EXHIBIT 7.5
Exhibit D
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into this
31st day of July, 2002, by and between FORTUNE DIVERSIFIED INDUSTRIES, INC., a
Delaware corporation (the "Company"), and ROBERT J. KINGSTON, a resident of the
State of Indiana ("Kingston").
WHEREAS, the Company purchased from Kingston all of the issued and
outstanding shares of Kingston Sales Corporation, an Indiana corporation,
pursuant to that certain Stock Purchase Agreement by and among the Company,
Kingston and Kingston Sales Corporation dated of even date herewith (the "Stock
Purchase Agreement");
WHEREAS, in partial consideration for the sale by Kingston of such shares,
the Company issued to Kingston 8,000,000 shares of the Company's Common Stock
(the "Common Stock"); and
WHEREAS, the Company is required, in accordance with the Stock Purchase
Agreement, to enter into this Agreement and to grant the rights granted
hereunder.
NOW, THEREFORE, in consideration of the foregoing, the parties to this
Agreement hereby agree as follows:
1. Incidental or Piggy-Back Registration Rights Granted to Kingston.
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(a) Notice of Registration. The Company shall promptly provide written
notice to Kingston if the Company shall determine to register any of its
Common Stock, preferred stock or any other capital stock ("Capital Stock")
for sale in an underwritten offering for its own account (other than a
registration relating to (i) a registration of an employee compensation
plan or arrangement adopted in the ordinary course of business on Form S-8
(or any successor form) or any dividend reinvestment plan, or (ii) a
registration of securities on Form S-4 (or any successor form) including,
without limitation, in connection with a proposed issuance in exchange for
securities or assets of, or in connection with a merger or consolidation
with, another corporation), or if the Company shall register any of its
Capital Stock pursuant to a demand request for registration by any holder
of the Company's Capital Stock other than Kingston. Kingston shall have ten
(10) days following the receipt of such notice from the Company to provide
written notice to the Company of Kingston's desire to include Kingston's
Common Stock and/or any other shares of Capital Stock owned beneficially by
Kingston ("Subject Stock") within such registration, which notice shall
specify the number of shares of Subject Stock Kingston desires to include.
Subject to the provisions of Section 1(b), the Company shall include in
such registration all the Subject Stock specified in Kingston's notice to
the Company (each an "Incidental Registration"). The right of
Kingston to have Subject Stock included in a registration pursuant to this
Section shall be conditioned upon Kingston's entrance into (together with
the Company and/or the other holders, if any, distributing their securities
through such underwriting) an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting by
the Company or by the stockholders who have demanded such registration.
(b) Cutback. If the lead managing underwriter of an offering covered
by Section 1(a) shall advise the Company in writing on or before the date
five (5) days prior to the date then scheduled for such offering that, in
its opinion, the amount of Capital Stock (including Subject Stock)
requested to be included in such registration exceeds the amount which can
be sold in such offering without adversely affecting the marketing of the
Capital Stock being offered, then the Company will include in such
registration, first, all the securities the Company proposes to register
for its own account, second, only the number of shares requested to be
registered for the account of John F. Fisbeck, Carter Fortune, Kingston and
any other persons or entities that received shares of the Company under the
terms of an acquisition by the Company of another business entity
consummated within two (2) years of the date of this Agreement,
collectively, which, when added to the securities to be sold by the
Company, does not cause the total number of registered shares to exceed the
amount which can be sold in such offering without adversely affecting the
marketing of the Capital Stock being offered, according to the lead
managing underwriter. If the number of shares requested to be registered by
the aforementioned persons and entities (other than the Company) exceed the
amount which can be sold in such offering by virtue of the foregoing
cutback mechanism, the number of shares to be included in such offering
shall be reduced pro rata among the requesting holders based upon the
number of shares of stock owned by such holders. Notwithstanding anything
in this Agreement to the contrary, in no event shall Kingston have any
registration rights more favorable than the registration rights available
to Carter Fortune and John Fisbeck. provided, however, that if the Company
will not, by virtue of the foregoing cutback mechanism, include in any such
registration all of the Subject Stock requested to be included in such
registration, Kingston may, upon written notice to the Company given within
three (3) days of the time Kingston is first notified of such matter,
reduce the amount of Subject Stock Kingston desires to have included in
such registration, whereupon only the Subject Stock Kingston desires to
have included, if any, will be considered for such inclusion.
2. Obligations of the Company.
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(a) Registration Statement Filing. Whenever the Company is required by
the provisions of this Agreement to effect the registration of any Subject
Stock under the Securities Act of 1933, as amended (the "Securities Act"),
the Company shall (i) prepare and, as soon as reasonably possible, file
with the SEC a registration statement with respect to the shares of Subject
Stock, and shall use its best efforts to cause such registration statement
to become effective and to remain effective until the earlier of the sale
of the shares of Subject Stock so registered or such time as Kingston may
sell all of the shares of Subject Stock pursuant to Rule 144 within a
six-month period, (ii) prepare
and file with the Securities and Exchange Commission ("SEC") such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be reasonably necessary to
make and to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the sale or other
disposition of all securities proposed to be registered pursuant to such
registration statement until the earlier of the sale of the shares of
Subject Stock so registered or such time as Kingston may sell all of the
shares of Subject Stock pursuant to Rule 144 within a six (6) month period,
and (iii) take all such other actions either necessary or desirable to
permit the shares of Subject Stock held by Kingston to be registered and
disposed of in accordance with the method of disposition described herein.
(b) Postponement. Notwithstanding the foregoing, if the Company shall
furnish to Kingston a certificate signed by its Chairman, Chief Executive
Officer or Chief Financial Officer stating that (i) filing a registration
statement or maintaining effectiveness of a current registration statement
would have a material adverse effect on the Company or its stockholders, or
(ii) the Company has determined in good faith that the filing or
maintaining effectiveness of a current registration statement would require
disclosure of material information that the Company desires to retain as
confidential for a valid business purpose, the Company shall be entitled to
postpone filing or suspend the use by Kingston of the registration
statement for a reasonable period of time.
(c) Provisions Applicable to Registration Statements. In connection
with any registration statement, the following provisions shall apply:
(i) The Company shall furnish to Kingston, prior to the filing
thereof with the SEC, a copy of any registration statement, and each
amendment thereof and each amendment or supplement, if any, to the
prospectus included therein, and shall use its reasonable efforts to
reflect in each such document, when so filed with the SEC, such
reasonable comments as Kingston and its counsel may propose.
(ii) The Company shall take such action as may be necessary so
that (A) any registration statement and any amendment thereto and any
prospectus forming part thereof and any amendment or supplement
thereto (and each report or other document incorporated therein by
reference) complies in all material respects with the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the respective rules and regulations thereunder, (B) any
registration statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (C) any
prospectus forming part of any registration statement, and any
amendment or supplement to such prospectus, does not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(iii) The Company shall advise Kingston and, if requested by
Kingston, confirm such advice in writing:
(A) when a registration statement and any amendment thereto
has been filed with the SEC and when the registration statement
or any post-effective amendment thereto has become effective;
(B) of any request by the SEC for amendments or supplements
to the registration statement or the prospectus included therein
or for additional information;
(C) the issuance by the SEC of any stop order suspending
effectiveness of the registration statement or the initiation of
any proceedings for that purpose;
(D) the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities
included therein for sale in any jurisdiction or the initiation
of any proceeding for such purpose; and
(E) the happening of any event of which the Company has
knowledge that requires the making of any changes in the
registration statement or the prospectus so that, as of such
date, the registration statement and the prospectus do not
contain an untrue statement of a material fact and do not omit to
state a material fact required to be stated therein or necessary
to make the statements therein (in the case of the prospectus, in
the light of the circumstances under which they were made) not
misleading (which advice shall be accompanied by an instruction
to suspend the use of the prospectus relating to the Subject
Stock until the requisite changes have been made).
(iv) The Company shall use its best efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of the registration statement relating to
the Subject Stock at the earliest possible time.
(v) The Company shall furnish to Kingston with respect to the
registration statement relating to the Subject Stock, without charge,
such number of copies of such registration statement and any
post-effective amendment thereto, including financial statements and
schedules, and all reports, other documents and exhibits (including
those incorporated by reference) as Kingston shall reasonably request.
(vi) The Company shall furnish to Kingston such number of copies
of any prospectus (including any preliminary prospectus and any
amended or supplemented prospectus) relating to the Subject Stock, in
conformity with the requirements of the Securities Act, as Kingston
may reasonably request in order to effect the offering and sale of the
shares of Subject Stock to be offered and sold, but only while the
Company shall be required under the provisions hereof to cause the
registration statement to remain current, and the Company consents
(except during the continuance of any event described in Sections 2(b)
or 2(c)(iii)(E)) to the use of the Prospectus or any amendment or
supplement thereto by Kingston in connection with the offering and
sale of the Subject Stock covered by the Prospectus or any amendment
or supplement thereto.
(vii) Prior to any offering of Subject Stock pursuant to any
registration statement, the Company shall use its best efforts to
register or qualify the shares of Subject Stock covered by such
registration statement under the securities or blue sky laws of such
states as Kingston shall reasonably request, maintain any such
registration or qualification current until the earlier of the sale of
the shares of Subject Stock so registered or 90 days subsequent to the
effective date of the registration statement, and do any and all other
acts and things either reasonably necessary or advisable to enable
Kingston to consummate the public sale or other disposition of the
shares of Subject Stock in jurisdictions where Kingston desires to
effect such sales or other disposition; provided, however, that the
Company shall not be required to take any action that would subject it
to the general jurisdiction of the courts of any jurisdiction in which
it is not to subject or to qualify as a foreign corporation in any
jurisdiction where the Company is not so qualified.
(viii) In connection with any offering of shares of Subject Stock
registered pursuant to this Agreement, the Company shall (x) furnish
Kingston, at the Company's expense, on a timely basis with
certificates free of any restrictive legends representing ownership of
the shares of Subject Stock being sold in such denominations and
registered in such names as Kingston shall request, and (y) instruct
the transfer agent and registrar of the Subject Stock to release any
stop transfer orders with respect to the shares of Subject Stock.
(ix) Upon the occurrence of any event contemplated by Section
2(c)(iii)(B) above, the Company shall promptly prepare a
post-effective amendment to any registration statement or an amendment
or supplement to the related prospectus or file any other required
document so that, as thereafter delivered to purchasers of the Subject
Stock included therein, the prospectus will not include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If the
Company notifies Kingston of the occurrence of any event contemplated
by Sections 2(b) or 2(c)(iii)(E) above, Kingston shall suspend the use
of the prospectus until the requisite changes to the prospectus have
been made.
(x) The Company shall, if requested, promptly include or
incorporate in a prospectus supplement or post-effective amendment to
a registration statement, such information as the managing
underwriters administering an underwritten offering of the Subject
Stock registered thereunder reasonably request to be included therein
and to which the Company does not reasonably object and shall make all
required filings of such prospectus statement or post-effective
amendment as soon as practicable after they are notified of the
matters to be included or incorporated in such prospectus supplement
or post-effective amendment.
(xi) If requested, the Company shall enter into an underwriting
agreement with a nationally recognized investment banking firm or
firms reasonably acceptable to the Company containing representations,
warranties, indemnities and agreements then customarily included by an
issuer in underwriting agreements with respect to secondary
underwritten distributions, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to
those set forth in Section 4 (or such other provisions and procedures
acceptable to the managing underwriters, if any) with respect to all
parties to be indemnified pursuant to Section 4.
(xii) The Company will use its best efforts to cause the Subject
Stock to be admitted for quotation on the OTC Bulletin Board, Nasdaq
National Market, New York Stock Exchange or other stock exchange or
trading system on which the Common Stock primarily trades on or prior
to the effective date of any registration statement hereunder, if any.
(xiii) In connection with any registration hereunder, Kingston
will furnish to the Company in writing such information with respect
to himself and the proposed distribution by him as reasonably shall be
necessary in order to assure compliance with federal and applicable
state securities laws.
(d) Availability of Information. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Subject Stock to the public without registration,
the Company agrees to:
(i) Make and keep public information available, as those terms
are understood and defined in and interpreted under Rule 144 (or any
successor provision) of the Securities Act, at all times;
(ii) During the term of this Agreement, to furnish to Kingston
upon request (A) a copy of the most recent annual or quarterly report
of the Company, and (B) such other reports and documents of the
Company as Kingston may reasonably request in availing itself of any
rule or regulation of the SEC allowing Kingston to sell any such
securities without registration.
3. Expenses. The Company shall pay all fees and expenses incurred in
connection with the performance of its obligations under Sections 1 and 2
hereof, including, without limitation, all SEC and blue sky registration and
filing fees, printing expenses, transfer agents' and registrars' fees, and the
reasonable fees and disbursements of the Company's outside counsel and
independent accountants incurred in connection with the preparation, filing and
amendment of any registration statement authorized by this Agreement (but
excluding underwriters' and brokers' discounts and commissions and fees of
Kingston and underwriter's counsel and related costs applicable to the sale of
Subject Stock which costs shall be paid by Kingston).
4. Indemnification and Contribution
(a) Indemnification by the Company. In the case of any offering
registered
pursuant to this Agreement, the Company agrees to indemnify and hold
Kingston, each underwriter (if any) of shares of Subject Stock under such
registration statements and each person who controls any of the foregoing
within the meaning of Section 15 of the Securities Act harmless against any
and all losses, claims, damages, liabilities or amounts paid in settlement
as permitted by this Agreement to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, and to reimburse them, from time to time upon request, for any
legal or other expenses incurred by them in connection with investigating
any claims and defending any actions, insofar as any such losses, claims,
damages, liabilities or actions shall arise out of or shall be based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement (or any amendment thereto) relating
to the sale of such shares of Subject Stock, including all documents
incorporated therein by reference, 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, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus (as amended or supplemented if the Company shall have filed with
the SEC any amendment thereof or supplement thereto), if used prior to the
effective date of such registration statement or contained in the
prospectus (as amended or supplemented if the Company shall have filed with
the SEC any amendment thereof or supplement thereto), if used within the
period during which the Company shall be required to keep the registration
statement to which such prospectus relates current pursuant to the terms of
this Agreement, or the omission or alleged omission to state therein (if so
used) a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the indemnification agreement contained in this
Section 4(a) shall not apply to such losses, claims, damages, liabilities
or actions which shall arise from the sale of shares of Subject Stock to
any person if such losses, claims, damages, liabilities or actions shall
arise out of or shall be based upon any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such
statement or omission shall have been (x) made in reliance upon an untrue
statement or alleged untrue statement or omission or alleged omission made
to the Company by Kingston or any such underwriter specifically for use in
connection with the preparation of the registration statement or any such
amendment thereof of supplement thereto, or (y) made in any preliminary
prospectus, and the prospectus contained in the registration statement as
declared effective or in the form filed by the Company with the SEC
pursuant to Rule 424 under the Securities Act shall have corrected such
statement or omission and a copy of such prospectus shall have been sent or
given to such person at or prior to the confirmation of such sale to him.
(b) Indemnification by Kingston. In the case of each offering
registered pursuant to this Agreement, Kingston agrees, in the same manner
and to the same extent as set forth in Section 4(a) of this Agreement, to
indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities
Act, its directors and those officers of the Company who shall have signed
any such registration statement with respect to any statement in or
omission from such registration statement or any preliminary prospectus (as
amended or as supplemented, if amended or supplemented as aforesaid) or
prospectus contained in such registration document (as amended or as
supplemented, if amended or supplemented as aforesaid), if such statement
or omission shall have been made in reliance upon and in conformity with
information furnished to the Company by Kingston specifically for use in
connection with the preparation of such registration statement or any
preliminary prospectus or prospectus contained in such registration
statement or any such amendment thereof of supplement thereto.
(c) Notice of Claims. Each party indemnified under Section 4(a) or
Section 4(b) of this Agreement shall, promptly after receipt of notice of
the commencement of any action against such indemnified party in respect of
which indemnity may be sought, notify the indemnifying party in writing of
the commencement thereof, enclosing a copy of all papers served on such
indemnified party. The omission of any indemnified party so to notify an
indemnifying party of any such action shall not relieve the indemnifying
party from any liability in respect of such action which it may have to
such indemnified party on account of the indemnity agreement contained in
Section 4(a) or Section 4(b) of this Agreement, unless the indemnifying
party was prejudiced by such omission, and in no event shall relieve the
indemnifying party from any other liability which it may have to such
indemnified party. In case any such action shall be brought against any
indemnified party and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party; provided that if any
indemnified party or parties reasonably determine that there may be legal
defenses available to such indemnified party that are different from or in
addition to those available to such indemnifying party or that
representation of such indemnifying party and any indemnified party by the
same counsel would present a conflict of interest, then such indemnifying
party shall not be entitled to assume such defense. If an indemnifying
party assumes the defense of an action in accordance with and as permitted
by the provisions of this paragraph, such indemnifying party shall not be
liable to such indemnified party under Section 4(a) or Section 4(b) of this
Agreement for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation. In no event shall the indemnifying party
be liable for the fees and expenses of more than one counsel (in addition
to local counsel) separate from its own counsel for all indemnified parties
in connection with any one action of separate but similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances.
(d) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity provided for in this
Section 4 is for any reason held to be unavailable to the indemnified
parties although applicable in accordance with its terms, the Company and
Kingston shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity incurred
by the Company and Kingston as incurred; provided that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person that was
not guilty of such fraudulent misrepresentation. As between the Company, on
the one hand, and Kingston, on the other hand, such parties shall
contribute to such aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of the
Company, on the one hand, and Kingston, on the other hand, with respect to
the statements or omissions which resulted in such loss, liability, claim,
damage or expense, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault of the Company, on
the one hand, and of Kingston, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, on the one
hand, or by on behalf of Kingston, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and Kingston
agree that it would not be just and equitable if contribution pursuant to
this Section 4 were to be determined by pro rata allocation or by any other
method of allocation that does not take into account the relevant equitable
considerations. For purposes of this Section 4(d), each person who controls
the Company or Kingston within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as Kingston or the Company,
as the case may be. No party shall be liable for contribution with respect
to any action, suit, proceeding or claim settled without its written
consent.
(e) Underwriter Compliance. The Company may require, as a condition to
entering into any underwriting agreement with respect to the registration
of Subject Stock, that the Company shall have received an undertaking
reasonably satisfactory to it from each underwriter named in any such
underwriting agreement, severally and not jointly, to comply with the
provisions of paragraphs (a) through (d) of this Section 4.
(f) Survival. The obligations of the Company and Kingston under this
Section 4 shall survive the completion of any offering of Subject Stock in
a registration statement.
5. Notices. Any notice or other communication given under this Agreement
shall be sufficient if in writing and sent by registered or certified mail,
return receipt requested, postage prepaid, to a party at its address set forth
below (or at such other address as shall be designated for such purpose by such
party in a written notice to the other party hereto):
(a) If to the Company, to it at:
Fortune Diversified Industries, Inc.
6809 Corporate Drive
Indianapolis, IN 46278
With an additional copy to:
Robert J. Milford, Esquire
DREWRY SIMMONS PITTS & VORNEHM, LLP
8888 Keystone Crossing, Suite 1200
Indianapolis, IN 46240
(b) If to Kingston, to him at:
Robert J. Kingston
12158 Crestwood Drive
Carmel, IN 46033
With an additional copy to:
John A. Millspaugh, Esq.
Bose McKinney & Evans LLP
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204
All such notices and communications shall be effective when received by the
addressee.
6. Governing Law. This Agreement shall be governed in all respects by the
internal laws of the State of Indiana as applied to contracts entered into
solely between residents of, and to be performed entirely within, such state,
and without reference to principles of conflicts of laws or choice of laws.
7. Entire Agreement; Amendments. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof and supersedes all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
8. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
9. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
10. Termination of Company Obligation. All registration rights provided
hereunder shall terminate upon the earlier of (i) the date Seller ceases to own
five percent (5%) or more of the issued and outstanding voting capital stock of
Buyer, or (ii) the fourth (4th) anniversary of the date of this Agreement.
11. Limitation on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not enter into any agreement granting any
holder or prospective holder of any securities of the Company demand
registration rights, or registration rights with respect to such securities that
would allow such holder or prospective holder to have registration rights more
favorable than those contained herein so long as any of the registration rights
under this Agreement remain in effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date set forth above.
Fortune Diversified Industries, Inc.
(the "Company")
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Carter Fortune, CEO
Robert J. Kingston
("Kingston")
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Robert J. Kingston, Individually