Exhibit 10.18
TRAVELSMITH OUTFITTERS, INC.
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▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
__________________
STOCKHOLDER RIGHTS AGREEMENT
July 17, 1996
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TABLE OF CONTENTS
Page
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SECTION 1 Definitions................................................................ 1
SECTION 2 Preemptive Rights ........................................................ 2
2.1 Preemptive Rights ........................................................ 2
SECTION 3 Transfer Restrictions and Right of First Refusal.......................... 4
3.1 Transfer by Cornerstone .................................................. 4
3.2 Cornerstone's and the Company's Right of First Refusal ................... 5
3.3 Company's Right of First Refusal ......................................... 6
3.4 Permitted Sales of Refused Securities .................................... 7
3.5 Intra-family transfers ................................................... 7
3.6 Transfers from Management to Cornerstone ................................. 7
SECTION 4 Co-Sale .................................................................. 7
4.1 Right to Participate ..................................................... 7
4.2 Qualified Participation .................................................. 8
4.3 Continuing Rights ........................................................ 8
4.4 Intra-Family Transfers ................................................... 8
SECTION 5 Registration Rights ...................................................... 8
5.1 Requested Registration ................................................... 8
5.2 Company Registration ..................................................... 10
5.3 Registration on Form S-3 ................................................. 11
5.4 Limitations on Subsequent Registration Rights ............................ 12
5.5 Expenses of Registration ................................................. 12
5.6 Registration Procedures .................................................. 12
5.7 Indemnification .......................................................... 13
5.8 Information by Holder .................................................... 14
5.9 Rule 144 Reporting ....................................................... 15
5.10 Transfer of Registration Rights .......................................... 15
5.11 Termination .............................................................. 15
5.12 Lockup Agreement ......................................................... 15
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TABLE OF CONTENTS
(continued)
Page
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SECTION 6 Voting Rights ...................................................... 16
6.1 General Voting Rights .............................................. 16
6.2 Voting Rights regarding Management ................................. 17
6.3 Board of Directors ................................................. 17
6.4 Board Meetings ..................................................... 18
SECTION 7 Fair Market Value Determination .................................... 18
7.1 Board Determination ................................................ 18
7.2 By Independent Appraiser ........................................... 18
7.3 Prohibition on Future Use of Independent Appraiser ................. 19
SECTION 8 Compliance with Securities Laws .................................... 19
8.1 Compliance with Securities Laws .................................... 19
8.2 Legends ............................................................ 19
SECTION 9 Miscellaneous ...................................................... 20
9.1 Governing Law ...................................................... 20
9.2 Entire Agreement; Amendment and Termination ........................ 20
9.3 Assignment ......................................................... 21
9.4 Notices, etc ....................................................... 21
9.5 Delays or Ommissions ............................................... 21
9.6 Severability ....................................................... 22
9.7 Counterparts ....................................................... 22
9.8 Specific Performance ............................................... 22
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TRAVELSMITH OUTFITTERS, INC.
STOCKHOLDER RIGHTS AGREEMENT
This Agreement is made as of July 17, 1996 among TravelSmith Outfitters,
Inc., a California corporation (the "Company"), The International Cornerstone
Group, Inc., a Delaware corporation ("Cornerstone"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇ (the "Management") and ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (together with
Management and Cornerstone, collectively the "Shareholders" and individually a
"Shareholder").
RECITALS
WHEREAS, the Company and the Shareholders are parties to a certain
Stockholder Rights Agreement dated as of July 23, 1993 (the "Prior Agreement");
and
WHEREAS, the Prior Agreement granted the Shareholders certain rights with
respect to their share ownership; and
WHEREAS, the Shareholders constitute all of the "Holders" under the Prior
Agreement; and
WHEREAS, the Prior Agreement may be amended as set forth in Section 8.2
thereof; and
WHEREAS, the Shareholders wish to terminate the Prior Agreement and restate
their rights herein;
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
SECTION 1
Definitions
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As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission of the
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United States or any other U.S. federal agency at the time administering the
Securities Act.
1.2 "Common Stock" shall mean shares of the Company's Common Stock.
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1.3 "Holder" shall mean each of the Shareholders (and their transferees as
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permitted by Section 5.10) holding Registrable Securities or securities
convertible into Registrable Securities.
1.4 "Other Holders" shall mean holders of Company securities, other than
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the Holders, proposing to distribute their securities pursuant to a registration
under Section 5 of this Agreement.
1.5 "Preferred" shall mean shares of the Company's Series A Preferred
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Stock.
1.6 "Registrable Securities" means Common Stock, Common Stock issued or
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issuable on conversion of the Preferred and any shares of Common Stock issued or
issuable in respect of such Common Stock upon any stock split, stock dividend,
recapitalization, or similar event. Shares of Common Stock or other securities
shall only be treated as Registrable Securities if they have not been (A) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold or, in the opinion of counsel to the
Company, are available for sale in a single transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale.
1.7 The terms "register," "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.8 "Registration Expenses" shall mean all expenses, except as otherwise
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stated below, incurred by the Company in complying with Sections 5.1, 5.2, and
5.3 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company (but not fees and disbursements of special counsel for Holders,
if any), blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
1.9 "Securities" shall mean the capital stock of the Company.
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1.10 "Securities Act" shall mean the Securities Act of 1933, as amended, or
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any similar United States federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.11 "Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the securities registered by
the Holders.
SECTION 2
Preemptive Rights On New Issuances
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2.1 Preemptive Rights. Until Cornerstone beneficially owns 80% of the
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outstanding capital stock of the Company (including capital stock issuable upon
conversion of any securities
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convertible into Common Stock of the Company) ("80% Ownership"), the Company
hereby grants to Cornerstone the right of first refusal to purchase all or any
portion of New Securities (as defined in Section 2.1(a)) that the Company may,
from time to time, propose to sell and issue at a price at or above Fair Market
Value (as determined in Section 7). After Cornerstone achieves 80% Ownership or
at any time the Company proposes to sell and issue New Securities at a price
below Fair Market Value, the Company hereby grants to each Shareholder
(including Cornerstone) the right of first refusal to purchase such
Shareholder's pro rata portion of New Securities that the Company may, from time
to time, propose to sell and issue. Such Shareholder's pro rata portion, for
purposes of this right of first refusal, is the ratio of the number of shares of
capital stock held by such Shareholder (including capital stock issuable upon
conversion of any securities convertible into capital stock of the Company held
by such Shareholder) bears to the total number of shares of capital stock
outstanding at the time of issuance of such New Securities (including capital
stock issuable upon conversion of all outstanding securities convertible into
capital stock). This right of first refusal shall be subject to the following
provisions:
(a) "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and any rights, options, or warrants to purchase
said capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided, however, that "New Securities"
does not include (i) securities offered to the public pursuant to a registration
statement filed under the Securities Act; (ii) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization; (iii) shares of the
Company's Common Stock issued to Cornerstone pursuant to Section 7.6 of the
Common Stock Purchase Agreement, dated as of June 30, 1996, among the Company
and the Shareholders (the "Purchase Agreement"); (iv) shares of the Company's
capital stock (or related options) issued to employees, officers, directors,
consultants, or other persons performing services for the Company (including,
but not by way of limitation, distributors and sales representatives) pursuant
to any stock offering, plan, or arrangement approved by the Board of Directors
of the Company; (v) shares of the Company's capital stock (or related warrants)
granted to financial institutions in connection with the extension of credit to
the Company or in connection with the lease of equipment; or (vi) shares of the
Company's capital stock issued in connection with any stock split, stock
dividend, or recapitalization by the Company.
(b) In the event that the Company proposes to issue New Securities, it
shall give Cornerstone or each Shareholder, as the case may be, written notice
delivered or mailed as provided in Section 9.4 of its intention, which notice
shall describe the type of New Securities, the price, and the general terms upon
which the Company proposes to issue the same. Cornerstone or each Shareholder,
as the case may be, shall have fifteen (15) days from the date of mailing of any
such notice to agree to purchase all or any portion, in the case of Cornerstone,
or its pro rata share, in the case of each Shareholder, of such New Securities
for the price and upon the general terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased.
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(c) In the event that a Shareholder (including Cornerstone) fails to
exercise in full the right of first refusal within said fifteen (15) day period,
the Company shall have one hundred twenty (120) days thereafter to sell (or
enter into an agreement pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within one hundred twenty (120) days from
the date of said agreement) the New Securities respecting which the
Shareholder's rights were not exercised, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities within said one hundred
twenty (120) day period (or sold and issued New Securities in accordance with
the foregoing within one hundred twenty (120) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Shareholders in the manner
provided above.
(d) Any Shareholder's failure to exercise this right of first refusal
on any issuance of New Securities shall not adversely affect such Shareholder's
right of first refusal to purchase subsequent issuances of New Securities.
SECTION 3
Transfer Restrictions and Right of First Refusal
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Before any Securities registered in the name of any Holder may be sold or
transferred to a third party (a "Proposed Transferee"), including a transfer by
operation of law or other involuntary transfer, such Securities shall first be
offered to (i) in the case of the sale of Securities held by Cornerstone, the
Management and then to the Company, and (ii) in the case of the sale of
Securities held by any Holder other than Cornerstone ("Non-Cornerstone Holder"),
Cornerstone and then to the Company, or first to the Company, as provided in
Section 3 below:
3.1 Transfer by Cornerstone.
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(a) Management's Right of First Refusal. Cornerstone's Securities
-----------------------------------
shall first be offered to the Management. Cornerstone shall deliver or mail by
certified mail a written notice (the "Notice") to the Company and the
Shareholders stating (i) its bona fide intention to sell or transfer Securities,
(ii) the number of shares of such Securities to be sold or transferred (which
amount of Securities shall be referred to herein as "Offered Securities"), and
(iii) the price for which Cornerstone proposes to sell or transfer such
Securities.
(b) The Management shall have the right exercisable at any time within
thirty (30) days of receipt of the Notice, to purchase all or any portion of the
Offered Securities, at the price per share specified in the Notice. Such right
shall be exercised by written notice and delivered or mailed as provided in
Section 9.4, which notice shall specify the time, place and date for settlement
of such purchase and the number of shares of Offered Securities which the
Management desires to purchase,
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and any such purchase shall be consummated within thirty (30) days of such
notice from the Management.
(c) If the Management elects not to exercise its right pursuant to
Section 3.1 with respect to all of the Offered Securities, or if such right is
not exercised within thirty (30) days of receipt of the Notice by the
Management, Cornerstone shall notify the Company of such fact within five (5)
days after the expiration of such thirty (30) day period.
(d) The Company will have an option, for ten (10) days after receiving
the notice specified in Section 3.1(c), to give written notice to Cornerstone
and the Management of its election to purchase all, but not less than all, of
the Offered Securities not purchased by the Management pursuant to Section 3.1
at the purchase price specified in the Notice.
(e) If exercised by the Company pursuant hereto, the right to purchase
the Offered Securities shall be exercised by written notice, signed by an
officer of the Company, and delivered or mailed to Cornerstone as provided in
Section 9.4. The exercise of the option shall specify the time, place and date
for settlement of such purchase, which shall be consummated at a closing held at
the Company or such other place agreed upon by the Company and Cornerstone
within fifteen (15) days after the expiration of the notice period specified in
Section 3.1(d).
(f) If the Company elects not to exercise its right pursuant to
Section 3.1(d), or if such right is not exercised within the ten (10) day period
set forth in Section 3.1(d), Cornerstone shall notify the Shareholders of such
fact within five (5) days after the expiration of such ten (10) day period.
(g) The Management's right of first refusal set forth in this Section
3.1 is nonassignable except to another Shareholder.
3.2 Cornerstone's and the Company's Right of First Refusal
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(a) Prior to Cornerstone's 80% Ownership, a Non-Cornerstone Holder's
Securities shall first be offered to Cornerstone. The Non-Cornerstone Holder
shall deliver or mail by certified mail a written notice (the "Notice") to the
Company and the Shareholders (including Cornerstone) stating (i) its bona fide
intention to sell or transfer Securities, (ii) the number of shares of such
Securities to be sold or transferred (which amount of Securities shall be
referred to herein as "Offered Securities"), and (iii) the price for which such
Non-Cornerstone Holder proposes to sell or transfer such Securities.
(b) Cornerstone shall have the right exercisable at any time within
thirty (30) days of receipt of the Notice, to purchase all or any portion of the
Offered Securities, at the price per share specified in the Notice. Such right
shall be exercised by written notice signed by an officer of Cornerstone and
delivered or mailed as provided in Section 9.4, which notice shall specify the
time, place and date for settlement of such purchase and the number of shares of
Offered Securities which
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Cornerstone desires to purchase, and any such purchase shall be consummated
within thirty (30) days of such notice from Cornerstone.
(c) If Cornerstone elects not to exercise its right pursuant to
Section 3.2 with respect to all of the Offered Securities, or if such right is
not exercised within thirty (30) days of receipt of the Notice by Cornerstone,
the selling Holder shall notify the Company of such fact within five (5) days
after the expiration of such thirty (30) day period.
(d) The Company will have an option, for ten (10) days after receiving
the notice specified in Section 3.2(c), to give written notice to Cornerstone
and the selling Holder of its election to purchase all, but not less than all,
of the Offered Securities not purchased by Cornerstone pursuant to Section 3.2
at the purchase price specified in the Notice.
(e) If exercised by the Company pursuant hereto, the right to purchase
the Offered Securities shall be exercised by written notice, signed by an
officer of the Company, and delivered or mailed to the selling Holder as
provided in Section 9.4. The exercise of the option shall specify the time,
place and date for settlement of such purchase, which shall be consummated at a
closing held at the Company or such other place agreed upon by the Company and
the selling Holder within fifteen (15) days after the expiration of the notice
period specified in Section 3.2(d).
(f) If the Company elects not to exercise its right pursuant to
Section 3.2(d), or if such right is not exercised within the ten (10) day
period set forth in Section 3.2(d), the selling Holder shall notify the
Shareholders of such fact within five (5) days after the expiration of such ten
(10) day period.
(g) Cornerstone's right of first refusal set forth in this Section
3.2 is nonassignable except to another Shareholder.
3.3 Company's Right of First Refusal.
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(a) After Cornerstone reaches 80% Ownership, the Non-Cornerstone
Holder's Securities shall first be offered to the Company. The Holder shall
deliver or mail by certified mail a Notice to the Company and the Shareholders
(including Cornerstone).
(b) The Company shall have the right exercisable at any time within
thirty (30) days of receipt of the Notice, to purchase all, but not less than
all, of the Offered Securities, at the price per share specified in the Notice.
Such right shall be exercised by written notice signed by an officer of the
Company and delivered or mailed as provided in Section 9.4, which notice shall
specify the time, place and date for settlement of such purchase and the number
of shares of Offered Securities which the Company desires to purchase, and any
such purchase shall be consummated within thirty (30) days of such notice from
the Company.
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(c) If the Company elects not to exercise its right pursuant to
Section 3.3 with respect to all of the Offered Securities, or if such right is
not exercised within thirty (30) days of receipt of the Notice by the Company,
the selling Holder shall notify the Shareholders of such fact within five (5)
days after the expiration of such thirty (30) day period.
3.4 Permitted Sales of Refused Securities. Subject to Section 4 hereof and
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any other restrictions on transfer, and if the Management, Cornerstone and/or
the Company has not exercised its rights of first refusal as described herein,
the selling Holder may then sell such shares to the Proposed Transferee at the
price specified in the Notice or at a higher price, provided that such sale or
transfer is consummated within one hundred twenty (120) days of the date of said
Notice, and provided further that any such sale is in accordance with all the
terms and conditions hereof If the selling Holder fails to consummate the sale
or transfer within such one hundred twenty (120) day period, the option of the
Management, Cornerstone and/or the Company provided hereby shall be deemed to be
revived with respect to such shares and no sale or transfer of Securities shall
be effected without first offering the shares in accordance herewith.
3.5 Intra-family transfers. The provisions of Sections 3.1, 3.2, 3.3 and
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4.1 shall not apply to a transfer of any shares of Securities by a Holder,
either during his lifetime, or on death by will or intestacy, to his ancestors,
descendants, or spouse, or any custodian or trustee for the account of a Holder
or a Holder's ancestors, descendants or spouse; provided, in each such case any
such transferee shall receive and hold such shares subject to the provisions of
this Agreement and there shall be no further transfer of such shares unless in
accordance herewith.
3.6 Transfers from Management to Cornerstone. The provisions of Sections
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3.1, 3.2, 3.3 and 4.1 shall not apply to a transfer of any shares of Securities
by Management or ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to Cornerstone pursuant to Section
7.7(c) of the Purchase Agreement.
SECTION 4
Co-Sale
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4.1 Right to Participate. In the event and to the extent the Rights of
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First Refusal described in Section 3 are not exercised in their entirety by
Cornerstone and/or the Company, each Shareholder shall have the right to
participate, to the extent of their Co-Sale pro rata Portion defined in this
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Section 4.1, in the sale to the Proposed Transferee, subject to the terms and
conditions set forth in this Section 4. A Shareholder shall exercise its right
by delivering to the Company and selling Holders, prior to the expiration of a
ten (10) day period from the date of the notice set forth in Section 3.1(f),
Section 3.2(f) or Section 3.3(c), (i) written notice of its intention to
participate in such Co-Sale, specifying the number of shares such Shareholder
desires to sell to the Proposed Transferee, and (ii) one or more certificates
representing the number of shares of Securities which such Shareholders elects
to sell hereunder, duly endorsed for transfer to the Proposed Transferee. The
Co-Sale pro rata Portion shall equal the amount of Offered Securities, as
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converted into Common
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Stock, multiplied by a fraction, the numerator of which shall equal the number
of shares of capital stock owned by such Shareholder (including capital stock
issuable upon conversion of any securities convertible into capital stock of the
Company ("Conversion Shares")), and the denominator of which shall equal the
aggregate of all capital stock and Conversion Shares held by all Shareholders as
a group.
4.2 Qualified Participation. If the Proposed Transferee desires to
-----------------------
purchase a number of shares of Securities other than the amount originally
offered, the amount that the Proposed Transferee desires to purchase shall be
substituted for Offered Securities for the purpose of determining each
Shareholder's Co-Sale pro rata Portion. In the event of Shareholder
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participation in the Co-Sale described herein, the amount of Offered Securities
which the selling Holder is entitled to sell on its own behalf pursuant to
Section 4 hereof shall be reduced accordingly, and the selling Holder shall
include such other Shareholder's shares in the sale at the closing thereof.
4.3 Continuing Rights. The exercise or non-exercise of the right to
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participate hereunder shall not adversely affect a Shareholder's right to
participate in subsequent sales by the same or any other Holder pursuant to this
Section 4.
4.4 Intra-Family Transfers. The provisions of this Section 4 shall not
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apply with respect to transfers described in Section 3.5.
SECTION 5
Registration Rights
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5.1 Requested Registration.
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(a) Request for Registration. In case the Company shall receive from
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any Holders a written request that the Company effect any registration,
qualification or compliance with respect to not less than twenty percent (20%)
of the Registrable Securities, the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written
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request received by the Company within twenty (20) days after receipt of such
written notice from the Company;
Provided, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance
pursuant to this Section 5.1:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(B) Prior to the earlier to occur of (i) six (6) months after the
effective date of the Company's first registered public offering of its stock
or (ii) February 1, 2000;
(C) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date six
(6) months immediately following the effective date of, any registration
statement pertaining to securities of the Company sold by the Company (other
than a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective;
(D) After the Company has effected two registrations pursuant to
this paragraph 5.1, and such registrations have been declared or ordered
effective, provided that all Registrable Securities requested to be included in
each such registration were in fact included in the registration;
(E) If the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for a registration statement to be filed in the near future,
then the Company's obligation to use its best efforts to register, qualify or
comply under this Section 5 shall be deferred for a period not to exceed ninety
(90) days from the date of receipt of written request from the Initiating
Holders, provided, however, that the Company shall not utilize this right more
than once in any twelve (12) month period; or
(F) If the Company would be required to obtain audited financial
statements in order to conduct any such registration, qualification or
compliance, then the Company may postpone such registration, qualification or
compliance until it may use annual, rather than interim, audited financial
statements.
Subject to the foregoing clauses (A) through (F), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders.
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(b) Underwriting. In the event that a registration pursuant to Section
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5.1 is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as part of the notice given pursuant to Section
5.1(a)(i). In such event, the right of any Holder to registration pursuant to
Section 5.1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 5.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting and the Other Holders) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company, but subject to the reasonable approval of
a majority in interest of the Initiating Holders. Notwithstanding any other
provision of this Section 5.1, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders and Other Holders, and the number of shares that may be included in the
registration and underwriting shall be allocated first among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration statement
and second among the Other Holders in proportion to the number of shares
proposed to be included in such registration by such Other Holders. No
Registrable Securities or other securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any holder to the nearest one hundred (100) shares.
If any Holder of Registrable Securities or Other Holder disapproves of
the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration.
5.2 Company Registration.
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(a) Notice of Registration. If at any time or from time to time the
----------------------
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within twenty (20) days after receipt of such written notice from
the Company or by any Holder.
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(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 5.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 5.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall, together with the
Company and the Other Holders, enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities and other securities to be included in such registration.
The Company shall so advise all Holders and Other Holders and the number of
shares that may be included in the registration and underwriting by all Holders
and Other Holders shall be allocated among them, as nearly as practicable,
first, to the Company (or, if applicable, to the holders for whose account the
-----
Company is registering the securities), second, among the Holders of Registrable
------
Securities in proportion to the respective amounts of Registrable Securities
held by such Holders at the time of filing of the registration statement, and,
third, among the Other Holders in proportion to the number of shares proposed
-----
to be included in such registration by such Other Holders. To facilitate the
allocation of shares in accordance with the above provisions, the Company may
round the number of shares allocated to any Holder or Other Holder to the
nearest 100 shares. If any Holder or Other Holder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the right
-------------------------------
to terminate or withdraw any registration initiated by it under this Section 5.2
prior to the effectiveness of such registration whether or not any Holder has
elected to include Registrable Securities in such registration.
5.3 Registration on Form 5-3.
------------------------
(a) Request for Registration. If any Holder or Holders request that
------------------------
the Company file a registration statement on Form S-3 (or any successor form to
Form S-3) for a public offering of shares of the Registrable Securities the
reasonably anticipated aggregate price to the public of which would exceed
$1,500,000, and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request. The substantive
provisions of Section 5.1(b) shall be applicable to each registration initiated
under this Section 5.3.
(b) Limitations. Notwithstanding the foregoing, the Company shall not
-----------
be obligated to take any action pursuant to this Section 5.3: (i) in any
particular jurisdiction in which the
-11-
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act; (ii) if the Company, within ten (10) days of the receipt of
the request of the initiating Holders, gives notice of its bona fide intention
to effect the filing of a registration statement with the Commission within
ninety (90) days of receipt of such request (other than with respect to a
registration statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration which is not appropriate for the
registration of Registrable Securities); (iii) during the period starting with
the date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date six (6) months immediately following, the effective date of
any registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective; or (iv) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in the near future,
then the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed ninety (90) days from the
receipt of the request to file such registration by such Holder, provided,
however, that the Company shall not utilize this right more than once in any
twelve (12) month period.
5.4 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date hereof, the Company will not, without the prior written consent of not
less than a Super-Majority (as such term is defined below) of the Board of
Directors, enter into any agreement with any holder or prospective holder of
any securities of the Company which allows such holder or prospective holder of
any securities of the Company to include such securities in any registration
filed under Sections 5.1, 5.2 or 5.3 hereof, unless, under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not diminish the amount of Registrable Securities which are included. However,
the Company may by agreement grant such holder or prospective holder a
registration right analogous to that set forth in Section 5.1 provided that (i)
such holder or prospective holder may not demand a registration analogous to
that set forth in Section 5.1 at any time earlier than the Holders first have
such right, and (ii) that the Registrable Securities may be included in any
such registration demanded by such holders to the extent such inclusion will
not diminish the amount of securities of such holders which are included.
5.5 Expenses of Registration.
------------------------
(a) Registration Expenses. The Company shall bear all Registration
---------------------
Expenses incurred in connection with all registrations pursuant to Section 5.1,
Section 5.2 and Section 5.3.
(b) Selling Expenses. Unless otherwise stated, all Selling Expenses
----------------
relating to securities registered on behalf of the Holders shall be borne by
the Holders pro rata on the basis of the number of shares so registered.
-12-
5.6 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will:
(a) keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof;
(b) Prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for at least one hundred twenty (120)
days or until the distribution described in the Registration Statement has been
completed; and
(c) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
5.7 Indemnification.
---------------
(a) By Company. The Company will indemnify and each Holder, each of
----------
its officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder, controlling person or underwriter and
stated to be specifically for use therein. If the Holders are represented by
counsel other than counsel for the Company, the Company will not be obligated
under this Section 5.7(a) to reimburse legal fees and expenses of more than one
separate counsel for all Holders.
-13-
(b) By Holders. Each Holder will, if Registrable Securities held by
----------
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this subsection (b) shall be limited in an amount
equal to the initial public offering price of the shares sold by such Holder,
unless such liability arises out of or is based on willful conduct by such
Holder.
(c) Procedures. Each party entitled to indemnification under this
----------
Section 5.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
5.8 Information by Holder. The Holder or Holders of Registrable Securities
---------------------
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by them as the Company may
-14-
request in writing and only as shall be necessary to enable the Company to
comply with the provisions hereof in connection with any registration,
qualification or compliance referred to in this Agreement.
5.9 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration,
after such time as a public market exists for the Common Stock of the Company,
the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements);
(c) Furnish to any Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934 (at
any time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as such Holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing such
Holder to sell any such securities without registration.
5.10 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Holders under Sections 5.1, 5.2 and 5.3 may be
assigned in connection with any transfer or assignment by a Holder of
Registrable Securities provided that: (i) such transfer may otherwise be
effected in accordance with applicable securities laws, (ii) such transfer is
effected in compliance with the restrictions on transfer contained in this
Agreement and in any other agreement between the Company and the Holder, and
(iii) such assignee or transferee is a general partner, limited partner,
subsidiary, ancestor, descendent, or spouse of the Holder or a custodian or
trustee for the account of an ancestor, descendent, or spouse of the Holder and
acquires at least 1,000 shares of Preferred and/or Common Stock (appropriately
adjusted for stock splits, stock dividends, recapitalizations and similar
events). No transfer or assignment will divest Holder or any subsequent owner
of such rights and powers unless all Registrable Shares are transferred or
assigned.
5.11 Termination. The rights granted pursuant to this Section 5 shall
-----------
terminate as to any Holder at the later of (i) two years after the Company's
initial public offering or (ii) at such time as such Holder may sell under Rule
144, or a successor rule, in a three month period all Registrable Securities
then held by such Holder.
-15-
5.12 Lockup Agreement. Each Holder agrees that, if, in connection with the
----------------
Company's initial public offering of the Company's securities, the Company or
the underwriters managing the offering so request, the Holder shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or the underwriters; provided that each officer and
director of the Company who owns stock of the Company also agrees to such
restrictions. This Section 5.12 shall be binding on all transferees or assignees
of Registrable Securities, whether or not such persons are entitled to
registration rights pursuant to Section 5.10.
SECTION 6
Voting Rights
-------------
6.1 General Voting Rights. The Company shall not, without the consent of
---------------------
not less than two-thirds of the members of the Board of Directors then in
office, provided, that at no time shall the Board of Directors act without the
consent of at least one Cornerstone Director and one Management Director as long
as Management or Cornerstone, as the case may be, is entitled to nominate
Cornerstone Directors or Management Directors, as the case may be, pursuant to
Section 6.3(a) (a "Super-Majority"):
(a) merge into or consolidate with any other corporation (other than a
wholly owned subsidiary corporation); or
(b) sell all or substantially all of the assets of the Company (except
a sale to an affiliate of the Company); or
(c) issue or sell any New Securities, as defined in Section 2.1(a)
hereof; or
(d) amend the Articles of Incorporation or Bylaws of the Company in a
manner that affects the rights of a party under this Agreement, the Purchase
Agreement or the Employment Agreement, dated July ____, 1996, between the
Company and each of the members of the Management without the consent of such
party; or
(e) incur additional indebtedness (including additional amounts drawn
pursuant to existing credit facilities), provided, that for purposes of this
subsection (e) of Section 6.1 but no other subsection of Section 6.1, no
director shall "unreasonably" withhold approval, where the term "unreasonable"
is defined as to be consistent with current bank covenants; or
(f) move any portion of the Company's operations.
-16-
6.2 Voting Rights regarding Management. (a) The Company shall not, without
----------------------------------
the consent of two-thirds of the members of the Board of Directors (excluding
the applicable member of Management):
(i) terminate a member of Management's employment with the Company,
subject to Section 6.2(b) below;
(ii) assign any duties or reduce any of his duties, either of which
results in a significant diminution in his position or responsibilities with the
Company in effect immediately prior to such assignment, or remove him from such
position and responsibilities;
(iii) reduce, without good business reasons, the facilities and
perquisites (including office space and location) available to him immediately
prior to such reduction;
(iv) reduce his base pay or incentive bonus as in effect immediately
prior to such reduction; or
(v) reduce the kind or level of employee benefits to which he is
entitled immediately prior to such reduction with the result that his overall
benefits package is significantly reduced.
(b) The Company shall not terminate, other than for Cause, the
employment of more than one member of Management prior to February 1, 2000.
6.3 Board of Directors. (a) So long as the Non-Cornerstone Holders shall
------------------
collectively own at least 20% of the outstanding capital stock of the Company
(including capital stock issuable upon conversion of any securities convertible
into capital stock of the Company) and either of the members of Management shall
be employed by the Company and so long as Cornerstone owns at least 20% of the
outstanding capital stock of the Company (including capital stock issuable upon
conversion of any securities convertible into capital stock of the Company),
each Shareholder shall vote all of its Securities for the following slate of
Directors at each election of the Board of Directors whether by annual or
special meeting or written consent: (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ End and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ as the current representatives of Cornerstone, or his successor
nominated by Cornerstone ("Cornerstone Directors"), (ii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as the current representatives of
Management, or his successor nominated by Management ("Management Directors"),
and (iii) one additional director approved by two-thirds of the Cornerstone
Directors and two-thirds of the Management Directors (the "Independent
Director").
(b) If two-thirds of the Cornerstone Directors, on the one hand, and
two-thirds of the Management Directors, on the other hand, cannot agree upon the
Independent Director within thirty (30) days of the date hereof or any date a
vacancy occurs in that office, within seven (7) days from the end of such thirty
(30) day period, two-thirds of the Cornerstone Directors shall appoint a person
("Cornerstone Judge") who with a person appointed by two-thirds of the
Management
-17-
Directors ("Management Judge") shall appoint the Independent Director. If the
Cornerstone Judge and the Management Judge cannot agree upon the Independent
Director within fourteen (14) days from the date of their appointment, they
shall appoint a third person who shall appoint the Independent Director within
fourteen (14) days from the date of his appointment and whose determination
shall be final and binding on all parties.
6.4 Board Meetings. Meetings of the Board of Directors shall be held not
--------------
less frequently than once per quarter.
SECTION 7
Fair Market Value Determination
-------------------------------
7.1 Board Determination. The per share Fair Market Value shall be a
-------------------
value determined by and agreed upon by a Super-Majority of the Board of
Directors.
7.2 By Independent Appraiser. If a Super-Majority of the Board of
------------------------
Directors cannot agree upon a value within seven days from the date the Company
determines to issue New Securities, Cornerstone and the Management shall
jointly retain, within thirty days from the end of such seven day period, an
independent broker, dealer or investment banker who shall be acceptable, in the
exercise of its sole discretion, to each of the Management and Cornerstone (an
"Independent Appraiser") for the purpose of determining the per share Fair
Market Value of the outstanding shares of Common Stock. The Independent
Appraiser shall determine a per share value based on the sale of the Company in
its entirety or the registration of substantially all of the shares of capital
stock of the Company. The Independent Appraiser shall (i) consider the
valuations of comparable privately or publicly held Companies and (ii) consider
the valuations of the Company in both a private sale scenario and an IPO
scenerio and shall assign to each such scenerio relative weights based on its
sole opinion of the suitability of an IPO (as such term is defined in the
Purchase Agreement) for the Company (including the possibility that the Company
is not suitable for an IPO) and the suitability of a private sale of the
Company. Notwithstanding the foregoing, the Independent Appraiser shall base
such Fair Market Value determination on its determination of the most
appropriate methodology for valuing the Company. Upon its determination of Fair
Market Value, the Independent Appraiser shall prepare and deliver to each of
the Management and Cornerstone a report (the "Appraisal Report") stating its
determination of the Fair Market Value and setting forth in reasonable detail
the method by which the same was determined. As a condition to its selection,
the Independent Appraiser shall submit the Appraisal Report within 30 business
days after its appointment.
Unless within five days after receipt of the Appraisal Report, the
Management or Cornerstone (any such person being hereinafter referred to as the
"Objecting Party" and the non-objecting party being hereinafter referred to as
the "Non-Objecting Party") delivers a written notice to the Company stating
that it objects to the Fair Market Value set forth in such Appraisal Report
(such notice being hereinafter referred to as the "Objection Notice"), the Fair
Market Value set forth therein
-18-
shall be final and binding on all parties. The Objection Notice shall set forth
in reasonable detail the reasons for the Objecting Party's objections. If the
Objecting Party and the Non-Objecting Party do not agree on the determination of
the Fair Market Value within five days after receipt of an Objection Notice, the
Objecting Party and the Non-Objecting Party shall select another Independent
Appraiser to review the determination of Fair Market Value and to determine such
amount independently in accordance with the provisions of this Section 7.2. Such
Independent Appraiser's determination of Fair Market Value shall be final and
binding on all parties. The fees and expenses of the second Independent
Appraiser shall be borne by the Objecting Party.
For all Fair Market Value determinations, an Independent Appraiser
shall assume the total number of outstanding shares of Common Stock to be the
number actually outstanding plus shares issuable with respect to any outstanding
options or other securities convertible into or exercisable for Common Stock.
7.3 Prohibition on Future Use of Independent Appraiser. None of the
--------------------------------------------------
Company, the Management nor Cornerstone shall engage, or receive any services
from, any Independent Appraiser for a period of five years from the date of any
Appraisal Report; provided that such Independent Appraiser may again be selected
as an Independent Appraiser pursuant to the provisions of this Agreement.
SECTION 8
Compliance with Securities Laws
-------------------------------
8.1 Compliance with Securities Laws. Each Shareholder agrees not to make
-------------------------------
any disposition of any Securities unless and until:
(a) 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
(b) The Shareholder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
proposed disposition, and if reasonably requested by the Company, such
Shareholder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration under the Securities Act.
8.2 Legends. Each Shareholder further understands that the share
-------
certificates evidencing any Securities shall be endorsed with the following
legends (in addition to any legends required under applicable state securities
laws):
-19-
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER INCLUDING RIGHTS OF FIRST REFUSAL AND CO-SALE
PROVISIONS AS SET FORTH IN AN AGREEMENT DATED JULY 17, 1996, BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
LOCKUP NOT TO EXCEED 180 DAYS FOLLOWING THE CORPORATION'S INITIAL PUBLIC
OFFERING, A COPY OF WHICH LOCKUP IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
(d) Any legend required to be placed thereon by the California
Commissioner of Corporations or any other applicable state securities laws.
SECTION 9
Miscellaneous
-------------
9.1 Governing Law. This Agreement shall be governed in all respects by the
-------------
laws of the State of California as applied to contracts made and to be fully
performed entirely within that state between residents of that state. All
disputes arising out of this Agreement shall be subject to the exclusive
jurisdiction and venue of the California state courts of Santa ▇▇▇▇▇ County,
California, (or, if there is exclusive federal jurisdiction, the United States
District Court for the Northern District of California) and the parties consent
to the personal and exclusive jurisdiction and venue of these courts.
9.2 Entire Agreement: Amendment and Termination.
-------------------------------------------
(a) This Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
This Agreement supersedes the Prior Agreement, and the Prior Agreement is hereby
terminated.
(b) This Agreement or any term hereof may only be amended, waived,
discharged or terminated by a written instrument signed by the Company, the
Management and Cornerstone and to the extent his rights, obligations and
liabilities are affected, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. The
-20-
provisions of Sections 2, 3, 4, and 6 including preemptive rights, rights of
first refusal, co-sale rights and voting rights, shall terminate upon (i) the
effective date of a merger involving the Company in which the shareholders of
this Company prior to the merger own less than fifty percent (50%) of the equity
securities of the surviving corporation, (ii) the effective date of a sale of
all or substantially all of the assets of the Company (except a sale to an
affiliate of the Company), (iii) the closing of the Company's initial firmly
underwritten public offering, and the provisions of Sections 2, 3, and 4 shall
not be applicable to such transactions; or (iv) the written consent of the
Company, the Management, Cornerstone and ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. Any amendment,
waiver, discharge or termination signed by the Management, Cornerstone and
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be binding on all such Holders. Notwithstanding the
foregoing, this Agreement shall terminate at such time as either Cornerstone, or
the Management and ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (as a group), no longer own any shares
of capital stock of the Company.
9.3 Assignment. The rights granted to the Shareholders in Sections 2, 4
----------
and 6 may not be assigned by a Shareholder, except (a) to another Shareholder,
(b) to an entity controlling, controlled by or under common control with such
Shareholder, or (c) to a purchaser or transferee from such Shareholder which
acquires at least 15,000 shares of Common Stock or Preferred (appropriately
adjusted for any stock split, reverse stock split, stock dividend or similar
recapitalization occurring after the date hereof), provided that written notice
of any such sale or transfer is given to the Company.
9.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be deemed given if in writing and mailed by registered
or certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to a Holder, at such Holder's address as set forth
under his, her or its name on the signature page of this Agreement, or at such
other address as such Holder shall have furnished to the Company in writing, or
(b) if to any other holder of any Registrable Securities, at such address as
such holder shall have furnished the Company in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder of such Registrable Securities who has so furnished an address to
the Company, or (c) if to the Company, at its address as set forth on the cover
page of this Agreement and addressed to the attention of the Corporate Secretary
and with a copy to Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇, or at such other address as the
Company shall have furnished to the holders.
9.5 Delays or Ommissions. No delay or omission to exercise any right,
--------------------
power or remedy accruing to any party, upon any breach or default of any other
party under this Agreement, shall impair any such right, power or remedy of such
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party 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 remedies, either
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under this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.
9.6 Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
9.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
9.8 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
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The foregoing Stockholder Rights Agreement is hereby executed as of the
date first above written.
"COMPANY" TRAVELSMITH OUTFITTERS, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Co-President
"SHAREHOLDERS"
/s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇
TravelSmith Outfitters, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
TravelSmith Outfitters, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
THE INTERNATIONAL CORNERSTONE GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name:
Title:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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