SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of report: October 22, 1997
(Date of earliest event reported)
SIRCO INTERNATIONAL CORP.
(Exact name of Registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation)
0-4465 13-2511270
(Commission File No.) (I.R.S. Employer
Identification No.)
24 Richmond Hill Avenue
Stamford, Connecticut 06901
(Address of principal executive offices; zip code)
(203) 359-4100
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 22, 1997 (the "Transaction Date"), the Sirco International
Corp. (the "Company") acquired from CLEC Holding Corp., a New Jersey corporation
("CLEC"), 3,000,000 shares of common stock, par value $.001 per share (the "CLEC
Common Stock"), of CLEC in consideration of the issuance by the Company of
375,000 shares of common stock, par value $.10 per share ("SIRCO Common Stock"),
of the Company. In the event the closing bid price of a share of SIRCO Common
Stock, as reported by NASDAQ, is less than $6.00 per share for any three
consecutive trading days in the 30-day period following the Transaction Date,
the Company will issue to CLEC promptly following such 30-day period 25,000
shares of SIRCO Common Stock, and if the closing bid price of a share of SIRCO
Common Stock, as so reported, is less than $5.50 per share for any three
consecutive trading days during such 30-day period, the Company will issue to
CLEC promptly following such 30-day period an additional 25,000 shares of SIRCO
Common Stock. In connection with such transaction, CLEC granted to the Company
certain rights to register under the Securities Act of 1933, as amended, the
shares of CLEC Common Stock acquired by the Company.
CLEC was formed in 1991 and was inactive until September 1997, when
CLEC acquired 95% of the capital stock of The Other Phone Company, Inc. ("OPC"),
an integrated telecommunications provider based in Florida. OPC is a reseller of
Bell South services that currently provides local service exclusively in the
State of Florida. The Company has been advised that OPC currently provides
service to approximately 2,000 small business customers with approximately 5,000
local access lines in use, and that OPC currently has an additional 4,000 lines
under contract.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) None.
(b) None.
(c) Exhibits.
Exhibit
Number Exhibit Title
- ------ -------------
10.1 Stock Purchase Agreement, dated October 22, 1997, between the Company
and CLEC (as amended).
10.2 Registration Rights Agreement, dated October 22, 1997, between the
Company and CLEC.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 4, 1997
SIRCO INTERNATIONAL CORP.
(Registrant)
By: /s/ Paul Riss
-------------
Paul Riss
Chief Financial Officer
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of this 22nd day of October,
1997 by and between CLEC HOLDING CORP. ("CLEC"), a New Jersey corporation, and
SIRCO INTERNATIONAL CORP. ("SIRCO"), a New York corporation.
INTRODUCTION
I. CLEC is engaged in the business of owning and operating a local telephone
company in the state of Florida known as The Other Phone Company, Inc. ("OPC")
and SIRCO is in the business of manufacturing luggage and other sports related
baggage;
II. CLEC and SIRCO are interested in entering into a relationship to allow SIRCO
to include solicitation and promotional inserts in OPC monthly local telephone
bills and to jointly develop and mutually benefit from such other marketing
efforts as are appropriate; and
III. In consideration of and in furtherance of the above described joint
efforts, CLEC and SIRCO have agreed issue shares of common stock in their
respective corporations on the terms and conditions set forth below.
NOW, THEREFORE, for Ten Dollars ($10) and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. STOCK ISSUANCE
Simultaneously with the execution hereof, SIRCO will cause to be issued
and delivered a stock certificate representing 375,000 shares of its common
stock (such shares, together with any additional shares that may be issued
pursuant to this Section 1, the "SIRCO Shares") to and in the name of CLEC and
CLEC will cause to be issued and delivered a stock certificate representing
3,000,000 shares of its common stock (the "CLEC Shares") to and in the name of
SIRCO; provided, however, that in the event the closing bid price of a share of
SIRCO common stock, as reported by NASDAQ, is less than $6.00 per share for any
three consecutive trading days in the thirty day period following the date
hereof, SIRCO shall issue to CLEC promptly following such thirty day period
25,000 shares of its common stock, and if the closing bid price of a share of
SIRCO common stock, as so reported, is less than $5.50 per share for any three
consecutive trading days during such thirty day period, SIRCO shall issue to
CLEC promptly following such thirty day period an additional 25,000 shares of
its common stock. The SIRCO Shares and the CLEC Shares will be issued without
registration under the Securities Act of 1933, as amended (the "Act"), based
upon an exemption from registration provided by Regulation D under the Act in
reliance upon the representations of CLEC or SIRCO, as the case may be, set
forth herein; such issuances will be further evidenced by restrictive legends on
the certificates representing the SIRCO Shares or the CLEC Shares and "stop
transfer" instructions to the transfer agents for the SIRCO Shares and the CLEC
Shares. The SIRCO Shares and the CLEC Shares will be "restricted securities"
within the meaning of the Act and the rules and regulations established
thereunder.
2. REPRESENTATIONS.
a. CLEC hereby represents, warrants and covenants as follows:
i. CLEC is a corporation duly organized, validly existing and
in good standing under the laws of the state of New Jersey. CLEC has one
subsidiary, OPC, of which it owns 95% of the issued and outstanding common stock
<PAGE>
thereof. Each of CLEC and OPC has full corporate power, right and authority to
own its assets, conduct its business as and where such business is presently
conducted, and CLEC has full corporate power, right and authority to enter into
and perform its obligations under this Agreement without the consent, approval
or authorization of, or obligation to notify, any person, entity or governmental
agency.
ii. The execution, delivery and performance of this Agreement
by CLEC of the transactions contemplated hereby: (i) have been duly authorized
by all necessary corporate actions on the part of CLEC, (ii) will not violate
any provision of the Articles of Incorporation or Bylaws of CLEC, (iii) will not
violate or conflict with or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) or will not result in the
termination or accelerate the performance required by, or result in the creation
of any lien, security interest, charge or encumbrance upon any of CLEC's assets
or capital stock under any term or provision of the Articles of Incorporation or
Bylaws of CLEC or any contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which CLEC is a party or by
which CLEC or any of its assets or properties may be bound or affected and (iv)
will not violate or be in conflict with any law, rule, or regulation, or any
judgment, decree, injunction or order, applicable to CLEC. This Agreement is the
legal, valid and binding obligation of CLEC, enforceable against CLEC in
accordance with its terms.
iii. True, correct and complete copies of the Articles of
Incorporation and the Bylaws of CLEC are set forth in Exhibit 2.a.iii.
iv. The authorized capital stock of CLEC consists exclusively
of 100,000,000 shares of common stock, each such share having a par value of
$.001 ("CLEC Common Stock"). Immediately prior to the closing of this
transaction and the issuance of the CLEC Shares to SIRCO, CLEC has 7,545,000
shares of CLEC Common Stock issued and outstanding. Neither the Articles of
Incorporation nor Bylaws of CLEC restrict the issuance of authorized capital
stock, except that the authorization to increase the number of authorized shares
of capital stock and modification of the rights of the Stockholders requires
amendment to the Articles of Incorporation which must be approved by the holders
of a majority of CLEC's Common Stock.
v. Upon issuance to SIRCO, the CLEC Shares will: be duly
authorized, validly issued, fully paid for, and nonassessable; evidence and
represent 3,000,000 shares of CLEC Common Stock; and constitute twenty eight and
four tenths (28.4%) percent of CLEC's issued and outstanding common stock. In
the event of dissolution, liquidation or winding up of CLEC, whether voluntary
or involuntary, the holders of CLEC Common Stock then outstanding are entitled
to share ratably in all assets of CLEC available for distribution after the
payment of CLEC's outstanding obligations. Holders of shares of CLEC Common
Stock are entitled to receive dividends when, as and if declared by CLEC's Board
of Directors out of funds legally available therefor. There are no preemptive
rights, conversion rights, redemption provisions or sinking fund provisions
relating to CLEC Common Stock or inuring to the holders thereof.
vi. Other than the CLEC Common Stock, CLEC is not authorized
to issue any other equity interest in CLEC.
vii. There are no options, warrants, or rights outstanding for
the purchase or acquisition of any shares of the capital stock of CLEC or any
securities or rights outstanding convertible or exchangeable into any shares of
such capital stock.
<PAGE>
viii. The CLEC Shares will be issued in the name of SIRCO or
its designee. Upon issuance by CLEC of the CLEC Shares to SIRCO as provided
herein, SIRCO will acquire from CLEC good and marketable title to the CLEC
Shares, free and clear or any lien, encumbrance, security interest, claim,
pledge, option, restriction, charge or equity of any nature whatsoever, except
for the restrictions on transfer contemplated by Section 1 of this Agreement.
ix. Each of CLEC and OPC has good and marketable title to all
of the assets, business and properties of CLEC or OPC, as the case may be, that
are used in or useful to the operations of the business as same shall exist on
the date of this Agreement.
x. In connection with conducting its business, each of CLEC
and OPC is in compliance, to the best of its knowledge, with all applicable
laws, rules and regulations and has not received notice of any alleged
violations of such laws, rules or regulations with respect to its business which
have not been corrected or otherwise resolved.
xi. There is no material fact relevant to the business of CLEC
or OPC or its future prospects that have not been set forth herein or otherwise
disclosed to SIRCO, the existence of which would have a material adverse affect
on CLEC's or OPC's business, financial condition or results of operations or
could result in liability (other than SIRCO's obligations hereunder) to SIRCO.
None of the information included herein or other documents furnished or to be
furnished by CLEC or any of its representatives contain any untrue statement of
a material nature or is misleading in any material respect or omits to state a
material fact necessary in order to make any of the statements herein or therein
not materially misleading. Except as otherwise provided for in this Agreement,
SIRCO acknowledges that CLEC has not made any representations or warranties as
the value of CLEC.
xii. CLEC understands that none of the SIRCO Shares are
registered under the Act, any state securities laws or any foreign securities
laws. CLEC understands that the offering and sale of the SIRCO Shares is
intended to be exempt from registration under the Act by virtue of Section 4(2)
and/or Section 4(6) of the Act and the provisions of Regulation D promulgated
thereunder, based, in part, upon the representations, warranties and agreements
of CLEC contained in this Agreement.
xiii. CLEC has received copies of all SIRCO's Annual Report on
Form 10-K for the fiscal year ended November 30, 1996, SIRCO's Quarterly Reports
on Form 10-Q for the fiscal quarters ended February 28, May 30, and August 31,
1997 and all other documents (collectively, the "SIRCO Disclosure Documents")
requested by CLEC, has carefully reviewed the SIRCO Disclosure Document in their
entirety, and CLEC has had access to the same kind of information with respect
to SIRCO that would be available in a registration statement filed by SIRCO
under the Act.
xiv. CLEC has taken no action which would give rise to any
claim by any person for brokerage commissions, finders' fees or the like
relating to this Agreement or the transactions contemplated hereby.
xv. CLEC is acquiring the SIRCO Shares solely for its own
account for investment and not with a view to resale or distribution.
xvi. CLEC meets the requirements of at least one of the
suitability standards for an "accredited investor" as defined in the Act.
<PAGE>
xvii. CLEC acknowledges that neither SIRCO nor any person
acting on SIRCO's behalf has made any representations to CLEC except as
contained in the Disclosure Documents or otherwise confirmed in writing by the
Chief Executive Officer of SIRCO; and in making its decision to purchase the
SIRCO Shares, CLEC has not relied on any representations or information other
than those which CLEC has independently investigated and verified to its
satisfaction.
xviii. CLEC shall furnish to SIRCO on or before December 31,
1997 audited financial statements for the year ended October 31, 1997 prepared
in accordance with generally accepted accounting principles and shall cooperate
with SIRCO in connection with its filing of a current report on Form 8-K and
related materials as required by the Securities Exchange Act of 1934, as
amended, reporting the transactions contemplated by this Agreement.
b. SIRCO hereby represents, warrants and covenants as follows:
i. SIRCO is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York. Except as disclosed in
the SIRCO Disclosure Documents, SIRCO has no subsidiaries. SIRCO has full
corporate power, right and authority to own its assets, conduct its business as
and where such business is presently conducted, and SIRCO has full corporate
power, right and authority to enter into and perform its obligations under this
Agreement without the consent, approval or authorization of, or obligation to
notify, any person, entity or governmental agency.
ii. The execution, delivery and performance of this Agreement
by SIRCO of the transactions contemplated hereby: (A) have been duly authorized
by all necessary corporate actions on the part of SIRCO, (B) will not violate
any provision of the Certificate of Incorporation or Bylaws of SIRCO, (C) will
not violate or conflict with or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or will not result
in the termination or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
SIRCO's assets or capital stock under any term or provision of the Certificate
of Incorporation or Bylaws of SIRCO or any contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which SIRCO is
a party or by which SIRCO or any of its assets or properties may be bound or
affected and (iv) will not violate or be in conflict with any law, rule, or
regulation, or any judgment, decree, injunction or order, applicable to SIRCO.
This Agreement is the legal, valid and binding obligation of SIRCO, enforceable
against SIRCO in accordance with its terms.
iii. True, correct and complete copies of the Certificate of
Incorporation and the Bylaws of SIRCO are set forth in Exhibit 2.b.iii.
iv. The authorized capital stock of SIRCO consists exclusively
of 10,000,000 shares of common stock, each such share having a par value of $.10
("SIRCO Common Stock") and 1,000,000 shares of preferred stock, each such share
having a par value of $.10. Immediately prior to the closing of this transaction
and the issuance of SIRCO Shares to CLEC, SIRCO has 3,875,400 shares of SIRCO
Common Stock issued and outstanding. Neither the Certificate of Incorporation
nor Bylaws of SIRCO restrict the issuance of authorized capital stock, except
that the authorization to increase the number of authorized shares of capital
stock and modification of the rights of the stockholders requires amendment to
the Certificate of Incorporation which must be approved by the holders of a
majority of SIRCO's Common Stock.
<PAGE>
v. Upon issuance to CLEC, the SIRCO Shares will: be duly
authorized, validly issued, fully paid for, and nonassessable; evidence and
represent 375,000 shares of SIRCO Common Stock; and constitute eight and eight
tenths (8.8%) percent of SIRCO's issued and outstanding common stock (assuming
no issuances of additional shares pursuant to the proviso in Section 1,
hereinabove). In the event of dissolution, liquidation or winding up of SIRCO,
whether voluntary or involuntary, the holders of SIRCO Common Stock then
outstanding are entitled to share ratably in all assets of SIRCO available for
distribution after the payment of SIRCO's outstanding obligations. Holders of
shares of SIRCO Common Stock are entitled to receive dividends when, as and if
declared by SIRCO's Board of Directors out of funds legally available therefor.
There are no preemptive rights, conversion rights, redemption provisions or
sinking fund provisions relating to SIRCO Common Stock or inuring to the holders
thereof.
vi. Other than as disclosed in the SIRCO Disclosure Documents,
SIRCO is not authorized to issue any other equity interest in SIRCO.
vii. Other than as disclosed in the SIRCO Disclosure
Documents, there are no options, warrants, or rights outstanding for the
purchase or acquisition of any shares of the capital stock of SIRCO or any
securities or rights outstanding convertible or exchangeable into any shares of
such capital stock.
viii. The SIRCO Shares will be issued in the name of CLEC.
Upon issuance by SIRCO of the SIRCO Shares to CLEC as provided herein, CLEC will
acquire from SIRCO good and marketable title to the SIRCO Shares, free and clear
or any lien, encumbrance, security interest, claim, pledge, option, restriction,
charge or equity of any nature whatsoever, except for the restrictions on
transfer contemplated by Section 1 of this Agreement.
ix. Other than the as disclosed in the SIRCO Disclosure
Documents, SIRCO has good and marketable title to all of the assets, business
and properties of SIRCO that are used in or useful to the operations of its
business as same shall exist on the date of this Agreement.
x. In connection with conducting its business, SIRCO is in
compliance, to the best of its knowledge, with all applicable laws, rules and
regulations and has not received notice of any alleged violations of such laws,
rules or regulations with respect to its business which have not been corrected
or otherwise resolved.
xi. There is no material fact relevant to the business of
SIRCO or its future prospects that have not been set forth herein or otherwise
disclosed to CLEC, the existence of which would have a material adverse affect
on SIRCO's business or could result in liability (other than CLEC's obligations
hereunder) to CLEC. None of the information included herein or in the SIRCO
Disclosure Documents, taken as a whole, contain any untrue statement of a
material nature or is misleading in any material respect or omits to state a
material fact necessary in order to make any of the statements herein or therein
not materially misleading. Except as otherwise provided for in this Agreement,
CLEC acknowledges that SIRCO has not made any representations or warranties as
the value of SIRCO.
<PAGE>
xii. SIRCO understands that none of the CLEC Shares are
registered under the Act, any state securities laws or any foreign securities
laws. SIRCO understands that the offering and sale of the CLEC Shares is
intended to be exempt from registration under the Act by virtue of Section 4(2)
and/or Section 4(6) of the Act and the provisions of Regulation D promulgated
thereunder, based, in part, upon the representations, warranties and agreements
of SIRCO contained in this Agreement.
xiii. SIRCO has received copies of CLEC's Private Placement
Memorandum dated August 25, 1997 and all other documents (collectively, the
"CLEC Disclosure Documents") requested by SIRCO, has carefully reviewed the CLEC
Disclosure Document in their entirety, and SIRCO has had access to the same kind
of information with respect to CLEC that would be available in a registration
statement filed by CLEC under the Act.
xiv. SIRCO has taken no action which would give rise to any
claim by any person for brokerage commissions, finders' fees or the like
relating to this Agreement or the transactions contemplated hereby.
xv. SIRCO is acquiring the CLEC Shares solely for its own
account for investment and not with a view to resale or distribution.
xvi. SIRCO meets the requirements of at least one of the
suitability standards for an "accredited investor" as defined in the Act.
xvii. SIRCO acknowledges that neither CLEC nor any person
acting on CLEC's behalf has made any representations to SIRCO except as
contained in the Disclosure Documents or otherwise confirmed in writing by the
Chief Executive Officer of CLEC; and in making its decision to purchase the CLEC
Shares, SIRCO has not relied on any representations or information other than
those which SIRCO has independently investigated and verified to its
satisfaction.
3. BOARD REPRESENTATION.
So long as SIRCO beneficially owns at least 1,000,000 of CLEC Common
Stock, SIRCO shall be permitted to designate one candidate for election to the
Board of Directors of CLEC, which candidate shall be supported for election by
the management and Board of Directors of CLEC. Such designee shall be entitled
to reimbursement for all out-of-pocket expenses incurred in attending meetings
of the Board of Directors of CLEC or any subsidiary thereof or any committee
thereof, including, but not limited to, food, lodging and transportation costs.
The designee shall have the right to notice of and the right to attend all
meetings or the Board of Directors of CLEC and of each subsidiary thereof and
all committees thereof. Such designee shall also serve on CLEC's audit and
compensation committees. To the extent permitted by the laws of the jurisdiction
of incorporation of CLEC and the Federal securities laws, CLEC agrees to
indemnify SIRCO and its designee as a director of CLEC to the fullest extent
permitted by law. In the event CLEC maintains liability insurance coverage
affording coverage for the acts of its officers and directors, CLEC agrees to
include SIRCO and its designee as an insured under such policy.
4. REGISTRATION RIGHTS.
Concurrently with the execution and delivery of this Agreement, the
parties hereto shall execute and deliver a registration rights agreement in the
form annexed as Exhibit A hereto.
<PAGE>
5. GENERAL PROVISIONS.
a. All of the terms and provision of this Agreement, whether so
expressed or not shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective personal representatives, legal
representatives, heirs, successors and permitted assigns.
b. 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.
c. The obligations of the parties hereunder shall not be modified or
waived except by an instrument in writing signed by the party against whom any
such modification or waiver is sought.
d. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York without regard to its conflicts of
laws principles.
e. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given, in either case, at the address set forth on the signature page hereof or
at such other address as either party shall have furnished in writing to the
other party in accordance with the provisions of this section.
f. The representations and warranties made in this Agreement shall
survive the execution and delivery hereof and the consummation of the
transactions contemplated hereby.
g. Each provision of this Agreement shall be considered separable and
if for any reason any provision or provisions hereof shall be determined to be
invalid or contrary to applicable law, such invalidity shall not impair the
operation of or affect the remaining portions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year set forth above.
CLEC HOLDING CORP. SIRCO INTERNATIONAL CORP.
3427 NW 55th Street 24 Richmond Hill Avenue
Ft. Lauderdale, FL 33309 Stamford, CT 06901
By: ___________________ By: ______________________
Name: ___________________ Name: ______________________
Title: ___________________ Title: ______________________
<PAGE>
AMENDMENT
This Amendment to that certain Stock Purchase Agreement dated as of
October 22, 1997 by and between CLEC HOLDING CORP. ("CLEC"), a New Jersey
corporation, and SIRCO INTERNATIONAL CORP. ("SIRCO"), a New York corporation is
made this 22nd day of October, 1997.
INTRODUCTION
I. CLEC and SIRCO entered into a Stock Purchase Agreement to reflect a
relationship which would allow SIRCO to include solicitation and promotional
inserts in The Other Phone Company, Inc. monthly local telephone bills and to
jointly develop and mutually benefit from such other marketing efforts as are
appropriate.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree to amend such Stock Purchase
Agreement as follows:
1. COOPERATION The parties hereto agree that in the event either party seeks to
engage in a subsequent transaction with respect to either of the CLEC Shares or
the SIRCO Shares, each shall cooperate with the other and, to the extent
permitted by law, execute such documents and provide such opinions as are
required to effectuate the transaction.
2. All other terms and conditions shall remain the same.
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Stock Purchase Agreement on the date and year set forth above.
CLEC HOLDING CORP. SIRCO INTERNATIONAL CORP.
3427 NW 55th Street 24 Richmond Hill Avenue
Ft. Lauderdale, FL 33309 Stamford, CT 06901
By: ___________________ By: ______________________
Name: ___________________ Name: ______________________
Title: ___________________ Title: ______________________
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
October 22,1997, is by and between CLEC HOLDING CORP., a New Jersey corporation
(the "Company"), and SIRCO INTERNATIONAL CORP., a New York corporation (the
"Investor").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock Purchase Agreement dated as of October
22, 1997 between the Company and the Investor, the Company has issued to the
Investor 3,000,000 shares (the "Shares") of its Common Stock, par value $.001
per share (the "Common Stock");
WHEREAS, the Company has agreed to provide the Investor with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement, capitalized terms used
herein shall have the meanings set forth in the preambles hereto, and in this
Section 1 and the other sections hereto.
1.1 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.3 "Holder" shall mean any registered holder, from time to
time, of Registrable Securities.
1.4 "Initial Public Offering" shall mean the sale of shares of
Common Stock pursuant to the Company's first effective registration statement
for such shares filed under the Securities Act following the date hereof.
1.5 "Initiating Holders" shall mean any Holder or Holders who,
in the aggregate, are Holders of Registrable Securities representing at least
fifty percent (50%) of the Registrable Securities then outstanding, and who
initiate a request pursuant to Section 2.1 below for the registration of all or
part of such Holder or Holders' Registrable Securities.
1.6 "Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind.
1.7 "Register", "registered" and "registration" shall, except
with respect to Section 1.4 hereof, refer to a registration effected by
preparing and filing a registration statement with the Commission in compliance
with the Securities Act and applicable rules and regulations thereunder, and the
declaration or ordering of the effectiveness of such registration statement by
the Commission.
<PAGE>
1.8 "Registrable Securities" shall mean any of the following
which are held by any Holder: (a) shares of Common Stock that are issued
pursuant to the Stock Purchase Agreement, (b) shares of Common Stock then
outstanding that were issued as, or upon the conversion or exercise of other
securities issued as, a dividend or other distribution with respect to or in
replacement of other Registrable Securities, (c) shares of Common Stock then
issuable upon the conversion or exercise of other securities that were issued as
a dividend or other distribution with respect to or in replacement of other
Registrable Securities, and (d) any equity securities of the Company issued or
issuable with respect to the securities referred to in clauses (a) through (c)
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization;
provided, however, that any such Registrable Securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities have been disposed of in accordance with such registration
statement, (ii) such securities shall have been sold as permitted by Rule 144
(or any successor provision) under the Securities Act, (iii) such securities
shall be eligible for sale pursuant to Rule 144(k) (or any successor provision)
under the Securities Act as confirmed in a written opinion of counsel to the
Company addressed to the Ho1ders, (iv) such securities shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent public
distribution of such securities shall not require registration of such
securities under the Securities Act, or (v) such securities shall have ceased to
be outstanding. For purposes of this Agreement, a Person will be deemed to be a
Holder of Registrable Securities whenever such Person has the unqualified right
to acquire such Registrable Securities (by conversion, redemption or otherwise,
but disregarding any legal restrictions upon the exercise of such right) whether
or not such acquisition has actually been effected.
1.9 "Registration Expenses" shall mean all expenses incurred
by the Company in compliance with this Agreement, exc1uding underwriters'
discounts and commissions but including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, and the fees and expenses of one counsel for all Holders, all blue sky
fees and expenses, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
1.10 "Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
1.11 "Selling Expenses" shall mean all underwriting discounts
and commissions applicable to the sale of Registrable Securities; provided,
however, that if Company Shares, Additional Shares or Other Securities are sold
in the same registration statement as Registrable Securities, the Selling
Expenses shall equal the product of (A) the underwriting discounts and
commissions applicable to the offering pursuant to such registration statement
multiplied by (B), a fraction, the numerator of which is the fair market value
of the Registrable Securities being sold thereunder and the denominator of which
is the fair market value of the Registrable Securities, Company Shares,
Additional Shares and Other Securities being sold thereunder.
<PAGE>
1.12 Certain Other Defined Terms. The following terms shall
have the meanings ascribed to them in the sections indicated below:
Defined Term Section
Additional Shares 2.2
Company Offering 2.1
Company Shares 2.2
Demand Registration Notice 2.1
Indemnified Party 6.3
Indemnifying Party 6.3
Other Securities 3.1
Other Shareholders 2.5
2. Requested Registration.
2.1 Request for Registration. At any time after the
consummation of the Initial Public Offering, upon written notice from Initiating
Holders requesting that the Company effect any registration with respect to all
or part of the Registrable Securities held by such Initiating Holders, the
Company shall (a) promptly give written notice of the proposed registration to
all other Holders (the "Demand Registration Notice") and (b) as soon as
practicable but not later than sixty (60) days after receipt of the request from
the Initiating Holders, use its best efforts and take all appropriate action to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
the blue sky or other state securities laws requested by Initiating Holders and
appropriate compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request given within thirty (30) days after receipt of the Demand
Registration Notice; provided, however, that:
(i) in no event shall the Company be required to effect, or to
take any action to effect, any such registration pursuant to this
Section 2 after the second such registration pursuant to this Section 2
has been declared or ordered effective;
(ii) if the Company shall have previously effected a
registration with respect to Registrable Securities owned by any Holder
pursuant to this Section 2, the Company shall not be required to effect
a registration pursuant to this Section 2 until a period of six (6)
months shall have elapsed from the effective date of the most recent
such previous registration; provided, however, that no registration of
Registrable Securities under this Section 2 shall relieve the Company
of its obligation (if any) to effect registrations of Registrable
Securities pursuant to Section 3 below;
(iii) if, upon receipt of a registration request pursuant to
this Section 2, the Company is advised in writing by a nationally
recognized independent investment banking firm selected by the Company
to act as lead underwriter in connection with a public offering of
securities by the Company (a "Company Offering") that, in such firm's
opinion, a registration at the time and on the terms requested would
<PAGE>
materially adversely affect such Company Offering that had been
contemplated by the Company prior to the notice of the Initiating
Holders, the Company shall not be required to effect a registration
pursuant to this Section 2 until the earliest of (A) three months after
the completion of such Company Offering, (B) the termination of any
"black out" period, if any, required by the underwriters to be
applicable to any Holder who has requested to have any Registrable
Securities registered in connection with such registration, (C)
promptly after abandonment of such Company Offering or (D) four months
after the date of written notice from the Initiating Holders demanding
registration pursuant to this Section 2; and
(iv) if, while a registration request is pending pursuant to
this Section 2, the Company determines, in the good faith judgment of
the Board of Directors of the Company, with the advice of counsel, that
the filing of a registration statement would require the disclosure of
nonpublic material information the disclosure of which would have a
material adverse effect on the Company or would otherwise adversely
affect a material financing, acquisition, disposition, merger or other
significant transaction, the Company shall deliver a certificate to
such effect signed by its President or any Vice President to the
proposed selling Holders and the Company shall not be required to
effect a registration pursuant to this Section 2 until the earlier of
(A) the date upon which such material information is disclosed to the
public or ceases to be material or (B) 90 days after the Company makes
such good faith determination.
2.2 Additional Shares to be Included. The registration
statement filed pursuant to the request of the Initiating Holders may, subject
to the provisions of Section 2.5 below, include (a) other securities of the
Company (the "Additional Shares") which are held by officers or directors of the
Company or which are held by Persons who, by virtue of agreements with the
Company, are entitled to include their securities with the Holders referred to
in Section 2.1 above, and (b) securities of the Company being sold for the
account of the Company (the "Company Shares").
2.3 Withdrawal of Registration. If the Initiating Holders
inform the Company by written notice that they are withdrawing their
registration request made pursuant to Section 2.1 above and the Initiating
Holders pay all of the Company's out-of-pocket expenses with respect to such
registration incurred to the date of such notice, then the registration
statement need not be filed and all efforts pursuant to this Agreement will not
count as a registration (or an exercise of rights) under this Section 2;
provided, however, that if the Company decides to go forward with the
registration on its own behalf, or on behalf of any other shareholders, then the
Initiating Holders shall not be required to pay any of the Company's
out-of-pocket expenses and such registration will not count as a registration
(or an exercise of rights) under this Section 2.
2.4 Underwriting.
(a) 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 2 and the Company shall include such information in the Demand
Registration Notice, and such Demand Registration Notice shall also state that
<PAGE>
inclusion of each Holder's Registrable Securities in the registration to which
such Demand Registration Notice applies shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein and
subject to the limitations provided herein. A Holder may elect to include in
such underwriting all or a part of such Holder's Registrable Securities.
(b) If the Registrable Securities are to be distributed by
means of an underwriting, the Company shall (together with all Holders,
officers, directors and Other Shareholders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders.
2.5 Limitations on Shares to be Included.
(a) Notwithstanding any other provision of this Section 2,
if the representative of the underwriters advises the Company or the Initiating
Holders in writing that marketing factors require a limitation on the number of
shares to be underwritten or that the inclusion of Additional Shares or Company
Shares may adversely affect the sale price (of the shares to be registered) that
may be obtained, first the Additional Shares shall be excluded from such
registration to the extent so required by such limitation, then the Company
Shares shall be excluded from such registration to the extent so required by
such limitation, and if a limitation of the number of shares is still required,
the number of shares that may be included in the registration and underwriting
shall be allocated among all Holders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities which they have requested to be
included in such registration statement.
(b) If the Company or any Holder of Registrable
Securities, or holder of Additional Shares (collectively, the "Other
Shareholders") who has requested inclusion in such registration as provided
above disapproves of the terms of any such underwriting, such Person may elect
to withdraw such Person's Registrable Securities, Additional Shares or Company
Shares therefrom by written notice to the Company, the underwriter and the
Initiating Holders. If the withdrawal of any Registrable Securities, Additional
Shares or Company Shares would allow, within the marketing limitations set forth
above, the inclusion in the underwriting of a greater number of shares of
Registrable Securities, Company Shares or Additional Shares, then, to the extent
practicable and without delaying the underwriting, the Company shall offer first
to the Holders and second to the Other Shareholders an opportunity to include
additional shares of Registrable Securities, Company Shares or Additional
Shares, as the case may be, in the proportions discussed above.
3. Company Registration
3.1 If the Company shall determine to register any of its
shares of Common Stock or other securities ("Other Securities") issued by it
having terms substantially similar to the Common Stock, either for its own
account or the account of a security holder or holders exercising any demand
registration rights, other than a registration relating solely to employee
benefit plans or a registration relating solely to a Rule 145 (under the
Securities Act) transaction, the Company will:
<PAGE>
(a) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends
to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(b) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or requests made by any Holder within twenty (20)
days after receipt of the written notice from the Company described in
clause (a) above, except as set forth in Section 3.3 below. Such
written request may specify all or a part of a Holder's Registrable
Securities.
3.2 Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.1(a). The right of any Holder to require registration
pursuant to this Section 3 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and any officers, directors or Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
3.3 Limitations on Shares to be Included. With respect to
Company registrations, notwithstanding any other provision of this Section 3, if
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation or elimination on the number of shares to
be underwritten, the representative may (subject to the allocation priority set
forth below) limit the number of Registrable Securities to be included in the
registration and underwriting. The Company shall so advise all Holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated as follows: first, to the Company for securities being sold for its
own account or to the security holder or holders exercising any demand
registration rights on such security holder or holders' account, second, among
all such Holders requesting registration, and third, among all Other
Shareholders requesting registration pursuant to the exercise of piggyback
registration rights, in each case in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities or Additional Shares which they
had requested to be included in such registration at the time of filing the
registration statement. If any Holder of Registrable Securities or any Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter.
3.4 Withdrawal from Registration. Any Holder requesting
inclusion of Registrable Securities pursuant to this Section 3 may, at any time
prior to the effective date of the registration statement relating to such
registration, revoke such request by delivering written notice of such
revocation to the Company; provided, however, that if the Company, in
consultation with its financial and legal advisors, determines that such
revocation would materially delay the registration or otherwise require a
recirculation of the prospectus contained in the registration statement, then
such Holder shall have no such right to revoke its request. If the withdrawal of
<PAGE>
any Registrable Securities or Additional Shares would allow, within the
marketing limitations set forth above, the inclusion in the underwriting of a
greater number of shares of Registrable Securities or Additional Shares, then,
to the extent practicable and without delaying the underwriting, the Company
shall offer to the Holders and to the Other Shareholders an opportunity to
include additional shares of Registrable Securities or Additional Shares, as the
case may be, in the proportions discussed in Section 3.3 above.
3.5 Termination or Withdrawal by Company. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
4. Expenses of Registration. All Registration Expenses incurred in
connection with the registration or qualification of, or compliance with, any
registration statement under Sections 2 and 3 of this Agreement shall be borne
by the Company. All Selling Expenses shall be borne pro rata by each Holder in
accordance with the number of shares sold.
5. Registration Procedures.
5.1 In the case of each registration to be effected by Company
pursuant to this Agreement, the Company will keep each Holder advised in writing
as to the initiation of each registration and all amendments thereto and as to
the completion thereof, advise any such Holder, upon request, of the progress of
such proceedings, use its best efforts to effect the registration of any
Registrable Securities under the Securities Act, and will, at its expense:
(a) Prepare and file with the Commission a registration
statement covering such Registrable Securities and use its best efforts
to cause such registration statement to be declared effective by the
Commission and to keep such registration effective for a period of
three hundred sixty-five (365) days or until the Holder or Holders have
completed the distribution described in the registration statement
relating thereto, whichever first occurs; provided, however, that the
Company shall keep such registration effective for longer than three
hundred sixty-five (365) days if the costs and expenses associated with
such extended registration are borne entirely by the selling Holders;
(b) Prepare and file with the Commission 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 and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities
covered by such registration statement until such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement;
(c) Furnish to each seller of Registrable Securities covered
by such registration statement and each Holder two conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller or Holder, as the case may be, may reasonably request;
<PAGE>
(d) Promptly notify each seller of Registrable Securities
covered by such registration statement and each Holder at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such states of the United States of America where an exemption is not
available and as the sellers of Registrable Securities covered by such
registration statement shall reasonably request, (ii) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect and (iii) to take any other
action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the
securities to be sold by such sellers; provided, however, that the
Company shall not for any such purpose be required to (x) qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this clause (e) be
obligated to be so qualified, (y) subject itself to taxation in any
such jurisdiction or (z) consent to general service of process in any
such jurisdiction; and provided, further, however, that the Company
shall not be required to register or qualify Registrable Securities
covered by a registration statement pursuant to Section 3 hereof in any
jurisdiction that is not included in the list provided as part of the
written notice given pursuant to Section 3.1(a) unless the Company is
registering other securities covered by such registration statement in
such jurisdiction;
(f) Use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the
Company and counsel to the seller or sellers of Registrable Securities
to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities;
(g) Use its best efforts to list all such Registrable
Securities registered in such registration on each securities exchange
or automated quotation system on which the Common Stock of the Company
is then listed;
(h) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities and a CUSIP number for all
such Registrable Securities, in each case not later than the effective
date of such registration;
<PAGE>
(i) Make available for inspection by any seller of Registrable
Securities and each Holder, any underwriter participating in any
disposition pursuant to such registration statement, and any attorney
or accountant retained by any such seller, Holder or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information
reasonably requested by any such seller, Holder, underwriter, attorney
or accountant in connection with such registration statement, which
information shall be subject to reasonable restrictions concerning
confidentiality and non-disclosure;
(j) Furnish to each selling Holder upon request a signed
counterpart, addressed to the selling Holder, of
(i) an opinion of counsel for the Company, dated the
effective date of the registration statement and in form
reasonably acceptable to the Company and such Holder, and
(ii) "comfort" letters signed by the Company's
independent public accountants who have examined and reported
on the Company's financial statements included in the
registration statement, to the extent permitted by the
standards of the American Institute of Certified Public
Accountants,
in the case of (i) and (ii) covering substantially the same
matters with respect to the registration statement (and the
prospectus included therein) and in the case of the
accountants' "comfort" letters with respect to events
subsequent to the date of the financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' "comfort" letters delivered to the underwriters
in underwritten public offerings of securities;
(k) Furnish to each selling Holder a copy of all
correspondence from or to the Commission in connection with any such
offering;
(1) 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 Registrable 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; and
(m) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and, if required,
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first month after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder.
<PAGE>
5.2 It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this agreement that the Holders
proposing to register Registrable Securities shall furnish to the Company such
information regarding them, the Registrable Securities held by them, and the
intended method of distribution of such Registrable Securities as the Company
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.
5.3 In connection with the preparation and filing of each
registration statement under this Agreement, the Company will give the Holders
on whose behalf such Registrable Securities are to be registered and their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each such Holder such
access to the Company's books and records and such opportunities to discuss the
business of the Company with its officers, its counsel and the independent
public accountants who have certified the Company's financial statements, as
shall be necessary, in the opinion of such Holders or such underwriters or their
respective counsel, in order to conduct a reasonable and diligent investigation
within the meaning of the Securities Act. Without limiting the foregoing, each
registration statement, prospectus, amendment, supplement or any other document
filed with respect to a registration under this Agreement shall be subject to
review and reasonable approval by the Holders registering Registrable Securities
in such registration and by their counsel.
6. Indemnification.
6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will indemnify and hold harmless each Holder, each of its officers,
directors, partners, employees, agents, attorneys and consultants and each
Person controlling such Holder, and each underwriter, if any, and each Person
who controls any underwriter, against all claims, losses, damages and
liabilities, joint and several (or actions, proceedings or settlements in
respect thereof) arising out of or based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, 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, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its officers, directors and partners, and each Person controlling such
Holder, each such underwriter and each Person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission made in reliance
upon and based upon written information furnished to the Company by such Holder
or underwriter and expressly stated to be specifically for use therein.
<PAGE>
6.2 Indemnification by the Holders. Each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
severally and not jointly, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each Person who controls the Company (other than
such Holder) or such underwriter within the meaning of the Securities Act and
the rules and regulations thereunder, each other such Holder and each of their
officers, directors and partners, and each Person controlling such Holder or
other stockholder, against all claims, losses, damages, expenses and liabilities
(or actions in respect thereof) arising out of or based upon any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, each of its directors and officers, each underwriter
or control Person, each other Holder and each of their officers, directors and
partners and each Person controlling such Holder or other shareholder for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and expressly stated to be specifically for use therein; provided, however, that
the liability of any such Holder under this Section 6.2 shall be limited to the
amount of proceeds received by such Holder in the offering giving rise to such
liability.
6.3 Notices of Claims, Procedures etc.Each party entitled to
indemnification under this Section 6 (the "Indemnified Party") shall give notice
to the party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided,
that counsel for the Indemnifying Party who shall conduct the defense of such
claim or any litigation resulting therefrom shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at the Indemnified Party's sole expense;
provided, further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6 unless such failure is prejudicial to the ability of the
Indemnifying Party to defend such claim or action. Notwithstanding the
foregoing, such Indemnified Party shall have the right to employ its own counsel
in any such litigation, proceeding or other action if (i) the employment of such
counsel has been authorized by the Indemnifying Party, in its sole and absolute
discretion, or (ii) the named parties in any such claims (including any
impleaded parties) include any such Indemnified Party and the Indemnified Party
and the Indemnifying Party shall have been advised in writing (in suitable
detail) by counsel to the Indemnified Party either (A) that there may be one or
more legal defenses available to such Indemnified Party which are different from
or additional to those available to the Indemnifying Party, or (B) that there is
a conflict of interest by virtue of the Indemnified Party and the Indemnifying
Party having common counsel, in any of which events, the legal fees and expenses
of a single counsel for all Indemnified Parties with respect to each such claim,
<PAGE>
defense thereof, or counterclaims thereto, shall be borne by the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement (x) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation, or (y) which requires action other than the payment of money by the
Indemnifying Party. Each Indemnified Party shall cooperate to the extent
reasonably required and furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
6.4 Contribution. If the indemnification provided for in this
Section 6 shall for any reason be held by a court to be unavailable to an
Indemnified Party under Section 6.1 or 6.2 hereof in respect of any loss, claim,
damage or liability, or any action in respect thereof, then, in lieu of the
amount paid or payable under Section 6.1 or 6.2, the Indemnified Party and the
Indemnifying Party under Section 6.1 or 6.2 shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault of the Company and
the prospective sellers of Registrable Securities covered by the registration
statement which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, as well as any other relevant equitable considerations or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering of the
securities covered by such registration statement; provided, that for purposes
of this clause (ii), the relative benefits received by the prospective sellers
shall be deemed not to exceed the amount of proceeds received by such
prospective sellers. 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. Such prospective sellers' obligations to contribute as
provided in this Section 6.4 are several in proportion to the relative value of
their respective Registrable Securities covered by such registration statement
and not joint. In addition, no Person shall be obligated to contribute hereunder
any amounts in payment for any settlement of any action or claim effected
without such Person's consent, which consent shall not be unreasonably withheld.
7. Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
8. Transfer or Assignment of Registration Rights. The rights with
respect to any Registrable Securities to cause the Company to register such
securities granted to a Holder by the Company under this Agreement may be
transferred or assigned by a stockholder, in whole or in part, to a transferee
or assignee of any Registrable Securities and, in such case, the Company shall
be given written notice stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned.
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9. Rule 144 and Rule 144A. At such time as the Company becomes subject
to the reporting requirements of the Exchange Act, the Company shall file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder, and will
take all actions reasonably necessary to enable holders of Registrable
Securities to sell such securities without registration under the Securities Act
within the limitation of the provisions of (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, (b) Rule 144A under the
Securities Act, as such Rule may be amended from time to time, if applicable or
(c) any similar rules or regulations hereafter adopted by the Commission. Upon
the request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
10. Specific Performance. Each Holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
11. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement.
Without limiting the generality of the foregoing, the Company will not hereafter
enter into any agreement with respect to its securities which grants, or modify
any existing agreement with respect to its securities to grant, to the holder of
its securities in connection with an incidental registration of such securities
equal or higher priority to the rights granted to the Investors under Section 3
of this Agreement.
12. Benefits of Agreement: Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, legal representatives and heirs; this
Agreement does not create, and shall not be construed as creating, any rights
enforceable by any other Person.
13. Complete Agreement. This Agreement constitutes the complete
understanding among the parties with respect to its subject matter and
supersedes all existing agreements and understandings whether oral or written,
among them. No alteration or modification of any provisions of this Agreement
shall be valid unless made in writing and signed by a majority in interest of
the Holders.
14. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this agreement.
15. Notices. All notices, offers, acceptances and other communications
required or permitted to be given or to otherwise be made to any party to this
Agreement shall be deemed to be sufficient if contained in a written instrument
delivered by hand, first class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery,
if to the Company, to it at CLEC Holding Corp., 3427 NW 55th Street, Ft.
Lauderdale, Florida 33309, Attention: President, and if to any Holder, to the
address of such Holder as set forth in the stock transfer books of the
Corporation.
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All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and the next business day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any party may change the address to which each such notice or communication
shall be sent by giving written notice to the other parties of such new address
in the manner provided herein for giving notice.
16. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
giving effect to the provisions, policies or principles thereof respecting
conflict or choice of laws.
17. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all of which taken
together shall constitute one and the same agreement.
18. Severability. Any provision of this Agreement which is determined
to be illegal, prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such illegality, prohibition or
unenforceability without invalidating the remaining provisions hereof which
shall be severable and enforceable according to their terms and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, as of the date first set the parties have signed
this Agreement forth above.
CLEC HOLDING CORP.
By: ____________________________
Name:
Title:
SIRCO INTERNATIONAL CORP.
By: ____________________________
Name:
Title:
