SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 2, 1996
ELECTRIC FUEL CORPORATION
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Delaware 0-23336 95-4302784
(State or Other Jurisdiction of (Commission File (IRS Employer Identification No.)
Incorporation) Number)
</TABLE>
885 Third Avenue, New York, New York 10022 - Suite 2900
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code (212) 230-2172
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
This is page 1 of 40 pages (including Exhibits).
Exhibit Index appears on page 6.
Page 1 of 40
<PAGE>
Item 5. Other Events
Pursuant to a Stock Purchase Agreement dated September 30, 1996 (the
"Agreement") between Electric Fuel Corporation (the "Company") and Mr. Leon S.
Gross, one of the Company's existing shareholders (the "Purchaser"), on October
2, 1996 the Company issued 1,538,462 shares of the Company's Common Stock, $.01
par value per share (the "Common Stock") to the Purchaser at a price of $6.50
per share, for a total purchase price of $10,000,003.00. The shares were issued
in a private placement under the Securities Act of 1933, as amended (the
"Securities Act") in reliance on the exemption therefrom provided by Section
4(2) of the Securities Act.
As a result of the private placement, Mr. Gross owns a total of
3,009,162 shares of Common Stock, or 20.2% of the Company, on a fully diluted
basis. Following the private placement, the Company has 14,900,495 shares of
Common Stock outstanding, on a fully diluted basis, compared to 13,362,033
shares on a fully diluted basis before the offering. The closing price on The
Nasdaq National Market for the Company's Common Stock on October 2, 1996 was $6
1/8 per share.
Pursuant to the terms of the Agreement, the Purchaser has agreed that
for a period of five (5) years from the Closing Date, neither the Purchaser nor
his Affiliates, as defined in the Securities Act, directly or indirectly or in
conjunction with or through any Associate (as defined in Rule 12b-2 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), will (i)
solicit proxies with respect to any capital stock or other voting securities of
the Company under any circumstances, or become a "participant" in any "election
contest" relating to the election of directors of the Company (as such terms are
used in Rule 14a-11 of Regulation 14A of the Exchange Act) or (ii) make an offer
for the acquisition of substantially all of the assets or capital stock of the
Company or induce or assist any other person to make such an offer or (iii) form
or join any "group" within the meaning of Section 13(d)(3) of the Exchange Act
with respect to any capital stock or other voting securities of the Company for
the purpose of accomplishing the actions referred to in clauses (i) and (ii)
above other than pursuant to the Voting Rights Agreement described below.
In connection with the Agreement, the Company and the Purchaser also
entered into a Registration Rights Agreement dated September 30, 1996, setting
forth the Purchaser's registration rights with respect to the shares of Common
Stock issued in connection with the offering. These rights include the right to
make two (2) demands for a shelf registration statement on Form S-3 ("Shelf
Registration Statement") for the sale of the Common Stock which may, subject to
certain customary limitations and requirements, be underwritten. In addition,
the Purchaser was granted the right to "piggyback" on registrations of the
Company's securities in an unlimited number of registrations. Also under the
Registration Rights Agreement, the Purchaser is subject to customary
underwriting lock-up requirements with respect to public offerings of the
Company's securities.
Pursuant to a Voting Rights Agreement dated September 30, 1996 (the
"Voting Rights Agreement"), between the Company, the Purchaser and certain
management shareholders, Robert S. Ehrlich (the Company's Chairman of the Board
and Chief Financial Officer) and
Page 2 of 40
<PAGE>
Yehuda Harats (the Company's President and Chief Executive Officer (the
"Management Stockholders"), Lawrence M. Miller, the Purchaser's advisor, will be
entitled to be nominated to serve on the Company's Board of Directors, so long
as the Purchaser, his heirs or assigns retains at least 1,375,000 shares of
Common Stock. As a result, the Company's Board of Directors will be increased to
a total of six members. In addition, under the Voting Rights Agreement, the
Purchaser and Messrs. Ehrlich and Harats agreed to vote and take all necessary
action so that Messrs. Ehrlich, Harats, and Miller shall serve as members of
the Board of Directors for a period of five (5) years covering the five (5)
Meetings of Stockholders following the offering. In addition, so long as Mr.
Miller serves as a director, the Purchaser, who shall succeed Mr. Miller
should he cease to serve on the Board, shall be entitled to attend and
receive notice of Board meetings. The Purchaser further agreed to vote, at
the Company's next Annual Meeting of Stockholders, and take any further
necessary action, in favor of an increase in shares authorized to be issued
upon exercise of options under the Company's 1993 Stock Option and Restricted
Stock Purchase Plan.
The foregoing descriptions of the Stock Purchase Agreement, the
Registration Rights Agreement and the Voting Rights Agreement are qualified in
their entirety by reference to the Stock Purchase Agreement, the Registration
Rights Agreement and the Voting Rights Agreement, respectively, copies of which
are attached to this report as Exhibits 4a, 4b and 4c, respectively, and are
incorporated herein by reference.
Page 3 of 40
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits. A list of exhibits required is given in the
Exhibit Index that precedes the exhibits filed
with this report.
Page 4 of 40
<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.
ELECTRIC FUEL CORPORATION
(Registrant)
By: /s/Robert S. Ehrlich
------------------------------------
Robert S. Ehrlich
Chairman and Chief Financial Officer
Date: October 4, 1996
Page 5 of 40
<PAGE>
EXHIBIT INDEX
The following exhibits are filed with the Current Report on Form 8-K.
Exhibit No. Description Sequential Page
Number
4a Stock Purchase Agreement between Electric
Fuel Corporation and Leon S. Gross, dated
September 30, 1996. (Incorporated by
reference)
4b Registration Rights Agreement between
Electric Fuel Corporation and Leon S. Gross,
dated September 30, 1996. (Incorporated by
reference)
4c Voting Rights Agreement between Electric
Fuel Corporation, Leon S. Gross, Robert S.
Ehrlich and Yehuda Harats, dated September
30, 1996. (Incorporated by reference)
99a Press Release re: Stock Purchase Agreement
between Electric Fuel Corporation and Leon
S. Gross, issued by Electric Fuel Corporation
on October 3, 1996.
Page 6 of 40
Exhibit 4a
ELECTRIC FUEL CORPORATION
Private Placement of Electric Fuel Corporation Common Stock
STOCK PURCHASE AGREEMENT
September 30, 1996
Mr. Leon S. Gross
c/o Enterprises, Inc.
River Park House
3600 Conshohocken Avenue
Philadelphia, PA 19131
Dear Leon:
Electric Fuel Corporation, a Delaware corporation (the "Company"),
proposes to sell to you (the "Purchaser") in a private placement (the
"Offering") 1,538,462 shares of its common stock, $.01 par value per share (the
"Common Stock"). In connection with and in consideration for the sale and
purchase of the Common Stock, the Company and the Purchaser agree to abide by
the mutual covenants contained herein.
1. Sale and Purchase of the Common Stock. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this stock purchase agreement (the "Agreement"), the
Company agrees to sell to the Purchaser, and the Purchaser agrees to purchase
from the Company, 1,538,462 shares of its Common Stock at a price of $6.50 per
share.
2. Delivery and Payment. On the Closing Date, the Purchaser will pay to
the Company $10,000,003.00 (the "Purchase Price"). Delivery of the Common Stock
by the Company to the Purchaser shall be made in accordance with Purchaser's
written instructions to be provided at least two days prior to such delivery and
payment of the Purchase Price shall be made by wire transfer in immediately
available funds in U.S. dollars to the Company's
Page 7 of 40
<PAGE>
account in accordance with the wire transfer instructions set forth on Annex I
hereto. The Closing of the Offering shall take place at the offices of Ropes &
Gray, One International Place, Boston, MA 02110 on October 2, 1996, or at such
time on such other date as shall be agreed upon by the Company and the
Purchaser. The day on which the Closing takes place shall be referred to herein
as the "Closing Date."
3. Offering of Common Stock. The Common Stock will be offered and sold
to you without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on the exemption therefrom provided by
Section 4(2) of the Securities Act.
The Purchaser will have the registration rights set forth in the
registration rights agreement by and among the Company and the Purchaser dated
the Closing Date (the "Registration Rights Agreement"), in substantially the
form of Exhibit A hereto. At the Closing, the Company and the Purchaser will
enter into the Registration Rights Agreement. At the Closing, the Company will
also enter into a voting rights agreement by and among the Company, the
Purchaser, Robert S. Ehrlich and Yehuda Harats dated the Closing Date (the
"Voting Rights Agreement"), in substantially the form of Exhibit B hereto. This
Agreement, the Registration Rights Agreement and the Voting Rights Agreement are
hereinafter referred to collectively as the "Operative Documents."
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state
of Delaware. The Company's wholly-owned Israeli subsidiary, Electric
Fuel (E.F.L.) Limited ("EFL"), is duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation. Each of the Company and EFL is
qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its assets or
properties (owned, leased or licensed) or the nature of its business
makes such qualification necessary, except for such jurisdictions where
the failure to so qualify, individually or in the aggregate, would not
have a material adverse effect on the assets or properties, business,
results of operations or financial condition, taken as a whole, of the
Company and EFL.
(b) All necessary corporate and shareholder action has been
duly and validly taken to authorize the execution, delivery and
performance of the Operative Documents by the Company. This Agreement
has been duly and validly authorized, executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles. The Registration Rights Agreement and
Page 8 of 40
<PAGE>
the Voting Rights Agreement have been duly and validly authorized, and
when executed and delivered, will constitute the legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
(c) Neither the execution, delivery and performance of the
Operative Documents by the Company nor the consummation of any of the
transactions contemplated hereby or thereby (including, without
limitation, the issuance and sale by the Company of the Common Stock)
will give rise to a right to terminate or accelerate the due date of
any payment due under, or conflict with or result in the breach of any
term or provision of, or constitute a default (or an event which with
notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or
imposition of any material lien, charge or encumbrance upon any
properties or assets of the Company pursuant to the terms of, any
material indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party or by which the Company or
any of its properties or businesses is bound, or any franchise,
license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company, or violate any provision of the charter or
by-laws of the Company or EFL, except for such consents or waivers that
have already been obtained and are in full force and effect, or require
any consent, approval, authorization or other order of or registration
or filing with, any court, regulatory body, administrative agency or
other governmental body, agency or official, or such consents or
waivers the failure to so obtain would not individually or in the
aggregate, have a material adverse effect upon the assets or
properties, business, results of operations or financial condition,
taken as a whole, of the Company and EFL.
(d) The entire authorized capital stock of the Company
consists of (i) 28,000,000 shares of Common Stock, of which 12,719,046
shares are issued and outstanding, and (ii) 1,000,000 shares of
preferred stock, $.01 par value per share (the "Preferred Stock"), of
which no shares are outstanding. No shares of Common Stock are held in
the Company's treasury. The shares of Common Stock outstanding have
been duly and validly issued, fully paid and nonassessable and have
been offered, issued and sold by the Company in compliance with
applicable state and federal securities laws. When issued and delivered
in accordance with the terms of this Agreement, the Common Stock to be
delivered to Purchaser hereunder will be duly authorized, validly
issued, fully paid and nonassessable. Except for the Company's 1991
Stock Option Plan, 1993 Stock Option and Restricted Stock Purchase Plan
and 1996 Amended and Restated Non-Employee Director Plan Stock Option
Plan, and options to purchase 7,286 shares of Common Stock issued to
consultants, there are no outstanding warrants, options or other rights
to purchase or acquire, or exchangeable for or convertible into, any
shares of Common Stock. Except as set forth in the
Page 9 of 40
<PAGE>
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 (the "1995 Form 10-K") and as provided in this Agreement, the
Voting Rights Agreement, or as set forth by applicable securities laws,
there are no restrictions on the transfer or voting of any shares of
the Company's Common Stock and no existing rights with respect to
registration under the Securities Act, of any of the Company's Common
Stock.
(e) The 1995 Form 10-K, the Company's Form 10-Q for the fiscal
period ended June 30, 1996 (the "1996 June Form 10-Q") and all
documents filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (such documents, together with the 1995
Form 10-K, 1996 June Form 10-Q are hereinafter referred to as the
"Exchange Act Documents") were filed in a timely manner and, when they
were filed (or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material
respects to the requirements of the Exchange Act, and the rules and
regulations thereunder, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Subsequent to the respective dates as of which information was given in
the Exchange Act Documents, except as described therein, there has not
been any material adverse change, and, to the Company's knowledge, no
event has occurred which with notice or lapse of time or both, that
would constitute such a material adverse change, in the assets or
properties, business, results of operations or financial condition of
the Company taken as a whole.
(f) There are no claims for brokerage commissions or finder's
fees on similar compensation in connection with the transactions by
this Agreement based on any arrangement or agreement made by or on
behalf of the Company, and the Company agrees to indemnify and hold the
Purchaser harmless against any damages incurred as a result of any such
claims.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to Company that:
(a) The Purchaser has full power and authority to execute,
deliver and perform each of this Agreement, the Registration Rights
Agreement and the Voting Rights Agreement. This Agreement constitutes a
valid and legally binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
(b) The Common Stock to be received by the Purchaser will be
acquired for investment for the Purchaser's own account, and not with a
view to the distribution of
Page 10 of 40
<PAGE>
any part thereof. The Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same. The
Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participation
to such person or to any third person, with respect to any of the
Common Stock.
(c) The Purchaser understands that the Common Stock may not be
sold, transferred, or otherwise disposed of without registration under
the Securities Act, or an exemption therefrom, and that in the absence
of an effective registration statement covering the Common Stock or an
available exemption from registration under the Securities Act, the
Common Stock must be held indefinitely. In the absence of an effective
registration statement covering the Common Stock, the Purchaser will
sell, transfer, or otherwise dispose of the Common Stock only in a
manner consistent with its representations and agreements set forth
herein.
(d) The Purchaser understands that the certificates evidencing
the Common Stock may bear substantially the following legends:
(i) "THE COMMON STOCK EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION
5 OF THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") AND APPLICABLE STATE
LAW, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM (IN EACH CASE BASED
UPON DOCUMENTATION SATISFACTORY TO THE
COMPANY, INCLUDING AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT
REGISTRATION UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE LAWS IS NOT
REQUIRED) OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT."
(ii) Any legend required by the Registration
Rights Agreement, the Voting Agreement or
any applicable law.
(e) The Purchaser is an "accredited investor" as such term is
defined in Rule 501(a)(1) promulgated pursuant to the Securities Act.
Page 11 of 40
<PAGE>
(f) The Purchaser's financial condition is such that he is
able to bear the risk of holding the Common Stock for an indefinite
period of time.
(g) The Purchaser has such knowledge and experience in
financial and business matters and in making high risk investments of
this type that he is capable of evaluating the merits and risks of the
purchase of the Common Stock.
(h) The Purchaser has been furnished access to the business
records of the Company and such additional information and documents as
the Purchaser has requested and has been afforded an opportunity to ask
questions of and receive answers from representatives of the Company
concerning the business, operations, market potential, capitalization,
financial condition and prospects, and all other matters deemed
relevant by the Purchaser.
(i) There are no claims for brokerage commissions or finder's
fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement
made by or on behalf of the Purchaser, and the Purchaser agrees to
indemnify and hold the Company harmless against any damages incurred as
a result of any such claims.
(j) The Purchaser acknowledges that the Company will rely upon
the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that, if any of the
acknowledgments, representations and agreements are no longer accurate,
he shall promptly notify the Company.
6. Conditions of the Purchaser's Obligations. The obligation of the
Purchaser to purchase the Common Stock is subject to each of the
following terms and conditions:
(a) The representations and warranties of the Company
contained in this Agreement shall be true and correct when made and on
and as of the Closing Date as if made on such date and the Company
shall have performed all covenants and agreements and satisfied all the
conditions contained in this Agreement required to be performed or
satisfied by it at or before the Closing Date.
(b) Receipt of an opinion by counsel to the Company in form
attached as Exhibit C hereto.
(c) The Company shall have executed and delivered the
Registration Rights Agreement and the Voting Rights Agreement and
delivered the Common Stock.
7. Conditions of the Company's Obligations. The obligation of the
Company to sell the Common Stock is subject to each of the following
terms and conditions:
Page 12 of 40
<PAGE>
(a) The representations and warranties of the Purchaser
contained in this Agreement shall be true and correct when made and on
and as of the Closing Date as if made on such date and the Purchaser
shall have performed all covenants and agreements and satisfied all the
conditions contained in this Agreement required to be performed or
satisfied by it at or before the Closing Date.
(b) Receipt by the Company of the Purchase Price from the
Purchaser.
(c) The Purchaser shall have executed and delivered the
Registration Rights Agreement and the Voting Rights Agreement.
8. Covenant of the Company. The Company covenants and agrees as
follows:
The Company shall use its reasonable best efforts to do and perform all
things required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date, and to satisfy all conditions precedent
to the delivery of the Common Stock.
9. Covenants of the Purchaser. The Purchaser covenants and agrees as
follows:
(a) The Purchaser shall use his reasonable best efforts to do
and perform all things required or necessary to be done and performed
under this Agreement by the Purchaser prior to the Closing Date, and to
satisfy all conditions precedent to the delivery of the Common Stock.
(b) The Purchaser agrees that from the date hereof until the
fifth anniversary of the Closing Date, he will not, and will not permit
any of his Affiliates, as defined in the Securities Act, to directly or
indirectly or in conjunction with or through any Associate (as defined
in Rule 12b-2 of the Exchange Act), (i) solicit proxies with respect to
any capital stock or other voting securities of the Company under any
circumstances, or become a "participant" in any "election contest"
relating to the election of directors of the Company (as such terms are
used in Rule 14a-11 of Regulation 14A of the Exchange Act) or (ii) make
an offer for the acquisition of substantially all of the assets or
capital stock of the Company or induce or assist any other person to
make such an offer or (iii) form or join any "group" within the meaning
of Section 13(d)(3) of the Exchange Act with respect to any capital
stock or other voting securities of the Company for the purpose of
accomplishing the actions referred to in clauses (i) and (ii) above
other than pursuant to the Voting Rights Agreement.
10. Miscellaneous. This Agreement has been and is made for the benefit
of the Purchaser and the Company, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser of
Common Stock from the Purchaser merely because of such purchase.
Page 13 of 40
<PAGE>
All notices and communications hereunder shall be in writing and mailed
or delivered or by telephone or telegraph if subsequently confirmed in writing,
(a) if to the Purchaser, Leon S. Gross, c/o Enterprises, Inc., River Park House,
3600 Conshohocken Avenue, Philadelphia, PA 19131, with a copy to: Lawrence M.
Miller, Esq., Schwartz, Woods & Miller, 1350 Connecticut Avenue, Washington,
D.C. 20036-1717; and (b) if to the Company, 885 Third Avenue, Suite 2900, New
York, NY 10022, with a copy to Winthrop Minot, Esq., Ropes & Gray, One
International Place, Boston, MA 02110.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to any conflicts or choice of
law principles which would cause the application of the internal laws of any
jurisdiction other than the State of Delaware.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
[THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
Page 14 of 40
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
ELECTRIC FUEL CORPORATION
By___________________________
Title:
Agreed and accepted:
LEON S. GROSS
- ----------------------------
Page 15 of 40
<PAGE>
Annex I
Wire Transfer Instructions
Details of the Electric Fuel Corporation account at Republic National Bank are
as follows:
Republic National Bank
452 Fifth Avenue
New York, NY
ABA # 021-004823
For credit to: Electric Fuel Corporation
Account #: 310303559
Page 16 of 40
Exhibit 4b
REGISTRATION RIGHTS AGREEMENT
Dated as of September 30, 1996
by and among
ELECTRIC FUEL CORPORATION
and
LEON S. GROSS
Common Stock of Electric Fuel Corporation
Page 17 of 40
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of September 30, 1996 by and among Electric Fuel Corporation, a
Delaware corporation (the "Company"), and Leon S. Gross (the "Purchaser") who
has on the date hereof purchased 1,538,462 shares (the "Shares") of the
Company's common stock, $.01 par value per share (the "Common Stock"), pursuant
to the Stock Purchase Agreement (as defined below).
This Agreement is made pursuant to the Stock Purchase Agreement by and
among the Company and the Purchaser dated September 30, 1996 (the "Stock
Purchase Agreement"). In order to induce the Purchaser to purchase the Shares,
the Company has agreed to provide the registration rights set forth in this
Agreement with respect to the Transfer Restricted Securities (as hereinafter
defined). The execution and delivery of this Agreement is a condition to the
obligations of the Purchaser set forth in Section 6 of the Stock Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The Borough of Manhattan, The City
of New York, New York are authorized or obligated by law or executive order to
close.
Closing Date: The date on which the Shares are purchased by the Purchaser.
Commission: The Securities and Exchange Commission.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holder: The Purchaser, or upon his death the executor or personal
representative, or similar legal representative of his estate (the
"Representative"), and then, after the Shares have been distributed to the
Purchaser's beneficiaries from the Representative, the single beneficiary who
receives the largest number of Shares under the Purchaser's last will and
testament.
Market Value: The average closing price of the Common Stock as reported
by The Nasdaq National Market System (as reported by The Wall Street Journal)
over the twenty trading days immediately preceding the date on which the
Purchaser makes a request under Section 3(c) hereof.
NASD: National Association of Securities Dealers, Inc.
Page 18 of 40
<PAGE>
Person: An individual, partnership, corporation, joint venture, trust, estate,
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Shelf Registration Statement
or any other registration statement filed with the Commission by the Company in
connection with Section 2(c)(ii) hereof, as amended or supplemented by any
prospectus supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by reference into such
Prospectus.
Securities Act: The Securities Act of 1933, as amended.
Transfer Restricted Securities: All Shares issued to the Purchaser
hereunder until (a) the date on which such shares have been effectively
registered under the Securities Act and disposed of in accordance with this
Agreement, or (b) the date on which such shares are distributed to the public
pursuant to Rule 144 under the Securities Act.
Underwritten Registration or Underwritten Offering: A registration in which
securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. REGISTRATION RIGHTS
(a) Shelf Registration. Upon the request of the Holder, the Company
shall file as promptly as practicable after the receipt of such request, a
registration statement on Form S-3 (the "Shelf Registration Statement")
providing for the sale by the Holder of the Transfer Restricted Securities,
pursuant to Rule 415 of the Commission under the Securities Act, and/or any
similar rule that may be adopted by the Commission. The Company agrees to use
its reasonable efforts to cause the Shelf Registration Statement to be declared
effective as promptly as practicable and to keep such Shelf Registration
Statement continuously effective (and the Prospectus contained therein current)
for a period of 270 days. So long as any such Shelf Registration Statement is
effective, any Holder desiring to sell Transfer Restricted Securities thereunder
shall give notice to the Company by facsimile transmission in accordance with
Section 6(b) hereof on the date of the initiation of the sale of such Transfer
Restricted Securities.
The Holder shall be entitled to make only two demands for a Shelf
Registration Statement hereunder. Upon the earlier of 270 days after the date on
which the second Shelf Registration Statement is first declared effective under
the Securities Act by the Commission and the date as of which the Holder no
longer continues to hold a greater number of shares of Common Stock than could
be sold in a three-month period within the limitations of Rule 144(e) under the
Securities Act, the obligations of the Company under this Agreement shall
terminate.
Page 19 of 40
<PAGE>
In the event the Company, in good faith, prepares and files with the
Commission a Shelf Registration Statement pursuant to the exercise of the
registration rights granted hereunder, and the Shelf Registration Statement is
not able to be declared effective, the Holder shall have the right to require
the Company to file one additional Shelf Registration Statement pursuant to this
Section 2, which third Shelf Registration Statement shall be at the Holder's
expense; provided that if the Shelf Registration Statement is not able to be
declared effective solely because the Company has not complied with its
obligations under this Agreement, such Shelf Registration Statement shall not be
counted for purposes of this Agreement.
The Company shall not be obligated to honor any such request for
registration under this Section 2 at any time (i) if, in the good faith judgment
of the Company's Board of Directors, such registration statement, Prospectus or
any document incorporated therein would not be in compliance with the Securities
Act and the regulations promulgated thereunder, (ii) starting with the date 30
days prior to the Company's good faith estimate of the date of filing of, and
ending on the date 180 days following the effective date of, a registration
statement in connection with a bona fide public offering of the Company's Common
Stock (or securities convertible into Common Stock) or (iii) if, in the good
faith judgment of the Company's Board of Directors, there is a material
development relating to the condition (financial or other) of the Company that
has not been disclosed to the general public. If the Company utilizes its rights
under clause (i) of this paragraph, it shall use reasonable efforts to cooperate
with the Holder, subject to clause (iii) of this paragraph, to be able to file
such registration statement as promptly as possible.
(b) Restrictions on Public Sale by Holder. Upon the written request of
the underwriter(s) in any Underwritten Offering of the Company, the Holder shall
not effect any sale or distribution of securities of the Company of the same
class as the securities or any security convertible into or exchangeable or
exercisable for such security, included in such Underwritten Offering, including
a sale pursuant to Rule 144 under the Securities Act (except as part of such
registration) during the 180-day period (or such shorter time period as the
underwriter(s) may request) beginning on the effective date of the registration
statement filed with respect to any such Underwritten Offering.
(c) Underwritten Offering.
(i) Upon request by the Holder, the Company agrees it will use all
reasonable efforts, subject to the conditions set forth in
Section 2(a) hereof, to amend or supplement the Shelf
Registration Statement such that it may be used in an
Underwritten Offering; provided that, the Transfer Restricted
Securities to be
-------- ----
sold by the Holder in such Underwritten Offering have a Market
Value equal to at least $10 million and that the Holder bear
all incremental expenses (subject to the provisions of the
second sentence of this Section 2(c)(i)), related to such
amendment or supplement. If the Company determines to
Register any securities in an Underwritten Offering requested
by the Holder pursuant to this
Page 20 of 40
<PAGE>
Section 2(c), the Company shall bear such portion of the total
expenses relating to such Underwritten Offering as the
securities registered in the Underwritten Offering by the
Company bear to the total securities registered in such
Underwritten Offering. The Holder may not participate in any
Underwritten Offering hereunder unless the Holder (i) agrees
to sell his Transfer Restricted Securities on the basis
provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
documents required under the terms of such underwriting
arrangements. In any such Underwritten Offering, the
investment banker or investment bankers and manager or
managers that will administer the offering will be selected by
the Company.
(ii) So long as any of the Shares constitute Transfer Restricted
Securities, if (but without any obligation to do so) the
Company proposes to register, including for this purpose a
registration effected by the Company for stockholders of the
Company other than the Holder, any of the Common Stock under
the Securities Act in connection with the public offering of
Common Stock solely for cash other than a registration on Form
S-8 or any successor form relating solely to the sale of
securities to participants in the Company stock plan, or a
registration on Form S-4 or any successor form relating to an
acquisition by the Company)(an "Incidental Registration"), the
Company shall, at such time, promptly give the Holder written
notice of such Incidental Registration. Upon the written
request of the Holder given within 20 days after mailing of
such notice by the Company, the Company shall use its
reasonable efforts to cause a registration statement covering
all of the Transfer Restricted Securities that the Holder has
requested to be registered to become effective under the
Securities Act; provided, however, that nothing herein,
including without limitation the provisions of Section 3 of
this Agreement, shall prevent the Company from, at any time,
abandoning or delaying any Incidental Registration.
In the case of an Underwritten Offering pursuant to this
Section 2(c)(ii), if the managing underwriter advises the
Company that marketing factors require a limitation of the
number of shares of Common Stock to be underwritten, then the
Company shall include in such registration (A) first, the
shares of the Common Stock, being registered on behalf of the
Company or on behalf of the stockholders (other than the
Holder) requesting such registration, as the case may be, and
(B) second, the Common Stock being registered on behalf of the
Holder apportioned on a pro rata basis among the Holder and
any other Persons entitled to include securities in such
registration in accordance with the number of shares of Common
Stock requested by the Holder and such other Persons to be
included in such registration.
Page 21 of 40
<PAGE>
SECTION 3. REGISTRATION PROCEDURES
The Company will use its reasonable best efforts to effect the
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with this Agreement and the intended method or methods of
distribution thereof, and pursuant thereto the Company will:
(a) prepare and file with the Commission a Shelf Registration Statement
relating to the registration on Form S-3 under the Securities Act, cooperate and
assist in any filings required to be made with the NASD and use its best efforts
to cause such Shelf Registration Statement to become effective;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement and such filings
under the Exchange Act as may be necessary to keep the Shelf Registration
Statement effective for such period as may be reasonably necessary to effect the
sale of such Transfer Restricted Securities, not to exceed 270 days and, comply
with the provisions of the Securities Act and the rules and regulations
thereunder, and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Shelf Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the Holder set forth in such Shelf Registration Statement;
(c) advise the underwriter(s), with respect to an offering pursuant to
Section 2(c), and the Holder promptly:
(i) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the Shelf
Registration Statement or a registration statement filed in accordance
with Section 2(c)(ii) or any post-effective amendment thereto, when the
same has become effective;
(ii) of any request by the Commission for amendments to the
Shelf Registration Statement or a registration statement filed in
accordance with Section 2(c)(ii) or amendments or supplements to the
Prospectus or for additional information relating thereto;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement under
the Securities Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes. If at any time the
Company shall receive any such stop order suspending the effectiveness
of the Shelf Registration Statement or a registration statement filed
in accordance with Section 2(c)(ii), or any such order from a state
securities commission or other regulatory authority, the
Page 22 of 40
<PAGE>
Company shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) if at any time the representations and warranties of the
Company contemplated by paragraph (j)(i) below cease to be true and
correct;
(v) of the existence of any fact and the happening of any
event that makes any statement of a material fact made in the Shelf
Registration Statement, or a registration statement filed in accordance
with Section 2(c)(ii), the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the Shelf
Registration Statement or a registration statement filed in accordance
with Section 2(c)(ii) or the Prospectus in order to make the statements
therein not misleading.
(d) in connection with the filing of any document that is to be
incorporated by reference into the Shelf Registration Statement or any
registration statement filed in accordance with Section 2(c)(ii) or the
Prospectus (after initial filing of the Shelf Registration Statement or any
registration statement filed in accordance with Section 2(c)(ii)):
(i) use its best efforts to provide copies of such document to
the Holder and to the managing underwriter(s), if any, prior to such
filing and in any event no later than concurrently with such filing;
and
(ii) make the Company's representative available for
discussion of such document;
(e) furnish to the Holder and each of the underwriter(s), with respect
to an offering pursuant to Section 2(c), at least one signed copy of the Shelf
Registration Statement, or a registration statement filed in accordance with
Section 2(c)(ii), as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and all
exhibits;
(f) deliver to the Holder and each of the underwriter(s), with respect
to an offering pursuant to Section 2(c), as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to the use of the
Prospectus and any amendment or supplement thereto by the Holder and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(g) prior to any public offering of Transfer Restricted Securities,
cooperate with the Holder, the underwriter(s) with respect to an offering
pursuant to Section 2(c), and their respective counsel in connection with the
registration and qualification of the Transfer
Page 23 of 40
<PAGE>
Restricted Securities under the securities or blue sky laws of such
jurisdictions as the Holder or underwriter(s) may request and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement, or a registration statement filed in accordance with
Section 2(c)(ii); provided, however, that the Company shall not be required to
register or qualify as a foreign corporation where it is not then so qualified
or to take any action that would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the Shelf
Registration Statement, or a registration statement filed in accordance with
Section 2(c)(ii), in any jurisdiction where it is not then so subject;
(h) cooperate with the Holder and the underwriter(s) with respect to an
offering pursuant to Section 2(c), to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be sold
and not bearing any restrictive legends; and enable such Transfer Restricted
Securities to be in such denominations and registered in the name as the Holder
or the underwriter(s), if any, may request at least two Business Days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(i) if any fact or event contemplated by clause (c)(v) above shall
exist or have occurred, prepare a supplement or post-effective amendment to the
Shelf Registration Statement, or a registration statement filed in connection
with Section 2(c)(ii) or related Prospectus or any document incorporated therein
by reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted 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;
(j) with respect to an offering pursuant to Section 2(c), enter into
such agreements (including an underwriting agreement) and take all such other
actions in connection therewith as may be required in order to expedite or
facilitate the disposition by the Holder, of the Transfer Restricted Securities
pursuant to this Agreement, and in connection with any such underwriting
agreement entered into by the Company:
(i) make such representations and warranties to the
underwriter(s) and the Holder, in form, substance and scope as are
customarily made by issuers to underwriters in primary underwritten
offerings;
(ii) obtain opinions of counsel to the Company and updates
thereof addressed to the Holder and the underwriter(s) covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be requested by, the Holder and
underwriters;
(iii) obtain "cold comfort" or "agreed upon procedures"
letters and updates thereof from the Company's independent certified
public accountants, addressed to the
Page 24 of 40
<PAGE>
Holder and the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in such letters by
underwriters in connection with primary underwritten offerings;
(iv) set forth in full or incorporate by reference in the
underwriting agreement the indemnification provisions and procedures of
Section 5 hereof with respect to all parties to be indemnified pursuant
to said Section; and
(v) deliver such documents and certificates as may be
requested by the Holder of the Transfer Restricted Securities being
sold or the underwriter(s) of such Underwritten Offering to evidence
compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into
by the Company pursuant to this clause (j).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder;
(k) make available for inspection by a representative of the Holder and
the underwriter(s) with respect to an offering pursuant to Section 2(c), and any
attorney or accountant retained by any of them, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any of them in connection with such Shelf Registration Statement
subsequent to the filing thereof and prior to its effectiveness; and
(l) use its best efforts to cause all Transfer Restricted Securities to
be listed on each securities exchange, if any, on which equity securities issued
by the Company are then listed.
The Holder agrees to furnish promptly to the Company all information
required to be disclosed by the Holder in order to make the information
previously furnished to the Company by such Holder not materially misleading.
The Holder agrees that upon receipt of any notice from the Company that
any fact or event exists as a result of which the Shelf Registration Statement,
the prospectus included therein, or any document incorporated therein by
reference contains or may contain any untrue statement of material fact or omits
or may 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, the Holder will forthwith discontinue any
disposition of any Transfer Restricted Securities pursuant to the Shelf
Registration Statement until (i) the Holder has received copies of the
supplemented or amended prospectus contemplated by Section 4(b) hereof, or (ii)
the Holder has received written advice from the Company that the use of the
Prospectus contained in the Shelf Registration Statement may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in such
Page 25 of 40
<PAGE>
prospectus, and, if so directed by the Company, the Holder will deliver to the
Company all copies, other than permanent file copies then in the Holder's
possession, of the prospectus covering the Transfer Restricted Securities
current at the time of receipt of such notice. The period from and including the
date of the giving of such notice to and including the date when each Holder
shall have either received copies of the supplemented or amended prospectus or
received advice from the Company that the use of the prospectus contained in the
Shelf Registration Statement may be resumed is referred to herein as the
"Holdback Period." The Company agrees to use all reasonable efforts to minimize
the duration and frequency of any Holdback Periods hereunder to the extent
consistent with the Company's financial, strategic, and other business
priorities.
SECTION 4. REGISTRATION EXPENSES
(a) Except as otherwise provided by Sections 2(a) or (c), all expenses
incident to the Company's performance of or compliance with this Agreement
(other than underwriting discounts or commissions) will be borne by the Company,
including without limitation:
(i) all registration and filing fees and expenses (including
filings made with the
NASD or any securities exchange);
(ii) fees and expenses of compliance with federal securities
and state blue sky or securities laws;
(iii) expenses of printing;
(iv) fees and disbursements of counsel for the Company;
(v) all application and filing fees in connection with listing
the Common Stock on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any
special audit and "cold comfort" or "agreed upon procedures" letters
required by or incident to such performance).
The Company will also bear its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting, duties), the expense of any annual audit, and the fees and
expenses of any Person, including special experts, retained by the Company.
SECTION 5. INDEMNIFICATION
Page 26 of 40
<PAGE>
(a) The Company agrees to indemnify and hold harmless the Holder and
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 from and against any and
all losses, claims, damages, liabilities and expenses (including, without
limiting the foregoing but subject to Section 5(c) hereof, the reasonable legal
and other expenses incurred in connection with any action, suit or proceeding or
any claim asserted) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Shelf Registration
Statement or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) or 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, in the light of the circumstances under which they were
made in the case of the Prospectus, not misleading, except insofar as such
losses, claims, damages, liabilities, or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or omission
based upon information (i) relating to the Holder, furnished in writing to the
Company by or on behalf of the Holder expressly for use therein or (ii) made in
any preliminary Prospectus if a copy of the Prospectus (as amended or
supplemented) was not sent or given by or on behalf of the Holder to the person
asserting any such loss, claim, damage or liability or obtaining such judgment
at or prior to the written confirmation of the sale of the Transfer Restricted
Securities as required by the Securities Act, and the Prospectus (as so amended
or supplemented) would have corrected such untrue statement or omission;
provided, however, that the Company shall have furnished copies of such
Prospectus (as so amended or supplemented) to the Holder in compliance with
Section 3(f) hereof.
(b) As a condition to the inclusion of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this Agreement, the
Holder thereof will furnish to the Company in writing, promptly after receipt of
a request therefor, such information as the Company may reasonably request for
use in connection with any Shelf Registration Statement, Prospectus or
preliminary prospectus and agrees to indemnify and hold harmless, the Company
and its directors, its officers who sign such Shelf Registration Statement, and
any Person controlling the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
indemnity from the Company to the Holder and Persons controlling such Holder,
but only with reference to information relating to the Holder furnished in
writing by or on behalf of such Holder expressly for use in such Shelf
Registration Statement or the Prospectus or any preliminary Prospectus included
therein. In case any action shall be brought against the Company, any of its
directors, any such officer, or any such controlling Person based on the Shelf
Registration Statement, the Prospectus or any preliminary prospectus and in
respect of which indemnity may be sought against the Holder, the Holder shall
have the rights and duties given to the Company (except that if the Company as
provided in Section 5(c) hereof shall have assumed the defense thereof the
Holder shall not be required to do so, but may employ separate counsel therein
and participate in the defense thereof but the fees and expenses of such counsel
shall be at such Holder's expense) and the Company and its directors, any such
officers, and any such controlling Person shall have the
Page 27 of 40
<PAGE>
rights and duties given by Section 5(c) hereof. In no event shall the liability
of the Holder hereunder be greater than the gross proceeds received by the
Holder upon the sale of the Transfer Restricted Securities giving rise to such
indemnification obligation.
(c) In case any action or proceeding shall be brought against the
Holder or any Person controlling the Holder, based upon the Shelf Registration
Statement, the Prospectus or any preliminary prospectus, or any amendment or
supplement thereto, and with respect to which indemnity may be sought against
the Company, the Holder or such Person controlling such Holder shall promptly
notify the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Holder and
payment of all reasonable fees and expenses relating thereto. The Holder and
such Persons controlling such Holder shall have the right to employ separate
counsel in any such action or proceeding and participate in the defense thereof,
but the fees and expenses of such counsel shall be at such Holder's expense
unless (i) the employment of such counsel has been specifically authorized in
writing by the Company, (ii) the Company has not assumed the defense and
employed counsel reasonably satisfactory to the Holder within 15 days after
notice of any such action or proceeding, or (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both the Holder
or any Person controlling such Holder and the Company and the Holder or any
Person controlling such Holder shall have been advised by such counsel that
there may be one or more legal defenses available to the Holder or Person
controlling such Holder that are different from or additional to those available
to the Company (in which case the Company shall not have the right to assume the
defense of such action or proceeding on behalf of such Holder or controlling
Person, it being understood, however, that the Company shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the Holder and controlling Persons, which firm
shall be designated in writing by the Holder of a majority of the Transfer
Restricted Securities). The Company shall not be liable for any settlement of
any such action effected without the written consent of the Company, but if
settled with the written consent of the Company, which consent shall not be
unreasonably withheld, or if there is a final judgment for the plaintiff, the
Company agrees to indemnify and hold harmless the Holder and all Persons
controlling, the Holder from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 5 is
unavailable to an indemnified party under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each 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 expenses in such
proportion as is appropriate to reflect the relative benefit to the Company on
the one hand and the Holder on the other hand in connection with the sale of the
Transfer Restricted Securities, as well as any other relevant equitable
considerations; provided, however, that the Holder
Page 28 of 40
<PAGE>
shall not be required to contribute an amount greater than the gross proceeds
received by the Holder with respect to the sale of Transfer Restricted
Securities giving rise to the indemnification obligation under this Section 5.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses 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 investigating or defending any such
action or claim.
(e) The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by a pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above 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
investigating any claim or defending any such action, suit or proceeding. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11
of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 6. MISCELLANEOUS
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of the Holder.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to the Holder, to: Leon S. Gross
c/o Enterprises, Inc.
River Park House
3600 Conshohocken Avenue
Philadelphia, PA 19131;
with a copy to: Lawrence M. Miller, Esq.
Schwartz, Woods & Miller
1350 Connecticut Avenue,N.W.
Washington, D.C.20036-1717;
(ii) if to the Company, to: Electric Fuel Corporation
885 Third Avenue, Suite 2900
Page 29 of 40
<PAGE>
New York, NY 10022
Attn: Robert S. Ehrlich
with a copy to: Winthrop G. Minot, Esq.
Ropes and Gray
One International Place
Boston, MA 02110
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
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. The registration rights granted to the
Holder pursuant to this Agreement shall not be for the benefit of, or
enforceable by, any subsequent holder of the Common Stock unless such subsequent
holder is a Holder. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Company.
(d) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to any
conflicts or choice of law principles which would cause the application of the
internal laws of any jurisdiction other than the State of Delaware.
(g) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(h) Entire Agreement. This Agreement, together with the other Operative
Documents (as defined in the Stock Purchase Agreement), is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the
Page 30 of 40
<PAGE>
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
Page 31 of 40
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ELECTRIC FUEL CORPORATION
By:___________________________________
Name:
Title:
LEON S. GROSS
By:______________________________
Page 32 of 40
Exhibit 4c
VOTING RIGHTS AGREEMENT
VOTING RIGHTS AGREEMENT (the "Agreement"), made as of September 30,
1996 by and among Electric Fuel Corporation, a Delaware corporation (the
"Company"), Leon S. Gross, Robert S. Ehrlich and Yehuda Harats, (each a
"Stockholder" and collectively the "Stockholders"), each a holder of shares of
common stock of the Company, $.01 par value per share (the "Common Stock").
WHEREAS, the Stockholders together hold, directly or indirectly, more
than 25% of the voting stock of the Company; and
WHEREAS, pursuant to the stock purchase agreement dated September 30,
1996 between the Company and Leon S. Gross (the "Stock Purchase Agreement"), the
Company is selling 1,538,462 shares of its Common Stock to Leon S. Gross in a
private placement; and
WHEREAS, in connection with the Stock Purchase Agreement, the Company
and the Stockholders agree to enter into this Agreement. Capitalized terms used
in this Agreement and not defined shall have the meanings assigned to them in
the Stock Purchase Agreement.
NOW THEREFORE, in consideration of the premises and agreements set
forth herein, the Stockholders agree with each other as follows:
1. Election of Directors. The Company shall use its best efforts to
cause Lawrence M. Miller to be designated as Leon S. Gross' nominee for election
to the Board of Directors of the Company (the "Board"); (i) immediately upon
satisfaction of all applicable governmental and corporate requirements, which
the parties shall use all reasonable efforts to accomplish as expeditiously as
possible, after the Closing; (ii) after each of Leon S. Gross and Lawrence M.
Miller has executed a confidentiality agreement in the form attached hereto as
Exhibit A; and (iii) for so long as Leon S. Gross or his heirs hold in excess of
1,375,000 shares of Common Stock. In the event Lawrence M. Miller shall cease to
serve as a member of the Board of Directors for any reason, Leon S. Gross (the
"Alternate Director") shall be nominated for election and be a successor to the
rights of Mr. Miller in accordance with the terms of this Section 1. Subject to
the terms and conditions hereof, until the later of (i) the fifth anniversary of
the Closing or (ii) the fifth Meeting of Stockholders following the Closing,
each Stockholder agrees to vote all shares of Common Stock or other voting
securities of the Company over which such Stockholder has voting control,
whether directly or indirectly, and to take all other necessary or desirable
actions within his control (whether as a stockholder, director or officer of the
Company or otherwise, including without limitation attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
Page 33 of 40
<PAGE>
consents in lieu of meetings), so that each of Lawrence M. Miller (or, if
applicable, the Alternate Director), Robert S. Ehrlich and Yehuda Harats
(collectively, the "Directors") shall serve as members of the Board. In
addition, for so long as Lawrence M. Miller serves as a Director, the Alternate
Director shall be entitled to notice of, and shall be entitled to attend, each
meeting of the Board of Directors of the Company.
2. Equity Incentive Plan. At the next Meeting of Stockholders, subject
to the terms and conditions hereof, Leon S. Gross agrees to vote all shares of
Common Stock or other voting securities of the Company over which he has voting
control, whether directly or indirectly, and to take all other necessary or
desirable actions within his control (whether as a stockholder, director or
officer of the Company or otherwise, including without limitation attendance at
meetings in person or by proxy for purposes of obtaining a quorum and execution
of written consents in lieu of meetings), for the proposal contained in the
proxy statement relating to such Meeting to increase the number of shares
authorized to be issued upon the exercise of options under the Company's 1993
Stock Option and Restricted Stock Purchase Plan, as approved by the Board.
3. Termination. In addition to the ability to exercise the remedies
provided for in Section 5 hereof, each Director's obligations under this
Agreement shall terminate with respect to each other Director if such other
Director does not nominate any of the Directors or does not vote his Common
Stock for any of the Directors, whether or not such other Director's failure to
vote to elect such Director as director of the Company was in violation of this
Agreement.
4. Assignment. Except as otherwise expressly provided herein, the
rights and obligations set forth in this Agreement may only be assigned with the
express written consent of the Company and Stockholder or Stockholders not
transferring rights and obligations under this Agreement and in accordance with
the provisions of this Section 4.
5. Filings. Each of the Stockholders agrees to promptly file with the
Securities and Exchange Commission all requisite filings required under the
Securities Exchange Act of 1934, as amended, with respect to their ownership of
shares of Common Stock and the provisions of this Agreement.
6. Remedies. The parties will be entitled to enforce his or its rights
under this Agreement specifically, to recover damages by reason of any breach of
any provision of this Agreement, and to exercise all other rights existing in
his or its favor. The parties agree and acknowledge that money damages will not
be an adequate remedy for any breach of the provisions of this Agreement and
that any party may in his or its sole discretion apply to any court of law or
equity of competent jurisdiction in order to enforce or prevent any violations
of the provisions of this Agreement.
Page 34 of 40
<PAGE>
7. Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the matters contemplated herein, and
supersedes any and all prior understandings as to the subject matter of this
Agreement.
8. General. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement. In this Agreement the singular includes the plural, the plural,
the singular, the masculine gender includes the neuter, masculine and feminine
genders. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to any conflicts or choice of
law principles which would cause the application of the internal laws of any
jurisdiction other than the State of Delaware.
9. Severability. If any provisions of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
10. Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one and the same instrument.
11. Legend. Each certificate representing Common Stock of the
Stockholders shall hereafter state therein:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS' VOTING
AGREEMENT DATED AS OF SEPTEMBER 30, 1996 AMONG THE
STOCKHOLDERS NAMED THEREIN."
[The rest of this page has been intentionally left blank]
Page 35 of 40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ELECTRIC FUEL CORPORATION
By:_______________________
--------------------------
Leon S. Gross
--------------------------
Robert S. Ehrlich
--------------------------
Yehuda Harats
Page 36 of 40
<PAGE>
- Exhibit A to
Voting Rights
Agreement
October 2, 1996
Mr. Robert S. Ehrlich
Chairman and Chief Financial Officer
Electric Fuel Corporation
885 Third Avenue, Suite 2900
New York, NY 10022
Dear Bob:
As an observer of the Board of Directors of Electric Fuel Corporation,
a Delaware corporation ("EFC"), I will receive certain information which may be
deemed confidential by EFC. I recognize and acknowledge the potential
competitive value of the confidential information to be provided and the damage
that could result to EFC if such information is disclosed to any third party.
Accordingly, in order to avoid misunderstandings or disagreements, EFC has
stated that it will provide confidential information to me only on the condition
that this letter is signed by me indicating my understanding of, and agreement
to, its contents.
The undersigned agrees that:
1. EFC's confidential information shall mean all information disclosed
to me in any manner, whether orally, visually or in tangible form and all copies
thereof, whether created by EFC or by me, other than information that:
a. I can demonstrate is already known to me otherwise than as
a result of (i) disclosure pursuant to this letter or (ii) disclosures I knew or
should have known would be a violation of a legal, contractual or fiduciary
obligation owed to EFC.
b. is generally known to the public or in the public domain,
other than as a result of disclosure by me;
c. I can demonstrate is subsequently lawfully obtained
by me from a third party having rights therein not in violation of any
confidentiality requirements of such third party; or
Page 37 of 40
<PAGE>
d. is required to be disclosed by order of any court or
governmental agency having jurisdiction over EFC or pursuant to any governmental
regulations, provided that I will as soon as practicable notify EFC of such
requirement or proposed requirement so that EFC may seek an appropriate
protective order.
2. I agree to comply with the Company's policies on securities trading.
I acknowledge and understand that receipt of EFC's confidential information puts
me in possession of material non-public information, and that any purchase or
sale of securities of EFC based on this information would be a violation of
federal and state securities laws.
3. It is further understood and agreed that money damages would not be
a sufficient remedy for any breach of this letter agreement, and that EFC shall
be entitled to specific performance and injunctive relief as remedies for any
such breach. Such remedies shall not be deemed to be the exclusive remedies for
a breach of this letter agreement, but shall be in addition to all other
remedies available at law or in equity. In the event of litigation concerning
this letter agreement, if a court of competent jurisdiction determines in a
final, nonappealable order that I have breached this letter agreement, then I
shall be liable for and pay to EFC the reasonable legal fees EFC incurred in
connection with such litigation, including any appeal therefrom.
Very truly yours,
[Member/Observer of Board of Directors]
Page 38 of 40
Electric Fuel
CONTACT: Matt Bourne FOR IMMEDIATE RELEASE
G.S. Schwartz & Co.
212-725-4500
ELECTRIC FUEL CORPORATION ANNOUNCES
$10 MILLION PRIVATE PLACEMENT
October 3, 1996 -- Electric Fuel Corporation, (Nasdaq: EFCX),
announced today that it has raised $10.0 million in a private placement of its
Common Stock at a price of $6.50 per share with one of its existing
stockholders, Leon S. Gross. As a result of this $10.0 million offering,
Mr. Gross will now own a total of 3,009,162 shares of Common Stock, or
20.2% of the Company on a fully-diluted basis. After this offering, the
Company will have 14,900,495 shares of Common Stock outstanding, on a
fully diluted basis, compared to 13,362,033 shares on a fully-diluted basis
before the offering. The closing price on The Nasdaq National Market for
Electric Fuel's Common Stock on October 2, 1996 was $6 1/8 per share.
"I believe that this Company represents a tremendous opportunity. Its
strategy of targeting the fleet and commercial vehicle markets is the
springboard to making all electric vehicles a reality," said Mr. Gross.
"The financing provides Electric Fuel with significant additional
financial resources which allows us to further expand the Company's marketing of
its proprietary zinc-air battery technology. This comes at a time when our
activities are expanding into Holland and our
Page 39 of 40
<PAGE>
marketing efforts are focusing on South Africa, the Far East and the United
States," said Yehuda Harats, Electric Fuel's President and Chief Executive
Officer.
In connection with the Offering, Lawrence M. Miller, Esq., an advisor
to Mr. Gross, will be selected to Electric Fuel's Board of Directors pursuant to
a voting agreement entered into by the Company, Mr. Gross and certain members of
management. In addition, Mr. Gross will be entitled to certain registration
rights with respect to his shares.
The Company will be filing a report on Form 8-K giving further detail
on the terms of the Offering.
This press release contains forward-looking statements. There are
certain important factors that could cause results to differ materially from
those anticipated by the statements made above. Among, but not limited to these
factors are reliance on the Deutsche Post field test, the uncertainty of the
electric vehicle market, significant future capital requirements and certain
United States tax consequences to the Company and its wholly-owned subsidiaries
as a result of the stock ownership of the Company.
Electric Fuel Corporation, with corporate offices in New York City and
manufacturing and R&D facilities in Jerusalem, Israel, has positioned its
zinc-air energy system at the forefront of zero-emission electric-powered
transportation.
Page 40 of 40
