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Exhibit 10.30
WARRANT EXCHANGE AGREEMENT
THIS WARRANT EXCHANGE AGREEMENT (this "Agreement") is dated as of
February 24, 1999, by and between G.I. JOE'S, INC., an Oregon corporation (the
"Company"), and XXXXX X. ORKNEY ("Orkney").
RECITALS
A. Orkney, a director of the Company, is the holder of a warrant dated
April 17, 1998 (the "Warrant"), exercisable for a number of shares of the
Company's Common Stock equal to 5% of the Company's Common Stock outstanding, on
a fully diluted basis, on the date of exercise.
B. Effective January 31, 1999, the Company effected a reclassification
of stock pursuant to which each four shares of outstanding stock were
reclassified into three shares of common stock.
C. Orkney and the Company desire to exchange the Warrant for 80,000
post-reclassification shares of the Company's Common Stock.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
SECTION 1. WARRANT CANCELLATION AND SHARE ISSUANCE
Orkney hereby surrenders the Warrant to the Company for cancellation in
exchange for 80,000 shares of the Company's Common Stock (the "Shares") that the
Company will promptly issue to Orkney. The Shares will be subject to the
Registration Rights Provisions attached hereto as Exhibit A.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ORKNEY
Orkney represents and warrants to the Company as follows:
2.1 OWNERSHIP OF WARRANT. Orkney is the sole owner of the Warrant, free
and clear of liens, claims, pledges, charges, or encumbrances of any kind and
has made no assignment or transfer of any interest in the Warrant.
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2.2. AUTHORIZATION AND CONSENTS. No declaration, filing, or
registration with, or notice to, or authorization, consent, or approval of, any
governmental or regulatory body or authority or nongovernmental third party, is
necessary for the execution and delivery of this Agreement by Orkney or the
consummation by Orkney of the transactions contemplated by this Agreement.
2.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares are being acquired by
Orkney for investment for his own account and not with a view to the
distribution of any part thereof.
2.4 INVESTMENT EXPERIENCE; ACCREDITED INVESTOR STATUS. Orkney
acknowledges that the Shares are a speculative risk. Orkney is able to fend for
himself in the transactions contemplated by this Agreement, can bear the
economic risk of his investment (including possible complete loss of such
investment) for an indefinite period of time and has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the investment in the Shares. Orkney understands that
the Shares have not been registered under the United States Securities Act of
1933, as amended (the "Act"), or applicable state or other securities laws, by
reason of reliance upon certain exemptions, and that the reliance of the Company
on such exemptions is predicated upon the accuracy of Orkney's representations
and warranties. Orkney is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Act.
2.5 RESTRICTED SHARES. Orkney understands that the Shares are
characterized as "restricted securities" under the Act and applicable
regulations and the Shares may be resold without registration under the Act only
in certain limited circumstances and in accordance with the terms and conditions
set forth in the legend described in Section 2.6 below.
2.6 LEGEND. It is understood that the certificates evidencing the
Shares may bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE OR OTHER SECURITIES LAWS, AND NO INTEREST THEREIN MAY
BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING SAID SECURITIES, (ii) THIS CORPORATION RECEIVES
AN OPINION OF LEGAL COUNSEL
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FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THIS CORPORATION
THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (iii) THIS
CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Orkney as follows:
3.1 EXISTENCE OF CORPORATION. The Company is a corporation duly
incorporated and validly existing under the laws of the State of Oregon.
3.2 POWER AND AUTHORITY; GOVERNMENTAL AUTHORIZATION; CONSENTS. The
Company has all requisite power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery by the Company of this Agreement and the performance by
the Company of its obligations hereunder have been duly and validly authorized
by all necessary action on the part of the Company, and this Agreement
constitutes its valid and binding obligation of the Company, enforceable against
it in accordance with its terms.
3.3 VALID ISSUANCE OF SHARES. The Shares, when issued, sold and
delivered in accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable, free of
any liens or encumbrances created by the Company.
SECTION 4. SURVIVAL
The representations, warranties, covenants and agreements of the
parties contained herein shall survive and remain in full force and effect after
the Closing, regardless of any investigation made by or on behalf of the Company
or Orkney.
SECTION 5. TAX MATTERS
The Company agrees to indemnify Orkney, in an amount not to exceed
$225,000, against all federal and state income taxes that are or may be payable
by Orkney as a result of the issuance of the Shares in exchange for the
cancellation of the Warrant. Payment by the Company of any amounts due under
this Section 5 in respect of taxes shall be made, subject to receipt from Orkney
of calculations and other materials supporting the tax liability, (i) at least
three calendar days before the due date of the applicable estimated or final tax
return required to be filed by Orkney,
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provided that no such payment shall be due from the Company prior to five
business days following receipt of written notice from Orkney, or (ii) within
five business days following an agreement between the Company and Orkney that an
indemnity amount is payable.
SECTION 6. RELEASE OF CLAIMS
6.1 RELEASE BY ORKNEY. Orkney hereby releases and forever discharges
the Company, its officers, directors, shareholders, and employees, and each of
their respective successors, assigns, representatives, affiliates, agents and
attorneys (collectively, the "Releasees"), from all claims, rights, demands,
damages, expenses (including attorneys' fees), actions or causes of action of
every name, nature, kind and description whatsoever, whether in tort, contract
or statute, that Orkney may have or claim to have now or that may hereafter
arise out of or in connection with any act or omission existing or occurring on
or before the date of this Agreement including, without limitation, those that
relate to any stock, equity or other ownership interest of Orkney in all or any
portion of the Company, or any predecessor, or their respective property or
business (hereinafter, collectively referred to as the "Claims"); provided,
however, that the foregoing shall not release or discharge the Company from any
Claims resulting from the breach of any representations, warranties, covenants
or agreements of the Company contained in this Agreement. Orkney represents and
warrants that there has been no assignment or other transfer of any interest in
any Claims that he may have against the Releasees.
6.2 RELEASE BY THE COMPANY. The Company hereby releases and forever
discharges Orkney and his successors, assigns, representatives, affiliates,
agents and attorneys (collectively, the "Releasees") from all claims, rights,
demands, damages, expenses (including attorneys' fees), actions or cause of
action of every name, nature, kind and description whatsoever, whether in tort,
contract or statute, the Company may have or claim to have now or that may
hereafter arise out of or in connection with any sums paid to Orkney to defray
personal income taxes arising out of the sale of property by the Company. The
Company represents and warrants that there has been no assignment or other
transfer of any interest in the claims that it may have against the Releasees.
SECTION 7. MISCELLANEOUS AND GENERAL
7.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof.
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7.2 BINDING EFFECT: BENEFIT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors,
assigns, heirs and legal representatives. Nothing express or implied in this
Agreement is intended or shall be construed to confer upon or give to any person
or entity other than the parties hereto, any rights or remedies under, in or by
reason of this Agreement or any transaction contemplated hereby.
7.3 FURTHER ASSURANCES. Each of the parties hereto, upon the request of
the other party hereto, shall do, execute, or cause to be done, executed,
acknowledged and delivered, all such further acts, documents, certificates,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably necessary or desirable to fully complete consummation of the
transactions contemplated by this Agreement.
7.4 WAIVERS AND AMENDMENT. This Agreement may be amended or modified,
and the terms and conditions hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of either party in exercising any right or
remedy hereunder shall operate as a waiver thereof, nor shall any waiver on the
part of either party of any such right or remedy, nor any single or partial
exercise of any such right or remedy, preclude any other or further exercise
thereof or the exercise of any other right or remedy hereunder.
7.5 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Oregon applicable to agreements
made and to be performed entirely within such State.
7.6 SEVERABILITY. If any provision of this Agreement or the application
of any provision hereof to either party hereto or to any given set of
circumstances is held invalid, the remainder of this Agreement and the
application of such provision to the other party hereto or to other
circumstances shall not be affected, unless the provisions held invalid shall
substantially impair the benefits of the remaining portions of this Agreement.
7.7 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
7.8 CAPTIONS. The captions and headings herein are for convenience of
reference only, do not constitute a part of this Agreement, and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
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7.9 NOTICES. All notices, requests, demands, waivers, and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by
telecopier as follows:
If to Orkney, to him at:
0000 X.X. Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
If to the Company, to:
G.I. Joe's, Inc.
0000 X.X. Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
or to such other person or address as any party shall specify by notice in
writing. All such notices, requests, demands, waivers, and communications shall
be deemed to have been received (a) on the date of delivery, if delivered during
normal business hours, (b) on the business day immediately following the date of
delivery, if delivered after normal business hours or (c) with respect to mailed
notices, on the third business day after deposit in the U.S. Mail.
7.10 ATTORNEYS' FEES. If any suit or action arising out of or related
to this Agreement is brought by any party, the prevailing party shall be
entitled to recover the costs and fees (including, without limitation,
reasonable attorneys' fees, the fees and costs of experts and consultants,
copying, courier and telecommunication costs, and deposition costs and all other
costs of discovery) incurred by such prevailing party in such suit or action,
including, without limitation, any post-trial or appellate proceeding, or in the
collection or enforcement of any judgment or award entered or made in such suit
or action.
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IN WITNESS WHEREOF, this Warrant Cancellation and Stock Subscription
Agreement has been duly executed and delivered by the parties hereto as of the
date first written above.
/s/ Xxxxx X. Orkney
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Xxxxx X. Orkney
G.I. JOE'S, INC.
By /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
NAME: XXXXXX X. XXXXXXX
TITLE: PRESIDENT
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EXHIBIT A
REGISTRATION RIGHTS
1. DEFINITION OF CERTAIN TERMS
The following terms shall have the following meanings:
1.1 "ACT" SHALL MEAN THE SECURITIES ACT OF 1933, AS AMENDED.
1.2 "COMMISSION" SHALL MEAN THE SECURITIES AND EXCHANGE
COMMISSION.
1.3 "HOLDER" MEANS ANY PERSON OWNING OR HAVING THE RIGHT TO
ACQUIRE REGISTRABLE SECURITIES.
1.4 "REGISTER," "REGISTERED," AND "REGISTRATION" SHALL MEAN A
REGISTRATION EFFECTED BY PREPARING AND FILING A REGISTRATION STATEMENT IN
COMPLIANCE WITH THE ACT AND THE DECLARATION OR ORDERING OF EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT.
1.5 "REGISTRABLE SECURITIES" SHALL MEAN (i) THE 80,000 SHARES
OF THE COMPANY'S COMMON STOCK (THE "SHARES") DESCRIBED IN THE WARRANT EXCHANGE
AGREEMENT TO WHICH THESE REGISTRATION RIGHTS PROVISIONS ARE ATTACHED AS AN
EXHIBIT AND (ii) ANY COMMON STOCK OF THE COMPANY ISSUED AS (OR ISSUABLE UPON THE
CONVERSION OR EXERCISE OF ANY WARRANT, RIGHT OR OTHER SECURITY THAT IS ISSUED
AS) A DIVIDEND OR OTHER DISTRIBUTION WITH RESPECT TO, OR IN EXCHANGE FOR OR IN
REPLACEMENT OF, THE SHARES, EXCLUDING IN ALL CASES, HOWEVER, ANY REGISTRABLE
SECURITIES SOLD BY A PERSON IN A TRANSACTION IN WHICH SUCH PERSON'S RIGHTS UNDER
THIS SECTION 1 ARE NOT ASSIGNED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8.
1.6 "REGISTRATION EXPENSES" SHALL MEAN ALL EXPENSES INCURRED
BY THE COMPANY IN COMPLYING WITH THESE REGISTRATION PROVISIONS, INCLUDING
WITHOUT LIMITATION ALL REGISTRATION AND FILING FEES, PRINTING EXPENSES, FEES AND
DISBURSEMENTS OF COUNSEL FOR THE COMPANY, AND BLUE SKY FEES AND EXPENSES.
1.7 "SELLING EXPENSES" SHALL MEAN ALL UNDERWRITING DISCOUNTS
AND SELLING COMMISSIONS APPLICABLE TO THE SALE OF REGISTRABLE SECURITIES OF A
HOLDER AND ALL FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH HOLDER.
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2. COMPANY REGISTRATIONS
2.1 Notice; Request of Inclusion of Shares
If at any time after its initial public offering, the Company
determines to register any of its capital stock for sale to the general public
solely for cash on a form that would also permit sale of the Registrable
Securities, either for its own account or the account of a security holder or
holders exercising demand registration rights, the Company will (i) promptly
give to each Holder written notice thereof and (ii) use its best efforts to
include in such registrations and in any related underwriting all Registrable
Securities specified in a written request by any Holder (which request shall
state the intended method of distribution of the Registrable Securities),
received by the Company within 15 days after receipt of such written notice from
the Company by any Holder, except as set forth in Section 2.2 below.
2.2 UNDERWRITTEN OFFERINGS; MARKET CUT-BACK
If the registration of which the Company gives notice under this
Section 2 is for a registered public offering involving an underwriting, the
Company will so advise the Holders as a part of the written notice given such
Holders pursuant to Section 2.1. In such event the right of any Holder to
registration pursuant to this Section 2 will be conditioned on such Holder's
participation in such underwriting and the inclusion of such Holder's shares in
the underwriting to the extent provided herein. All Holders proposing to
distribute shares through such underwriting will (together with the Company and
the other Holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 2, if the underwriter of the offering determines
that marketing factors require a limitation on the number of shares to be sold
for the account of security holders, the Company may exclude all Registrable
Securities from, or limit the number of Registrable Securities to be included
in, the registration and underwriting. If less than all Registrable Securities
for which registration is sought are to be included in the registration and
underwriting, the number of Registrable Securities included will be reduced pro
rata among the Holders requesting registration based on the number of
Registrable Securities of such Holders for which registration is sought.
3. LIMITS ON REGISTRATIONS
Notwithstanding any other provision of these Registration Rights, the
Company shall not be obligated to register any Registrable Securities if it
furnishes the Holder a written opinion of counsel to the Company that such
Holder will be able to sell all the Registrable Securities that such Holder in
good faith wishes to sell in a three-month
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period pursuant to Rule 144 (or a comparable successor rule adopted by the
Commission).
4. INDEMNIFICATION
4.1 INDEMNIFICATION BY THE COMPANY
The Company will indemnify each Holder distributing shares pursuant to
an underwriting provided for in Section 2, any officers, directors, or partners
of the Holder, if the Holder is an entity, and any person controlling a Holder,
to the extent shares of such Holder have been registered, qualified, or for
which compliance has been effected pursuant to Section 2, and each underwriter,
if any, and each person who controls any underwriter, against all claims,
losses, damages, and liabilities or actions in respect thereof arising out of or
based on any untrue statement or alleged untrue statement of a material fact
contained in any prospectus, offering circular or other document, including any
related registration statement, notification, or the like, incident to any such
registration, qualification or compliance, or based on any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse such
Holder, each of its officers, directors, or partners, as the case may be, and
each person controlling such Holder, each such underwriter, and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred by each such person so indemnified in connection with investigating or
defending any such claim, loss, damage, liability, or action; provided, however,
that the Company will not be liable in any such case to the extent any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based on written information furnished to the
Company by such Holder or underwriter specifically for use in the prospectus or
offering circular.
4.2 INDEMNIFICATION BY HOLDERS
Each Holder whose shares are included in the securities for which any
such registration, qualification or compliance is being effected will indemnify
to the extent permitted by law the Company, each of its directors and officers,
each legal counsel and independent accountant of the Company, each underwriter,
if any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter within the meaning of
the Act, and each other shareholder whose shares are included in such
registration, and each of such other shareholder's officers and directors and
each person controlling such other shareholder, against all claims, losses,
damages, and liabilities or actions in respect thereof arising out of or based
on any untrue statement or alleged untrue statement of a material fact contained
in any prospectus, offering circular or other document,
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including any related registration statement, notification, or the like,
incident to any such registration, qualification or compliance, and will
reimburse the Company, such shareholder, and such directors, officers, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred by such persons in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement is made in
such registration statement, prospectus, offering circular, or other document in
reliance on and in conformity with written information furnished to the Company
by the Holder furnishing the same specifically for use therein; provided,
however, that the obligations of any indemnifying Holder hereunder will be
limited to an amount equal to the proceeds to such Holder from the sale of such
Holder's shares in such registration.
4.3 NOTICE; THIRD-PARTY CLAIMS
Each party entitled to indemnification under this Section 4 (such party
being referred to in this Section 4 as the "Indemnified Party") will give notice
to the party required to provide indemnification (such party being referred to
in this Section 4 as the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought, and
will permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who will conduct the defense of such claim or litigation, is approved by
the Indemnified Party (whose approval will not unreasonably be withheld), and
the Indemnified Party may participate in such defense at such party's expense;
provided, however, that, if the Indemnified Party is advised by its counsel that
there may be differing defenses, expenses of counsel will be paid by the
Indemnifying Party, and, provided further, that the failure of any Indemnified
Party to give notice as provided herein will not relieve the Indemnifying Party
of its obligations under this Section 4. No Indemnifying Party, in the defense
of any such claim or litigation, will, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
THAT does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
5. EXPENSES
5.1 REGISTRATION EXPENSES
All Registration Expenses incurred in connection with a registration
pursuant to Section 2 will be borne by the Company.
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5.2 SELLING EXPENSES
All Selling Expenses will be borne by the Holder or Holders of the
securities so registered apportioned on a pro rata basis.
5.3 ADJUSTMENTS
Notwithstanding any other provision of this Section 5, the provisions
of this Section 5 shall be deemed amended to incorporate and comply with the
provisions of any applicable state securities laws, regulations, and
administrative policies, and the rules of the National Association of Securities
Dealers, Inc. and stock exchanges upon which the Registrable Securities are or
will be eligible for listing.
6. PROCEDURES
Whenever required under Section 2 to use its best efforts to effect the
registration of any of the Registrable Securities, the Company will, as
expeditiously as reasonably possible: (a) prepare and file with the Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and remain
effective; (b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration
statement; (c) furnish to each Holder with respect to whom Registrable
Securities are included in such registration statement such numbers of copies of
a prospectus, including a preliminary prospectus, and such other documents as
the Holder reasonably may require to facilitate the disposition of such
Registrable Securities; and (d) use its reasonable efforts to register and
qualify the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as reasonably are appropriate
for the distribution of the securities covered by such registration statement;
provided, however, that the Company will not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such state or jurisdiction unless the Company is
already subject to service in such jurisdiction; and, provided further, that in
connection with any proposed registration, the Company will in no event be
obligated to cause any such registration to remain effective for more than 90
days.
7. INFORMATION FROM HOLDERS
Each Holder whose shares are included in any registration under Section
2 of this Agreement will furnish in writing to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may
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request in writing and as may be required in connection with registration,
qualification or compliance referred to in Section 2.
8. ASSIGNMENT
Orkney's registration rights may be assigned by Orkney to a transferee
or assignee of the Shares if the Company is given written notice of the
transfer, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned; provided, however, that such assignment will be effective only
if immediately following such assignment the transferee or assignee holds at
least 50 percent of the Registrable Securities.
9. STAND-OFF AGREEMENT
No Holder who participates in the registration, if so requested by the
Company and an underwriter of securities of the Company, will sell or otherwise
transfer or dispose of any other securities of the Company held by such Holder
other than pursuant to the registration statement during the 180-day period
following and including the effective date of a registration statement;
provided, however, that such Holder's agreement in this Section 9 will apply
only if all officers and directors of the Company enter into similar agreements
in writing in a form satisfactory to the Company and such underwriter covering
shares of Common Stock owned by such officers and directors. The Company may
impose stop transfer instructions with respect to the securities subject to the
restriction in this Section 9 until the end of the 180-day period.
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