INVESTOR RIGHTS AGREEMENT
-------------------------
Investor Rights Agreement, dated as of August 13, 2007 (this
"Agreement"), by and between Delta Financial Corporation, a Delaware corporation
(the "Company"), and AG Delta Holdings, LLC, a Delaware limited liability
company (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company is issuing (the "Issuance") warrants (the
"Warrants") to purchase up to Ten Million (10,000,000) shares of the Company's
common stock, par value $0.01 per share (the "Common Stock") (each such share
underlying a Warrant, a "Warrant Share"), as set forth in a Warrant Acquisition
Agreement entered into by and between the Company and the Purchaser (the
"Warrant Acquisition Agreement");
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Warrant Acquisition Agreement that the Company
provide for the rights set forth in this Agreement; and
WHEREAS, certain terms used in this Agreement are defined in Section 6
hereof.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound, the parties hereto hereby agree as
follows:
1. REGISTRATION RIGHTS.
1.1 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 1.1, if the
Company shall receive at any time a written request from the Holders (the
"Initiating Holders") relating to Registrable Securities with an aggregate price
(calculated based upon the Market Price of the Registrable Securities on the
date of such request) to the public of no less than $5,000,000 that the Company
file a registration statement under the Securities Act covering such Registrable
Securities, then the Company shall, within five days of the receipt thereof,
give written notice of such request to all Holders, and subject to the
limitations of this Section 1.1, use its best efforts to effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities that the Holders request to be registered in a written request
received by the Company within 20 days of the mailing of the Company's notice
pursuant to this Section 1.1(a).
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.1 and the Company shall include such information in the written
notice referred to in this Section 1.1(a). In such event, the right of any
Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a majority
in interest of the Initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company
(which underwriter or underwriters shall be reasonably acceptable to a majority
in interest of the Initiating Holders). Notwithstanding any other provision of
this Section 1.1, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities underwritten (including
Registrable Securities), then the Company shall so advise all Holders whose
Registrable Securities would otherwise be underwritten pursuant hereto, and the
number of shares that may be included in the underwriting shall be allocated to
such Holders on a pro rata basis (as nearly as practicable) based on the number
of Registrable Securities held by all such Holders (including the Initiating
Holders), PROVIDED that no Registrable Securities shall be excluded unless and
until all other securities of the Company have been excluded. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(c) In addition, the Company shall not be required to effect a
registration pursuant to this Section 1.1:
(i) More than one (1) time;
(ii) during the period starting with the date of the
filing of, and ending on a date 180 days following the effective date
of, a Company-initiated registration subject to Section 1.3, PROVIDED
that the Company is actively employing in good faith all reasonable
best efforts to cause such registration statement to become effective;
(iii) if the Initiating Holders propose to dispose of
Registrable Securities that may be registered on Form S-3 pursuant to
Section 1.2; or
(iv) if the Company shall furnish to Holders
requesting a registration pursuant to this Section 1.1, a certificate
signed by the Company's Chief Executive Officer or Chairman of the
Board of Directors stating that in the good faith judgment of the Board
of Directors of the Company, it would (i) be materially detrimental to
the Company and its shareholders for such registration to be effected
at such time, (ii) require the disclosure of a material transaction or
other matter and such disclosure would be materially disadvantageous to
the Company, or (iii) adversely effect a material financing,
acquisition, disposition of assets or stock, merger or other comparable
transaction; in which event the Company shall have the right to defer
such filing for a period of not more than 60 days after receipt of the
request of the Initiating Holders, PROVIDED that such right to delay a
request shall be exercised by the Company not more than once in any
12-month period and PROVIDED FURTHER, that the Company shall not
register any other of its shares during such twelve 12-month period.
(d) No registration initiated by the request of Holders
hereunder will count as a registration under Section 1.1 and Section 1.2 in the
event that such registration is withdrawn
2
by the Holders because of material adverse information relating to the business,
operations, assets, condition (financial or other) or prospects of the Company,
(ii) if the effect of any cut-back pursuant to Section 1.1(b) is to reduce the
number of shares requested by the Holders to be included in the registration
below 90%, or (iii) if the related registration statement filed with the SEC is
not declared effective or is declared effective but is subject to a stop order
or is withdrawn by the Company before at least 90% of the securities so
registered are sold.
1.2 FORM S-3 REGISTRATION. If the Company is eligible to use
Form S-3 under the Securities Act (or any similar successor form) and shall
receive from a Holder (collectively, the "S-3 Initiating Holders") a written
request or requests that the Company effect a registration on such Form S-3,
including without limitation, pursuant to Rule 415 of the Securities Act with
respect to all or part of the Registrable Securities owned by the S-3 Initiating
Holders (PROVIDED, THAT the S-3 Initiating Holders registering Registrable
Securities in such registration (together with all other Holders to be included
in such registration) propose to sell their Registrable Securities at an
aggregate price (calculated based upon the Market Price of the Registrable
Securities on the date of such request) to the public of no less than
$5,000,000), the Company shall (i) promptly give written notice of the proposed
registration to all other Holders; and (ii) as soon as practicable, use
reasonable best efforts to file and effect such registration and all such
qualifications and compliances as would permit or facilitate the sale and
distribution of all or such portion of the Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder in the group of Holders joining in such request
as is specified in a written request given within ten (10) days after the
Holder's receipt of such written notice from the Company. No registration
requested by any S-3 Initiating Holders pursuant to this Section 1.2 shall be
deemed a registration pursuant to Section 1.1.
1.3 PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a registration pursuant to Section 1.2 or a registration on Form S-4 or S-8 or
any successor or similar forms) and the registration form to be used may be used
for the registration of Registrable Securities, whether or not for sale for its
own account, the Company will give prompt written notice (but in no event less
than fifteen (15) days before the anticipated filing date) to all Holders, and
such notice shall describe the proposed registration and distribution and offer
to all Holders the opportunity to register the number of Registrable Securities
as each such Holder may request. The Company will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within five (5) business days after the
Holders' receipt of the Company's notice (a "Piggyback Registration").
(b) REASONABLE EFFORTS. The Company shall use all reasonable
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be
included in a Piggyback Registration to be included on the same terms and
conditions as any similar securities of the Company or any other security holder
included therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof.
3
(c) WITHDRAWAL. Any Holder shall have the right to withdraw
its request for inclusion of its Registrable Securities in any Registration
Statement pursuant to this Section 1.3 by giving written notice to the Company
of its request to withdraw; PROVIDED, that in the event of such withdrawal
(other than pursuant to Section 1.3(e) hereof), the Company shall not be
required to reimburse such Holder for the fees and expenses referred to in
Section 1.7 hereof incurred by or on behalf of such Holder prior to such
withdrawal, unless such withdrawal was due to a material adverse change to the
Company. The Company may withdraw a Piggyback Registration at any time prior to
the time it becomes effective.
(d) PRIORITY IN REGISTRATIONS. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of Registrable Securities requested to be included on a secondary basis
in such registration exceeds the number which can be sold in such offering
without materially and adversely affecting the marketability of such primary or
secondary offering (the "Company Offering Quantity"), then the Company will
include in such registration securities in the following priority:
(i) First, the Company will include the securities
the Company proposes to sell.
(ii) Second, the Company will include all Registrable
Securities requested to be included by any Holder, and if the number of
such Holders' securities requested to be included exceeds the Company
Offering Quantity, then the Company shall include only each such
requesting Holders' pro rata share of the shares available for
registration by the Purchaser, based on the amount of securities held
by such Holder, on an as converted basis.
(iii) Third, the Company will include other
securities of the Company proposed to be included in the registration.
(e) CUTBACK. If, as a result of the pro ration provisions of
this Section 1.3, any Holder shall not be entitled to include all Registrable
Securities in a Piggyback Registration that such Holders have requested to be
included, such Holder may elect to withdraw his request to include Registrable
Securities in such registration but the Company shall be required to reimburse
such Holder for the fees and expenses referred to in Section 1.7 hereof incurred
by such Holder prior to such withdrawal.
(f) LIMITATION. The Company shall not be required to effect a
registration pursuant to this Section 1.3 if the registration is filed after the
date hereof (the "Closing Date") to register the shares of Common Stock issuable
upon the exercise of convertible notes of the Company to be initially issued to
Pabrai Investment Fund 3 Ltd., Pabrai Investment Fund II, L.P., Pabrai
Investment Fund IV, L.P., Xxxxx Street, LLC, and The Dakshana Foundation
(collectively, the "PIF Investors").
4
1.4 HOLDBACK AGREEMENTS.
(a) To the extent not inconsistent with applicable law, in
connection with a public offering of securities of the Company, upon the request
of the Company or the underwriter, in the case of an underwritten public
offering, the underwriters managing such underwritten offering of the Company's
securities, each Holder who owns at least 5% of the outstanding capital stock of
the Company on an "as-converted" basis or is an officer or director of the
Company will not effect any public sale or distribution (other than those
included in the registration) of any securities of the Company, or any
securities, options or rights convertible into or exchangeable or exercisable
for such securities during the seven (7) days prior to and the ninety (90) day
period beginning on such effective date, unless (in the case of an underwritten
public offering) the managing underwriters otherwise agree to a shorter period
of time. Notwithstanding the foregoing, no Holder shall be required to enter
into any such "lock up" agreement unless and until all of the Company's
executive officers and directors execute substantially similar "lock up"
agreements. Neither the Company nor the underwriter shall amend, terminate or
waive a "lock up" agreement unless each "lock up" agreement with a Holder is
also amended or waived in a similar manner or terminated, as the case may be.
(b) The Company shall have the right at any time to require
that the Holders suspend further open market offers and sales of Registrable
Securities pursuant to a Registration Statement filed hereunder whenever in the
reasonable judgment of the Company after consultation with counsel there is or
may be in existence a Changing Event (as defined in Section 1.5(e)). The Company
will give the Holders notice of any such suspension and will use all reasonable
best efforts to minimize the length of such suspension.
1.5 REGISTRATION PROCEDURES. Whenever any Registrable
Securities are required to be registered pursuant to this Agreement, the Company
will use reasonable best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended methods of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the SEC on any form, if not so
otherwise provided for, for which the Company qualifies, as soon as practicable
after the end of the period within which requests for registration may be given
to the Company, a Registration Statement with respect to the offer and sale of
such Registrable Securities and thereafter use reasonable best efforts to cause
such Registration Statement to become effective and remain effective until the
completion of the distribution contemplated thereby or the required time period
under this Agreement, whichever is shorter (and before filing such Registration
Statement, the Company will furnish to the counsel selected by the Holders of a
majority of the Registrable Securities initiating such Registration Statement
copies of all such documents proposed to be filed); PROVIDED, HOWEVER, that the
Company may postpone for not more than sixty (60) calendar days the filing or
effectiveness of any registration statement required pursuant to this Agreement
if the Board of Directors, in its good faith judgment, determines that such
registration could reasonably be expected to have a material adverse effect on
the Company and its shareholders for any reason including, but not limited to,
any proposal or plan by the Company to engage in any
5
acquisition or sale of assets (other than in the ordinary course of business) or
any merger, consolidation, tender offer or similar transaction then under
consideration (in which event, the applicable Holders shall be entitled to
withdraw such request, and if such request is withdrawn such registration will
not count as a registration statement pursuant to this Agreement) by delivering
written notice to the applicable Holders who requested inclusion of Registrable
Securities in such Registration Statement of its determination to postpone such
Registration Statement; PROVIDED, FURTHER, THAT (i) the Company shall not
disclose any information that could be deemed material non-public information to
any Holder included in a Registration Statement that is subject to such
postponement, (ii) in no event may the Company postpone a filing requested
hereunder more than once in any twelve (12) month period; PROVIDED, THAT any two
postponements must be at least three (3) months apart; PROVIDED, FURTHER, THAT
the Company shall delay the effectiveness of any such registration statement if
the SEC rules and regulations prohibit the Company from declaring a Registration
Statement effective because its financial statements are stale at a time when
its fiscal year has ended or it has made an acquisition reportable under Item
1.01 of Form 8-K or any other similar situation until the earliest time in which
the SEC would allow the Company to declare a Registration Statement effective
(provided that the Company shall use its reasonable best efforts to cure any
such situation as soon as possible so that the Registration Statement can be
made effective at the earliest possible time);
(b) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
a period provided for in the applicable Section above, or if not so provided,
for a period of twelve (12) months (for a registration pursuant to Rule 415 of
the Securities Act) or, if such Registration Statement relates to an
underwritten offering, such period as in the opinion of counsel for the
underwriters a prospectus is required by law to be delivered in connection with
sales of Registrable Securities by an underwriter or dealer or such shorter
period as will terminate when all of the securities covered by such Registration
Statement have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement (but in any event not before the expiration of any longer period
required under the Securities Act), and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such Registration Statement. In the event the
Company shall give any notice pursuant to Section 1.4(b), the applicable time
period mentioned in this Section 1.5(b) during which a Registration Statement is
to remain effective shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
1.4(b) to and including the date when each seller of a Registrable Security
covered by such Registration Statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 1.5(e);
(c) furnish to each seller of Registrable Securities, prior to
filing a Registration Statement, such number of copies of such Registration
Statement, each amendment and supplement thereto, any preliminary prospectus,
any issuer free writing prospectus and the prospectus included in such
Registration Statement (each in conformity with the requirements of
6
the Securities Act) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions as any seller reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller and to
keep each such registration or qualification (or exemption therefrom) effective
during the period which the Registration Statement is required to be kept
effective (PROVIDED, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (ii) subject itself to taxation
in any such jurisdiction or (iii) consent to general service of process in any
such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event (a "Changing Event") as a result
of which, the prospectus included in such Registration Statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and, at the request of any such seller, the Company will as soon
as possible prepare and furnish to such seller (a "Correction Event") a
reasonable number of copies of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such Registration
Statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form with any underwriter, if any is
selected by the Company) and take all such other actions as the Holders of a
majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities, including causing its officers to participate in "road
shows" and other information meetings organized by an underwriter, if any,
provided that any underwriter shall have been selected by the Company;
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
employees and independent accountants to supply all information reasonably
7
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such Registration Statement;
(j) permit any Holders to modify any information contained in
a Registration Statement or prospectus or any amendments or supplements thereto
pertaining to such Holders, and the Company shall use its reasonable best
efforts to comply with such request; PROVIDED, HOWEVER, that the Company shall
not have any obligation to so modify any information if the Company reasonably
believes that so doing would cause the Registration Statement or prospectus or
any amendments or supplements thereto to contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(k) before filing a Registration Statement or prospectus or
any amendments or supplements thereto, the Company shall provide counsel
selected by the Holders owning a majority of the Registrable Securities being
registered in such registration ("Holders' Counsel") and any other Inspector (as
defined below) with an adequate and appropriate opportunity to review and
comment on such Registration Statement and each prospectus included therein (and
each amendment or supplement thereto) to be filed with the SEC, subject to such
documents being under the Company's control, and the Company shall notify the
Holders' Counsel and each seller of Registrable Securities of any stop order
issued or threatened by the SEC;
(l) otherwise comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve months
beginning with the first day of the Company's first full calendar quarter after
the effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(m) in the event of the issuance of any stop order suspending
the effectiveness of a Registration Statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such Registration Statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(n) subject to execution and delivery of mutually satisfactory
confidentiality agreements, make available at reasonable times for inspection by
any seller of Registrable Securities, any managing underwriter participating in
any disposition of such Registrable Securities pursuant to a Registration
Statement, Holders' Counsel and any attorney, accountant or other agent retained
by any managing underwriter (each, an "Inspector" and collectively, the
"Inspectors"), during normal business hours of Company at Company's corporate
office and without unreasonable disruption of Company's business or unreasonable
expense to Company and solely for the purpose of due diligence with respect to
the registration statement, non-confidential, legally disclosable, financial and
other records and pertinent corporate documents of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's
8
and its subsidiaries' officers, directors and employees, and the independent
public accountants of the Company, to make available for inspection, at such
parties' offices during their respective normal business hours and without
unreasonable disruption of their business or unreasonable expense to Company and
solely for the purpose of due diligence with respect to a registration statement
covering Registrable Securities pursuant to this Agreement all information
reasonably requested by any such Inspector in connection with such Registration
Statement;
(o) subject to execution and delivery of mutually satisfactory
confidentiality agreements, keep Holders' Counsel advised as to the initiation
and progress of any registration hereunder including, but not limited to,
providing Holders' Counsel with all correspondence with the SEC;
(p) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be made
with the NASD; and
(q) take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.
1.6 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS PURSUANT TO
THIS AGREEMENT. By executing and delivering this Agreement, each Holder
represents and warrants that the information concerning, and representations and
warranties by, such Holder, including information concerning the securities of
the Company held, beneficially or of record, by such Holder, furnished to the
Company pursuant to the Warrant Acquisition Agreement and the Registration
Statement Questionnaire delivered pursuant thereto, are true and correct as if
the same were represented and warranted on the date of any registration
statement by the Company pursuant to this Agreement or any amendment thereto,
and each Holder covenants to immediately notify the Company in writing of any
change in any such information, representation or warranty and to refrain from
offering or disposing of any securities pursuant to any such registration
statement until the Company has reflected such change in the registration
statement. By executing and delivering this Agreement, each such Holder further
agrees to furnish any additional information as the Company may reasonably
request in connection with any action to be taken by the Company pursuant to
this Agreement, and to pay such Holder's expenses which are not required to be
paid by the Company pursuant to this Agreement.
1.7 REGISTRATION EXPENSES. All expenses incident to the
Company's performance of or compliance with the registration rights contemplated
by this Agreement including, without limitation, all registration and filing
fees payable by the Company, fees and expenses of compliance by the Company with
securities or blue sky laws, printing expenses of the Company, messenger and
delivery expenses of the Company, and fees and disbursements of counsel for the
Company, all independent certified public accountants of the Company,
underwriters (excluding discounts and commissions, which will be paid by the
sellers of Registrable Securities) and other Persons retained by the Company
will be borne by the Company, and the Company will pay its internal expenses
(including, without limitation, all salaries and expenses of its employees
performing legal or accounting duties), the expense of
9
any annual audit or quarterly review, the expense of any liability insurance of
the Company, the expenses and fees for listing the securities to be registered
on each securities exchange on which similar securities issued by the Company
are then listed and the reasonable fees and disbursements of one counsel that
any Holder may choose to retain in connection with a registration statement per
year filed pursuant to this Agreement, in each case, in an amount up to $50,000,
which amount will not be exceeded without the prior consent of the Company (such
consent not to be unreasonably withheld). The Company shall have no obligation
to pay any underwriting discounts or commissions attributable to the sale of
Registrable Securities and any of the expenses incurred by any Holder which are
not payable by the Company, such costs to be borne by such Holder or Holders,
including, without limitation, underwriting fees, discounts and expenses, if
any, applicable to any Holder's Registrable Securities; selling commissions or
stock transfer taxes applicable to the Registrable Securities registered on
behalf of any Holder; any other expenses incurred by or on behalf of such Holder
in connection with the offer and sale of such Holder's Registrable Securities
other than expenses which the Company is expressly obligated to pay pursuant to
this Agreement.
1.8 COMPLIANCE WITH APPLICABLE LAW. Each Holder covenants with
the Company not to make any sale of the Warrant Shares under any Registration
Statement without complying with the provisions of this Agreement and without
effectively causing the prospectus delivery requirement under the Securities Act
to be satisfied (whether physically or through compliance with Rule 172 under
the Securities Act or any similar rule).
1.9 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Holder and each Holder/Affiliate against any losses, claims, damages,
liabilities or expenses, joint or several, to which the Holder or
Holder/Affiliate may become subject, under the Securities Act, the Exchange Act,
or any other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the prior written consent of the Company, which consent shall not
be unreasonably withheld or delayed), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, including the
Prospectus (as defined below), financial statements and schedules, and all other
documents filed as a part thereof, as amended at the time of effectiveness of
the Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to Rules 430A, 430B or 430C of
the Rules and Regulations of the Securities Act, or the Prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations of the Securities Act, or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required (the
"Prospectus") or any subsequent amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state in any of them a
material fact required to be stated therein or necessary to make the statements
in the Registration Statement or any amendment or supplement thereto not
misleading or in the Prospectus or any amendment or supplement thereto not
misleading in light of the circumstances under which they were made, or arise
out of or are based in whole or in part on any inaccuracy in
10
the representations or warranties of the Company contained in this Agreement, or
in any writing delivered pursuant to this Agreement, or any failure of the
Company to perform its obligations hereunder or under law, and will promptly
reimburse the Holder and each Holder/Affiliate for any legal and other expenses
as such expenses are reasonably incurred by the Holder or such Holder/Affiliate
in connection with investigating, defending or preparing to defend, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; PROVIDED, HOWEVER, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, the Prospectus,
any free writing prospectus (as defined in Rule 405 under the Securities Act)
prepared by a Holder or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of the Holder expressly for use therein, or (ii) any statement or omission in
any Prospectus that is corrected in any subsequent Prospectus that was delivered
to the Holder prior to the pertinent sale or sales by the Holder.
(b) Each Holder will severally, but not jointly, indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, against any losses, claims, damages, liabilities or expenses
to which the Company, each of its directors, each of its officers who signed the
Registration Statement or controlling person may become subject, under the
Securities Act, the Exchange Act, or any other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, but only if such settlement is effected with the prior written
consent of such Holder) insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements in the Registration Statement or any amendment
or supplement thereto not misleading or in the Prospectus or any amendment or
supplement thereto not misleading in light of the circumstances under which they
were made, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of any Holder expressly for use therein, and will reimburse the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person of the Company for any legal and other expense
reasonably incurred by the Company, each of its directors, each of its officers
who signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. Notwithstanding anything herein contained
to the contrary, in no event shall the aggregate indemnification obligations of
any Holder under this Section 1.9 exceed the net proceeds from the offering of
the Warrant Shares received by such Holder.
11
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 1.9, promptly notify the indemnifying
party in writing thereof; but the omission to notify the indemnifying party will
not relieve it from any liability that it may have to any indemnified party for
contribution or otherwise under the indemnity agreement contained in this
Section 1.9 to the extent it is not prejudiced as a result of such failure. In
case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; PROVIDED, HOWEVER, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party, based upon the advice of such indemnified party's counsel,
shall have reasonably concluded that there may be a conflict of interest between
the positions of the indemnifying party and the indemnified party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party under this Section 1.9 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in accordance
with the proviso to the preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, reasonably satisfactory to such indemnifying party,
representing all of the indemnified parties who are parties to such action) or
(ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of action, in each of which cases
the reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party. The indemnifying party shall not be liable for any
settlement of any action without its written consent; provided that such consent
shall not be unreasonably withheld or delayed.
(d) If the indemnification provided for in this Section 1.9 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) of this Section 1.9 in respect to any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Holder from the placement of the Warrants
contemplated by this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect
12
not only the relative benefits referred to in clause (i) above but the relative
fault of the Company and the Holder in connection with the statements or
omissions or inaccuracies in the representations and warranties in this
Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and each Holder on the other
shall be deemed to be in the same proportion as the amount paid by such Holder
to the Company for the Warrant Shares purchased by such Holder that were sold
pursuant to the Registration Statement bears to the difference (the
"Difference") between the amount such Holder paid for the Warrant Shares that
were sold pursuant to the Registration Statement and the amount received by such
Holder from such sale. The relative fault of the Company on the one hand and
each Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by such Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (c) of this
Section 1.9, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set forth in paragraph (c) of this Section 1.9 with respect to the
notice of the threat or commencement of any threat or action shall apply if a
claim for contribution is to be made under this paragraph (d); PROVIDED,
HOWEVER, that no additional notice shall be required with respect to any threat
or action for which notice has been given under paragraph (c) for purposes of
indemnification. The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 1.9 were determined solely by
PRO RATA allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 1.9, no Holder shall be required
to contribute any amount in excess of the amount by which the Difference exceeds
the amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Holder's
obligations to contribute pursuant to this Section 1.9 are several and not
joint.
1.10 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
(a) No Person may participate in any registration hereunder
which is underwritten unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved by
the Person or Persons entitled hereunder to approve such arrangements
(including, without limitation, pursuant to the terms of any over-allotment or
"green shoe" option requested by the managing underwriter(s), PROVIDED, that
each Holder shall not be required to sell more than the number of Registrable
Securities that such Holder has requested the Company to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
13
documents reasonably required under the terms of such underwriting arrangements
and this Agreement.
(b) Each Person that is participating in any registration
under this Agreement agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 1.5(e) above, such
Person will forthwith discontinue the disposition of its Registrable Securities
pursuant to the Registration Statement and all use of the Registration Statement
or any prospectus or related document until such Person's receipt of the copies
of a supplemented or amended prospectus as contemplated by such Section 1.5(e)
and, if so directed by the Company, will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in
Holder's possession of such documents at the time of receipt of such notice.
Furthermore, each Holder agrees that if such Holder uses a prospectus in
connection with the offering and sale of any of the Registrable Securities, the
Holder will use only the latest version of such prospectus provided by Company.
1.11 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.3, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the amount of the Registrable Securities of the
Holders that are included or (b) to make a demand registration which could
result in such registration statement being declared effective within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.1.
1.12 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
implementation of any registration rights provided in this Agreement.
1.13 PENALTIES. If the SEC does not declare a registration
statement filed pursuant to Section 1.1 or 1.2 hereof effective within 60 days
after the filing date (the "Effectiveness Target Date"), the Company shall
become obligated to pay to the Purchaser an amount in cash, as liquidated
damages and not as a penalty, equivalent to 1% of the initial aggregate exercise
price of the Warrants then held by the Purchaser or its Affiliates for which
Warrant Shares are being registered for each full month that effectiveness is
delayed beyond the Effectiveness Target Date (pro-rated on a daily basis for
partial months). The Company shall pay in full any liquidated damages pursuant
to this Section 1.13 within 30 days after the date on which the Company becomes
obligated to pay such damages. Notwithstanding the foregoing provisions, in no
event shall the Company be obligated to pay liquidated damages in an aggregate
amount that exceeds 10% of the aggregate exercise price of the Warrants pursuant
to this Agreement.
14
1.14 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any right provided for in Sections 1.1, 1.2 and 1.3 at such
time at which all Registrable Securities held by such Holder (and any Affiliate
of the Holder with whom such Holder must aggregate its sales under Rule 144) can
be sold in any 90 day period without registration in compliance with Rule 144 of
the Securities Act.
2. RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this Section 2, the Company hereby grants to the Purchaser, for so long as
the Warrant Shares (whether or not issued) held by the Purchaser constitute at
least 5 million shares of Common Stock (as adjusted to reflect any stock split,
stock dividend or similar transaction) (assuming, if applicable, that the
Warrants have been exercised in their entirety, but without regard to the
limitation imposed by Section 1D of the Warrant), a right of first offer with
respect to future sales by the Company of its Shares (as hereinafter defined).
For purposes of this Section 2, the term the "Purchaser" includes any general
partners and Affiliates of the Purchaser. The Purchaser shall be entitled to
apportion the right of first offer hereby granted it among itself and its
partners and Affiliates in such proportions as it deems appropriate, so long as
such apportionment does not cause the loss of the exemption under Section 4(2)
of the Securities Act or any similar exemption under applicable state securities
laws in connection with such sale of Shares by the Company.
Each time the Company proposes to offer any shares of, or
securities convertible into or exchangeable or exercisable for any shares of,
any class of its capital stock (the "Shares"), the Company shall first make an
offering of such Shares to the Purchaser in accordance with the following
provisions:
(a) The Company shall deliver a notice in accordance with the
terms of this Agreement (the "Notice") to the Purchaser stating (i) its bona
fide intention to offer such Shares, (ii) the number of such Shares to be
offered, and (iii) the price and terms upon which it proposes to offer such
Shares.
(b) By written notification received by the Company, within
twenty (20) calendar days after receipt of the Notice, the Purchaser may elect
to purchase or obtain, at the price and on the terms specified in the Notice, up
to 50% of such Shares.
(c) If all Shares that the Purchaser is entitled to obtain
pursuant to Section 2 are not elected to be obtained as provided in Section 2(b)
hereof, the Company may offer the remaining unsubscribed portion of such Shares
to any Person or Persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Shares within such period, or if
such agreement is not consummated within 60 days of the execution thereof, the
right provided in this Section 2 shall be deemed to be revived and such Shares
shall not be offered unless first reoffered to the Purchaser in accordance
herewith.
(d) The right of first offer in this Section 2 shall not be
applicable to:
15
(i) the issuance of shares of securities pursuant to
a split or subdivision of the outstanding shares of Common Stock or the
determination of Holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the Holder
thereof to receive indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment
of any consideration by such Holder for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares
of Common Stock issuable upon conversion or exercise thereof);
(ii) the issuance of shares of Common Stock or
options therefor to employees, consultants, officers or directors (if
in transactions with primarily non-financing purposes) of the Company
pursuant to a stock option plan or restricted stock purchase plan or
similar grant outside of a plan approved by the Board of Directors of
the Company;
(iii) the issuance of shares of Common Stock pursuant
to the conversion or exercise of convertible or exercisable securities
outstanding as of the date hereof (provided that amendments to the
terms of such securities shall be subject to this Section 2 if they
affect the exercise price, conversion price or number of shares of
Common Stock that may be issued thereunder) or subsequently issued
pursuant to this Section 2;
(iv) the issuance of shares of Common Stock to
acquire a company or business in a bona fide acquisition by the
Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise, each as approved by the Board of
Directors of the Company (which such shares, for the avoidance of
doubt, may only be used pursuant to this clause (iv) as the
consideration for the entity, stock or assets to be acquired, and not
for the purpose of obtaining financing for the proposed acquisition);
or
(v) the issuance or sale of stock, warrants or other
securities or rights to Persons or entities with which the Company has
business relationships provided such issuances are for other than
primarily equity financing purposes and provided that at the time of
any such issuance the aggregate of such issuance and similar issuances
do not exceed shares of Common Stock with an aggregate value of
$2,000,000 (as reasonably determined by the Company's Board of
Directors, and which such amount may be increased upon the written
consent of the Registered Holder, which such consent shall not be
unreasonably withheld).
In addition to the foregoing, the right of first offer in this Section
2 shall not be applicable with respect to the Purchaser or any other
party and any subsequent securities issuance, if (i) at the time of
such subsequent securities issuance, the Purchaser or such other party
is not an "accredited investor," as that term is then defined in Rule
501(a) under the Act, and (ii) such subsequent securities issuance is
otherwise being offered only to accredited investors.
(e) The right of first offer set forth in this
Section 2 may not be assigned or
16
transferred, except to an Affiliate of the Purchaser.
3. BOARD RIGHTS.
3.1 If all or a portion of the Warrants are exercised, and if
the Purchaser (together with its Affiliates) holds 5 million shares of Common
Stock or more (as adjusted to reflect any stock split, stock dividend or similar
transaction) (the "Director Minimum Amount"), the Purchaser shall have the right
to appoint two individuals to the Company's Board of Directors. For the
avoidance of doubt, such individuals must qualify for such election under the
Company's certificate of incorporation and by-laws, and applicable law.
3.2 Upon written notice from the Purchaser, the Company and
its Board of Directors shall promptly take such actions as shall be deemed
necessary to promptly appoint such individuals to the Board of Directors,
including by acting by majority vote of the Board to fill vacancies. At each
subsequent annual or special meeting of the shareholders (or any written consent
obtained for the purpose of electing directors), the Company and/or the Board of
Directors shall recommend that the shareholders elect such individuals to the
Board of Directors, in the same manner as any other nominees. If the Company's
Board of Directors consists of two or more classes of directors, the Purchaser's
nominees shall be appointed to different classes.
3.3 The Company shall not amend its certificate of
incorporation or by-laws in any manner as to limit the implementation of this
Section 3.
3.4 If the ownership of the Company's outstanding shares
subsequently declines below the Director Minimum Amount, the Purchaser and its
Affiliates, upon the written request of the Company, shall take such action to
cause the individuals that it has selected to serve on the Company's Board of
Directors to promptly resign. The Company may secure written agreements of such
directors to do so as a condition to their joining the Board of Directors.
4. PROXY STATEMENT.
(a) The Company shall, as soon as practicable following the
Closing Date under the Warrant Acquisition Agreement, but in any event within 20
business days of such Closing Date, file with the SEC a preliminary proxy
statement for a special meeting (the "Special Meeting") of the Company's
shareholders, which has been previously reviewed by the Purchaser, soliciting
the affirmative vote of the Company's shareholders at the Special Meeting for
approval of the issuance of the Warrant Shares (such affirmative approval being
referred to herein as the "Shareholder Approval"). The Company shall file a
preliminary proxy statement relating to the Special Meeting within 20 business
days of the Closing Date. The Company shall use its best efforts to promptly
deliver a definitive proxy statement for the Special Meeting once it is advised
orally or in writing by the SEC that the SEC has no further comments with
respect to the preliminary proxy statement. The definitive proxy statement shall
contain a recommendation from the Board of Directors to the shareholders that
they approve the issuance of the Warrant Shares, and the Company will use its
reasonable best efforts to obtain the
17
Shareholder Approval. Neither the Company, nor any Person acting on behalf of
the Company, shall issue any communication to its shareholders recommending a
vote against the Shareholder Approval, or abstaining from voting thereon.
(b) The Purchaser shall use its reasonable best efforts to
cause each of its Affiliates holding shares of Common Stock as of the date of
the Special Meeting to vote such shares in favor of all matters necessary for
the approval of the issuance of the shares of Common Stock issuable upon
exercise of the notes held by the PIF Investors.
5. TRANSFERS OF CERTAIN RIGHTS.
5.1 TRANSFER. The rights granted to the Purchaser under this
Agreement are non-transferable EXCEPT for a transfer to a Person or entity which
is an Affiliate of the transferor, and any such transfer, in any case, shall be
subject to the provisions of Sections 5.2 and 5.3; PROVIDED that nothing
contained herein shall be deemed to permit an assignment, transfer or
disposition of the Registrable Securities in violation of the terms and
conditions of the Warrant Acquisition Agreement or applicable law.
5.2 TRANSFEREES. Any permitted transferee to whom rights under
this Agreement are transferred shall, as a condition to such transfer, deliver
to the Company a written instrument by which such transferee agrees to be bound
by the obligations imposed upon the Purchaser under this Agreement to the same
extent as if such transferee were a Purchaser hereunder.
5.3 SUBSEQUENT TRANSFEREES. A transferee to whom rights are
transferred pursuant to this Section 5 may not again transfer such rights to any
other Person or entity, other than as provided in Sections 5.1 or 5.2 above.
6. CERTAIN DEFINITIONS. The following capitalized terms shall have the
meanings ascribed to them below:
"Affiliate" means any Person that directly or indirectly
controls, or is under control with, or is controlled by such Person. As used in
this definition, "control" (including with its correlative meanings, "controlled
by" and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
"Closing Price" means, with respect to the Registrable
Securities (a) if the shares are listed or admitted for trading on any national
securities exchange or included in The Nasdaq Global Market, the last reported
sales price as reported on such exchange or market; (b) if the shares are not
listed or admitted for trading on any national securities exchange or included
in The Nasdaq Global Market, the average of the last reported closing bid and
asked quotation for the shares as reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or a similar service if
NASDAQ is not reporting such information; (c) if
18
the shares are not listed or admitted for trading on any national securities
exchange or included in The Nasdaq Global Market or quoted by NASDAQ or a
similar service, the average of the last reported bid and asked quotation for
the shares as quoted by a market maker in the shares (or if there is more than
one market maker, the bid and asked quotation shall be obtained from two market
makers and the average of the lowest bid and highest asked quotation). In the
absence of any available public quotations for the Common Stock, the Board and a
majority of the Holders shall determine in good faith the fair value of the
Common Stock.
"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Holder" means the Purchaser, and any Affiliate of the
Purchaser holding Registrable Securities.
"Holder/Affiliate" shall mean any Affiliates of the Holder,
including a transferee who is an Affiliate of the Holder, and the directors and
officers of the Holder and any person who controls the Holder or any Affiliate
of the Holder within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act.
"Market Price" means, on any date of determination, the
average of the daily Closing Price of the Registrable Securities for the
immediately preceding five (5) days on which the national securities exchanges
are open for trading.
"NASD" means the National Association of Securities Dealers,
Inc., or any successor thereto.
"Person" means any individual, company, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental body or other entity.
"Registrable Securities" means, subject to the immediately
following sentence, (i) the Warrant Shares issued or issuable upon the exercise
of the Warrants acquired by the applicable Purchaser from the Company pursuant
to the Warrant Acquisition Agreement, and (ii) any shares of Common Stock issued
or issuable directly or indirectly with respect to the securities referred to in
clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares of Common Stock constituting
Registrable Securities, such shares of Common Stock will cease to be Registrable
Securities when they (x) have been effectively registered under the Securities
Act and disposed of in accordance with a Registration Statement covering them,
(y) have been sold to the public pursuant to Rule 144 (or by similar provision
under the Securities Act), or (z) are eligible for resale under Rule 144(k)
(or by similar provision under the
19
Securities Act) without any limitation on the amount of securities that may be
sold under paragraph (e) thereof.
"Registration Statement" means any registration statement of
the Company filed under the Securities Act which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including any
preliminary prospectus, final prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such registration statement.
"SEC" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
7. MISCELLANEOUS.
7.1 RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this
Agreement shall apply to the full extent set forth herein with respect to (i)
the Registrable Securities, (ii) any and all shares of Common Stock into which
the Registrable Securities are converted, exchanged or substituted in any
recapitalization or other capital reorganization by the Company and (iii) any
and all equity securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in conversion of, in exchange for or in
substitution of, the Registrable Securities and shall be appropriately adjusted
for any stock dividends, splits, reverse splits, combinations, recapitalizations
and the like occurring after the date hereof. The Company shall cause any
successor or assign (whether by merger, consolidation, sale of assets or
otherwise) to enter into a new registration rights agreement with the Holders on
terms substantially the same as this Agreement as a condition of any such
transaction.
7.2 NO INCONSISTENT AGREEMENTS. The Company has not and shall
not enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Purchasers in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or materially
inconsistent with the rights granted in this Agreement.
7.3 AMENDMENTS AND WAIVERS. The provisions of this Agreement
may be amended and the Company may take action herein prohibited, or omit to
perform any act herein required to be performed by it, if, but only if, the
Company has obtained the written consent of Holders of at least a majority of
the Registrable Securities then in existence.
7.4 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law,
20
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
7.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing, shall be
mailed by first-class registered or certified airmail, e-mail, confirmed
facsimile or nationally recognized overnight express courier postage prepaid,
and shall be deemed given when so mailed and shall be delivered as addressed as
follows:
if to the Company, to:
Delta Financial Corporation
0000 Xxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other person at such other place as the Company
shall designate to the Purchaser in writing.
If to the Purchaser, to:
The address or facsimile number of each Purchaser as
recorded in the shareholder records of the Company.
7.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of laws rules or provisions.
7.8 FORUM; SERVICE OF PROCESS. Any legal suit, action or
proceeding brought by any party or any of its Affiliates arising out of or based
upon this Agreement shall be instituted in any federal or state court in New
York County, New York, and each party waives any objection which it may now or
hereafter have to the laying of venue or any such proceeding, and irrevocably
submits to the jurisdiction of such courts in any such suit, action or
proceeding.
21
7.9 CAPTIONS. The captions, headings and arrangements used in
this Agreement are for convenience only and do not in any way limit or amplify
the terms and provisions hereof.
7.10 NO PREJUDICE. The terms of this Agreement shall not be
construed in favor of or against any party on account of its participation in
the preparation hereof.
7.11 REMEDY FOR BREACH. The Company hereby acknowledges that
in the event of any breach or threatened breach by the Company of any of the
provisions of this Agreement, the Holders would have no adequate remedy at law
and could suffer substantial and irreparable damage. Accordingly, the Company
hereby agrees that, in such event, the Holders shall be entitled, and
notwithstanding any election by any Holder to claim damages, to obtain a
temporary and/or permanent injunction to restrain any such breach or threatened
breach or to obtain specific performance of any such provisions, all without
prejudice to any and all other remedies which any Holder may have at law or in
equity.
7.12 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto, each subsequent Holder and their respective
permitted successors and assigns and executors, administrators and heirs.
Holders are intended third party beneficiaries of this Agreement and this
Agreement may be enforced by such Holders.
7.13 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
22
IN WITNESS WHEREOF, the parties hereto have caused this Investor Rights
Agreement to be duly executed as of the date and year first written above.
DELTA FINANCIAL CORPORATION
By: /s/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Title: President and Chief
Executive Officer
AG DELTA HOLDINGS, LLC
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: Director
