EXHIBIT 4.2
RIGHTS AGREEMENT
The securities represented hereby have been acquired for investment and
have not been registered under the securities act of 1933. Such
securities and any securities or shares issued hereunder or thereunder
may not be sold or transferred in the absence of such registration or
an exemption therefrom under said act.
It is unlawful to consummate a sale or transfer of these securities, or
any interest therein, or to receive any consideration therefor, without
the prior written consent of the commissioner of corporations of the
state of California, except as permitted in the commissioner's rules.
THIS RIGHTS AGREEMENT ("RIGHTS AGREEMENT") is made and entered into as of
this ___ day of October, 1996 by and between Hi, Tiger International, Inc., a
Utah corporation (the "Company") and Xxxxxxx Xxx (the "Investor").
RECITALS
A. Pursuant to the terms and conditions of that certain Acquisition Agreement
dated August 30, 1996 (the "Acquisition Agreement") by and among AvTel
Communications, Inc., a California corporation ("AvTel"), Hi, Tiger
International, Inc., a Utah corporation (the "Company") and AvTel
Communications, Inc., a Utah corporation ("Merger Sub") and, after giving
effect to the transactions contemplated by the Acquisition Agreement, the
holders of all the issued and outstanding common stock of AvTel are to
receive a controlling interest in the issued and outstanding common stock of
the Company, and all of the holders of the Series A Preferred Stock of AvTel
(the "AvTel Preferred Stock") issued and outstanding prior to the
consummation of the transactions contemplated by the Acquisition Agreement
are to receive, in connection with such transactions, shares of the Series A
Convertible Preferred Stock of Hi, Tiger (the "Hi Tiger Preferred");
B. The Investor is the holder of AvTel Preferred Stock and, pursuant to the
terms and conditions of the Acquisition Agreement, is to receive shares of
the Hi Tiger Preferred Stock; and
C. It is an express condition precedent to the consummation of the transactions
contemplated by the Acquisition Agreement that the Company and the Investor
enter into this Rights Agreement.
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NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. REGISTRATION RIGHTS.
1.1 DEFINITIONS. Capitalized terms used in this Agreement shall, unless
otherwise defined herein, have the same meanings as are ascribed to
them in the Acquisition Agreement. As used in this Rights Agreement,
the following terms shall have the meanings set forth below:
(a) COMMISSION shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities
Act.
(b) EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules
and regulations thereunder, all as the same shall be in effect
from time to time.
(c) HOLDER shall mean any Investor who holds Registrable Securities.
(d) INITIATING HOLDERS shall mean any Holder or Holders who in the
aggregate hold not less than fifty percent (50%) of the
outstanding Registrable Securities.
(e) INVESTOR(S) shall mean persons who purchased Shares pursuant to
the Purchase Agreement.
(f) OTHER STOCKHOLDERS shall mean persons other than Holders who, by
virtue of agreements with the Company, are entitled to include
their securities in certain registrations hereunder.
(g) REGISTRABLE SECURITIES shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares and
(ii) any Common Stock issued as a dividend or other distribution
with respect to or in exchange for or in replacement of the
shares referenced in (i) above; provided, however, that
Registrable Securities shall not include any shares of Common
Stock which have previously been registered or which have been
sold to the public either pursuant to a registration statement or
Rule 144, or which have been sold in a private transaction in
which the transferor's rights under this Agreement are not
assigned.
(h) The terms REGISTER, REGISTERED and REGISTRATION shall refer to a
registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act and applicable
rules and regulations thereunder,
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and the declaration or ordering of the effectiveness of such
registration statement.
(i) REGISTRATION EXPENSES shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including,
without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses and expenses
of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses, fees
and disbursements of counsel for the Holders and the compensation
of regular employees of the Company, which shall be paid in any
event by the Company.
(j) REGISTRATION STATEMENT shall mean a registration statement filed
by the Company on Form X-0, X-0 or 10-SB of the Securities Act.
(k) SECURITIES ACT shall mean the Securities Act of 1933, as amended,
or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from
time to time.
(l) SELLING EXPENSES shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of
Registrable Securities and fees and disbursements of counsel for
any Holder (other than the fees and disbursements of counsel for
any Holder (other than the fees and disbursements of counsel
included in Registration Expenses).
(m) SHARES shall mean the Company's Series A Convertible Preferred
Stock.
1.2 DEMAND REGISTRATION RIGHTS. If the Company shall receive from
Initiating Holders at any time or times not earlier than the earlier
of (i) three (3) years after the Effective Date or (ii) one (1) year
after the effective date of the first Registration Statement filed by
the Company covering an underwritten offering of any of its securities
to the general public, a written request (the "Demand Notice") that
the Company effect any registration by filing a Registration Statement
("Demand Registration Statement") with respect to all or a part of the
Registrable Securities, the Company will:
(a) promptly give written notice of the proposed registration to all
Other Stockholders; and
(b) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, filing post-
effective amendments,
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appropriate qualifications under applicable blue sky or other
state securities laws, and appropriate compliance with the
Securities Act) 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 Other
Stockholders joining in such request as are specified in a
written request received by the Company from such Other
Stockholders within twenty (20) days after such written notice
from the Company is mailed or delivered.
1.3 LIMITATIONS. The Company shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to Section 1.2:
(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) after the Company has initiated one such registration pursuant to
Section 1.2 (counting for these purposes only a registration
which has been declared or ordered effective and pursuant to
which securities have been sold);
(c) during the period starting the date sixty (60) days prior to the
Company's good faith estimate of the date of filing of, and
ending on a date one hundred eight (180) days after the effective
date of, a Company-initiated registration; provided that the
Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective;
(d) if the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered
pursuant to a request made under Section 1.4 hereof;
(e) if the Initiating Holders do not request that such offering be
firmly underwritten by underwriters selected by the Initiating
Holders (subject to the consent of the Company, which consent
will not be unreasonably withheld); or
(f) if the Company and the Initiating Holders are unable to obtain
the commitment of the underwriter described in clause (e) above
to firmly underwrite the offer.
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Subject to the foregoing clauses (a) through (f), the Company shall
file a Registration Statement covering Registrable Securities so
requested to be registered as soon as practicable after receipt of the
Demand Notice from the Initiating Holders; provided, however, that if
(i) in the good faith judgment of the Board of Directors of the
Company, such registration would be seriously detrimental to the
Company and the Board of Directors of the Company concludes, as a
result, that it is essential to defer the filing of such Registration
Statement at such time, and (ii) 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 of the
Company, it would be seriously detrimental to the Company for such
registration statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such registration
statement, then the Company shall have the right to defer such filing
(except as provided in clause (c) above) for a period of not more than
one hundred eighty (180) days after receipt of the Demand Notice from
the Initiating Holders, and, provided, further, that the Company shall
not defer its obligation in this manner more than twice in any twelve-
month period.
1.4 PIGGYBACK REGISTRATION RIGHTS. If at any time after the first
anniversary of the Issuance Date hereof, or from time to time
thereafter, the Company shall determine to register any shares of its
capital stock of the same class as the Registrable Securities for its
own account or for the account of any shareholder (other than any
Holder) in an underwritten offering, the Holder(s) shall be entitled
to include Registrable Securities in such registration (a "Piggyback
Registration Statement") on the following terms and conditions:
(a) PIGGYBACK NOTICE. The Company shall promptly give written notice
of such determination to the Holders (a "Piggyback Notice") and
the Holders shall have the right to request, by written notice
given to the Company not later than ten (10) days following the
date the Piggyback Notice is received from the Company, that a
specific number of Registrable Securities be included in the
Piggyback Registration Statement and related underwritten
offering.
(b) UNDERWRITING. The right of any Holder to registration pursuant to
this Section 1.4 shall be conditioned upon the participation in
such underwriting by Holder's representing and the inclusion
therein, of not less than 33 1/3% of the then outstanding
Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating
Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to
include in such underwriting all or a part of the Registrable
Securities he holds.
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(c) PROCEDURES. Each Holder must agree to sell such Holder's
Registrable Securities on the same basis provided in the
underwriting arrangements approved by the Company and to timely
complete and execute all questionnaires, powers of attorney,
indemnities, "standstill", "lock-up" and "holdback" agreements,
underwriting agreements and other documents required under the
terms of such underwriting arrangements or by the Commission or
otherwise considered reasonable and appropriate under the
circumstances by counsel for the Company or the underwriters. If
the managing underwriter for any underwritten offering under the
Piggyback Registration Statement determines that inclusion of all
or any portion of the Registrable Securities in such offering
would adversely affect the ability of the underwriter for such
offering to sell all of the securities requested to be included
for sale in such offering, the number of shares that may be sold
in such offering shall be allocated first to the Company (or, if
the offering is being made principally for the account of another
Person, to such Person) and thereafter pro rata among the Holders
who have requested that Registrable Securities be included in the
underwriting ("Selling Shareholders") and to any other
shareholders holding applicable pre-existing contractual
registration rights. Selling Shareholders shall have the right to
withdraw their Registrable Securities from the Piggyback
Registration Statement, but they may only do so during the time
period and on terms agreed upon among the underwriters.
Notwithstanding anything to the contrary, no Piggyback
Registration shall be permitted with respect to any registration
of securities required as a condition to the closing of the Hi,
Tiger Merger.
1.5 EXPENSES. All expenses incident to the Company's performance of or
compliance with this Agreement, including Registration Expenses shall
be borne by the Company. Investor(s) shall be responsible for payment
of all fees and disbursements of their counsel and accountants, all
other out of pocket expenses of Investor(s) in connection with their
participation in any offering pursuant to this Rights Agreement and
all Selling Expenses applicable to the sale of Registrable Securities
by Investor(s) in any registered offering pursuant to this Rights
Agreement.
1.6 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless each Holder of Registrable Securities who
participates in any registered offering pursuant to this Rights
Agreement from and against any and all losses, claims, damages
and liabilities, joint or several (including any investigation,
legal or other expenses reasonably incurred in connection with,
and any amount paid in
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settlement of, any action suit or proceeding or any claim
asserted), to which such Holder may become subject under the
Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement, prospectus or preliminary prospectus or
any amendment or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading or (ii) any violation by the Company of the Securities
Act or the Exchange Act, or other federal or state law applicable
to the Company and relating to any action or inaction required by
the Company in connection with such registration; provided,
however, that the Company shall not be liable to any such holder
in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any alleged untrue
statement or alleged omission made in such Registration
Statement, prospectus, preliminary prospectus or amendment or
supplement in reliance upon any information furnished to the
Company by such Holder.
(b) INDEMNIFICATION BY HOLDERS. Each Holder, by exercising the
registration rights hereunder, agrees to indemnify and hold
harmless the Company, its directors and each officer who signed
such Registration Statement under the same circumstances as the
foregoing indemnity from the Company to the Holders to the extent
that such losses, claims, damages, liabilities or actions arise
out of or are based upon any alleged untrue statement of a
material fact or alleged omission of a material fact that was
made in the Registration Statement, the prospectus, the
preliminary prospectus or any amendment or supplement thereto, in
reliance upon any information furnished to the Company by
Holders.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnification and (ii)
permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified
party; provided, however, that any Person entitled to
indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such
Person and not of the indemnifying party unless (x) the
indemnifying party has agreed to pay such fees or expenses, or
(y) the indemnifying party shall have
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failed to assure the defense of such claim or employ counsel
reasonably satisfactory to such Person, or (z) in the reasonable
judgment of the Person to be indemnified, a conflict of interest
may exist between such Person and the indemnifying party with
respect to such claims (in which case, if the Person notifies the
indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense
of such claim on behalf of such Person). If such defense is not
assumed by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld).
No indemnified party will b e required to consent to entry of any
judgement or enter into any settlement which does not include as
an unconditional term thereof the giving by all claimants or
plaintiffs to such indemnified party of a release from all
liability in respect to such claim.
2. RESTRICTIONS AND LIMITATIONS
2.1 TRANSFERABILITY AND NONNEGOTIABILITY. The Shares may not be
transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by each Investor and
the transferee of any Investor (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to
the Company, if such are requested by the Company).
2.2 COMPLIANCE WITH SECURITIES LAWS. Each Investor hereby acknowledges
that the Shares and any Common Stock to be issued upon conversion
thereof are being acquired solely for the Investor's own account and
not as a nominee for any other party, and for investment, and that the
Investor will not offer, sell or otherwise dispose of any Shares or
any Common Stock to be issued upon conversion thereof except under
circumstances that will not result in a violation of the Act or any
state securities laws. Upon execution of this Rights Agreement, and
from time to time thereafter, each Investor shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company,
that the Shares are being acquired solely for the Investor's own
account and not as a nominee for any other party, for investment and
not with a view toward distribution or resale. This Rights Agreement,
the Shares and all Common Stock issued upon conversion thereof shall
be stamped or imprinted with a legend in substantially the following
form (in addition to any legend required by state securities laws):
The securities represented hereby have been acquired for
investment and have not been registered under the securities act
of 1933, as amended (the "act"). Such securities and any
securities or shares issued
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hereunder or thereunder may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
act.
3. COVENANTS OF THE COMPANY.
3.1 So long as any Shares remain outstanding, the Company shall not, and
shall not permit any Subsidiary to, without the vote or written
consent of the Holders of more than 50% of the then outstanding
Shares, declare or pay any dividends (other than stock dividends) on
or declare or make any other distribution, direct or indirect, on
account of the Common Stock or set apart any sum for any such purpose.
3.2 So long as any Shares remain outstanding, the Company covenants and
agrees in the Holders of the Shares that the Company will furnish the
Holders within forty-five (45) days of the end of each fiscal quarter,
copies of the Company's unaudited consolidated balance sheet,
consolidated statement of income and consolidated statement of cash
flows, prepared in accordance with generally accepted accounting
principles and, within ninety (90) days of the end of each fiscal
year, copies of the Company's consolidated balance sheet, consolidated
statement of income and consolidated statement of cash flows audited
by an independent firm of certified public accountants; and within
ninety (90) days after the filing thereof, copies of any report,
application or documents which the Company may be required to file
with the Securities and Exchange Commission, or any state securities
commission or other comparable regulatory authority.
4. MISCELLANEOUS
4.1 INVESTOR UNDERTAKING. Investor hereby agrees to take whatever
additional action and execute whatever additional documents the
Company may deem necessary or advisable in order to carry out or
effect one or more of the obligations or restrictions imposed on
either Investor or the Shares pursuant to the express provisions of
this Rights Agreement.
4.2 AGREEMENT IS ENTIRE CONTRACT. This Rights Agreement constitutes the
entire contract between the parties hereto with regard to the subject
matter hereof.
4.3 GOVERNING LAW. This Rights Agreement shall be governed by, and
construed in accordance with, the laws of the State of Utah without
resort to that State's conflict-of-laws rules.
4.4 COUNTERPARTS. This Rights Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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4.5 SUCCESSORS AND ASSIGNS. The provisions of this Rights Agreement shall
inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Investor and Investor's legal
representatives, heirs, legatees, distributees, assigns and
transferees by operation of law, whether or not any such Person shall
have become a party to this Rights Agreement and have agreed in
writing to join herein and be bound by the terms and conditions
hereof.
4.6 SURVIVAL OF WARRANTIES. The warranties, representations and covenants
of the Company and the Investor(s) contained in or made pursuant to
this Rights Agreement shall survive the execution and delivery of this
Rights Agreement and the Closing.
4.7 NOTICES. Unless otherwise provided, all notices and other
communications required or permitted under this Rights Agreement shall
be in writing and shall be mailed by United States first class mail,
postage prepaid, sent by facsimile or delivered personally by hand or
by nationally recognized courier addressed to the party to be notified
at the address or facsimile number indicated for each Person on the
signature page hereof, or at such other address or facsimile number as
such party may designate by ten (10) days' advance written notice to
the other parties hereto. All such notices and other written
communications shall be effective on the date of mailing, facsimile
transfer or delivery.
4.8 FINDER'S FEES. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in
the nature of a finder's fee (and the cost and expenses of defending
against such liability or asserted liability) for which the Investor
or any of its officers, partners, employees or representatives is
responsible. The Company agrees to indemnify and hold harmless each
Investor from liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending
against such liability or asserted liability) for which the Company or
any of its officer, employees or representatives is responsible.
4.9 ATTORNEYS' FEES. In the event of any litigation or other action in
connection with this Agreement, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and disbursements from the
other party as costs of suit and not as damages.
IN WITNESS WHEREOF, the parties have executed this Rights Agreement on the
day and year first indicated above.
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INVESTOR HI, TIGER INTERNATIONAL, INC.
A UTAH CORPORATION
_______________________________ _____________________________
Xxxxx Xxx
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