An investment in shares of our common stock involves a high degree of risk. You should carefully consider the risks described below, and the other information included or incorporated by reference in this prospectus, including the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended September 29, 2013, before making an investment decision. Additional risks as well as updates or changes to the risks described below or incorporated by reference herein, may be included in a prospectus supplement or other offering material. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The market or trading price of our securities could decline due to any of these risks, and you may lose all or part of your investment. In addition, please read “Forward-Looking Statements” in this prospectus, where we describe additional uncertainties associated with our business and the forward-looking statements included or incorporated by reference in this prospectus. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.
Risks Related to our Common Stock
An investment in any securities offered pursuant to this prospectus and any accompanying prospectus supplement involves a high degree of risk. We urge you to carefully consider the risks incorporated by reference in this prospectus and, in any accompanying prospectus supplement, before making an investment decision, including those risks identified under “Risk Factors” in our annual report on Form 10-K for the fiscal year ended September 29, 2013 filed with the SEC on December 13, 2013, and our quarterly reports on Form 10-Q for the quarters ended December 29, 2013 and March 30, 2014, as filed on February 7, 2014 and May 9, 2014, respectively, which are incorporated by reference in this prospectus and which may be amended, supplemented or superseded from time to time by other reports that we subsequently file with the SEC.
Our business, financial condition, results of operations and cash flows could be materially adversely affected by any of these risks. The market or trading price of our securities could decline due to any of these risks. In addition, please read “Forward-Looking Statements” in this prospectus, where we describe additional uncertainties associated with our business and the forward-looking statements included or incorporated by reference in this prospectus or in any prospectus supplement used in connection with an offering of securities.
Future sales of shares of our common stock may depress its market price and impact the value of the warrant shares.
Subject to stockholder approval or certain restrictions under our credit facilities, we are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities. In the future, we may sell additional shares of our common stock to raise capital and may issue substantial amounts of additional shares of our common stock, including shares issuable upon exercise of outstanding options. We may also sell shares in connection with future acquisitions or for other purposes, including to finance our operations and business strategy or to adjust our ratio of debt to equity. Such issuances and sales or the perception that such issuances and sales could occur, may have a harmful effect on value of the warrant shares and the prevailing market prices for our common stock and our ability to raise additional capital in the financial markets at a time and price favorable to us.
Volatility in the market price and trading volume of our common stock could adversely impact the trading price of the warrants.
The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section, elsewhere in this prospectus or the documents we have incorporated by reference in this prospectus or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers,
competitors, trading counterparties or suppliers regarding their own performance, as well as regulatory changes or developments, government actions or announcements, industry conditions and general financial, economic and political instability.
Our credit facilities restrict our ability to pay dividends or repurchase or redeem our capital stock.
Prior to October 2008, we had a history of paying dividends to our stockholders and repurchasing our common stock when sufficient cash was available. However, future cash dividends and common stock repurchases were restricted under our 2008 refinancing. Under our First Lien Credit Agreement dated as of March 31, 2014, the “1st lien credit facility,” among us, the lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, and JPMorgan Securities LLC and Deutsche Bank Securities Inc., as Joint Lead Arrangers and as Joint Bookrunners, and our 2
nd
lien credit facility, we continue to be restricted from paying dividends on our common stock and generally restricted from repurchasing our common stock, unless in each case no default will have occurred and the company will have satisfied certain financial measures. Currently, our policy is not to pay cash dividends on our common stock or repurchase our common stock.
A decrease in our stock price may limit the ability to trade our stock or for the Company to raise equity capital.
As of July 1, 2011, our common stock traded at an average 30-day closing market price of less than $1.00 per share. Under the NYSE listing standards, if our common stock fails to maintain an adequate per share price and our total market capitalization falls below $50.0 million, our common stock could be removed from the NYSE and traded in the over the counter market. In July 2011, the NYSE first notified us that our common stock did not meet the NYSE continued listing standards due to the failure to maintain an adequate share price. Under the NYSE rules, our common stock was allowed to continue to be listed during a cure period. In February 2012, after completing our debt refinancing, the NYSE notified us that we were again in compliance with the minimum closing price standard. In January 2013, the NYSE notified us that we had returned to full compliance with all continued listing standards. However, there can be no assurance that we will continue to be able to meet these listing standards, and the removal of our common stock from the NYSE could adversely affect our ability to raise equity capital.
DESCRIPTION OF CAPITAL STOCK
General
The following descriptions of our common stock and preferred stock summarize the material terms and provisions of these securities. For the complete terms of our common stock and preferred stock, please refer to our certificate of incorporation, our by-laws and Series A convertible preferred stock, without par value, the “preferred share purchase rights,” that are incorporated by reference into this prospectus. The terms of these securities may also be affected by the General Corporation Law of the State of Delaware. The summary below is qualified in its entirety by reference to our certificate of incorporation, by-laws and preferred share purchase rights agreement.
Authorized Capital Stock
Our certificate of incorporation authorizes 150,500,000 shares of capital stock, consisting of 500,000 shares of serial convertible preferred stock, no par value per share, 120,000,000 shares of common stock, $0.01 par value per share, and 30,000,000 shares of Class B common stock, $2.00 par value per share. Under our 2012 bankruptcy, the par value of our common stock was changed from $2.00 per share to $0.01 per share effective January 30, 2012.
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As of June 2, 2014, no shares of preferred stock, 53,613,791 shares of common stock and no shares of Class B common stock were issued and outstanding.
Common Stock and Class B Common Stock
Voting, Dividend and Other Rights
. The voting powers, preferences and rights of the common stock and the Class B common stock are identical in all respects, except that:
(1) the holders of common stock are entitled to one vote per share and the holders of Class B common stock are entitled to ten votes per share;
(2) stock dividends on common stock may be paid only in shares of common stock and stock dividends on Class B common stock may be paid only in shares of Class B common stock; and
(3) shares of Class B common stock have certain conversion rights and are subject to certain restrictions on ownership and transfer described below under “Description of Capital Stock— Conversion Rights and Restrictions on Transfer of Class B Common Stock.”
Except with respect to amendments to our certificate of incorporation that alter or change the powers, preferences or special rights of their respective classes of stock so as to affect them adversely or as otherwise required under Delaware law, the holders of common stock and Class B common stock vote together as a single class.
The holders of common stock and Class B common stock are entitled to receive, from funds legally available for the payment thereof, dividends when and as declared by resolution of the board of directors, subject to the dividend preference of any outstanding preferred stock and restrictions on the payment of dividends contained in our credit facilities. Due to restrictions under our 1
st
lien credit facility and our 2
nd
lien credit facility, currently, it is our policy not to pay cash dividends on our common stock. In the event of liquidation, each share of common stock and Class B common stock is entitled to share pro rata in any distribution of our assets after payment or providing for the payment of liabilities and any liquidation preference of any outstanding preferred stock.
Holders of common stock and Class B common stock have no preemptive rights to purchase, subscribe for or otherwise acquire any unissued or treasury shares or other securities.
Conversion Rights and Restrictions on Transfer of Class B Common Stock
. The common stock has no conversion rights. However, at the option of the holder, each share of Class B common stock is convertible at any time and from time to time into one share of common stock. In order to exercise this right of conversion, a holder of Class B common stock must present and surrender that holder’s certificate representing such shares of Class B common stock along with a written notice of the election to convert such shares of Class B common stock. In addition, if at any time after the initial issuance of shares of Class B common stock, the number of outstanding shares of Class B common stock falls below 5,600,000, as adjusted for any future stock splits, combination or stock dividends effected after the initial issuance of the Class B common stock, all of the outstanding shares of Class B common stock will be deemed to have been converted into common stock. As originally anticipated, the number of outstanding Class B shares decreased over time through trading and reached the sunset level of 5,600,000 shares in March 2011. In March 2011, in accordance with the sunset provisions established in 1986, we effected conversion of all outstanding shares of Class B common stock to common stock. As a result, all stockholders have one vote per share on all future matters. Class B shares formerly had ten votes per share.
Our certificate of incorporation provides that no holder of shares of Class B common stock may transfer such shares to a person other than a permitted transferee, as defined, consisting of family members, certain trusts, heirs and devisees and certain charitable organizations. Upon any sale or transfer of ownership or voting rights to a transferee other than a permitted transferee or to the extent an entity no longer remains a permitted transferee, such
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shares of Class B common stock will automatically convert into an equal number of shares of our common stock. Accordingly, no trading market exists for our Class B common stock, nor do we expect one to develop. Our Class B common stock is not listed or traded on any exchange or in any market.
Effects of Disproportionate Voting Rights
. The disproportionate voting rights of the common stock and Class B common stock, if issued, could have an adverse effect on the market price of the common stock. Such disproportionate voting rights may make us a less attractive target for a takeover than we otherwise might be, or render more difficult or discourage a merger proposal, a tender offer or a proxy contest, even if such actions were favored by our stockholders other than the holders of the Class B common stock. Accordingly, such disproportionate voting rights may deprive holders of common stock of an opportunity to sell their shares at a premium over prevailing market prices, since takeover bids frequently involve purchases of stock directly from stockholders at such a premium price.
Classification of the Board of Directors.
Our certificate of incorporation provides that our board of directors must be divided into three classes as nearly equal in number as possible, with the term of office of one class expiring each year. Each class of directors must be elected for a three-year term. The affirmative vote of the holders of a plurality of the voting power of our common stock and Class B common stock, if any is outstanding at such time, represented in person or by proxy at the annual meeting is required to elect our directors. The number of our directors will be, from time to time, fixed by, or in the manner provided in, the by-laws, but not less than three. Our certificate of incorporation does not permit cumulative voting.
Shareholder Rights Plan.
In 1998, our board of directors adopted a shareholder rights plan, the “rights plan”. Under the rights plan, our board of directors declared a dividend of one preferred share purchase right, a “right,” for each outstanding share of our common stock and Class B common stock, collectively, the “common shares.” Rights are attached to, and automatically trade with, our common shares.
In 2008, our board of directors approved an amendment to the rights plan. The amendment increased the beneficial ownership threshold to 25% from 20% for stockholders purchasing common stock for passive investment only and decreased the threshold to 15% for all other investors. In addition, the amendment extended the expiration of the rights plan from May 31, 2008 to May 31, 2018.
Rights become exercisable only if any person or group of affiliated persons other than a passive investor becomes a holder of 15% or more of our outstanding common shares, or commences a tender or exchange offer which, if consummated, would result in that person or group of affiliated persons owning at least 15% of our outstanding common shares. Once the rights become exercisable, they entitle all other stockholders to purchase, by payment of a $150 exercise price, one one-thousandth of a share of Series A participating preferred stock, subject to adjustment, with a value of twice the exercise price.
In addition, at any time after a 15% position is acquired and prior to the acquisition of a 50% position, our board of directors may require, in whole or in part, each outstanding right, other than rights held by the acquiring person or group of affiliated persons, to be exchanged for one share of common stock or one one-thousandth of a share of Series A preferred stock. The rights may be redeemed at a price of $0.001 per right at any time prior to their expiration.
Our rights plan may make us a less attractive target for a takeover than we otherwise might be, or render more difficult or discourage a merger proposal, a tender offer or a proxy contest, even if such actions were favored by our stockholders other than the holders of the Class B common stock, if any. Accordingly, our rights plan may deprive holders of common stock of an opportunity to sell their shares at a premium over prevailing market prices, since takeover bids frequently involve purchases of stock directly from stockholders at such a premium price.
Our common stock is listed on the NYSE under the symbol “LEE.” The transfer agent and registrar for our common stock is Shareowner Services, Wells Fargo Bank Minnesota, N.A., 161 N. Concord Exchange South, St. Paul, MN 55075-1139. Its phone number is (800) 468-9716.
Preferred Stock
Under our certificate of incorporation, we may issue up to 500,000 shares of serial convertible preferred stock. We currently have no
shares of preferred stock outstanding.
Our board of directors has the authority, without further action by the stockholders, to cause the shares of preferred stock to be issued in one or more series from time to time. All shares of preferred stock of all series will be of equal rank and all shares of any particular series will be identical except as to the date or date from which dividends will be cumulative. The shares of preferred stock of different series, subject to applicable law, may vary as to the following rights, preferences, privileges and restrictions:
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The annual dividend rate for such series and the date from which dividends on all shares of such series issued prior to the record date for the first dividend of such series will be cumulative;
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The redemption price or prices for such series;
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The terms and amount of any sinking fund provided for the purchase or redemption of shares of such series; and
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The conversion, which must be into common stock and not Class B common stock, participating or other special rights, and the qualifications, limitations or restrictions thereof, if any, of such series.
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The rights, preferences, privileges and restrictions of each series will be fixed by the certificate of designation relating to that series. Any or all of the rights of the preferred stock may be greater than the rights of the common stock.
The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of common stock. In certain circumstances, an issuance of preferred stock could have the effect of decreasing the market price of our common stock.
Dividend Rights
. The holders of outstanding shares of each series of preferred stock on the applicable record date will be entitled to receive, when and as declared by our board of directors, dividends at an annual rate for such series, payable quarterly on the 1
st
day of January, April, July and October in each year. No dividend will be declared on any series of preferred stock in respect of any quarter-yearly dividend period unless there will likewise be declared on all shares of all series of the preferred stock then outstanding, like proportionate dividends, ratably, in proportion to the annual dividend rates fixed therefor in respect of the same quarter-yearly dividend period, to the extent that such shares are entitled to receive such a dividend for that quarter-yearly dividend period. All such dividends will be cumulative:
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If issued prior to the record date for the first dividend on the shares of such series, then from the date for the particular series fixed therefor by our board of directors at any time prior to the issuance of shares of the particular series;
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If issued during the period commencing on a record date for a dividend and terminating at the close of the payment date for such dividend, then from such dividend payment date; and
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Otherwise from the quarter-yearly dividend payment date next preceding the date of issuance of such shares.
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This means that unless dividends on all outstanding shares of each series of preferred stock, at the annual dividend rate and from the dates for accumulation thereof fixed as provided above, will have be paid or declared and set aside for payment for all past quarter-yearly dividend periods, but without interest on cumulative dividends, no dividends will be paid or declared and no other distribution will be made on the common stock or Class B common stock and no common stock or Class B common stock will be purchased or otherwise acquired for value by us.
Under our 1
st
lien credit facility and our 2
nd
lien credit facility, the terms of any preferred stock we may issue, “qualified preferred stock,” are restricted. Among other restrictions, we are restricted from paying cash dividends on our qualified preferred stock. Currently, it is our policy not to pay cash dividends on our preferred stock. However, we may declare and pay regularly scheduled dividends on our qualified preferred stock through the issuance of additional shares of such qualified preferred stock, our common stock, options, warrants or other rights to purchase our common stock or qualified preferred stock.
Also, under our 1
st
lien credit facility and our 2
nd
lien credit facility, we are prohibited from redeeming any of our series of preferred stock other than through the issuance of additional shares of our common stock.
Further, under our 1
st
lien credit facility and our 2
nd
lien credit facility, our qualified preferred stock may not contain any mandatory put, redemption, repayment, sinking fund or other similar provision prior to March 16, 2023, other than as a result of the conversion of such qualified preferred stock into common stock without any cash payment.
Liquidation Rights
. Before any amount will be paid to or any assets distributed among the holders of common stock or Class B common stock upon any liquidation, dissolution or winding up of the company, and after paying or providing for the payment of all of our creditors, the holders of each series of preferred stock at the time outstanding will be entitled to be paid, in cash, the amount for the particular series fixed by our board of directors, together will all accumulated dividends that have not been paid prior to the date of liquidation.
Conversion Rights
. Each share of preferred stock of any series may, at the option of the holder thereof, be converted into common stock at any time prior to the close of business on the 10
th
day preceding the date fixed for redemption thereof, into the number of shares of common stock designated by our board of directors at the time of the authorization of such series.
Preemptive Rights
. If we offer the holders of common stock any right to subscribe for our stock or other securities, the holders of shares of preferred stock of any series have the right to subscribe for and purchase at the same price and terms as offered to the holders of common stock, the number of shares or amount of securities to which they would have been entitled had all of their preferred stock been converted into common stock on the record date for such rights.
Other Rights
. So long as any shares of preferred stock of any series are outstanding, we may not, without the consent of the holders of at least two-thirds of the total number of shares of the preferred stock of all series then outstanding:
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Create or authorize any class of stock ranking prior to the preferred stock or create or authorize any obligation or security convertible into shares of stock of any such class;
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Amend, alter, change or repeal any of the express terms of the preferred stock or of any series of the preferred stock then outstanding in a manner prejudicial to the holders thereof; provided, however, that if any such amendment, alteration, change or repeal would be prejudicial to the holders of one or more, but not all, of the series of the preferred stock at the time outstanding, only such consent of the holders of two-thirds of the total number of shares of all series so affected is required; or
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Issue any shares of any series of preferred stock unless our net earnings available for the payment of dividends on the preferred stock for any twelve consecutive calendar months within the fifteen calendar months immediately preceding the calendar month within which such additional shares of stock will be issued, will have been at least two times the dividend requirements for a twelve months’ period upon the entire amount of the preferred stock to be outstanding immediately after such issue.
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So long as any shares of preferred stock of any series are outstanding, we may not, without the consent of the holders of at least a majority of the total number of shares of the preferred stock of all series then outstanding, increase the total authorized amount of the preferred stock of all series.
Certain Effects of Authorized but Unissued Stock
We have shares of common stock, Class B common stock and preferred stock available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, fund employee and director stock purchase and executive incentive plans, facilitate corporate acquisitions or payable as a dividend on the capital stock.
The existence of unissued and unreserved common stock, Class B common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. In addition, the issuance of preferred stock could adversely affect the voting power of holders of common stock and Class B common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation.
Delaware Law and Certain Provisions of Our Certificate of Incorporation and By-laws
Provisions of Delaware law and our certificate of incorporation and by-laws could make the acquisition of our company and the removal of incumbent officers and directors more difficult. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to negotiate with us first. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of discouraging such proposals because, among other things, negotiation of such proposals could result in an improvement of their terms.
We are subject to the provisions of Section 203 of the Delaware general corporation law. In general, the statute prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date that the person became an interested stockholder unless, subject to certain exceptions, the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior, did own 15% or more of the corporation’s voting stock. These provisions may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders.
Our by-laws provide that stockholder action may be taken at an annual or special meeting of stockholders. Our by-laws also provide that special meetings of stockholders may be called by the board of directors, the chairman of the board or the president. The business permitted to be conducted at any special meeting of stockholders is limited to the purposes stated in the notice of such meeting. Our by-laws set forth an advance notice procedure with regard to the nomination, other than by or at the direction of the board of directors, of candidates for election as directors and with regard to business to be brought before a meeting of stockholders.
Unanimous Written Consent; Special Meetings
Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting if a unanimous consent in writing is signed by all the stockholders entitled to vote on the subject matter.
Special meetings of the stockholders may be called by the chairman of the board, the president or the board of directors.
Other Agreements
Registration Rights Agreement
Under our registration rights agreement with the warrant parties, we agreed to file a shelf registration statement with the SEC covering resales of the warrant shares and use our commercially reasonable efforts to cause the shelf registration statement to become effective under the Securities Act on or prior to the 180th day after March 31, 2014.
Subject to certain suspension periods, as described below, we have agreed to use our commercially reasonable efforts to keep the shelf registration statement effective until the earlier of (1) the date on which there are no warrants or registrable securities, as defined in the registration rights agreement, outstanding; and (2) the 60
th
trading day, as defined, immediately following March 31, 2022, subject to a specified extension while the registration statement is not effective. A copy of the registration rights agreement has been filed with the SEC and is incorporated herein by reference. You are encouraged to read the registration rights agreement in its entirety.
Under the registration rights agreement, we have the right to suspend use of this prospectus upon the occurrence or existence of any pending corporate development or similar event or because of filings with the SEC, if, in our reasonable judgment, we deem it appropriate to suspend such use. We may not suspend the use of this prospectus for a period or periods in excess of 30 days in any calendar quarter or 60 days in any calendar year;
provided
that 30 days will be increased to 45 days in any calendar quarter and 60 days will be increased to 90 days in any calendar year if we determine in good faith that the disclosure of a previously undisclosed proposed or pending material business transaction would be reasonably likely to impede our ability to consummate such transaction. We will notify each selling securityholder of any suspension period, but do not need to specify the nature of the event giving rise to a suspension in any such notice. The registration rights agreement provides that each selling securityholder will keep confidential any communications received by it from us regarding the suspension of the use of the prospectus.
Selling securityholders who elect to sell any warrant shares pursuant to the registration statement of which this prospectus forms a part:
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will be required to deliver a prospectus to purchasers;
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will be subject to the civil liability provisions under the Securities Act in connection with any sales; and
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will be bound by the applicable provisions of the registration rights agreement, including the indemnification obligations applicable to selling securityholders.
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Under the registration rights agreement, we have agreed to indemnify each selling securityholder and its directors, officers, employees, affiliates, agents and controlling persons against specific liabilities in connection with the offer and sale of warrant shares pursuant to this registration statement, including liabilities under the Securities Act, subject to certain exceptions.
Under the registration rights agreement, each selling securityholder has agreed to indemnify, severally and not jointly, us and each of our directors, each of our officers who signs this registration statement and each controlling person of ours to the same extent as the foregoing indemnity from us against specific liabilities in connection with the offer and sale of warrant shares pursuant to this registration statement, including liabilities under the Securities Act, subject to certain exceptions.
We have agreed, among other things, to bear substantially all expenses, other than underwriting discounts and selling commissions, in connection with the registration of the warrant shares covered by this prospectus. See “Plan of Distribution” for more information.
Annex A to the registration rights agreement contains a form of notice and questionnaire, which must be completed and delivered by a selling securityholder to us before any intended distribution of the warrant shares under the registration statement of which this prospectus forms a part. If we receive a fully completed questionnaire from a selling securityholder, together with such other information as we may reasonably request, we will prepare and file a prospectus supplement or post-effective amendment, within 20 business days after the receipt of such questionnaire to permit a selling securityholder to deliver a prospectus to purchasers of their warrant shares, subject to our right to suspend use of the registration statement as described above;
provided
that if a post-effective amendment is required, we will not be obligated to file more than one such supplement or post-effective amendment for all such selling securityholders in any 45-day period. Any selling securityholder that does not complete and deliver a questionnaire or provide such other information as we may reasonably request will not be named as a selling securityholder in the registration statement, of which this prospectus forms a part, and therefore will not be permitted to sell any warrant shares under the registration statement.