SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-
1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
ELCOTEL, INC.
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class and Securities)
284447 0 10 9
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(CUSIP Number of Class of Securities)
Arthur Amron, Esq.
WEXFORD MANAGEMENT LLC
411 West Putnam Avenue, Suite 125
Greenwich, Connecticut 06830
(203) 862-7000
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
Copy to:
Randall H. Doud, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
December 18, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Statement because of
Rule 13d-1(b)(3) or (4), check the following: ( )
See Rule 13d-1(a) for other parties to whom copies are to be sent.
CUSIP No. 284447 0 10 9 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON.
Wexford Partners Fund, L.P.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) (X)
(b) ( )
3. SEC USE ONLY
4. SOURCE OF FUNDS
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
( )
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 2,637,219
EACH
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH 10. SHARED DISPOSITIVE POWER
2,637,219
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,637,219
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES ( )
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.5% (based on 13,471,130 shares of Common Stock outstanding
on November 13, 1998 and up to 39,950 shares of Common Stock
issuable to certain of the Reporting Persons filing this
Schedule 13D).
14. TYPE OF REPORTING PERSON
PN
CUSIP No. 284447 0 10 9 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON.
Wexford Capital, L.P.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) (X)
(b) ( )
3. SEC USE ONLY
4. SOURCE OF FUNDS
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
( )
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 2,637,219
EACH
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH
10. SHARED DISPOSITIVE POWER
2,637,219
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,637,219
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES ( )
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.5% (based on 13,471,130 shares of Common Stock outstanding
on November 13, 1998 and up to 39,950 shares of Common Stock
issuable to certain of the Reporting Persons filing this
Schedule 13D).
14. TYPE OF REPORTING PERSON
PN
CUSIP No. 284447 0 10 9 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON.
Wexford Capital Corp.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) (X)
(b) ( )
3. SEC USE ONLY
4. SOURCE OF FUNDS
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
( )
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 2,637,219
EACH
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH 10. SHARED DISPOSITIVE POWER
2,637,219
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,637,219
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.5% (based on 13,471,130 shares of Common Stock outstanding on
November 13, 1998 and up to 39,950 shares of Common Stock issuable
to certain of the Reporting Persons filing this Schedule 13D).
14. TYPE OF REPORTING PERSON
CO
CUSIP No. 284447 0 10 9 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON.
Wexford Management LLC
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) (X)
(b) ( )
3. SEC USE ONLY
4. SOURCE OF FUNDS
00
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
( )
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Connecticut
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 2,637,219
EACH
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH 10. SHARED DISPOSITIVE POWER
2,637,219
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,637,219
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES ( )
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.5% (based on 13,471,130 shares of Common Stock outstanding
on November 13, 1998 and up to 39,950 shares of Common Stock
issuable to certain of the Reporting Persons filing this
Schedule 13D).
14. TYPE OF REPORTING PERSON
IA
CUSIP No. 284447 0 10 9 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON.
Joseph M. Jacobs
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) (X)
(b) ( )
3. SEC USE ONLY
4. SOURCE OF FUNDS
00
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
( )
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 2,637,219
EACH
REPORTING 9. SOLE DISPOSITIVE POWER -0-
PERSON
WITH 10. SHARED DISPOSITIVE POWER
2,637,219
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,637,219
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
( )
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.5% (based on 13,471,130 shares of Common Stock outstanding
on November 13, 1998 and up to 39,950 issuable to certain of the
Reporting Persons filing this Schedule 13D).
14. TYPE OF REPORTING PERSON
IN
CUSIP No. 284447 0 10 9 13D
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON.
Charles E. Davidson
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) (X)
(b) ( )
3. SEC USE ONLY
4. SOURCE OF FUNDS
00
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
( )
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 2,637,219
EACH
REPORTING 9. SOLE DISPOSITIVE POWER -0-
PERSON
WITH 10. SHARED DISPOSITIVE POWER
2,637,219
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,637,219
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES ( )
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.5% (based on 13,471,130 shares of Common Stock outstanding
on November 13, 1998 and up to 39,950 shares of Common Stock
issuable to certain of the Reporting Persons filing this
Schedule 13D).
14. TYPE OF REPORTING PERSON
IN
Item 1. Security and Issuer.
This statement relates to the shares of common stock, par value $.01
per share (the "Common Stock"), of Elcotel, Inc., a Delaware corporation
(the "Company"). The Company's principal executive offices are located at
6428 Parkland Drive, Sarasota, Florida 34243.
Item 2. Identity and Background.
(a) This statement is being filed by (i) Wexford Partners Fund, L.P.
(the "Partnership"), (ii) Wexford Capital, L.P. ("WCLP"), (iii)
Wexford Capital Corp. ("WCC"), (iv) Wexford Management LLC
("Wexford"), (v) Joseph M. Jacobs, and (vi) Charles E. Davidson
(the individuals and entities referred to above, collectively,
the "Reporting Persons"), with respect to shares of Common Stock
beneficially owned by the Reporting Persons.
(b) The principal business and office address for the Reporting
Persons is c/o Wexford Management LLC, 411 West Putnam Avenue,
Greenwich, Connecticut 06830.
(c) The Partnership is a Delaware limited partnership and its
principal business is investments.
WCLP is a Delaware limited partnership and the general partner of
the Partnership.
WCC is a Delaware corporation and the general partner of WCLP.
Wexford is a Connecticut limited liability company and is the
manager of the Partnership. Wexford also serves as investment
manager or sub-advisor to the members of the Partnership.
Joseph M. Jacobs is an officer and controlling shareholder of WCC
and is the president, managing member and a controlling member of
Wexford. Mr. Jacobs also is a controlling person or an investor
in a number of private companies, including certain members of
the Partnership. Mr. Jacobs is also a Director of the Company.
Charles E. Davidson is an officer, the sole director and a
controlling shareholder of WCC and is the chairman and a
controlling member of Wexford. Mr. Davidson also is a
controlling person or an investor in a number of private
companies, including certain members of the Partnership and their
controlling persons.
(d) None of the Reporting Persons has during the last five years been
convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors).
(e) None of the Reporting Persons was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal of
state securities laws or finding any violation with respect to
such laws.
(f) Messrs. Jacobs and Davidson are United States citizens.
Item 3. Source and Amount of Funds or Other Consideration.
On August 13, 1997, the Company, Technology Services Group, Inc.
("TSG") and Elcotel Hospitality Service, Inc. ("Merger Subsidiary") entered
into an Agreement and Plan of Merger (the "TSG Merger Agreement"), pursuant
to which, on December 18, 1997, Merger Subsidiary merged with and into TSG
(the "TSG Merger"). As a result of the TSG Merger, the stockholders of TSG
received 1.05 shares of Common Stock for each share of common stock of TSG
that they held. As a result of the TSG Merger, the Partnership, which was
the holder of shares of TSG common stock at the time of the TSG Merger,
received 2,566,500 shares of Common Stock. In addition, options to purchase
shares of common stock of TSG outstanding immediately prior to the TSG
Merger were converted into options to purchase that number of shares of
Common Stock equal to 1.05 times the number of shares of common stock of
TSG purchasable pursuant to such outstanding options. As a result of this
option treatment, Messrs. Jacobs and Davidson and Mark L. Plaumann, an
employee of Wexford at the time of the TSG Merger, received, collectively,
options to purchase up to 39,950 shares of Common Stock, all or a portion
of which may be attributable to the Partnership pursuant to a management
agreement between Wexford and the funds that it manages, including the
Partnership. The options are all currently exercisable at exercise prices
per share ranging from $4.5625 to $10.2971. In addition, in connection
with the TSG Merger, 30,769 shares of Common Stock were issued to the
Partnership by the Company for payment of an investment banking fee owed to
the Partnership by TSG as a result of the provision of services in
connection with the TSG Merger.
On December 18, 1997, the Company, the Partnership and Fundamental
Management Corporation ("Fundamental") entered into a Stockholders'
Agreement (the "Stockholders' Agreement") to, among other things: (i)
comply with the conditions set by the TSG Merger Agreement; (ii) restrict
some forms of transfers of the Common Stock held by the Stockholders; (iii)
provide certain tag along rights among the parties to the Stockholders'
Agreement; and (iv) require the Company to file a registration statement
under the Securities Act of 1933, as amended, with respect to the Common
Stock owned by the Partnership and Fundamental within 45 days after any
request by both the Partnership and Fundamental.
Item 4. Purpose of Transaction.
See Item 3 above.
The Reporting Persons reserve the right to acquire or dispose of the
Common Stock or to formulate other purposes, plans or proposals regarding
the Company or the Common Stock held by the Reporting Persons to the extent
deemed advisable in light of general investment policies, market conditions
and other factors.
Item 5. Interest in Securities of the Issuer.
The Reporting Persons may be deemed to beneficially own the respective
percentages and numbers of outstanding shares of Common Stock set forth
below. Such percentages have been calculated using information contained in
the Company's most recent quarterly report on Form 10-Q on the basis of
13,471,130 shares of Common Stock issued and outstanding on November 13, 1998
and the 39,950 shares of Common Stock issuable to certain of the Reporting
Persons.
A. Wexford Partners Fund, L.P.
(a) Aggregate number of shares of Common Stock beneficially owned:
2,637,219
Percentage: 19.5%
(b) 1. Sole power to vote or to direct to vote: -0-
2. Shared power to vote or to direct to vote: 2,637,219
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 2,637,219
(c) There were no transactions by the Partnership during the past 60
days.
(d) Not applicable.
(e) Not applicable.
B. Wexford Capital, L.P.
(a) Aggregate number of shares of Common Stock beneficially owned:
2,637,219
Percentage: 19.5%
(b) 1. Sole power to vote or to direct to vote: -0-
2. Shared power to vote or to direct to vote: 2,637,219
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 2,637,219
(c) There were no transactions by WCLP during the past 60 days.
(d) Not applicable.
(e) Not applicable.
C. Wexford Capital Corp.
(a) Aggregate number of shares of Common Stock beneficially owned:
2,637,219
Percentage: 19.5%
(b) 1. Sole power to vote or to direct to vote: -0-
2. Shared power to vote or to direct to vote: 2,637,219
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 2,637,219
(c) There were no transactions by WCC during the past 60 days.
(d) Not applicable.
(e) Not applicable.
D. Wexford Management, LLC
(a) Aggregate number of shares of Common Stock beneficially owned:
2,637,219
Percentage: 19.5%
(b) 1. Sole power to vote or to direct to vote: -0-
2. Shared power to vote or to direct to vote: 2,637,219
3. Sole power to dispose or to direct the
disposition: -0-
4. Shared power to dispose or to direct the
disposition: 2,637,219
(c) There were no transactions by Wexford during the past 60 days.
(d) Not applicable.
(e) Not applicable.
E. Joseph M. Jacobs
(a) Aggregate number of shares of Common Stock beneficially owned:
2,637,219
Percentage: 19.5%
(b) 1. Sole power to vote or to direct to vote: 2,637,219
2. Shared power to vote or to direct to vote:
3. Sole power to dispose or to direct the
disposition: 2,637,219
4. Shared power to dispose or to direct the
disposition: -0-
(c) There were no transactions by Mr. Jacobs during the past 60 days.
(d) Not applicable.
(e) Not applicable.
F. Charles E. Davidson
(a) Aggregate number of shares of Common Stock beneficially owned:
2,637,219
Percentage: 19.5%
(b) 1. Sole power to vote or to direct to vote: 2,637,219
2. Shared power to vote or to direct to vote: -0-
3. Sole power to dispose or to direct the
disposition: 2,637,219
4. Shared power to dispose or to direct the
disposition: -0-
(c) There were no transactions by Mr. Davidson during the past 60
days.
(d) Not applicable.
(e) Not applicable.
Wexford, by reason of its status as manager of the Partnership, may be
deemed to own beneficially the Common Stock of which the Partnership
possesses beneficial ownership.
Each of WCLP and WCC, by reason of their status as controlling persons
of the Partnership, may be deemed to own beneficially the Common Stock of
which the Partnership possesses beneficial ownership.
Each of Charles E. Davidson and Joseph M. Jacobs, by reason of his
status as a controlling person of the Partnership, WCLP and WCC, may be
deemed to own beneficially the Common Stock of which those entities possess
beneficial ownership.
Each of Charles E. Davidson, Joseph M. Jacobs and Wexford shares the
power to vote and to dispose of the shares of Common Stock the Partnership
beneficially owns.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
See Items 2, 3, 4, and 5 above.
Except as described above, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons
named in Item 2 or between such persons and any other person with respect
to any securities of the Company, including but not limited to, transfer or
voting of any such securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit I -- Stockholders' Agreement by and between
Elcotel, Inc., Wexford Partners Fund, L.P.
and Fundamental Management Corporation dated
as of December 18, 1997.
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief,
we certify that the information set forth in this statement is true,
complete and correct.
Date: December 11, 1998
Wexford Partners Fund, L.P.
By: /s/ Arthur H. Amron
-------------------------
Name: Arthur H. Amron
Title: Vice President
Wexford Capital, L.P.
By: /s/ Arthur H. Amron
-------------------------
Name: Arthur H. Amron
Title: Vice President
Wexford Capital Corp.
By: /s/ Arthur H. Amron
-------------------------
Name: Arthur H. Amron
Title: Vice President
Wexford Management LLC
By: /s/ Arthur H. Amron
-------------------------
Name: Arthur H. Amron
Title: Senior Vice President
Joseph M. Jacobs
By: /s/ Joseph M. Jacobs
------------------------
Charles E. Davidson
By: /s/ Charles E. Davidson
------------------------
EXHIBIT I
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT, dated as of December 18, 1997 is
among ELCOTEL, INC., a Delaware corporation (the "Company"); WEXFORD
PARTNERS FUND, L.P., a Delaware limited partnership ("Wexford"); and
FUNDAMENTAL MANAGEMENT CORPORATION, a Florida corporation ("Fundamental",
together with Wexford, the "Stockholders").
WITNESSETH:
WHEREAS, pursuant to that certain Agreement and Plan of Merger
dated as of August 13, 1997, as amended (the "Merger Agreement"), among the
Company, Technology Services Group, Inc. ("TSG") and Elcotel Hospitality
Service, Inc. ("Merger Subsidiary") pursuant to which Merger Subsidiary is
merging (the "Merger") with and into TSG, and as a result of which the
stockholders of TSG will receive shares (the "Merger Shares") of the
Company's common stock, par value $.0l per share (the "Common Stock");
WHEREAS, Fundamental is the owner of approximately 17.5 percent
of the outstanding Common Stock of the Company immediately prior to the
Merger;
WHEREAS, as a result of the consummation of the Merger, Wexford
is receiving approximately 2,566,500 shares of Common Stock;
WHEREAS, the execution and delivery of this Agreement by the
parties hereto is a condition to the transactions contemplated by the
Merger Agreement and is an inducement therefor;
WHEREAS, the Stockholders' desire to enter into certain
arrangements with respect to the disposition of their shares of Common
Stock and to define certain rights, duties and obligations of such parties.
NOW THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Transfers Restricted. (a) Neither Stockholder shall sell,
assign, transfer, mortgage, pledge, hypothecate or in any way dispose of or
encumber any legal or beneficial interest (collectively, "Transfer" or a
"Transfer") in any or all of the Capital Stock now or hereafter owned by
such Stockholder, whether for consideration or otherwise, except in
accordance with the provisions of this Agreement. For purposes of this
Agreement, "Capital Stock" shall mean any and all Common Stock of the
Company, any and all securities of the Company issued as a dividend on or
in exchange for such Common Stock and any and all warrants, options,
convertible securities or other rights to purchase or acquire any of the
foregoing.
(b) Any purported Transfer of Capital Stock by a Stockholder
which is not permitted by the provisions of this Agreement, or which is in
violation of such provisions shall be void and of no force or effect
whatsoever. The Company or its transfer agent shall not recognize or give
effect to any such proposed Transfer and shall be entitled to issue, or to
cause to be issued, stop transfer instructions with respect to any proposed
Transfer that violates the provisions of this Agreement.
2. Prohibitions on Transfers. (a) Each of the Stockholders
agrees that it will not Transfer any of the Capital Stock owned by it
during the six month period beginning on the effective date of the Merger;
except that Fundamental may sell Capital Stock not to exceed 75,000 shares
and Wexford may sell Capital Stock not to exceed 125,000 shares (1) during
the three month period beginning on the day after the effective date of the
Merger and (ii) during the three month period beginning on the three month
anniversary of the effective date of the Merger.
(b) After such six month anniversary of the effective date of
the Merger, the Stockholders may Transfer shares of Capital Stock owned by
them in accordance with applicable law; provided that the Stockholder
Transferring such shares complies with the provisions of Section 3 or
Section 4.
3. Tag Along Rights. If any Stockholder proposes to sell any
shares of Capital Stock otherwise permitted to be sold pursuant to the
terms of this Agreement, but excluding (i) sales to a Related Transferee of
such Stockholder or to A.T.T. IV, N.V. in accordance with Section 4 or (ii)
any sale in which all of the Stockholders agree and are permitted to
participate, then such Stockholder shall offer (the "Participation Offer")
to include in the proposed sale a number of shares of Capital Stock
designated by any of the other Stockholders, not to exceed, in respect of
any such other Stockholder, the number of shares equal to the product of
(A) the aggregate number of shares of Capital Stock to be sold by such
Stockholder to the proposed transferee(s) and (B) a fraction the numerator
of which is equal to the number of shares of Capital Stock owned by such
other Stockholder and the denominator of which is equal to the number of
shares of Capital Stock held by all Stockholders; provided that if the
consideration to be received by such Stockholder includes any securities
subject to Section 5 of the Securities Act of 1933 (or any successor
statute) (the "Securities Act"), only Stockholders who are permitted by the
Securities Act to purchase such securities shall be entitled to include
their shares of Capital Stock in such sale. The Stockholder making the
Participation Offer (the "Offering Stockholder") shall give written notice
to each other Stockholder of the Participation Offer (the "Tag-Along
Notice") at least 15 days prior to the proposed sale. The Tag-Along Notice
shall specify the proposed transferee(s), the number of shares of Capital
Stock to be sold to such transferee(s), the amount and type of
consideration to be received therefor, and the place and date on which the
sale is to be consummated. Each other Stockholder who wishes to include
shares of Capital Stock in the proposed sale in accordance with the terms
of this Section 3 shall so notify the Offering Stockholder not more than 10
days after the date of the Tag-Along Notice. The Participation Offer shall
be conditioned upon consummation of the sale of shares of Capital Stock
pursuant to the transactions contemplated in the Tag-Along Notice. If any
Stockholder shall have accepted the Participation Offer, the Offering
Stockholder shall reduce to the extent necessary the amount of Capital
Stock it otherwise would have sold in the proposed sale so as to permit the
other Stockholders who have accepted the Participation Offer to sell the
number of shares that they are entitled to sell under this Section 3, and
the Offering Stockholder and such other Stockholders shall sell the number
of shares specified in the Participation Offer in accordance with the terms
of such sale set forth in the Tag-Along Notice.
4. Exempt Transfers. Notwithstanding anything in this Agreement
to the contrary, (a) Wexford may sell to A.T.T. IV, N.V. up to 150,000
shares (subject to adjustment) of Capital Stock pursuant to the Amended and
Restated Option Agreement of even date herewith, and (b) each Stockholder
that is not a natural person may sell any or all of its Capital Stock to
any entity or person affiliated with, controlled by, or under common
control with such Stockholder, in each case without the consent of the
other Stockholder or the Company and without being required to first offer
such Capital Stock to any Stockholder or the Company. Any such transferee
of a Stockholder (other than A.T.T. IV, N.V. under clause (a) hereof) is
referred to herein as a "Related Transferee." If any Stockholder transfers
any of the Capital Stock held by it to a Related Transferee (or if any
Related Transferee subsequently transfers or re-transfers any of such
Capital Stock to another Related Transferee of such Stockholder), such
Related Transferee shall receive and hold the Capital Stock so transferred
subject to the provisions of this Agreement, including, without limitations
the obligations hereunder of the Stockholder who originally transferred
such Capital Stock, as though such Capital Stock were still owned by such
holder and the Related Transferee shall be deemed a Stockholder for
purposes of this Agreement. It shall be a condition precedent to any
Transfer permitted by this Section 4 that the Related Transferee shall
execute and deliver to each party hereto an agreement acknowledging that
all Capital Stock transferred or to be transferred to such Related
Transferee is and shall be subject to this Agreement and no Transfer by any
Stockholder (or by any of such holder's Related Transferees) under Section
4 shall release such Stockholder from any of such holder's obligations or
liabilities hereunder that occurred prior to the date of such transfer.
5. Stockholder Breaches of Sections 2 or 3. If either
Stockholder breaches its obligations with respect to the Transfer of shares
of Capital Stock or giving notice with respect thereto under the provisions
of Section 2 or Section 3 of this Agreement, the non-breaching Stockholder
shall have the right for a period of 1 year after such Stockholder becomes
aware of any such breach to require the breaching Stockholder to purchase
for cash from the non-breaching Stockholder all or a portion of that number
of its shares of Capital Stock equal to the number of shares of Capital
Stock which were Transferred by the breaching Stockholder in violation of
such Section 2 or 3 at a price per share of Capital Stock equal to (i) the
price per share the breaching Stockholder received as consideration for the
shares of Capital Stock Transferred by the breaching Stockholder in
violation of such Section 2 or 3 plus (ii) interest at an annual rate of
15% compounded quarterly on the amount payable pursuant to the foregoing
clause (i) from the date of the breach until final payment is received by
the non-breaching Stockholder.
6. Representations and Warranties.
(a) Each of the Stockholders (as to such Stockholder only)
represents and warrants to the Company and the other Stockholders that:
(i) such Stockholder has full power and authority to
execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery, and
performance by it of this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary action;
(ii) this Agreement has been duly and validly executed and
delivered by such Stockholder and constitutes the binding obligation
of such Stockholder enforceable against such Stockholder in accordance
with its terms; and
(iii) the execution, delivery, and performance by such
Stockholder of this Agreement and the consummation by such Stockholder
of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (A) violate any
provision of law, statute, rule, or regulation to which it is subject,
(B) violate any order, judgment, or decree applicable to it, or (C)
conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation or by-laws, certificate
of limited partnership or partnership agreement, as applicable, or any
agreement or other instrument to which such Stockholder is a party or
by which such Stockholder is bound, other than any such violation,
conflict or breach the occurrence of which would not have a material
adverse effect on the ability of such Stockholder to perform this
Agreement.
(b) The Company hereby represents and warrants to each
Stockholder that:
(i) it is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, it has
full corporate power and authority under its certificate of
incorporation to execute, deliver, and perform this Agreement and to
consummate the transactions contemplated hereby, and the execution,
delivery, and performance by it of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by
all necessary corporate action;
(ii) this Agreement has been duly and validly executed and
delivered by the Company and constitutes the binding obligation
thereof enforceable against the Company in accordance with its terms;
and
(iii) the execution, delivery, and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby will not, with or without the giving
of notice or the lapse of time, or both, (A) violate any provision of
law, statute, rule, or regulation to which the Company is subject, (B)
violate any order, judgment, or decree applicable to the Company, or
(C) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation or by-laws or any
agreement or other instrument to which the Company is a party or by
which it is bound, other than any such violation, conflict or breach
the occurrence of which would not have a material adverse effect on
the ability of the Company to perform this Agreement.
7. Term. This Agreement shall terminate as follows:
(a) Upon the unanimous agreement of all Stockholders and the
Company.
(b) Upon the happening of any of the following events:
(i) A trustee or receiver is appointed for the Company or
for the major part of its property and is not discharged within 30
days after such appointment;
(ii) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted against
the Company, are consented to by the Company or are not dismissed
within 60 days after such institution;
(iii) The Company shall be merged with or into another
company and the stockholders of the Company immediately prior to such
merger do not own after such merger substantially all of the capital
stock of the Company or the surviving entity of such merger in
substantially the same proportions or whose shares of capital stock
shall not be listed on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. Automated Quotation
System (the "NASDAQ System"); or
(iv) At such time as a Stockholder and its Related
Transferees collectively own less than 5% of the outstanding Common
Stock of the Company (in which event this Agreement shall continue to
be binding upon the Company and the other Stockholders until such time
as termination hereof otherwise occurs), provided that such
Stockholder and Related Transferees' registration rights pursuant to
Section 9 hereof shall only terminate upon the Stockholder and Related
Transferees owning no outstanding Common Stock of the Company.
(c) In any event, not later than five (5) years from the date of
this Agreement.
8. Voting of Capital Stock. During the period ending
immediately after the second annual meeting of stockholders of the Company
which occurs after the meeting at which the Merger was approved, each of
the Stockholders agrees that it will vote (or cause to be voted) its shares
of Capital Stock in favor of any nominees for director nominated by the
incumbent Board of Directors of the Company.
9. Registration Rights. Stockholders and their Related
Transferees and Acor S.A. shall have the registration rights set forth in
Exhibit A hereto. The parties hereto acknowledge and agree that Acor S.A.
is a third party beneficiary of such registration rights and shall have
full power and authority to enforce such rights as if it had been a party
executing this Agreement.
10. Specific Performance. The Stockholders and the Company
recognize that the obligations imposed on them in this Agreement are
special, unique, and of extraordinary character, and that in the event of
breach by any party, damages may be an insufficient remedy. Consequently,
it is agreed that the Stockholders and the Company may have specific
performance and injunctive relief (in addition to damages) as a remedy for
the enforcement hereof, without proving damages.
11. Notices. Any and all notices, designations, consents,
offers, acceptances, or other communications provided for herein (each a
"Notice") shall be given in writing by overnight courier, telegram, or
telecopy (with receipt confirmed) which shall be addressed, or sent, to the
respective addresses as follows (or such other address or telecopier number
as the Company or any Stockholder may specify to the Company and all other
Stockholders by notice):
To the Company, at
Elcotel, Inc.
6428 Parkland Drive
Sarasota, Florida 34243
Attention: President
Telecopier: (941) 751-4716
With a copy to
Larry P. Laubach, Esquire
Schnader, Harrison, Segal & Lewis LLP
1600 Market Street, Suite 3600
Philadelphia, PA 19103
Telecopier: (215) 972-7378
If to Wexford, at
Wexford Partners Fund, L.P.
411 W. Putnam Avenue, Suite 125
Greenwich, CT 06830
Attention: Mark Plaumann
Telecopier: (203) 862-7313
If to Fundamental, at
Fundamental Management Corporation
4000 Hollywood Boulevard, Suite 610N
Hollywood, Florida 33021
Attention: C. Shelton James
Telecopier: (954) 961-5153
All notices shall be deemed effective and received (a) if given by
telecopy, when such telecopy is transmitted to the telecopy number
specified above and receipt thereof is confirmed; (b) if given by
overnight courier, on the business day immediately following the day on
which such notice is delivered to a reputable overnight courier service; or
(c) if given by telegram, when such notice is delivered at the address
specified above. No Stockholder shall be entitled to receive a notice
hereunder (or a copy of a notice delivered to the Company) if, at the time
such notice is to be sent, such Stockholder (including its Affiliates and
the employees of such Stockholder and its Affiliates) no longer owns any
shares of Common Stock.
12. Modification, Amendment and Waiver. No modification,
amendment or waiver of any provision of this Agreement shall be effective
unless approved in writing by each of the parties hereto. The failure of
any party at any time to enforce any of the provisions of this Agreement
shall in no way be construed as a waiver of such provisions and shall not
affect the rights of the party thereafter to enforce the provisions of this
Agreement in accordance with its terms.
13. Arbitration. Any and all disputes arising out of, under, in
connection with, or relating to this Agreement (including, without
limitation, valuation disputes) shall be finally settled by arbitration in
the City of New York, or in such other place as the parties hereto agree,
in accordance with the rules then in effect of the American Arbitration
Association. The board of arbitrators shall be composed of three
arbitrators, each being qualified to make evaluations of the kind under
dispute. Each of the parties to such arbitration shall appoint one
arbitrator and the two arbitrators so appointed shall appoint the third
arbitrator within thirty days after their appointment. If either party
fails to appoint its arbitrator within fifteen days after written request
by the other party, the other party may request the President of the
American Arbitration Association to make such appointment within fifteen
days after such request to the President. The arbitration award shall be
final and binding on the parties and may include costs, including
attorneys' fees. Any arbitration award may be enforced in any court having
jurisdiction over the party against which enforcement is sought.
14. Entire Agreement. This document embodies the entire
agreement and understanding between and among the parties hereto with
respect to the subject matter hereof, and supersedes and preempts any prior
understandings, agreements, or representations by or among the parties,
written or oral, that may have related to the subject matter hereof.
15. Successors and Assigns. This Agreement will bind and inure
to the benefit of and be enforceable by the parties and their respective
permitted successors and assigns. This Agreement may not be assigned by
any party hereto without the prior written consent of all parties hereto.
16. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken
together will constitute one and the same agreement.
17. Applicable Law. All questions concerning this Agreement
will be governed by and interpreted in accordance with the laws of the
State of Delaware, without regard to the conflict of laws principles
thereof.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
ELCOTEL, INC. WEXFORD PARTNERS FUND L.P.
By: Wexford Management LLC
Its Investment Manager
By: /s/ Tracey Gray By: /s/ H.E. Sullivan III
------------------ -------------------------
Name: Tracey L. Gray Name: Howard E. Sullivan III
Title: President Title: Vice President
FUNDAMENTAL MANAGEMENT CORPORATION
By: /s/ C. Shelton James
----------------------
Name: C. Shelton James
Title: President
EXHIBIT A
REGISTRATION RIGHTS
1. Definitions. Except as otherwise set forth below, terms
defined in the Stockholders Agreement of which this Exhibit is a part are
used herein as therein defined.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" means any Stockholder, Related Transferee or Acor, S.A.
who holds Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c)
below.
"Indemnifying Party" has the meaning set forth in Section 5(c)
below.
"Person" (or "Persons" as the context may require) means an
individual, a corporation, a partnership, a limited liability partnership,
a limited liability company, a firm, a joint venture, an association, a
trust, or an unincorporated organization.
"Registrable Securities" means the Common Stock issued to Wexford
pursuant to the Merger, any other Common Stock beneficially owned by
Wexford, any Common Stock beneficially owned by Fundamental, any Common
Stock beneficially owned by Acor, S.A. and any other securities issuable
with respect to such Common Stock by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or reorganization; provided that
(1) any Registrable Security will cease to be a
Registrable Security when (a) a registration statement
covering such Registrable Security has been declared
effective by the SEC and it has been disposed of
pursuant to such effective registration statement or
(b) it is sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar
provisions then in force) under the Securities Act are
met; and
(2) Registrable Securities shall only include such
Registrable Securities which any Holder could not
otherwise sell pursuant to Rule 144 under the
Securities Act without restriction as a result of
volume limitations, whether under subsection (k) of
Rule 144 or otherwise.
"Registration Expenses" has the meaning set forth in
Section 4 below.
"SEC" means the United States Securities and Exchange
Commission.
2. Registration. The Company shall file with the SEC within
forty-five (45) days after the effective date of the Merger, a "shelf"
registration statement on Form S-3 or other appropriate available Form,
covering the Registrable Securities owned by the Holders and shall use its
reasonable best efforts to cause the same to be declared effective by the
SEC as promptly as practicable after such filing.
3. Registration Procedures. The Company will:
(a) before filing the registration statement or prospectus
or any amendments or supplements thereto, furnish to all Holders and to one
counsel selected by the Holders, copies of all such documents proposed to
be filed, which document will be subject to the review of and comment by
such counsel;
(b) prepare and promptly 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 (except as provided in the last paragraph
of this Section 3) of not less than 360 consecutive days or, if shorter,
the period terminating when all Registrable Securities covered by such
registration statement have been sold (but not before the expiration of the
applicable period referred to in Section 4(3) of the Securities Act and
Rule 174 thereunder, if applicable);
(c) furnish to each Holder such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto) and the prospectus included in such
registration statement as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Holder;
(d) notify the Holders promptly, (i) when the registration
statement or any post-effective amendment has become effective under the
Securities Act and applicable state law, (ii) of any request by the SEC or
any other Federal or state governmental authority for amendments or
supplements to the registration statement or related prospectus or for
additional information, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose, and (v) of the happening of any event
which makes any statement made in such registration statement or related
prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the
making of any changes in such registration statement, prospectus or
documents so that, in the case of the registration statement, it will not
contain any untrue statements 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, and that in the case of the prospectus,
it will not contain any 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, in light of the circumstances under which they were
made, not misleading;
(e) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction;
(f) use its reasonable best efforts to register or qualify
such Registrable Securities as promptly as practicable under such other
securities or blue sky laws of such jurisdictions as any Holder reasonably
(in light of the intended plan of distribution) requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such Holder; 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 paragraph (f), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(g) use its reasonable best efforts to cause all such
Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed or quoted on any
inter-dealer quotation system on which similar securities issued by the
Company are then quoted;
(h) if any event contemplated by Section 3(d)(v) above
shall occur, as promptly as practicable prepare a supplement or amendment
or post-effective amendment to such registration statement or the related
prospectus or any document incorporated therein by reference or promptly
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the prospectus will not 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.
The Company may require each Holder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as it may from time to time reasonably request and
such other information as may be legally required in connection with such
registration. Notwithstanding anything herein to the contrary, the Company
shall have the right to exclude from any offering the Registrable
Securities of any Holder who does not comply with the provisions of the
immediately preceding sentence.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(d)(v) hereof, such Holder shall forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(d)(v) hereof,
and, if so directed by the Company, such Holder shall deliver to the
Company all copies, other than permanent file copies, then in such
Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
the Company shall give such notice, the Company shall extend the period
during which such registration statement shall be maintained effective
(including the period referred to in Section 3(b) hereof) by the number of
days during the period from and including the date of the giving of notice
pursuant to Section 3(d)(v) hereof to the date when the Company shall make
available to the Holders of Registrable Securities covered by such
registration statement a prospectus supplemented or amended to conform with
the requirements of Section 3(d)(v) hereof.
4. Registration Expenses. In connection with any registration
statement required to be filed hereunder, the Company shall pay the
following registration expenses (the "Registration Expenses'): (i) all
registration and filing fees, (ii) fees and expenses of compliance with
securities or blue sky laws, (iii) word processing, duplicating and
printing expenses, (iv) internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), (v) transfer agents', trustees', depositories',
registrars' and fiscal agents' fees, (vi) the fees and expenses incurred in
connection with the listing of the Registrable Securities on the Nasdaq
National Market or any other trading medium or exchange on which the Common
Stock is then listed or traded, (vii) all fees and disbursements of counsel
for the Company and fees and expenses for independent certified public
accountants retained by the Company, and (viii) the fees and expenses of
any special experts retained by the Company in connection with such
registration.
5. Indemnification; Contribution. (a) Indemnification by the
Company. The Company agrees to indemnify and hold harmless each Holder,
each Person, if any, who controls such Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, and the
officers, directors, agents, general and limited partners, and employees of
each Holder and each such controlling person from and against any and all
losses, claims, damages, liabilities, and reasonable expenses (including
reasonable costs of investigation) directly or indirectly arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus relating to the
Registrable Securities or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or reasonable expenses
arise out of, or are based upon, any such untrue statement or omission or
allegation thereof based upon information furnished to the Company by such
Holder or on such Holder's behalf expressly for use therein; and the
Company will reimburse such Indemnified Party for any legal or other
expenses reasonably incurred by them in connection with enforcing their
rights hereunder, provided, however, that with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this paragraph
shall not apply to the extent that any such loss, claim, damage, liability
or expense results from the fact that a current copy of the prospectus was
not sent or given to the Persons asserting any such loss, claim, damage,
liability or expense at or prior to the written confirmation of the sale of
the Registrable Securities concerned to such Person if it is determined
that (i)(A) it was the responsibility of such Holder to provide such person
with a current copy of the prospectus, (B) such Holder was provided with a
current copy of the prospectus prior to the written confirmation of sale
and (C) such current copy of the prospectus would have cured the defect
giving rise to such loss, claim, damage, liability or expense or (ii) the
Holder provided a prospectus to any Person in violation of the last
paragraph of Section 3 hereof.
(b) Indemnification by Holder of Registrable Securities.
Each Holder agrees to indemnify and hold harmless the Company, and each
Person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act and the
officers, directors, agents and employees of the Company and each such
controlling Person to the same extent as the foregoing indemnity from the
Company to such Holder, but only with respect to written information
furnished by such Holder or on such Holder's behalf for use in any
registration statement or prospectus relating to the Registrable
Securities. The liability of any Holder under this Section 5(b) shall be
limited to the net amount of proceeds received by such Holder pursuant to
the sale of Registrable Securities covered by such registration statement
or prospectus.
(c) Conduct of Indemnification Proceedings. If any action
or proceeding (including any governmental investigation) shall be brought
or asserted against any Person entitled to indemnification under Section
5(a) or 5(b) above (an "Indemnified Party") in respect of which indemnity
may be sought from any party who has agreed to provide such indemnification
under Section 5(a) or 5(b) above (an "Indemnifying Party"), the Indemnified
Party shall give prompt notice to the Indemnifying Party, provided that the
failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 5,
except to the extent that such Indemnifying Party is materially prejudiced
by such failure to give notice. The Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Party, and shall assume the payment of all
reasonable expenses of such defense. Such Indemnified Party shall have the
right to employ separate counsel in any such action or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party has agreed to pay such fees and expenses or (ii) the
Indemnifying Parry fails promptly to assume the defense of such action or
proceeding or fails to employ counsel reasonably satisfactory to such
Indemnified Party or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both such Indemnified
Party and Indemnifying Party (or an affiliate of the Indemnifying Party),
and such Indemnified Party shall have been advised by counsel that there is
a conflict of interest on the part of counsel employed by the Indemnifying
Party to represent such Indemnified Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Party). Notwithstanding
the foregoing, the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable at any time for the fees
and expenses of more than one separate firm of attorneys (together in each
case with appropriate local counsel). The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without
its written consent (which consent will not be unreasonably withheld), but
if settled with its written consent, or if there be a final judgment for
the plaintiff in any such action or proceeding, the Indemnifying Party
shall indemnify and hold harmless such Indemnified Party from and against
any loss or liability (to the extent stated above) by reason of such
settlement or judgment. The Indemnifying Party shall not consent to entry
of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release, in form and substance satisfactory to the
Indemnified Party, from all liability in respect of such action or
proceeding for which such Indemnified Party would be entitled to
indemnification hereunder.
(d) Contribution. If the indemnification provided for in
this Section 5 is unavailable to the Indemnified Parties in respect of any
losses, claims, damages, liabilities or judgment referred to herein, then
each such Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages, liabilities and
judgments as between the Company on the one hand and each Holder on the
other, in such proportion as is appropriate to reflect the relative fault
of the Company and of each Holder in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of each Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by the Indemnified Party
as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
the investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 5(d), no Holder shall be required to
contribute any amount in excess of the amount by which the total price of
which the Registrable Securities of such Holder were offered to the public
exceeds the amount of any damages which Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statements or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section II (f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
