Exhibit 4.F
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of July 28, 2003 (this
"Agreement"), is made by and among Parlex Corporation, a Massachusetts
corporation, with headquarters located at One Parlex Place, Methuen,
Massachusetts 01844 (the "Company"), and the investors named on the
signature pages hereto (the "Investors").
RECITALS:
A. In connection with the Securities Purchase Agreement dated as of
July 28, 2003 by and among the Investors and the Company (the "Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Purchase Agreement, to issue and sell to the Investors
$6,000,000 in aggregate principal of its 7% Convertible Subordinated Notes
(the "Convertible Notes"), which is convertible into shares of the
Company's common stock, par value $.10 per share (the "Common Stock"), and
to issue to the Investors stock purchase warrants (the "Warrants") to
purchase additional shares of Common Stock (the shares of Common Stock
issued or issuable with respect to the Convertible Notes (including the PIK
Interest Shares, as defined in the Purchase Agreement) or the Warrants are
hereinafter collectively referred to as the "Common Shares").
B. In order to induce the Investors to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act and applicable state securities laws with
respect to the Common Shares.
In consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used and not otherwise defined herein have the
respective meanings given them set forth in the Purchase Agreement. In
addition, as used in this Agreement, the following terms have the following
meanings:
1.1 "Common Shares" means the shares of Common Stock issued or
issuable with respect to the Convertible Notes (including the PIK Interest
Shares, as defined in the Purchase Agreement) or the Warrants.
1.2 "Investors" means the investors named on the signature pages
hereto and any of their transferees or assignees who agree to become bound
by the provisions of this Agreement in accordance with Article IX hereof.
1.3 "Registrable Securities" means the Common Shares (without regard
to any limitations on conversion or exercise) and any shares of capital
stock issued or issuable from
time to time (with any adjustments) in exchange for or otherwise with
respect to the Convertible Notes, Warrants or Common Shares.
1.4 "Registration Period" means the period between the date of this
Agreement and the earlier of (i) the date on which all of the Registrable
Securities have been sold and no further Registrable Securities may be
issued in the future, or (ii) the date on which all the Registrable
Securities (in the reasonable opinion of the Investors' counsel) may be
immediately sold without registration and without restriction (including
without limitation as to volume by each holder thereof) as to the number of
Registrable Securities to be sold, pursuant to Rule 144 or otherwise.
1.5 "Registration Statement" means a Registration Statement of the
Company filed under the Securities Act.
1.6 The terms "register," "registered," and "registration" refer to
a registration effected by preparing and filing a Registration Statement or
statements in compliance with the Securities Act and pursuant to Rule 415
and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.
1.7 "Rule 415" means Rule 415 under the Securities Act, or any
successor Rule providing for offering securities on a continuous basis, and
applicable rules and regulations thereunder.
ARTICLE II
REGISTRATION
2.1 Mandatory Registration. The Company will file with the SEC a
Registration Statement on Form S-3 registering the Registrable Securities
and no other securities for resale within 75 days after the Closing Date of
the purchase of the Convertible Notes under the Purchase Agreement. If
Form S-3 is not available at that time, then the Company will file a
Registration Statement on such form as is then available to effect a
registration of the Registrable Securities within such 75-day period. To
the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), the Registration Statement will include
the Common Shares and such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Convertible
Notes and exercise of the Warrants (a) to prevent dilution resulting from
stock splits, stock dividends or similar transactions, or (b) by reason of
changes in the Conversion Price of the Convertible Notes or the Exercise
Price of the Warrants in accordance with the terms thereof. The number of
shares of Registrable Securities initially included in the Registration
Statement will be no less than 133 1/3% of the aggregate number of Common
Shares that are issuable upon conversion of the Convertible Notes at the
Conversion Price and exercise of the Warrants at the Exercise Price.
2.2 Effectiveness of the Registration Statement. The Company will
use its best efforts to cause the Registration Statement contemplated by
Section 2.1 to be declared effective by the SEC as soon as practicable
after filing, and in any event no later than the 165th day after the
Closing Date (the "Required Effective Date"). If the SEC takes the
position that registration of the resale of the Registrable Securities by
the Investors is not available under applicable laws, rules and regulation
and that the Company must register the offering of the Registrable
Securities
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as a primary offering by the Company, the Company will file a Registration
Statement as a primary offering and will use its best efforts to cause the
Registration Statement to be declared effective by the SEC as soon as
practicable after filing, and in any event no later than the Required
Effective Date. The Company's best efforts will include, but not be
limited to, promptly responding to all comments received from the staff of
the SEC. If the Company receives notification from the SEC that the
Registration Statement will receive no action or review from the SEC, then
the Company will cause the Registration Statement to become effective
within five business days after such SEC notification. Once the
Registration Statement is declared effective by the SEC, the Company will
cause the Registration Statement to remain effective throughout the
Registration Period, except as permitted under Section 3.1.
2.3 Payments by the Company. If (i) at any time after effectiveness
of the Registration Statement, sales cannot be made thereunder during the
Registration Period for any reason (including any suspension of the use of
the Registration Statement under Section 3.6 hereof) for a period of more
than 10 consecutive business days, or 30 days in the aggregate, during any
12-month period or (ii) the Common Stock is not listed or included for
quotation on Nasdaq, Nasdaq SmallCap, the NYSE or AMEX for more than an
aggregate of 10 business days in any 12-month period, then the Company will
thereafter make a payment (by wire transfer or check) to each Investor as
compensation for such delay. The amount of the payment made to each
Investor will be equal to 1% of the Outstanding Principal Amount (as
hereinafter defined) for the first month that sales cannot be made under
the effective Registration Statement or the Common Stock is not listed or
included for quotation on Nasdaq, Nasdaq SmallCap, the NYSE or AMEX, and 2%
of the Outstanding Principal Amount for each month thereafter, continuing
through the date that sales can be made under the effective Registration
Statement or the Common Stock is listed or included for quotation on
Nasdaq, Nasdaq SmallCap, the NYSE or AMEX. The term "Outstanding Principal
Amount" for purposes of computing the amount of payment to be made to an
Investor under Section 2.3 and Section 2.4 shall mean the sum of (x) the
principal amount of the then-outstanding Convertible Notes held by such
Investor and (y) in the case of Registrable Securities issued upon
conversion of the Convertible Notes purchased by such Investor and not
previously sold by such Investor, the principal amount of the Convertible
Notes from which such Registrable Securities were converted. These
payments will be prorated on a daily basis for partial months and will be
paid to each Investor by wire transfer or check within five business days
following the end of each month. Each Investor agrees and acknowledges that
the sums payable by the Company hereunder represent a reasonable estimate
of the Investor's damages hereunder and that Investor shall be entitled to
such sum as liquidated damages, which except for specific performance shall
be Investor's sole and exclusive remedy for monetary damages.
2.4 Effect of Late Registration. If the Registration Statement
required pursuant to Section 2.1 above has not been declared effective by
the Required Effective Date, then the Company will make a payment (by wire
transfer or check) to each Investor as compensation for such delay (the
"Late Registration Payments"). The Late Registration Payments will be
equal to 1% of the Outstanding Principal Amount for the first month after
the Required Effective Date, and 2% of the Outstanding Principal Amount for
each month thereafter, continuing through the date on which the
Registration Statement is declared effective by the SEC. The Late
Registration Payments will be prorated on a daily basis for partial months
and will be paid to the Investors by wire transfer or check within five
business days after the earlier of (i) the end of
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each month following the Required Effective Date or (ii) the effective date
of the Registration Statement. Each Investor agrees and acknowledges that
the sums payable by the Company hereunder represent a reasonable estimate
of the Investor's damages hereunder and that Investor shall be entitled to
such sum as liquidated damages, which shall be Investor's sole and
exclusive remedy for monetary damages. Nothing herein limits any
Investor's right to exercise such Investor's equitable remedies to cause
the Company to file a Registration Statement or to have it declared
effective by the SEC on or prior to the Required Effective Date in
accordance with the terms of this Agreement.
2.5 Piggyback Registrations.
(a) If, at any time prior to the expiration of the
Registration Period, a Registration Statement is not effective with
respect to all of the Registrable Securities and the Company decides
to register any of its securities for its own account or for the
account of others, then the Company will promptly give the Investors
written notice thereof and will use its best efforts to include in
such registration all or any part of the Registrable Securities
requested by such Investors to be included therein (excluding any
Registrable Securities previously included in a Registration
Statement). This requirement does not apply to Company registrations
on Form S-4 or S-8 or their equivalents relating to equity securities
to be issued solely in connection with an acquisition of any entity
or business or equity securities issuable in connection with stock
option or other employee benefit plans, or a registration on any
other form that does not permit secondary sales. Each Investor must
give its request for registration under this paragraph to the Company
in writing within 15 days after receipt from the Company of notice of
such pending registration. If the registration for which the Company
gives notice is a public offering involving an underwriting, the
Company will so advise the Investors as part of the above-described
written notice. In that event the right of any Investor to
registration shall be conditioned upon such Investor's participation
in such underwriting and the inclusion of such Investor's Registrable
Securities in the underwriting to the extent provided herein. All
Investors proposing to distribute their securities through such
underwriting shall (together with the Company and the other
stockholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the
underwriter(s) selected for such underwriting by the Company. In
that event, if the managing underwriter(s) of the public offering
impose a limitation on the number of shares of Common Stock (or other
securities convertible into or exercisable or exchangeable for Common
Stock) that may be included in the Registration Statement due to
marketing factors, then the Company will be obligated to include only
such limited portion, if any, of the Registrable Securities with
respect to which such Investors have requested inclusion hereunder.
Any exclusion of Registrable Securities will be made pro rata among
all holders of the Company's securities seeking to include shares of
Common Stock in proportion to the number of shares of Common Stock
sought to be included by those holders. However, the Company will
not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are not
entitled by right to inclusion of securities in such Registration
Statement or are not entitled pro rata inclusion with the Registrable
Securities. If any Investor or other person does not agree to the
terms of such underwriting or otherwise fails to comply with the
terms of this Agreement, he shall be excluded therefrom upon written
notice from the Company or underwriter. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
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(b) No right to registration of Registrable Securities under
this Section 2.5 limits in any way the registration required under
Section 2.1 above. The obligations of the Company under this Section
2.5 expire upon the earliest of (i) the effectiveness of the
Registration Statement filed pursuant to Section 2.1 above with
respect to the Registrable Securities or the respective portion
thereof, (ii) after the Company has afforded the opportunity for the
Investors to exercise registration rights under this Section 2.5 for
two registrations (provided, however, that any Investor that has had
any Registrable Securities excluded from any Registration Statement
in accordance with this Section 2.5 may include in any additional
Registration Statement filed by the Company the Registrable
Securities so excluded), or (iii) expiration of the Registration
Period.
(c) The Company shall have the right to terminate or withdraw
any registration initiated by it under this Section 2.5 prior to the
effectiveness of such registration whether or not any Investor has
elected to include securities in such registration. The expenses of
such withdrawn registration shall be borne by the Company.
2.6 Eligibility to use Form S-3. The Company represents and
warrants that it meets the requirements for the use of Form S-3 for
registration of the resale by the Investors of the Registrable Securities.
The Company will file all reports required to be filed by the Company with
the SEC in a timely manner so as to preserve its eligibility for the use of
Form S-3.
ARTICLE III
ADDITIONAL OBLIGATIONS OF THE COMPANY
3.1 Continued Effectiveness of Registration Statement. The Company
will keep the Registration Statement covering the Registrable Securities
effective under Rule 415 at all times during the Registration Period. In
the event that the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of
the Registrable Securities issued or issuable upon conversion of (or
otherwise pursuant to) the Convertible Notes and upon exercise of (or
otherwise pursuant to) the Warrants, the Company will (if permitted) amend
the Registration Statement or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover all
of the Registrable Securities. The Company will file such amendment or new
Registration Statement as soon as practicable, but in no event later than
20 business days after the necessity therefor arises (based upon the market
price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company will use its best efforts to cause
such amendment or new Registration Statement to become effective as soon as
is practicable after the filing thereof, but in no event later than 90 days
after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor.
3.2 Accuracy of Registration Statement. Any Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) filed by the Company covering Registrable Securities will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading. The Company will promptly prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
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Registration Statement as may be necessary to permit sales pursuant to the
Registration Statement at all times during the Registration Period, and,
during such period, will comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement until the termination of the
Registration Period, or if earlier, 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 as set
forth in the Registration Statement.
3.3 Furnishing Documentation. The Company will furnish to each
Investor whose Registrable Securities are included in a Registration
Statement, and to its legal counsel, (a) promptly after each document is
prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of any Registration Statement filed pursuant to this
Agreement and any amendments thereto, each preliminary prospectus and final
prospectus and each amendment or supplement thereto; and, in the case of a
Registration Statement filed under Section 2.1 above, each letter written
by or on behalf of the Company to the SEC and each item of correspondence
from, or order issued by, the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than any portion of any item
thereof which contains information for which the Company has sought
confidential treatment); and (b) a number of copies of a prospectus,
including a preliminary prospectus (if any), and all amendments and
supplements thereto, and such other documents as the Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by the Investor. The Company will promptly
notify by facsimile each Investor whose Registrable Securities are included
in any Registration Statement of the effectiveness of the Registration
Statement and any post-effective amendment.
3.4 Additional Obligations. The Company will use its best efforts
to (a) register and qualify the Registrable Securities covered by a
Registration Statement under such other securities or blue sky laws of such
jurisdictions as each Investor who holds (or has the right to hold)
Registrable Securities being offered reasonably requests, (b) prepare and
file in those jurisdictions any amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may
be necessary to maintain their effectiveness during the Registration
Period, (c) take any other actions necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period,
and (d) take any other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions. Notwithstanding
the foregoing, the Company is not required, in connection such obligations,
to (i) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.4, (ii) subject
itself to general taxation in any such jurisdiction, (iii) file a general
consent to service of process in any such jurisdiction, (iv) provide any
undertakings that cause material expense or burden to the Company, or (v)
make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of
the Company and its stockholders.
3.5 Underwritten Offerings. If the Investors who hold a majority in
interest of the Registrable Securities being offered in an offering
pursuant to a Registration Statement or any amendment or supplement thereto
under this Agreement select underwriters reasonably acceptable to the
Company for such offering, the Company will enter into and perform its
obligations under an underwriting agreement in usual and customary form
including, without
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limitation, customary indemnification and contribution obligations, with
the managing underwriter of such offering.
3.6 Suspension of Registration.
(a) The Company will notify (by telephone and also by
facsimile and reputable overnight courier) each Investor who holds
Registrable Securities being sold pursuant to a Registration
Statement of the happening of any event of which the Company has
knowledge as a result of which the prospectus included in the
Registration Statement as then in effect includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
Company will make such notification as promptly as practicable after
the Company becomes aware of the event (but in no event will the
Company disclose to any Investor any of the facts or circumstances
regarding the event), will promptly (but in no event more than five
business days) prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and will
deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request. The Company will
use its best efforts to keep the length of any such suspension to as
short a period as is practicable given the then existing
circumstances and may so defer or suspend the use of the Registration
Statement no more than two times in any 18-month period, and
provided, further, that, after deferring or suspending the use of
the Registration Statement, the Company may not again defer or
suspend the use of the Registration Statement until a period of
thirty days has elapsed after resumption of the use of the
Registration Statement. Notwithstanding anything to the contrary
contained herein or in the Purchase Agreement, if the use of the
Registration Statement is suspended by the Company, the Company will
promptly give notice of the suspension to all Investors whose
securities are covered by the Registration Statement, and will
promptly notify each such Investor as soon as the use of the
Registration Statement may be resumed. Notwithstanding anything to
the contrary contained herein or in the Purchase Agreement, the
Company will cause the Transfer Agent to deliver unlegended shares of
Common Stock to a transferee of an Investor in accordance with the
terms of the Purchase Agreement in connection with any sale of
Registrable Securities with respect to which such Investor has
entered into a contract for sale prior to receipt of notice of such
suspension and for which such Investor has not yet settled unless, in
the reasonable opinion of Company counsel, such delivery would be in
violation of applicable securities laws and/or otherwise subject the
Company to liability.
(b) Subject to the Company's rights under Section 3.1, the
Company will use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration
Statement and, if such an order is issued, will use its best efforts
to obtain the withdrawal of such order at the earliest possible time
and will promptly notify each Investor that holds Registrable
Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the
resolution thereof.
3.8 Review by the Investors. The Company will permit each
Investor's legal counsel to review the Registration Statement and all
amendments and supplements thereto (as well as all requests for
acceleration or effectiveness thereof) a reasonable period of time prior to
their filing with the SEC, and will not file any document in a form to
which such counsel reasonably objects
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unless such counsel fails to notify the Company of his objection within 5
business days after receipt of the proposed Registration Statement and,
unless otherwise required by law in the opinion of the Company's counsel.
The sections of any such Registration Statement including information with
respect to the Investors, the Investors' beneficial ownership of securities
of the Company or the Investors' intended method of disposition of
Registrable Securities must conform to the information provided to the
Company by each of the Investors.
3.9 Information. The Company will make generally available to its
security holders as soon as practicable, but not later than 90 days after
the close of the period covered thereby, an earnings statement (in a form
complying with the provisions of Rule 158 under the Securities Act)
covering a 12-month period beginning not later than the first day of the
Company's fiscal quarter next following the effective date of the
Registration Statement.
3.10 Comfort Letter; Legal Opinion. At the request of the Investors
who hold a majority in interest of the Registrable Securities being sold
pursuant to a Registration Statement, and on the date that Registrable
Securities are delivered to an underwriter for sale in connection with the
Registration Statement, the Company will furnish to the Investors and the
underwriters (i) a letter, dated such date, from the Company's independent
certified public accountants, in form and substance as is customarily given
by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for
purposes of the Registration Statement, in form and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters and Investors.
3.11 Due Diligence; Confidentiality.
(a) Upon reasonable request and the execution by the Investor
of a written confidentiality agreement, then and in that event only,
the Company will make available for inspection by any Investor whose
Registrable Securities are being sold pursuant to a Registration
Statement, any underwriter participating in any disposition pursuant
to the Registration Statement, and any attorney, accountant or other
agent retained by any such Investor or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of the Company (collectively, the
"Records"), as each Inspector reasonably deems necessary to enable
the Inspector to exercise its due diligence responsibility in
connection with or related to the contemplated offering. The Company
will cause its officers, directors and employees to supply all
information that any Inspector may reasonably request for purposes of
performing such due diligence.
(b) The Company will hold in confidence, and will not make any
disclosure of, information concerning an Investor provided to the
Company under this Agreement unless (i) disclosure of such
information is necessary to comply with federal or state securities
laws, or any exchange listing or similar rules and regulations, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or
other order from a court or governmental body of competent
jurisdiction, (iv) such information has been made generally available
to the public other than by disclosure in violation of this Agreement
or any other agreement or (v) such Investor consents to the form and
content of any such disclosure. If the
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Company learns that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, the Company will give prompt
notice to such Investor prior to making such disclosure and allow
such Investor, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such
information.
3.12 Listing. The Company will (i) cause all of the Registrable
Securities covered by each Registration Statement to be listed on each
national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such
exchange, or (ii) to the extent the securities of the same class or series
are not then listed on a national securities exchange, secure the
designation and quotation of all of the Registrable Securities covered by
each Registration Statement on Nasdaq and, without limiting the generality
of the foregoing, arrange for at least two market makers to register with
the National Association of Securities Dealers, Inc. as such with respect
to such Registrable Securities.
3.13 Transfer Agent; Registrar. The Company will provide a transfer
agent and registrar, which may be a single entity, for the Registrable
Securities not later than the effective date of the Registration Statement.
3.14 Share Certificates. The Company will cooperate with the
Investors who hold Registrable Securities being sold and with the managing
underwriter(s), if any, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to a Registration Statement
and will enable such certificates to be in such denominations or amounts as
the case may be, and registered in such names as the Investors or the
managing underwriter(s), if any, may reasonably request, all in accordance
with Article V of the Purchase Agreement.
3.15 Plan of Distribution. At the request of the Investors holding
a majority in interest of the Registrable Securities registered pursuant to
a Registration Statement, the Company will promptly prepare and file with
the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement, and the prospectus used in
connection with the Registration Statement, as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.
3.16 Securities Laws Compliance. The Company will comply with all
applicable laws related to any Registration Statement relating to the sale
of Registrable Securities and to offering and sale of securities and with
all applicable rules and regulations of governmental authorities in
connection therewith (including, without limitation, the Securities Act,
the Exchange Act and the rules and regulations promulgated by the SEC).
3.17 Further Assurances. The Company will take all other reasonable
actions as any Investor or the underwriters, if any, may reasonably request
to expedite and facilitate disposition by such Investor of the Registrable
Securities pursuant to the Registration Statement.
3.18 No Additional Selling Stockholders. The Company will not, and
will not agree to, allow the holders of any securities of the Company to
include any of their securities in any
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Registration Statement under Section 2.1 hereof, or any amendment or
supplement thereto under Section 3.2 hereof, without the consent of the
holders of a majority in interest of the Registrable Securities.
ARTICLE IV
OBLIGATIONS OF THE INVESTORS
4.1 Investor Information. As a condition to the obligations of the
Company to complete any registration pursuant to this Agreement with
respect to the Registrable Securities of each Investor, such Investor will
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the
Registrable Securities held by it as is reasonably required by the Company
to effect the registration of the Registrable Securities. At least 10
business days prior to the first anticipated filing date of a Registration
Statement for any registration under this Agreement, the Company will
notify each Investor of the information the Company requires from that
Investor if the Investor elects to have any of its Registrable Securities
included in the Registration Statement. If, within three business days
prior to the filing date, the Company has not received the requested
information from an Investor, then the Company may file the Registration
Statement without including Registrable Securities of that Investor. Any
and all information provided by the Investor pursuant hereto shall be true,
accurate and complete in all material respects.
4.2 Further Assurances. Each Investor will cooperate with the
Company, including the execution and delivery such further documents and
taking of such further actions as may be reasonably required to implement
and effectuate the transactions contemplated in this Agreement as
reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor's election to exclude all
of such Investor's Registrable Securities from the Registration Statement.
4.3 Suspension of Sales. Upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.6,
each Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until (i) it receives copies of a supplemented or amended
prospectus contemplated by Section 3.6 or (ii) the Company advises the
Investor that a suspension of sales under Section 3.6 has terminated. If
so directed by the Company, each Investor will deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession (other
than a limited number of file copies) of the prospectus covering such
Registrable Securities that is current at the time of receipt of such
notice.
4.4 Underwritten Offerings.
(a) If Investors holding a majority in interest of the
Registrable Securities being registered (with the approval of a
majority in interest of the Investors) determine to engage the
services of an underwriter, each Investor will enter into and perform
such Investor's obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
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underwriter of such offering, and will take such other actions as are
reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has
notified the Company in writing of such Investor's election to
exclude all of its Registrable Securities from such Registration
Statement.
(b) Without limiting any Investor's rights under Section 2.1
hereof, no Investor may participate in any underwritten distribution
hereunder unless such Investor (a) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve
such arrangements, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements, and (c) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting,
and legal expenses of the underwriter, applicable with respect to its
Registrable Securities, in each case to the extent not payable by the
Company under the terms of this Agreement.
ARTICLE V
EXPENSES OF REGISTRATION
The Company will bear all reasonable expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Articles II and III of
this Agreement, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees, the fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one firm of legal counsel selected by the Investors
pursuant to Section 3.8 hereof. The fees and expenses incurred by
Investor's counsel and payable by the Company hereunder shall be subject
to, and aggregated with, the fees and expenses that shall be borne by the
Company as provided in Section 4.5 of the Purchase Agreement. In no event
shall the Company's liability therefor be deemed to exceed an aggregate
maximum amount of $50,000.
ARTICLE VI
INDEMNIFICATION
In the event that any Registrable Securities are included in a
Registration Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify and
hold harmless each Investor that holds such Registrable Securities, any
underwriter (as defined in the Securities Act) for the Investors, any
directors, officers or advisors of such Investor or such underwriter and
any person who controls such Investor or such underwriter within the
meaning of the Securities Act or the Exchange Act (each, an "Indemnified
Person") against any losses, claims, damages, expenses or liabilities
(joint or several) (collectively, and together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether
commenced or threatened in respect thereof, "Claims") to which any of them
become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims arise out of or are based upon any of the following
statements, omissions or violations in a Registration Statement filed
pursuant to this
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Agreement, any post-effective amendment thereof or any prospectus included
therein: (a) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (b) any untrue statement or alleged
untrue statement of a material fact contained in the prospectus (as it may
be amended or supplemented) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made,
not misleading, or (c) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act or any other law, including without
limitation any state securities law or any rule or regulation thereunder
(the matters in the foregoing clauses (a) through (c) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6.3 with
respect to the number of legal counsel, the Company will reimburse the
Investors and each such underwriter or controlling person and each such
other Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.1 (i) does not apply
to Claims arising out of or based upon a Violation that occurs in reliance
upon and in conformity with information furnished in writing to the Company
by an Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3.3 hereof; and (ii) does not apply to amounts
paid in settlement of any Claim if such settlement is made without the
prior written consent of the Company, which consent will not be
unreasonably withheld. This indemnity obligation will remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Persons and will survive the transfer of the Registrable
Securities by the Investors under Article IX of this Agreement.
6.2 In connection with any Registration Statement in which an
Investor is participating, each such Investor will indemnify and hold
harmless, to the same extent and in the same manner set forth in Section
6.1 above, the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, and
any other stockholder selling securities pursuant to the Registration
Statement and any of its directors and officers and any person who controls
such stockholder within the meaning of the Securities Act or the Exchange
Act (each an "Indemnified Person") against any Claim to which any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claim arises out of or is based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such
Registration Statement. Subject to the restrictions set forth in Section
6.3, such Investor will promptly reimburse the Company and each such other
Indemnified Person, any legal or other expenses (promptly as such expenses
are incurred and due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim. However, the indemnity
agreement contained in this Section 6.2 does not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent will not be unreasonably
withheld, and no Investor will be liable under this Agreement (including
this Section 6.2 and Article VII) for the amount of any Claim that exceeds
the net proceeds actually
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received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. This indemnity will remain in
full force and effect regardless of any investigation made by or on behalf
of an Indemnified Party and will survive the transfer of the Registrable
Securities by the Investors under Article IX of this Agreement.
6.3 Promptly after receipt by an Indemnified Person under this
Article VI of notice of the commencement of any action (including any
governmental action), such Indemnified Person will, if a Claim in respect
thereof is to be made against any indemnifying party under this Article VI,
deliver to the indemnifying party a written notice of the commencement
thereof. The indemnifying party may participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly given notice, assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties and the Indemnified
Person. In that case, the indemnifying party will diligently pursue such
defense. If, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person and the indemnifying party would be inappropriate due to actual or
potential conflicts of interest between the Indemnified Person and any
other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action including the
Indemnified Person, and such Indemnified Person reasonably determines that
there may be legal defenses available to such Indemnified Person that are
different from or in addition to those available to the indemnifying party,
then the Indemnified Person is entitled to assume such defense and may
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party (subject to the restrictions on settlement under Section
6.1 or Section 6.2, as applicable). The Company will pay for only one
separate legal counsel for the Investors collectively, and such legal
counsel will be selected by the Investors holding a majority in interest of
the Registrable Securities. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action does not relieve an indemnifying party of any liability to an
Indemnified Person under this Article VI, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Article VI will be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due
and payable. Each Indemnified Person shall furnish such information
regarding itself or the claim in question as an Indemnifying Person may
reasonably request in writing and shall be reasonably required in
connection with the defense of such claim and litigation resulting
therefrom.
ARTICLE VII
CONTRIBUTION
To the extent that any indemnification provided for herein is
prohibited or limited by law, the indemnifying party will make the maximum
contribution with respect to any amounts for which it would otherwise be
liable under Article VI to the fullest extent permitted by law. However,
(a) no contribution will be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set
forth in Article VI, (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (c) contribution
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(together with any indemnification or other obligations under this
Agreement) by any seller of Registrable Securities will be limited in
amount to the net amount of proceeds received by such seller from the sale
of such Registrable Securities.
ARTICLE VIII
EXCHANGE ACT REPORTING
In order to make available to the Investors the benefits of Rule 144
or any similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration, the Company will:
(a) File with the SEC in a timely manner, and make and keep
available, all reports and other documents required of the Company
under the Securities Act and the Exchange Act so long as the Company
remains subject to such requirements (it being understood that
nothing herein limits the Company's obligations under Section 4.3 of
the Purchase Agreement) and the filing and availability of such
reports and other documents is required for the applicable provisions
of Rule 144; and
(b) Furnish to each Investor, so long as such Investor holds
Convertible Notes, Warrants or Registrable Securities, promptly upon
the Investor's request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents filed by the Company with the SEC and (iii) such other
information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
ARTICLE IX
ASSIGNMENT OF REGISTRATION RIGHTS
The rights of the Investors hereunder, including the right to have
the Company register Registrable Securities pursuant to this Agreement,
will be automatically assigned by the Investors to transferees or assignees
of all or any portion of the Convertible Notes, Warrants or Registrable
Securities, but only if (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment,
(b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being transferred or assigned, (c) after such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and
applicable state securities laws, (d) at or before the time the Company
received the written notice contemplated by clause (b) of this sentence,
the transferee or assignee agrees in writing with the Company to be bound
by all of the provisions contained herein, (e) such transfer is made in
accordance with the applicable requirements of the Purchase Agreement or
the Warrant, as the case may be, and (f) the transferee is an "accredited
investor" as that term is defined in Rule 501 of Regulation D. Any
transferee or assignee of an Investor under this Article IX shall be deemed
an "Investor" for all purposes of this Agreement, and shall be entitled to
all rights of, and subject to all obligations (including indemnification
obligations) of, an Investor hereunder.
14
ARTICLE X
AMENDMENT OF REGISTRATION RIGHTS
This Agreement may be amended and the obligations hereunder may be
waived (either generally or in a particular instance, and either
retroactively or prospectively) only with the written consent of the
Company and each Investor (but not including any Investor who is not
affected by such amendment or waiver). Any amendment or waiver effected in
accordance with this Article X is binding upon each Investor (and each
future holder of all such Registrable Securities) and the Company.
Notwithstanding the foregoing, no amendment or waiver will retroactively
affect any Investor without its consent, or will prospectively adversely
affect any Investor who no longer owns any Convertible Notes, Warrants or
Registrable Securities without its consent. Neither Article VI nor Article
VII hereof may be amended or waived in a manner adverse to an Investor
without its consent.
ARTICLE XI
MISCELLANEOUS
11.1 Conflicting Instructions. A person or entity is deemed to be a
holder of Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities
with respect to the same Registrable Securities, the Company will act upon
the basis of instructions, notice or election received from the registered
owner of such Registrable Securities.
11.2 Notices. Any notices required or permitted to be given under
the terms of this Agreement will be given and deemed received as set forth
in the Purchase Agreement.
11.3 Waiver. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, does not operate as a waiver thereof.
11.4 Governing Law. This Agreement will be governed by and
interpreted in accordance with the laws of the Commonwealth of
Massachusetts without regard to the principles of conflict of laws. The
parties hereto hereby submit to the jurisdiction of the United States
federal and state courts located in the Commonwealth of Massachusetts with
respect to any dispute arising under this Agreement, the agreements entered
into in connection herewith or the transactions contemplated hereby or
thereby.
11.5 Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such
provision will be deemed modified in order to conform with such statute or
rule of law. Any provision hereof that may prove invalid or unenforceable
under any law will not affect the validity or enforceability of any other
provision hereof.
11.6 Entire Agreement. This Agreement, the Purchase Agreement and
the Warrants (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein or
therein. This
15
Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
11.7 Successors and Assigns. Subject to the requirements of Article
IX hereof, this Agreement inures to the benefit of and is binding upon the
successors and assigns of each of the parties hereto. Notwithstanding
anything to the contrary herein, including, without limitation, Article IX,
the rights of an Investor hereunder are assignable to and exercisable by a
bona fide pledgee of the Registrable Securities in connection with an
Investor's margin or brokerage accounts.
11.8 Use of Pronouns. All pronouns refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
11.9 Headings. The headings of this Agreement are for convenience of
reference only, are not part of this Agreement and do not affect its
interpretation.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which is deemed an original but all of which
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile
transmission, and facsimile signatures are binding on the parties hereto.
11.11 Further Assurances. Each party will do and perform, or cause
to be done and performed, all such further acts and things, and will
execute and deliver all other agreements, certificates, instruments and
documents, as another party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
11.12 Consents. All consents and other determinations to be made by
the Investors pursuant to this Agreement will be made by the Investors
holding a majority in interest of the Registrable Securities, determined as
if all Convertible Notes and all Warrants then outstanding had been
converted into or exercised for Registrable Securities.
11.13 No Strict Construction. The language used in this Agreement
is deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
11.14 No Third-Party Beneficiaries. Other than as specifically
provided herein, this Agreement is intended to inure to the benefit of the
parties hereto only, and no other party shall have any rights, express or
implied, by reason of this Agreement.
11.15 Saturdays, Sundays, Holidays, Etc. If the last or appointed
day for the taking of any action required or permitted hereby shall be a
Saturday, Sunday, a nationally recognized holiday, or a state holiday in
the Commonwealth of Massachusetts, then such action may be taken on the
next succeeding business day.
11.16 Heartland Value Fund. The Company understands and
acknowledges that Heartland Group, Inc. is entering into this Agreement
solely on behalf of the Heartland Value Fund and that any claims that the
Company may have against Heartland Group, Inc. under this
16
Agreement or otherwise in connection with the transactions contemplated
hereby shall only be made against the assets of the Heartland Value Fund,
provided, however, that the foregoing shall be of no force or effect in the
event of the distribution of all of the assets of, or dissolution, winding
up or other termination of, the Heartland Value Fund.
11.17 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any of the Securities Purchase
Agreement, Convertible Note, Warrant or this Agreement (collectively, the
"Transaction Documents") are several and not joint with the obligations of
any other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under any Transaction
Document. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Investors are
in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Document. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or
out of the other Transaction Documents, and it shall not be necessary for
any other Investor to be joined as an additional party in any proceeding
for such purpose. Each Investor has been represented by its own separate
legal counsel in their review and negotiation of the Transaction Documents.
The Company has elected to provide all Investors with the same terms and
Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Investors.
[signature pages follow]
17
IN WITNESS WHEREOF, the undersigned Investors and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
PARLEX CORPORATION
By: /s/ Peter J. Murphy
--------------------------------
Peter J. Murphy
Chief Executive Officer & President
[Signatures continued on next page]
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INVESTOR:
TATE CAPITAL PARTNERS FUND, LLC
By Tate Capital Partners, LLC
Its Managing Member
By Tate Capital Management, LLC
Its Managing Member
By: /s/ Kurtis J. Winters
--------------------------------
Name: Kurtis J. Winters
Its: Managing Member
ADDRESS:
Tate Capital Partners Fund, LLC
3600 Minnesota Drive, Suite 525
Minneapolis, MN 55435
[Signatures continued on next page]
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INVESTOR:
MIDSUMMER INVESTMENT, LTD.
By: /s/ Michel A. Amsalem
--------------------------------
Name: Michel A. Amsalem
Its: Director
ADDRESS:
Midsummer Investment, Ltd.
c/o Midsummer Capital, LLC
485 Madison Avenue, 23rd Floor
New York, NY 10022
[Signatures continued on next page]
20
INVESTOR:
ISLANDIA L.P.
By: /s/ Richard O. Berner
--------------------------------
Name: Richard O. Berner
Its: Partner
ADDRESS:
Islandia L.P.
c/o John Lang, Inc
485 Madison Avenue, 23rd Floor
New York, NY 10022
[Signatures continued on next page]
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INVESTOR:
SF CAPITAL PARTNERS Ltd.
By: /s/ Brian Davidson
--------------------------------
Name: Brian Davidson
Its: Partner
ADDRESS:
SF Capital Partners Ltd.
c/o Staro Asset Management, LLC
3600 South Lake Drive
St. Francis, Wisconsin 53235
[Signatures continued on next page]
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INVESTOR:
HEARTLAND GROUP, INC.
(Solely on behalf of Heartland Value
Fund)
By: /s/ Paul T. Beste
--------------------------------
Name: Paul T. Beste
Its: Vice President
ADDRESS:
789 N. Water Street
Milwaukee, WI 53202