RIGHT OF FIRST REFUSAL AND
CO-SALE AGREEMENT
This Right of
First Refusal and Co-Sale Agreement (this “ Agreement
”), dated as of April 30, 2009, is made by and among
ComVest NationsHealth Holdings, LLC, a Delaware limited liability
company (“ Parent ”), NationsHealth, Inc., a
Delaware corporation (the “ Company ”), MHR
Capital Partners Master Account, LP, MHR Capital Partners
(100) LP, OTQ, LLC, and Mark H. Rachesky M.D., as a holder of
record and as authorized signatory for certain other entities,
(collectively, with their respective Affiliates and any successor
to any of the foregoing, “MHR,” provided, that any
representations and covenants made by any of the foregoing
signatories hereto shall be made severally and not jointly), Glenn
Parker, Lewis Stone, Timothy Fairbanks Mark Lama, and RGGPLS, LLC,
a Delaware limited liability company, (each, individually, a
“ Key Holder ” and, collectively, the “
Key Holders ” and together with MHR and Parent,
individually, a “ Stockholder ” and,
collectively, the “ Stockholders ”). Certain
defined terms used in this Agreement are defined in
Article 7 and capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Merger
Agreement (as defined below).
WHEREAS ,
concurrently with the execution of this Agreement, Parent,
NationsHealth Acquisition Corp., a Delaware corporation and a
wholly owned Subsidiary of Parent (“ Merger Sub
”), and the Company have entered into that certain Agreement
and Plan of Merger (the “ Merger Agreement
”);
WHEREAS ,
pursuant to the Merger Agreement, Merger Sub will merge with and
into the Company (the “ Merger ”) and the
separate corporate existence of Merger Sub shall thereupon cease,
and the Company shall be the surviving corporation in the Merger
(the “ Surviving Corporation ”);
WHEREAS ,
in connection with the Merger and immediately prior to the
Effective Time, each of the Stockholders shall contribute all
issued and outstanding shares of Company Common Stock and Company
Restricted Stock owned, beneficially and of record, by each of them
(or their respective Affiliates) (the “ Rollover
Shares ”) in exchange for the same number of shares of
the Merger Sub Non-Voting Common Stock at a price per share equal
to $0.12 (the “ Exchange ”) in accordance with
the terms and conditions of the Exchange and Rollover
Agreement;
WHEREAS ,
in connection with the Merger and at the Effective Time,
(a) each share of issued and outstanding Company Common Stock,
including shares of Company Restricted Stock (other than shares to
be canceled in accordance with Section 2.1(c) of the Merger
Agreement, the Dissenting Shares, and the shares of Preferred Stock
issued at or immediately prior to the Effective Time in connection
with the Preferred Stock Investment and the Preferred Stock
Investment Option (if exercised)) shall be converted into the right
to receive from the Surviving Corporation a cash amount equal to
$0.12 per share, (b) each share of Merger Sub Non-Voting
Common Stock owned, beneficially or of record, by each of the
Stockholders (or its Affiliates or permitted assigns or
transferees) shall be converted into and become one share of
Surviving Corporation Common Stock in accordance with
Section 2.1(a) of the Merger Agreement, and (c) each share of
Merger Sub Voting Common Stock owned, beneficially or of record, by
Parent shall be converted into and become one share of Surviving
Corporation Common Stock in accordance with the terms and
conditions of Section 2.1(a) of the Merger
Agreement;
WHEREAS ,
concurrently with the execution of this Agreement, the Company and
Parent have entered into the Bridge Loan Documents pursuant to
which Parent has agreed to provide the Bridge Loan which Bridge
Loan shall be converted into shares of Preferred Stock at the
Effective Time;
WHEREAS ,
all of the outstanding obligations under the Bridge Loan may be
converted into shares of Preferred Stock in accordance with the
Bridge Loan Documents and/or the Merger Agreement;
WHEREAS ,
concurrently with the execution of this Agreement, the Company,
Parent, the Key Holders and MHR have entered into the other
Preferred Stock Investment Documents to which each is a party,
including the Series A Preferred Stock Purchase Agreement,
dated the date hereof (the “ Series A Stock Purchase
Agreement ”), by and between Parent and the Company,
pursuant to which Parent shall purchase, and the Company shall
sell, shares of Preferred Stock and the Company shall grant to
Parent the Preferred Stock Investment Option;
WHEREAS ,
the execution and delivery of this Agreement is a condition to
Parent’s purchase of the Preferred Stock pursuant to the
Series A Stock Purchase Agreement, Parent’s execution
and delivery of the Series A Stock Purchase Agreement, and
Parent’s funding of the Bridge Loan; and
WHEREAS ,
at the Effective Time, each of the Stockholders shall own,
beneficially or of record, in such Stockholder’s name (or in
the name(s) of its Affiliates or permitted assigns or transferees)
the number of shares of Surviving Corporation Common Stock and/or
Preferred Stock set forth opposite such Stockholders name on
Schedule A attached hereto; and
WHEREAS ,
the Company and each of the Stockholders desire to enter into this
Agreement for the purposes, among others, of providing certain
rights and restrictions with respect to the Capital Stock owned by
the Stockholders and the Preferred Stock owned by
Parent.
NOW,
THEREFORE , in consideration of the mutual covenants and
agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby mutually covenant and
agree as follows:
ARTICLE 1
GENERAL TRANSFER RESTRICTIONS
1.1 General
Stockholder Restrictions . Neither any Key Holder nor MHR may
sell, give, pledge, transfer, encumber, or otherwise dispose of all
or any portion of their respective Capital Stock, whether now owned
or acquired subsequent to the date of this Agreement, except as may
otherwise be specifically provided for in this Agreement. This
Agreement shall not apply to or restrict the transfer of the
Notes.
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1.2 Transfer
Void; Equitable Relief . Any sale, transfer, offer to sell,
pledge, mortgage, hypothecation, encumbrance, alienation or
disposition of any Key Holder’s or MHR’s Capital Stock
not made in compliance with the requirements of this Agreement
shall be null and void ab initio , shall not be recorded on
the books of the Company or its transfer agent and shall not be
recognized by the Company. Each party hereto acknowledges and
agrees that any breach of this Agreement would result in
substantial harm to the other parties hereto for which monetary
damages alone could not adequately compensate. Therefore, the
parties hereto unconditionally and irrevocably agree that any
non-breaching party hereto shall be entitled to seek protective
orders, injunctive relief and other remedies available at law or in
equity (including, without limitation, seeking specific performance
or the rescission of purchases, sales and other transfers of
Capital Stock not made in strict compliance with this
Agreement).
1.3 Key Holder
Restrictions . In addition to the other restrictions set forth
in this Agreement, except for sales or transfers pursuant to
Article 4 or Article 5 , no Key Holder may
sell, give, pledge, transfer, encumber, or otherwise dispose of all
or any portion of the Key Holder’s Capital Stock unless
(i) the per share purchase price received by such Key Holder
for the Capital Stock is equal to or greater than $0.30
(appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization affecting the Capital Stock
occurring after the Effective Time), (ii) such Key Holder or
its permitted transferee(s) set forth in Section 1.5
has been the record owner of such Capital Stock for at least
fifty-four (54) months commencing at the Effective Time,
(iii) such Key Holder complies with Article 2 ,
and (iv) such Key Holder receives written notice from the
Company stating that the Company’s Board of Directors has
determined in good faith that the transferee(s) of such Key
Holder’s Capital Stock does not directly or indirectly
compete with the Company.
1.4 MHR
Restrictions . In addition to the other restrictions set forth
in this Agreement, except for sales or transfers pursuant to
Article 4 or Article 5 , MHR shall not
sell, give, pledge, transfer, encumber, or otherwise dispose of all
or any portion of MHR’s Capital Stock unless (i) the per
share purchase price received by MHR for the Capital Stock is equal
to or greater than $0.30 (appropriately adjusted to reflect any
stock dividend, split, combination or other recapitalization
affecting the Capital Stock occurring after the Effective Time),
(ii) MHR or its permitted transferee(s) set forth in
Section 1.6 has been the record owner of such Capital
Stock for at least thirty (30) months commencing at the
Effective Time, (iii) MHR complies with Article 3 , and
(iv) MHR receives written notice from the Company stating that
the Company’s Board of Directors has determined in good faith
that the transferee(s) of MHR’s Capital Stock does not
directly or indirectly compete with the Company.
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1.5 Key Holder
Exempt Transfers . The provisions of Section 1.3
and Article 2 shall not apply (a) in the case of a
Key Holder that is a natural person, upon a transfer of such Key
Holder’s Capital Stock made for bona fide estate planning
purposes, either during his or her lifetime or on his or her death
by will or intestacy to his or her spouse, child (natural or
adopted), or any other direct lineal descendant of such Key Holder
(or his or her spouse) (all of the foregoing collectively referred
to as “family members”), or any other person approved
by the Company’s Board of Directors, or any custodian or
trustee of any trust, partnership or limited liability company for
the benefit of, or the ownership interests of which are owned
wholly by, such Key Holder or any such family members, (b) in
the case of a Key Holder that is an entity, upon a transfer by such
Key Holder to its stockholders, members, partners or other equity
holders, (c) to a repurchase of such Key Holder’s
Capital Stock by the Company at a price no greater than that
originally paid by such Key Holder for such Capital Stock approved
by the Company’s Board of Directors, and (d) to a pledge
of such Key Holder’s Capital Stock that was granted before
the date of this Agreement, was disclosed to Parent, and creates a
mere security interest in the pledged Capital Stock so long s such
pledgee thereof agrees in writing in advance to be bound by and
comply with all applicable provisions of this Agreement to the same
extent as if it were the Key Holder making such pledge;
provided that in each case set forth in clauses (a), (b),
(c), and (d) above (A) such Key Holder shall deliver
prior written notice to Parent of such pledge, gift or transfer,
(B) such shares of Capital Stock shall at all times remain
subject to the terms and restrictions set forth in this Agreement,
(C) such transferee shall, as a condition to such issuance,
deliver a counterpart signature page to this Agreement as
confirmation that such transferee shall be bound by all the terms
and conditions of this Agreement as a Key Holder (but only with
respect to the securities so transferred to the transferee),
including the obligations of a Key Holder with respect to
Article 2 , and (D) such Key Holder receives
written notice from the Company stating that the Company’s
Board of Directors has determined in good faith that the
transferee(s) of such Key Holder’s Capital Stock does not
directly or indirectly compete with the Company; and
provided , further , in the case of any transfer
pursuant to clause (a) or (b) above, that such transfer
is made pursuant to a transaction in which there is no
consideration actually paid for such transfer. In the event of a
transfer pursuant to this Section 1.5 , such transferee
shall (x) assume the holding period of a Key Holder with
respect to calculating the holding period of such Capital Stock set
forth in Section 1.3 and (y) be entitled to all of
the rights, benefits and interest that such Key Holder has under
this Agreement.
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1.6 MHR Exempt
Transfers . The provisions of Section 1.4 and
Article 3 shall not apply (a) to any transfer by
MHR of Capital Stock to any of its Affiliates, stockholders,
members, partners or other equity holders, (b) to a repurchase
of MHR’s Capital Stock by the Company at a price no greater
than that originally paid by MHR for such Capital Stock approved by
the Company’s Board of Directors, (c) to a pledge of
MHR’s Capital Stock that creates a mere security interest in
the pledged Capital Stock; provided that the pledgee thereof
agrees in writing in advance to be bound by and comply with all
applicable provisions of this Agreement to the same extent as if it
were MHR making such pledge, (d) to any transactions in which
MHR lends or borrows any Capital Stock to brokers, banks or other
financial institutions for the purpose of effecting any margin
transactions, including any transactions effecting or resulting in
any pledge or other encumbrance (in existence or hereinafter
created) over such Capital Stock in the ordinary course of business
without the transferee being bound in writing in advance to comply
with applicable provisions of this Agreement, (e) to a
transfer to any investor of such MHR entity that is an investment
fund in connection with a pro rata distribution of shares to all
investors at the time of expiration or termination of the fund, and
(f) in the case of any MHR party that is a natural person,
upon a transfer of such person’s Capital Stock made for bona
fide estate planning purposes, either during his or her lifetime or
on his or her death by will or intestacy to his or her spouse,
child (natural or adopted), or any other direct lineal descendant
of such person (or his or her spouse) (all of the foregoing
collectively referred to as “family members”), or any
other person approved by the Company’s Board of Directors, or
any custodian or trustee of any trust, partnership or limited
liability company for the benefit of, or the ownership interests of
which are owned wholly by, such person or any such family members,
provided that in each case set forth in clauses (a), (b),
(c), (e) and (f) above (A) MHR shall deliver prior
written notice to Parent of such pledge, gift or transfer,
(B) such shares of Capital Stock shall at all times remain
subject to the terms and restrictions set forth in this Agreement,
(C) such transferee shall, as a condition to such issuance,
deliver a counterpart signature page to this Agreement as
confirmation that such transferee shall be bound by all the terms
and conditions of this Agreement as a Stockholder (but only with
respect to the securities so transferred to the transferee),
including the obligations of a Stockholder with respect to
Article 3 , and (D) in the case of a transfer
other than to an affiliated fund of MHR that conducts no business
other than holding securities, MHR receives written notice from the
Company stating that the Company’s Board of Directors has
determined in good faith that the transferee(s) of MHR’s
Capital Stock does not directly or indirectly compete with the
Company; and provided , further , in the case of any
transfer pursuant to clause (a) above, that such transfer is
made pursuant to a transaction in which there is no consideration
actually paid for such transfer. In the event of a transfer
pursuant to this Section 1.6 , such transferee shall
(x) assume the holding period of MHR with respect to
calculating the holding period of such Capital Stock set forth in
Section 1.4 and (y) be entitled to all of the
rights, benefits and interest that MHR has under this
Agreement.
1.7 Exempted
Offerings . Notwithstanding the foregoing or anything to the
contrary herein, the provisions of Article 1 ,
Article 2 , Article 3 , and Article
4 shall not apply to the sale of any Capital Stock (a) to
the public in an offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended or
(b) pursuant to a Liquidation Event (as defined in the
Company’s Third Amended and Restated Certificate of
Incorporation).
ARTICLE 2
RIGHT OF FIRST REFUSAL AND CO-SALE RIGHTS
2.1 Right of
First Refusal .
(a)
Grant . Subject to the terms of Article 1 , each
Key Holder hereby unconditionally and irrevocably grants to the
Company a Right of First Refusal to purchase all or any portion of
the Capital Stock that such Key Holder (a “ Selling Key
Holder ”) may propose to transfer in a Key Holder
Proposed Transfer, at the same price and on the same terms and
conditions as those offered by the Key Holder Prospective
Transferee.
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(b)
Notice . Each Selling Key Holder proposing to make a Key
Holder Proposed Transfer shall first deliver to the Company and
Parent a written notice (a “ Key Holder Proposed Transfer
Notice ”) not later than forty-five (45) days prior
to the consummation of such K ey Holder Proposed Transfer,
which shall (i) state the Selling Key Holder’s intention
to transfer or sell Capital Stock to a Key Holder Prospective
Transferee, the identity of such Key Holder Prospective Transferee,
the amount and types of Capital Stock proposed to be transferred,
the per share purchase price for such Capital Stock and a summary
of the other material terms of the Key Holder Proposed Transfer
(including, without limitation, the proposed transfer date), and
(ii) invite the Company to make an offer to purchase all or a
portion of such Capital Stock at the per share purchase price and
on the terms and conditions set forth in the Key Holder Proposed
Transfer Notice. To exercise its Right of First Refusal under this
Section 2.1 , the Company must deliver a Company Notice
to the Selling Key Holder within fifteen (15) days after
delivery of the Key Holder Proposed Transfer Notice.
(c)
Grant of Secondary Refusal Right to Parent. Subject to the
terms of Article 1 , each Key Holder hereby unconditionally
and irrevocably grants to Parent a Secondary Refusal Right to
purchase all or any portion of the Capital Stock not purchased by
the Company pursuant to the Right of First Refusal, as provided in
Section 2.1(a) . If the Company does not intend to
exercise its Right of First Refusal with respect to all of the
Capital Stock set forth in a Key Holder Proposed Transfer Notice,
the Company must deliver a Secondary Notice to the Selling Key
Holder and to Parent to that effect no later than fifteen
(15) days after the Selling Key Holder delivers the Key Holder
Proposed Transfer Notice to the Company. To exercise its Secondary
Refusal Right, Parent must deliver a Parent Notice to the Selling
Key Holder and the Company within fifteen (15) days after the
later of (i) the Company’s deadline for its delivery of
the Secondary Notice as provided in this Section 2.1(c)
, or (ii) the Company’s actual delivery of such
Secondary Notice.
(d)
Consideration; Closing . If the consideration proposed to be
paid for the Capital Stock by the Key Holder Prospective Transferee
in the Key Holder Proposed Transfer is in property, services or
other non-cash consideration, the fair market value of the
consideration shall be as determined in good faith by the
Company’s Board of Directors and as set forth in the Company
Notice or the Parent Notice. If the Company or Parent cannot for
any reason pay for the Capital Stock proposed to be transferred in
the Key Holder Proposed Transfer in the same form of non-cash
consideration, the Company or Parent may pay the cash value
equivalent thereof, as determined in good faith by the
Company’s Board of Directors and as set forth in the Company
Notice or the Parent Notice. The closing of the purchase of Capital
Stock by the Company and Parent pursuant to this
Section 2.1 shall take place, and all payments from the
Company and Parent shall have been delivered to the Selling Key
Holder, by the later of (i) the proposed transfer date
specified in the Key Holder Proposed Transfer Notice, or
(ii) sixty (60) days after delivery of the Key Holder
Proposed Transfer Notice.
(a)
Exercise of Right . If any Capital Stock set forth in a Key
Holder Proposed Transfer Notice is not purchased pursuant to
Section 2.1 and thereafter is to be sold to a Key
Holder Prospective Transferee, Parent may elect to exercise the
Right of Co-Sale and participate on a pro rata basis in the Key
Holder Proposed Transfer as set forth in Section 2.2(b)
below and otherwise on the same terms and conditions specified in
the Key Holder Proposed Transfer Notice (provided that if Parent
wishes to sell Preferred Stock, the price set forth in the Key
Holder Proposed Transfer Notice shall be appropriately adjusted
based on the conversion ratio of the Preferred Stock into Common
Stock). To exercise the Right of Co-Sale, Parent must give the
Selling Key Holder written notice to that effect within fifteen
(15) days after the deadline for delivery of the Parent Notice
set forth in Section 2.1(c) , and upon giving such
notice Parent shall be deemed to have effectively exercised the
Right of Co-Sale.
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(b)
Shares Includable . If Parent timely exercises the Right of
Co-Sale by delivering the written notice provided for in
Section 2.2(a) , Parent may include in the Key Holder
Proposed Transfer all or any part of Parent’s Capital Stock
equal to the product obtained by multiplying (i) the aggregate
number of shares of Capital Stock subject to the Key Holder
Proposed Transfer (excluding shares purchased by the Company
pursuant to the Right of First Refusal or by Parent pursuant to the
Secondary Refusal Right) by (ii) a fraction, the numerator of
which is the number of shares of Capital Stock owned by Parent
immediately before consummation of the Key Holder Proposed Transfer
and the denominator of which is the total number of shares of
Capital Stock owned by Parent immediately prior to the consummation
of the Key Holder Proposed Transfer (including any shares that
Parent has agreed to purchase pursuant to the Secondary Refusal
Right), plus the number of shares of Capital Stock held by the
Selling Key Holder. To the extent Parent exercises such right of
participation in accordance with the terms and conditions set forth
herein, the number of shares of Capital Stock that the Selling Key
Holder may sell in the Key Holder Proposed Transfer shall be
correspondingly reduced.
(c)
Delivery of Certificates . Parent shall effect its
participation in the Key Holder Proposed Transfer by delivering to
the Selling Key Holder, no later than fifteen (15) days after
Parent’s exercise of the Right of Co-Sale, one or more stock
certificates, properly endorsed for transfer to the Key Holder
Prospective Transferee, representing:
(i) the
number of shares of Common Stock that Parent elects to include in
the Key Holder Proposed Transfer; or
(ii) the
number of shares of Preferred Stock that is at such time
convertible into the number of shares of Common Stock that Parent
elects to include in the Key Holder Proposed Transfer;
provided , however , that if the Key Holder
Prospective Transferee objects to the delivery of convertible
Preferred Stock in lieu of Common Stock, Parent shall first convert
the Preferred Stock into Common Stock and deliver Common Stock as
provided above.
(d)
Purchase Agreement . The parties hereby agree that the terms
and conditions of any sale pursuant to this Section 2.2
will be memorialized in, and governed by, a written purchase and
sale agreement with customary terms and provisions for such a
transaction and the parties further covenant and agree to enter
into such an agreement as a condition precedent to any sale or
other transfer pursuant to this Section 2.2
.
(e)
Deliveries . Each stock certificate Parent delivers to the
Selling Key Holder pursuant to Section 2.2(c) will be
transferred to the Key Holder Prospective Transferee against
payment therefor in consummation of the sale of the Capital Stock
pursuant to the terms and conditions specified in the Key Holder
Proposed Transfer Notice and the purchase and sale agreement, and
the Selling Key Holder shall concurrently therewith remit to
Parent, or direct payment to Parent of, the portion of the sale
proceeds to which Parent is entitled by reason of its participation
in such sale. If any Key Holder Prospective Transferee or
Transferees refuse(s) to purchase securities subject to the Right
of Co-Sale from Parent exercising its Right of Co-Sale hereunder,
no Selling Key Holder may sell any Capital Stock to such Key Holder
Prospective Transferee or Transferees unless and until,
simultaneously with such sale, such Selling Key Holder purchases
all securities subject to the Right of Co-Sale from Parent on the
same terms and conditions (including the proposed purchase price)
as set forth in the Key Holder Proposed Transfer Notice.
(f)
Additional Compliance . If any Key Holder Proposed Transfer
is not consummated within forty-five (45) days after receipt
of the Key Holder Proposed Transfer Notice by the Company, the
Selling Key Holder shall continue to hold its Capital Stock subject
to all of the terms and conditions of this Agreement and may not
sell such Capital Stock without first complying in full with each
provision of this Article 2 .
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2.3 Effect of
Failure to Comply .
(a)
Violation of First Refusal Right . If any Selling Key Holder
becomes obligated to sell any Capital Stock to the Company or
Parent under this Agreement and fails to deliver such Capital Stock
in accordance with the terms of this Agreement, the Company and/or
Parent may, at its option, in addition to all other remedies it may
have, send to such Selling Key Holder the purchase price for such
Capital Stock as is herein specified and transfer to the name of
the Company or Parent (or request that the Company effect such
transfer in the name of Parent) on the Company’s books the
certificate or certificates representing the Capital Stock to be
sold.
(b)
Violation of Co-Sale Right . If any Selling Key Holder
purports to sell any Capital Stock in contravention of the Right of
Co-Sale (a “ Key Holder Prohibited Transfer ”)
and Parent desires to exercise its Right of Co-Sale under
Section 2.2 , Parent may, in addition to such remedies
as may be available by law, in equity or hereunder, require such
Selling Key Holder to purchase from Parent the type and number of
shares of Capital Stock that Parent would have been entitled to
sell to the Key Holder Prospective Transferee under
Section 2.2 had the Key Holder Prohibited Transfer been
effected pursuant to and in compliance with the terms of
Section 2.2 . The sale will be made on the same terms
and subject to the same conditions as would have applied had the
Selling Key Holder not made the Key Holder Prohibited Transfer,
except that the sale (including, without limitation, the delivery
of the purchase price) must be made within ninety (90) days
after Parent learns of the Key Holder Prohibited Transfer, as
opposed to the timeframe prescribed in Section 2.2 .
Such Selling Key Holder shall also reimburse Parent for any and all
reasonable and documented out-of-pocket fees and expenses,
including reasonable legal fees and expenses, incurred in
connection with the exercise or the attempted exercise of
Parent’s rights under Section 2.2 .
ARTICLE 3
RIGHT OF FIRST OFFER
3.1 Right of
First Offer .
(a)
Right of First Offer . Subject to the terms of
Article 1 and this Section 3.1 , if at any
time MHR desires to sell, offer to sell, pledge, mortgage,
hypothecate, encumber, alienate or dispose of any of its Capital
Stock, MHR shall promptly gi
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