EXHIBIT 4.3
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QUESTAR INVESTOR RIGHTS AGREEMENT
QUESTAR INVESTOR RIGHTS AGREEMENT (this "Agreement"), dated
as of May 31, 2006, by and among Touchstone Applied Science
Associates, Inc., a Delaware corporation (the "Company"), and
the individuals who are signatory hereto (each a "Questar
Stockholder" and collectively, the "Questar Stockholders").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock Purchase Agreement, dated as
of May 31, 2006 (the "Stock Purchase Agreement"), the Company
has purchased from the Questar Stockholders all of the
outstanding shares of capital stock of Questar Educational
Systems, Inc. ("Questar");
WHEREAS, as part of the consideration paid to the Questar
Stockholders, the Company has issued to the Questar Stockholders
shares of Series A-2 Convertible Preferred Stock, par value
$0.0001 per share (the "Series A-2 Shares"), of the Company in
the respective amounts set forth opposite each such Questar
Stockholder's name on Exhibit A attached hereto;
WHEREAS, pursuant to the Stock Purchase Agreement, the
Company has placed One Million One Hundred Eleven Thousand One
Hundred Eleven (1,111,111) Series A-2 Shares in escrow for the
benefit of the Questar Stockholders to be released on or before
January 31, 2010 subject to the terms and conditions of Section
2.2.3 of the Stock Purchase Agreement (the "Earnout");
WHEREAS, the Questar Registrable Shares (as defined below)
have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and therefore, may not be sold,
transferred or assigned except pursuant to an effective
registration statement under the Securities Act or an exemption
therefrom;
WHEREAS, in order to induce the Questar Stockholders to
enter into the Stock Purchase Agreement and to consummate the
transactions contemplated thereby, the Company has agreed to
register the Questar Registrable Shares under the Securities
Act, and applicable state securities laws, upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS.
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As used in this Agreement, the following terms shall have
the following respective meanings:
"Affiliated Party" means, with respect to any Questar
Stockholder, any person or entity which, directly or indirectly,
controls, is controlled by or is under common control with such
Questar Stockholder, including, without limitation, any general
partner, officer or director of such Questar Stockholder and any
venture capital fund now or hereafter existing which is
controlled by one or more general partners of, or shares the
same management company as, such Questar Stockholder.
"Available Undersubscription Amount" means the difference
between the total of all of the Basic Amounts available for
purchase by Qualified Holders pursuant to Section 3.1 and the
Basic Amounts subscribed for pursuant to Section 3.1.
"Basic Amount" means, with respect to a Qualified Holder,
its pro rata portion of the Offered Securities determined by
multiplying the number of Offered Securities by a fraction, the
numerator of which is the aggregate number of shares of Common
Stock issuable upon conversion of all Series A-2 Shares then
held by such Qualified Holder and the denominator of which is
the total number of shares of Common Stock then held by all of
the Qualified Holders (giving effect to the conversion into
Common Stock of all outstanding shares of convertible preferred
stock).
"Camden" means, collectively, Camden Partners Strategic
Fund III, L.P. and Camden Partners Strategic Fund III-A, L.P.
"Camden Preferred Shares" means the shares of Series A-1
Convertible Preferred Shares, par value $0.0001 per Share, of
the Company.
"Camden Stock Purchase Agreement" means the Series A
Convertible Preferred Stock Purchase Agreement, dated as of May
31, 2006, by and among the Company and Camden.
"Camden Registrable Shares" means the (a) the shares of
Common Stock issued or issuable upon conversion of the Camden
Preferred Shares, (b) any other shares of Common Stock, and any
shares of Common Stock issued or issuable upon the conversion or
exercise of any other securities, acquired by Camden and (c) any
other shares of Common Stock issued in respect of such Camden
Preferred Shares (because of stock splits, stock dividends,
reclassifications, recapitalizations or similar events);
provided, however, that shares of Common Stock which are Camden
Registrable Shares shall cease to be Camden Registrable Shares
upon any sale pursuant to a Registration Statement or Rule 144
under the Securities Act.
"Common Stock" means the common stock, $0.0001 par value
per share, of the Company.
"Company Sale" means: (a) a merger or consolidation in
which (i) the Company is a constituent party, or (ii) a Company
Subsidiary is a constituent party and the Company issues shares
of its capital stock pursuant to such merger or consolidation,
except in the case of either clause (i) or (ii) any such merger
or consolidation involving the Company or a Company Subsidiary
in which the shares of capital stock of the Company outstanding
immediately prior to such merger or consolidation continue to
represent, or are converted into or exchanged for shares of
capital stock which represent, immediately following such merger
or consolidation, more than 50% by voting power of the capital
stock of (A) the surviving or resulting corporation or (B) if
the surviving or resulting corporation is a wholly owned
subsidiary of another corporation immediately following such
merger or consolidation, the parent corporation of such
surviving or resulting corporation; (b) the sale, lease,
transfer, exclusive license or other disposition, in a single
transaction or series of related transactions, by the Company or
a Company Subsidiary of all or substantially all the assets of
the Company and the Company Subsidiaries taken as a whole
(except where such sale, lease, transfer, exclusive license or
other disposition is to a wholly owned Company Subsidiary); (c)
the combination of the Company with another entity pursuant to
which the Company is the surviving corporation if, immediately
after the combination, the stockholders of the Corporation
immediately prior to the combination hold, directly or
indirectly, less than 50% of the combined voting power of the
combined company; or (d) any person (as such term is used in the
Exchange Act), other than any person who was a beneficial owner
of more than 15% of the Common Stock, on a fully-diluted basis,
on or before the date hereof, is or becomes the "beneficial
owner" (as defined the Exchange Act) of securities of the
Company representing more than 50% of the combined voting power
of the Company.
"Company Subsidiary" means any corporation, partnership,
trust, limited liability company or other non-corporate business
enterprise in which the Company (or a Company Subsidiary) holds
stock or other ownership interests representing (a) more than
50% of the voting power of all outstanding stock or ownership
interests of such entity or (b) the right to receive more than
50% of the net assets of such entity available for distribution
to the holders of outstanding stock or ownership interests upon
a liquidation or dissolution of such entity.
"Confidential Information" means any information that is
labeled as confidential, proprietary or secret which a Questar
Stockholder obtains from the Company pursuant to financial
statements, reports and other materials provided by the Company
to such Questar Stockholder pursuant to this Agreement or
pursuant to visitation or inspection rights granted hereunder.
"Demand Registration" means a registration as described in
Section 2 of this Agreement.
"Exchange Act" means the Securities Exchange Act or 1934,
as amended, and the rules and regulations thereunder.
"Indemnified Party" means a party entitled to
indemnification pursuant to Section 2.5.
"Indemnifying Party" means a party obligated to provide
indemnification pursuant to Section 2.5.
"Initiating Holders" means the Questar Stockholders
initiating a request for registration pursuant to Section 2.1(a)
or 2.1(b), as the case may be.
"Notice of Acceptance" means a written notice from a
Questar Stockholder to the Company containing the information
specified in Section 3.1(b).
"Offer" means a written notice of any proposed or intended
issuance, sale or exchange of Offered Securities containing the
information specified in Section 3.1(a).
"Offered Securities" means (a) any shares of the Common
Stock of the Company, (b) any other equity securities of the
Company, including, without limitation, shares of preferred
stock, (c) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any equity securities of the
Company, or (d) any debt securities convertible into capital
stock of the Company.
"Qualified Holder" means an individual Questar Stockholder
or a group of Questar Stockholders acting together, who holds at
least 500,000 Series A-2 Shares (subject to stock splits, stock
dividends, consolidations, recapitalizations and other similar
events).
"Questar Registrable Shares" means (a) the shares of Common
Stock of the Company issued or issuable upon conversion of the
Series A-2 Shares, (b) any other shares of Common Stock of the
Company, and any shares of Common Stock of the Company issued or
issuable upon the conversion or exercise of any other
securities, acquired by the Questar Stockholders and (c) any
other shares of Common Stock of the Company issued in respect of
such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations or similar events);
provided, however, that shares of Common Stock which are Questar
Registrable Shares shall cease to be Questar Registrable Shares
upon any sale pursuant to a Registration Statement or Rule 144
under the Securities Act. Wherever reference is made in this
Agreement to a request or consent of holders of a certain
percentage of Questar Registrable Shares, the determination of
such percentage shall include shares of Common Stock issuable
upon conversion of the shares even if such conversion has not
been effected.
"Refused Securities" means those Offered Securities as to
which a Notice of Acceptance has not been given by the Qualified
Holders pursuant to Section 3.1.
"Registration Expenses" means all expenses incurred by the
Company in complying with the provisions of Section 2,
including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and expenses of
counsel for the Company and the fees and expenses of one counsel
selected by the Selling Stockholders to represent the Selling
Stockholders, state Blue Sky fees and expenses, and the expense
of any special audits incident to or required by any such
registration, but excluding underwriting discounts, selling
commissions and the fees and expenses of Selling Stockholders'
own counsel (other than the one counsel selected to represent
all Selling Stockholders).
"Registration Statement" means a registration statement
filed by the Company with the SEC for a public offering and sale
of securities of the Company (other than a registration
statement on Form S-8 or Form S-4, or the respective successors
forms, or any other form for a similar limited purpose, or any
registration statement covering only securities proposed to be
issued in exchange for securities or assets of another
corporation), including, without limitation, a "shelf
registration" statement pursuant to Rule 415 of the Securities
Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Selling Stockholder" means any Questar Stockholder owning
Questar Registrable Shares and Camden owning Camden Registrable
Shares included in a Registration Statement.
"Undersubscription Amount" means, with respect to a
Qualified Holder, any additional portion of the Offered
Securities attributable to the Basic Amounts of other Qualified
Holders as such Qualified Holder indicates it will purchase or
acquire should the other Qualified Holders subscribe for less
than their Basic Amounts.
2. REGISTRATION RIGHTS.
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2.1 DEMAND REGISTRATION. At any time after the Earnout
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has occurred pursuant to Section 2.2.3 of the Stock Purchase
Agreement and the Series A-2 Shares or the Questar Registrable
Shares, as applicable, have been released from escrow and issued
to the Questar Stockholders, the Questar Stockholders shall have
the following demand registration rights with respect to the
Questar Registrable Shares:
(a) A Questar Stockholder or Questar Stockholders
holding in the aggregate at least 50% of the Questar
Registrable Shares may request, in writing, that the
Company file a Registration Statement covering Questar
Registrable Shares owned by such Questar Stockholders
having an aggregate value of at least $2,500,000 (based on
the volume weighted average public market price for the
five trading days preceding the date of such request).
(b) At any time after the Company becomes eligible to
file a Registration Statement on Form S-3 (or any successor
form relating to secondary offerings), a Questar
Stockholder or Questar Stockholders holding Questar
Registrable Shares having an aggregate value of at least
$1,000,000 (based on the volume weighted average public
market price for the five trading days preceding the date
of such request), may request, in writing, that the Company
effect the registration on Form S-3 (or such successor
form), of such Questar Registrable Shares.
(c) Upon receipt of any request for registration
pursuant to this Section 2.1, the Company shall promptly
give written notice of such proposed registration to all
other Questar Stockholders and to Camden. Such other
Questar Stockholders shall have the right, by giving
written notice to the Company within 30 days after the
Company provides its notice, to elect to have included in
such registration such of their Questar Registrable Shares
as such Questar Stockholders may request in such notice of
election, and Camden shall have the right, by giving
written notice to the Company within 30 days after the
Company provides its notice, to elect to have included in
such registration such of their Camden Registrable Shares
as Camden may request in such notice of election, in both
cases, subject, in the event of an underwritten offering,
to the terms of Section 2.1(d). Thereupon, the Company
shall, as expeditiously as possible, use its best efforts
to effect the registration on an appropriate registration
form of all Questar Registrable Shares and all Camden
Registrable Shares which the Company has been requested to
so register; provided, however, that in the case of a
registration requested under Section 2.1(b), the Company
will only be obligated to effect such registration on Form
S-3 (or any successor form).
(d) If the Initiating Holders intend to distribute
the Questar Registrable Shares covered by their request by
means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to Section 2.1(a)
or (b), as the case may be, and the Company shall include
such information in its written notice referred to in
Section 2.1(c). In such event, (i) the right of any other
Questar Stockholder to include its Questar Registrable
Shares and the right of Camden to include any Camden
Registrable Shares in such registration pursuant to Section
2.1(c), shall be conditioned upon such other Questar
Stockholder's participation and Camden's participation in
such underwriting on the terms set forth herein, and (ii)
all Selling Stockholders including Questar Registrable
Shares and Camden Registrable Shares, as the case may be,
in such registration shall enter into an underwriting
agreement upon customary terms with the underwriter or
underwriters managing the offering; provided that such
underwriting agreement shall not provide for
indemnification or contribution obligations on the part of
the Selling Stockholders materially greater than the
obligations of the Selling Stockholders pursuant to Section
2.5. The Initiating Holders shall have the right to select
the managing underwriter(s) for any underwritten offering
requested pursuant to Section 2.1(a) or (b), subject to the
approval of the Company, which approval will not be
unreasonably withheld, conditioned or delayed. If any
Questar Stockholder who has requested inclusion of its
Questar Registrable Shares or Camden who has requested
inclusion of Camden's Registrable Shares in such
registration as provided above disapproves of the terms of
the underwriting, such Questar Stockholder or Camden, as
the case may be, may elect, by written notice to the
Company, to withdraw its Questar Registrable Shares or
Camden Registrable Shares, respectively, from such
Registration Statement and underwriting. If the managing
underwriter advises the Company in writing that, in its
discretion, market factors require a limitation on the
number of shares to be underwritten, the number of Questar
Registrable Shares and Camden Registrable Shares to be
included in the Registration Statement and underwriting
shall be allocated among all Questar Stockholders and
Camden requesting registration in proportion, as nearly as
practicable, to the respective number of Questar
Registrable Shares and Camden Registrable Shares,
respectively, held by them on the date of the request for
registration made by the Initiating Holders pursuant to
Section 2.1(a) or (b), as the case may be. If any Questar
Stockholder would thus be entitled to include more Questar
Registrable Shares than such Questar Stockholder requested
to be registered, the excess shall be allocated among other
requesting Questar Stockholders pro rata in the manner
described in the preceding sentence.
(e) The Company shall not be required to effect (i)
more than one registration pursuant to Section 2.1(a) and
Section 2.1(b) in any period of twelve consecutive months,
or (ii) no more than two registrations in total pursuant to
Section 2.1(a) and Section 2.1(b). For purposes of this
Section 2.1(e), a Registration Statement shall not be
counted until such time as such Registration Statement has
been declared effective by the Commission (unless the
Initiating Holders withdraw their request for such
registration (other than as a result of information
concerning the business or financial condition of the
Company which is made known to the Questar Stockholders
after the date on which such registration was requested)
and elect not to pay the Registration Expenses therefor
pursuant to Section 2.4). For purposes of this Section
2.1(e), a Registration Statement shall not be counted if,
as a result of an exercise of the underwriter's cut-back
provisions as described in Section 2.1(d), less than 50% of
the total number of Questar Registrable Shares that
Initiating Holders have requested to be included in such
Registration Statement are so included.
(f) If at the time of any request to register Questar
Registrable Shares by Initiating Holders pursuant to this
Section 2.1, the Company is engaged or has plans to engage
in a registered public offering or is engaged in any other
activity which, in the good faith determination of the
Company's Board of Directors, would be adversely affected
by the requested registration, then the Company may at its
option direct that such request be delayed for a period not
in excess of 90 days from the date of such request, such
right to delay a request to be exercised by the Company not
more than once in any 12-month period.
2.2 INCIDENTAL REGISTRATIONS.
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(a) Whenever the Company proposes to file a
Registration Statement (other than a Registration Statement
filed pursuant to Section 2.1) at any time and from time to
time, it will, prior to such filing, give written notice to
all Questar Stockholders of its intention to do so. Upon
the written request of a Questar Stockholder given within
20 days after the Company provides such notice (which
request shall state the intended method of disposition of
such Questar Registrable Shares), the Company shall use its
best efforts to cause all Questar Registrable Shares which
the Company has been requested by such Questar Stockholder
to register to be registered under the Securities Act to
the extent necessary to permit their sale or other
disposition in accordance with the intended methods of
distribution specified in the request of such Questar
Stockholder; provided that the Company shall have the right
to postpone or withdraw any registration effected pursuant
to this Section 2.2 without obligation to any Questar
Stockholder.
(b) If the registration for which the Company gives
notice pursuant to Section 2.2(a) is a registered public
offering involving an underwriting, the Company shall so
advise the Questar Stockholders as a part of the written
notice given pursuant to Section 2.2(a). In such event,
(i) the right of any Questar Stockholder to include its
Questar Registrable Shares in such registration pursuant to
this Section 2.2 shall be conditioned upon such Questar
Stockholder's participation in such underwriting on the
terms set forth herein and (ii) all Questar Stockholders
including Questar Registrable Shares in such registration
shall enter into an underwriting agreement upon customary
terms with the underwriter or underwriters selected for the
underwriting by the Company; provided that such
underwriting agreement shall not provide for
indemnification or contribution obligations on the part of
Questar Stockholders materially greater than the
obligations of the Questar Stockholders pursuant to Section
2.5. If any Questar Stockholder who has requested
inclusion of its Questar Registrable Shares in such
registration as provided above disapproves of the terms of
the underwriting, such person may elect, by written notice
to the Company, to withdraw its shares from such
Registration Statement and underwriting. If the managing
underwriter advises the Company in writing that, in its
discretion, market factors require a limitation on the
number of shares to be underwritten, the shares held by
holders of securities of the Company other than Questar
Stockholders and the Questar Stockholders shall be excluded
from such Registration Statement and underwriting to the
extent deemed advisable by the managing underwriter, and,
if a further reduction of the number of shares is required,
the number of shares that may be included in such
Registration Statement and underwriting shall be allocated
among all Questar Stockholders and Camden requesting
registration in proportion, as nearly as practicable, to
the respective number of shares of Common Stock (on an as-
converted basis) held by them on the date the Company gives
the notice specified in Section 2.2(a). If any Questar
Stockholder would thus be entitled to include more shares
than such holder requested to be registered, the excess
shall be allocated among other requesting Questar
Stockholders pro rata in the manner described in the
preceding sentence.
2.3 REGISTRATION PROCEDURES.
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(a) If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to
effect the registration of any Questar Registrable Shares
and, if applicable, any Camden Registrable Shares, under
the Securities Act, the Company shall:
(i) file with the Commission a Registration
Statement with respect to such Questar Registrable
Shares, if any, and use its best efforts to cause that
Registration Statement to become effective as soon as
possible;
(ii) as expeditiously as possible prepare and
file with the Commission any amendments and
supplements to the Registration Statement and the
prospectus included in the Registration Statement as
may be necessary to comply with the provisions of the
Securities Act (including the anti-fraud provisions
thereof) and to keep the Registration Statement
effective for 36 months from the effective date or
such lesser period until all such Questar Registrable
Shares and Camden Registrable Shares, if any, are
sold;
(iii) as expeditiously as possible furnish to each
Selling Stockholder such reasonable numbers of copies
of the Prospectus, including any preliminary
Prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such
Selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the
Questar Registrable Shares or Camden Registrable
Shares, if any, owned by such Selling Stockholder;
(iv) as expeditiously as possible use its best
efforts to register or qualify the Questar Registrable
Shares and Camden Registrable Shares, if any, covered
by the Registration Statement under the securities or
Blue Sky laws of such states as the Selling
Stockholders shall reasonably request, and do any and
all other acts and things that may be necessary or
desirable to enable the Selling Stockholders to
consummate the public sale or other disposition in
such states of the Questar Registrable Shares and
Camden Registrable Shares, if any, owned by the
Selling Stockholders; provided, however, that the
Company shall not be required in connection with this
paragraph (iv) to qualify as a foreign corporation or
to execute a general consent to service of process in
any jurisdiction or to amend its Certificate of
Incorporation or By-laws in a manner that the Board of
Directors determines is inadvisable;
(v) as expeditiously as possible, cause all such
Questar Registrable Shares and Camden Registrable
Shares, if any, to be listed on each securities
exchange or automated quotation system on which
similar securities issued by the Company are then
listed;
(vi) promptly provide a transfer agent and
registrar for all such Questar Registrable Shares and
Camden Registrable Shares, if any, not later than the
effective date of such Registration Statement;
(vii) promptly make available for inspection by
the Selling Stockholders, any managing underwriter
participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant
or other agent retained by any such underwriter or
selected by the Selling Stockholders, all financial
and other records, pertinent corporate documents and
properties of the Company and cause the Company's
officers, directors, employees and independent
accountants to supply all information reasonably
requested by any such seller, underwriter, attorney,
accountant or agent in connection with such
Registration Statement;
(viii) notify each Selling Stockholder, promptly
after it shall receive notice thereof, of the time
when such Registration Statement has become effective
or a supplement to any Prospectus forming a part of
such Registration Statement has been filed; and
(ix) as expeditiously as possible following the
effectiveness of such Registration Statement, notify
each Selling Stockholder of any request by the
Commission for the amending or supplementing of such
Registration Statement or Prospectus.
(b) If the Company has delivered a Prospectus to the
Selling Stockholders and after having done so, such
Prospectus is subsequently amended to comply with the
requirements of the Securities Act, the Company shall
promptly notify the Selling Stockholders of such amendment
and, if requested by the Company, the Selling Stockholders
shall immediately cease making offers of all Questar
Registrable Shares and Camden Registrable Shares and return
all pre-amendment Prospectuses to the Company. The Company
shall promptly provide the Selling Stockholders with
amended Prospectuses and, following receipt of the amended
Prospectuses, the Selling Stockholders shall be free to
resume making offers of the Questar Registrable Shares and
the Camden Registrable Shares.
(c) In the event that, in the judgment of the
Company, it is advisable to suspend use of a Prospectus
included in a Registration Statement due to pending
material developments or other events that have not yet
been publicly disclosed and as to which the Company
believes public disclosure would be detrimental to the
Company, the Company shall notify all Selling Stockholders
to such effect, and, upon receipt of such notice, each such
Selling Stockholder shall immediately discontinue any sales
of Questar Registrable Shares and Camden Registrable
Shares, if any, pursuant to such Registration Statement
until such Selling Stockholder has received copies of a
supplemented or amended Prospectus or until such Selling
Stockholder is advised in writing by the Company that the
then current Prospectus may be used and has received copies
of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such
Prospectus. Notwithstanding anything to the contrary
herein, the Company shall not exercise its rights under
this Section 2.3(c) to suspend sales of Questar Registrable
Shares for a period in excess of 45 days consecutively or
90 days in any 365-day period.
2.4 ALLOCATION OF EXPENSES. The Company will pay all
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Registration Expenses for all registrations under this
Agreement; provided, however, that if a registration under
Section 2.1 is withdrawn at the request of the Initiating
Holders (other than as a result of information concerning the
business or financial condition of the Company which is made
known to the Selling Stockholders after the date on which such
registration was requested) and if the Initiating Holders elect
not to have such registration counted as a registration
requested under Section 2.1, the Selling Stockholders shall pay
the Registration Expenses of such registration pro rata in
accordance with the number of their Questar Registrable Shares
included in such registration.
2.5 INDEMNIFICATION AND CONTRIBUTION.
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(a) In the event of any registration of any of the
Questar Registrable Shares under the Securities Act
pursuant to this Agreement, the Company will indemnify and
hold harmless each Questar Stockholder, each underwriter of
such Questar Registrable Shares, and each other person, if
any, who controls such Questar Stockholder or underwriter
within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages or liabilities,
joint or several, to which such Questar Stockholder,
underwriter or controlling person may become subject under
the Securities Act, the Exchange Act, state securities or
Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in
any Registration Statement under which such Questar
Registrable Shares were registered under the Securities
Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment
or supplement to such Registration Statement, (ii) the
omission or alleged omission to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the
Exchange Act or any state securities law in connection with
the Registration Statement or the offering contemplated
thereby; and the Company will reimburse such Questar
Stockholder, underwriter and each such controlling person
for any legal or any other expenses reasonably incurred by
such Questar Stockholder, underwriter or controlling person
in connection with investigating or defending any such
loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement,
preliminary prospectus or prospectus, or any such amendment
or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on
behalf of such Questar Stockholder, underwriter or
controlling person specifically for use in the preparation
thereof.
(b) In the event of any registration of any of the
Questar Registrable Shares under the Securities Act
pursuant to this Agreement, each Selling Stockholder,
severally and not jointly, will indemnify and hold harmless
the Company, each of its directors and officers and each
underwriter (if any) and each person, if any, who controls
the Company or any such underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which
the Company, such directors and officers, underwriter or
controlling person may become subject under the Securities
Act, Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration
Statement under which such Questar Registrable Shares were
registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to
the Registration Statement, or (ii) any omission or alleged
omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, if and to the extent (and only to the extent)
that the statement or omission was made in reliance upon
and in conformity with information relating to such Selling
Stockholder furnished in writing to the Company by such
Selling Stockholder specifically for use in connection with
the preparation of such Registration Statement, prospectus,
amendment or supplement; provided, however, that the
obligations of a Selling Stockholder hereunder shall be
limited to an amount equal to the net proceeds to such
Selling Stockholder of Questar Registrable Shares sold in
connection with such registration.
(c) Each Indemnified Party shall give notice to the
Indemnifying Party promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation
resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld,
conditioned or delayed); and, provided, further, that the
failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its
obligations under this Section 2.5 except to the extent
that the Indemnifying Party is adversely affected by such
failure. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that
the Indemnifying Party shall pay such expense if the
Indemnified Party reasonably concludes that representation
of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnified Party
and any other party represented by such counsel in such
proceeding; provided further that in no event shall the
Indemnifying Party be required to pay the expenses of more
than one counsel per jurisdiction for the Indemnified
Party. The Indemnifying Party also shall be responsible
for the expenses of such defense if the Indemnifying Party
does not elect to assume such defense. No Indemnifying
Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any
settlement 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 of such claim or litigation, and no Indemnified
Party shall consent to entry of any judgment or settle such
claim or litigation without the prior written consent of
the Indemnifying Party, which consent shall not be
unreasonably withheld, conditioned or delayed.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnification
provided for in this Section 2.5 is due in accordance with
its terms but for any reason is held to be unavailable to
an Indemnified Party in respect to any losses, claims,
damages and liabilities referred to herein, then the
Indemnifying Party shall, in lieu of indemnifying such
Indemnified Party, contribute to the amount paid or payable
by such Indemnified Party as a result of such losses,
claims, damages or liabilities to which such party may be
subject in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and the
Selling Stockholders, on the other hand, in connection with
the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of
the Company and the Selling Stockholders shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of material fact related
to information supplied by the Company or the Selling
Stockholders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such statement or omission. The Company and the Selling
Stockholders agree that it would not be just and equitable
if contribution pursuant to this Section 2.5(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the
provisions of this Section 2.5(d), (i) in no case shall any
one Selling Stockholder be liable or responsible for any
amount in excess of the net proceeds received by such
Selling Stockholder from the offering of Questar
Registrable Shares or Camden Registrable Shares, as
applicable and (ii) the Company shall be liable and
responsible for any amount in excess of such proceeds;
provided, however, that 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. Any party entitled to contribution
will, promptly after receipt of notice of commencement of
any action, suit or proceeding against such party in
respect of which a claim for contribution may be made
against another party or parties under this Section 2.5(d),
notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties
from whom contribution may be sought shall not relieve such
party from any other obligation it or they may have
thereunder or otherwise under this Section 2.5(d). No
party shall be liable for contribution with respect to any
action, suit, proceeding or claim settled without its prior
written consent, which consent shall not be unreasonably
withheld, conditioned or delayed.
(e) The rights and obligations of the Company and the
Questar Stockholders under this Section 2.5 shall survive
the termination of this Agreement.
2.6 OTHER MATTERS WITH RESPECT TO UNDERWRITTEN OFFERINGS.
----------------------------------------------------
In the event that Questar Registrable Shares are sold pursuant
to a Registration Statement in an underwritten offering pursuant
to Section 2.1, the Company agrees to (a) enter into an
underwriting agreement containing customary representations and
warranties with respect to the business and operations of the
Company and customary covenants and agreements to be performed
by the Company, including without limitation customary
provisions with respect to indemnification by the Company of the
underwriters of such offering; (b) use its reasonable best
efforts to cause its legal counsel to render customary opinions
to the underwriters with respect to the Registration Statement;
and (c) use its reasonable best efforts to cause its independent
public accounting firm to issue customary "cold comfort letters"
to the underwriters with respect to the Registration Statement.
2.7 INFORMATION BY SELLING STOCKHOLDERS. Each Selling
-----------------------------------
Stockholder shall furnish to the Company such information
regarding such Selling Stockholder and the distribution proposed
by such Selling Stockholder as the Company may reasonably
request in writing and as shall be required in connection with
any registration, qualification or compliance referred to in
this Agreement.
2.8 CONFIDENTIALITY OF NOTICES. Any Questar Stockholder
--------------------------
receiving any written notice from the Company regarding the
Company's plans to file a Registration Statement shall treat
such notice confidentially and shall not disclose such
information to any person other than as necessary to exercise
its rights under this Agreement.
2.9 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. The
---------------------------------------------
Company shall not, without the prior written consent of Questar
Stockholders holding at least 50% of the Questar Registrable
Shares then held by all Questar Stockholders, enter into any
agreement (other than this Agreement and an equivalent agreement
granting registration rights to Camden with respect to the
Camden Registrable Shares) with any holder or prospective holder
of any securities of the Company which grants such holder or
prospective holder rights to include securities of the Company
in any Registration Statement, unless (a) such rights to include
securities in a registration initiated by the Company or by
Questar Stockholders are not more favorable than the rights
granted to the Questar Stockholders under Sections 2.1 and 2.2,
and (b) no rights are granted to initiate a registration, other
than registration pursuant to a registration statement on Form
S-3 (or its successor) in which Questar Stockholders are
entitled to include Questar Registrable Shares on a pro rata
basis with such holders based on the number of shares of Common
Stock (on an as-converted basis) owned by Questar Stockholders
and such holders.
2.10 RULE 144 REQUIREMENTS. So long as the Company
---------------------
maintains its registration of a class of securities under
Section 12 of the Exchange Act, the Company agrees to:
(a) make and keep current public information about
the Company available, as those terms are understood and
defined in Rule 144;
(b) use its best efforts to file with the Commission
in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to any holder of Questar Registrable
Shares upon request (i) a copy of the most recent annual or
quarterly report of the Company, and (ii) such other
reports and documents of the Company as such holder may
reasonably request to avail itself of any similar rule or
regulation of the SEC allowing it to sell any such
securities without registration.
2.11 TERMINATION. All of the Company's obligations to
-----------
register Questar Registrable Shares under Sections 2.1 and 2.2
shall terminate upon the earlier of (a) the date on which the
Questar Stockholders do not beneficially own any Questar
Registrable Shares or (b) a Company Sale.
3. RIGHT OF FIRST REFUSAL. At any time after the Earnout has
----------------------
occurred pursuant to Section 2.2.3 of the Stock Purchase
Agreement and the Series A-2 Shares or the Questar Registrable
Shares, as applicable, have been released from escrow and issued
to the Questar Stockholders, the Questar Stockholders shall have
the following rights with respect to the Questar Registrable
Shares:
3.1 RIGHTS OF QUESTAR STOCKHOLDERS TO ACQUIRE OFFERED
-------------------------------------------------
SECURITIES.
----------
(a) Subject to Section 3.1(h), the Company shall not
issue, sell or exchange, agree to issue, sell or exchange,
or reserve or set aside for issuance, sale or exchange, any
Offered Securities, unless in each such case the Company
shall have first complied with this Section 3.1. The
Company shall deliver to each Questar Stockholder an Offer,
which shall (i) identify and describe the Offered
Securities, (ii) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the
number or amount of the Offered Securities to be issued,
sold or exchanged, (iii) identify the persons or entities
(if known) to which or with which the Offered Securities
are to be offered, issued, sold or exchanged, and (iv)
offer to issue and sell to or exchange with such Questar
Stockholder that is a Qualified Holder (A) such Qualified
Holder's Basic Amount and (B) such Qualified Holder's
Undersubscription Amount.
(b) To accept an Offer, in whole or in part, a
Qualified Holder must deliver to the Company, on or prior
to the date 30 days after the date of delivery of the
Offer, a Notice of Acceptance indicating the portion of the
Qualified Holder's Basic Amount that such Qualified Holder
elects to purchase and, if such Qualified Holder shall
elect to purchase all of its Basic Amount, the
Undersubscription Amount (if any) that such Qualified
Holder elects to purchase. If the Basic Amounts subscribed
for by all Qualified Holders are less than the total of all
of the Basic Amounts available for purchase, then each
Qualified Holder who has set forth an Undersubscription
Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for,
the Undersubscription Amount it has subscribed for;
provided, however, that if the Undersubscription Amounts
subscribed for exceed the Available Undersubscription
Amount, each Qualified Holder who has subscribed for any
Undersubscription Amount shall be entitled to purchase only
that portion of the Available Undersubscription Amount as
the Undersubscription Amount subscribed for by such
Qualified Holder bears to the total Undersubscription
Amounts subscribed for by all Qualified Holders, subject to
rounding by the Board of Directors to the extent it deems
reasonably necessary.
(c) The Company shall have 90 days from the
expiration of the period set forth in Section 3.1(b) to
issue, sell or exchange all or any part of the Refused
Securities, but only to the offerees or purchasers
described in the Offer (if so described therein) and only
upon terms and conditions (including, without limitation,
unit prices and interest rates) which are not more
favorable, in the aggregate, to the acquiring person or
persons or less favorable to the Company than those set
forth in the Offer.
(d) In the event the Company shall propose to sell
less than all the Refused Securities, then each Qualified
Holder may, at its sole option and in its sole discretion,
reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that
shall be not less than the number or amount of the Offered
Securities that the Qualified Holder elected to purchase
pursuant to Section 3.1(b) multiplied by a fraction, (i)
the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue,
sell or exchange (including Offered Securities to be issued
or sold to Qualified Holders pursuant to Section 3.1(b)
prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities. In
the event that any Qualified Holder so elects to reduce the
number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or
exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have
again been offered to the Qualified Holders in accordance
with Section 3.1(a).
(e) Upon (i) the closing of the issuance, sale or
exchange of all or less than all of the Refused Securities
or (ii) such other date agreed to by the Company and a
Qualified Holder who has subscribed for a majority of the
Offered Securities subscribed for by the Qualified Holder,
such Qualified Holder shall acquire from the Company and
the Company shall issue to such Qualified Holder, the
number or amount of Offered Securities specified in the
Notices of Acceptance, as reduced pursuant to Section
3.1(d) if any Qualified Holder has so elected, upon the
terms and conditions specified in the Offer.
(f) The purchase by a Qualified Holder of any Offered
Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Qualified
Holder of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to
the Qualified Holder and its respective counsel.
(g) Any Offered Securities not acquired by a
Qualified Holder or other persons in accordance with
Section 3.1(c) may not be issued, sold or exchanged until
they are again offered to the Qualified Holder under the
procedures specified in this Agreement.
(h) The rights of a Qualified Holder under this
Section 3.1 shall not apply to:
(i) the issuance of any shares of Common Stock
as a stock dividend to holders of Common Stock or upon any
subdivision, stock split, recapitalization or reorganization
combination of shares of Common Stock;
(ii) the issuance of any shares of Common Stock
upon conversion of shares of Series A-1 Convertible Preferred
Stock or Series A-2 Convertible Preferred Stock, or upon the
exercise of options or warrants issued and outstanding as of the
date of this Agreement;
(iii) the issuance or options to purchase
Common Stock to employees, directors or officers of, or
consultants to, the Company or any Company Subsidiary pursuant
to any plan, agreement or arrangement approved by the Board of
Directors or by the appropriate committee of the Board of
Directors;
(iv) the issuance of the Camden Preferred Shares,
and the Camden Registrable Shares upon the conversion thereof;
(v) the issuance and sale of Common Stock (or
options or other rights to purchase Common Stock) in an
acquisition or other combination transaction, which transaction
has been approved by the Board of Directors of the Company.
(vi) the issuance of shares of Common Stock by
the Company in a firm-commitment underwritten public offering
pursuant to an effective registration statement under the
Securities Act.
4. COVENANTS.
---------
4.1 NEGATIVE COVENANTS. So long as a Questar Stockholder
------------------
beneficially owns any Series A-2 Shares, the Company shall not,
directly or indirectly, without prior written consent of the
holders of not less than 50% of the then outstanding Series A-2
Shares:
(a) amend or repeal any provision of, or add any
provision to, the Company's Certificate of Incorporation or
Bylaws (whether by merger, consolidation or otherwise) if such
action would change or adversely affect the rights, preference
or privileges of the Series A-2 Shares;
(b) authorize, designate or issue any class of stock
having any right, preference or priority superior to or on a
parity with the Series A-2 Shares (other than the Camden
Preferred Shares); or
(c) amend the Company's Certificate of Incorporation
(whether by merger, consolidation or otherwise) to authorize any
additional shares of Series A-2 Convertible Preferred Stock.
4.2 AFFIRMATIVE COVENANTS. So long as a Questar
---------------------
Stockholder beneficially owns any Series A-2 Shares, the Company
covenants and agrees that it will perform and observe the
following covenants and provisions and will cause each Company
Subsidiary to perform and observe such of the following
covenants and provisions as are applicable to such Company
Subsidiary:
(a) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge
-------------------------------
all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or business, or
upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims, which, if
unpaid, might become a lien or charge upon any properties of the
Company or a Company Subsidiary, other than those which are
being contested in good faith if the Company or such Company
Subsidiary shall have set aside on its books and shall have
provided, in accordance with generally accepted accounting
principles, adequate reserves with respect thereto; and pay in
conformity with customary trade terms, all lease obligations,
all trade debt, and all other indebtedness incident to its
operations, except such as are being contested in good faith if
the Company shall have set aside on its books and shall have
provided, in accordance with generally accepted accounting
principles, appropriate reserves with respect thereto.
(b) MAINTENANCE OF INSURANCE. Maintain with responsible
------------------------
and reputable insurance companies or associations, insurance
(including D&O and key-man insurance) in such amounts and
covering such risks in amounts and terms consistent with or more
favorable to those obtained by similarly-situated public
companies.
(c) PRESERVATION OF CORPORATE EXISTENCE. Preserve and
-----------------------------------
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify
and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required, unless the
failure to so qualify does not and will not have a material and
adverse effect on the business, operations or financial
condition of the Company; and preserve and maintain all material
licenses and other rights to use patents, processes, licenses,
trademarks, trade names, inventions, intellectual property
rights or copyrights owned or possessed by it as are reasonably
necessary or advisable for it to conduct its business; provided,
however, that the Company may, without the consent of the
Questar Stockholders, dissolve or liquidate any inactive Company
Subsidiary or merge any Company Subsidiary into the Company or
any other Company Subsidiary.
(d) COMPLIANCE WITH LAWS. Comply with all applicable
--------------------
laws, rules, regulations and orders of any governmental
authority, noncompliance with which could materially adversely
affect its business or condition, financial or otherwise, except
non-compliance being contested in good faith through appropriate
proceedings so long as the Company shall have set up and funded
sufficient reserves, if any, required under generally accepted
accounting principles with respect to such items.
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep
---------------------------------------
adequate records and books of account, in which complete entries
will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial
transactions of the Company, and in which, for each fiscal year,
all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection
within its business shall be made.
(f) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve
------------------------------
all of its properties that the Company reasonably deems
necessary or useful in the proper conduct of its business in
good repair, working order and condition, ordinary wear and tear
excepted, and from time to time make all necessary and proper
repairs, renewals, replacements, additions and improvements
thereto; and comply with the provisions of all material leases
to which it is a party or under which it occupies property so as
to prevent any material loss or forfeiture thereof or
thereunder.
4.3 INSPECTION AND OBSERVATION. The Company shall permit
--------------------------
each Questar Stockholder, or any authorized representative
thereof, to visit and inspect the properties of the Company,
including its corporate and financial records, and to discuss
its business and finances with executive officers of the
Company, during normal business hours following reasonable
notice, but no more than once per fiscal quarter for all Questar
Stockholders in the aggregate.
4.4 FINANCIAL STATEMENTS AND OTHER INFORMATION.
------------------------------------------
(a) So long as the Questar Stockholders, in the aggregate,
beneficially own at least 50% of the Series A-2 Shares issued
pursuant to the Stock Purchase Agreement, the Company shall
deliver to each Questar Stockholder:
(i) within 120 days after the end of each fiscal year
of the Company, an audited balance sheet of the Company as at
the end of such year and audited statements of income and of
cash flows of the Company for such year, certified by certified
public accountants of established national reputation selected
by the Company, and prepared in accordance with generally
accepted accounting principles consistently applied; and
(ii) within 60 days after the end of each fiscal
quarter of the Company (other than the fourth quarter), an
unaudited balance sheet of the Company as at the end of such
quarter, and unaudited statements of income and of cash flows of
the Company for such fiscal quarter and for the current fiscal
year to the end of such fiscal quarter.
(iii) within 30 days after the end of each month
(other than the last month of any fiscal quarter), an unaudited
balance sheet of the Company as at the end of such month and
unaudited statements of income and of cash flows of the Company
for such month and for the current fiscal year to the end of
such month, setting forth in comparative form the Company's
projected financial statements for the corresponding periods for
the current fiscal year; accompanied by a certificate of the
chief financial officer of the Company stating that such
statements have been prepared on a basis consistent with the
financial statements delivered pursuant to clause (ii) and with
prior monthly financial statements, but the monthly financial
statements are not required to be GAAP-compliant;
(iv) as soon as available, but in any event prior to
the commencement of each new fiscal year, a business plan and
projected financial statements for such fiscal year;
(v) such other notices, information and data with
respect to the Company as the Company delivers to the holders of
its capital stock at the same time it delivers such items to
such holders; and
(vi) with reasonable promptness, such other
information and data as such Questar Stockholder may from time
to time reasonably request.
(b) The financial statements delivered pursuant to clauses
(ii) and (iii) of paragraph (a) shall be accompanied by a
certificate of the Chief Executive Officer or Chief Financial
Officer that such financial statements fairly present the
financial condition and results of operations of the Company at
the date thereof and for the periods covered thereby, subject to
the assumptions contained therein and the limitations described
in clauses (ii) and (iii), respectively.
4.5 MATERIAL CHANGES AND LITIGATION. The Company shall
-------------------------------
promptly notify the Questar Stockholders of any material adverse
change in the business, prospects, assets or condition,
financial or otherwise, of the Company and of any litigation or
governmental proceeding or investigation brought or, to the best
of the Company's knowledge, threatened against the Company, or
against any officer, director, or key employee of the Company
which, if adversely determined, would have a material adverse
effect on the business, prospects, assets or condition
(financial or otherwise) of the Company.
4.6 BOARD OF DIRECTORS. The Company's Certificate of
------------------
Incorporation shall at all times provide for the indemnification
of the members of the Board of Directors to the fullest extent
provided by the law of the jurisdiction in which the Company is
organized. In the event that the Company or any of its
successors or assigns (i) consolidates with or merges into any
other entity and shall not be the continuing or surviving
corporation in such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to
any entity, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors
and assigns of the Company assume the obligations of the Company
with respect to indemnification of members of the Board of
Directors as contained in the Company's Certificate of
Incorporation.
4.7 RELATED PARTY TRANSACTIONS. The Company shall not
--------------------------
enter into any agreement with any stockholder, officer or
director of the Company, including without limitation any
agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity,
without the consent of at least a majority of the members of the
Board of Directors having no interest in such agreement or
arrangement; provided, however, that this covenant shall not
apply to any transactions between the Company and any Company
Subsidiary.
4.8 RESERVATION OF COMMON STOCK. The Company shall
---------------------------
reserve and maintain a sufficient number of shares of Common
Stock for issuance upon conversion of all of the outstanding
Series A-2 Shares.
4.9 TERMINATION OF COVENANTS. All covenants of the
------------------------
Company contained in this Section 4 shall terminate upon the
earlier of (a) the closing of a Company Sale, and (b) the date
on which the Questar Stockholders, in the aggregate,
beneficially own less than 500,000 Series A-2 Shares.
5. CONFIDENTIALITY. Each Questar Stockholder agrees that he,
---------------
she or it will keep confidential and will not disclose, divulge
or use for any purpose, other than to monitor its investment in
the Company, any Confidential Information, unless such
Confidential Information (a) is known or becomes known to the
public in general (other than as a result of a breach of this
Section 5 by such Questar Stockholder), (b) is or has been
independently developed or conceived by the Questar Stockholder
without use of the Company's Confidential Information or (c) is
or has been made known or disclosed to the Questar Stockholder
by a third party without a breach of any obligation of
confidentiality such third party may have to the Company;
provided, however, that a Questar Stockholder may disclose
Confidential Information (i) to its attorneys, accountants,
consultants, and other professionals to the extent necessary to
obtain their services in connection with monitoring its
investment in the Company, (ii) to any prospective purchaser of
any Series A-2 Shares from such Questar Stockholder as long as
such prospective purchaser agrees to be bound by the provisions
of this Section 5, (iii) to any affiliated party of such Questar
Stockholder, or (iv) as may otherwise be required by law,
provided that, prior to such disclosure, such Questar
Stockholder provides reasonable prior notice to the Company to
afford the Company a reasonable opportunity to contest such
requested disclosure, the Questar Stockholder takes reasonable
steps to minimize the extent of any such required disclosure.
Notwithstanding the foregoing, such information shall not be
deemed confidential for the purpose of enforcing this Agreement.
6. TRANSFERS OF RIGHTS; CALCULATION OF SHARE NUMBERS.
-------------------------------------------------
6.1 TRANSFER OF RIGHTS. This Agreement, and the rights
------------------
and obligations of each Questar Stockholder hereunder, may, upon
prior written notice to the Company, be assigned by such Questar
Stockholder to any Affiliated Party, partner or member of such
Questar Stockholder and such transferee shall be deemed a
"Questar Stockholder" for purposes of this Agreement. This
Agreement, and the rights and obligations of each Questar
Stockholder under Section 2 of this Agreement may be assigned by
such Questar Stockholder to any person or entity to which Series
A-2 Shares are transferred by such Questar Stockholder and such
transferee shall be deemed a "Questar Stockholder" for purposes
of this Agreement; provided, that such assignment of rights
shall be contingent upon the transferee's providing a written
instrument to the Company notifying the Company of such transfer
and assignment and agreeing in writing to be bound by the terms
of this Agreement; provided, however, that such Questar
Stockholder may not assign or transfer its rights under Sections
3 or 4 of this Agreement to any person or entity who is not an
Affiliated Party of such Questar Stockholder without the
Company's prior written consent in each instance.
6.2 CALCULATION OF SHARE NUMBERS. In determining the
----------------------------
number of Series A-2 Shares owned by a Questar Stockholder for
purposes of exercising rights under this Agreement, (a) Series
A-2 Shares owned by a Questar Stockholder shall be deemed to
include Series A-2 Shares which have been converted into Common
Stock so long as such Common Stock is owned by such Questar
Stockholder and (b) all Series A-2 Shares held by Affiliated
Parties of such Questar Stockholder shall be aggregated
together.
7. GENERAL.
-------
7.1 SEVERABILITY. The invalidity or unenforceability of
------------
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
7.2 SPECIFIC PERFORMANCE. In addition to any and all
--------------------
other remedies that may be available at law in the event of any
breach of this Agreement, each Questar Stockholder shall be
entitled to specific performance of the agreements and
obligations of the Company hereunder and to such other
injunctive or other equitable relief as may be granted by a
court of competent jurisdiction.
7.3 GOVERNING LAW. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of New
York (without reference to the conflicts of law provisions
thereof).
7.4 NOTICES. All notices, requests, consents and other
-------
communications under this Agreement shall be in writing and
shall be deemed delivered (i) three business days after being
sent by registered or certified mail, return receipt requested,
postage prepaid or (ii) one business day after being sent via a
reputable nationwide overnight courier service guaranteeing next
business day delivery, in each case to the intended recipient as
set forth below:
If to the Company, at 4 Hardscrabble Heights, XX Xxx 000,
Xxxxxxxx, XX 00000-0000 Attention: President, Facsimile: 1-
000-000-0000, or at such other address as may have been
furnished in writing by the Company to the other parties hereto,
with a copy (which shall not constitute notice) to Vedder,
Price, Xxxxxxx & Kammholz, P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, XX
00000-0000, Attention: Xxxxxx X. Xxxxxx, Esq., Facsimile: (212)
407-7799; or
If to a Questar Stockholder, at its address set forth on Exhibit
A, or at such other address as may have been furnished in
writing by such Questar Stockholder to the other parties hereto,
with a copy (which shall not constitute notice) to Robins,
Kaplan, Xxxxxx & Xxxxxx L.L.P., 0000 XxXxxxx Xxxxx, 000 XxXxxxx
Xxxxxx, Xxxxxxxxxxx, XX 00000, Attention: Xxxxx Xxxxx, Esq.,
Facsimile: (000) 000-0000.
Any party may give any notice, request, consent or other
communication under this Agreement using any other means
(including, without limitation, personal delivery, messenger
service, telecopy or first class mail), but no such notice,
request, consent or other communication shall be deemed to have
been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address
to which notices, requests, consents or other communications
hereunder are to be delivered by giving the other parties notice
in the manner set forth in this Section 7.4.
7.5 COMPLETE AGREEMENT. This Agreement constitutes the
------------------
entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.
7.6 AMENDMENTS AND WAIVERS. This Agreement may be amended
----------------------
or terminated and the observance of any term of this Agreement
may be waived with respect to all parties to this Agreement
(either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the
Company and Questar Stockholders holding at least 50% of the
Questar Registrable Shares. Notwithstanding the foregoing, this
Agreement may not be amended or terminated and the observance of
any term hereunder may not be waived with respect to any Questar
Stockholder without the written consent of such Questar
Stockholder unless such amendment, termination or waiver applies
to all Questar Stockholders in the same fashion (it being agreed
that a waiver of the provisions of Section 3 with respect to a
particular transaction shall be deemed to apply to all Qualified
Holders in the same fashion if such waiver does so by its terms,
notwithstanding the fact that certain Qualified Holders may
nonetheless, by agreement with the Company, purchase securities
in such transaction). The Company shall give prompt written
notice of any amendment or termination hereof or waiver
hereunder to any party hereto that did not consent in writing to
such amendment, termination or waiver. Any amendment,
termination or waiver effected in accordance with this Section
7.6 shall be binding on all parties hereto, even if they do not
execute such consent. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
7.7 PRONOUNS. Whenever the context may require, any
--------
pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa.
7.8 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
----------------------------------
may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which together
shall constitute one and the same document. This Agreement may
be executed by facsimile signatures.
7.9 SECTION HEADINGS AND REFERENCES. The section headings
-------------------------------
are for the convenience of the parties and in no way alter,
modify, amend, limit or restrict the contractual obligations of
the parties. Any reference in this agreement to a particular
section or subsection shall refer to a section or subsection of
this Agreement, unless specified otherwise.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this
Questar Investor Rights Agreement as of the date first above
written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By: /s/ XXXXXX X. XXXXX
-----------------------
Xxxxxx X. Xxxxx, President
QUESTAR STOCKHOLDERS:
/s/ XXXX XXXXX
---------------------------
Xxxx Xxxxx
/s/ XXXXX XXXXXXXX
---------------------------
Xxxxx Xxxxxxxx
/s/ XXXX XXXXX
---------------------------
Xxxx Xxxxx
/s/ XXXXXXX XXXXXXXXX
---------------------------
XxXxxxx Xxxxxxxxx
/s/ XXXXX X. XXXX
---------------------------
Xxxxx X. Xxxx
/s/ XXXX XXXXXXXXX
---------------------------
Xxxx Xxxxxxxxx
/s/ XXXXXXXX XXXXXXX
---------------------------
Xxxxxxxx Xxxxxxx
/s/ XXXXX XXXXX
---------------------------
Xxxxx Xxxxx
EXHIBIT A
SHARES ISSUED TO QUESTAR STOCKHOLDERS
SHAREHOLDER ADDRESS NO. OF SHARES OF
----------- ------- SERIES A-2
CONVERTIBLE
PREFERRED STOCK
----------------
Xxxx Xxxxx 00000 Xxxxxx Blvd 22,222
Xxxxxxxxx, XX 00000
Xxxxx Xxxxxxxx 0000 Xxxxxxx Xxxxxx 0,000
Xxxxxxxxxx, XX 00000
Xxxx Xxxxx 00000 00xx Xxxxxx X 0,000
Xxxxx Xxxxx, XX 00000
XxXxxxx Xxxxxxxxx 0000 000xx Xxxxxx X 00,000
Xxxxxx, XX 00000
Xxxxx X. Xxxx 000 Xxxxxxx Xxxxxx 000,000
Xxxxxx, XX 00000
Xxxx Xxxxxxxxx 0000 Xxxxxx Xxxxx 8,888
Xxxxxxxxxx, XX 00000
Xxxxxxxx Xxxxxxx 00000 Xxxxxxx Xxxx 00,000
Xxxxx Xxxxxx, XX 00000
Xxxxx Xxxxx 0000 Xxxxxx Xxxxxx X 0,000
Xxxxxxxxxxx, XX 00000
