FROST REGISTRATION RIGHTS AGREEMENT NO. 1
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of May 2,
2005 by and among CHARYS HOLDING COMPANY, INC., a Delaware corporation
("Charys") and THE FROST NATIONAL BANK, a national banking corporation located
in San Antonio, Texas ("Frost").
WHEREAS, Charys has issued to Frost 400,000 shares of its Series B
Convertible Preferred Stock, par value $0.001, per share (the Charys Series B
Convertible Preferred Stock"), which is convertible into shares of the Charys
common stock, par value $0.001 per share (the "Charys Common Stock"); and
WHEREAS, a copy of the Certificate of Designation of the Charys Series B
Convertible Preferred Stock is attached hereto as Attachment A;
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
REGISTRATION RIGHTS
1.1 Registrable Shares. "Registrable Shares" means and includes the
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shares of the Charys Common Stock issued pursuant to any conversion of the
Charys Series B Convertible Preferred Stock, plus all other securities of Charys
issued with respect to such Charys Common Stock by way of a stock split, stock
dividend, recapitalization, merger or consolidation or otherwise. As to any
particular Registrable Shares, such securities will cease to be Registrable
Shares when:
(a) They have been effectively registered under the Securities Act of
1933, as amended (the "Securities Act") and disposed of in accordance with the
Registration Statement covering them; or
(b) A Registration Statement with respect thereto shall have been
effective for a period of two years.
1.2 Registration of Registrable Shares. Charys shall, within 90 days
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after demand therefor by Frost, file a registration statement (the "Registration
Statement") pursuant to Rule 415 under the Securities Act, or any similar rule
that may be adopted by the Securities and Exchange Commission (the "SEC"),
covering the resale of the Registrable Shares. Charys shall use its best
efforts to cause the Registration Statement to be declared effective by the SEC
(the "Required Effectiveness Date") on the earlier of:
(a) 180 days following such demand by Frost;
(b) Ten days following the receipt of a "No Review" or similar letter
from the SEC; or
(c) The first day following the day the SEC determines the
Registration Statement is eligible to be declared effective.
1.3 Registration Statement Form. Registration under Paragraph 1.2 shall
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be on Form SB-2 or such other appropriate registration form of the SEC as shall
permit the disposition of the Registrable Shares in accordance with the intended
method or methods of disposition specified by Frost to be included in the
Registration Statement; provided, however, such intended method of disposition
shall not include more than one underwritten offering of not less than all
Registrable Shares, the underwriter of which shall be selected by Charys and
reasonably acceptable to Frost.
1.4 Expenses. Charys will pay all registration expenses in connection
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with any registration required by Paragraph 1.2 herein.
1.5 Effective Registration Statement. A registration requested pursuant
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to Paragraph 1.2 shall not be deemed to have been effected:
(a) Unless a Registration Statement with respect thereto has become
effective within the time period specified herein, provided that a registration
which does not become effective after Charys files a Registration Statement with
respect thereto solely by reason of the refusal to proceed by Frost (other than
a refusal to proceed based upon the advice of counsel in the form of a letter
signed by such counsel and provided to Charys relating to a disclosure matter
unrelated to Frost) shall be deemed to have been effected by Charys unless Frost
shall have elected to pay all registration expenses in connection with such
registration,
(b) If, after it has become effective, such Registration Statement
becomes subject to any stop order, injunction or other order or extraordinary
requirement of the SEC or other governmental agency or court for any reason; or
(c) If, after it has become effective, such Registration Statement
ceases to be effective or it or the prospectus forming a part thereof are not
usable by Frost, other than during the allowable Black-Out Periods (as defined
herein), to permit the disposition thereunder of the Registrable Shares in
compliance with the Securities Act and the SEC regulations during the period the
Registration Statement is required to be effective.
1.6 Plan of Distribution. Charys hereby agrees that the Registration
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Statement shall include a plan of distribution section reasonably acceptable to
Frost.
1.7 Liquidated Damages. If (a) Charys shall not cause the Registration
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Statement to be declared effective pursuant to the requirements of Paragraph 1.2
herein, then Charys shall pay Frost, as liquidated damages and not as a penalty,
an amount equal to interest on $1,709,201.51 computed at a per annum rate equal
to the lesser of (i) a rate equal to the Prime Rate of Frost, plus three percent
per annum, with said rate to be adjusted to reflect any change in said Prime
Rate at the time of any such change or (ii) the highest rate permitted by
applicable law from the date hereof until the date the Registration Statement
shall be declared effective and (b) if, after the Registration Statement is
declared effective and until two years after it becomes effective, the
Registration Statement or the related prospectus is not usable by Frost as a
result of any of the conditions specified in Paragraph 1.5(b) or (c) hereof,
then Charys shall pay Frost, as liquidated damages and not as a penalty, an
amount equal to the interest on $1,709,201.51 computed at a per annum rate equal
to the lesser of (i) a rate equal to the Prime Rate of Frost, plus three percent
per annum, with said rate to be adjusted to reflect any change in said Prime
Rate at the time of any such change or (ii) the highest rate permitted by
applicable law for each such day that the Registration Statement or the related
prospectus is not so usable by Frost.
The "Prime Rate" shall mean the prime rate of interest charged by Frost as
established from time to time. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
Interest shall be computed on a per annum basis of a year of 360 days and
for the actual number of days elapsed, unless such calculation would result in a
rate greater than the highest rate permitted by applicable law, in which case
interest shall be computed on a per annum basis of a year of 365 days or 366
days in a leap year, as the case may be.
The parties agree that the only damages payable for a violation of the
terms of this Agreement with respect to which liquidated damages are expressly
provided shall be such liquidated damages. Nothing shall preclude Frost from
pursuing or obtaining specific performance or other equitable relief with
respect to this Agreement.
The parties hereto agree that the liquidated damages provided for in this
Paragraph 1.7 constitute a reasonable estimate of the damages that may be
incurred by Frost by reason of the failure of the Registration Statement to be
filed, or declared effective, or cease to be effective, in accordance with the
provisions hereof.
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ARTICLE II
INCIDENTAL REGISTRATION RIGHTS
2.1 Right to Include ("Piggy-Back") Registrable Shares. If at any time
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Charys proposes to register any of its securities under the Securities Act
(other than by a registration in connection with an acquisition in a manner
which would not permit registration of Registrable Shares for sale to the
public, on Form S-8, or any successor form thereto, on Form S-4, or any
successor form thereto and other than pursuant to Article I hereof), on an
underwritten basis (either "best-efforts" or "firm-commitment"), and Frost
continues to own Charys Series B Convertible Preferred Stock or any shares of
Charys Common Stock issued pursuant to the conversion of the Charys Series B
Convertible Preferred Stock, or any other securities of Charys issued with
respect to such Charys Common Stock by way of stock split, stock divided,
recapitalization, merger, consolidation or otherwise, then, Charys will each
such time give prompt written notice to Frost of its intention to do so and of
Frost's rights under this Paragraph 2.1. Upon the written request of Frost made
within 10 days after the receipt of any such notice (which request shall specify
the Registrable Shares intended to be disposed of by Frost and the intended
method of disposition thereof), Charys will, subject to the terms of this
Agreement, use its commercially reasonable best efforts to effect the
registration under the Securities Act of the Registrable Shares, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Shares so to be registered, by
inclusion of the Registrable Shares in the Registration Statement which covers
the securities which Charys proposes to register; provided that if, at any time
after 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, Charys shall determine for any reason either not to register or to
delay registration of such securities, Charys may, at its election, give written
notice of such determination to Frost and, thereupon:
(a) In the case of a determination not to register, shall be relieved
of this obligation to register any of the Registrable Shares 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 Frost
entitled to do so to request that such registration be effected as a
registration under Article I hereof; and
(b) In the case of a determination to delay registering, shall be
permitted to delay registering any of the Registrable Shares, for the same
period as the delay in registering such other securities.
No registration effected under this Paragraph 2.1 shall relieve Charys of
its obligation to effect any registration upon request under Article I hereof.
Charys will pay all registration expenses in connection with each registration
of the Registrable Shares requested pursuant to this Paragraph 2.1. The right
provided Frost pursuant to this paragraph shall be exercisable at its sole
discretion and will in no way limit any of Charys' obligations hereunder.
2.2 Priority in Incidental Registrations. If the managing underwriter of
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the underwritten offering contemplated by this Article II shall inform Charys
and Frost by letter of its belief that the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering, then Charys will include in such registration, to the extent of the
number which Charys is so advised can be sold in such offering:
(a) First, securities proposed by Charys to be sold for its own
account; and
(b) Second, the Registrable Shares and securities of other selling
security holders requested to be included in such registration pro rata on the
basis of the number of shares of such securities so proposed to be sold and so
requested to be included; provided, however, Frost shall have pro rata rights of
registration with all shares sought to be included by officers and directors of
Charys as well as holders of 10 percent or more of the Charys Common Stock.
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ARTICLE III
REGISTRATION PROCEDURES
3.1 Registration Procedures. If and whenever Charys is required to effect
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the registration of any of the Registrable Shares under the Securities Act as
provided in Paragraph 1.2 hereof, Charys shall, as expeditiously as possible:
(a) Prepare and file with the SEC the Registration Statement, or
amendments thereto, to effect such registration (including such audited
financial statements as may be required by the Securities Act or the rules and
regulations promulgated thereunder) and thereafter use its commercially
reasonable best efforts to cause the Registration Statement to be declared
effective by the SEC, as soon as practicable, but in any event no later than the
Required Effectiveness Date (with respect to a registration pursuant to
Paragraph 1.2 hereof); provided, however, that before filing the Registration
Statement or any amendments thereto, Charys will furnish to the counsel selected
by Frost, copies of all such documents proposed to be filed;
(b) With respect to any Registration Statement pursuant to Paragraph
1.2 hereof, prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all of the
Registrable Shares covered by the Registration Statement (subject to the right
of Charys to suspend the use thereof for not more than 10 consecutive trading
days or an aggregate of 40 trading days during each year (each a "Black-Out
Period") until two (2) years after such Registration Statement became effective;
(c) Furnish to Frost such number of conformed copies of the
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 the 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 Frost and the underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Shares owned by Frost;
(d) Use its commercially reasonable best efforts to register or
qualify all of the Registrable Shares and other securities covered by the
Registration Statement under such other securities laws or blue sky laws of such
states as Frost shall reasonably request, to keep such registrations or
qualifications in effect for so long as the Registration Statement remains in
effect, and take any other action which may be reasonably necessary to enable
Frost to consummate the disposition in such jurisdictions of the securities
owned by Frost, except that Charys 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 (d) be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;
(e) Use its commercially reasonable best efforts to cause all of the
Registrable Shares covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable Frost thereof to consummate the disposition of the
Registrable Shares;
(f) Furnish to Frost a signed counterpart, addressed to Frost, and
the underwriters, if any, of an opinion of counsel for Charys, dated the
effective date of the Registration Statement (or, 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
Frost) including that the prospectus and any prospectus supplement forming a
part of the Registration Statement does not contain an untrue statement of a
material fact or omits a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(g) Notify Frost and its counsel promptly and confirm such advice in
writing promptly after Charys has knowledge thereof:
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(i) 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;
(ii) Of any request by the SEC for amendments or supplements
to the Registration Statement or the prospectus or for additional information;
(iii) Of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings by any person for that purpose; and
(iv) Of the receipt by Charys of any notification with
respect to the suspension of the qualification of any Registrable Shares for
sale under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
(h) Notify Frost, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts 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 Frost promptly prepare and
furnish to Frost 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;
(i) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(j) Otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first full calendar month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) Enter into such agreements and take such other actions as Frost
shall reasonably request in writing (at the expense of Frost) in order to
expedite or facilitate the disposition of the Registrable Shares; and
(l) Use its commercially reasonable best efforts to list all of the
Registrable Shares covered by the Registration Statement on any securities
exchange on which any of the Registrable Shares are then listed.
Charys may require Frost to furnish Charys such information regarding Frost
and the distribution of such securities as Charys may from time to time
reasonably request in writing.
3.2 Charys will not file any Registration Statement pursuant to Paragraph
1.2 hereof, or amendment thereto or any prospectus or any supplement thereto to
which Frost shall reasonably object, provided that Charys may file such
documents in a form required by law or upon the advice of its counsel.
3.3 Charys represents and warrants to Frost that it has obtained all
necessary waivers, consents and authorizations necessary to execute this
Agreement and consummate the transactions contemplated hereby.
3.4 Frost agrees that, upon receipt of any notice from Charys of the
occurrence of any event of the kind described in subdivision (h) of Paragraph
3.1 hereof, Frost will forthwith discontinue its disposition of the Registrable
Shares pursuant to the Registration Statement relating to the Registrable Shares
until Frost's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (h) of Paragraph 3.1 and, if so directed by Charys,
will deliver to Charys (at Charys' expense) all copies, other than permanent
file copies, then in Frost's possession of the prospectus relating to the
Registrable Shares current at the time of receipt of such notice.
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ARTICLE IV
UNDERWRITTEN OFFERINGS
4.1 Underwritten Offerings. If Charys at any time proposes to register
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any of its securities under the Securities Act as contemplated by Paragraph 2.1
hereof and such securities are to be distributed by or through one or more
underwriters, and if requested by Frost as provided in Paragraph 2.1 and subject
to the provisions of Paragraph 2.2, or if requested by Frost for the disposition
of Registrable Shares under Article I hereof in an underwritten offering, Charys
will use its commercially reasonable best efforts to arrange for underwriters to
distribute all of the Registrable Shares to be offered and sold by Frost.
4.2 Holdback Agreements. Subject to such other reasonable requirements as
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may be imposed by the underwriter as a condition of inclusion of the Registrable
Shares in an underwritten offering, Frost agrees, if so required by the managing
underwriter, 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,
except as part of such underwritten offering, any equity securities of Charys,
during such reasonable period of time requested by the underwriter; provided
however:
(a) If the offering is a secondary offering by Charys, the offering
is intended to raise a minimum of $2,000,000 on behalf of Charys; and
(b) Such period shall not exceed 90 days commencing with the
completion of the underwritten offering.
Charys agrees and acknowledges that during any holdback period, Frost may
sell, in the holdback period, the Registrable Shares in the amount of up to one
percent per week of the shares of the Charys Common Stock held by Frost as long
as this Agreement remains effective.
4.3 Participation in Underwritten Offerings. Frost may not participate in
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any underwritten offering under Paragraph 2.1 unless Frost:
(a) Agrees to sell its Registrable Shares on the basis provided in
any underwriting arrangements approved by Frost; and
(b) Completes and executes all questionnaires, indemnities,
underwriting agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other
agreement in connection with such offering) shall require Frost to make a
representation or warranty to or agreements with Charys or the underwriters
other than representations and warranties contained in a writing furnished by
Frost expressly for use in the related Registration Statement or
representations, warranties or agreements regarding Frost, its Registrable
Shares, and its intended method of distribution and any other representation
required by law.
4.4 Preparation; Reasonable Investigation. In connection with the
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preparation and filing of each Registration Statement under the Securities Act
pursuant to this Agreement, Charys will give Frost, and its counsel and
accountants, the opportunity to participate in the preparation of the
Registration Statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of Charys with its officers and the independent public accountants who
have certified its financial statements as shall be necessary, in the reasonable
opinion of Frost and its counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by Charys. In the event of any registration of any
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securities of Charys under the Securities Act, Charys will, and hereby does
agree to indemnify and hold harmless Frost, its directors and officers,
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each other person who participates as an underwriter in the offering or sale of
such securities and each other person, if any, who controls Frost or any such
underwriter within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which Frost or any such director or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages 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, 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 or
necessary to make the statements therein not misleading, and Charys will
reimburse Frost and each such director, officer, underwriter and controlling
person 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, provided that Charys 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 the Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to Charys by Frost or underwriter
stating that it is for use in the preparation thereof and, provided further that
Charys shall not be liable to any person who participates as an underwriter in
the offering or sale of Registrable Shares or to any other person, if any, who
controls such underwriter within the meaning of the Securities Act, 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 such person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities Act to the
person asserting the existence of an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of the Registrable Shares to such person if such
statement or omission was corrected in such final prospectus or an amendment or
supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Frost or any such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by Frost.
5.2 Indemnification by Frost. Charys may require, as a condition to
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including any of the Registrable Shares in any Registration Statement filed
pursuant to this Agreement, that Charys shall have received an undertaking
satisfactory to it from Frost, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Paragraph 5.1 hereof) Charys, each
director of Charys, each officer of Charys and each other person, if any, who
controls Charys within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from the
Registration Statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to Charys
through an instrument duly executed by Frost specifically stating that it is for
use in the preparation of the Registration Statement, 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 Charys or any such director, officer or controlling
person and shall survive the transfer of such securities by Frost.
5.3 Notices of Claims, etc. Promptly after receipt by an indemnified
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party of notice of the commencement of any action or proceeding involving a
claim referred to in Paragraph 5.1 and Paragraph 5.2 hereof, such indemnified
party will, if 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
Paragraph 5.1 and Paragraph 5.2 hereof, 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 other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
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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, or a covenant not to xxx, 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.
5.4 Other Indemnification. Indemnification similar to that specified in
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Paragraph 5.1 and Paragraph 5.2 hereof (with appropriate modifications) shall be
given by Charys and Frost (but only if and to the extent required pursuant to
the terms herein) with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority, other than the Securities Act.
5.5 Indemnification Payments. The indemnification required by Paragraph
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5.1 and Paragraph 5.2 hereof shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
5.6 Contribution. If the indemnification provided for in Paragraph 5.1
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and Paragraph 5.2 hereof 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:
(a) In such proportion as is appropriate to reflect the relative
benefits received by Charys on the one hand and Frost or the underwriter, as the
case may be, on the other from the distribution of the Registrable Shares; or
(b) If the allocation provided by clause (a) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) above but also the relative fault of
Charys on the one hand and of Frost or the 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 Charys on the one hand and Frost or the
underwriter, as the case may be, on the other in connection with the
distribution of the Registrable Shares shall be deemed to be in the same
proportion as the total net proceeds received by Charys from the initial sale of
the Registrable Shares by Charys to the purchasers bear to the gain, if any,
realized by Frost, or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of Charys on the one hand
and of Frost or the 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 Charys, by Frost or by the underwriter and the
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 provisions contained herein, and in no event shall the obligation of any
indemnifying party to contribute under this Paragraph 5.6 exceed the amount that
such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for hereunder had been available
under the circumstances.
Charys and Frost agree that it would not be just and equitable if
contribution pursuant to this Paragraph 5.6 were determined by pro rata
allocation (even if Frost 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.
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
herein, 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 Paragraph 5.6, Frost and any
underwriter shall not be required to contribute any amount in excess of the
amount by which (i) in the case of Frost, the net proceeds received by Frost
from the sale of the Registrable Shares, or (ii) in the case of an underwriter,
the total price at which the Registrable Shares purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the amount
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of any damages that Frost or the 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 VI
RULE 144
6.1 Rule 144. Charys shall timely file the reports required to be filed
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by it under the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including but not limited to the reports under
Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of
Rule 144 adopted by the SEC under the Securities Act, and the rules and
regulations adopted by the SEC thereunder (or, if Charys is not required to file
such reports, will, upon the request of Frost, make publicly available other
information) and will take such further action as Frost may reasonably request,
all to the extent required from time to time to enable Frost to sell the
Registrable Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144, as amended, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
Xxxxx, Xxxxxx will deliver to Frost a written statement as to whether it has
complied with the requirements of this Paragraph 6.1.
ARTICLE VII
MISCELLANEOUS
7.1 Amendments and Waivers. This Agreement may be amended and Charys may
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take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if Charys shall have obtained the written consent to
such amendment, action or omission to act, of Frost.
7.2 Nominees for Beneficial Owners. In the event that any of the
---------------------------------
Registrable Shares are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of the
Registrable Shares for purposes of any request or other action by any holder or
holders of Registrable Shares pursuant to this Agreement or any determination of
any number or percentage of shares of Registrable Shares held by a holder or
holders of Registrable Shares contemplated by this Agreement. If the beneficial
owner of any Registrable Shares so elects, Charys may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of the
Registrable Shares.
7.3 Notices. Except as otherwise provided in this Agreement, all notices,
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requests and other communications to any person provided for hereunder shall be
in writing and shall be given to such person:
(a) In the case of a party hereto other than Charys, at such address
as such party shall have furnished to Charys in writing; or
(b) In the case of Charys, at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000,
Xxxxxxx, Xxxxxxx 00000, to the attention of its President, or at such other
address, or to the attention of such other officer, as Charys shall have
furnished to Frost.
Each such notice, request or other communication shall be effective (i) if
given by mail, 72 hours after such communication is deposited in the mail with
first class postage prepaid, addressed as aforesaid or (ii) if given by any
other means (including, without limitation, by fax or air courier), when
delivered at the address specified above, provided that any such notice, request
or communication shall not be effective until received.
7.4 Assignment. This Agreement shall be binding upon and inure to the
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benefit of and be enforceable by the parties hereto. In addition, and whether
or not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than Charys
shall also be for the benefit of and enforceable by any subsequent holder of any
of the Registrable Shares, and the term "Frost" in this Agreement shall be
deemed to include such other holder of Registrable Shares; provided that any
such transferee of Registrable Shares assumes in writing the respective
obligations of Frost under this Agreement.
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7.5 Descriptive Headings. The descriptive headings of the several
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sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
7.6 Governing Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the laws of the State of Texas, without giving effect to
applicable principles of conflicts of law.
7.7 Jurisdiction. This Agreement shall be exclusively governed by and
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construed in accordance with the laws of the State of Texas. If any action is
brought among the parties with respect to this Agreement or otherwise, by way of
a claim or counterclaim, the parties agree that in any such action, and on all
issues, the parties irrevocably waive their right to a trial by jury. Exclusive
jurisdiction and venue for any such action shall be the State Courts of Texas.
In the event suit or action is brought by any party under this Agreement to
enforce any of its terms, or in any appeal therefrom, it is agreed that the
prevailing party shall be entitled to reasonable attorneys fees to be fixed by
the arbitrator, trial court, and/or appellate court.
7.8 Entire Agreement. This Agreement embodies the entire agreement and
-----------------
understanding between Charys and Frost relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
7.9 Severability. If any provision of this Agreement, or the application
------------
of such provisions to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
7.10 Binding Effect. All the terms and provisions of this Agreement shall
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be binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
7.11 Preparation of Agreement. This Agreement shall not be construed more
------------------------
strongly against any party regardless of who is responsible for its preparation.
The parties acknowledge each contributed and is equally responsible for its
preparation.
7.12 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
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delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement herein, nor
shall any single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
7.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
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IN WITNESS WHEREOF, Frost and Charys have executed this Agreement as of the
date first written above.
CHARYS HOLDING COMPANY, INC.
By
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Xxxxx X. Xxx, Xx., President
THE FROST NATIONAL BANK
By
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, Vice President
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Attachment:
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Attachment A Certificate of Designation of the Charys Series B Convertible
Preferred Stock
See Exhibit 4.1 to this Current Report
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