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EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
This Agreement is made and entered into this 30th day of November,
1998, by and among APPALACHIAN BANCSHARES, INC., a Georgia corporation
(hereinafter called the "Company"), and the undersigned shareholders of the
Company (hereinafter called the "Shareholders"), for themselves and their
successors and assigns.
WHEREAS, concurrently with the execution of this Agreement, the Company
has issued to Shareholders an aggregate of 50,000 shares of the Common Stock of
the Company in connection with those certain subscription agreements, each dated
as of November 30, 1998, between the Company and each of the Shareholders
(hereinafter called the "Issued Shares"); and
WHEREAS, said Issued Shares have been issued to Shareholders without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), and the Company and Shareholders desire to provide hereunder for
compliance therewith and for the registration of certain of the Issued Shares;
and
WHEREAS, the Board of Directors of the Company has approved this
Registration Rights Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
. Certain Other Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Registrable Securities" shall mean the Issued Shares, or any portion
thereof, which have not been sold pursuant to a registration statement under the
Securities Act or pursuant to the Commission's Rule 144 (or pursuant to any
other exemption from registration which has effected a removal of restrictions
on the transfer of the Issues Shares).
"Commission" shall mean the United States Securities and Exchange
Commission and any successor federal agency having similar powers and
responsibility for administering the Securities Act.
"Common Stock" shall mean common stock of the Company, $5.00 par value.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended (or any similar successor statute) and the rules and regulations
thereunder, all as the same shall be in effect at the time.
"Initiating Holders" shall mean any holder or holders who, in the
aggregate, own a majority of the Registrable Securities.
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The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and this Agreement, and the declaration or
ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Section 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company (including any fees incurred by Company counsel for
advice rendered to Shareholders), blue sky fees and expenses, fees of the
National Association of Securities Dealers, Inc. and accountants' expenses,
including without limitation, any special audits or "comfort" letters incident
to, or required by, any such registration, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions.
. Restrictions on Transfer. Each of the Shareholders represents to
the Company that it is acquiring the Issued Shares for its own investment
account and without a view to the subsequent public distribution of the Issued
Shares, otherwise than pursuant to an effective registration statement under the
Securities Act or an exemption therefrom. Each certificate for Issued Shares,
issued to Shareholders and to any subsequent holder, which have not been sold
pursuant to an effective registration statement under the Securities Act or
pursuant to the Commission's Rule 144, or as to which the restrictions on
transfer have not been, otherwise, removed, as hereinafter provided, shall bear
a restrictive legend reciting that the same have not been registered pursuant to
the Securities Act and may not be transferred in the absence of an effective
registration statement as to such shares or an exemption from the registration
requirements thereof. Prior to any proposed transfer of any Issued Shares
containing such restrictive legends, except pursuant to an effective
registration statement under the Securities Act, the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and shall be
accompanied by an opinion of counsel, experienced in securities laws matters and
reasonably acceptable to the Company and its counsel, to the effect that the
proposed transfer may be effected without registration under the Securities Act,
whereupon the holder of such Issued Shares shall be entitled to transfer such
securities in accordance with the terms of its notice and such opinion.
Restrictions imposed under this Section 2 upon the transferability of the Issued
Shares shall cease when
() a registration statement covering such Issued Shares becomes
effective under the Securities Act, or
() the Company receives from the holder thereof an opinion of
counsel experienced in securities laws matters, which counsel shall be
reasonably acceptable to the Company, that such restrictions are no longer
required in order to insure compliance with the Securities Act.
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When such restrictions terminate, the Company shall, or shall instruct its
Transfer Agent to, issue new securities in the name of the holder not bearing
the restrictive legends required by this Section 2.
. Registration under Securities Act.
. Registration on Request.
() Request. Upon the written request of Initiating Holders,
requesting that the Company effect the registration under the Securities Act of
all or part of such Initiating Holders' Registrable Securities and specifying
the intended method or methods of disposition thereof, the Company will
promptly, but in any event within ten business days, give written notice of such
requested registration to all holders of Registrable Securities and, thereupon,
will use its best efforts to effect the registration under the Securities Act
of:
() the Registrable Securities which the Company has been so
requested to register by such Initiating Holders, for disposition in
accordance with the intended method or methods of disposition stated in
such request,
() all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request
delivered to the Company within ten business days after the giving of
such written notice by the Company (which request shall specify the
intended method or methods of disposition of such Registrable
Securities), and
() all shares of Common Stock which the Company may elect to
register for its own account in connection with the offering of
Registrable Securities pursuant to this Section 3.1 and Section 3.4,
all to the extent requisite to permit the disposition of the Registrable
Securities in accordance with the intended methods thereof, as specified by the
holders of a majority of the Registrable Securities so to be registered;
provided that:
(1) no registration shall be required to be effected pursuant to
this Section 3.1 from the date hereof through the first anniversary of
the date of this Agreement, and
(2) the Company shall not be required to effect more than one
registration pursuant to this Section 3.1 subsequent to the first
anniversary of the date of this Agreement, and
(3) the Company shall not be required to file any registration
statement to effect registration pursuant to this Section 3.1, unless
the Initiating Holders make a request prior to the second anniversary
of the date of this Agreement, and
(4) the Company shall not be required to file any registration
statement to effect registration pursuant to this Section 3.1, if the Initiating
Holders can, at the time of the request or
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within one hundred twenty-five (125) days thereafter, sell the Registrable
Securities pursuant to the Commission's Rule 144 or another exemption from
registration.
If, at the date of receipt of a registration request by Initiating
Holders, the Company has previously filed a registration statement pursuant to
the Securities Act or given notice of its intention to file a registration
statement pursuant to Section 3.2 hereof (other than on Form S-8 or S-4 or any
similar form for the registration of securities pursuant to an employee benefit
plan or business combination or reorganization), the Company may defer the
filing of any such requested registration statement to a date not later than (i)
one hundred twenty (120) days after the effective date of such prior
registration statement, or (ii) ninety days after the filing of such prior
registration statement, if such registration statement is not declared effective
within such time period, or (iii) sixty days after giving of the notice pursuant
to Section 3.2 if a registration statement is not filed by the Company within
that time period. In any such event, the Initiating Holders will be entitled to
withdraw such request and, if such request is withdrawn, such request shall not
count as a requested registration under this Section 3.1.
() Registration Statement Form. Each registration requested
pursuant to this Section 3.1 shall be effected by the filing of a registration
statement on any form which the Company is eligible to use, such form to be
selected by the Company, after consultation with counsel and after notice of the
selection of such form is delivered to the holders of all Registrable Securities
electing to participate in such registration; provided, however, that if the
holders of a majority of the Registrable Securities as to which registration has
been requested pursuant to this Section 3.1 shall so request, the Company shall
file such registration statement pursuant to the Commission's Rule 415, or any
successor rule or regulation thereto, so as to permit the continuous or delayed
offering of the Registrable Securities in accordance with the intended method of
disposition specified in the Initiating Holders' notice pursuant to subsection
(a) of this Section 3.1, but in no event shall the Company be required to
maintain the effectiveness of such registration beyond the period specified in
Section 3.3(c).
() Expenses. Except as otherwise prohibited by applicable law,
the Company will pay all Registration Expenses in connection with the
registration of Registrable Securities requested pursuant to this Section 3.1.
() Effective Registration Statement. A registration requested
pursuant to this Section 3.1 shall not be deemed to be effected unless it has
been declared effective by the Commission or otherwise becomes effective,
provided that (i) a registration which does not become effective after the
Company has substantially prepared and has filed or is in a position to file a
registration statement with respect thereto solely by reason of the refusal to
proceed of the holders of a majority of the Registrable Securities so to be
registered (other than any refusal to proceed based upon the advice of their
counsel that the registration statement, or the prospectus contained therein,
contains 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) shall be deemed
to have been effected by the Company pursuant to this Section 3.1, (ii) if,
after a registration has become effective and before the closing of all sales of
Issued Shares pursuant thereto, such registration is interfered with by a stop
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order, injunction or other order or requirement of the Commission or federal,
state or other governmental agency or court for any reason, such registration
shall not be deemed effective by the Company pursuant to this Section 3.1 with
respect to the Issued Shares remaining unsold and covered by such registration
statement.
() Priority of Shares. With respect to a registration requested
by the Initiating Holders pursuant to this Section 3.1, if such Initiating
Holders shall determine that the number of shares of Registrable Securities and
any other securities to be sold in any such offering should be limited due to
market conditions or otherwise, the Company will include in such registration to
the extent of the number which the Company is so advised can be sold in such
offering (i) first, Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities, on the
basis of the number of shares of such securities requested to be included by
such holders, and after all Registrable Securities requested to be registered
have been included, (ii) other securities of the Company proposed to be included
in such registration, in accordance with the priorities, if any, then existing
among the Company and the holders of such securities.
. Incidental Registration.
() Right to Include Registrable Securities. If, at any time prior
to the date which marks the second anniversary of the date of this Agreement,
the Company proposes to register any of its equity securities under the
Securities Act (other than on Form S-8 or S-4, or any similar form for the
registration of securities pursuant to an employee benefit plan or business
combination or reorganization, and as otherwise provided herein), whether for
sale for its own account or for the account of any other person, on a form and
in a manner which would permit registration of Registrable Securities for sale
to the public under the Securities Act, it will, each such time, give prompt
written notice to all holders of Registrable Securities of its intention to do
so, describing such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration, and, upon the written
request of any such holder delivered to the Company within ten business days
after the giving of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method or
methods of disposition thereof), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable Securities which
the Company has been so requested to register by the holders of Registrable
Securities (hereinafter "Requesting Holder"), to the extent requisite to permit
the disposition of the Registrable Securities in accordance with the intended
methods thereof as specified by the holders of a majority of the Registrable
Securities so to be registered, provided that:
() if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each Requesting Holder and
thereupon shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith as provided in subdivision (b) of this
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Section 3.2), without prejudice, however, to the rights of any
Initiating Holders of Registrable Securities to request that such
registration be effected as a registration under Section 3.1;
() if (A) the registration so proposed by the Company involves
an underwritten offering of the securities so being registered, whether
or not for sale for the account of the Company, to be distributed by or
through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, (B) the Company
proposes that the securities to be registered in such underwritten
offering will not include all of the Registrable Securities requested
to be so included, and (C) the managing underwriter of such
underwritten offering shall advise the Company and the Requesting
Holders in writing that, in its judgment, the distribution of all or a
specified portion of such Registrable Securities concurrently with the
securities being distributed by such underwriters will adversely affect
the distribution of such securities by such underwriters, then the
Company may require, by written notice to each such holder, that the
distribution of all or a specified portion of such Registrable
Securities be excluded from such distribution (in case of an exclusion
of a portion of such Registrable Securities, such portion to be
allocated among such holders in proportion to the respective numbers of
shares of Registrable Securities owned by such holders) provided that,
the number of shares of Registrable Securities included shall be
reduced pro rata with any securities being offered for the account of
any Person other than the Company (other than pursuant to the "demand"
registration rights of such person);
() the Company shall not be obligated to effect any registration
of Registrable Securities under this Section 3.2 incidental to the
registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans, stock
option plans or other employee benefit plans, or incidental to the
registration of any non-equity securities not convertible into equity
securities;
() the Company shall not be required to file any registration
statement to effect registration pursuant to this Section 3.2 if the
Initiating Holders can at the time of the request or within one hundred
twenty-five (125) days thereafter sell the Registrable Securities
pursuant to the Commission's Rule 144 or another exemption from
registration; and
() the Company may, but shall not be obligated to, effect any
registrations pursuant to this Section 3.2.
No registrations of Registrable Securities effected under this Section 3.2 shall
relieve the Company of its obligation to effect registrations of Registrable
Securities pursuant to Section 3.1.
() Expenses. Except as otherwise prohibited by applicable law,
the Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2.
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. Registration Procedures. If, and whenever, the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act, as provided in Sections 3.1 and 3.2, the
Company will promptly:
() cooperate with any underwriters for, and the holders
of, such Registrable Securities, and will enter into a usual and
customary underwriting agreement with respect thereto and take all such
other reasonable actions as are necessary or advisable to permit,
expedite and facilitate the disposition of such Registrable Securities
in the manner contemplated by the related registration statement, and
the Company will provide to the holders of such Registrable Securities,
any underwriter participating in any distribution thereof pursuant to a
registration statement, and any attorney, accountant or other agent
retained by any holder of Registrable Securities or underwriter,
reasonable access to appropriate Company officers and employees to
answer questions and to supply financial and other information
reasonably requested by any such holders of Registrable Securities,
underwriter, attorney, accountant or agent in connection with such
registration statement;
() prepare and file (within sixty days of the last date
on which the holders of Registrable Securities may notify the Company
of their request to include their Registrable Securities in such
registration in accordance herewith) with the Commission a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective,
provided that, in the case of a registration of any Registrable
Securities pursuant to Section 3.2, such preparation and filing may be
delayed in the reasonable judgment of the Company, without prejudice,
however, to the rights of the Initiating Holders of Registrable
Securities to request that such registration be effected as a
registration under Section 3.1;
() prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities and
other securities covered by such registration statement, until the
earlier of such time as all of such Registrable Securities and such
other securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such registration statement or the expiration of ninety days after such
registration statement becomes effective; and will furnish, upon
request, to each such seller and each Requesting Holder prior to the
filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any such
amendment or supplement to which any such seller or holder shall have
reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
() furnish to each seller of such Registrable Securities
and the underwriters (if any) such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus included in such registration statement (including each
preliminary
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prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents, if any,
incorporated by reference in such registration statement or prospectus,
and such other documents, as such seller may reasonably request;
() promptly, upon written request, deliver to each
seller of Registrable Securities and the underwriters (if any), copies
of all correspondence between the Commission and (i) the Company, (ii)
its counsel, or (iii) its auditors, with respect to the registration
statement;
() use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities, or "blue sky," laws
of the states of the United States as each seller shall reasonably
request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and do any and
all other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities covered by such registration statement, except
that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this Subsection (f) be
obligated to be so qualified, or to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any
such jurisdiction;
() immediately notify each seller 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, upon discovery that, or upon 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 any material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing, which untrue statement or
omission requires amendment of the registration statement or
supplementation of the prospectus, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to, or an amendment of, such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit 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; provided,
however, that each holder of Registrable Securities registered pursuant
to such registration statement agrees that he will not sell any
Registrable Securities pursuant to such registration statement during
the time that the Company is preparing and filing with the Commission a
supplement to or an amendment of such prospectus or registration
statement;
() if such offering is underwritten, furnish to each
seller of Registrable Securities participating in the offering and to
the underwriters (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of
the closing under the underwriting agreement) and (ii) a "cold comfort"
letter dated the effective date of such registration statement (or, if
such registration includes an underwritten public offering, a
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letter dated the date of the closing under the underwriting agreement)
signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration
statement, in each case covering substantially the same matters with
respect to such registrations (and the prospectus included therein) and
in the case of such accountant's letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of
securities;
() in the event of the issuance of any stop order
suspending the effectiveness of any registration statement or of any
order suspending or preventing the use of any prospectus or suspending
the qualification of any Registrable Securities for sale in any
jurisdiction, use its best efforts to obtain its withdrawal;
() otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its securities holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first month of the
first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
() provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement; and
() use its best efforts to list all Common Stock covered
by such registration statement on each securities exchange or
securities quotation system on which any of the Common Stock is then
listed.
The Company may require each seller of Registrable Securities, as to which any
registration is being effected, to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request or as shall be required by law or by the
Commission in connection therewith.
. Underwritten Offerings.
() Underwriting Agreement. If requested by the
underwriters for any underwritten offering of Registrable Securities on behalf
of the Initiating Holders of Registrable Securities, pursuant to a registration
requested under Section 3.1, the Company will enter into an underwriting
agreement, reasonably acceptable to the Company, with such underwriters for such
offering, such agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities to the effect and to the extent provided in
Section 3.6. The holders of Registrable Securities on whose behalf Registrable
Securities are to be distributed by such underwriters shall be parties to any
such underwriting agreement and may, at their option, require that any or all of
the representations,
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warranties and covenants of the Company to, or for the benefit of, such
underwriters shall also be made to and for the benefit of such holders. Such
holders of Registrable Securities shall not be required by the Company to make
any representations or warranties to, or agreements with, the Company or the
underwriters, other than reasonable representations, warranties or agreements
(including indemnity agreements customary in secondary offerings) regarding such
holder, such holder's Registrable Securities and such holder's intended method
or methods of disposition and any other representation required by law.
() Incidental Underwritten Offerings. If the Company, at
any time, proposes to register any of its securities under the Securities Act,
as contemplated by Section 3.2, and such securities are to be distributed by or
through one or more underwriters, the Company will use its best efforts, if
requested by any holder or holders of Registrable Securities who requests
incidental registration of Registrable Securities in connection therewith
pursuant to Section 3.2, to arrange for such underwriters to include the
Registrable Securities to be offered and sold by such holder among the
securities to be distributed by or through such underwriters, provided that, for
purposes of this sentence, best efforts shall not require the Company to reduce
the amount or sale price of such securities proposed to be distributed by or
through such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters, and may, at such holders' option,
require that any or all of the representations, warranties and covenants of the
Company to or for the benefit of such underwriters shall also be made to, and
for the benefit of, such holders, and the Company will cooperate with such
holders of Registrable Securities to the end that the conditions precedent to
the obligations of the underwriters to purchase the securities of such holders
of Registrable Securities under such underwriting agreement shall not include
conditions that are not customary in underwriting agreements with respect to
combined primary and secondary distributions and shall be otherwise reasonably
satisfactory to such holders. Such holders of Registrable Securities shall not
be required by the Company to make any representations or warranties to, or
agreements with, the Company or the underwriters, other than reasonable
representations, warranties or agreements (including indemnity agreements
customary in secondary offerings) regarding such holder, such holder's
Registrable Securities and such holder's intended method or methods of
distribution and any other representation required by law.
() Allocation of Over-Allotment Option. Whenever the
Company shall effect an underwritten offering of Registrable Securities pursuant
to a registration subject to Section 3.2 hereof, the securities to be sold
pursuant to the underwriter's exercise of an over-allotment option (the
"Over-Allotment Shares"), if any, shall be allocated as follows: (i) in any such
registration in which the number of Registrable Securities requested to be
registered has not been reduced based on the advice of the managing underwriter
of such offering, then the sellers of Registrable Securities shall not be
entitled to sell any Registrable Securities as part of the Over-Allotment
Shares, and (ii) in any such registration in which the number of Registrable
Securities requested to be registered has been reduced, pursuant to the
provisions hereof based on the advice of the managing underwriter of such
offering, then the sellers of Registrable Securities participating in such
offering may sell that number of Over-Allotment Shares equal to the total number
of Over-Allotment Shares multiplied by a fraction, the numerator of which is the
number of total
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principal offering shares that constitute Registrable Securities and the
denominator of which is the total number of principal offering shares, which
shares shall be allocated on a pro rata basis among the sellers of Registrable
Securities participating in such registration, based upon the number of
Registrable Securities originally requested to be registered; provided, however,
that the number of Registrable Securities that constitute Over-Allotment Shares
shall not exceed the number of Registrable Securities requested to be
registered, but which were not registered based on the advice of the managing
underwriter.
() Selection of Underwriters. Whenever a registration
requested pursuant to Section 3.1 is for an underwritten offering, the holders
of a majority of the Registrable Securities included in such registration shall
have the right to select the managing underwriter(s) to administer the offering,
after consulting with the Company as to such selection and subject to the
approval of the Company, which approval will not be unreasonably withheld.
However, if the Company, at any time, proposes to register any of its securities
under the Securities Act for sale for its own account and such securities are to
be distributed by or through one or more underwriters, the selection of the
managing underwriter(s) shall be made by the Company and notice of the selection
thereof delivered to the holders of all Registrable Securities eligible to
participate in such registration.
() Holdback Agreements. (i) If any registration pursuant
to Section 3.1 or 3.2 shall be in connection with an underwritten public
offering, each holder of Registrable Securities agrees by acquisition of such
Registrable Securities, if so required by the managing underwriter, not to
effect any public sale or distribution of Registrable Securities (other than as
part of such underwritten public offering) for such period as the officers and
directors of the Company are required by the underwriter to cease sales or
distributions.
(ii) The Company agrees not to effect any public sale or
distribution of any of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven days
prior to, and during the ninety day period beginning on, the date on which any
underwritten registration pursuant to Section 3.1 or 3.2 has become effective,
except as part of such underwritten registration and except pursuant to
registrations on Form S-8 or Form S-4 or any successor thereto.
. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of
Registrable Securities, on whose behalf such Registrable Securities are to be so
registered, the opportunity to review such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and, in the event such offering of Registrable
Securities is underwritten, will give each of them and the underwriters and
their counsel such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements, as shall be reasonably
necessary in the opinion of such holders and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. To minimize disruption and expense to the Company during the
course of the registration process, sellers of Registrable
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Securities to be covered by any such registration statement shall coordinate
their investigation and due diligence efforts hereunder and, to the extent
practicable, will act through a single set of counsel and a single set of
accountants.
. Indemnification.
() Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless, in the case of any
registration statement filed pursuant to Section 3.1 or 3.2, the seller of any
Registrable Securities covered by such registration statement, and if such
seller is a corporation, its directors, trustees and officers, employees and
agents, each other person who participates as an underwriter in the offering or
sale of such securities, and each other person, if any, who controls such seller
or any such underwriter (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities or expenses, joint or several, to which
such seller or any such director, trustee, officer, employee or agent,
participating or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions or proceedings in respect thereof) arise out of or are based upon
(x) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, (y) 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, or
(z) any violation by the Company of any rule or regulation promulgated under the
Securities Act or the Exchange Act, or other federal or state securities law
applicable to the Company and relating to any action or inaction required of the
Company in connection with such registration, and the Company will reimburse
such seller, and each such director, trustee, officer, employee or agent,
participating person and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
shall not be liable in any such case if and to the extent that any such loss,
claim, damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such seller or any such director, trustee, officer, employee
or agent, participating person or controlling person specifically for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, trustee, officer, employee or agent, participating person or
controlling person and shall survive the transfer of such securities by such
seller.
() Indemnification by the Sellers. As a condition to including
any Registrable Securities in any registration statement filed pursuant to
Section 3.1 or 3.2, each seller of Registrable Securities shall, severally and
not jointly, indemnify and hold harmless the Company, its directors and
officers, employees and agents, and each other person, if any, who controls the
13
Company, against any losses, claims, damages or liabilities, joint or several,
to which the Company or any such director or officer or any such person may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which Registrable Securities were registered under the
Securities Act, or in any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent that such alleged untrue statement or alleged omission was contained
in written information furnished to the Company by such holder specifically for
use therein, and shall reimburse the Company or such director, officer or other
person for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such loss, claim, damage, liability or
action.
() Notice of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section 3.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subsections of this Section 3.6, except and to the extent
that the indemnifying party is prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless, in such
indemnified party's reasonable judgment, a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected, provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party, and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party, or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select one
separate law firm as counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as the same shall be incurred. No
indemnifying party shall, without the consent of the 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.
14
() Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any seller of Registrable Securities exercising rights under this
Agreement, or any controlling person of any such seller, makes a claim for
indemnification pursuant to this Section 3.6, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 3.6 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
seller or any such controlling person in circumstances for which indemnification
is provided under this Section 3.6, then, and in each such case, the Company and
such seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) (A) in
such proportion so that such seller is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative proceeds but also
the relative fault of each of the contributing parties, on the one hand, and the
party receiving contribution, on the other hand, in connection with statements
or omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable consideration; provided,
however, that in any such case, (1) no such seller will be required to
contribute any amount in excess of the aggregate public offering price of all
such Registrable Securities offered by such seller pursuant to such registration
statement; and (2) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, or by such seller, and the relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this Subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by a party entitled to
contribution in connection with investigating or defending such action or claim.
Any party entitled to contribution will promptly, after receipt of notice of
commencement of any action or proceeding against such party in respect of which
a claim for contribution may be made against another party or parties under this
Subsection (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this Subsection (d), to the
extent that such party or parties were not adversely affected by such omission.
The contribution agreement set forth above shall be in addition to any
liabilities which any party may have at common law or otherwise.
() Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section 3.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities, with respect to any required registration or other
15
qualification of such Registrable Securities under any federal or state law or
regulation of governmental authority, other than the Securities Act.
() Indemnification Payments. The indemnification required by this
Section 3.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
. Rule 144. For so long as the Company shall have any class of
its equity securities registered under Section 12(b) or Section 12(g) of the
Exchange Act, the Company shall take such action as any holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell shares of Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Commission including, without limitation,
() filing with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
() furnishing to any holder of Registrable Securities, upon
request, (i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144 and the Exchange Act; (ii) a copy of the most
recent annual or quarterly report of the Company; and (iii) such other
information as may be reasonably required to permit sales of Registrable
Securities under Rule 144.
. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of a majority of the Registrable Securities. Each holder of any
Registrable Securities at the time shall be bound by any consent authorized by
this Section 5.
. Notices. Notices and other communications under this Agreement
shall be in writing and shall be deemed given when personally delivered, or, if
by U.S. mail, three days after mailing, by Certified First Class Mail, postage
prepaid, return receipt requested, addressed
() if to any holder of Issued Shares, at the address
shown on the stock transfer books of the Company, unless such holder
has advised the Company in writing of a different address as to which
notices shall be sent under this Agreement, and
() if to the Company, at X.X. Xxx X, Xxxxxxx, Xxxxxxx
00000, to the attention of Xxxx Xxxxxxx, or to such other address or to
the attention of such other officer, as the Company shall have
furnished to each holder of Issued Shares at the time outstanding.
. Miscellaneous. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto. This Agreement
16
may not be assigned without the approval of a majority of the holders of the
Registrable Securities. This Agreement embodies the entire agreement and
understanding between the Company and the other parties hereto and supersedes
all prior agreements and understandings relating to the subject matter hereof.
This Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of Georgia. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. 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.
17
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered, as of the date first above written.
"COMPANY"
APPALACHIAN BANCSHARES, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Title: President and CEO
--------------------------------
[CORPORATE SEAL]
Attest:
By: /s/ Xxxx Xxxxxxx
-----------------------------------
Title: Executive Vice President
--------------------------------
"SHAREHOLDER"
Community Financial Services, Inc.
/s/ Xxx Xxxxxx, SVP (L.S.)
---------------------------
