Exhibit 4.2
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement, dated as of October 13, 1999 (this
"Agreement"), is entered into by and among THE XXXXXXX.XXX, INC., a Delaware
corporation (the "Company"), and those persons listed from time to time on
Schedule A to this Agreement (the "Investors").
W I T N E S S E T H:
WHEREAS, the Company has commenced an offering (the "Offering") of a
minimum of 1,000,000 and a maximum of 2,500,000 shares of its Common Stock, par
value $.01 per share (the "Common Stock"), all as more particularly set forth in
the Company's Confidential Private Placement Memorandum dated August 2, 1999, as
supplemented by a Supplement dated September 28, 1999 (the "Memorandum"); and
WHEREAS, the Company and the Investors desire to set forth certain
agreements with respect to the Common Stock purchased by Investors in the
Offering (the "Investor Shares").
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements herein contained, and intending to be legally bound, it
is hereby agreed as follows:
ARTICLE 1.
DEFINITIONS
1.1. Definitions. For purposes of this Agreement:
"Common Stock" is defined in the Preamble.
"Company" is defined in the Preamble.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be from time to time amended and in
effect.
"Investor Shares" is defined in the Preamble.
"Material Adverse Effect" means a material adverse effect upon
the business, assets, financial condition, income or prospects of the Company.
"Management Shareholder" means Xxxxxx X. Xxxxx or Xxxxxx X.
Xxxxx.
"Members of the Immediate Family" as applied to any
individual, means each parent, spouse, child, brother, sister or the spouse of a
child, brother or sister of the individual, and each trust created for the
benefit of one or more of such persons and each custodian of a property of one
or more such persons.
"Offered Shares" means any Common Stock, or securities
convertible into or options, warrants or other rights to purchase Common Stock,
proposed to be issued by the Company prior to the consummation of a Qualified
Public Offering.
"Person" means an individual, partnership, corporation,
company, association, trust, joint venture, unincorporated organization and any
governmental department or agency or political subdivision.
"Proportionate Percentage" means, for any holder of Investor
Shares, a percentage of Offered Shares covered by a Proposal under Article 5
equal to (i) the number of Investor Shares held by such Person (together with
any shares theretofore purchased by such Investor pursuant to Article 5) divided
by (ii) the total number of shares of Common Stock outstanding at the time of
delivery of the Proposal (assuming the conversion and exercise of options,
warrants, rights and shares of capital stock that are convertible into or
exercisable for Common Stock).
"Proposal" is defined in Section 5.1.
"Proposed Buyer" means a Person to whom a Management
Shareholder desires to sell any of his Investor Shares, as set forth in Section
4.1.
"Proposed Sales" means a proposed transaction between a
Management Shareholder and a Proposed Buyer.
"Qualified Public Offering" means a public offering of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act on Forms X-0, X-0 or S-3, or any successors to such forms,
following which the Company becomes subject to the reporting requirements of
Sections 13 or 15 of the Exchange Act.
"Register," "registered," and "registration" mean a
registration effected by preparing and filing a Registration Statement, and the
declaration or ordering of effectiveness of such registration statement or
document.
"Registrable Securities" means (1) the Investor Shares and (2)
any other shares of capital stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Investor Shares, excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which his rights under this Agreement are
not assigned.
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"Registration Statement" means a registration statement or
similar document filed in compliance with the Securities Act, together with any
amendment or supplement thereto and any preliminary prospectus or prospectus
included as a part thereof.
"SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act, the Exchange
Act or both.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be from time to time amended and in effect.
"Selling Shareholder" means a Management Shareholder selling
Shares under Article 4.
"Subscription Agreement" means the agreement between the
Company and an Investor under which the Investor subscribes for Investor Shares.
"Tag-Along Notice" means a notice from a Selling Shareholder
to Investors as set forth in Section 4.2.
ARTICLE 2.
RESTRICTIVE LEGEND
2.1. Restrictive Legend. Each certificate representing Investor Shares
shall, except as otherwise provided in this Article 2 or in Article 3, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY BE
OFFERED, PLEDGED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE
DISPOSED OF ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF
THE ACT AND SUCH LAWS, OR IF AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act and applicable state
securities laws.
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ARTICLE 3.
REGISTRATION RIGHTS
3.1. Piggy-Back Registration.
If the Company shall seek to register under the Securities Act
or qualify any of the Common Stock of the Company or any of its stockholders
(except in connection with any stock option plan, stock purchase plan, savings
or similar plan or an acquisition, merger or exchange of stock) and if the form
of Registration Statement proposed to be used may be used for the registration
of the Registrable Shares, then, on each such occasion, the Company shall
furnish the Investors with at least 30 days prior written notice thereof. At the
written request of one or more Investors, given within 20 days after the receipt
of such notice, the Company will use its best efforts to cause all or any of the
Registrable Shares for which registration shall have been requested by Investors
to be included in such Registration Statement. In the event that the proposed
registration by the Company is, in whole or in part, an underwritten public
offering of Common Stock of the Company, and the managing underwriter determines
that the inclusion of all or any portion of the Registrable Shares proposed to
be included in the underwritten public offering and other issued and outstanding
shares of Common Stock proposed to be included therein by persons other than
holders of Registrable Shares (the "Other Shares") would interfere with the
marketing (including pricing) of the Company's Common Stock, then the number of
Registrable Shares and Other Shares to be included in such underwritten public
offering shall be, at the request of the managing underwriter, excluded from the
offering or reduced ("cutback") pro rata among the holders of Registrable Shares
and Other Shares, based upon the number of shares requested by holders thereof
to be registered in such underwritten public offering. The Company shall have
the right to terminate an offering under this Section 3.1 at any time in its
discretion.
3.2. Demand Registration.
(a) If (i) at any time after the date hereof the Company has
consummated a Qualified Public Offering, or (ii) on or before September 30,
2003, the Company has not consummated a Qualified Public Offering and the
Company shall thereafter receive a written request from Investors that the
Company file a Registration Statement covering the registration of at least
thirty-three and one-third percent (331/3%) (in the case of a request pursuant
to clause (i), above), or twenty-five percent (25%) (in the case of a request
pursuant to clause (ii), above) of the Registrable Securities then outstanding,
then the Company shall use its best efforts to: (x) subject to the limitations
of Section 3.2(b), file with the SEC within sixty (60) days of the receipt of
such request a Registration Statement on the appropriate form, and (y) cause as
promptly as practicable the registration under the Securities Act of all
Registrable Securities which Investors request to be registered. Neither the
Company nor any person other than Investors shall be entitled to include shares
of Common Stock in the registrations made under this Section 3.2 without the
consent of Investors holding a majority of the Registrable Shares included in
the registration.
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(b) If the Investors intend to distribute the Registrable
Securities covered by their request by means of an underwriting as permitted by
Section 3.4(c), they shall so advise the Company as a part of their request made
pursuant to Section 3.2(a) and shall (together with the Company as provided in
Section 3.2(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Investors
which underwriters shall include a regional or national underwriting firm which
is a member in good standing of the National Association of Securities Dealers,
Inc.
(c) The Company is obligated to effect only three
registrations pursuant to Section 3.2(a)(i) and only one registration pursuant
to Section 3.2(a)(ii).
(d) The rights granted by Section 3.2(a)(i) expire September
30, 2002 and the rights granted by Section 3.2(a)(ii) expire September 30, 2004.
3.3. Obligations of the Company. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Registration Statement
with respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become effective, and, upon the request of a
majority of the Investors whose Registrable Securities are registered
thereunder, keep such Registration Statement effective for up to ninety (90)
days.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
(c) Furnish to each Investor such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as he may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by him.
(d) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
Blue Sky laws as shall be reasonably requested by the Investors, provided that
the Company shall not be required (i) qualify to do business in any
jurisdiction, (ii) subject itself to general taxation in such jurisdiction,
(iii) provide any undertakings that cause more than nominal expense or burden to
the Company, or (iv) make any change to its certificate of incorporation or
bylaws.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Investor
shall also enter into and perform his obligations under such an agreement.
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(f) Notify Investors whose Registrable Securities are covered
by such Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and use its best efforts promptly to prepare a supplement or amendment
to the Registration Statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request.
(g) In the case of an underwritten public offering, furnish,
at the request of the Investors, on the date that such Registrable Securities
are delivered to the underwriters, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (ii) a letter, dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.
(h) The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities, and shall provide
CUSIP numbers for the Registrable Securities, not later than the effective date
of the Registration Statement.
3.4. Obligations of the Investors. In connection with the registration
of their Registrable Securities, each Investor whose Registrable Securities are
being registered shall:
(a) Furnish to the Company such information regarding himself,
the Registrable Securities held by him and the intended method of disposition of
the Registrable Securities held by him as shall be reasonably required to effect
the registration of such Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request.
(b) Cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder.
(c) In the event Investors determine to engage the services of
an underwriter (which such determination shall be made by the written consent or
approval of Investors holding a majority of the Registrable Securities being
registered) or in the event of a registration pursuant to Section 3.1(a) where
the Company has selected underwriters and determines that the Registrable
Securities shall be included in the securities being offered by the
underwriters, enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities.
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(d) Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.3(f), immediately
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Investor's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
3.3(f) and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
under Section 3.4(c), (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay his pro rata share of all underwriting discounts and commissions.
3.5. Expenses of Registration. All expenses, incurred in connection
with registrations, filings or qualifications pursuant to this Agreement,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for the
Company shall be borne by Company. The Investors shall bear the cost of any
underwriters' or brokers' commissions and fees and fees and disbursements of the
Investors; provided, however, the Company shall permit a single firm of counsel,
designated as Investors' counsel by Investors who hold a majority of the
Registrable Securities being sold, to represent the Investors in connection with
any registration pursuant to this Agreement and shall pay the reasonable fees
and disbursements of such counsel.
3.6. Delay of Registration. No Investor shall have a right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
3.7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Investors against any losses, claims, damages or liabilities to which the
Investors may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, or (ii) the omission or alleged omission to state therein a material
fact required to
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be stated in such a Registration Statement or necessary to make
the statements therein not misleading, and will reimburse the Investors for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or omission made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by any Investor or underwriter for such Investor specifically for
use in the preparation thereof. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) Each Investor will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed a
Registration Statement and each person, if any, who controls the Company,
against any losses, claims, damages or liabilities to which the Company or any
such director, officer, or controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that the
Investor will be liable in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission has been made in such Registration Statement in reliance upon and in
conformity with written information furnished by the Investor specifically for
use in the preparation thereof; and provided further that indemnification by any
Investor under this Section 3.7 shall be limited in amount to his share of the
proceeds of the offering. This indemnity will be in addition to any liability
which the Investor may otherwise have. Nothing contained in this Section 3.7(b)
or in Sections 3.7(a) and 3.7(d) shall limit the liability of the Investor, if
any, for his acts in his capacity as an officer or director of the Company in
connection with the Registration Statement.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 3.7, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 3.7(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 3.7(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution under Section 3.7(d) hereof or otherwise
than on account of the provisions of Section 3.7(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the
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commencement thereof, the indemnifying party shall
retain counsel reasonably satisfactory to the indemnified party to defend the
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. The indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay as
incurred the fees and expenses of the counsel retained by the indemnified party
in the event (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, (ii) the indemnifying party
has failed to assume the defense of such proceeding or shall have failed to
retain counsel reasonably satisfactory to the indemnified party, or (iii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel, under applicable rules of professional conduct,
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm (and appropriate
local counsel) for all such indemnified parties. Such firm shall be designated
in writing by indemnified parties holding a majority of the Registrable
Securities included in the proceeding in the case of parties indemnified
pursuant to Section 3.7(a) and by the Company in the case of parties indemnified
pursuant to Section 3.7(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 3.7 is
unavailable (other than by reason of the exception contained in the second
sentence of Section 3.7(c) hereof) to or insufficient to hold harmless an
indemnified party under Section 3.7(a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Investors on the other from the offering of the
Registrable Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 3.7(c), then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Investors, solely in their role as Investors and not as officers or
directors of the Company, on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Investors on the other shall be deemed to be in the same
proportion as the total net
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proceeds from the offering (before deducting
expenses) received by the Company or the Investors bears to the total net
proceeds from the offering, in each case as set forth in the Registration
Statement. The 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 on the one hand or the Investors on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company further agrees that,
in connection with any underwritten public offering, it also will enter into
customary contribution arrangements with the Investors selling Registrable
Securities pursuant thereto and the underwriters or broker-dealers through whom
the Registrable Securities may be sold, with respect to situations in which
indemnification is potentially unavailable.
The Company and the Investors agree that it would not be just
and equitable if contributions pursuant to this Section 3.7(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
3.7(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 3.7(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation, and (ii) contribution from any
Investor under this Section 3.7 shall be limited in amount to his share of the
proceeds of the offering.
(e) In any proceeding relating to the Registration Statement,
each party against whom contribution may sought under this Section 3.7 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that processing issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
ARTICLE 4.
TAG-ALONG RIGHTS
4.1. General. In the event a Management Shareholder shall desire to
sell any of his Investor Shares to a Proposed Buyer, he may do so only if he
complies with the provisions of this Article 4, except that this Article 4 shall
not apply to (i) a sale by a Management Shareholder of his shares in a
registered public offering or (ii) a transfer by a Management Shareholder to
Members of the Immediate Family of the Management Shareholder, to another
Management Shareholder or to a trust of which the Management Shareholder,
individually or together with one or more Members of the Immediate Family of the
Management Shareholder, are the sole trustees; provided, however, that any
transferee under clause (ii), above shall be subject to the terms of this
Agreement as though he or it were a Management Shareholder, but only to the
extent of the shares so transferred.
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4.2. Offer. A Tag-Along Notice shall be delivered by the Selling
Shareholder to the Investors at least 30 days prior to the date of any Proposed
Sale. The Tag-Along Notice shall include:
(a) A copy of a bona fide offer from the Proposed Buyer, which
shall set forth the complete terms of the Proposed Sale, including the number of
Shares proposed to be purchased, the purchase price, the name and address of the
Proposed Buyer and the other principal terms of the Proposed Sale.
(b) An offer by the Selling Shareholder to include in the
Proposed Sale to the Proposed Buyer, at the Investor's option, that number of
the Investor's Investor Shares as is determined in accordance with Section 4.3,
on the same terms and conditions as the Selling Shareholder shall sell his
Shares; and
(c) An agreement from the Proposed Buyer to purchase such
number of the of the Investor's Investor Shares as shall be includable in such
Proposed Sale pursuant to Section 4.3.
4.3. Time and Manner of Exercise. If any of the Investors desires to
accept the offer contained in the Tag-Along Notice, such Investor shall notify
the Selling Shareholder in writing within 20 days after receipt of the Tag-Along
Notice. If an Investor has not accepted such offer in writing, the Investor
shall be deemed to have waived all of his rights with respect to the Proposed
Sale. Any acceptance by an Investor of the offer contained in the Tag-Along
Notice shall be irrevocable except as hereinafter provided. Each Investor who
has elected to participate in such Proposed Sale shall be entitled to sell in
the Proposed Sale, on the same terms and conditions as the Selling Shareholder,
such number or amount of his Investor Shares as shall equal the number (rounded
to the nearest whole share) of all Shares to be included in the Proposed Sale
times a fraction, the numerator of which is the total number of Investor Shares
held by such Investor immediately before the Proposed Sale and the denominator
of which is the sum of the total number of Investor Shares.
4.4. Time and Manner of Closing. Each of the Investors participating in
any Proposed Sale shall take such actions and execute such documents and
instruments as shall be reasonably necessary in order to consummate the Proposed
Sale expeditiously on the same terms as the Selling Shareholder. If at the end
of 90 days following the date on which the Tag-Along Notice was given the
Selling Shareholder has not completed the Proposed Sale in accordance with the
terms hereof, the Investors shall be released from their obligations hereunder.
At the closing of any sale under this Section 4.4, each Investor shall deliver
certificates representing the Investor Shares to be sold by him, duly endorsed
for transfer and (if requested in writing by the Proposed Buyer) with signature
guaranteed, and with any stock transfer tax stamps affixed, against delivery of
the applicable purchase price. Any shares sold to the Proposed Buyer in
accordance with this Section 4.4 shall no longer be subject to this Agreement.
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ARTICLE 5.
RIGHT OF FIRST REFUSAL
5.1. Right of First Refusal. Until the consummation of a Qualified
Public Offering, the Company shall not issue or sell any Offered Shares without
first providing each holder of Investor Shares the right to subscribe for its
Proportionate Percentage of the Offered Shares at a price and on such other
terms which are at least as favorable as the Company shall have offered or
proposes to offer and which the Company shall have specified in a notice
delivered to each holder of Investor Shares (the "Proposal"). The Proposal by
its terms shall remain open and irrevocable for a period of 30 days from the
date it is delivered by the Company to each holder of Investor Shares (the
"Exercise Period")
5.2. Notice. Notice of the intention of each Investor to accept the
Proposal shall be evidenced by a writing signed by such Investor and delivered
to the Company prior to the end of the Exercise Period (the "Notice of
Purchase") setting forth that portion of the Offered Shares such Investor elects
to purchase (the "Accepted Shares").
5.3. Full Acceptance. In the event that the Investors elect to purchase
all of the Offered Shares, the Company shall sell to the Investors the number of
Accepted Shares set forth in their respective Notices of Purchase.
5.4. Partial Acceptance. In the event that one or more Investors do not
elect to purchase all of the Offered Shares, the Company shall sell to each
Investor that has so elected to purchase the number of Accepted Shares, if any,
set forth in such Investor's Notice of Purchase. Investors may, in their Notice
of Purchase, offer to purchase and purchase any remaining Offered Shares not
purchased by the other Investors pro rata based on their respective
Proportionate Percentages, or as they may otherwise agree with the Company.
5.5. Sale of Shares. No later than 30 days after the expiration of the
Exercise Period, the Company shall deliver to each Investor who has submitted a
Notice of Purchase to the Company a notice indicating the number of Offered
Shares which the Company shall sell to such Investor pursuant to this Article 5
and the terms and conditions of such sale, which shall be in all respects
(including, without limitation, unit price and interest rates) the same as
specified in the Proposal. The sale to such holders of such Offered Shares shall
take place not later than 10 days after receipt of such notice.
Any sale of Offered Shares that were not selected for purchase by the
Investors as provided above shall take place not later than 90 days after the
expiration of the Exercise Period. Such sale shall be upon terms and conditions
in all respects (including, without limitation, unit price and interest rates)
which are not less favorable to the Company than those set forth in the
Proposal. Any refused Offered Shares not purchased as contemplated by the
Proposal within the 90-day period specified above shall remain subject to this
Article 5.
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5.6. Exclusion of Certain Shares. Offered Shares shall not include (i)
shares of Common Stock issuable pursuant to plans, options, warrants or rights
outstanding on the date hereof or contemplated by this Agreement or the
Memorandum, (ii) shares of capital stock issued pursuant to an effective
Registration Statement, (ii) shares of capital stock issued in connection with
the acquisition by the Company of another corporation or other entity by merger,
purchase of all or substantially all of the assets or otherwise, or (iv) shares
of capital stock issued other than for cash in connection with a strategic
business transaction.
ARTICLE 6.
DISSOLUTION AND WINDING UP
6.1. Dissolution in Certain Events. In the event that the Company shall
not form or acquire a commercial bank and obtain all regulatory approvals
required for the operation of a commercial banking business by such bank on or
before October 31, 2000, the Company shall dissolve in accordance with Section
274 of the Delaware General Corporation Law (or any successor provision thereto)
or, if the provisions of such Section are not available, shall propose
dissolution of the Company to the stockholders of the Company in accordance with
Section 2875, et seq., of the Delaware General Corporation law (or any successor
provisions thereto).
6.2. Winding Up of Affairs; Distribution to Stockholders. Upon
dissolution of the Company pursuant to Section 6.1, the Company shall proceed
promptly to wind up its affairs, include payment or the provision for payment or
other discharge of all of its expenses, liabilities and obligations. Any
remaining assets shall be distributed to the stockholders.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
BY THE COMPANY
The Company represents and warrants to the Investors that, as of the
date hereof and as of the date an Investor purchases his Investor Shares:
7.1. Due Incorporation and Qualification. The Company has been duly
incorporated, chartered or organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware, and has full corporate or
other power and authority to own or lease, as the case may be, its properties
and, except as set forth in the Memorandum, to conduct its business as described
in the Memorandum. The Company (i) has filed a notice of intent with the State
Bank Commissioner of the State Delaware to obtain a certificate of public
convenience and advantage in connection with the formation and organization of a
wholly-owned subsidiary to be qualified as a Delaware state chartered commercial
bank (the "Bank") and (ii) will use its best efforts to qualify the Company as a
registered bank holding company under the Bank Holding Company At of 1956, as
amended, and the Delaware Banking Act and to qualify the Bank as a Delaware
state chartered commercial bank. The Company has no subsidiaries as of the date
hereof. The Company is duly qualified to do business as a foreign entity and is
in good standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases properties or conducts business except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
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7.2. Authorization and Validity of Agreements. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and the Subscription Agreements and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Investors, constitutes
the legal, valid and binding and enforceable instrument of the Company (subject,
as to the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights generally from
time to time and to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity).
7.3. No Conflict. Neither the execution and delivery of this Agreement
or, the Subscription Agreements nor the consummation of the transactions
contemplated hereby, thereby or in the Memorandum nor the fulfillment of the
terms hereof and thereof will (i) conflict with or result in a violation of the
charter or by-laws of the Company or (ii) except as would not, individually or
in the aggregate, have a Material Adverse Effect, conflict with or result in a
breach or violation of, or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to (A) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which the Company is a party or by which it is or may be bound or to which any
of its assets may be subject or (B) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or the Bank of any
governmental or regulatory authority.
7.4. Capitalization and Other Capital Stock Matters. Upon consummation
of the offering contemplated by the Memorandum, the capitalization of the
Company will conform in all material respects to the description thereof
contained in the Memorandum under the caption "Pro Forma Capitalization." None
of the Investor Shares will have been issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its subsidiaries
other than those described in or contemplated by the Memorandum or this
Agreement.
7.5. Absence of Litigation. Except as disclosed in the Memorandum,
there is no action, suit, proceeding, inquiry or investigation before or by any
governmental or regulatory authority pending, or to the knowledge of the
Company, threatened against or affecting the Company or any of its directors or
officers or proposed directors or officers in their capacities as such that is
reasonably likely to have a Material Adverse Effect.
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7.6. No Violation. The Company is not in violation of its charter or
by-laws. The Company is not in violation of: (i) any indenture, mortgage, deed
of trust, note or other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which any of its assets may be subject;
(ii) any statute, law, rule or regulation applicable to the Company; or (iii)
any judgment, decree or order applicable to the Company, which violation or
violations individually, or in the aggregate, might result in any Material
Adverse Effect.
7.7. Year 2000 Prepareness. There are no issues related to the
Company's preparedness for the Year 2000 that (i) are of a character required to
be described or referred to in the Memorandum by the Securities Act or by the
Exchange Act which have not been accurately described or (ii) might reasonably
be expected to have a Material Adverse Effect.
ARTICLE 8.
GENERAL
8.1. Notices. All notices or other communications required or permitted
to be delivered hereunder shall be in writing and shall be delivered to each of
the parties at their respective addresses as set forth in Schedule A.
Any party to this Agreement may at any time change the address
to which notice to such party shall be delivered by giving notice of such change
to the other parties and such notice shall be deemed given when received by the
other parties. Notices shall be deemed effectively given when personally
delivered or sent to the recipient at the address set forth above by telex or
facsimile transmission, one business day after having been delivered to a
receipted, nationally recognized courier, properly addressed, or five business
days after having been deposited into the United States mail, postage prepaid,
provided, that any notice to any party outside of the United States shall be
sent by telecopy and confirmed by overnight or two-day courier.
8.2. Amendments, Waivers and Consents. Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or provision herein set forth may be
omitted or waived, if the Company (a) shall obtain consent thereto in writing
from Investors holding a majority of the Investor Shares then outstanding
(provided that such change, addition or waiver shall affect all holders of
Investor Shares equally) and (b) shall, in each such case, deliver copies of
such consent in writing to any parties who did not execute the same.
8.3. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the personal representatives, successors and assigns
of the respective parties hereto. The Company shall not have the right to assign
its rights or obligations hereunder or any interest herein without obtaining the
prior written consent of Investors holding a majority of the Investor Shares
then outstanding.
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8.4. Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable and, as modified, shall be
enforced as any other provision hereof, all of the other provisions hereof
continuing in full force and effect.
8.5. Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous understandings, whether written or oral.
8.6. Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
8.7. Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.8. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws (other than the conflict of laws rules) of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereof have caused this Investor Rights
Agreement to be executed on their behalf on the date first above written.
THE XXXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxx, CFO
------------------------
INVESTORS
Each of the Investors has executed
this Agreement by execution of a
counterpart acknowledgement on file
in the offices of The Xxxxxxxx.xxx,
Inc.
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