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EXHIBIT 4.10
AIR SOUTH AIRLINES, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of June 14, 1996 by and among AIR SOUTH AIRLINES, INC., a
Delaware corporation (the "Company") and X. X. XXXXX & ASSOCIATES, INC.
("Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an aggregate
of 120,000 shares of its Series C Preferred Stock par value $0.001 per share
(the "Preferred Stock");
WHEREAS, Purchaser desire to purchase 40,000 shares of the Preferred Stock
(the "Shares") on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized the sale and
issuance to the Purchaser of the Shares having the rights, preferences,
privileges and restrictions set forth in the Certificate of Designations in the
form attached hereto as Exhibit A (the "Certificate of Designations"). The
Company has, or prior to the Closing will have, adopted and filed the
Certificate of Designations with the Secretary of State of the State of
Delaware.
1.2 Sale and Purchase.
(a) Subject to the terms and conditions hereof, at the Closing (as
hereinafter defined) the Company hereby agrees to issue and sell to the
Purchaser and the Purchaser agrees to purchase from the Company 40,000 Shares at
a purchase price of twelve and 50/100 dollars ($12.50) per share.
2. CLOSING DELIVERY AND PAYMENT.
(a) The closing of the sale and purchase of the Shares under this
Agreement (the "Closing") shall take place at 10:00 a.m. on June 14, 1996 (the
"Closing"), at the offices of the Company at 0000 Xxxxxxx Xxxxxxxxx, Xxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000, or at such other time or place as the Company
and the Purchaser may mutually agree.
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(b) At the Closing, subject to the terms and conditions hereof, the
Company will deliver to the Purchaser a certificate representing the number of
Shares to be purchased at the Closing by the Purchaser, against payment of the
purchase price therefor by a check or wire transfer made payable to the order of
the Company.
3. REPRESENTATIONS AND WARRANTEES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. The Company has full power and authority to own
and operate its properties and assets, and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its activities
and of its properties (both owned and leased) makes such qualification
necessary, except for those jurisdictions in which failure to do so would not
have a material adverse effect on the Company or its business. The Company has
no subsidiaries and owns no equity securities of any other corporation, limited
partnership or similar entity.
3.2 Capitalization. The authorized capital stock of the Company,
immediately prior to the Closing, consists of eighteen million (18,000,000)
shares of Common Stock par value $0.001 per share ("Common Stock"), six million
nine hundred seventeen thousand one hundred eighty-two (6,917,182) shares of
which are issued and outstanding; and two million (2,000,000) shares of
Preferred Stock par value $0.001 per share, one million two hundred fifty
thousand (1,250,000) of which are designated Series A Preferred Stock, all of
which are issued and outstanding, six hundred twenty-five thousand (625,000) of
which are designated Series B Preferred Stock, all of which are issued and
outstanding and one hundred twenty thousand (120,000) of which are designated
Series C Preferred Stock, none of which are issued and outstanding . All shares
of the Company's Common Stock (i) have been duly authorized and validly issued,
and (ii) are fully paid and nonassessable. The rights, preferences, privileges
and restrictions of the Shares shall be as stated in the Certificate of
Incorporation. The shares of Common Stock issuable upon the conversion of the
Shares (the "Conversion Shares") have been duly and validly reserved for
issuance and, when issued in accordance with the Certificate of Incorporation,
will be validly issued, fully paid and nonassessable. The Company has reserved
2,501,333 shares of Common Stock for issuance upon the exercise of: (i) options
to purchase shares of Common Stock pursuant to its various stock option plans
for directors, officers and employees; and (ii) warrants to purchase shares of
Common Stock which have been issued to a supplier, former employees,
consultants to the Company, a bank lender to the Company and the guarantor of
certain bank debt of the Company. Other than as set forth above and except as
may be granted pursuant to the Investor's Rights Agreement (defined below),
there are no outstanding options, warrants, rights (including conversion or
preemptive rights), proxy or stockholder agreements, or agreements of any kind
for the purchase or acquisition from the Company of any of its securities.
Other than as set forth above and except as may be granted pursuant to that
certain Investor's Rights Agreement in the form attached hereto as Exhibit B
(the "Investor's Rights Agreement") there are no outstanding options, warrants,
rights (including conversion or preemptive rights), proxy or stockholder
agreements, or agreements of any kind for the purchase or acquisition from the
Company of any of its
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securities. A true and correct list of the Company's stockholders as of the
date hereof is attached hereto as Exhibit C
3.3 Authorization; Binding Obligations. All corporate action on the part
of the Company, its officers, directors and stockholders necessary for the
authorization, sale and issuance of the Shares pursuant hereto and the
Conversion Shares pursuant to the Certificate of Incorporation and for the
performance of the Company's obligations hereunder and under the Investor's
Rights Agreement has been taken or will be taken prior to the Closing. The
Agreement and the Investor's Rights Agreement when executed and delivered, will
be valid and binding obligations of the Company enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) general principles of equity that
restrict the availability of equitable remedies; and (iii) to the extent that
the enforceability of the indemnification provisions in Section 2.8 of the
Investor's Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of Shares into Conversion Shares are not
and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with. When issued in compliance
with the provisions of this Agreement and the Certificate of Incorporation, the
Shares and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time a transfer is
proposed.
3.4 Financial Statements. The Company has delivered to the Purchaser its
financial statements (balance sheet, statement of income, statement of
stockholders' equity and statement of cash flows, including notes thereto) at
December 31, 1995 and for the year then ended (the "Financial Statements").
The Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Financial
Statements fairly present the financial condition and position of the Company
as of the date and for the period indicated therein. Except as set forth in
the Financial Statements or Exhibit D hereto, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to December 31, 1995 and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Financial Statements, which in both cases, individually or in
the aggregate, are not material to the financial condition or operating results
of the Company.
3.5 Contracts and Other Commitments.
(a) Except as set forth in Exhibit D hereto, the Company does not
have any contracts, agreements, lease or other commitment, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary and usual course of business
and that do not involve more than $100,000 and that do not extend for more than
one year beyond the date hereof and (ii) contracts terminable at will by the
Company on no more than 30 days notice without cost or liability to the Company
and are not material to the conduct of the Company's business.
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(b) Except as set forth in Exhibit D hereto, the Company has not (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock, (ii) redeemed,
directly or indirectly, any shares of its capital stock or otherwise purchased
shares of its capital stock, or (iii) made any loans or advances to any person,
or (iv) sold, exchanged or otherwise disposed of any of its assets or rights.
3.6 No Obligations to Related Parties. Except as set forth in Exhibit D
hereto, there are no obligations of the Company to current or former officers,
directors, stockholders, or employees of the Company.
3.7 Trademarks. The Company has sufficient trade names, trade secrets,
information, proprietary title and ownership of all trademarks, service marks,
rights and processes necessary for its business as currently conducted and as
proposed to be conducted, without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the trademarks,
service marks, trade names, trade secrets, licenses, proprietary rights and
processes of any other person or entity. The Company is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with their duties to the Company or that would conflict with the Company's
business as currently conducted and as proposed to be conducted. Neither the
execution nor delivery of this Agreement or the Investor's Rights Agreement,
nor the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as currently conducted and as
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any employee is now obligated.
The Company does not believe it is or will be necessary to utilize any
inventions of any of its employees made prior to their employment by the
Company. The Company is not aware of any violation by a third party of any of
the Company's trademarks, service marks, trade names, trade secrets or other
proprietary rights.
3.8 Compliance with Other Instruments. The Company is not in violation of
any term of its Certificate of Incorporation or bylaws, as set forth in Exhibit
E hereto (the "Bylaws"), or any term contained in any material instrument or
contract to which it is a party, and, to the best of its knowledge, is not in
violation of any statute, rule, or regulation applicable to the Company which
violation would have a material adverse effect on the Company's business,
condition (financial or otherwise), properties, prospects or results of
operations. No event or failure of performance has occurred which, with the
passage of time or the giving of notice or both, would constitute such a
violation. The execution, delivery, and performance of and compliance with
this Agreement and the Investor's Rights Agreement and the issuance and sale of
the Shares pursuant hereto and of the Conversion Shares pursuant to the
Certificate of Incorporation, will not result in any such violation, or be in
conflict with or constitute a default under any such term, or result in the
creation of any mortgage, pledge, lien, encumbrance, or charge upon any of the
properties or assets of the Company. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement, or the Investor's Rights Agreement,
and the issuance of the Shares or
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the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner.
3.9 Title to Properties and Assets; Liens, Etc. The Company has good and
marketable title to all of its properties and assets it purports to own, in
each case subject to no mortgage, pledge, lien, lease, security interest,
encumbrance or charge, other then (i) liens for current taxes not yet due and
payable, and (ii) liens and encumbrances which do not in any case materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and which have not arisen other then in the ordinary
course of business.
3.10 Litigation. There is no action, suit, proceeding or investigation
pending or threatened against the Company which questions the validity of this
Agreement, or the Investor's Rights Agreement, or the right of the Company to
enter into either of them, or to consummate the transactions contemplated
hereby and thereby, or which might result, either individually or in the
aggregate, in any material adverse changes in the business, condition
(financial or otherwise), properties, prospects or results of operations of the
Company, or any change in the current equity ownership of the Company. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.11 Permits, Licenses. The Company has all federal, state and local
governmental permits, licenses, certificates of authority any similar authority
necessary for the conduct of its business as now being conducted and as
proposed to be conducted. The Company is not in default in any material
respect under any such permit, license, certificate of authority or other
similar authority.
3.12 Environmental and Safety Laws. To the best of its knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
3.13 Changes. Except as listed on Exhibit D, since December 31, 1995
there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance which materially and adversely affects the business, condition
(financial or otherwise), properties, prospects or results of operations of the
Company;
(c) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, condition (financial or
otherwise), properties, prospects or results of operations of the Company;
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(d) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due and payable;
(e) any loans or guarantees made by the Company to or for the
benefit of it employees, officers or directors, or any member of their immediate
families, other than advances in the ordinary course of business;
(f) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
business, condition (financial or otherwise) properties, prospects or results of
operations of the Company; or
(g) any agreement or commitment by the Company to do any of the
things described in this Section 3.13.
3.14 Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be
due and payable on such returns, any assessments imposed, and all other taxes
due and payable by the Company on or before the Closing have been paid or will
be paid prior to the time they become delinquent.
3.15 Insurance. The Company has in full force and effect fire and
casualty insurance, with extended coverage, aircraft hull insurance and
liability and errors and omissions insurance in amounts customary for
commercial passenger airlines.
3.16 Employees. Except as disclosed on Exhibit D hereto, the Company has
no employment contract with any officer or employee or other consultant or
person which is not terminable by it at will without liability, except as the
Company's right to terminate its employees at will may be limited by applicable
law. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract or any other agreement relating to the right of any
such individual to be employed by, or to contract with, the Company because of
the nature of the business to be conducted by the Company; and to the Company's
knowledge, the continued employment by the Company of its present employees,
and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. There are no controversies
or labor trouble or union organization activities pending or, to the knowledge
of the Company, threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To the best of
its knowledge, the Company has complied with all applicable state and federal
equal employment opportunity laws and other laws related to employment in which
the failure to so comply might have a material adverse effect on the business,
condition (financial or otherwise), properties, properties, prospects or
results of operations of the Company. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer or key
employee.
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3.17 Registration Rights. Except as set forth in Exhibit D hereto and
except as required pursuant to the Investor's Rights Agreement, the Company is
presently not under any obligation, and has not granted any rights, to register
(as defined in Section 1.1 of the Investor's Rights Agreement) any of the
Company's presently outstanding securities or any of its securities that may
hereafter be issued.
3.18 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 4.3 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of any applicable state securities laws. Neither
the Company nor any agent on its behalf has solicited or will solicit any
offers to sell or has offered to sell or will offer to sell all or any part of
the Shares to any person or persons so as to bring the sale of such Shares by
the Company within the registration provisions of the Securities Act.
3.19 Full Disclosure. This Agreement, the Exhibits hereto and all other
documents delivered by the Company to the Purchaser or Purchaser's attorneys or
agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, do not contain any untrue statement of a
material fact nor, to the Company's knowledge, omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
3.20 Real Property Holding Corporation. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code
Section 897(c)(2) and any regulations promulgated thereunder.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Investor's Rights Agreement and to carry out the provisions
of this Agreement and the Investor's Rights Agreement. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement and the Investor's Rights Agreement have been or will be effectively
taken prior to the Closing. Upon their execution and delivery this Agreement
and the Investor's Rights Agreement will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights; (ii) general
principles of equity that restrict the availability of equitable remedies; and
(iii) to the extent that the enforceability of the indemnification provisions
of Section 2.8 of the Investor's Rights Agreement may be limited by applicable
laws.
4.2 Consents. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in
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this Agreement and the Investor's Rights Agreement have been or shall have been
obtained prior to and be effective as of the Closing.
4.3 Investment Representations. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that there is no assurance that any exemption
from registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the Shares
and the Conversion Shares for Purchaser's own account for investment only, and
not with a view towards their distribution. If the Purchaser is other than a
natural person, Purchaser represents that each and every shareholder, partner,
member, beneficiary, or other owner thereof is or will be an "Accredited
Investor" as defined in Rule 501 of Regulation D under the Securities Act.
(c) Purchaser Can Protect Its Interest. Purchaser represents that by
reason of its management's, business or financial experience, Purchaser has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement and the Investor's Rights Agreement. Further,
Purchaser is aware of no publication of any advertisement in connection with the
transactions contemplated in this Agreement.
(d) Company Information. Purchaser has received and read the
Financial Statements has received other written materials about the Company and
has had an opportunity to discuss the Company's business, management and
financial affairs with directors, officers and management of the Company and has
had the opportunity to review the Company's operations and facilities. Purchaser
has also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchaser's Obligations at the Closing. Purchaser's
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) Representations and Warranties True; Performance of Obligations.
The representations and warranties made by the Company in Section 3 hereof shall
be true and correct in
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all material respects as of the Closing Date with the same force and effect as
if they had been made as of the Closing Date, and the Company shall have
performed all obligations and conditions herein required to be performed or
observed by it on or prior to the Closing.
(b) Third Party Consents, Permits, and Waivers. The Company shall
have obtained any and all consents, permits, and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
and the Investor's Rights Agreement.
(c) Corporate Documents. The Company shall have delivered to the
Purchaser or its counsel copies of all corporate documents of the Company as the
Purchaser shall reasonably request.
(d) Reservation of Conversion Shares. The Conversion Shares issuable
upon conversion of the Shares shall have been duly authorized and reserved for
issuance upon such conversion.
(e) Filing of Certificate of Designations. The Certificate of
Designations shall have been filed with the Secretary of State of the State of
Delaware.
(f) Compliance Certificate. The Company shall have delivered to the
Purchaser a Compliance Certificate, executed by the President and Chief
Executive Officer of the Company, dated the Closing Date, to the effect that the
conditions specified in subsections (a) through (e) of this Section 5.1 have
been satisfied.
(g) Investor's Rights Agreement. An Investor's Rights Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
and delivered by the Company.
(h) Proceedings and Documents. At the Closing all corporate and
other proceedings in connection with the transactions contemplated at the
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Purchaser and its
counsel, and the Purchaser and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
(i) Opinion. Purchaser shall have received from Xxxxx X. Xxxxxxxx of
the Bars of New York and South Carolina, General Counsel to the Company, an
opinion letter substantially in the form attached hereto as Exhibit F, addressed
to Purchaser as of the date of the Closing.
(j) Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful sale and issuance
of the Shares pursuant to this Agreement shall have been duly obtained and
shall be effective as of the Closing. No stop order or other order enjoining
the sale of the Shares or the proposed issuance of the Conversion Shares shall
have been issued and no proceedings for such purpose shall be pending or, to
the knowledge of the Company, threatened by the Securities and Exchange
Commission or any commissioner or corporations or similar officer of any state
having jurisdiction over this transaction. At the time of Closing, the sale and
issuance of the
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Shares and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which the Purchaser and the Company
are subject.
5.2 Conditions to Obligations of the Company. The Company's obligation to
issue and sell the Shares at the Closing is subject to the satisfaction, on or
prior to the Closing, of the following conditions:
(a) Representations and Warranties True; Performance of Obligations.
The representations and warranties made by the Purchaser in Section 4 hereof
shall be true and correct in all material respects at the date of the Closing
Date, with the same force and effect as if they had been made on and as of said
date, and the Purchaser shall have performed and complied with all agreements
and conditions herein required to be performed or complied with by it on or
before the Closing.
(b) Third Party Consents, Permits, and Waivers. The Company shall
have obtained any and all consents, permits, and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
and the Investor's Rights Agreement.
(c) Filing of Certificate of Designations. The Certificate of
Designations shall have been filed with the Secretary of State of the State of
Delaware.
(d) Investor's Rights Agreement. An Investor's Rights Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
and delivered by the Purchaser.
(e) Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful sale and issuance of
the Shares pursuant to this Agreement shall have been duly obtained and shall be
effective as of the Closing. No stop order or other order enjoining the sale of
the Shares or the proposed issuance of the Conversion Shares shall have been
issued and no proceedings for such purpose shall be pending or, to the knowledge
of the Company, threatened by the Securities and Exchange Commission or any
commissioner or corporations or similar officer of any state having jurisdiction
over this transaction. At the time of Closing, the sale and issuance of the
Shares and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which the Purchaser and the Company are
subject.
6. AFFIRMATIVE COVENANTS OF THE COMPANY.
6.1 Board of Directors Meetings. For as long as any shares of Series C
Preferred remain outstanding, the Company agrees that it shall hold meetings of
the Board of Directors no less frequently than once per calendar quarter.
6.2 Qualified Small Business Stock. The Company covenants that so long as
any of the Shares, or Conversion Shares, are held by Purchaser (or a transferee
in whose hands such Shares or Conversion Shares are eligible to qualify as
Qualified Small Business Stock as defined in Section 1202(c) of the Internal
Revenue Code of 1986, as amended), it will use its reasonable efforts to cause
the Shares, or the Conversion Shares, to qualify as Qualified Small Business
Stock; provided, however, that "reasonable efforts" as used in this Section 6.3
shall not be construed to require the
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Company to operate its business in a manner which would adversely affect its
business, limit its future prospects or alter the timing or resource allocation
related to its planned operations or financing activities.
6.3 Board of Director Approval. The Company covenants that so long as any
shares of Series A Preferred Stock remain outstanding, the approval of the
Board of Directors of the Company shall be obtained prior to taking any of the
following actions:
(a) The hiring of any officer of the Company;
(b) The adoption of any compensation program, including base
salaries and bonus programs for officers and key employees of the Company;
(c) The adoption of any stock option plan and the issuance of any
stock and stock options;
(d) The adoption of an annual budget, business or financial plan;
(e) The purchase or lease of any real estate, fixed asset or
aircraft lease in excess of $500,000;
(f) The approval by the Company of any obligation or commitment,
including capital equipment leases or purchases, with a value in excess of
$500,000 or which are outside the most recent business plan or budget approved
by the Board of Directors; and
(g) Transfers by stockholders of more than 10,000 shares of the
Company's stock; provided, however, that this Section 6.4(vii) shall expire on
an initial public offering of the Company's Common Stock resulting in aggregate
proceeds (net of underwriting discounts and commissions) to the Company of at
least $10,000,000 at a minimum price of $4.00 per share; and provided further,
that the provisions of this Section 6.4(vii) shall not apply to transfers by a
stockholder to such stockholder's partners, family members and affiliates.
7. MISCELLANEOUS.
7.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York.
7.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs,
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executors, and administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a holder of the
Shares from time to time.
7.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Investor's Rights Agreement, and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or
bound to any other in any manner by any representations, warranties, covenants,
and agreements except as specifically set forth herein and therein.
7.5 Separability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
7.6 Amendment and Waiver. This Agreement may be amended or modified only
upon the written consent of the Company and holders of more than fifty percent
(50%) of the Shares.
7.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to the Purchaser, upon any
breach, default or noncompliance of the Company under this Agreement, the
Investor's Rights Agreement, or the Certificate of Incorporation, shall impair
any such right, power, or remedy, nor shall it be construed to be a waiver of
any such breach, default or noncompliance, or any acquiescence therein, or of
or in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent, or approval of any kind or
character on Purchaser's part of any breach, default or noncompliance under
this Agreement or under the Certificate of Incorporation or any waiver on
Purchaser's part of any provisions or conditions of the Agreement must be in
writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, the Certificate of
Incorporation, Bylaws, or otherwise afforded to Purchaser, shall be cumulative
and not alternative.
7.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) upon receipt after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon receipt after deposit with a nationally recognized overnight
courier, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth below or at such
other address such party may designate by advance written notice to the other
party hereto given in the manner set forth above.
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If to the Company: With a copy to:
Air South Airlines, Inc. Xxxxx X. Xxxxxxxx, Esquire
0000 Xxxxxxx Xxxxxxxxx Xxxxxxxx Law Firm
Xxxx Xxxxxxxx, XX 00000 0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx: President; Xxxxxxxx, XX 00000
If to the Purchaser With a copy to:
X. X. Xxxxx & Associates, Inc. Dolgewos Xxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx 00 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
7.9 Expenses. The Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement.
7.10 Attorneys' Fees. If legal action is brought to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and legal costs in connection therewith.
7.11 Titles and Subtitles. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.13 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.13 being
untrue.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth in the first paragraph hereof.
AIR SOUTH AIRLINES, INC. X.X. Xxxxx & Associates, Inc.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxx
--------------------- --------------------------
Xxxxx X. Xxxxxx Xxxxxxx X. Xxxxx
President and Chief Executive Officer Its: President
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INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 14th day of June 1996, by and among AIR SOUTH AIRLINES, INC., a Delaware
corporation (the "Company") and X. X. Xxxxx & Associates, Inc. ("Purchaser").
RECITALS
WHEREAS, the Company proposes to sell and issue Forty Thousand (40,000)
shares of its Series C Preferred Stock ("Series C Preferred") pursuant to the
Series C Preferred Stock Purchase Agreement of even date herewith between the
Company and Purchaser (the "Purchase Agreement"); and
WHEREAS, as a condition to entering into the Purchase Agreement, the
Purchaser has requested that the Company extend to it registration rights,
information rights and certain other rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants, and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
1. GENERAL.
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Equity Securities" means (i) any stock or similar security of the
Company, (ii) any security convertible, with or without consideration, into any
stock or similar security (including any option to purchase such a convertible
security), (iii) any security carrying any warrant or right to subscribe to or
purchase any stock or similar security or (iv) any such warrant or right.
"Family Member" means a Holder's spouse, children, stepchildren and
grandchildren.
"Final Prospectus" means an amended prospectus filed with the SEC pursuant
to SEC Rule 424(b) of the Securities Act.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities.
"Initial Offering" means the first underwritten public offering of the
Company's securities.
"Initiating Holders" means the Holder or Holders of at least forty
percent (40%) of the Registrable Securities then outstanding.
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"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act, and the declaration or ordering of effectiveness by the SEC
of such registration statement or document.
"Registrable Securities" means (i) the Shares; (ii) Common Stock of the
Company issued or issuable upon conversion of the Shares; and (iii) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferors rights under Article II of this Agreement
are not assigned. Outstanding Shares and warrants, rights and other securities
issued as a dividend or other distribution with respect to outstanding Shares,
or in exchange or replacement of outstanding Shares, shall be deemed to
represent a number of shares of Registrable Securities equal to the number of
shares of Common Stock into which such Shares, warrants, rights or other
securities are convertible as of the time such determination is made.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean the shares held by the Holders of Company's Series C
Preferred Stock.
"SEC" or "Commission" means the Securities and Exchange Commission.
2. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until the transferee has agreed
in writing for the benefit of the Company to be bound by this Section 2.1,
provided and to the extent such Section is then applicable and either:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (B) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act.
(b) Notwithstanding the provisions of paragraphs (i) and (ii) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder (A) which is a partnership to its partners in accordance
with partnership interests, (B) to the Holder's Family Member or trust for the
benefit of an individual Holder or (C) to an affiliate of the Holder (as that
term is defined in Rule 144 (a)(1) of the Securities Act (an "Affiliate"),
provided the transferee will be subject to the terms of this Section 2.1 to the
same extent as if he were an original Holder hereunder.
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Each certificate representing Series C Preferred Stock or Registrable
Securities shall (unless otherwise permitted by the provisions of the
Agreement) be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER
WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
DOES NOT REQUIRE REGISTRATION.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registrations and Form S-3 Registration
(a) The Purchaser shall have no right to demand that the Company
shall register all or any part of any Registrable Securities.
(b) If holders of shares of the Company's Series A Preferred Stock
or Series B Preferred Stock (collectively, "A and B Preferred") shall exercise
their right to demand that the Company shall register any registrable
securities, as such term is defined in the investors rights agreements (the
"Applicable Agreements") relating to the A and B Preferred, then the Company
shall also allow the Purchaser to register Registrable Securities on a pro-rata
basis to the number of registrable securities being registered by holders of A
and B Preferred, based on the ratio of the total number of shares of Common
Stock into which the Series A Preferred Stock or Series B Preferred Stock, as
the case may be, are convertible to the total number of shares of Common Stock
into which the Series C Preferred Stock are convertible. If Registrable
Securities are so included in a demand registration, the holders of such
included securities shall be subject to the terms and conditions, and
obligations regarding such registration contained in the Applicable Agreements.
(c) If the holders of A and B Preferred shall exercise their right
to a Form S-3 Registration under the Applicable Agreements then the Company
shall also allow the Purchaser to register Registrable Securities on Form S-3 on
a pro-rata basis to the number of registrable securities being registered by
holders of A and B Preferred, based on the ratio of the total number of shares
of Common Stock into which the Series A Preferred Stock or Series B Preferred
Stock, as the case may be, are convertible to the number of shares of Common
Stock into which the Series C Preferred Stock. If Registrable Securities are so
included in a Form S-3 registration, the holders of such included securities
shall be subject to the terms and conditions, and obligations regarding such
registration contained in the Applicable Agreements.
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2.3 Piggyback Registrations.
(a) The Company shall notify all Holders in writing at least thirty
(30) days prior to the filing of any registration statement under the Securities
Act for purposes of a public offering of securities of the Company (including,
but not limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to the
Initial Offering, employee benefit plans and corporate reorganizations) and will
afford each such Holder who would have been unable to sell all of such
Registrable Securities on an unrestricted basis pursuant to Rule 144 promulgated
under the Securities Act, during the four-week period immediately preceding the
effective date of the registration statement, an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder. Each Holder desiring to include in any such registration statement all
or any part of the Registrable Securities held by it shall, within twenty (20)
days after receipt of the above-described notice from the Company, so notify the
Company in writing. Such notice shall state the intended method of disposition
of the Registrable Securities by such Holder. If a Holder decides not to include
all of its Registrable Securities in any registration statement thereafter filed
by the Company, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
Notwithstanding anything to the contrary, the foregoing shall not apply to any
registrations occurring on or after the fifth anniversary of the Initial
Offering
(b) If the registration statement under which the Company gives
notice under this Section 2.3 is for an underwritten offering, the Company shall
so advise the Holders. In such event, the right of any such Holder to be
included in a registration pursuant to this Section 2.3 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of the Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Company; second, to the
holders of shares of the Company's Series A, Series B and Series C Preferred
Stock allocated pro rata on the basis of the total number of shares of Common
Stock into which the Series A, Series B and Series C Preferred Stock are
convertible; third to the 7,500 shares of Common Stock par value $0.001 per
share held by a designee of NationsBank, N.A.; and fourth to any stockholder of
the Company (other than a Holder) on a pro rata basis. No such reduction shall
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting.
(c) The Company shall bear all fees and expenses incurred in
connection with any registration under this Section 2.3 (excluding underwriters'
discounts and commissions, which shall be paid by the selling Holders pro rata
with respect to their included shares), including without limitation all
registration, filing, qualification, printers' and accounting fees, fees and
disbursements of counsel to the Company, and the reasonable fees and
disbursements of a single counsel to the selling Holders (which counsel shall
also be counsel to the Company unless counsel to the Company has a conflict of
interest with respect to the representation of any selling Holder or the
underwriters object to the selling Holders representation by Company counsel).
2.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.3, that
the selling Holders shall furnish to the Company such information regarding
themselves, the
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Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
2.5 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article II.
2.6 Indemnification. In the event any Registrable Securities are included
in a registration statement under Section 2.3:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation") by the Company: (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the 1934 Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each such
Holder, partner, officer or director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.6(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished to
the Company expressly for use in connection with such registration by such
Holder, partner, officer, director, underwriter or controlling person of such
Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's partners,
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or other such
Holder, or partner, director, officer or controlling person of such other Holder
may become subject under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company by such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, or partner, officer, director or controlling person of such other Holder
in connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially
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determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 2.5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.6 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.5 of notice of the commencement of any action (including any
governmental action) as to which indemnity may be sought, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 2.6, deliver to the indemnifying party a written notice of
the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.6, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.6.
(d) If the indemnification provided for in this Section 2.6 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided that, in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The foregoing indemnity agreements of the Company and Holders
are subject to the condition that, insofar as they relate to any Violation made
in a preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the SEC at the time the registration statement in question becomes
effective or the Final Prospectus, such indemnity agreement shall not inure to
the benefit of any person obligated under the Securities Act to furnish to the
person asserting the loss, liability, claim or damage a copy of the Final
Prospectus if a copy of the Final Prospectus was furnished to the indemnified
party and was not furnished to the person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the Securities Act.
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(f) The obligations of the Company and Holders under this Section
2.5 shall survive the completion of any offering of Registrable Securities
pursuant to a registration statement, or otherwise.
2.7 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Article II may be assigned by
a Holder to a transferee or assignee of Registrable Securities; provided,
however, that no such transferee or assignee shall be entitled to registration
rights under Section 2.3, hereof unless such transferee or assignee: (i) is a
Holder; (ii) holds after such transfer or assignment at least one hundred
thousand (100,000) shares of Registrable Securities (as adjusted for stock
dividends, splits and combinations); or (iii) is a Family Member or a
subsidiary, parent, general partner, Affiliate, or limited partner of a Holder.
In each such case, the Company shall, within twenty (20) days after such
transfer, be furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned.
2.8 Amendment of Registration Rights. Any provision of this Article II
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of more than fifty percent (50%)
of the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 2.8 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Article II, each Holder hereby agrees to
be bound by the provisions hereunder.
2.9 "Market Stand-Off" Agreement. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, the Purchaser
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such stockholder (other than those included
in the registration) for a period specified by the underwriters not to exceed
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that all
officers and directors of the Company and all holders of at least one percent
(1%) of the Company's voting securities enter into similar agreements. The
obligations described in this Section 2.9 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
3. COVENANTS OF THE Company.
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
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(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter or, after the Initial
Offering, simultaneously with the filing of the Company's annual report on Form
10-K with the SEC), the Company will furnish each Holder a consolidated balance
sheet of the Company, as at the end of such fiscal year, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such year, all prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail. Such financial statements
shall be accompanied by a report and opinion thereon by independent public
accountants of national standing selected by the Company's Board of Directors.
(c) As soon as practicable after the end of each fiscal quarter of
the Company, and in any event within thirty days thereafter or, after the
Initial Offering, simultaneously with the filing of the Company's reports on
Form 10-Q with the SEC), the Company will furnish each Holder a consolidated
balance sheet of the Company, as at the end of such fiscal quarter, and a
consolidated statement of income and a consolidated statement of cash flows of
the Company for such quarter, prepared and presented in a manner consistent with
the financial statements described in Section 3.l(b). Such statement shall be
accompanied by a certificate signed by the Chairman of the Board and Chief
Financial Officer of the Company stating that the preparation and presentation
of such statements is consistent with the financial statements described in
Section 3.1(b).
(d) So long as a Holder (with its Affiliates) shall own not less
than one hundred thousand (100,000) shares of Registrable Securities, the
Company will furnish such Holder a consolidated balance sheet of the Company, as
at the end of each calendar month, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such month, prepared and
presented in a manner consistent with the financial statements described in
Section 3.1(b). Such statements shall be furnished as soon as practicable
after the end of each month and in any event within ten days thereafter and
shall be accompanied by a certificate signed by the Chairman of the Board and
Chief Financial Officer of the Company stating that the preparation and
presentation of such statements is consistent with the financial statements
described in Section 3.1(b). Prior to January 1st of each year, the Company
shall furnish such Holders an annual budget for the Company for the following
twelve month period, broken down by month. The Company's obligations under this
Section 3.l(d) shall terminate upon the Initial Offering.
3.2 Inspection Rights. So long as a Holder (with its affiliates) shall
own not less than one hundred thousand (100,000) shares of Registrable
Securities, each such Holder shall have the right to visit and inspect any of
the properties of the Company or any of its subsidiaries, and to discuss the
affairs, finances and accounts of the Company or any of its subsidiaries with
its officers, all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under
this Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Holder agrees to use, and to use its
best efforts to insure that its authorized representatives use, the same degree
of care as such Holder uses to protect its own confidential information to keep
confidential any information furnished to it which the Company identifies as
being confidential or proprietary (so long as such information is not in the
public domain), except that such Holder may disclose such proprietary or
confidential information to any partner, subsidiary, Affiliate or parent of
such Holder for the purpose of evaluating its investment in the Company as long
as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
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3.4 Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Series C Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Election of Director. The Company agrees that at the next annual
meeting of stockholders of the Company a director designated by the Purchaser
and nominated by the nominating committee of the Board of Directors will be
nominated as a director of the Company to serve until his or her successor is
duly elected and shall have qualified.
4. RIGHTS OF FIRST REFUSAL.
4.1 Subsequent Offerings. Each Holder shall have a right of first refusal
to purchase its pro rata share of all Equity Securities that the Company may,
from time to time, propose to sell and issue after the date of this Agreement,
other than the Equity Securities excluded by Section 4.6 hereof. Each Holder's
pro rata share is equal to the ratio of the number of shares of Common Stock,
assuming full conversion of all shares of Registrable Securities owned by such
Holder, held by such Holder immediately prior to the issuance of such Equity
Securities to the total number of shares of the Company's outstanding Common
Stock (including all shares of Common Stock issuable upon conversion of the
Registrable Securities).
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Holder written notice of its intention,
describing the Equity Securities, the price, and the terms and conditions upon
which the Company proposes to issue the same. Each Holder shall have fifteen
(15) days from the receipt of such notice to agree to purchase its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Holder who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
4.3 Issuance of Equity Securities to Other Persons. If the Holders fail
to exercise in full the rights of first refusal, the Company shall have ninety
(90) days thereafter to sell the Equity Securities in respect of which the
Holders' rights were not exercised, at a price and upon terms and conditions no
more favorable to the purchaser thereof than specified in the Company's notice
to the Holders pursuant to Section 4.2 hereof. If the Company has not sold
such Equity Securities within such ninety (90) days, the company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Holders in the manner provided above.
4.4 Termination of Rights of First Refusal. The rights of first refusal
established by this Article IV shall terminate upon the closing of the Initial
Offering.
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4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Holder under this Article IV may be transferred to any subsidiary or
parent of such Holder, to any successor in interest to all or substantially all
the assets of such Holder, or to an assignee or transferee who acquires
Registrable Securities.
4.6 Excluded Securities. The rights of first refusal established by this
Article IV shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to, the Company, pursuant to stock purchase or stock option plans or
other compensation arrangements that are approved by the Board of Directors of
the Company;
(b) stock issued pursuant to any rights, options and warrants
granted after the date of this Agreement, provided that the rights of first
refusal established by this Article IV applied with respect to the initial sale
or grant by the Company of such rights, options or warrants;
(c) Any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) any Equity Securities that are issued by the Company as part of
the Initial Offering referred to in Section 4.4 hereof;
(e) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(f) shares of Common Stock issued upon conversion of the Company's
Preferred Stock; and
(g) any Equity Securities issued pursuant to any equipment leasing
arrangement or commercial bank financing approved by the Company's Board of
Directors.
4.7 Other Rights of First Refusal. The Company has granted to the Holders
of its outstanding Series A and Series B Preferred Stock rights of first
refusal similar to the rights of first refusal granted by this Article IV. The
Company has obtained an agreement between the Company, and the holders of
Series A, Series B and Series C Preferred Stock that the Rights of the
Purchaser shall rank pari passu with each other based upon the relative number
of shares of Common Stock into which the Series A, Series B and Series C are
convertible.
5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York.
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5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 Separability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of more than fifty percent (50%) of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of more than fifty percent (50%) of the
Registrable Securities.
5.6 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character
on any Holder's part of any breach, default or noncompliance under this
Agreement or any waiver on such Holder's part of any provisions or conditions
of this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and
not alternative.
5.7 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) upon receipt after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon receipt after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent to the party to be notified at the address as
set forth below or at such other address as such party may designate by ten
(10) days advance written notice to the other party hereto in the manner
provided above.
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If to the Company: With a copy to:
Air South Airlines, Inc. Xxxxx X. Xxxxxxxx, Esquire
0000 Xxxxxxx Xxxxxxxxx Xxxxxxxx Xxx Xxxxxxx
Xxxx Xxxxxxxx, XX 00000 0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx: President; Xxxxxxxx, XX 00000
If to the Purchaser With a copy to:
X. X. Xxxxx & Associates, Inc. Dolgenos Xxxxxx & Xxxxxx L.L.P.
000 Xxxx Xxxxxx 00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, XX 00000
5.8 Attorneys' Fees. If legal action is brought to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and legal costs in connection therewith.
5.9 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of
the date set forth in the first paragraph hereof.
AIR SOUTH AIRLINES, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
President and Chief Executive Officer
X.X. Xxxxx & Associates, Inc.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name Xxxxxxx X. Xxxxx
Title: President
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