Exhibit 10.12
EXECUTION COPY
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (this "Agreement") is entered
into as of September 7, 2004, by and
between FRIEDMAN'S INC., a Delaware
corporation (the "Company"), and JEWELRY
INVESTORS II, L.L.C., a Delaware
limited liability company (the
"Investor").
RECITALS
WHEREAS, the Investor is participating in a restructuring
(the "Restructuring") of the Company's
Amended and Restated Credit Agreement,
dated as of August 28, 2002, as amended, by
and among the lending institutions
parties thereto, The CIT Group/Business
Credit, Inc., PNC Bank, N.A., Bank of
America, N.A., the Company and certain of
its subsidiaries, pursuant to which
it is providing to the Company a term loan
in the amount of $67,500,000 (the
"Term Loan");
WHEREAS, as a condition to the closing of the Restructuring
(the "Closing"), and pursuant to the terms
of the Restructuring, the Company
will, at the Closing, issue Warrants (as
defined below) to the Investor;
WHEREAS, the Company has agreed to register the shares of
Common Stock (as defined below) issued or
issuable upon exercise of the
Warrants and to grant certain other rights
to the Investor or the Holders (as
defined below), as more fully set forth
herein.
AGREEMENT
In consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto
agree as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following
respective meanings:
"Additional Warrants" shall have the meaning assigned in
Section 7(c).
"Affiliate" shall mean with respect to any Person, any other
Person that is directly or indirectly
controlling, controlled by or under
common control with such Person and the
term "control" (including (with
correlative meanings) the terms
"controlling," "controlled by" and "under
common control with") means having,
directly or indirectly, the power to
direct or cause the direction of the
management or policies of a Person,
whether through ownership of voting
securities, by contract or otherwise.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required
or permitted to be closed in the
State of New York or the State of
Georgia.
"Class B Common Stock" shall mean the share of Class B
Common Stock, par value $0.01 per share, of
the Company.
"Commission" shall mean the Securities and Exchange
Commission or any other Federal agency at
the time administering the
Securities Act.
"Common Stock" shall mean all of the shares of the Class A
Common Stock, par value $0.01 per share, of
the Company, and any other
securities issued in replacement of or
exchange for such shares in any
reclassification, recapitalization,
reorganization, merger, consolidation,
share exchange, business combination or
similar transaction.
"Common Stock Equivalents" shall mean any options, warrants,
rights or convertible securities
exercisable or exchangeable for or
convertible into shares of Common Stock,
including, without limitation, Class
B Common Stock, but excluding rights to
acquire preferred stock of the Company
that are issued pro-rata to all holders of
Common Stock and Class B Common
Stock pursuant to a shareholders' rights
plan; provided, however, that such
shares of preferred stock or Common Stock
Equivalents issuable upon the
conversion of or the exercise of rights
under such preferred stock shall be
Common Stock Equivalents.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor
Federal statute and the rules and
regulations thereunder, all as the same
shall be in effect from time to time.
"Holder" shall mean any Person that is a holder of
Registrable Securities, including for this
purpose any holder of a Warrant,
with the number of shares of Registrable
Securities held by such holder being
equal to the number of shares of
Registrable Securities for which such Warrant
is exercisable.
"Initial Warrants" shall mean warrants to acquire an
aggregate of 3,000,000 shares of Common
Stock issued to the Investor on the
date of the making of the Term Loan and any
warrant or other right issued in
substitution or exchange therefore.
"Initiating Holders" shall mean any Holder or Holders of
shares of Common Stock that request
registration thereof hereunder and who
own, in the aggregate, at least 10% of the
Registrable Securities at the time
of such request.
"Person" shall mean an individual, proprietorship, trust,
estate, personal representative,
partnership, limited liability company, joint
venture, association, company, corporation,
government agency or other entity.
"Registrable Securities" shall mean the shares of Common
Stock or other securities issued or
issuable upon exercise of the Warrants and
any other securities issued or issuable
with respect to, upon exercise or
conversion of, or in exchange for
Registrable Securities; provided, however,
that no securities shall be deemed
Registrable Securities following (i) such
time as they have been sold pursuant to an
effective registration statement
under the Securities Act or pursuant to
Rule 144, or (ii) the eighth
anniversary of the date of this
Agreement.
The terms "register," "registered" and "registration" shall
refer to a registration effected by
preparing and filing a registration
statement in compliance with the Securities
Act and the declaration or
ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 2,
3 and 5, including, without
limitation, all registration and filing
fees, printing, mailing and
distribution expenses, all fees and
disbursements of the accountants and
counsel for the Company, blue sky fees and
expenses for state qualifications
or registrations, the expense of the
preparation and any audit of the
Company's financial statements incident to
or required by any such
registration, and, as provided in Section
4, the fees and disbursements of one
counsel for the Holders participating in
such registration.
"Regulation S-X" shall mean regulation S-X under the federal
securities laws, as it may be amended from
time to time, and any successor
rule or regulation.
"Rule 144" shall mean Rule 144 under the Securities Act, as
it may be amended from time to time, and
any successor rule or regulation.
"Rule 145" shall mean Rule 145 under the Securities Act, as
it may be amended from time to time, and
any successor rule or regulation.
"Rule 415" shall mean Rule 415 under the Securities Act, as
it may be amended from time to time, and
any successor rule or regulation.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor Federal
statute and the rules and
regulations thereunder, all as the same
shall be in effect from time to time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and expense allowances
applicable to the sale of
Registrable Securities in any specified
public offering and, other than as
provided in Section 4, the fees and
expenses of counsel for the Holders
participating in such public offering.
"Warrants" shall mean the Initial Warrants and the
Additional Warrants.
2. Demands for Registration.
(a) Requested Registrations.
(i) Upon the written request (a "Registration Request")
of the Initiating Holders that the Company
effect the registration (a "Demand
Registration") of all or part of such
Initiating Holders' Registrable
Securities, the Company shall use its
commercially reasonable efforts to
effect, pursuant to Section 2(b), the
registration of (x) the Registrable
Securities which the Company has been so
requested to register by such
Initiating Holders, and (y) such
Registrable Securities as are specified in
Demand Inclusion Notices of other Holders
pursuant to Section 2(b)(ii);
provided, however, that (A) the Initiating
Holders may not make a Registration
Request prior to three (3) months after the
first date on which the Company
has available audited financial statements
meeting the requirements of
Regulation S-X for inclusion in the
registration statement to be filed
pursuant to such Registration Request; (B)
the Company shall not be obligated
to effect a Demand Registration for fewer
than 500,000 shares of Registrable
Securities (subject to adjustment for stock
splits, reverse stock splits,
dividends, reclassifications,
recapitalizations, or reorganizations); and (C)
the Company shall not be obligated to (1)
effect more than an aggregate of two
Demand Registrations pursuant to this
Section 2, or (2) effect a Demand
Registration within nine (9) months
following the effective date of any prior
Demand Registration.
(ii) The Initiating Holders may, at any time prior to
the filing of a registration statement with
the Commission in connection with
a Registration Request made pursuant to
this Section 2, revoke such
Registration Request by providing a written
notice to the Company revoking
such Registration Request and may, any time
after the filing of such
registration statement and prior to the
effective date thereof, request the
Company to withdraw such registration
statement by providing a written notice
to the Company, whereupon the Company shall
withdraw such registration
statement as promptly as practicable. If
the Initiating Holders revoke any
Registration Request or the registration
statement filed with the Commission
in connection with such Registration
Request is withdrawn as aforesaid or
otherwise fails to become effective, the
Registration Request made in
connection with such registration statement
will not constitute a Demand
Registration for purposes of determining
the number of Demand Registrations to
which the Holders are entitled
hereunder.
(b) Obligations of the Company. Upon receipt by the
Company of a Registration Request pursuant
to Section 2(a), the Company shall:
(i) give written notice ("Demand Notice") within 10
Business Days after receipt of the
Registration Request and proposed
registration to all other Holders of
Registrable Securities;
(ii) use its commercially reasonable efforts to file,
within ninety (90) days of the receipt of
such Registration Request, a
registration statement on such form of the
Commission as selected by the
Company in its good faith, and thereafter
use its commercially reasonable
efforts (x) if the Company has been
reviewed by the Commission in the three
(3) years preceding the date of filing of
such registration statement, to
cause such registration statement to become
and remain effective as soon as
practicable, but in no event later than
sixty (60) days after the filing by
the Company of such registration statement,
and (y) if the Company has not
been reviewed by the Commission in the
three (3) years preceding the date of
filing of such registration statement, to
cause such registration statement to
become and remain effective as soon as
practicable, but in no event later than
ninety (90) days after the filing by the
Company of such registration
statement, to permit the sale and
distribution of the Registrable Securities
requested to be registered by the
Initiating Holders and by the Holders of
Registrable Securities that give notice
("Demand Inclusion Notice") to the
Company that they desire to include
Registrable Securities in such
registration, which notice shall state the
number of Registrable Securities
requested to be so included and shall be
given within thirty (30) days after
receipt of such Demand Notice from the
Company; provided, however, that if at
the time a Registration Request is sent to
the Company, the Company has
available audited financial statements
meeting the requirements of Regulation
S-X and has filed an annual report on Form
10-K incorporating such financial
statements, the Company shall use its
commercially reasonable efforts to file
such registration statement within forty
five (45) days of receipt of such
Registration Request. If the Company shall
receive a Demand Inclusion Notice,
it shall promptly inform the Initiating
Holders of the Holders that gave such
Demand Inclusion Notice and the number of
Registrable Securities stated in
such Demand Inclusion Notice; and
(iii) use its commercially reasonable efforts to
maintain the effectiveness of a
registration statement filed pursuant to this
Section 2 for the period ending on the
earlier of (x) two hundred seventy
(270) days following the effective date of
such registration statement and (y)
the date on which all Registrable
Securities covered by such registration
statement have been sold and the
distribution contemplated thereby has been
completed.
(c) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities
covered by their request by means of an
underwritten public offering, they shall so
advise the Company in the
Registration Request and the Company shall
include such information in the
Demand Notice. The Company, together with
all Holders of Registrable
Securities proposing to distribute their
securities through such underwritten
public offering, shall enter into an
underwriting agreement in customary form
with the managing underwriter(s) selected
for such underwritten public
offering by the Initiating Holders holding
a majority of the Registrable
Securities proposed to be included in the
Demand Registration, which
underwriter(s) shall be reasonably
acceptable to the Company; provided,
however, that: (i) no Holder of Registrable
Securities shall be required to
make any representations, warranties or
indemnities except as they relate to
such Holder's ownership of Registrable
Securities, any encumbrances thereon
created on permitted by such Holder, the
authority of such Holder to enter
into, and perform its obligations under,
the underwriting agreement, such
Holder's intended method of distribution
and other information about such
Holder that the Company reasonably believes
is necessary to comply with the
Securities Act; and (ii) the liability of
such Holder under such underwriting
agreement shall be limited to an amount
equal to the net proceeds from such
public offering received by such
Holder.
Notwithstanding any other provision of this Section 2, if the
managing underwriter informs the Company in
writing that in such underwriter's
good faith determination the total number
of Registrable Securities which the
Holders intend to include in such
underwritten public offering is such as to
affect adversely the success of such
underwritten public offering, including
the price at which such securities can be
sold, then the Company shall so
advise all Holders who requested to include
Registrable Securities in such
offering and the number of shares of
Registrable Securities that shall be
included in such underwritten public
offering shall be reduced to the number
determined by the managing underwriting and
such number shall be allocated
among all Holders requesting registration
thereof in proportion (as nearly as
practicable) to the amount of Registrable
Securities owned by each such Holder
at the time of the filing of the
registration statement; provided, however,
that neither the Company nor any other
Person shall be permitted to include any
shares of Common Stock in such underwritten
offering unless the Registrable
Securities of all Holders who have elected
to participate in such offering are
so included and in the determination of the
managing underwriter can be sold in
such offering.
If any Holder participating in the registration in its sole
discretion disapproves of the terms of such
underwritten public offering, such
Holder may elect to withdraw therefrom by
written notice to such effect to
such managing underwriter, the Company and
the Initiating Holders given not
later than 5 days prior to proposed
effective date of the applicable
registration statement; provided, however,
that no such withdrawal shall
prejudice such Holder's rights under this
Agreement with respect to any other
registration of Registrable Securities. The
securities so withdrawn shall also
be withdrawn from registration.
3. Piggyback Registration.
(a) If, at any time, the Company determines to register
any of its equity securities either for its
own account or the account of a
security holder, other than (i) a
registration relating solely to employee
benefit plans, or (ii) a registration
relating solely to a Rule 145
transaction involving the acquisition of a
business (but not a Rule 145
transaction designed solely to exchange
restricted securities for registered
securities in a manner that is the
functional equivalent of registration
rights), or (iii) a registration relating
solely to options or warrants, or to
securities issuable in respect of options
or warrants, which options or
warrants are sold in connection with an
offering or issuance of debt
securities, the Company will: (x) promptly
give to each Holder written notice
thereof, and (y) include in such
registration (and any related qualification
under blue sky laws), and in any
underwriting involved therein, all of the
Registrable Securities specified in a
notice or notices to such effect given
by a Holder (a "Piggyback Inclusion
Notice") within 30 days after receipt of
the written notice from the Company
described in clause (x) of this Section
3(a), except to the extent set forth in
Section 3(b). Such written request may
specify all or a part of a Holder's
Registrable Securities.
(b) If a registration statement for which the Company
gives notice under Section 3(a)(x) is for
an underwritten public offering, and
if the managing underwriter of such
underwritten public offering has informed
the Company in writing, that in such
underwriter's good faith determination
the total number of securities which the
Company, such Holders and any other
persons desiring to participate in such
registration intend to include in such
public offering is such as to adversely
affect the success of such public
offering, including the price at which such
securities can be sold, then the
Company will be required to include in such
registration, only the number of
securities which it is so advised should be
included in such registration and
the priority of securities that will be
included in such registration and
underwriting shall be allocated as
follows:
(i) first, if the notice provided by the Company in
Section 3(a)(x) resulted from the Company's
determination to issue and sell
Common Stock in a public offering or
pursuant to the demand registration
rights of any other security holder, then
the shares of Common Stock which the
Company or such other security holder
proposed to issue and sell as stated in
such notice;
(ii) second, the Registrable Securities which have been
requested to be included in such
registration by the Holders in Piggyback
Inclusion Notices in proportion (as nearly
as practicable) to the number of
Registrable Securities specified by Holders
in such Piggyback Inclusion
Notices.
(iii) third, provided that no securities sought to be
included by the Holders of Registrable
Securities have been excluded from such
registration, the securities of other
Persons entitled to exercise "piggyback"
registration rights pursuant to contractual
commitments of the Company (in
proportion (as nearly as practicable) to
the number of securities or sought to
be registered by such Persons); and
(iv) fourth, provided that no securities of any other
Person have been excluded from such
registration, any other securities which
the Company proposes to register, if
any.
(c) If a registration statement for which the Company
gives notice under Section 3(a)(x) is for
an underwritten public offering, the
Holders participating therein shall enter
into the underwriting agreement for
such offering; provided, however, that (i)
no Holder shall be required to make
any representations, warranties or
indemnities except as they relate to such
Holder's ownership of Registrable
Securities, any encumbrances thereon created
on permitted by such Holder, the authority
of such Holder to enter into, and
perform its obligations under, the
underwriting agreement, such Holder's
intended method of distribution and other
information about such Holder that
the Company reasonably believes is
necessary to comply with the Securities
Act; and (ii) the liability of such Holder
under such underwriting agreement
shall be limited to an amount equal to the
net proceeds from such public
offering received by such Holder.
(d) The Company may determine not to file or may
withdraw any registration statement of
which the Company has given notice
pursuant to Section 3(a)(x)
4. Expenses of Registration. The Company shall bear all
Registration Expenses incurred in
connection with the registration and
qualification of Registrable Securities and
the compliance by the Company with
applicable securities laws and all
underwriting discounts, selling commissions
and expense allowances applicable to the
sale of any securities by the Company
for its own account in any registration.
All Selling Expenses applicable to
the sale of Registrable Securities shall be
borne by the Holders, if any,
whose securities are included in such
registration pro rata on the basis of
the numbe
