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EXHIBIT 99.5
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
COMFORCE CORPORATION/INFINITY INVESTORS LIMITED
December 26, 1996
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the
"Agreement") has been executed by the undersigned in connection with the sale in
a private placement pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), of certain shares of common stock, par value
$.01 per share, (hereinafter the "Common Shares") of COMFORCE Corporation (CFS),
0000 Xxxxxx Xxxxxx, Xxxx Xxxxxxx, XX 00000, a corporation organized under the
laws of Delaware (hereinafter "SELLER") to Infinity Investors Limited, located
at 00 Xxxxxxxxxx Xxxx, Xxxx Xxxxxxx, a corporation organized under the laws of
Nevis, West Indies (hereinafter "BUYER"). SELLER and BUYER (hereinafter
collectively the "parties") each hereby represents, warrants and agrees as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE AND TERMS
(i) SELLER and BUYER are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission under the Securities Act; and
(ii) BUYER hereby subscribes for Sixty-Five Thousand Seven Hundred
Fourteen (65,714) Common Shares of Seller ("Common Shares"), for an aggregate
purchase price of Five Hundred Thousand Dollars ($500,000) payable in United
States Dollars at the Closing, as defined in Paragraph 8 hereof.
(iii) BUYER shall pay the purchase price by delivering same day funds
in United States Dollars as agreed between the parties, to be delivered to the
order of SELLER upon delivery of the Common Shares.
(iv) In addition, BUYER shall receive a Common Stock Purchase Warrant
(the "Warrant" or "Warrants") entitling BUYER to purchase Thirteen Thousand
Seven Hundred Ninety-Four (13,794) Common Shares at an exercise price of $19
per share. The Warrants shall be exercisable upon issuance to BUYER at Closing
and will expire on December 26, 1999. The Common Shares issuable upon exercise
of the Warrants are hereinafter referred to as the "Warrant Shares."
(v) The Common Shares issued to BUYER may not be sold until the
earlier of (1) five months following the date on which an S-1 registration
statement filed by SELLER registering SELLER'S common stock for resale in an
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December 26, 1996 Page 2
underwritten public offering (an "Underwritten Registration") has been declared
effective by the U.S. Securities and Exchange Commission (such registration
statement effective date referred to herein as the "Effective Date"), or (2)
August 1, 1997; provided, however, that in any event, if the Effective Date has
not occurred by April 30, 1997, then the Common Shares will be tradable on or
after May 1, 1997 without restriction, it being understood that under such
circumstances SELLER will have registered the Common Shares for resale in a
shelf registration not calling for an underwritten offering. This period
during which the Common Shares are restricted from trading is referred to
herein as the "Lock-Up Period."
(vi) In the event the Market Price (defined as the lesser of (a) the
average of the closing bid price of SELLER'S common stock over the ten trading
days immediately preceding the date in question, or (b) the closing bid price
of SELLER'S common stock on the trading day immediately preceding the date in
question, in both instances as reported by Bloomberg, L.P.) is less than Ten
Dollars ($10.00) per share (1) on May 1, 1997, if the Effective Date has not
occurred by April 30, 1997, or alternatively, (2) on the last day of the Lock-
Up Period, then SELLER shall pay to BUYER the difference between the Market
Price and $10.00, multiplied by the number of Common Shares held by BUYER on
such date. SELLER shall have the option to make such payment in cash or in
common stock of SELLER, or in any combination thereof, and shall make such
payment to BUYER within four (4) business days of the applicable date referred
to in this subsection. Any shares of SELLER'S common stock delivered to BUYER
in satisfaction of SELLER'S obligations under this subsection are referred to
herein as "Bonus Shares."
2. BUYER'S REPRESENTATIONS AND AGREEMENTS
BUYER represents, warrants and agrees as follows:
(i) BUYER understands that the Common Shares, the Bonus Shares, the
Warrants, and the Warrant Shares (collectively, the "Securities") have not been
registered under the Securities Act, or any other applicable securities law,
and, accordingly, none of the Securities may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless registered pursuant to,
or in a transaction exempt from registration under, the Securities Act and any
other applicable securities law;
(ii) BUYER is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3), or (7) of Regulation D (an "Accredited Investor") that is
acquiring the Securities either for its own account or as a fiduciary or agent
for
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December 26, 1996 Page 3
one or more institutional accounts as to which it exercises sole discretion,
each of which is an Accredited Investor. BUYER has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks
of an investment in the Securities. BUYER has had a reasonable opportunity to
ask questions of and receive answers from SELLER concerning SELLER and the
offering of the Securities. BUYER is not subscribing for the Securities as a
result of or pursuant to any advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio. BUYER is aware that it (or such
institutional account) may be required to bear the economic risk of an
investment in the Securities for an indefinite period, and it (or such
institutional account) is able to bear such risk for an indefinite period;
(iii) BUYER is acquiring the Securities for its own account or for one
or more institutional accounts as described in Paragraph 2(ii) hereof, in each
case for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution thereof (subject to any requirement of law
that the disposition of its property or the property of such institutional
account or accounts remain within its or their control). BUYER agrees on its
own behalf and on behalf of any such institutional account for which it is
acquiring the Securities to offer, sell or otherwise transfer any Securities
only to Accredited Investors (subject to any requirement of law that the
disposition of its property or the property of such institutional account or
accounts remain within its or their control) in conformity with the Securities
Act and any other applicable securities law and with the restrictions on
transfer set forth on the certificate(s) evidencing the Common Shares and the
Bonus Shares. BUYER acknowledges that each certificate evidencing the Common
Shares and Bonus Shares shall bear a legend substantially to the effect of the
foregoing paragraphs 2(i) and 2(ii) and this paragraph 2(iii). Such legend
shall be in substantially the following form:
"THE COMMON SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS
OF THE COMPANY SET FORTH IN A PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
BETWEEN THE COMPANY AND FAIRWAY CAPITAL LIMITED DATED DECEMBER 26,
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1996. A COPY OF THE PORTION OF THE AFORESAID SUBSCRIPTION AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE
OFFICES."
Upon expiration of the Lock-Up Period, SELLER shall promptly exchange
BUYER'S legended Common Stock certificates, representing Common Shares or Bonus
Shares, for unlegended Common Stock certificates.
(iv) BUYER acknowledges that prior to the expiration of the Lock-Up
Period, SELLER or any transfer agent of SELLER shall register the transfer or
exchange of any of the Securities only upon receipt of the certificate(s)
evidencing such Securities with the transfer notice set forth thereon
appropriately completed and upon receipt in writing from the transferee or the
recipient of such Securities in such transfer or exchange (as the case may be)
of a certificate setting forth the representations in Paragraph 2 hereof and
only upon the availability of an exemption from registration under the
Securities Act;
(v) If BUYER is acquiring any of the Securities as fiduciary or agent
for one or more institutional accounts, BUYER represents that it has sole
investment discretion with respect to each such account and that it has full
power to make the foregoing acknowledgments, representations and agreements on
behalf of each such institutional account;
(vi) BUYER acknowledges that SELLER will rely upon the truth and
accuracy of the foregoing acknowledgments, representations and agreements and
further agrees that if, prior to any closing hereunder, any of such
acknowledgments, representations and agreements made by BUYER are no longer
accurate, BUYER will promptly notify SELLER;
(vii) BUYER has received SELLER'S latest Form 10-K, all Forms 10-Q and
8-K filed thereafter, any amendments thereto, and the Proxy Statement for its
latest fiscal year (collectively, the "Public Documents") and the Private
Placement Memorandum prepared by SELLER;
(viii) This Agreement has been duly authorized, validly executed, and
delivered on behalf of BUYER and is a valid and binding agreement enforceable
in accordance with its terms, subject to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally; and
(ix) BUYER has not engaged and agrees not to engage in any short sales
of the Company's common stock prior to the end of the Lock-Up Period, except
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to the extent that any such short sale is fully covered by shares of common
stock of SELLER owned by BUYER other than the Common Shares or Bonus Shares
purchased pursuant to this Agreement.
3. SELLER'S REPRESENTATIONS AND AGREEMENTS
SELLER represents, warrants and agrees as follows:
(i) SELLER has not conducted any general solicitation or general
advertising (as defined in Regulation D) with respect to any of its securities;
(ii) The Common Shares, the Bonus Shares, and Warrant Shares, when
issued and delivered will be duly and validly authorized and issued, fully-paid
and nonassessable, free and clear of any liens, encumbrances, charges, or
adverse claims of any nature whatsoever, and will not subject the holders
thereof to personal liability by reason of being such holders. There are no
preemptive rights of any shareholder of SELLER with respect to the transactions
contemplated by this Agreement or the Warrant;
(iii) This Agreement and the Warrant have each been duly authorized,
validly executed and delivered on behalf of SELLER and constitute valid and
binding agreements in accordance with their respective terms, subject to
general principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally;
(iv) The execution and delivery of this Agreement and the Warrant and
the consummation of the issuance of the Securities and the transactions
contemplated by this Agreement do not and will not conflict with or result in a
breach by SELLER of any of the terms or provisions of, or constitute a default
under, the articles of incorporation (or charter) or bylaws of SELLER, or any
indenture, mortgage, deed of trust or other material agreement or instrument to
which SELLER is a party or by which it or any of its properties or assets are
bound, or any existing applicable decree, judgment or order of any court,
federal or state regulatory body, administrative agency or other governmental
body having jurisdiction over SELLER or any of its properties or assets;
(v) No authorization, approval or consent of or filing with any
federal, state or local governmental body of the United States is legally
required for the issuance and sale of the Securities as contemplated by this
Agreement;
(vi) Neither the information provided by or on behalf of SELLER to
BUYER and referred to in Section 2(vii) of this Agreement, nor any
representation
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or warranty made by SELLER to BUYER hereunder contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
such statements, in the light of the circumstance under which they are made,
not misleading. All of such information (the "SEC Filings") required to be
filed under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
was timely filed and each such report, at the time filed, complied as to form
with the requirements of the 1934 Act. Since December 31, 1995, there has been
no material adverse development in the business, properties, operations,
financial condition or results of operations of SELLER, except as disclosed in
the documents referred to in the SEC Filings. The audited and unaudited
consolidated balance sheets of the Seller contained in the SEC Filings, and the
related consolidated statements of income, changes in stockholders' equity and
changes in cash flows for the periods then ended (the consolidated balance
sheet of the SELLER as of December 31, 1995 is hereinafter referred to as the
"Balance Sheet"), including footnotes thereto, except as indicated therein,
have been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods indicated. The Balance Sheet
fairly presents the financial condition of SELLER at the date thereof and,
except as indicated therein, reflects all claims against and all debts and
liabilities of SELLER, fixed or contingent, as of the date thereof and the
related statements of income, stockholders' equity and changes in cash flows
fairly present the results of the operations of SELLER and its financial
position for the period indicated. Since December 31, 1995, (the "Balance
Sheet Date") there has been (x) no material adverse change in the assets or
liabilities, or in the business condition, financial or otherwise, or in the
results of operations or prospects, of the SELLER and its subsidiaries, whether
as a result of any legislative or regulatory change, revocation of any license
or rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, act of God, public force or
otherwise, and (y) no change in the assets or liabilities, or in the business
or condition, financial or otherwise, or in results of operations or prospects,
of the SELLER except the ordinary course of business; and, to the best
knowledge, information and belief of the SELLER, no fact or condition exists or
is contemplated or threatened which might cause such a change in the future.
(vii) SELLER will issue one or more certificates representing the
Common Shares in the name of BUYER in such denominations to be specified by
BUYER prior to closing. SELLER will issue one or more certificates
representing the Warrant in the name of BUYER in such denominations to be
specified by BUYER prior to closing. Until the end of the Lock-Up Period and
prior to any exchange for unlegended share certificates, certificates
representing the Common Shares and Bonus Shares will bear the restrictive
legend specified in Section 2(iii) of this Agreement. Upon exercise of the
Warrant in accordance with its terms, SELLER
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will issue one or more certificates representing Warrant Shares in such name or
names and in such denominations specified by BUYER in an election to purchase.
Subject to the provisions of the Registration Rights Agreement, the Warrant
Shares shall not bear any restrictive legends and shall be freely tradable,
subject to compliance with federal and state securities laws. SELLER further
warrants that no instructions other than these instructions and stop transfer
instructions to give effect to Section 2(i) hereof will be given to the
transfer agent and also warrants that the Securities shall otherwise be
transferable on the books and records of SELLER as and to the extent provided
in this Agreement, subject to compliance with federal and state securities
laws. Following registration of the Common Shares, the Bonus Shares and the
Warrant Shares, SELLER agrees to furnish new instructions to the transfer agent
advising them of registration and instructing them to reissue the Common Shares
without a legend and to notify BUYER of the delivery of such instructions.
Nothing in this Section shall affect in any way BUYER'S obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities.
(viii) Except as disclosed in the SEC Filings, there is no action, suit
or proceeding before or by any court or governmental agency or body, domestic
or foreign, now pending or, to the knowledge of SELLER, threatened against or
affecting SELLER, or any of its properties, which could reasonably be expected
to result in any material adverse change in the business, properties, results
of operations, condition (financial or otherwise), or prospects of SELLER, or
which could reasonably be expected to materially and adversely affect the
properties or assets of SELLER or which could reasonably be expected to
interfere with SELLER'S ability to consummate the transactions contemplated by
this Agreement and the Warrant.
(ix) Private Placements. Except as set forth in the SEC Filings,
SELLER has not issued any shares of its Common Stock (or securities convertible
into or exercisable for shares of Common Stock), pursuant to any exemption from
registration under the Securities Act, except for shares of Common Stock issued
as an adjustment to, or in connection with a conversion or exercise of, such
securities, except as set forth or contemplated in the SEC Filings.
(x) Commissions. Except for a fee which is payable by SELLER to
Shoreline Pacific, no other person, firm or corporation will be entitled to
receive any brokerage fee, commission or other similar payment from SELLER in
connection with the consummation of the transactions contemplated hereby and
SELLER shall not make any such payment to any person, firm or corporation other
than as set forth herein.
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(xi) Accountants. For as long as any Common Shares remain subject to
the Lock-Up Period, SELLER shall, until at least the second anniversary of the
date of the Closing (the "Closing Date"), maintain as its independent auditors
an accounting firm that is authorized to practice before the SEC.
(xii) Corporate Existence and Taxes. For as long as any Common Shares
or Bonus Shares remain subject to the Lock-Up Period, SELLER shall, until the
second anniversary of the Closing Date, maintain its corporate existence and
good standing, and shall pay all its taxes when due except for taxes which
SELLER disputes in good faith and for which adequate reserves are established
on SELLER'S books and records.
(xiii) Reserved Shares and Listings. For so long as any Common Shares
or Bonus Shares or Warrants remain outstanding:
(a) SELLER will reserve from its authorized but unissued
Common Shares a sufficient number of Common Shares to permit the
exercise of the then outstanding Warrants; and
(b) SELLER will maintain a listing of its common stock on the
Nasdaq National Stock Market or a national securities exchange.
(xiv) Capitalization. SELLER has an authorized capitalization
consisting of One Hundred Million (100,000,000) shares of common stock, $0.01
par value, of which Ten Thousand (10,000,000) shares issued and outstanding and
Zero (0) shares are held in SELLER'S treasury. All such outstanding shares
have been duly authorized and validly issued and are fully paid and
nonassessable. There are no outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements
of any character providing for the purchase, issuance or sale of any shares of
the capital stock of SELLER, other than as contemplated by this Agreement.
(xv) Subsidiaries. Set forth in Exhibit A attached hereto is a list
of each corporation in which SELLER owns, directly or indirectly, any equity
security (a "subsidiary"). Each subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation (as set forth on Exhibit A), and has all requisite power to own
its property and to carry on its business as now being conducted. Set forth on
Exhibit A is a list of jurisdictions in which each subsidiary is qualified as a
foreign corporation. Such jurisdictions are the only jurisdictions in which
the character or location of the properties owned or leased by each subsidiary,
or the nature of the business conducted by each subsidiary, makes such
qualifications necessary. All of the
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outstanding shares of capital stock of each subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and, except as
set forth in Exhibit A, are owned, of record and beneficially, by SELLER, free
and clear of all liens, encumbrances, restrictions and claims of every kind.
No shares of capital stock of any subsidiary are reserved for issuance and
there are no outstanding options, warrants, rights, subscriptions, claims,
agreements, obligations, convertible or exchangeable securities or other
commitments, contingent or otherwise, relating to the capital stock of any
subsidiary or pursuant to which any subsidiary is or may become obligated to
issue or exchange any shares of capital stock. Neither SELLER nor any
subsidiary owns, directly or indirectly, any capital stock or other equity or
ownership or proprietary interest in any corporation, partnership, association,
trust, joint venture or other entity except as set forth on Exhibit A.
(xvi) Private Offering. Assuming (without any independent
investigation or verification by or on behalf of SELLER) the accuracy of the
representations and warranties of BUYER set forth herein, the offer and sale of
the Common Shares, the Bonus Shares, the Warrants, and the Warrant Shares are
exempt from registration under Section 5 of the Securities Act of 1933, as
amended (the "Securities Act"). Neither SELLER nor any person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of any securities of SELLER under circumstances which would require
the integration of such offering with the offering of the shares under the
Securities Act) which might subject the offering, issuance or sale of the
Common Shares, the Bonus Shares, the Warrants, or the Warrant Shares to the
registration requirements of Section 5 of the Securities Act.
(xvii) Consents and Approvals. Neither SELLER nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, or make any
filing or registration with, any count or other federal, state local, or other
governmental authority or other person in connection with the execution,
delivery and performance by SELLER of the transaction documents except for (i)
the filing of the registration statements contemplated by the Registration
Rights Agreement with the Securities and Exchange Commission, which shall be
filed in the time periods set forth in the Registration Rights Agreement, (ii)
applications for the listing of the Common Shares, the Bonus Shares and the
Warrant Shares with the American Stock Exchange (and with any other national
securities exchange or market on which SELLER'S common stock is then listed),
and (iii) other than, in all other cases, where the failure to obtain such
consent, waiver, authorization or order, or to give or make such notice of
filing, would not materially impair or delay the ability of SELLER to effect
the Closings and to deliver to BUYER the Common Shares, the Bonus Shares, the
Warrants (and, upon
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exercise of the Warrants, the Warrant Shares) in the manner contemplated hereby
and the Registration Rights Agreement free and clear of all liens and
encumbrances of any nature whatsoever.
(xviii) SELLER hereby covenants and agrees to comply with all
terms and conditions of the Registration Rights Agreement which is annexed
hereto.
4. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO SELL THE COMMON
SHARES
The obligation of SELLER to sell the Common Shares hereunder is subject
to the satisfaction or waiver by SELLER, at or before the Closing of the
purchase thereof, of each of the following conditions:
(i) Accuracy of BUYER'S Representations and Warranties. The
representations and warranties of BUYER shall be true and correct in all
material respects as of the date when made and as of the Closing Date, as
though made on and as of such date (except that representations and warranties
that are made as of a specific date need be true in all material respects only
as of such date);
(ii) Performance by BUYER. BUYER shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by BUYER
at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement; and
(iv) Required Approvals. All Required Approvals shall have been
obtained.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER TO PURCHASE THE
COMMON SHARES.
The obligation of BUYER hereunder to acquire and pay for the Common
Shares is subject to the satisfaction or waiver by BUYER, at or before the
closing of the purchase of the Common Shares, of each of the following
conditions:
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(i) Accuracy of SELLER'S Representations and Warranties. The
representations and warranties of SELLER shall be true and correct in all
material respects as of the date when made and as of the closing of the
purchase of the Common Shares as though made on and as of such date;
(ii) Performance by SELLER. SELLER shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by SELLER at or prior to the closing of the purchase of the Common Shares;
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement;
(iv) Adverse Changes. Since the date of the financial statements
included in SELLER'S Quarterly Report on Form 10-Q or Annual Report on Form 10-
K, whichever is more recent, last filed prior to the date of this Agreement, no
event which in the judgment of BUYER had a Material Adverse Effect and no
material adverse change in the financial condition or prospects of SELLER shall
have occurred (for purposes hereof changes in the market price of SELLER'S
common stock may be considered in determining whether there has occurred an
event which has had a Material Adverse Effect or whether a material adverse
change has occurred);
(v) No Suspensions of Trading in Common Stock. The trading in
SELLER'S common stock shall not have been suspended by the Securities and
Exchange Commission or on the American Stock Exchange;
(vi) Listing of Common Stock. SELLER'S common stock shall have at all
times between the date hereof and the closing of the purchase of the Common
Shares been, and on such Closing Date be, listed for trading on the American
Stock Exchange;
(vii) Legal Opinion. SELLER shall have delivered to the escrow agent
on behalf of BUYER the opinion of Doepken Keevican & Xxxxx, counsel to SELLER;
(viii) Required Approvals. All Required Approvals shall have been
obtained;
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(ix) Shares of Common Stock. On or prior to the closing of the
purchase of the Common Shares, SELLER shall have duly reserved for issuance
upon exercise of the Warrants sufficient common shares to meet the obligations
of SELLER under this Agreement;
(x) Delivery of Stock Certificates. SELLER shall have delivered to
the escrow agent on behalf of BUYER or its designee the stock certificate(s)
representing the Common Shares, registered in the name of BUYER, each in form
satisfactory to BUYER;
(xi) Registration Rights Agreement. SELLER shall have executed the
Registration Rights Agreement;
(xii) Warrant. SELLER shall have executed and delivered the Warrants
in accordance with the terms of this Agreement;
(xiii) Company Certificates. BUYER shall have received within three (3)
days of closing a certificate, dated the closing date of the purchase of the
Common Shares, signed by the Secretary or an Assistant Secretary of SELLER and
certifying (a) that attached thereto is a true, correct and complete copy of
(1) SELLER'S Restated Articles of Organization, as amended to the date thereof,
(2) SELLER'S By-Laws, as amended to the date thereof, and (3) resolutions duly
adopted by the Board of Directors of Seller authorizing the execution, delivery
and (where appropriate) filing of the transaction documents and the Certificate
of Designation and the issuance and sale of the Common Shares, the Warrants,
and the Warrant Shares underlying the Warrants, and (b) the incumbency of the
officers executing the transaction documents, the Common Shares and the
Warrants.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER TO CLOSE SECOND
TRANCHE
The obligation of BUYER to close the second tranche (the "Second
Tranche"), as provided in Section 8 hereof, is subject to the satisfaction or
waiver by BUYER, at or before the closing of the second tranche, each of the
following conditions:
(i) First Tranche. The closing of the First Tranche shall have
occurred.
(ii) Accuracy of SELLER'S Representations and Warranties. The
representations and warranties of SELLER contained herein and in the
Registration Rights Agreement shall be true and correct in all material
respects as of the date
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when made and as of the closing of the Second Tranche, as though made on and as
of such date;
(iii) Performance by SELLER. SELLER shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to
be performed, satisfied or complied with by SELLER at or prior to the closing
of the First Tranche or the Second Tranche, as applicable;
(iv) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement relating to the issuance of any
of the Common Shares or exercise of any of the Warrants;
(v) Adverse Changes. Since the date of the financial statements
included in SELLER'S last filed Quarterly Report on Form 10-Q or Annual Report
on Form 10-K, whichever is more recent, last filed prior to the date of this
Agreement, no event which in the judgment of BUYER had a Material Adverse
Effect shall have occurred, nor shall there have occurred in the judgment of
BUYER a material adverse change in the financial conditions or prospects of
SELLER, which is not disclosed in the SEC Filings (for the purposes hereof,
changes in the market price of SELLER'S common stock may be considered in
determining whether there has occurred an event which has had a Material
Adverse Effect or whether a material adverse change has occurred);
(vi) Litigation. No material litigation shall have been instituted or
threatened against SELLER;
(vii) No Suspensions of Trading in Common Stock. The trading in
SELLER'S common stock shall not have been suspended by the Securities and
Exchange Commission or the American Stock Exchange (except for any suspension
of trading of limited duration solely to permit dissemination of material
information regarding SELLER);
(viii) Listing of Common Stock. SELLER'S common stock shall have been
at all times between the closing of the First Tranche and the closing of the
Second Tranche, and on such closing dates be, listed for trading on the
American Stock Exchange.
14
Private Sec. Sub. Agreement: COMFORCE Corporation/[BUYER]
December 26, 1996 Page 14
7. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
Shoreline Pacific, the Institutional Division of Financial West Group
("Shoreline Pacific"), shall be deemed a third party beneficiary of SELLER'S
agreements and representations set forth in this Agreement, entitled to enforce
the terms thereof, and to indemnification for any damages resulting to
Shoreline Pacific from any actual or threatened breach thereof by SELLER, both
in Shoreline Pacific's personal capacity and, should Shoreline Pacific so
elect, on behalf of BUYER.
8. CLOSING. Subject to the Conditions of Closing set forth below, the
investment of HW Partners, L.P. (which includes BUYER'S investment hereunder,
together with the $3,000,000 investment of Infinity Investors Limited on like
terms) shall take place in two tranches of $3,500,000 each. The first and
second tranches shall close on or about December 26, 1996, or at such other
time as is mutually agreed to by the parties. The appropriate Common Share
certificates and Warrants shall be delivered to BUYER and the funds therefor
shall be delivered to SELLER at each Closing.
9. CONDITIONS TO CLOSING
(i) BUYER understands that SELLER'S obligation to sell the Common
Shares is conditioned upon delivery as agreed between BUYER and SELLER by BUYER
of the amount set forth in Paragraph 1 hereof.
(ii) SELLER understands that BUYER'S obligation to purchase the Common
Shares is conditioned upon delivery of certificate(s) representing Common
Shares as described in Paragraph 1(ii) hereto and provision of an opinion of
counsel confirming the matters set out in Section 3(ii), (iii), (iv) and (v)
above.
(iii) SELLER understands that BUYER'S obligation to purchase the Common
Shares is conditioned upon SELLER and BUYER entering into a Registration Rights
Agreement substantially in the form of Annex I hereto.
(iv) SELLER understands that BUYER'S obligation to close the second
tranche of $3,500,000 is expressly conditioned on there not having occurred any
material adverse change in the business results of operation, condition
(financial or otherwise), prospects, properties or assets of SELLER, or any
material decline in the market price of SELLER'S Common Stock after the date of
this Agreement.
10. GOVERNING LAW; INTERPRETATION. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without giving
effect to rules governing the conflict of laws. Facsimile signatures of this
agreement shall be binding on all parties hereto.
15
Private Sec. Sub. Agreement: COMFORCE Corporation/[BUYER]
December 26, 1996 Page 15
11. AMENDMENT. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any
such amendment, waiver, discharge or termination is sought.
12. NOTICES, ETC. Any notice, demand or request required or permitted to be
given by either SELLER or BUYER pursuant to the terms of this Agreement shall
be in writing and shall be deemed given when delivered personally or by
facsimile, with a hard copy to follow by two (2) day courier addressed to the
parties at the addresses of the parties set forth at the beginning of this
Agreement or such other address as a party may request by notifying the other
in writing.
13. CONFIDENTIALITY. BUYER will keep confidential all non-public
information regarding SELLER that they received from SELLER unless disclosure
of such information is compelled by a court or other administrative body or
otherwise necessary, in the opinion of BUYER'S counsel, to comply with
applicable law. Neither party shall disclosure any information regarding any
of the transactions contemplated hereby without prior consent of the other
party, unless such disclosure is required in filings made with the SEC.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. A facsimile transmission of a signature hereto shall be valid as
if an original and binding on all parties.
15. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
16. PARTIES IN INTEREST. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto, other than by operation of law.
This Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
16
Private Sec. Sub. Agreement: COMFORCE Corporation/[BUYER]
December 26, 1996 Page 16
IN WITNESS WHEREOF, this Agreement was duly executed and is made effective as
of the 26th day of December, 1996.
Official Signatory of BUYER:
Fairway Capital Limited
BY: /s/ Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx
Director
Official Signatory of SELLER:
COMFORCE CORPORATION
BY: /s/ Xxxxxx Xxxxxx
---------------------------
Xxxxxx Xxxxxx
Assistant Secretary
17
ANNEX I
ANNEX I
TO
SUBSCRIPTION
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 26, 1996 (this
"Agreement"), is made by and among COMFORCE Corporation a Delaware corporation
(the "Company"), and the person named on the signature page hereto (the
"Initial Investor").
W I T N E S S E T H :
WHEREAS, in connection with the Private Securities Subscription
Agreement, dated as of December 26, 1996, between the Initial Investor and the
Company (the "Subscription Agreement"), the Company has agreed, upon the terms
and subject to the conditions of the Subscription Agreement, to issue and sell
to the Initial Investor shares of Common Stock (the "Common Stock") and
Warrants to purchase shares of Common Stock (such shares referred to as
"Warrant Shares"). In addition, the Initial Investor may receive additional
Common Stock of the Company (the "Bonus Shares") pursuant to the provisions of
the Subscription Agreement between the parties thereto, to which this
Registration Rights Agreement is annexed. The Common Stock, the Warrant Shares
and the Bonus Shares are sometimes collectively referred to herein as
"Shares"); and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
18
(i) "Investor" means the Initial Investor and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof; provided, however, that if the Company has
requested acceleration of any Registration Statement to register the Shares
held by such Investor, then the term "Investor" shall not include any
subsequent transferee of such Investor. Notwithstanding such proviso, the
Investor shall not be prohibited from transferring a beneficial interest in the
Shares so long as the same is permitted under applicable securities laws, and
the Company shall do all things necessary or appropriate to give effect to any
such transfer so as to facilitate the subsequent resale of the Shares pursuant
to a Registration Statement, all as contemplated in this Agreement.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act on such appropriate
registration form promulgated by the Commission as shall be selected by the
Company, and when requested by the Initial Investor or any Investor pursuant to
Section 2(b) hereof, shall (A) be reasonably acceptable to the holders of a
majority of the Registrable Securities to which such registration relates, and
(B) shall permit the disposition of Registrable Securities in accordance with
the intended method or methods specified in the Investor's request for such
registration, and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
("SEC").
(iii) "Registrable Securities" means the Shares.
(iv) "Registration Statement" means a registration statement
under the Securities Act registering securities of the Company.
(v) "Rule 144" means Rule 144 promulgated under the Securities
Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(a) REGISTRATION RIGHTS. The Company shall cause the Registrable
Securities to be included for registration for resale under the Securities Act
on Form S-1 (or on Forms S-2 or S-3 or any other form appropriately selected by
the Company for the resale registration of securities other than a registration
statement on Forms S-4 or S-8). Company shall keep such Registration Statement
and the Prospectus used in connection
19
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 3
therewith effective for a period of two years thereafter. The Company shall be
permitted to replace any Registration Statement with another (as, for example,
by replacing a Registration Statement on Form S-1 with one on Form S-3) so long
the Shares registered thereby are continuously registered for resale.
(b) DEMAND REGISTRATION. If, at any time after 90 days after the
last Closing, the Company has failed to cause to be declared effective or
failed to keep effective a Registration Statement covering the Shares as
described in Paragraph 2(a) above, and any Investor holding a majority of the
Registrable Securities shall notify the Company in writing that it intends to
offer or cause to be offered for public sale Registrable Securities held by
such Investor, the Company shall cause such of the Registrable Securities as
may be requested by any Investor to be registered, on one occasion only, under
the Securities Act and applicable state laws as expeditiously as possible.
Once the right for registration of any Registrable Securities under this
Section 2(b) has been exercised by any Investor, the Company shall prepare and
file a Registration Statement covering such Registrable Securities with the SEC
within ten (10) days of the exercise of such registration right and such
Registration Statement shall be kept effective for a period of no less than two
years thereafter.
(c) PAYMENTS BY THE COMPANY. If a Registration Statement covering
the Registrable Securities is not effective by April 30, 1997 (the "Required
Date"), then the Company will make payments to each holder of Registrable
Securities (each, a "Holder") in such amounts and at such times as shall be
determined pursuant to this Section 2(c). The amount to be paid by the Company
to the Holders shall be equal to: (1) 1/2% per month in the event the
Registration Statement is not effective by the Required Date; (2) 1% per month
in the event the Registration Statement is not effective within 30 days after
the Required Date; and (3) 2% per month in the event the Registration Statement
is not effective within 60 days after the Required Date, in each case of the
aggregate subscription price paid by the Initial Investor for the Shares
pursuant to the Subscription Agreement (the "Periodic Amount"). In the event
the Company receives a "no comment letter" from the SEC with regard to the S-1
filing, then the Company shall cause the S-1 to be effective within 5 business
days of the no comment letter; and if it is not so effective, then the monthly
penalties noted above will apply beginning on the 6th day following the date of
the no comment letter. The Periodic Amount shall be divided among all the
Holders in the same proportion as each Holder's Registrable Securities bears to
the total of the outstanding Registrable Securities. The Periodic Amount shall
be paid by the Company within five business days after each Computation Date
and shall be payable in cash; provided, however, that the Company may elect in
lieu of payment of any Periodic Amount in cash to deliver to the Initial
Investor shares of Common Stock having an Aggregate Market Value equal to the
amount of the Periodic Amount if, but only if, such shares are freely tradable
by the Initial Investor without any restriction under the Securities Act or any
state securities or "blue sky" law.
20
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 4
As used in this Section 2(c), the following terms shall have the
following meanings:
"Aggregate Market Value" of any shares of Common Stock as of any
Computation Date means the product obtained by multiplying (a) such number of
shares of Common Stock times (b) the Average Market Price of the Common Stock
for the Measurement Period for such Computation Date.
"Average Market Price" of any security for any period shall be computed
as the average closing bid price of the shares over the five trading-day period
ending on the relevant Computation Date, as reported by Bloomberg, L.P.
"Computation Date" means the date which is 60 days after the exercise of
demand registration rights under Section 2(b) and, if the Registration
Statement required to be filed by the Company pursuant to Section 2(b) has not
theretofore been declared effective by the SEC, each date which is 30 days
after a Computation Date and, if the Registration Statement required to be
filed by the Company pursuant to Section 2(b) is not declared effective by the
SEC within 60 days after the exercise of demand registration rights under
Section 2(b), the date on which such Registration Statement is declared
effective.
"Measurement Period" means the period of ten consecutive trading days
for the Common Stock ending on (or on the last trading day preceding) each
Computation Date.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event
later than 10 days) after a request in accordance with Section 2(b) hereof a
Registration Statement or Statements with respect to all Registrable Securities
to be included therein, and thereafter use its best efforts to cause the
Registration Statement to become effective as soon as reasonably possible after
such filing. If such Registration Statement is filed pursuant to Rule 415, the
Company shall keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is two years after the date such Registration
Statement is first ordered effective by the SEC. In any case, the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) filed by the Company shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that,
subject to the conditions set forth in Section 4(a) below, each Investor may
notify the Company in writing that it wishes to
21
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 5
exclude all or a portion of its Registrable Securities from such Registration
Statement; provided further, however, that if at any time the Investors shall
be entitled to sell all Registrable Securities held by them pursuant to Rule
144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration and without
imposing restrictions arising under the federal securities laws on the
purchases thereof in a period of two consecutive months, then the Company
shall, so long as it meets the current public information requirements of Rule
144, thereafter no longer be required to maintain the registration of
Registrable Securities pursuant to this Agreement;
(b) prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times until such
date as is two years after the date such Registration Statement is first
ordered effective by the SEC, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until the earlier of (i) such two-year period or (ii) such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement, such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times until such date as is the earlier of three years after
the date such Registration Statement is first ordered effective by the SEC or
is three years after the Initial Investor acquired the Shares and (iv) take all
other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (I)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (II) subject itself to general
taxation in any such jurisdiction, (III) file a general consent to service of
process in any
22
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 6
such jurisdiction, (IV) provide any undertakings that cause more than nominal
expense or burden to the Company or (V) make any change in its charter or by-
laws, which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders;
(e) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold pursuant to
such registration of the happening of any event of which the Company has
knowledge, 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 a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver a number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request;
(f) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold pursuant to
such registration (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the SEC of any stop order or other suspension
of effectiveness of the Registration Statement at the earliest possible time;
(g) permit a single firm of counsel designated as selling
stockholders' counsel (such counsel to be retained at such Investor(s)'
expense) by the Investors who hold a majority in interest of the Registrable
Securities being sold pursuant to such registration to review the Registration
Statement and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and shall not file any document in a
form to which such counsel reasonably objects;
provided that counsel shall expeditiously complete its review so that
the registration can be timely effected;
(h) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of Rule 158 under the Securities Act) covering a twelve-month period beginning
not later than the first day of the Company's fiscal quarter next following the
date of the Registration Statement;
(i) make its officers available from time to time to respond to
inquires of Investors and make available to any Investor, all pertinent
financial and other records, pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably necessary to
enable such Investor to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
such Investor may reasonably request for purposes of such due diligence;
provided, however, that such Investor shall not make any
23
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 7
disclosure (except to an Investor who has previously entered into a written
confidentiality agreement with the Company) of any Record or other information
which the Company determines in good faith to be confidential and of which
determination the Investor is so notified unless (i) in the event an Investor
believes that disclosure of Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, then it shall notify
the Company in writing of its belief and the basis therefor and shall provide
the Company with reasonable opportunity to correct the misstatement or omission
or provide to Investor reasonably satisfactory evidence that such a correction
is not required (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. Such Investor shall, upon completing such due diligence,
destroy or return to the Company all such Records and all copies or
distillation thereof and all notes or other stored information containing
information derived in whole or in part from such Records; provided further
that such Investor may retain one copy of the Records in its office of its
legal counsel solely for the purpose of preserving the record of the materials
received by it and using the same to defend against any claims or actions
threatened or instituted involving the Records and such Records may not be made
available to any person for any other purpose at any time hereafter. The
Company shall not be required to disclose any confidential information in such
Records to any Investor until and unless such Investor shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this
Section 3(i). Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. The Company shall hold in confidence and shall not make
any disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other order from a court or governmental body of competent jurisdiction or (iv)
such information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information;
24
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 8
(j) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange on
which similar securities issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange or (ii) secure designation of all the Registrable Securities
covered by the Registration Statement as a National Association of Securities
Dealers Automated Quotations System ("NASDAQ") "national market system
security" within the meaning of Rule 11Aa2-1 of the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the quotation of the
Registrable Securities on the NASDAQ National Market System or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii), the Company
is unsuccessful in satisfying the preceding clause (i) or (ii), to secure
listing on a national securities exchange or NASDAQ authorization and quotation
for such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities;
(k) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(l) cooperate with the Investors who hold Registrable Securities
being sold to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to the denominations or
amounts as the case may be, and registered in such names as the Investors may
reasonably request; and, within five business days after a Registration
Statement which includes Registrable Securities is ordered effective by the
SEC, the Company shall deliver, and shall cause legal counsel selected by the
Company to deliver, to the transfer agent for the Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) instructions to the transfer agent to issue new stock
certificates without a legend and an opinion of such counsel that the shares
have been registered; and
(m) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant
to the Registration Statement;
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable
25
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 9
Securities held by it as shall be reasonably required to effect the
registration of the Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least fifteen (15) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. If within five
(5) business days prior to the filing date the Company has not received the
Requested Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), or that the Board of Directors of the Company has determined, in its good
faith reasonable judgment, that the disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
would materially interfere with, or require the premature disclosure of, any
financing, acquisition or reorganization involving the Company or any of its
subsidiaries or otherwise would require premature disclosure or any other
material nonpublic information as to which the Company has a bona fide business
purpose for maintaining its confidentiality, such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
3(e) or 3(f), or upon receipt of written authorization from the Company and ,
if so directed by the Company, such Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice; and
5. EXPENSES OF REGISTRATION. All expenses (other than commissions
and other fees and expenses of investment bankers and other than brokerage
commissions) incurred in connection with registrations, filings or
qualifications pursuant to Section 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investors shall bear the fees and
26
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 10
out-of-pocket expenses of the one legal counsel selected by the Investors
pursuant to Section 3(h) hereof.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against any
losses, claims, damages, expenses or liabilities (joint or several)
(collectively "Claims") to which any of them become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act or any
state securities law or any rule or regulation (the matters in the foregoing
clauses (i) through (iv) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6 (d) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) (I) shall not apply to a Claim arising out of
or based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; (II) with respect to any preliminary
prospectus shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject
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COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 11
thereof (or to the benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; and (III) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Indemnified Persons and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, any other stockholder
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such stockholder within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor,
which consent shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Section 6(b) for only that amount
of a Claim as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from selling
brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information
28
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 12
such persons so furnished in writing by such persons expressly for inclusion in
the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof and this indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel for the
Investors; such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification provided for
herein is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that (a) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (b) no seller of Registrable Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (c) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale
of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 or any other similar rule or regulation
of the SEC that
29
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 13
may during the period beginning two years after and ending three years from the
earliest conversion date allowed hereunder, permit the Investors to sell
securities of the Company to the public without registration, until such time
as the Investors have sold all the Registrable Securities pursuant to a
Registration Statement or Rule 144, the Company agrees to during such period:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC 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 each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company.
10. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
Shoreline Pacific, the Institutional Division of Financial West Group
("Shoreline Pacific"), shall be deemed a third party beneficiary of the
Company's agreements and representations set forth in this Agreement, entitled
to enforce the terms thereof, and to indemnification for any damages resulting
to Shoreline Pacific from any actual or threatened breach thereof by the
Company, both in Shoreline Pacific's personal capacity and, should Shoreline
Pacific so elect, on behalf of the Investor.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
30
COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 14
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when delivered by
facsimile transmission, personally delivered or when sent by registered mail,
return receipt requested, addressed (i) if to the Company, at COMFORCE
Corporation, 0000 Xxxxxx Xxxxxx, Xxxx Xxxxxxx, XX 00000 Attention: Xxxx X.
Xxxxxx, Chief Financial Officer, (ii) if to the Initial Investor, at the
address set forth under its name in the Subscription Agreement and (iii) if to
any other Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 12(b), and shall be effective,
when delivered by facsimile transmission, upon confirmation thereof; when
personally delivered, upon receipt; and when sent by certified mail, four
business days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to the agreements
made and to be performed entirely within such state, without giving effect to
rules governing the conflict of laws. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.
(e) This Agreement and the Subscription Agreement to which this
Agreement is annexed constitute the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no other restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in the Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
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COMFORCE Corporation/Fairway Capital Ltd. December 26, 1996
Registration Rights Agreement
Page 15
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
COMFORCE CORPORATION
By /s/ Xxxxxx Xxxxxx
----------------------------
Xxxxxx Xxxxxx
Assistant Secretary
FAIRWAY CAPITAL LIMITED
By /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
Assistant Secretary
