WARRANT PURCHASE AND
REGISTRATION RIGHTS AGREEMENT
This
Warrant Purchase and Registration Rights Agreement, dated as of
September 23, 2008, between BROOKSIDE TECHNOLOGY HOLDINGS
CORP., a Florida corporation (together with its successors, the
“ Company ”), those Persons identified as the
“Stockholders” on the signature page of this Agreement
(collectively the “ Stockholders ” and,
individually, a “ Stockholder ”); and CHATHAM
CAPITAL MANAGEMENT III, LLC, (“ Chatham Capital
”), not individually but as agent for CHATHAM INVESTMENT FUND
III, LLC (“ Chatham II ”) and CHATHAM INVESTMENT
FUND QP III, LLC, (“ Chatham QP II ”, and
together with Chatham Capital and Chatham II and any successors or
assign of Chatham Capital, Chatham II or Chatham QP II, the “
Warrantholders ” and each, a “
Warrantholder ”).
WHEREAS,
in connection with the Warrantholders entering into that certain
Credit Agreement dated as of September ___, 2008 (as amended,
restated, supplemented and otherwise modified from time to time
(the “ Credit Agreement ”), by and among the
Company and the other parties named as “Borrowers”
therein, the other persons designated as “Credit
Parties” therein, the financial institutions designated as
“Lenders” therein, and Chatham Capital Management III,
LLC, a Georgia limited liability company, as Agent (“
Agent ”), the Company has issued those certain
Warrants, dated on or about the date hereof, in favor of each
Warrantholder, entitling the Warrantholders to purchase in the
aggregate up to 140,930,835 shares of Company’s Common Stock,
$.001 par value (as described more particularly below, its “
Common Stock ”), subject to adjustment as set forth
therein;
WHEREAS,
the Company is issuing the Warrants contemporaneously with the
execution and delivery of this Agreement;
WHEREAS,
the Stockholders, on a fully diluted basis, that is, assuming
conversion of all shares of Preferred Stock to Common Stock and the
exercise of all Warrants and Options owned by the Stockholders, are
(or would be) the record and beneficial owners of 474,207,168
shares of Common Stock and are joining in this Agreement at the
Warrantholder’s request.
NOW,
THEREFORE, the parties hereto agree as follows:
SECTION
1.1 Definitions . Unless otherwise defined herein, in the
Warrants or in the Credit Agreement, the following terms used in
this Agreement shall have the meanings specified below.
“
Commission ” means the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act.
“
Common Stock ” means any class of shares of the
Company’s common equity or any other class of stock of the
Company having a right to participate with the common equity in the
distribution of the Company’s remaining assets upon
liquidation.
“
Conversion Shares ” means (i) any shares of Stock
or other securities issuable or issued upon the exercise of the
Warrants and (ii) any shares of Stock or other securities
issuable or issued with respect to any of such shares or other
securities referred to in clause (i) upon the conversion
thereof into shares of Stock, other securities or by way of stock
dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization or otherwise; provided that any of such
securities shall cease to be Conversion Shares when such securities
shall have (x) been disposed of pursuant to a Public Sale or
(y) ceased to be outstanding.
“
Exchange Act ” means the Securities Exchange Act of
1934, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be
in effect at the time. Reference to a particular section of the
Securities Exchange Act of 1934 shall include a reference to the
comparable section, if any, of any such successor federal
statute.
“
Initiating Holders ” has the meaning set forth in
Section 3.1 hereof.
“
Other Shares ” has the meaning set forth in
Section 3.1(f) .
“
Person ” means a corporation, an association, a
partnership, an organization, a business, an individual, a
government or a subdivision thereof or a governmental
agency.
“
Public Sale ” means any sale of Common Stock to the
public pursuant to an offering registered under the Securities Act
or to the public through a broker, dealer or market maker pursuant
to the provisions of Rule 144 (or any successor provision then
in effect) adopted under the Securities Act.
“
Registrable Securities ” means any Conversion Shares
until the date (if any) on which such Conversion Shares shall have
been transferred or exchanged and new certificates for them not
bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them shall
not require registration or qualification of them under the
Securities Act or any similar state law then in force.
“
Registration Expenses ” means all expenses incident to
the Company’s performance of or compliance with
Sections 3.1 through 3.5 hereof, including
(i) all registration, filing and NASD fees, (ii) all fees
and expenses of complying with securities or blue sky laws,
(iii) all word processing, duplicating and printing expenses,
(iv) all messenger and delivery expenses, (v) the fees
and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or
“cold comfort” letters required by or incident to such
performance and compliance, (vi) the fees and disbursements of
any one counsel and one accountant retained by holders of a
majority in interest of Registrable Securities being registered
(or, in the case of any registration effected pursuant to
Section 3.1 , as
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the Initiating
Holders shall have selected to represent all holders of the
Registrable Securities being registered), (vii) premiums and
other costs of policies of insurance (if any) against liabilities
arising out of the public offering of the Registrable Securities
being registered if the Company desires such insurance and
(viii) any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but not including
underwriting discounts and commissions and transfer taxes, if any,
provided that, in any case where Registration Expenses are
not to be borne by the Company, such expenses shall not include
(i) salaries of the Company personnel or general overhead
expenses of the Company, (ii) auditing fees,
(iii) premiums or other expenses relating to liability
insurance required by underwriters of the Company or (iv) other
expenses for the preparation of financial statements or other data,
to the extent that any of the foregoing either is normally prepared
by the Company in the ordinary course of its business or would have
been incurred by the Company had no public offering taken
place.
“
Restricted Securities ” means the Stock held by the
Stockholders, the Warrants, the Conversion Shares and any
securities obtained upon exchange for or upon conversion or
transfer of or as a distribution on the Warrants, the Conversion
Shares or any such securities; provided that particular securities
shall cease to be Restricted Securities when (x) such
securities shall have been disposed of pursuant to a Public Sale,
(y) been otherwise transferred or exchanged and new
certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent
disposition of them shall not require registration or qualification
of them under the Securities Act or any similar state law then in
force or (z) ceased to be outstanding. Whenever any particular
securities cease to be Restricted Securities, the holder thereof
shall be entitled to receive from the issuer thereof or its
transfer agent, without expense (other than transfer taxes, if
any), new securities of like tenor not bearing a legend of the
character set forth in Section 2.2 .
“
Securities Act ” means the Securities Act of 1933, or
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time. Reference to a particular section of the Securities Act of
1933 shall include a reference to the comparable section, if any,
of any such similar federal statute.
“
Stock ” means all issued and outstanding capital stock
of the Company including, without limitation, the Common Stock and
any securities convertible into such capital stock.
“
Warrant ” means any and all warrants to purchase Stock
originally issued to the Warrantholders and as such Warrant(s) may
be transferred or otherwise assigned, but only to the extent not
theretofore exercised, redeemed or expired in accordance with their
respective terms.
“
Warrantholder ” has the meaning set forth in the
introductory paragraph (and for purposes of Section 2.8
shall include any Person that held a Warrant that was redeemed
pursuant to its terms).
“
Warrant Securityholder ” means at any time any
Warrantholder and/or any holder of Conversion Shares.
All
references herein to “days” shall mean calendar days
unless otherwise specified.
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TRANSFER OF SHARES; PAYMENTS TO
WARRANTHOLDER
SECTION
2.1 General . Each Stockholder and Warrantholder agrees that
except as otherwise required by law, such Stockholder and
Warrantholder shall not transfer or attempt to transfer any of its
shares of Stock at any time to any Persons without fully complying
with each of the terms and conditions of this Agreement.
SECTION
2.2 Restrictions on Transfer; Legend on Certificates .
(a) Except as otherwise provided in this Agreement, Restricted
Securities shall not be transferable except (i) pursuant to an
effective registration statement under the Securities Act,
(ii) pursuant to Rule 144 or 144A (or any successor
provisions) under the Securities Act or (iii) pursuant to a
transaction that is otherwise exempt from the registration
requirements of the Securities Act.
(b) Unless
otherwise expressly provided herein, each certificate for
Restricted Securities and each certificate issued in exchange for
or upon transfer of any thereof shall be stamped or otherwise
imprinted with a legend in substantially the following
form:
THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR SALE
UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO AND HAVE THE BENEFIT OF THE WARRANT PURCHASE AND
REGISTRATION RIGHTS AGREEMENT, DATED AS OF SEPTEMBER ___, 2008,
BETWEEN BROOKSIDE TECHNOLOGY HOLDINGS CORP. AND THE WARRANTHOLDERS
LISTED ON THE SIGNATURE PAGES THEREOF, (AMONG OTHERS), AS AMENDED
FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH BROOKSIDE
TECHNOLOGY HOLDINGS CORP.
(c) Any
other provision of this Agreement to the contrary notwithstanding,
no transfer of any Restricted Securities other than pursuant to a
Public Sale may be made to any Person unless such Person shall have
agreed in writing that such Person, as a holder of Restricted
Securities, and the Restricted Securities it acquires shall be
bound by and be entitled to the benefits of all the provisions of
this Agreement applicable to such Restricted Securities (and upon
such agreement such Person shall be entitled to such benefits). Any
purported transfer of Restricted Securities without compliance with
the applicable provisions of this Agreement shall be void and of no
effect, and the purported transferee shall have no rights as a
Warrantholder under this Agreement. In the event of such
non-complying transfer, the Company shall not transfer any such
Restricted Securities on its books or recognize the purported
transferee as a
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Stockholder or
a Warrantholder, as the case may be, for any purpose, until all
applicable provisions of this Agreement have been complied
with.
(d) The
restrictions on transfer provided in Section 2.2(a)
shall not be applicable to (i) any transfer in compliance with
federal and all applicable state securities laws to an Affiliate of
the holder of Restricted Securities, from an Affiliate of such
holder to such holder or between Affiliates of such holder (if any
such Affiliate to whom shares of Restricted Securities have been
transferred by a holder thereof ceases to be an Affiliate of such
holder of Restricted Securities, such Restricted Securities shall
immediately be transferred back to the transferor thereof),
(ii) any transfer upon the death of any holder of Restricted
Securities to such holder’s executors, administrators or
testamentary trustees, (iii) any transfer to a trust the
beneficiaries of which include only the holder of such Restricted
Securities or such holder’s spouse, parents, siblings or
descendants or (iv) any transfer by the holder in connection
with the grant of a participation interest in the Loan Agreement
(any transferee referred to in (i), (ii), (iii) or
(iv) above being referred to herein as a “ Permitted
Transferee ”); provided that no such transfer
shall be made to any Permitted Transferee unless such Permitted
Transferee shall have agreed in writing that such Permitted
Transferee, as a Stockholder or Warrantholder (as the case may be),
and the Warrants or Conversion Shares it acquires shall be bound by
and be entitled to the benefits of all the provisions of this
Agreement applicable to Warrants or Conversion Shares (as the case
may be), and upon such agreement such Permitted Transferee shall be
entitled to such benefits.
SECTION
2.3 Tag-Along Rights . (a) If any Stockholder or any of
its Affiliates (any such Person for purposes of this
Section 2.3 , the “ Transferor ”)
wishes, in a single transaction or a series of related
transactions, to transfer shares of its Stock to any Person ( the
“ Transferee ”) for cash and/or non-cash
consideration in an aggregate amount equal to One Million Dollars
($1,000,000) or more, the Transferor shall first give to the
Company and each Warrantholder written notice (a “
Transfer Notice ”), executed by it and the Transferee
and containing (i) the class and the number of shares of Stock
that the Transferee proposes to acquire from the Transferor,
(ii) the name and address of the Transferee, (iii) the
proposed purchase price, terms of payment and other material terms
and conditions of such proposed transfer, (iv) an estimate, in
the Transferor’s reasonable judgment, of the fair market
value of any non-cash consideration offered by the Transferee and
(v) an offer by the Transferee or Transferor to purchase, upon
the purchase by the Transferee of any shares of Stock owned by the
Transferor and for the same per share consideration, that number of
Conversion Shares (or if such number is not an integral number, the
next integral number which is greater than such number) of each
Warrantholder which shall be the product of (x) the aggregate
number of Conversion Shares either then owned, or issuable upon
exercise of the Warrants, by such Warrantholder and (y) a
fraction, the numerator of which shall be the number of shares of
Stock indicated in the Transfer Notice as subject to purchase by
the Transferee and the denominator of which shall be the sum of
(A) the total number of shares of Stock then owned by the
Transferor and its Affiliates plus (B) the total number of
Conversion Shares either then owned, or issuable upon exercise of
the Warrants then owned, by the Warrantholders. The Warrantholders
shall have the right, for a period of twenty (20) days after
the Transfer Notice is given, to accept such offer in whole or
in
5
part,
exercisable by delivering a written notice to the Transferor and
the Company within such twenty (20) day period, stating
therein the number of shares of Stock (which may be the number of
shares set forth in the offer by the Transferor or Transferee, as
the case may be, or a portion thereof) to be sold by the
Warrantholders to the Transferor or Transferee, as the case may be.
Prior to the earlier of (x) the end of such twenty
(20) day period or (y) the acceptance or rejection by
each Warrantholder of the Transferee’s or Transferor’s
offer, as the case may be, neither the Transferor nor its
Affiliates will complete any sale of shares of Stock to the
Transferee. Thereafter, for a period of sixty (60) days after
the prohibition under the preceding sentence shall have terminated,
the Transferor may sell to the Transferee for the consideration
stated and on the terms set forth in the Transfer Notice the shares
of Stock stated in the Transfer Notice as subject to purchase by
the Transferee, provided that the Transferor or Transferee, as the
case may be, shall simultaneously purchase the number of shares of
Stock as calculated above from such Warrantholder if such
Warrantholder has accepted the Transferor’s or
Transferee’s offer. The Company shall take any and all
actions necessary to facilitate the timely issuance of Conversion
Shares in connection with any such purchase. The provisions of this
Section 2.3 shall not apply to transfers between the
Transferor and any of its Affiliates or between Affiliates of the
Transferor.
(b) Notwithstanding
anything contained in Section 2.3(a) to the contrary,
transfers of (x) shares of Stock by a Transferor to such
Transferor’s spouse, parents, siblings, children or
grandchildern, or other member of the Transferor’s immediate
or extended family (including relatives by marriage), or to a
custodian, trustee or other fiduciary for the account of Transferor
or members of Transferor’s immediate or extended family in
connection with an estate planning transaction shall not be subject
to the provisions set forth in Section 2.3(a) ;
provided that prior to such transfer, any such Transferee
agrees, in a writing reasonably satisfactory to Warrantholders, to
the restrictions set forth in this Agreement as to such transferred
Stock.
SECTION
3.1 Registration on Request . (a) Upon the written
request of the Warrantholders holding of record Warrants
exercisable for more than fifty percent (50%) of the Conversion
Shares (collectively referenced as the “ Initiating
Holder ”), requesting that the Company effect the
registration under the Securities Act of all or part of such
Initiating Holder’s Registrable Securities and specifying the
intended method of disposition thereof, the Company will promptly
give written notice of such requested registration to all holders
of Registrable Securities, and thereupon the Company will use its
reasonable best efforts to effect the registration under the
Securities Act, in the following priority, of:
(i)
the Registrable Securities which the Company has been so requested
to register by the Initiating Holder for disposition in accordance
with the intended method of disposition stated in such
request;
6
(ii)
all other Registrable Securities the holders of which shall have
made a written request to the Company for registration thereof
within thirty (30) days after the giving of such written
notice by the Company (which request shall specify the intended
method of disposition of such Registrable Securities);
and
(iii)
all shares of Stock which the Company may elect to register in
connection with the registration of Registrable Securities pursuant
to this Section 3.1 , whether for its own account or
for the account of a holder of Common Stock,
all to the
extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) as expeditiously as
possible, but in no event later than one hundred and eighty
(180) days from the date of such request, of the Registrable
Securities and the additional shares of Stock, if any, to be so
registered; provided that (i) the Warrantholders and
any other holders of Registrable Securities as a class shall be
entitled to not more than two (2) registrations upon request
pursuant to this Section 3.1 and (ii) the
Warrantholders shall not demand a registration under this
Section 3.1 within thirty (30) days of the
Warrantholders’ receipt of the Company’s notice
provided pursuant to Section 3.1(a) or
Section 3.2 (which shall in no way affect the
Warrantholders’ rights under Section 3.2 ).
(b) Registrations
under this Section 3.1 shall be on such appropriate
registration form of the Commission (i) as shall be selected
by the Company and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method
or methods of disposition specified in their request for such
registration. The Company agrees to include in any such
registration statement all information which holders of Registrable
Securities being registered shall reasonably request.
(c) The
Company will pay all Registration Expenses in connection with any
registration requested pursuant to this Section 3.1
.
(d) A
registration requested pursuant to this Section 3.1
shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has been declared
effective by the Commission; provided that a registration
which does not become effective after the Company has filed a
registration statement with respect thereto solely by reason of the
refusal to proceed by the Initiating Holder (other than a refusal
to proceed based upon the advice of counsel relating to a matter
with respect to the Company) shall be deemed to have been effected
by the Company at the request of the Initiating Holder unless the
Initiating Holder shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after
it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any reason,
other than by reason of some act or omission by any Warrantholder
or Warrant Securityholder, or (iii) the conditions to closing
specified in the purchase agreement or underwriting agreement
entered into in connection with such registration are not
satisfied, other than by reason of some act or omission by any
Warrantholder or Warrant Securityholder.
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(e) If
a requested registration pursuant to this Section 3.1
involves an underwritten offering, the underwriter or underwriters
thereof shall be selected by the holders of at least a majority (by
a number of shares) of the Registrable Securities as to which
registration has been requested and shall be reasonably acceptable
to the Company.
(f) If
a requested registration pursuant to this Section 3.1
involves an underwritten offering, and the managing underwriter
shall advise the Company (with a copy of any such notice being
delivered by the Company to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of
securities requested to be included in such registration (including
securities proposed to be sold for the account of the Company)
exceeds the number which can be sold in such offering within a
price range acceptable to the Initiating Holder, the Company will
include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first,
Registrable Securities of the Warrantholders and Warrant
Securityholders requesting such registration, (ii) second, all
shares proposed to be included by the Company in such registration
and (iii) third, all shares other than Registrable Shares (any
such shares with respect to any registration, “ Other
Shares ”) requested to be included in such registration
by the holder or holders thereof.
SECTION
3.2 Incidental Registration . (a) If the Company at any
time proposes to register any of its securities under the
Securities Act (other than (x) by a registration on Form S-4
or S-8 or any successor or similar forms or (y) pursuant to
Section 3.1 ) whether for its own account or for the
account of the holder or holders of any Other Shares, it will each
such time give prompt written notice to each Warrant Securityholder
of its intention to do so and of Warrant Securityholders’
rights under this Section 3.2. Upon the written request
of Warrant Securityholders holding fifty percent (50%) of
Conversion Shares and/or Warrants made within 20 days after
the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by the Warrant
Securityholders and the intended method of disposition thereof),
the Company will use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers
the securities which the Company proposes to register; provided
that 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 either not to register
or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each
holder of Registrable Securities and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice,
however, to the rights of the Warrant Securityholders to request
that such registration be effected as a registration under
Section 3.1 , and (ii) in the case of a
determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the
delay in registering such other securities, without prejudice,
however, to the rights of any Warrant Securityholder entitled to do
so to request that such Registration be effected as a
8
Registration
under Section 3.1 . No registration effected under this
Section 3.2 shall relieve the Company of its obligation
to effect any registration upon request under
Section 3.1 , nor shall any such registration hereunder
be deemed to have been effected pursuant to Section 3.1 .
The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities pursuant to this
Section 3.2 .
(b) If
the Company at any time proposes to register any of its securities
under the Securities Act as contemplated by this
Section 3.2 and such securities are to be distributed
by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in
this Section 3.2 , use its reasonable best efforts to
arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters, provided
that if the managing underwriter of such underwritten offering
shall inform the Company and holders of the Registrable Securities
requesting such registration and all other holders of any Other
Shares which shall have exercised, in respect of such underwritten
offering, registration rights comparable to the rights under this
Section 3.2 by letter of its belief that inclusion in
such distribution of all or a specified number of such securities
proposed to be distributed by such underwriters would interfere
with the successful marketing of the securities being distributed
by such underwriters (such letter to state the basis of such belief
and the approximate number of such Registrable Securities and such
Other Shares proposed so to be registered which may be distributed
without such effect), then the Company may, upon written notice to
all holders of such Registrable Securities and holders of such
Other Shares, reduce pro rata (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect) the
number of such Registrable Securities and Other Shares the
registration of which shall have been requested by each holder
thereof so that the resultant aggregate number of such Registrable
Securities and Other Shares so included in such registration,
together with the number of securities to be included in such
registration for the account of the Company, shall be equal to the
number of shares stated in such managing underwriter’s
letter.
SECTION
3.3 Registration Procedures . (a) If and whenever the
Company is required to effect the registration of any Registrable
Securities under the Securities Act as provided in
Sections 3.1 and 3.2 , the Company shall, as
expeditiously as possible:
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