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EXHIBIT 4.5
AIR SOUTH AIRLINES, INC.
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
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TABLE OF CONTENTS
Page
1. AGREEMENT TO SELL AND PURCHASE .................................... 1.
1.1 Authorization of Shares ..................................... 1.
1.2 Sale and Purchase ........................................... 1.
2. CLOSING, DELIVERY AND PAYMENT ..................................... 1.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ..................... 2.
3.1 Organization, Good Standing and Qualification ............... 2.
3.2 Capitalization .............................................. 2.
3.3 Authorization; Binding Obligations .......................... 2.
3.4 Financial Statements ........................................ 3.
3.5 Contracts and Other Commitments ............................. 3.
3.6 No Obligations to Related Parties ........................... 3.
3.7 Trademarks .................................................. 4.
3.8 Compliance with Other Instruments ........................... 4.
3.9 Title to Properties and Assets; Liens, Etc. ................. 4.
3.10 Litigation .................................................. 4.
3.11 Permits, Licenses ........................................... 5.
3.12 Enviromental and Safety Laws ................................ 5.
3.13 Changes ..................................................... 5.
3.14 Tax Returns and Payments .................................... 6.
3.15 Insurance ................................................... 6.
3.16 Employees ................................................... 6.
3.17 Registration Rights ......................................... 6.
3.18 Offering Valid .............................................. 6.
3.19 Full Disclosure ............................................. 6.
3.20 Real Property Holding Corporation ........................... 7.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ................... 7.
4.1 Requisite Power and Authority ............................... 7.
4.2 Consents .................................................... 7.
4.3 Investment Representations .................................. 7.
5. CONDITIONS TO CLOSING ............................................. 8.
5.1 Conditions to Purchaser's Obligations at the Closing ........ 8.
5.2 Conditions to Obligations of the Company .................... 9.
6. AFFIRMATIVE COVENANTS OF THE COMPANY ............................. 10.
6.1 Election of Directors ...................................... 10.
6.2 Board of Directors Meetings ................................ 10.
6.3 Qualified Small Business Stock ............................. 10.
6.4 Board of Director Approval ................................. 10.
6.5 Approval of Series A Preferred Stock ....................... 11.
7. MISCELLANEOUS .................................................... 11.
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TABLE OF CONTENTS
(continued)
Page
7.1 Governing Law .................................................... 11.
7.2 Survival ......................................................... 11.
7.3 Successors and Assigns ........................................... 11.
7.4 Entire Agreement ................................................. 11.
7.5 Separability ..................................................... 12.
7.6 Amendment and Waiver ............................................. 12.
7.7 Delays or Omissions .............................................. 12.
7.8 Notices .......................................................... 12.
7.9 Expenses ......................................................... 12.
7.10 Attorneys' Fees .................................................. 12.
7.11 Titles and Subtitles ............................................. 12.
7.12 Counterparts ..................................................... 13.
7.13 Broker's Fees .................................................... 13.
LIST OF EXHIBITS
Certificate of Incorporation ...................................... Exhibit A
Investor's Rights Agreement ....................................... Exhibit B
Stockholder List .................................................. Exhibit C
Schedule of Exceptions ............................................ Exhibit D
Certificate of Merger ............................................. Exhibit E
Bylaws ............................................................ Exhibit F
Opinion ........................................................... Exhibit G
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AIR SOUTH AIRLINES, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of December 29, 1995 by and among AIR SOUTH AIRLINES, INC., a
Delaware corporation (the "Company") and ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ GROUP, L.L.C.
("Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of 1,250,000 shares of its Series A Preferred Stock (the "Shares");
WHEREAS, Purchaser desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized the sale and
issuance to the Purchaser of the Shares having the rights, preferences,
privileges and restrictions set forth in the Certificate of Incorporation of
the Company in the form attached hereto as Exhibit A (the "Certificate of
Incorporation"). The Company has, or prior to the Closing will have, adopted
and filed the Certificate of Incorporation with the Secretary of State of the
State of Delaware.
1.2 SALE AND PURCHASE.
(A) Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined) the Company hereby agrees to issue and sell to
the Purchaser and the Purchaser agrees to purchase from the Company 1,250,000
Shares at a purchase price of two dollars ($2.00) per share.
2. CLOSING, DELIVERY AND PAYMENT.
(A) The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at 4:00 p.m. on December
29, 1995, at the offices of ▇▇▇▇▇▇ Godward ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other time or place as the
Company and the Purchaser may mutually agree (such date is hereinafter referred
to as the "Closing Date").
(B) At the Closing, subject to the terms and conditions
hereof, the Company Will deliver to the Purchaser a certificate representing
the number of Shares to be purchased at the Closing
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by the Purchaser, against payment of the purchase price therefor by a check or
wire transfer made payable to the order of the Company.
3. REPRESENTATION AND WARRANTS OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duty organized, validly existing, and in good standing under the
laws of the State of Delaware. The Company has full power and authority to own
and operate its properties and assets, and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its activities
and of its properties (both owned and leased) makes such qualification
necessary, except for those jurisdictions in which failure to do so would not
have a material adverse effect on the Company or its business. The Company has
no subsidiaries and owns no equity securities of any other corporation, limited
partnership or similar entity.
3.2 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the Closing, consists of eighteen million (18,000,000)
shares of Common Stock, seven million one hundred fifty-six thousand two
hundred sixty-four (7,156,264) shares of which are issued and outstanding; and
two million (2,000,000) shares of Preferred Stock, one million two hundred
fifty thousand (1,250,000) of which are designated Series A Preferred Stock,
none of which are issued and outstanding. All shares of the Company's Common
Stock (i) have been duly authorized and validly issued, and (ii) are fully paid
and nonassessable. The rights, preferences, privileges and restrictions of the
Shares are as stated in the Certificate of Incorporation. The shares of Common
Stock issuable upon the conversion of the Shares (the "Conversion Shares") have
been duly and validly reserved for issuance and, when issued in accordance with
the Certificate of Incorporation, will be validly issued, fully paid and
nonassessable. The Company has reserved 1,250,000 shares of Common Stock under
the Company's 1993 Incentive Stock Option Plan and 1994-1995 Incentive and Non-
Qualified Stock Option Plan (together, the "Stock Option Plans"). The Company
has outstanding: (i) options to purchase 1,852,666 shares of Common Stock
granted under the Stock Option Plans to the Company's employees and granted
outside the Stock Option Plans to employees, directors and consultants of the
Company; and (ii) warrants to purchase 260,000 shares of Common Stock issued to
a supplier, former employee and consultants of the Company. Other than as set
forth above and except as may be granted pursuant to that certain Investor's
Rights Agreement in the form attached hereto as Exhibit B (the "Investor's
Rights Agreement") there are no outstanding options, warrants, rights
(including conversion or preemptive rights), proxy or stockholder agreements,
or agreements of any kind for the purchase or acquisition from the Company of
any of its securities. A true and correct list of the Company's stockholders
as of the date hereof is attached hereto as Exhibit C.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and stockholders necessary for
the authorization, sale and issuance of the Shares pursuant hereto and the
Conversion Shares pursuant to the Certificate of Incorporation and for the
performance of the Company's obligations hereunder and under the Investor's
Rights Agreement has been taken or will be taken prior to the Closing. The
Agreement and the Investor's Rights Agreement when executed and delivered, will
be valid and binding obligations of the Company enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) general principles of equity that
restrict the availability of equitable remedies; and (iii) to the extent that
the enforceability of
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the indemnification provisions in Section 2.8 of the Investor's Rights
Agreement may be limited by applicable laws. The sale of the Shares and the
subsequent conversion of Shares into Conversion Shares are not and will not be
subject to any preemptive rights or rights of first refusal that have not been
properly waived or complied with. When issued in compliance with the
provisions of this Agreement and the Certificate of Incorporation, the Shares
and the Conversion Shares will be validly issued, fully paid and nonassessable,
and will be free of any liens or encumbrances; provided, however, that the
Shares and the Conversion Shares may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein. or as otherwise
required by such laws at the time a transfer is proposed.
3.4 FINANCIAL STATEMENTS. The Company has delivered to the
Purchaser its audited financial statements (balance sheet, statement of income,
statement of stockholders' equity and statement of cash flows, including notes
thereto) at August 31, 1994 and for the fiscal year then ended and its
unaudited financial statements (balance sheet and statement of income) as at
August 31, 1995 and for the fiscal year then ended and for the three months
ended November 30, 1995 (collectively, the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except that
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and position of the Company as of as of the
dates and for the periods indicated therein. Except as set forth in the
Financial Statements or Exhibit D hereto, the Company has no material
liabilities, contingent or otherwise, other then (1) liabilities incurred in
the ordinary course of business subsequent to November 30, 1995 and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Financial Statements, which in both cases, individually or in
the aggregate, are not material to the financial condition or operating results
of the Company.
3.5 CONTRACTS AND OTHER COMMITMENTS.
(A) Except as set forth in Exhibit D hereto, the Company
does not have any contracts, agreements, lease or other commitment, written or
oral, absolute or contingent, other than (i) contracts for the purchase of
supplies and services that were entered into in the ordinary and usual course
of business and that do not involve more than $100,000 and that do not extend
for more than one year beyond the date hereof and (ii) contracts terminable at
will by the Company on no more than 30 days notice without cost or liability to
the Company and are not material to the conduct of the Company's business.
(B) Except as set forth in Exhibit D hereto, the Company
has not (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock,
(ii) redeemed, directly or indirectly, any shares of its capital stock or
otherwise purchased shares of its capital stock, or (iii) made any loans or
advances to any person, or (iv) sold, exchanged or otherwise disposed of any of
its assets or rights.
3.6 NO OBLIGATIONS TO RELATED PARTIES. Except as set forth in
Exhibit D hereto, there are no obligations of the Company to current or former
officers, directors, stockholders, or employees of the Company.
3.7 TRADEMARKS. The Company has sufficient trade names, trade
secrets, information, proprietary title and ownership of all trademarks,
service marks, rights and processes necessary for its business as currently
conducted and as proposed to be conducted, without any conflict with or
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infringement of the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the trademarks, service marks, trade names, trade secrets,
licenses, proprietary rights and processes of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company's business as currently conducted and as
proposed to be conducted. Neither the execution nor delivery of this Agreement
or the Investor's Rights Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as currently conducted and as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions of any of its
employees made prior to their employment by the Company. The Company is not
aware of any violation by a third party of any of the Company's trademarks,
service marks, trade names, trade secrets or other proprietary rights.
3.8 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any term of its Certificate of Incorporation or bylaws, as set
forth in Exhibit F hereto (the "Bylaws"), or any term contained in any material
instrument or contract to which it is a party, and, to the best of its
knowledge, is not in violation of any statute, rule, or regulation applicable
to the Company which violation would have a material adverse effect on the
Company's business, condition (financial or otherwise), properties, prospects
or results of operations. No event or failure of performance has occurred
which, with the passage of time or the giving of notice or both, would
constitute such a violation. The execution, delivery, and performance of and
compliance with this Agreement and the Investor's Rights Agreement and the
issuance and sale of the Shares pursuant hereto and of the Conversion Shares
pursuant to the Certificate of Incorporation, will not result in any such
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance, or charge
upon any of the properties or assets of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection
with the execution and delivery of this Agreement, or the Investor's Rights
Agreement, and the issuance of the Shares or the Conversion Shares, except such
as has been duly and validly obtained or filed, or with respect to any filings
that must be made after the Closing, as will be filed in a timely manner.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to all of its properties and assets it purports to
own, in each case subject to no mortgage, pledge, lien, lease, security
interest, encumbrance or charge, other then (i) liens for current taxes not yet
due and payable, and (i) liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen other then in
the ordinary course of business.
3.10 LITIGATION. There is no action, suit, proceeding or
investigation pending or threatened against the Company which questions the
validity of this Agreement, or the Investor's Rights Agreement, or the right of
the Company to enter into either of them, or to consummate the transactions
contemplated hereby and thereby, or which might result, either individually or
in the aggregate, in any material adverse changes in the business, condition
(financial or otherwise), properties, prospects or results of operations of the
Company, or any change in the current equity ownership of the Company. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or
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government agency or instrumentality. Mere is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate.
3.11 PERMITS, LICENSES. The Company has all federal, state and
local governmental permits, licenses, certificates of authority any similar
authority necessary for the conduct of its business as now being conducted and
as proposed to be conducted. The Company is not in default in any material
respect under any such permit, license, certificate of authority or other
similar authority.
3.12 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge,
the Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
3.13 CHANGES. Except as listed on Exhibit D, since November 30,
1995 there has not been:
(A) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(B) any damage, destruction or loss, whether or not
covered by insurance which materially and adversely affects the business,
condition (financial or otherwise), properties, prospects or results of
operations of the Company;
(C) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, condition
(financial or otherwise), properties, prospects or results of operations of the
Company;
(D) any mortgage, pledge, transfer of a security interest
in, or lien, created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due and payable;
(E) any loans or guarantees made by the Company to or for
the benefit of its employees, officers or directors, or any member of their
immediate families, other than advances in the ordinary course of business;
(F) to the best of the Company's knowledge, any other
event or condition of any character that might materially and adversely affect
the business, condition (financial or otherwise), properties, prospects or
results of operations of the Company; or
(G) any agreement or commitment by the Company to do any
of the things described in this Section 3.13.
3.14 TAX RETURNS AND PAYMENTS. The Company has filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessment imposed, and all other
taxes due and payable by the Company on or before the Closing have been paid or
will be paid prior to the time they become delinquent.
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3.15 INSURANCE. The Company has in full force and effect fire and
casualty insurance, with extended coverage, aircraft hull insurance and
liability and errors and omissions insurance in amounts customary for
commercial passenger airlines.
3.16 EMPLOYEES. Except as disclosed on Exhibit D hereto, the
Company has no employment contract with any officer or employee or other
consultant or person which is not terminable by it at will without liability,
except as the Company's right to terminate its employees at will may be limited
by applicable law. To the Company's knowledge, no employee of the Company, nor
any consultant with whom the Company has contracted, is in violation of any
term of any employment contract or any other agreement relating to the right of
any such individual to be employed by, or to contract with, the Company
because of the nature of the business to be conducted by the Company; and to
the Company's knowledge, the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. There are no
controversies or labor trouble or union organization activities pending or, to
the knowledge of the Company, threatened between it and its employees. None of
the Company's employees belongs to any union or collective bargaining unit. To
the best of its knowledge, the Company has complied with all applicable state
and federal equal employment opportunity laws and other laws related to
employment in which the failure to so comply might have a material adverse
effect on the business, condition (financial or otherwise), properties,
properties, prospects or results of operations of the Company. The Company is
not aware that any officer or key employee, or that any group of key employees,
intends to terminate his, her or their employment with the Company, nor does
the Company have a present intention to terminate the employment of any officer
or key employee.
3.17 REGISTRATION RIGHTS. Except as set forth in Exhibit D hereto
and except as required pursuant to the Investor's Rights Agreement, the Company
is presently not under any obligation, and has not granted any rights, to
register (as defined in Section 1.1 of the Investor's Rights Agreement) any of
the Company's presently outstanding securities or any of its securities that
may hereafter be issued.
3.18 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchaser contained in Section 4.3 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of any applicable state securities laws. Neither
the Company nor any agent on its behalf has solicited or will solicit any
offers to sell or has offered to sell or will offer to sell all or any part of
the Shares to any person or persons so as to bring the sale of such Shares by
the Company within the registration provisions of the Securities Act.
3.19 FULL DISCLOSURE. This Agreement, the Exhibits hereto and all
other documents delivered by the Company to the Purchaser or Purchaser's
attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, do not contain any untrue
statement of a material fact nor, to the Company's knowledge, omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
3.20 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code
Section 897(c)(2) and any regulations promulgated thereunder.
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4. REPRESENTATIONS AND WARRANTS OF THE PURCHASER. Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Investor's Rights Agreement and to carry out the
provisions of this Agreement and the Investor's Rights Agreement. All action
on Purchaser's part required for the lawful execution and delivery of this
Agreement and the Investor's Rights Agreement have been or will be effectively
taken prior to the Closing. Upon their execution and delivery this Agreement
and the Investor's Rights Agreement will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application affecting enforcement of creditors' rights; (ii) general
principles of equity that restrict the availability of equitable remedies; and
(iii) to the extent that the enforceability of the indemnification provisions
of Section 2.8 of the Investor's Rights Agreement may be limited by applicable
laws.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in this
Agreement and the Investor's Rights Agreement have been or shall have been
obtained prior to and be effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that
neither the Shares nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares are being offered
and sold pursuant to an exemption from registration contained in the Securities
Act based in part upon Purchaser's representations contained in the Agreement.
Purchaser hereby represents and warrants as follows:
(A) PURCHASER BEARS ECONOMIC RISK. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser must bear the
economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser understands that there is
no assurance that any exemption from registration under the Securities Act will
be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might
propose.
(B) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring
the Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution; provided, however, that
Purchaser will transfer the Shares to H & Q Air South Investors, L.P. ("H & Q,
L. P.") immediately upon its formation. Purchaser represents that each and
every partner in H & Q, L.P. will be an "accredited investor" as defined in
Rule 501 of Regulation D under the Securities Act.
(C) PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement and the
Investor's Rights Agreement.
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Further, Purchaser is aware of no publication of any advertisement in
connection with the transactions contemplated in this Agreement.
(D) COMPANY INFORMATION. Purchaser has received and read
the Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING.
Purchaser's obligations to purchase the Shares at the Closing are subject to
the satisfaction, at or prior to the Closing, of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section
3 hereof shall be true and correct in all material respects as of the Closing
Date with the same force and effect as if they had been made as of the Closing
Date, and the Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing.
(B) THIRD PARTY CONSENTS, PERMITS, AND WAIVERS. The
Company shall have obtained any and all consents, permits, and waivers
necessary or appropriate for consummation of the transactions contemplated by
this Agreement and the Investor's Rights Agreement.
(C) CORPORATE DOCUMENTS. The Company shall have
delivered to the Purchaser or its counsel copies of all corporate documents of
the Company as the Purchaser shall reasonably request.
(D) RESERVATION OF CONVERSION SHARES. The Conversion
Shares issuable upon conversion of the Shares shall have been duly authorized
and reserved for issuance upon such conversion.
(E) REINCORPORATION. The Company shall have
reincorporated in Delaware pursuant to the Certificate of Merger attached
hereto as Exhibit E.
(F) FILING OF CERTIFICATE OF INCORPORATION. The
Certificate of Incorporation shall have been filed with the Secretary of State
of the State of Delaware.
(G) ADOPTION OF BYLAWS. The Company shall have adopted
the Bylaws.
(H) COMPLIANCE CERTIFICATE. The Company shall have
delivered to the Purchaser a Compliance Certificate, executed by the Chairman
of the Board of the Company, dated the Closing Date, to the effect that the
conditions specified in subsections (a) through (g) of this Section 5.1 have
been satisfied.
(I) INVESTOR'S RIGHTS AGREEMENT. An Investor's Rights
Agreement substantially in the form attached hereto as Exhibit B shall have
been executed and delivered by the Company.
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(J) PROCEEDINGS AND DOCUMENTS. At the Closing all
corporate and other proceedings in connection with the transactions
contemplated at the Closing hereby and all documents and instruments incident
to such transactions shall be reasonably satisfactory in substance and form to
the Purchaser and its counsel, and the Purchaser and its counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(K) OPINION. Purchaser shall have received from ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, counsel to the Company, an opinion letter substantially in the form
attached hereto as Exhibit G, addressed to Purchaser as of the date of the
Closing.
(L) QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Shares pursuant to this Agreement shall have duly obtained and
shall be effective as of the Closing. No stop order or other order enjoining
the sale of the Shares or the proposed issuance of the Conversion Shares shall
have been issued and no proceedings for such purpose shall be pending or, to
the knowledge of the Company, threatened by the Securities and Exchange
Commission or any commissioner or corporations or similar officer of any state
having jurisdiction over this transaction. At the time of Closing, the sale
and issuance of the Shares and the proposed issuance of the Conversion Shares
shall be legally permitted by all laws and regulations to which the Purchaser
and the Company are subject.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Purchaser in
Section 4 hereof shall be true and correct in all material respects at the date
of the Closing Date, with the same force and effect as if they had been made on
and as of said date, and the Purchaser shall have performed and complied with
all agreements and conditions herein required to be performed or complied with
by it on or before the Closing.
(B) THIRD PARTY CONSENTS, PERMITS AND WAIVERS. The
Company shall have obtained any and all consents, permits, and waivers
necessary or appropriate for consummation of the transactions contemplated by
this Agreement and the Investor's Rights Agreement.
(C) REINCORPORATION. The Company shall have
reincorporated in Delaware pursuant to the Certificate of Merger attached
hereto as Exhibit E.
(D) FILING OF CERTIFICATE OF INCORPORATION. The
Certificate of Incorporation shall have been filed with the Secretary of State
of the State of Delaware.
(E) ADOPTION OF BYLAWS. The Company shall have adopted
the Bylaws set forth in Exhibit F attached hereto.
(F) INVESTOR'S RIGHTS AGREEMENT. An Investor's Rights
Agreement substantially in the form attached hereto as Exhibit B shall have
been executed and delivered by the Purchaser.
(G) QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in
9.
13
connection with the lawful sale and issuance of the Shares pursuant to this
Agreement shall have been duly obtained and shall be effective as of the
Closing. No stop order or other order enjoining the sale of the Shares or the
proposed issuance of the Conversion Shares shall have been issued and no
proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the Securities and Exchange Commission or any
commissioner or corporations or similar officer of any state having
jurisdiction over this transaction. At the time of Closing, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which the Purchaser and the
Company are subject.
6. AFFIRMATIVE COVENANTS OF THE COMPANY.
6.1 ELECTION OF DIRECTORS. The Company agrees that at the next
annual meeting of stockholders of the Company to be held no later than January
31, 1996, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
plus two directors nominated by the nominating committee of the Board of
Directors and reasonably acceptable to Purchaser, will be nominated as
directors of the Company to serve until their respective successors are duly
elected and have qualified.
6.2 BOARD OF DIRECTORS MEETINGS. For as long as any shares of
Series A Preferred Stock of the Company remain outstanding, the Company agrees
that it shall hold meetings of the Board of Directors no less frequently than
once per calendar quarter.
6.3 QUALIFIED SMALL BUSINESS STOCK. The Company covenants that so
long as any of the Shares, or Conversion Shares, are held by Purchaser (or a
transferee in whose hands such Shares or Conversion Shares are eligible to
qualify as Qualified Small Business Stock as defined in Section 1202(c) of the
Internal Revenue Code of 1986, as amended), it will use its reasonable efforts
to cause the Shares, or the Conversion Shares, to qualify as Qualified Small
Business Stock; provided, however, that "reasonable efforts" as used in this
Section 6.3 shall not be construed to require the Company to operate its
business in a manner which would adversely affect its business, limit its
future prospects or alter the timing or resource allocation related to its
planned operations or financing activities.
6.4 BOARD OF DIRECTOR APPROVAL. The Company covenants that so
long as any shares of Series A Preferred Stock remain outstanding, the approval
of the Board of Directors of the Company shall be obtained prior to taking any
of the following actions:
(A) The hiring of any officer of the Company;
(B) The adoption of any compensation program, including
base salaries and bonus programs for officers and key employees of the Company;
(C) The adoption of any stock option plan and the
issuance of any stock and stock options;
(D) The adoption of an annual budget, business or
financial plan;
(E) The purchase or lease of any real estate, fixed asset
or aircraft lease in excess of $500,000;
10.
14
(F) The approval by the Company of any obligation or
commitment, including capital equipment leases or purchases, with a value in
excess of $500,000 or which are outside the most recent business plan or budget
approved by the Board of Directors; and
(G) Transfers by stockholders of more than 10,000 shares
of the Company's stock; provided, however, that this Section 6.4(vii) shall
expire on an initial public offering of the Company's Common Stock resulting in
aggregate proceeds (net of underwriting discounts and commissions) to the
Company of at least $10,000,000 at a minimum price of $4.00 per share; and
provided further, that the provisions of this Section 6.4(vii) shall not apply
to transfers by a stockholder to such stockholder's partners, family members
and affiliates.
6.5 APPROVAL OF SERIES A PREFERRED STOCK. For so long as any of
the shares of Series A Preferred Stock remain outstanding, the Company agrees
not to allow the transfer of more than 100,000 shares of the Company's Common
Stock by any stockholder in any 12 month period without the prior approval of
at least a majority of the shares of Series A Preferred Stock then outstanding.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and performed entirely in
California.
7.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
7.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Investor's Rights Agreement, and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants, and agreements except as specifically set forth herein and therein.
7.5 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
7.6 AMENDMENT AND WAIVER.
(A) This Agreement may be amended or modified only upon
the written consent of the Company and holders of more than fifty percent (50%)
of the Shares (treated as if converted and including any Conversion Shares that
have not been sold to the public).
11.
15
(B) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under this Agreement may be
waived only with the written consent of the holders of more than fifty percent
(50%) of the Shares (treated as if converted and including any Conversion
Shares that have not been sold to the public).
7.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission
to exercise any right, power, or remedy accruing to the Purchaser, upon any
breach, default or noncompliance of the Company under this Agreement, the
Investor's Rights Agreement, or the Certificate of Incorporation, shall impair
any such right, power, or remedy, nor shall it be construed to be a waiver of
any such breach, default or noncompliance, or any acquiescence therein, or of
or in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent, or approval of any kind or
character on Purchaser's part of any breach, default or noncompliance under
this Agreement or under the Certificate of Incorporation or any waiver on
Purchaser's part of any provisions or conditions of the Agreement must be in
writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, the Certificate of
Incorporation, Bylaws, or otherwise afforded to Purchaser, shall be cumulative
and not alternative.
7.8 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) upon receipt at the address on the signature
page hereto after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (iii) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature page hereof or at
such other address as such party may designate by ten (10) days advance written
notice to the other party hereto.
7.9 EXPENSES. The Company shall pay all costs and expenses that
it incurs with respect to the negotiation, execution, delivery and performance
of this Agreement. The Company shall, at the Closing, reimburse the reasonable
fees, not to exceed $15,000, and reasonable expenses of ▇▇▇▇▇▇ Godward ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for the Purchaser.
7.10 ATTORNEYS' FEES. If legal action is brought to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and legal costs in connection therewith.
7.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
7.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.13 BROKER'S FEES. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any broker's
or finder's fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.13 being
untrue.
12.
16
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of
the date set forth in the first paragraph hereof.
AIR SOUTH AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ GROUP, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
13.
17
AIR SOUTH AIRLINES, INC.
INVESTOR'S RIGHTS AGREEMENT
18
TABLE OF CONTENTS
Page
I. General ......................................................... 1
1.1 Definitions .............................................. 1
II. Restrictions On Transfer; Registration .......................... 2
2.1 Restrictions on Transfer ................................. 2
2.2 Demand Registration ...................................... 3
2.3 Piggyback Registrations ................................. 4
2.4 Form S-3 Registration .................................... 6
2.5 Obligations of the Company ............................... 6
2.6 Furnish Information ...................................... 7
2.7 Delay of Registration .................................... 8
2.8 Indemnification .......................................... 8
2.9 Assignment of Registration Rights ........................ 10
2.10 Amendment of Registration Rights ......................... 10
2.11 "Market Stand-Off" Agreement ............................. 10
III. Covenants Of The Company ........................................ 10
3.1 Basic Financial Information and Reporting ................ 10
3.2 Inspection Rights ........................................ 11
3.3 Confidentiality of Records ............................... 11
3.4 Reservation of Common Stock .............................. 12
IV. Rights Of First Refusal ......................................... 12
4.1 Subsequent Offerings ..................................... 12
4.2 Exercise of Rights ....................................... 12
4.3 Issuance of Equity Securities to Other Persons ........... 12
4.4 Termination of Rights of First Refusal ................... 12
4.5 Transfer of Rights of First Refusal ...................... 12
4.6 Excluded Securities ...................................... 12
V. Miscellaneous ................................................... 13
5.1 Governing Law ............................................ 13
5.2 Survival ................................................. 13
5.3 Successors and Assigns ................................... 13
5.4 Separability ............................................. 14
5.5 Amendment and Waiver ..................................... 14
5.6 Delays or Omissions ...................................... 14
5.7 Notices .................................................. 14
5.8 Attorneys' Fees .......................................... 14
5.9 Titles and Subtitles ..................................... 14
5.10 Counterparts ............................................. 14
i.
19
INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is entered into as
of the 29th day of December 1995, by and among AIR SOUTH AIRLINES, INC., a
Delaware corporation (the "Company") and ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ GROUP,
L.L.C.("Purchaser").
RECITALS
WHEREAS, the Company proposes to sell and issue one million two
hundred fifty thousand (1,250,000) shares of its Series A Preferred Stock
("Series A Preferred Stock") pursuant to the Series A Preferred Stock Purchase
Agreement of even date herewith between the Company and Purchaser (the
"Purchase Agreement"); and,
WHEREAS, as a condition to entering into the Purchase Agreement, the
Purchaser has requested that the Company extend to it registration rights,
information rights and a right of first refusal as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms
shall have the following respective meanings:
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
"EQUITY SECURITIES" means (i) any stock or similar security of the
Company, (ii) any security convertible, with or without consideration, into any
stock or similar security (including any option to purchase such a convertible
security), (iii) any security carrying any warrant or right to subscribe to or
purchase any stock or similar security or (iv) any such warrant or right.
"FAMILY MEMBER" means a Holder's spouse, children, stepchildren and
grandchildren.
"FINAL PROSPECTUS" means an amended prospectus filed with the SEC
pursuant to SEC Rule 424(b) of the Securities Act.
"HOLDER" means any person owning of record Registrable Securities.
"INITIAL OFFERING" means the first underwritten public offering of the
Company's securities.
"INITIATING HOLDERS" means the Holder or Holders of at least forty
percent (40%) of the Registrable Securities then outstanding.
1.
20
"REGISTER," "REGISTERED" AND "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act, and the declaration or ordering of effectiveness by the SEC
of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) the Shares; (ii) Common Stock of
the Company issued or issuable upon conversion of the Shares; and (iii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such above described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferror's rights under Article II of this
Agreement are not assigned. Outstanding Shares and warrants, rights and other
securities issued as a dividend or other distribution with respect to
outstanding Shares, or in exchange or replacement of outstanding Shares, shall
be deemed to represent a number of shares of Registrable Securities equal to
the number of shares of Common Stock into which such Shares, warrants, rights
or other securities are convertible as of the time such determination is made.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHARES" shall mean the Company's Series A Preferred Stock.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
II. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1 RESTRICTIONS ON TRANSFER.
(A) Each Holder agrees not to make any disposition of all
or any portion of the Registrable Securities unless and until the transferee
has agreed in writing for the benefit of the Company to be bound by this
Section 2.1, provided and to the extent such Section is then applicable and:
(I) There is then in effect a registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(II) (A) Such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (B) if reasonably requested by the Company, such Holder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such shares
under the Securities Act.
(III) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder (A) which is a partnership to its
partners in accordance with partnership interests, (B) to the Holder's family
member
2.
21
or trust for the benefit of an individual Holder or (C) to an affiliate of the
Holder (as that term is defined in Rule 144 (a)(1) of the Securities Act (an
"Affiliate"), provided the transferee will be subject to the terms of this
Section 2.1 to the same extent as if he were an original Holder hereunder.
(B) Each certificate representing Series A Preferred
Stock or Registrable Securities shall (unless otherwise permitted by the
provisions of the Agreement) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required
under applicable state securities laws or as provided elsewhere in this
Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON
OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION DOES NOT REQUIRE REGISTRATION.
(C) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder
shall have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(D) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with
respect to such securities shall be removed upon receipt by the Company of an
order of the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(A) Subject to The conditions of this Section 2.2, if the
Company shall receive at any time after the later of December 31, 1996 and one
hundred twenty (120) days after the closing of the Initial Offering, a written
request from the Initiating Holders that the Company file a registration
statement under the Securities Act covering the registration of at least 25% of
the Registrable Securities held by such Initiating Holders, then the Company
shall, within thirty (30) days of the receipt thereof, give written notice of
such request to all Holders, and subject to the limitations of Section 2.2(b),
effect, as soon as practicable, the registration under the Securities Act;
provided, however, that the Initiating Holders may request registration of less
than 25% of such Registrable Securities if the anticipated aggregate offering
price, net of underwriting discounts and commissions, exceeds $5,000,000.
(B) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include such Holder's Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders (which underwriter or underwriters shall
3.
22
be reasonably acceptable to the Company). Notwithstanding any other provision
of this Section 2.2, if the underwriter advises the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares that may be included in
the underwriting shall be allocated to the Holders of such Registrable
Securities on a pro rata basis based on the number of Registrable Securities
held by all such Holders (including the Initiating Holders). Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(C) The Company shall not be obligated to effect more
than two (2) registrations pursuant to this Section 2.2.
(D) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
2.2, a certificate signed by the Chairman of the Board stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than thirty (30) days after receipt of the request of
the Initiating Holders; provided that such right to delay a request shall be
exercised by the Company no more than once in any one-year period.
(E) All expenses incurred in connection with a
registration pursuant to this Section 2.2 (excluding underwriters'
discounts and commissions, which shall be paid by the selling Holders pro rata
with respect to their included shares), including without limitation all
registration, filing, qualification, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of a single counsel for the selling Holders, shall be borne by
the Company; provided, however, that the Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to Section 2.2
if the registration request is subsequently withdrawn, unless the withdrawal of
the registration request results from either (a) intentional actions by the
Company outside the normal course of business that materially reduce the
feasibility of the registration proceeding, or (b) the discovery of information
about the Company that was not known at the time of the Initiating Holders'
request made pursuant to Section 2.2(a), and such information materially
reduces the feasibility of the registration proceeding. If the Company is
required to pay the registration expenses pursuant to this Section 2.2(e), then
the Holders shall not forfeit their rights pursuant to this Section 2.2 to a
demand registration.
2.3 PIGGYBACK REGISTRATIONS.
(A) The Company shall notify all Holders in writing at
least thirty (30) days prior to the filing of any registration statement under
the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to the Initial Offering, employee benefit plans and
corporate reorganizations) and will afford each such Holder who would have been
unable to sell all of such Registrable Securities on an unrestricted basis
pursuant to Rule 144 promulgated under the Securities Act, during the four-week
period immediately preceding the effective date of the registration statement,
an opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing. Such
4.
23
notice shall state the intended method of disposition of the Registrable
Securities by such Holder. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set forth
herein. Notwithstanding anything to the contrary, the foregoing shall not
apply to any registrations occurring on or after the fifth anniversary of the
Initial Offering.
(B) If the registration statement under which the Company
gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders. In such event, the right of any such
Holder to be included in a registration pursuant to this Section 2.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors require a
limitation of the number of shares to be underwritten, the number of shares
that may be included in the underwriting shall be allocated, first, to the
Company; second, to the Holders on a pro rata basis based on the total number
of Registrable Securities held by the Holders; and third, to any stockholder of
the Company (other than a Holder) on a pro rata basis. No such reduction shall
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting, except that in no event shall
the amount of securities of the selling Holders included in the registration
be reduced below twenty percent (20%) of the total amount of securities
included in such registration, unless such offering is the Initial Offering and
such registration does not include shares of any other selling stockholders, in
which event any or all of the Registrable Securities of the Holders may be
excluded in accordance with the immediately preceding sentence. In no event
will shares of any other selling stockholder be included in such registration
which would reduce the number of shares which may be included by Holders
without the written consent of Holders of not less than fifty percent (50%) of
the Registrable Securities proposed to be sold in the offering.
(C) The Company shall bear all fees and expenses incurred
in connection with any registration under this Section 2.3 (excluding
underwriters' discounts and commissions, which shall be paid by the selling
Holders pro rata with respect to their included shares), including without
limitation all registration, filing, qualification, printers' and accounting
fees, fees and disbursements of counsel to the Company, and the reasonable fees
and disbursements of a single counsel to the selling Holders (which counsel
shall also be counsel to the Company unless counsel to the Company has a
conflict of interest with respect to the representation of any selling Holder
or the underwriters object to the selling Holders representation by Company
counsel).
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from
the Holders at least ten percent (10%) of the Registrable Securities a written
request or requests that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(A) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and
(B) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or
5.
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such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as are
specified in a written request given within fifteen (15) days after receipt of
written notice from the Company pursuant to Section 2.4(a); provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4: (i) if Form S-3 is
not available under the Securities Act or rules or regulations promulgated
thereunder for such offering by the Holders; (ii) if the Holders, together with
the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than $500,000;
(iii) if the Company shall furnish to the Holders a certificate signed by the
Chairman of the Board of Directors of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not
more than thirty (30) days after receipt of the request of the Holder or
Holders under this Section 2.4, provided that, such right to defer the filing
may be exercised by the Company no more than once in any one-year period; (iv)
if the Company has, within the twelve (12) month period preceding the date of
such request, already effected two (2) registrations on Form S-3 for the
Holders pursuant to this Section 2.4; or (v) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(C) Subject to the foregoing, the Company shall file a
Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All such expenses incurred in
connection with registrations requested pursuant to this Section 2.4 shall be
paid by the selling Holders (and any other selling stockholders pro rata with
respect to their included shares, including without limitation all
registration, filing, qualification, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of a single counsel for the selling Holder or Holders.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(A) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days.
(B) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(C) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
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(D) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or state blue sky laws of such jurisdictions as shall be reasonably requested
by the Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(E) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter(s) of such offering.
Each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(F) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(G) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
2.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
2.7 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Article II.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(A) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers and directors
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint
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26
or several) to which they may become subject under the Securities Act, the 1934
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each
such Holder, partner, officer or director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.8(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished to the Company expressly for use in connection with such registration
by such Holder, partner, officer, director, underwriter or controlling person
of such Holder.
(B) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers, each person, if any, who controls the Company within the meaning
of the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's partners,
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or other such
Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter or other Holder, or partner, officer, director or controlling
person of such other Holder in connection with investigating or defending any
such loss, claim, damage, liability or action if it is judicially determined
that there was such a Violation; provided, however, that the indemnity
agreement contained in this Section 2.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.8 exceed the proceeds from the offering received
by such Holder.
(C) Promptly after receipt by an indemnified party under
this Section 2.8 of notice of the commencement of any action (including any
governmental action) as to which indemnity may be sought, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.8, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified
8.
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party shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.8.
(D) If the indemnification provided for in this Section
2.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the Violation(s) that
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by a court of law by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided that, in
no event shall any contribution by a Holder hereunder exceed the proceeds from
the offering received by such Holder.
(E) The foregoing indemnity agreements of the Company and
Holders are subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the registration statement
in question becomes effective or the Final Prospectus, such indemnity agreement
shall not inure to the benefit of any person obligated under the Securities Act
to furnish to the person asserting the loss, liability, claim or damage a copy
of the Final Prospectus if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
(F) The obligations of the Company and Holders under this
Section 2.8 shall survive the completion of any offering of Registrable
Securities pursuant to a registration statement, or otherwise.
2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Article II may be
assigned by a Holder to a transferee or assignee of Registrable Securities;
provided, however, that no such transferee or assignee shall be entitled to
registration rights under Sections 2.2, 2.3 or 2.4 hereof unless such
transferee or assignee: (i) is a Holder; (ii) holds after such transfer or
assignment at least one hundred thousand (100,000) shares of Registrable
Securities (as adjusted for stock dividends, splits and combinations); or (iii)
is a Family Member or a subsidiary, parent, general partner, Affiliate, or
limited partner of a Holder. In each such case, the Company shall, within
twenty (20) days after such transfer, be furnished with written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned.
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2.10 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Article II may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
more than fifty percent (50%) of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 2.10 shall be binding upon each
Holder and the Company. By acceptance of any benefits under this Article II,
each Holder hereby agrees to be bound by the provisions hereunder.
2.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and
an underwriter of Common Stock (or other securities) of the Company, the
Purchaser shall not sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company held by such stockholder (other than those
included in the registration) for a period specified by the underwriters not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act, provided
that all officers and directors of the Company and all holders of at least one
percent (1%) of the Company's voting securities enter into similar agreements.
The obligations described in this Section 2.11 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose stop-
transfer instructions with respect to the shares (or securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day
period.
III. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(A) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently
applied.
(B) As soon as practicable after the end of each fiscal
year of the Company, and in any event within 90 days thereafter or, after the
Initial Offering, simultaneously with the filing of the Company's annual report
on Form 10-K with the SEC), the Company will furnish each Holder a consolidated
balance sheet of the Company, as at the end of such fiscal year, and a
consolidated statement of income and a consolidated statement of cash flows of
the Company for such year, all prepared in accordance with generally accepted
accounting principles and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Company's Board of
Directors.
(C) As soon as practicable after the end of each fiscal
quarter of the Company, and in any event within thirty days thereafter or,
after the Initial Offering, simultaneously with the filing of the Company's
reports on Form 10-Q with the SEC), the Company will furnish each Holder a
consolidated balance sheet of the Company, as at the end of such fiscal
quarter, and a consolidated statement of income and a consolidated statement of
cash flows of the Company for such quarter, prepared and presented in a manner
consistent with the financial statements described in Section 3.1(b). Such
statement shall be accompanied by a certificate signed by the Chairman of the
Board and Chief
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Financial Officer of the Company stating that the preparation and presentation
of such statements is consistent with the financial statements described in
Section 3.1(b).
(D) So long as a Holder (with its Affiliates) shall own not
less than one hundred thousand (100,000) shares of Registrable Securities, the
Company will furnish such Holder a consolidated balance sheet of the Company,
as at the end of each calendar month, and a consolidated statement of income
and a consolidated statement of cash flows of the Company for such month,
prepared and presented in a manner consistent with the financial statements
described in Section 3.1(b). Such statements shall be furnished as soon as
practicable after the end of each month and in any event within ten days
thereafter and shall be accompanied by a certificate signed by the Chairman of
the Board and Chief Financial Officer of the Company stating that the
preparation and presentation of such statements is consistent with the
financial statements described in Section 3.1(b). Prior to January 1st of each
year, the Company shall furnish such Holders an annual budget for the Company
for the following twelve month period, broken down by month. The Company's
obligations under this Section 3.1(d) shall terminate upon the Initial
Offering.
3.2 INSPECTION RIGHTS. So long as a Holder (with its affiliates)
shall own not less than one hundred thousand (100,000) shares of Registrable
Securities, each such Holder shall have the right to visit and inspect any of
the properties of the Company or any of its subsidiaries, and to discuss the
affairs, finances and accounts of the Company or any of its subsidiaries with
its officers, all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under
this Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Holder agrees to use, and to
use its best efforts to insure that its authorized representatives use, the
same degree of care as such Holder uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Holder may
disclose such proprietary or confidential information to any partner,
subsidiary, Affiliate or parent of such Holder for the purpose of evaluating
its investment in the Company as long as such partner, subsidiary or parent is
advised of the confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the
conversion of the Series A Preferred Stock, all Common Stock issuable from time
to time upon such conversion.
IV. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Holder shall have a right of first
refusal to purchase its pro rata share of all Equity Securities that the
Company may from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
Each Holder's pro rata share is equal to the ratio of the number of shares of
Common Stock, assuming full conversion of all shares of Registrable Securities
owned by such Holder, held by such Holder immediately prior to the issuance of
such Equity Securities to the total number of shares of the Company's
outstanding Common Stock (including all shares of Common Stock issuable upon
conversion of the Registrable Securities).
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4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any
Equity Securities, it shall give each Holder written notice of its intention,
describing the Equity Securities, the price, and the terms and conditions upon
which the Company proposes to issue the same. Each Holder shall have fifteen
(15) days from the receipt of such notice to agree to purchase its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Holder who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the
Holders fail to exercise in full the rights of first refusal, the Company shall
have ninety (90) days thereafter to sell the Equity Securities in respect of
which the Holders' rights were not exercised, at a price and upon terms and
conditions no more favorable to the purchaser thereof than specified in the
Company's notice to the Holders pursuant to Section 4.2 hereof. If the Company
has not sold such Equity Securities within such ninety (90) days, the Company
shall not thereafter issue or sell any Equity Securities, without first
offering such securities to the Holders in the manner provided above.
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Article IV shall terminate upon the closing of the
Initial Offering.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal of each Holder under this Article IV may be transferred to any
subsidiary or parent of such Holder, to any successor in interest to all or
substantially all the assets of such Holder, or to an assignee or transferee
who acquires Registrable Securities.
4.6 EXCLUDED SECURITIES. The rights of first refusal established
by this Article IV shall have no application to any of the following Equity
Securities:
(A) shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights issued pursuant to such options, warrants or
other rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to, the Company, pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board of Directors
of the Company;
(B) stock issued pursuant to any rights, options and
warrants granted after the date of this Agreement, provided that the rights of
first refusal established by this Article IV applied with respect to the
initial sale or grant by the Company of such rights, options or warrants;
(C) any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(D) any Equity Securities that are issued by the Company
as part of the Initial Offering referred to in Section 4.4 hereof;
(E) shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(F) shares of Common Stock issued upon conversion of the
Company's Preferred Stock; and
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(G) any Equity Securities issued pursuant to any
equipment leasing arrangement or commercial bank financing approved by the
Company's Board of Directors.
V. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any or other instrument delivered by or on behalf
of the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate
written notice of the transfer of any Registrable Securities specifying the
full name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.
5.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 AMENDMENT AND WAIVER.
(A) Except as otherwise expressly provided, this
Agreement may be amended or modified only upon the written consent of the
Company and the holders of more than fifty percent (50%) of the Registrable
Securities.
(B) Except as otherwise expressly provided, the
obligations of the Company and the rights of the Holders under this Agreement
may be waived only with the written consent of the holders of more than fifty
percent (50%) of the Registrable Securities.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission
to exercise any right, power, or remedy accruing to any Holder, upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval
of any kind or character on any Holder's part of any breach, default or
noncompliance under this Agreement or any waiver on such Holder's part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
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remedies, either under this Agreement, by law, or otherwise afforded to
Holders, shall be cumulative and not alternative.
5.7 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) upon receipt at the address on the signature
page hereto after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (iii) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature page hereof or at
such other address as such party may designate by ten (10) days advance written
notice to the other party hereto.
5.8 ATTORNEYS' FEES. If legal action is brought to enforce or
interpret this Agreement, the prevailing Company shall be entitled to recover
its reasonable attorneys' fees and legal costs in connection therewith.
5.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
AIR SOUTH AIRLINES, INC. ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ GROUP, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By:
-------------------------------- --------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman of the Board Chairman
Chief Executive Officer
Address: Address:
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