Exhibit 10.4
SHAREHOLDERS REGISTRATION RIGHTS AGREEMENT
SHAREHOLDERS REGISTRATION RIGHTS AGREEMENT, dated as of February 3,
1998 (this "Agreement"), by and among ELGAR HOLDINGS, INC., a Delaware
corporation ("Company"), and the Persons listed on the signature pages hereto
(the "Shareholders").
WHEREAS, the Board of Directors of the Company has effected a
recapitalization of the Company pursuant to which, among other things,
JFL-EEC Merger Sub. Co., a Delaware corporation ("MergerCo"), a wholly owned
subsidiary of JFL-EEC LLC, a Delaware limited liability company, has merged
with and into the Company, with the Company surviving such merger (the
"Merger"), pursuant to which the Company assumed the liabilities and
obligations of MergerCo;
WHEREAS, the Board of Directors of the Company has determined that
it is in the best interests of the Company and the Shareholders that, in
connection with the Merger, the Company provide the registration rights set
forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, the following
terms shall have the following meanings below:
"COMMON STOCK" shall mean the common stock of the Company, $.01 par
value per share, upon consummation of the Merger.
"OTHER HOLDERS" shall mean Persons who are holders of record of equity
securities of the Company who have valid contractual registration rights
under the Warrantholders Registration Rights Agreement.
"PERSON" shall mean an individual, corporation, unincorporated
association, partnership, group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934), trust, joint stock company, joint
venture, business trust or unincorporated organization, any governmental
entity or any other entity of whatever nature.
"REGISTRABLE SHARES" shall mean any shares of Common Stock which may
be (i) held from time to time by the Shareholders or (ii) issued or
distributed in respect of the Common Stock referred to in clause (i) above
by way of stock dividend or stock split or other distribution,
recapitalization or reclassification. As to any particular Registrable
Share, such Registrable Share shall cease to be a Registrable Share when
(i) it shall have been sold, transferred or otherwise disposed of or
exchanged pursuant to a registration statement under the Securities Act or
(ii) it shall have been distributed to the public pursuant to Rule 144 (or
any successor provision) under the Securities Act.
"WARRANTHOLDERS REGISTRATION RIGHTS AGREEMENT" shall mean that certain
agreement dated as of February 4, 1998 entered into among certain holders
of warrants to purchase Common Stock of the Company and the Company.
2. INCIDENTAL REGISTRATIONS.
(a) RIGHT TO INCLUDE REGISTRABLE SHARES. After the
completion of the initial public offering by the Company of its Common Stock,
each time the Company shall determine to file a registration statement under
the Securities Act in connection with the proposed offer and sale for cash of
Common Stock (other than debt securities which are convertible into Common
Stock and other than registration statements on Form S-4 or S-8) either by it
or by any holders of its outstanding equity securities, the Company shall
give prompt written notice of its determination to each Shareholder and of
such Shareholder's rights under this Section 2, at least 20 days prior to the
anticipated filing date of such registration statement. Upon the written
request of each Shareholder made within 15 days after the receipt of any such
notice from the Company, (which request shall specify the Registrable Shares
intended to be disposed of by such Shareholder), the Company shall, subject
to Section 2(b), effect the registration under the Securities Act of all
Registrable Shares which the Company has been so requested to register by the
Shareholders thereof, to the extent required to permit the disposition of the
Registrable Shares so to be registered; PROVIDED, HOWEVER, that (i) if, at
any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any reason not to proceed with the proposed registration of the securities to
be sold by it, the Company may, at its election, give written notice of such
determination to each Shareholder of Registrable Shares and thereupon shall
be relieved of its obligation to register any Registrable Shares in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith) and (ii) if such registration
involves an underwritten offering, all Shareholders of Registrable Shares
requesting to be included in the Company's registration must sell their
Registrable Shares to the underwriters on the same terms and conditions as
apply to the Company, with such differences, including any with respect to
indemnification, as may be customary or appropriate in combined primary and
secondary offerings (provided that no Shareholder shall be required to
provide indemnification which is more expansive than the indemnification
provided in Section 9(b) hereof and provided, further, that the
representations and warranties provided by any Shareholder shall be limited
to such matters as the authority of such Shareholder to sell its Registrable
Shares, its title thereto and the absence of liens thereon). If a
registration requested pursuant to this Section 2(a) involves an underwritten
public offering, any Shareholder of Registrable Shares requesting to be
included in such registration may elect in writing prior to the effective
date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration. No registration effected under this Section 2 shall relieve
the Company of its obligations to effect one registration upon request under
Section 4 hereof.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration
pursuant to this Section 2 involves an underwritten offering and the managing
underwriter in good faith advises the Company in writing that, in its opinion,
the number of securities which the Company, the Shareholders and any other
Persons intend to include in such registration exceeds the largest
2
number of securities which can be sold in such offering without having an
adverse effect on such offering (including the price at which such securities
can be sold), then the Company shall include in such registration: (i) FIRST,
100% of the securities the Company proposes to sell for its own account; and
(ii) SECOND, such number of Registrable Shares which the Shareholders have
requested to be included in such registration and such number of securities
which Other Holders have requested to be included in such registration which,
in the opinion of such managing underwriter, can be sold without having the
adverse effect referred to above, such number of Registrable Shares and
securities of Other Holders to be included on a pro rata basis among all
requesting Shareholders and Other Holders on the basis of the relative number
of shares of Common Stock requested to be included in such registration by
such Shareholders and Other Holders; and (iii) THIRD, to the extent that the
number of securities which are to be included in such registration pursuant
to clauses (i) and (ii), in the aggregate, is less than the number of
securities which the Company has been advised can be sold in such offering
without having the adverse effect referred to above, such number of other
securities requested to be included in the offering for the account of any
other Persons which, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above, such number to be
allocated pro rata among all holders of such other securities on the basis of
the relative number of such other securities each other person has requested
to be included in such registration.
3. HOLDBACK AGREEMENTS. If any registration of Registrable Shares
shall be effected in connection with an underwritten public offering, the
Shareholders agree not to effect any public sale or distribution without the
consent of the managing underwriter (except in connection with such public
offering), of any equity securities of the Company, or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten public offering),
during the 120-day period (or such lesser period as the managing underwriter may
permit) beginning on the effective date of such registration, if, and to the
extent, the managing underwriter of any such offering determines such action is
necessary or desirable to effect such offering and if and to the extent that
each director and executive officer of the Company so agrees; PROVIDED, HOWEVER,
that each Shareholder has received the written notice required by Section 2(a)
hereof.
4. REGISTRATION ON DEMAND.
(a) DEMAND BY SHAREHOLDERS. At any time on or after the later
of (i) February 3, 2003 and (ii) the one hundred and eighty-first (181st) day
after completion of the initial public offering by the Company of its Common
Stock, upon the written request by Shareholders of at least 66-2/3% of all
Registrable Shares, that the Company effect the registration under the
Securities Act of all or part of the Registrable Shares of such requesting
party, and specifying the amount and intended method of disposition thereof, the
Company shall promptly give notice of such requested registration to all other
Shareholders and, as expeditiously as possible, use its best efforts to effect
the registration under the Securities Act of: (i) the Registrable Shares which
the Company has been so requested to register; and (ii) all other Registrable
Shares which the Company has been requested to register by any other Shareholder
by written request received by the Company within 15 days after the giving of
such written notice by the Company (which request shall specify the intended
method of disposition of such Registrable Shares); PROVIDED, HOWEVER, that the
Company shall not be required to effect such
3
registration unless the Registrable Shares requested to be so registered have
an aggregate proposed offering price of not less than $5,000,000; and
PROVIDED, FURTHER, HOWEVER, that the Company shall not be required to effect
more than one registration pursuant to this Section 4(a) unless (X) all of
the Registrable Shares that the Shareholders initially requesting
registration pursuant to this Section 4(a) requested to be registered are not
included in such registration statement or (Y) the Company is eligible to
file on Form S-3, in which case the Shareholders shall be entitled to request
an unlimited number of registrations pursuant to this Section 4(a) except
that the Company shall not be required to effect such registration pursuant
to this clause (Y) unless the Registrable Shares requested to be so
registered have an aggregate proposed offering price of not less than
$5,000,000 and no other registration statement on Form S-3 has been filed by
the Company and been declared effective within the previous twelve months.
Promptly after the expiration of the 15-day period referred to in clause (ii)
above, the Company shall notify all Shareholders to be included in the
registration of the other Shareholders participating in such registration and
the number of Registrable Shares requested to be included therein. The
Shareholders initially requesting a registration pursuant to this Section
4(a) may, at any time prior to the effective date of the registration
statement relating to such registration, revoke such request by providing a
written notice to the Company revoking such request; PROVIDED, HOWEVER, that
if such revocation occurs after the date of the filing of such registration
statement, then the Registration Expenses incurred by the Company in
connection with the revoked request shall be payable by the Shareholders
participating in such demand registration.
(b) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 4 shall not be deemed to have been effected unless it
has become effective under the Securities Act and has remained effective for 180
days or such shorter period as all the Registrable Shares included in such
registration have actually been sold thereunder.
(c) PRIORITY IN DEMAND REGISTRATIONS. If a demand registration
pursuant to this Section 4 involves an underwritten offering and the managing
underwriter in good faith advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Shares) exceeds
the largest number of securities which can be sold in such offering without
having an adverse effect on such offering (including the price, acceptable to
the Shareholders requesting such registration, at which such securities can be
sold), then the Company will include in such registration (i) FIRST, 100% of the
Registrable Shares requested to be registered pursuant to Section 4(a) (provided
that if the number of Registrable Shares requested to be registered pursuant to
Section 4(a) exceeds the number which the Company has been advised can be sold
in such offering without having the adverse effect referred to above, the number
of such Registrable Shares to be included in such registration by the
Shareholders shall be allocated pro rata among such Shareholders on the basis of
the relative number of Registrable Shares each Shareholder has requested to be
included in such registration); and (ii) SECOND, to the extent that the number
of Registrable Shares requested to be registered pursuant to Section 4(a) is
less than the number of securities which the Company has been advised can be
sold in such offering without having the adverse effect referred to above, such
number of shares of equity securities that, FIRST, the Company and, SECOND,
Other Holders may request to be included in such registration.
4
5. REGISTRATION PROCEDURES.
(a) If and whenever the Company is required by the provisions of
Sections 2 or 4 hereof to use its best efforts to effect or cause the
registration of Registrable Shares, the Company shall as expeditiously as
possible:
(i) prepare and, in any event within 60 days after the
end of the period within which a request for registration may be given to the
Company, file with the Securities and Exchange Commission (the "SEC") a
registration statement with respect to such Registrable Shares and use its
best efforts to cause such registration statement to become effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period not in excess of 180 days and to comply with the
provisions of the Securities Act, the Exchange Act, and the rules and
regulations promulgated thereunder with respect to the disposition of all the
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the Shareholders
thereof set forth in such registration statement; PROVIDED, that the Company
shall notify each Shareholder of Registrable Shares covered by such
registration statement of any stop order issued or threatened by the SEC, any
other order suspending the use of any preliminary prospectus or of the
suspension of the qualification of the registration statement for offering or
sale in any jurisdiction, and take all reasonable actions required to prevent
the entry of such stop order, other order or suspension or to remove it if
entered;
(iii) furnish to each Shareholder and each underwriter, if
applicable, of Registrable Shares covered by such registration statement such
number of copies of the registration statement and of each amendment and
supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement (including
each preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as each
Shareholder of Registrable Shares covered by such registration statement may
reasonably request in order to facilitate the disposition of the Registrable
Shares owned by such Shareholder;
(iv) use its best efforts to register or qualify such
Registrable Shares covered by such registration statement under the state
securities or blue sky laws of such jurisdictions as each Shareholder of
Registrable Shares covered by such registration statement and, if applicable,
each underwriter, may reasonably request, and do any and all other acts and
things which may be reasonably necessary to consummate the disposition in
such jurisdictions of the Registrable Shares owned by such Shareholder;
PROVIDED, HOWEVER, that in connection therewith, the Company shall not be
required to (A) qualify as a foreign corporation to do business or to
register as a broker or dealer in any such jurisdiction where it would not
otherwise be required to qualify or register but for this clause (iv), (B)
subject itself to taxation in any jurisdiction or (C) file a general consent
to service of process in any such jurisdiction.
5
(v) use its best efforts to cause such Registrable
Shares covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the Shareholders thereof to consummate the disposition of
such Registrable Shares;
(vi) if at any time when a prospectus relating to the
Registrable Shares is required to be delivered under the Securities Act any
event shall have occurred as the result of which any such prospectus as then
in effect would include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, immediately give written notice
thereof to each Shareholder and the managing underwriter, if any, of such
Registrable Shares and prepare and furnish to each such Shareholder a
reasonable number of copies of an amended or supplemental prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement of
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading;
(vii) use its best efforts to cause such Registrable
Shares to be accepted for listing or quotation on any securities exchange or
automated quotation system on which similar securities of the Company are
then listed, and enter into customary agreements including a listing
application and indemnification agreement in customary form, provided that
the applicable listing requirements are satisfied, and provide a transfer
agent and registrar for such Registrable Shares covered by such registration
statement not later than the effective date of such registration statement;
(viii) enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions as each
Shareholder of Registrable Shares being sold or the underwriter, if any,
reasonably requests in order to expedite or facilitate the disposition of such
Registrable Shares, including customary indemnification and opinions;
(ix) to the extent reasonably requested by the
Shareholders of at least 51% of the Registrable Shares being sold, or the
underwriters, if any, use its best efforts to obtain a "cold comfort" letter
or letters from the Company's independent public accountants in customary
form and covering matters of the type customarily covered by "cold comfort"
letters;
(x) make available, at the Company's expense, for
inspection by representatives of any Shareholder of Registrable Shares
covered by such registration statement, by any underwriter participating in
any disposition to be effected pursuant to such registration statement and by
any attorney, accountant or other agent retained by such Shareholders or any
such underwriter (collectively, the "SHAREHOLDER REPRESENTATIVES"), all
financial and other records, pertinent corporate documents and properties of
the Company and its subsidiaries (excluding any such records and documents as
are protected by attorney-client privilege or which the Company is prohibited
from disclosing pursuant to the terms of any nondisclosure agreements to
which the Company or any of its subsidiaries is a party; PROVIDED that, to
the extent permitted under any such nondisclosure agreement, the Company
shall disclose any information subject to such nondisclosure agreement upon
execution and delivery by such Shareholder or Shareholder
6
Representative of a confidentiality agreement for the benefit of the parties
to such nondisclosure agreement);
(xi) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable after the effective date
of the registration statement, an earnings statement which shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and
regulations promulgated thereunder; and
(xii) notify counsel for the Shareholders of Registrable
Shares included in such registration statement and the managing underwriter, if
any, immediately, and confirm the notice in writing, (A) when the registration
statement, or any post-effective amendment to the registration statement, shall
have become effective, or any supplement to the prospectus or any amendment
prospectus shall have been filed and (B) of any request of the SEC to amend the
registration statement or amend or supplement the prospectus or for additional
information.
(b) Each Shareholder of Registrable Shares hereby agrees
that, upon receipt of any notice from the Company of the happening of any
event of the type described in Section 5(a)(vi) hereof, such Shareholder
shall forthwith discontinue disposition of such Registrable Shares covered by
such registration statement or related prospectus until such Shareholder's
receipt of the copies of the supplemental or amended prospectus contemplated
by Section 5(a)(vi) hereof. In the event the Company shall give any such
notice, the period mentioned in Section 5(a)(ii) hereof shall be extended by
the number of days during the period from and including the date of the
giving of such notice pursuant to Section 5(a)(vi) hereof and including the
date when such Shareholder shall have received the copies of the supplemental
or amended prospectus contemplated by Section 5(a)(vi) hereof. If for any
other reason the effectiveness of any registration statement filed pursuant
to Section 4 hereof is suspended or interrupted prior to the expiration of
the time period regarding the maintenance of the effectiveness of such
Registration Statement required by Section 5(a)(ii) hereof so that
Registrable Shares may not be sold pursuant thereto, the applicable time
period shall be extended by the number of days equal to the number of days
during the period beginning with the date of such suspension or interruption
to and ending with the date when the sale of Registrable Shares pursuant to
such registration statement may be recommenced.
(c) Each Shareholder hereby agrees to provide the Company,
upon receipt of its request, with such information about such Shareholder to
enable the Company to comply with the requirements of the Securities Act and
to execute such certificates as the Company may reasonably request in
connection with such information and otherwise to satisfy any requirements of
law. Each Shareholder further agrees to furnish to the Company in writing
such information regarding the Shareholder and his, her or its proposed
distribution of Registrable Shares as the Company may from time to time
reasonably request.
6. UNDERWRITTEN REGISTRATIONS. Subject to the provisions of
Sections 2, 3 and 4 hereof, any of the Registrable Shares covered by a
registration statement may be sold in an underwritten offering at the discretion
of the Shareholder thereof. In the case of an underwritten
7
offering pursuant to Section 2 or Section 4 hereof, the managing underwriter
or underwriters that will administer the offering shall be selected by the
Company, PROVIDED that such managing underwriter or underwriters is
reasonably satisfactory to the Shareholders of a majority of the Registrable
Shares to be registered.
7. SUSPENSION OF REGISTRATION REQUIREMENT.
(a) Notwithstanding anything to the contrary set forth in
this Agreement, the Company's obligation to use its best efforts to cause a
registration statement and any filings with any state securities authorities
to become effective or to amend or supplement any such registration statement
or filings shall be suspended during such period as circumstances exist
(including, without limitation, pending negotiations relating to, or the
consummation of, any transaction) which (i) would require additional
disclosure of material information by the Company in such registration
statement or filing which the Company has a bona fide business purpose for
not disclosing in such registration statement or (ii) render the Company
unable to comply with SEC requirements (any such circumstances hereinafter
referred to as a "Suspension Event"); PROVIDED that any suspension as a
result of a Suspension Event shall occur on not more than one occasion during
any 365-day period and shall continue only for so long as such event or its
effect is continuing and in no event shall any such suspension continue for
more than 120 days. The Company shall use all commercially reasonable
efforts to minimize the length of such suspension as a result of a Suspension
Event. To the extent that any such suspension occurs during a period in
which a registration statement has been filed pursuant hereto and remains
effective, the time during which the Company shall be required to maintain
the effectiveness of such registration statement shall be extended for the
number of days during which such suspension continued.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, the Company shall not be required to cause a registration
statement requested pursuant to Section 4(a) to become effective during the
period beginning 30 days prior to the Company's good faith estimate of the
date of filing of, and ending 180 days after the effective date of, a
Company-initiated registration, provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective.
(c) The Company shall give the Shareholders written notice
immediately upon the occurrence of any Suspension Event instructing such
Shareholders to suspend sales of Registrable Shares as a result of such
Suspension Event. The Shareholders agree that after receipt of such notice
they will not effect any sales of Registrable Shares pursuant to any
registration statement filed pursuant to this Agreement until such time as
such Shareholders shall have received further notice from the Company that
such sales may be recommenced, which notice shall be given by the Company not
later than five days after the conclusion of any such Suspension Event.
8
8. EXPENSES.
(a) The fees, costs and expenses of all registrations in accordance
with Sections 2 and 4 hereof shall be borne by the Company, subject to the
provisions of Section 8(b) hereof.
(b) The fees, costs and expenses of registration to be borne
as provided in Section 8(a) hereof shall include, without limitation, all
expenses incident to the Company's performance of or compliance with this
Agreement, including without limitation all SEC and stock exchange or NASD
registration and filing fees and expenses, fees and expenses of compliance
with securities or blue sky laws (including without limitation reasonable
fees and disbursements of counsel for the underwriters, if any, or for the
selling Shareholders in connection with blue sky qualifications of the
Registrable Shares), rating agency fees, printing expenses (including
expenses of printing certificates for Registrable Shares and prospectuses),
the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange or automated
quotation system on which similar securities issued by the Company are then
listed, and fees and disbursements of counsel for the Company and all
independent certified public accountants (including the expenses of any
annual audit, special audit and "cold comfort" letters required by or
incident to such performance and compliance) (but in any event not including
any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Shares by such Shareholders)
(collectively, "Registration Expenses").
9. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act
pursuant to Sections 2 or 4 hereof, the Company shall, and it hereby does,
indemnify and hold harmless, to the extent permitted by law, each of the
Shareholders of any Registrable Shares covered by such registration
statement, each affiliate of such Shareholder and their respective directors
and officers (and the directors, officers, affiliates and controlling Persons
thereof), each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such Shareholder or any such underwriter within the meaning of the
Securities Act (collectively, the "Indemnified Parties"), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including any amounts paid in any settlement effected with the Company's
consent, which consent shall not be unreasonably withheld and including any
expenses paid in connection with the enforcement of the indemnification
rights contained herein) to which any Indemnified Party may become subject
under the Securities Act, state securities or blue sky laws, common law, any
other applicable law, foreign or domestic, or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof, whether or not such Indemnified Party is a party thereto) or
expenses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or (iii) any violation by the Company of
9
any federal, state or common law rule or regulation applicable to the Company
and relating to action required of or inaction by the Company in connection
with any such registration, and the Company shall reimburse such Indemnified
Party for any legal or any other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; PROVIDED that the Company shall not be liable to any
Indemnified Party in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement
or amendment or supplement thereto or in any such preliminary, final or
summary prospectus in reliance upon and in conformity with written
information with respect to such Shareholder furnished to the Company by such
Shareholder specifically for use therein. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Shareholder or any Indemnified Party and shall survive the transfer of
such securities by such Shareholder.
(b) INDEMNIFICATION BY THE SHAREHOLDERS AND UNDERWRITERS.
The Company may require, as a condition to including any Registrable Shares
in any registration statement filed in accordance with Sections 2 or 4
hereof, that the Company shall have received an undertaking reasonably
satisfactory to it from the Shareholders of such Registrable Shares or any
underwriter to, severally and not jointly, indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 9(a) hereof)
the Company with respect to any statement or alleged statement in or omission
or alleged omission from such registration statement, any preliminary, final
or summary prospectus contained therein, or any amendment or supplement, if
such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information with respect to
such Shareholder or such underwriter furnished to the Company by such
Shareholder or such underwriter specifically for use in such registration
statement, preliminary, final or summary prospectus or amendment or
supplement, or a document incorporated by reference into any of the
foregoing; PROVIDED that no such Shareholder shall be liable for any
indemnity claims in excess of the amount of net proceeds received by such
Shareholder from the sale of Registrable Shares. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Company or any of the Shareholders, or any of their respective
affiliates, directors, officers or controlling Persons, and shall survive the
transfer of such securities by such Shareholder.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section 9, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; PROVIDED that the
failure of the indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Section 9,
except to the extent that the indemnifying party is actually materially
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
10
costs of investigation; PROVIDED that the indemnified party shall have the
right to employ counsel to represent the indemnified party and its respective
controlling persons, directors, officers, general or limited partners,
employees or agents who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the indemnified party against
such indemnifying party under this Section 9 PROVIDED that the employment of
such counsel shall be at the expense of the indemnified party, unless (i) the
indemnifying party shall have agreed in writing to pay the expenses of such
counsel, (ii) the indemnifying party shall not have promptly employed counsel
reasonably satisfactory to the indemnified party to assume the defense of
such action or counsel or (iii) any indemnified party shall have reasonably
concluded that there may be defenses available to such indemnified party or
its respective controlling persons, directors, officers, employees or agents
which are in conflict with or in addition to those available to the
indemnifying party, and in that event the reasonable fees and expenses of one
firm of separate counsel for the indemnified party (in addition to the
reasonable fees and expenses of one firm serving as local counsel) shall be
paid by the indemnifying party. No indemnifying party shall consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) CONTRIBUTION. If the indemnification provided for in
this Section 9 shall for any reason be unavailable to any indemnified party
under Section 9(a) or 9(b) hereof or is insufficient to hold it harmless in
respect of any loss, claim, damage or liability, or any action in respect
thereof referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
loss, claim, damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits received
by the indemnified party and indemnifying party or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the indemnified
party and indemnifying party with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations.
Notwithstanding any other provision of this Section 9(d), no Shareholder of
Registrable Shares shall be required to contribute an amount greater than the
dollar amount of the proceeds received by such Shareholder with respect to
the sale of any such Registrable Shares. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) OTHER INDEMNIFICATION. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 9
(with appropriate modifications) shall be given by the Company and each
Shareholder of Registrable Shares with respect to any required registration
or other qualification of securities under any federal or state law or
regulation or governmental authority other than the Securities Act.
(f) NON-EXCLUSIVITY. The obligations of the parties under
this Section 9 shall be in addition to any liability which any party may
otherwise have to any other party.
11
10. ASSIGNABILITY. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and permitted assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are
for the benefit of the parties hereto other than the Company shall also be
for the benefit of and enforceable by any subsequent Shareholder of any
Registrable Shares, subject to the provisions contained herein. The Company
may not assign any of its rights or delegate any of its duties under this
Agreement without the written consent of the Shareholders of a majority of
the Registrable Shares.
11. NOTICES. Any and all notices, designations, consents, offers,
acceptances or any other communications shall be given in writing by either
(a) personal delivery to and receipted for by the addressee or by (b)
telecopy or registered or certified mail which shall be addressed, in the
case of the Company, to the Company c/o Elgar Electronics Corporation, 9250
Brown Deer Road, San Diego, CA 02121, facsimile (619) 458-0257, attention of
Chief Executive Officer, with a copy to J.F. Lehman Equity Investors I, L.P.,
450 Park Avenue, New York, New York 10022, facsimile (212) 634-1155,
attention of Mr. Donald Glickman, and in the case of Shareholders, to the
address or addresses thereof appearing on the books of the Company or of the
transfer agent and registrar for the Registrable Shares.
All such notices and communications shall be deemed to have been
duly given and effective: when delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid, if
mailed; and when receipt acknowledged, if telecopied.
12. ARBITRATION. Any controversy, dispute or claim arising out of,
in connection with or in relation to the interpretation, performance or
breach of this Agreement shall be determined, at the request of any party, by
arbitration in a city mutually agreeable to the parties to such controversy,
dispute or claim, or, failing such agreement, in New York, New York, before
and in accordance with the then-existing Rules for Commercial Arbitration of
the American Arbitration Association, and any judgment or award rendered by
the arbitrator will be final, binding and unappealable and judgment may be
entered by any state or Federal court having jurisdiction thereof. The
pre-trial discovery procedures of the Federal Rules of Civil Procedure shall
apply to any arbitration under this Section 12. Any controversy concerning
whether a dispute is an arbitrable dispute or as to the interpretation or
enforceability of this Section 12 shall be determined by the arbitrator. The
arbitrator shall be a retired or former United States District Judge or other
person acceptable to each of the parties, provided such individual has
substantial professional experience with regard to corporate or partnership
legal matters. The parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable.
13. SEVERABILITY. If any provision of this Agreement or any
portion thereof is finally determined to be unlawful or unenforceable, such
provision or portion thereof shall be deemed to be severed from this
Agreement. Every other provision, and any portion of such an invalidated
provision that is not invalidated by such a determination, shall remain in
full force and effect.
12
14. AMENDMENTS, WAIVERS. This Agreement may not be amended,
modified or supplemented and no waivers of or consents to departures from the
provisions hereof may be given unless consented to in writing by the Company
and the Shareholders of at least a majority of the Registrable Shares.
15. ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to any other available remedy.
16. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions
contemplated herein and understandings among the parties relating to the
subject matter hereof. Any and all previous agreements and understandings
between or among the parties hereto regarding the subject matter hereof are,
whether written or oral, superseded by this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
18. CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
19. LIMITATION OF LIABILITY OF SHAREHOLDERS AND OFFICERS OF
COMPANY. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE COMPANY WHICH MAY
ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH
MAY BE INCURRED BY IT PURSUANT TO ANY INSTRUMENT, TRANSACTION OR UNDERTAKING
CONTEMPLATED HEREBY SHALL BE SATISFIED OUT OF THE COMPANY'S ASSETS ONLY. NO
SUCH OBLIGATION OR LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR SHALL
RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF THE
COMPANY'S SHAREHOLDERS (SOLELY AS A RESULT OF THEIR STATUS AS SHAREHOLDERS),
DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH
OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE.
NOTWITHSTANDING THE FOREGOING, THIS SECTION 19 SHALL NOT IN ANY WAY AFFECT OR
LIMIT ANY RIGHTS OR OBLIGATIONS OF THE COMPANY OR ANY SHAREHOLDER UNDER THIS
AGREEMENT.
20. LIMITATION OF LIABILITY OF SHAREHOLDERS AND OFFICERS OF EACH
SHAREHOLDER. ANY OBLIGATION OR LIABILITY WHATSOEVER OF ANY SHAREHOLDER WHICH
MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY
WHICH MAY BE INCURRED BY IT PURSUANT TO ANY INSTRUMENT, TRANSACTION OR
UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED OUT OF THE SHAREHOLDER'S
ASSETS ONLY. NO SUCH OBLIGATION OR LIABILITY SHALL BE PERSONALLY BINDING
UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF
ANY
13
OF SUCH SHAREHOLDERS SHAREHOLDERS (SOLELY AS A RESULT OF THEIR STATUS AS
SHAREHOLDERS), DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, REGARDLESS OF
WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR
OTHERWISE. NOTWITHSTANDING THE FOREGOING, THIS SECTION 20 SHALL NOT IN ANY
WAY AFFECT OR LIMIT ANY RIGHTS OR OBLIGATIONS OF THE COMPANY OR ANY
SHAREHOLDER UNDER THIS AGREEMENT.
21. GOVERNING LAW. This Agreement is made pursuant to and shall
be construed in accordance with the laws of the State of New York.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective authorized officers as of the date
aforesaid.
ELGAR HOLDINGS, INC.
By: /s/ Donald Glickman
--------------------------
Name: Donald Glickman
Title: President
THE SHAREHOLDERS:
JFL-EEC LLC,
a Delaware limited liability company
By: /s/ Donald Glickman
--------------------------
Name: Donald Glickman
Title: Manager
CARLYLE-ELGAR INTERNATIONAL
PARTNERS, L.P.
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
--------------------------
Daniel A. D'Aniello
Managing Director
CARLYLE-ELGAR PARTNERS, L.P.
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
--------------------------
Daniel A. D'Aniello
Managing Director
15
CARLYLE PARTNERS II, L.P.
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
-----------------------------
Daniel A. D'Aniello
Managing Director
CARLYLE PARTNERS III, L.P.
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
-----------------------------
Daniel A. D'Aniello
Managing Director
CARLYLE INTERNATIONAL PARTNERS II, L.P.
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
-----------------------------
Daniel A. D'Aniello
Managing Director
CARLYLE INTERNATIONAL PARTNERS III, L.P.
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
-----------------------------
Daniel A. D'Aniello
Managing Director
16
C/S INTERNATIONAL PARTNERS
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
-----------------------------
Daniel A. D'Aniello
Managing Director
SBC MASTER PENSION TRUST
By: /s/ Shannon Greene
-----------------------------
Name: Shannon Greene
-----------------------------
Title: Executive Vice President,
McGahan Greene HcHugh Capital
Management, LLC
-----------------------------
STATE STREET BANK AS TRUSTEE FOR
THE CHAMPION INTERNATIONAL
RETIREMENT TRUST
By: /s/ Scott Kennedy
-----------------------------
Name: Scott Kennedy
-----------------------------
Title: Assistant Secretary
-----------------------------
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
-----------------------------
Daniel A. D'Aniello
Managing Director
MELLON BANK, N.A., solely in its capacity
as Trustee for FIRST PLAZA GROUP
TRUST, (as directed by General Motors
Investment Management Corporation), and
not in its individual capacity
By: /s/ Bernadette Rist
-----------------------------
Name: Bernadette Rist
-----------------------------
Title: Authorized Signatory
-----------------------------
CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM
By: TC Group, L.L.C.,
its General Partner
By: TCG Holdings, L.L.C.,
its Managing Member
By: /s/ Daniel A. D'Aniello
-----------------------------
Daniel A. D'Aniello
Managing Director
17
INDOSUEZ ELGAR PARTNERS LP
By: Indosuez CM II, Inc, its Managing
General Partner
By: /s/ Michael Walsh
-----------------------------
Name: Michael Walsh
-----------------------------
Title: Vice President
-----------------------------
By: /s/ Allen Gruenhut
-----------------------------
Name: Allen Gruenhut
-----------------------------
Title: Vice President
-----------------------------
RIT CAPITAL PARTNERS PLC
By: /s/ A. H. Bloom
-----------------------------
Name: A. H. Bloom
-----------------------------
Title: Authorized Signatory
-----------------------------
DURHAM ENTERPRISES LTD.
By: /s/ C. P. M. Harris
-----------------------------
Name: C. P. M. Harris
-----------------------------
Title: Director
-----------------------------
GFI PARTNERS L.L.C.
By: /s/ Ian Schapiro
-----------------------------
Name: Ian Schapiro
-----------------------------
Title: Chief Financial Officer
-----------------------------
GFI ONE L.L.C.
By: /s/ Ian Schapiro
-----------------------------
Name: Ian Schapiro
-----------------------------
Title: Chief Financial Officer
-----------------------------
/s/ Kenneth R. Kilpatrick
-----------------------------------
Kenneth R. Kilpatrick
/s/ Ronald Garrett
-----------------------------------
Ronald Garrett
/s/ Normand E. Precourt
-----------------------------------
Normand E. Precourt
/s/ Christopher W. Kelford
-----------------------------------
Christopher W. Kelford
18
/s/ Tom Erickson
-----------------------------------
Tom Erickson
TOM ERICKSON I.R.A.
By /s/ Dawn Phillips
--------------------------------
Name: Dawn Phillips
Title: Assistant Vice President,
Bank of Commerce
/s/ Samuel A. Lewis
-----------------------------------
Samuel A. Lewis
/s/ Raymond Daniel
-----------------------------------
Raymond Daniel
/s/ Daniel E. Donati
-----------------------------------
Daniel E. Donati
/s/ Grant A. Moore
-----------------------------------
Grant A. Moore
19