and of no effect, and the
purported transferee shall have no rights as a Warrantholder or Shareholder (as
applicable) or under this Agreement. In the event of such non-complying
transfer, Source shall not transfer any such Restricted Securities on its books
or recognize the purported transferee as a shareholder or warrantholder, as the
case may be, for any purpose, until all applicable provisions of this Agreement
have been complied with.
Section 2.3 Permitted Transfers. The restrictions on transfer provided
in Section 2.2(a) shall not be applicable to (i) any transfer in compliance with
federal and all applicable state securities laws to an Affiliate of the holder
of Restricted Securities, from an Affiliate of such holder to such holder or
between Affiliates of such holder (if any such Affiliate to whom shares of
Restricted Securities have been transferred by a holder thereof ceases to be an
Affiliate of such holder of Restricted Securities, such Restricted Securities
shall immediately be transferred back to the transferor thereof), (ii) any
transfer upon the death of any holder of Restricted Securities to such holder's
executors, administrators or testamentary trustees, (iii) any transfer to a
trust the beneficiaries of which include only the holder of such Restricted
Securities or such holder's spouse, parents, siblings or descendants or (iv) any
transfer by the holder in connection with the grant of a participation interest
in the Loan Agreement (any transferee referred to in (i), (ii), (iii) or (iv)
above being referred to herein as a "Permitted Transferee"); provided that no
such transfer shall be made to any Permitted Transferee unless such Permitted
Transferee shall have agreed in writing that such Permitted Transferee, as a
Stockholder or Warrantholder (as the case may be), and the Warrants or Warrant
Shares it acquires shall be bound by and be entitled to the benefits of all the
provisions of this Agreement applicable to Warrants or Warrant Shares (as the
case may be), and upon such agreement such Permitted Transferee shall be
entitled to such benefits.
Section 2.4 [Intentionally Omitted]
Section 2.5 Restrictions on Transfer by Regulated Holders.
(a) Notwithstanding anything else set forth herein to the
contrary, in the event of any reasonable determination in good faith by any
Regulated Holder that, by reason of any Regulatory Requirement, such Regulated
Holder is effectively restricted or prohibited from holding, exercising or
transferring (as the case may be) any Warrant or Warrant Shares (or any portion
thereof), Source shall use reasonable good faith efforts to take such action as
it may determine is reasonably necessary and appropriate to permit such
Regulated Holder to hold, exercise or transfer (as the case may be) such Warrant
or Warrant Shares (or any portion thereof) in such manner as is necessary to
comply with such Regulatory Requirement. All such actions shall be taken at the
expense of Regulated Holder. Regulated Holder shall give written notice to
Source of any reasonable determination by it hereunder and the transfer or other
action it believes may be necessary or appropriate to permit it to comply with
such Regulatory Requirement. In the event of a Regulatory Change, the effect of
which is to permit such Regulated Holder to hold, exercise or transfer such
Warrant or Warrant Shares in any other manner, the foregoing proviso shall be
deemed modified to permit the holding, exercise or transfer of such Warrant or
Warrant Shares in such other manner.
6
(b) Nothing in this Agreement (including without
limitation Section 2.4) shall require any Regulated Holder to make a transfer of
Warrants or Warrant Shares in a manner not permitted by Section 2.2(a) (an
"Impermissible Transfer"). If any provision of this Agreement would otherwise
require any Regulated Holder to make an Impermissible Transfer as a condition
precedent to making a transfer of Warrants or Warrant Shares in a manner
permitted by Section 2.2(a) (a "Permissible Transfer"), then such Regulated
Holder shall not be required to make such Impermissible Transfer as a condition
precedent to making such Permissible Transfer.
Section 2.6 No Inconsistent Agreements. Source has not entered into and
will not enter into any stockholders rights agreement, registration rights
agreement or similar arrangements the performance by Source of the terms of
which would in any manner restrict or limit, or materially conflict with, the
performance by Source of its obligations under this Agreement.
ARTICLE III.
REGISTRATION RIGHTS
Section 3.1 Registration on Request.
(a) The demand registration rights set forth in this
section 3.1 may be exercised only at such time or times when (i) Source shall
not then be eligible to register Registrable Securities on Form S-3 (or any
similar or successor form), (ii) Source shall not have complied with the terms
of Section 3.3 hereof or (iii) any Blackout Period is not in effect. At any time
or from time to time on or after the date hereof, on not more than two (2)
occasions, upon the written request of the holder or holders of fifty percent
(50%) of all outstanding Warrant Shares and Warrants (such majority determined,
for purposes of this Section 3.1, by calculating the number of Warrant Shares
for which such Warrants are then exercisable) (the "Initiating Holders"),
requesting that Source effect the registration under the Securities Act of all
or part of such Initiating Holders' Registrable Securities and specifying the
intended method of disposition thereof, Source will promptly give written notice
of such requested registration to all holders of Warrants and Registrable
Securities, and thereupon Source will use its reasonable best efforts to effect
the registration under the Securities Act of:
(i) the Registrable Securities which Source has
been so requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such request;
(ii) all other Registrable Securities the holders
of which shall have made a written request to Source for registration thereof
within 20 days after the giving of such written notice by Source (which request
shall specify the intended method of disposition of such Registrable
Securities); and
(iii) all shares of Common Stock which Source may
elect to register in connection with the offering of Registrable Securities
pursuant to this Section 3.1, whether for its own account or for the account of
a holder of Common Stock,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) as expeditiously as possible, but in no
event later than 120 days from the
7
date of such request, of the Registrable Securities and the additional shares of
Common Stock, if any, to be so registered, provided that the Warrant
Securityholders as a class shall be entitled to not more than two (2)
registrations upon request pursuant to this Section 3.1 nor more than one such
registration during any 12 month period.
(b) Registrations under this Section 3.1 shall be on such
appropriate registration form of the Commission (i) as shall be selected by
Source and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
their request for such registration. Source agrees to include in any such
registration statement all information which holders of Registrable Securities
being registered shall reasonably request.
(c) Source will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 3.1.
(d) A registration requested pursuant to this Section 3.1
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective; provided that a registration which
does not become effective after Source has filed a registration statement with
respect thereto solely by reason of the refusal to proceed by the Initiating
Holders (other than a refusal to proceed based upon the advice of counsel
relating to a matter with respect to Source) shall be deemed to have been
effected by Source at the request of the Initiating Holders unless the
Initiating Holders shall have elected to pay all Registration Expenses in
connection with such registration, (ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason, other than by reason of some act or omission by any Warrantholder or
Warrant Securityholder, or (iii) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by any Warrantholder or Warrant Securityholder.
(e) If a requested registration pursuant to this Section
3.1 involves an underwritten offering, the underwriter or underwriters thereof
shall be selected by the holders of at least a majority (by a number of shares)
of the Registrable Securities as to which registration has been requested and
shall be reasonably acceptable to Source.
(f) If a requested registration pursuant to this Section
3.1 involves an underwritten offering, and the managing underwriter shall advise
Source (with a copy of any such notice to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering within a price range acceptable to the Initiating Holders,
Source will include in such registration, to the extent of the number which
Source is so advised can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registration by the holder or
holders of Registrable Securities, pro rata among such holders requesting such
registration on the basis of the number of such securities requested to be
included by such holders, and (ii) second, all shares other than Registrable
Shares (any such shares with respect to any registration, "Other Shares")
requested to be included in such registration by the holder or holders thereof.
8
Section 3.2 Incidental Registration.
(a) The registration rights set forth in this Section 3.2
may not be exercised when any Blackout Period is in effect. If Source at any
time proposes to register any of its securities under the Securities Act (other
than (x) by a registration on Form S-4 or S-8 or any successor or similar forms
or (y) pursuant to Section 3.1 or (z) pursuant to Section 3.3) whether for its
own account or for the account of the holder or holders of shares other than
Registrable Shares (any such shares with respect to any registration, "Other
Shares") requested to be included in such registration by the holder or holders
thereof, it will each such time give prompt written notice to all Warrant
Securityholders of its intention to do so and of such holders' rights under this
Section 3.2. Upon the written request of any such bolder made within 20 days
after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), Source will use its reasonable best
efforts to effect the registration under the Securities Act of all of the
Registrable Securities which Source has been so requested to register by the
holders thereof; to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which Source proposes to
register; provided that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, Source shall
determine for any reason either not to register or to delay registration of such
securities, Source may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any Warrant
Securityholder entitled to do so to request that such registration be effected
as a registration under Section 3.1, and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities, without prejudice, however, to the rights of any Warrant
Securityholder entitled to do so to request that such registration be effected
as a registration under Section 3.1. No registration effected under this Section
3.2 shall relieve Source of its obligation to effect any registration upon
request under Sections 3.1 or 3.3, nor shall any such registration hereunder be
deemed to have been effected pursuant to Sections 3.1. or 3.3. Source will pay
all Registration Expenses in connection with each registration of Registrable
Securities pursuant to this Section 3.2.
(b) If Source at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 3.2 and such
securities are to be distributed by or through one or more underwriters, Source
will, if requested by any holder of Registrable Securities as provided in this
Section 3.2, use its reasonable best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters, provided that if
the managing underwriter of such underwritten offering shall inform Source and
holders of the Registrable Securities requesting such registration and all other
holders of any other shares of Common Stock which shall have exercised, in
respect of such underwritten offering, registration rights comparable to the
rights under this Section 3.2 by letter of its belief that inclusion in such
9
distribution of all or a specified number of such securities proposed to be
distributed by such underwriters would interfere with the successful marketing
of the securities being distributed by such underwriters (such letter to state
the basis of such belief and the approximate number of such Registrable
Securities and such Other Shares proposed so to be registered which may be
distributed without such effect), then Source may, upon written notice to all
holders of such Registrable Securities and holders of such Other Shares, reduce
pro rata (if and to the extent stated by such managing underwriter to be
necessary to eliminate such effect) the number of such Registrable Securities
and Other Shares the registration of which shall have been requested by each
holder thereof so that the resultant aggregate number of such Registrable
Securities and Other Shares so included in such registration, together with the
number of securities to be included in such registration for the account of
Source, shall be equal to the number of shares stated in such managing
underwriter's letter.
Section 3.3 Short-Form Registration on Form S-3. The registration
rights set forth in this Section 3.3 may not be exercised when any Blackout
Period is in effect. After the conclusion of the Blackout Period, provided such
form is available for registration, the Company shall prepare, and, on or prior
to 30 days after the conclusion of the Blackout Period, file with the SEC a
Registration Statement or Registration Statements (as is necessary) on Form S-3,
covering the resale of all of the Registrable Securities, which Registration
Statement(s) shall state that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration Statement(s) also covers such indeterminate number
of additional shares of Common Stock as may become issuable upon exercise of the
Warrant to prevent dilution resulting from stock splits, stock dividends or
similar transactions. Such Registration Statement shall register for resale
400,000 shares of Common Stock. Such registered shares of Common Stock shall be
allocated among the Warrantholders pro rata based on the total number of
Registrable Securities issued or issuable as of each date that a Registration
Statement, as amended, relating to the resale of the Registrable Securities is
declared effective by the SEC. The Company shall use its reasonable best efforts
to have the Registration Statement declared effective by the SEC within 60 days
after the same is filed with the SEC. No registration effected under this
Section 3.3 shall relieve Source of its obligation to effect any registration
upon request under Sections 3.1 or 3.2, nor shall any such registration
hereunder be deemed to have been effected pursuant to Sections 3.1 or 3.2.
Source will pay all Registration Expenses in connection with any registration
pursuant to this Section 3.3.
Section 3.4 Registration Procedures.
(a) If and whenever Source is required to effect the
registration of any Registrable Securities under the Securities Act as provided
in Sections 3.1, 3.2 and 3.3, Source shall use its reasonable best efforts to:
(i) meet the requirements for the use of Form
S-3 for registration of the sale by the holders of Registrable Securities as
soon as reasonably practicable (but in any event, within the 30th day following
the conclusion of the Blackout Period and file all reports required to be filed
by the Company with the SEC in a timely manner so as to obtain and maintain such
eligibility for the use of Form S-3, and thereafter use its reasonable best
efforts to cause such registration statement to become and remain effective. In
the event that Form S-3 is not available for sale by the holders of Registrable
Securities, then the Company, shall prepare
10
and (as soon as practicable but in any event within 30 days after receipt of a
request for registration by Source pursuant to Sections 3.1 or 3.2); provided
that Source may discontinue any registration of its securities which are not
Registrable Securities at any time prior to the effective date of the
registration statement relating thereto; provided further that before filing
such registration statement or any amendments thereto, Source will furnish to
the counsel selected by the holders of Registrable Securities which are to be
included in such registration copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel;
(ii) in the case of a registration statement
pursuant to Section 3.1 or 3.2, 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 and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until the expiration of ninety (90) days after such registration
statement becomes effective;
(iii) furnish to each seller of Registrable
Securities covered by such registration statement and each underwriter, if any,
of the securities being sold by such seller such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
(iv) register or qualify all Registrable
Securities and other securities covered by such registration statement under
blue sky or similar laws of such jurisdictions as any seller thereof and any
underwriter of the securities being sold by such seller shall reasonably
request, to keep such registrations or qualifications in effect for so long as
such registration statement remains in effect, and take any other action which
may be reasonably necessary or advisable to enable such seller and underwriter
to consummate the disposition in such jurisdictions of the securities owned by
such seller, except that Source shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv) be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(v) cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable
Securities a signed counterpart, addressed to such seller and the underwriters,
if any, of
11
(A) an opinion of counsel for Source,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), reasonably satisfactory in
form and substance to such seller, and
(B) a "comfort" letter, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, a letter dated the date of the closing
under the underwriting agreement), signed by the independent public accountants
who have certified Source's financial statements included in such registration
statement, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities;
(vii) notify the holders of Registrable Securities
and the managing underwriter or underwriters, if any, promptly and confirm such
advice in writing promptly thereafter:
(A) when the registration statement,
the prospectus or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and, with respect to the
registration statement or any post-effective amendment thereto, when the same
has become effective;
(B) of any request by the Commission
for amendments or supplements to the registration statement or the prospectus or
for additional information;
(C) of the issuance by the Commission
of any stop order suspending the effectiveness of the registration or the
initiation of any proceedings by any Person for that purpose; and
(D) of the receipt by Source of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon Source's
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
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 the light of the circumstances then existing, and at the request
of any such seller promptly prepare and furnish to such seller and each
underwriter, if any, 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 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 then existing;
12
(ix) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible moment;
(x) otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar quarter after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(xi) make available for inspection by a
representative of the holders of Registrable Securities participating in the
offering, any underwriter participating in any disposition pursuant to the
registration and any attorney or accountant retained by such selling holders or
underwriter (each, an "Inspector"), all financial and other records, pertinent
corporate documents and properties of Source (the "Records"), and cause Source'
officers, directors and employees to supply all information reasonably requested
by any such Inspector in connection with such registration; provided that Source
shall not be required to comply with this subdivision (xi) if there is a
reasonable likelihood, in the judgment of Source based on advice from its legal
counsel, that such delivery could result in the loss of any attorney-client
privilege related thereto; and provided further that Records which Source
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors (other than
to any holder of Registrable Securities participating in the offering) unless
(x) such Records have become generally available to the public or (y) the
disclosure of such Records may be necessary or appropriate (A) to comply with
any law, rule, regulation or order applicable to any such Inspectors or holder
of Registrable Securities, (B) in response to any subpoena or other legal
process or (C) in connection with any litigation to which such Inspectors or any
holder of Registrable Securities is a party (provided that Source is provided
with reasonable notice of such proposed disclosure and a reasonable opportunity
to seek a protective order or other appropriate remedy with respect to such
Records);
(xii) provide and cause to be maintained a
transfer agent and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the effective date
of such Registration Statement; and
(xiii) use its reasonable best efforts to comply
with all applicable rules and regulations of the NASDAQ and to maintain its
right to list securities on such exchange.
Source may require each seller of Registrable Securities as to which any
registration is being effected to furnish Source such information regarding such
seller and the distribution of such securities as Source may from time to time
reasonably request in writing for purposes of preparing the relevant
registration statement and amendments and supplements thereto.
(b) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
Source of the occurrence of any event of the kind described in subdivision
(viii) of Section 3.4(a), such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the
13
supplemented or amended prospectus contemplated by subdivision (viii) of Section
3.4(a). In the event Source shall give any such notice, the periods specified in
subdivision (ii) of Section 3.4(a) shall be extended by the length of the period
from and including the date when each seller of any Registrable Securities
covered by such registration statement shall have received such notice to the
date on which each such seller has received the copies of the supplemented or
amended prospectus contemplated by subdivision (viii) of Section 3.4(a).
(c) If any such registration or comparable statement
refers to any holder of Registrable Securities by name or otherwise as the
holder of any securities of Source, then such holder shall have the right to
require, in the event that such reference to such holder by name or otherwise is
not required by the Securities Act or any similar federal statute then in force,
the deletion of the reference to such holder.
(d) Source shall not be obligated to include any
Registrable Securities in a registration pursuant to Sections 3.1, 3.2 and 3.3
unless the holders thereof consent to reasonable conditions imposed by Source as
Source shall determine with the advice of counsel are reasonably necessary or
advisable to ensure compliance with Regulatory Requirements, and shall be
limited to the following:
(i) conditions requiring such holder to comply
with all prospectus delivery requirements of the Securities Act and with all
anti-stabilization, anti-manipulation and similar provisions of Section 10 of
the Exchange Act and any rules issued thereunder by the Commission, and to
furnish to the Company information about sales made in such public offering;
(ii) conditions prohibiting such holders upon
receipt of telegraphic or written notice from the Company (until further notice)
from effecting sales of shares, such notice being given to permit the Company to
correct or update a registration statement or prospectus; and
(iii) conditions requiring that at the end of the
period during which the Company is obligated to keep the registration statement
effective under Section 5, the holders of shares included in the registration
statement shall discontinue sales of shares pursuant to such registration
statement upon receipt of notice form the Company of its intention to remove
from registration the shares covered by such registration statement that remain
unsold, and requiring such holders to notify the Company of the number of shares
registered that remain unsold immediately upon receipt of notice from the
Company.
Section 3.5 Underwritten Offerings.
(a) If requested by the underwriters for any underwritten
offering by holders of Registrable Securities pursuant to a registration
requested under Section 3.1, Source will enter into an underwriting agreement
with such underwriters for such offering, such agreement to be satisfactory in
substance and form to Source, each such holder and the underwriters, and to
contain such representations and warranties by Source and such other terms as
are generally prevailing in agreements of such type, including, without
limitation, indemnities to the effect and
14
to the extent provided in Section 3.7. The holders of the Registrable Securities
will reasonably cooperate with Source in the negotiation of the underwriting
agreement.
(b) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of any equity securities of Source, during
the ten days prior to and the 90 days after the effective date of any
underwritten registration pursuant to Section 3.1, 3.2 or 3.3 has become
effective, except as part of such underwritten registration, whether or not such
holder participates in such registration, and except as otherwise permitted by
the managing underwriter of such underwriting (if any). Each holder of
Registrable Securities agrees that Source may instruct its transfer agent to
place stop transfer notations in its records to enforce this Section 3.4(b).
(c) No Person may participate in any underwritten
offering hereunder unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the Person or a majority of the
Persons entitled to approve such arrangements and (ii) completes and executes
all agreements, questionnaires, indemnities and other documents (other than
powers of attorney) required under the terms of such underwriting arrangements.
Section 3.6 Current Public Information.
Source will timely 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, and will take such further action as any
holder or holders of Registrable Securities may reasonably request, all to the
extent required to enable such holders to sell Registrable Securities pursuant
to Rule 144 adopted by the Commission under the Securities Act (as such rule may
be amended from time to time) or any similar rule or regulation hereafter
adopted by the Commission and pursuant to Form S-3 or any similar short form
registration statement. Upon written request, the Company will deliver to such
holders a written statement as to whether it has complied with such
requirements.
Section 3.7 Indemnification.
(a) Source agrees to indemnify and hold harmless each
holder of Registrable Securities whose Registrable Securities are covered by any
registration statement, its directors, officers, affiliates and partners, and
each other Person, if any, who controls such holder within the meaning of the
Securities Act (and any broker or dealer through whom such shares may be sold),
against any losses, claims, damages, expenses or liabilities, joint or several,
to which any such indemnified party may become subject under the Securities Act
or under any other statute or at common law or otherwise, insofar as such
losses, claims, damages, expenses or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act or any filing with any State securities
commission or agency, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein
15
or necessary to make the statements therein not misleading, or any violation by
Source of any rule or regulation promulgated under the Securities Act or any
State securities laws or regulations applicable to Source and relating to action
or inaction required of Source in connection with such registration, and Source
will reimburse each such indemnified party for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, whether or not resulting in
any liability; provided that Source shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement or such State securities commission or agency filing, any
such preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to Source by or on behalf of such holder or controlling person specifically for
use in the preparation thereof. In addition, Source shall indemnify any
underwriter of such offering and each other Person, if any, who controls any
such underwriter within the meaning of the Securities Act in substantially the
same manner and to substantially the same extent as the indemnity herein
provided to each Indemnified Party. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such holder
or any such director, officer, affiliate, partner, underwriter or controlling
person and shall survive the transfer of such securities by such holder.
(b) Each prospective seller of Registrable Securities
hereunder shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 3.7) Source, each
director of Source, each officer of Source who has signed or otherwise
participated in the preparation of the registration statement, and each other
Person, if any, who controls Source within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading from, such
registration statement, or filing with any State securities commission or
agency, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereof, if such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to Source
by or on behalf of such seller specifically for use in the preparation of such
registration statement, filing, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Any such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
Source or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller. The amount payable by any
prospective seller of Registrable Security with respect to the indemnification
set forth in this subsection (b) in connection with any offering of securities
will not exceed the amount of net proceeds received by such prospective seller
pursuant to such offering.
(c) Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 3.7, 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 that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this
16
Section 3.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that the indemnifying
party may wish, 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 shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which 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. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in the preceding
subdivisions of this Section 3.7 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability (i) in such proportion
as is appropriate to reflect the relative benefits received by Source on the one
hand and the holder or underwriter, as the case may be, on the other from the
distribution of the Registrable Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Source on the one hand and of the holder or
underwriter, as the case may be, on the other in connection with the statements
or omissions which resulted in such expense, loss, damage or liability, as well
as any other relevant equitable considerations. The relative benefits received
by Source on the one hand and the holder or underwriter, as the case may be, on
the other in connection with the distribution of the Registrable Securities
shall be deemed to be in the same proportion as the total net proceeds received
by Source from the initial sale of the Registrable Securities by Source to the
purchaser bear to the gain realized by the selling holder or the underwriting
discounts and commissions received by the underwriter, as the case may be. The
relative fault of Source on the one hand and of the holder or underwriter, as
the case may be, on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission to state a material fact relates to information supplied by Source, by
the holder or by the underwriter and parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission;
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable to such
indemnified party by reason of the proviso contained in the first sentence of
subdivision (a) of this Section 3.7, and in no event shall the obligation of any
indemnifying party to contribute under this subdivision (d) exceed the amount
that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under subdivisions (a) or
(b) of this Section 3.7 had been available under the circumstances.
17
Source and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (d)
were determined by pro rata allocation (even if the holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph and subdivision (c) of this Section
3.7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), no
holder of Registrable Securities or underwriter shall be required to contribute
any amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable Securities
or (ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or 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.
ARTICLE IV.
MISCELLANEOUS
Section 4.1 Notices.
All notices and other communications provided for hereunder
shall be dated and in writing and shall be deemed to have been given (i) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section and telephonic confirmation of receipt thereof is
obtained or (ii) if given by mail, prepaid overnight courier or any other means,
when received at the address specified in this Section or when delivery at such
address is refused. Such notices shall be addressed to the appropriate party to
the attention of the person who executed this Agreement at the address or
telecopy number set forth under such party's signature below (or to the
attention of such other person or to such other address or telecopy number as
such party shall have furnished to each other party in accordance with this
Section 4.1).
Section 4.2 Binding Nature of Agreement.
This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto or their successors in interest,
except as expressly otherwise provided herein.
Section 4.3 Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
Section 4.4 Specific Performance.
18
Without limiting the rights of each party hereto to pursue all
other legal and equitable rights available to such party for the other parties'
failure to perform their obligations under this Agreement, the parties hereto
acknowledge and agree that the remedy at law for any failure to perform their
obligations hereunder would be inadequate and that each of them, respectively,
shall be entitled to specific performance, injunctive relief or other equitable
remedies in the event of any such failure.
Section 4.5 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW RULES. EACH OF THE PARTIES HERETO
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION
6.1. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS
AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 4.6 Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
Section 4.7 Severability.
In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
Section 4.8 Entire Agreement.
This Agreement is intended by the parties hereto as a final
and complete expression of their agreement and understanding in respect to the
subject matter contained
19
herein. This Agreement supersedes all prior agreement and understandings,
written or oral, between the parties with respect to such subject matter.
Section 4.9 Amendment to Waiver.
Any provision of this Agreement may be amended if, but only
if, such amendment is in writing and is signed by Source and the Warrantholders.
Any provision may be waived if, but only if, such waiver is in writing and is
signed by the party or parties waiving such provision and for whose benefit such
provision is intended.
Section 4.10 No Third Party Beneficiaries.
Nothing in this Agreement shall convey any rights upon any
person or entity which is not a party or an assignee of a party to this
Agreement.
Section 4.11 Transferability of Registration Rights.
For all purposes of this Agreement, the holders of Registrable
Securities shall include not only the Warrantholder but also any assignee or
transferee of the Warrantholder. The Warrantholder may assign or transfer its
rights under this Agreement to any Person to whom the Warrantholder transfers
any Registrable Shares, provided, however, that such assignee or transferee
agrees in writing to be bound by all of the provision of this Agreement.
Section 4.12 Assignment or Transfer of the Term Loan Under the Loan
Agreement.
If Hilco assigns or otherwise transfers all or any of its Term
Loan (as defined in the Loan Agreement) (including by selling participations
therein to any Person, Hilco may request (upon 10 days' prior notice to Source)
that (a) the Warrants then held by Hilco be canceled on the date of such
assignment and transfer and (b) a like number of Warrants be issued by Source to
the Person to whom such Term Loan (as defined in the Loan Agreement), or portion
thereof, is being assigned or otherwise transferred. Upon the date specified in
such request:
(i) Source shall issue, and Hilco shall
surrender (or cause to be surrendered ) for cancellation, such number of
Warrants as aforesaid, provided that such issuance shall not violate the
Securities Act or any applicable state securities laws;
(ii) Source will deliver to each Person that
receives a certificate for Warrants a favorable legal opinion from counsel to
Source acceptable to such Person, covering matters reasonably requested by such
Person relating to the Warrants; and
(iii) Source will deliver a certificate to each
Person that receives Warrants affirming the representations and warranties
contained in this Section hereof as of such date.
[Signature Page Follows]
20
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the date first above written.
SOURCE INTERLINK COMPANIES, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
Address: 00000 Xxxxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxx Xxxxxxx, Xxxxxxx 00000
Telecopy: 239) 949-7689
Telephone: 239) 000-0000
HILCO CAPITAL LP
By: /s/ Xxxx Xxxxx
---------------------------------------------
Name: Xxxx Xxxxx
Title: Vice President
Address: One Northbrook Place
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Portfolio Administrator
Telecopy: (000) 000-0000
Telephone. (000) 000-0000
[Signature Page to Registration Rights Agreement]
