INVESTOR RIGHTS AGREEMENT
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This Investor Rights Agreement, dated as of June 12, 2002 (this
"Agreement"), is entered into by and between THE XXXXXXX.XXX, INC., a Delaware
corporation (the "Company"), and COMMERCE BANCORP, INC., a New Jersey
corporation ("Investor").
W I T N E S S E T H:
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WHEREAS, the Company and Investor have entered into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
pursuant to which the Company sold and issued to Investor, and Investor
purchased, (i) 25,000 shares of the Company's Series A Preferred Stock, par
value $0.01 per share (the "Series A Preferred Stock"), and (ii) warrants (the
"Investor Warrants") to purchase 200,000 shares of the Company's Common Stock,
par value $0.01 per share (the "Common Stock"); and
WHEREAS, the Company and Investor desire to set forth certain
agreements with respect to the Series A Preferred Stock and the Investor
Warrants purchased by Investor.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements herein contained, and intending to be legally bound, it
is hereby agreed as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement:
"1999 XXX" means the Company's Investor Rights Agreement
entered into among the Company and certain investors in October 1999.
"1999 Investors" means the investors party to the 1999 XXX.
"Common Stock" is defined in the Recitals.
"Company" is defined in the Preamble.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be from time to time amended and in
effect.
"Investor Warrants" is defined in the Recitals.
"Investor" is defined in the Preamble.
"Management Shareholder" means Xxxxxx X. Xxxxx or
Xxxxxx X. Xxxxx.
"Members of the Immediate Family" as applied to any
individual, means each parent, spouse, child, brother, sister or the spouse of a
child, brother or sister of the individual, and each trust created for the
benefit of one or more of such Persons and each custodian of a property of one
or more such Persons.
"Material Adverse Effect" means a material adverse effect upon
the business, assets, financial condition, income or prospects of the Company.
"Memorandum" means that certain Private Placement Memorandum,
dated as of the date hereof, delivered to Investor by the Company in connection
with the offer and sale of the Series A Preferred Stock and the Investor
Warrants.
"Offered Shares" means any Common Stock, or securities
convertible into or options, warrants or other rights to purchase Common Stock,
proposed to be issued by the Company prior to the consummation of a Qualified
Public Offering.
"Person" means an individual, partnership, corporation,
company, association, trust, joint venture, unincorporated organization and any
governmental department or agency or political subdivision.
"Proportionate Percentage" means a percentage of Offered
Shares covered by a Proposal under Article 5 equal to (i) the number of shares
of Common Stock then held by Investor (including any shares of Common Stock
issuable upon conversion of shares of Series A Preferred Stock then held by
Investor) (together with any shares theretofore purchased by Investor pursuant
to Article 5) divided by (ii) the total number of shares of Common Stock
outstanding at the time of delivery of the Proposal (assuming the conversion and
exercise of options, warrants, rights and shares of capital stock that are
convertible into or exercisable for Common Stock).
"Proposal" is defined in Section 5.1.
"Proposed Buyer" means a Person to whom a Management
Shareholder desires to sell any shares of Common Stock, as set forth in
Section 4.1.
"Proposed Sales" means a proposed transaction between a
Management Shareholder and a Proposed Buyer.
"Purchase Agreement" is defined in the Recitals.
"Qualified Public Offering" means a public offering of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act on Forms X-0, X-0 or S-3, or any successors to such forms,
following which the Company becomes subject to the reporting requirements of
Sections 13 or 15 of the Exchange Act.
"Register," "registered," and "registration" mean a
registration effected by preparing and filing a Registration Statement, and the
declaration or ordering of effectiveness of such registration statement or
document.
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"Registrable Securities" means (1) Common Stock issued or
issuable upon conversion of the Series A Preferred Stock held by Investor; (2)
Common Stock issued or issuable upon exercise of the Investor Warrant; and (3)
Common Stock issued (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, excluding in all cases, however, any Registrable Securities sold by
a Person in a transaction in which his rights under this Agreement are not
assigned.
"Registration Statement" means a registration statement or
similar document filed in compliance with the Securities Act, together with any
amendment or supplement thereto and any preliminary prospectus or prospectus
included as a part thereof.
"SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act, the Exchange
Act or both.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be from time to time amended and in effect.
"Selling Shareholder" means a Management Shareholder selling
Shares under Article 4.
"Tag-Along Notice" means a notice from a Selling Shareholder
to Investors as set forth in Section 4.2.
ARTICLE II
RESTRICTIVE LEGEND
2.1 Restrictive Legend. Each certificate representing Series A
Preferred Stock, the Investor Warrant and shares of Common Stock issuable upon
conversion or exercise thereof shall, except as otherwise provided in this
Article 2 or in Article 3, be stamped or otherwise imprinted with a legend
substantially in the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY BE
OFFERED, PLEDGED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE
DISPOSED OF ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF
THE ACT AND SUCH LAWS, OR IF AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
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A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act and applicable state
securities laws.
ARTICLE III
REGISTRATION RIGHTS
3.1 Piggy-Back Registration.
Subject to the prior consent of the 1999 Investors, as
required under Section 3.2(a) of the 1999 XXX, if the Company shall seek to
register under the Securities Act or qualify any of the Common Stock of the
Company or any of its stockholders (except in connection with any stock option
plan, stock purchase plan, savings or similar plan or an acquisition, merger or
exchange of stock) and if the form of Registration Statement proposed to be used
may be used for the registration of the Registrable Securities, then, on each
such occasion, the Company shall furnish Investor with at least 30 days prior
written notice thereof. At the written request of Investor, given within 20 days
after the receipt of such notice, the Company will use its best efforts to cause
all or any of the Registrable Securities for which registration shall have been
requested by Investor to be included in such Registration Statement. In the
event that the proposed registration by the Company is, in whole or in part, an
underwritten public offering of Common Stock of the Company, and the managing
underwriter determines that the inclusion of all or any portion of the
Registrable Securities proposed to be included in the underwritten public
offering and other issued and outstanding shares of Common Stock proposed to be
included therein by Persons other than holders of Registrable Securities (the
"Other Shares") would interfere with the marketing (including pricing) of the
Company's Common Stock, then the number of Registrable Shares and Other Shares
to be included in such underwritten public offering shall be, at the request of
the managing underwriter, excluded from the offering or reduced ("cutback") pro
rata among the holders of Registrable Shares and Other Shares, based upon the
number of shares requested by holders thereof to be registered in such
underwritten public offerings. The Company shall have the right to terminate an
offering under this Section 3.1 at any time in its discretion.
3.2 Demand Registration.
(a) If (i) at any time after the date hereof the Company has
consummated a Qualified Public Offering, or (ii) on or before June 12, 2007, the
Company has not consummated a Qualified Public Offering and the Company shall
thereafter receive a written request from Investor that the Company file a
Registration Statement covering the registration of the Registrable Securities,
then the Company shall use its best efforts to: (x) subject to the limitations
of Section 3.2(c), file with the SEC within sixty (60) days of the receipt of
such request a Registration Statement on the appropriate form, and (y) cause as
promptly as practicable the registration under the Securities Act of all
Registrable Securities.
(b) If Investor intends to distribute the Registrable
Securities covered by its request by means of an underwriting as permitted by
Section 3.4(c), Investor shall so advise the Company as a part of its request
made pursuant to Section 3.2(a) and shall (together with the Company as provided
in Section 3.2(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by Investor which
underwriters shall include a regional or national underwriting firm which is a
member in good standing of the National Association of Securities Dealers, Inc.
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(c) The Company is obligated to effect only one registration
pursuant to this Section 3.2; provided that, in the event that the Company fails
to obtain the consent required under Section 3.2(a) of the 1999 XXX within 180
days of the date hereof, the Investor shall have the right to request, and
Company shall be obligated to effect, two registrations pursuant to this Section
3.2, in each case subject to the provisions of this Section 3.2.
(d) The rights granted by Sections 3.2(a)(i) and (ii) expire
June 12, 2008.
3.3 Obligations of the Company. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Registration Statement
with respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become effective, and, upon the request of
Investor, keep such Registration Statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
(c) Furnish to Investor such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as it may reasonably request in order
to facilitate the disposition of Registrable Securities owned by Investor.
(d) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
Blue Sky laws as shall be reasonably requested by Investor, provided that the
Company shall not be required (i) qualify to do business in any jurisdiction,
(ii) subject itself to general taxation in such jurisdiction, (iii) provide any
undertakings that cause more than nominal expense or burden to the Company, or
(iv) make any change to its certificate of incorporation or bylaws.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Investor shall
also enter into and perform his obligations under such an agreement.
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(f) Notify Investor at any time when a prospectus is required
to be delivered under the Securities Act of the happening of any event as a
result of which the prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and use
its best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to Investor as it may
reasonably request.
(g) In the case of an underwritten public offering, furnish,
at the request of Investor, on the date that such Registrable Securities are
delivered to the underwriters, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (ii) a letter, dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.
(h) The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities, and shall provide
CUSIP numbers for the Registrable Securities, not later than the effective date
of the Registration Statement.
3.4 Obligations of Investor. In connection with the registration of
Registrable Securities, Investor shall:
(a) Furnish to the Company such information regarding
Investor, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request.
(b) Cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder.
(c) In the event Investor determines to engage the services of
an underwriter or in the event of a registration pursuant to Section 3.1(a)
where the Company has selected underwriters and determines that the Registrable
Securities shall be included in the securities being offered by the
underwriters, enter into and perform Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities.
(d) Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.3(f), immediately
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until Investor's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3.3(f)
and, if so directed by the Company, Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a certificate
of destruction) all copies in Investor's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of such notice.
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(e) Investor may not participate in any underwritten
registration hereunder unless Investor (i) agrees to sell Registrable Securities
on the basis provided in any underwriting arrangements under Section 3.4(c),
(ii) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay Investor's pro rata
share of all underwriting discounts and commissions.
3.5 Expenses of Registration. All expenses, incurred in connection with
registrations, filings or qualifications pursuant to this Agreement, including,
without limitation, all registration, filing and qualification fees, printers'
and accounting fees, and fees and disbursements of counsel for the Company shall
be borne by Company. Investor shall bear the cost of any underwriters' or
brokers' commissions and fees, and fees and disbursements of Investor and its
own legal costs, unless the Company shall, as provided in Section 3.5 of the
1999 XXX, have permitted a single firm of counsel, designated by the 1999
Investors, to represent such investors in connection with a registration under
the 1999 XXX in which the Investor is participating or a registration under this
agreement in which the 1999 Investors are participating, in which case the
Investor may utilize the services of such firm under the conditions applicable
to all participating 1999 Investors.
3.6 Delay of Registration. Investor shall not have a right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
3.7 Indemnification.
(a) The Company agrees to indemnify and hold harmless
Investor, its affiliates and each of their respective officers, directors,
stockholders and agents, against any losses, claims, damages or liabilities to
which Investor, its affiliates and each of their respective officers, directors,
stockholders and agents may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement, or (ii) the omission or alleged omission to state
therein a material fact required to be stated in such a Registration Statement
or necessary to make the statements therein not misleading, and will reimburse
Investor for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or omission made in
such Registration Statement in reliance upon and in conformity with written
information furnished to the Company by Investor or any underwriter for Investor
specifically for use in the preparation thereof. This indemnity will be in
addition to any liability which the Company may otherwise have.
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(b) Investor will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed a Registration
Statement and each Person, if any, who controls the Company, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that Investor
will be liable in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission has
been made in such Registration Statement in reliance upon and in conformity with
written information furnished by Investor specifically for use in the
preparation thereof; and provided further that indemnification by Investor under
this Section 3.7 shall be limited in amount to its share of the proceeds of the
offering. This indemnity will be in addition to any liability which Investor may
otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to this Section 3.7, such Person (the
"indemnified party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 3.7(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 3.7(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution under Section 3.7(d) hereof or otherwise
than on account of the provisions of Section 3.7(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
retain counsel reasonably satisfactory to the indemnified party to defend the
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. The indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay as
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incurred the fees and expenses of the counsel retained by the indemnified party
in the event (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, (ii) the indemnifying party
has failed to assume the defense of such proceeding or shall have failed to
retain counsel reasonably satisfactory to the indemnified party, or (iii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel, under applicable rules of professional conduct,
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm (and appropriate
local counsel) for all such indemnified parties. Such firm shall be designated
in writing by indemnified parties holding a majority of the Registrable
Securities included in the proceeding in the case of parties indemnified
pursuant to Section 3.7(a) and by the Company in the case of parties indemnified
pursuant to Section 3.7(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 3.7 is
unavailable (other than by reason of the exception contained in the second
sentence of Section 3.7(c) hereof) to or insufficient to hold harmless an
indemnified party under Section 3.7(a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and Investor on the other from the offering of the
Registrable Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 3.7(c), then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
Investor, on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and Investor on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company or Investor bears to the total net proceeds from the offering, in each
case as set forth in the Registration Statement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or Investor on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company further agrees that, in connection with any underwritten public
offering, it also will enter into customary contribution arrangements with
Investor selling Registrable Securities pursuant thereto and the underwriters or
broker-dealers through whom the Registrable Securities may be sold, with respect
to situations in which indemnification is potentially unavailable.
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The Company and Investor agree that it would not be just and
equitable if contributions pursuant to this Section 3.7(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
3.7(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 3.7(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation, and (ii) contribution from Investor
under this Section 3.7 shall be limited in amount to its share of the proceeds
of the offering.
(e) In any proceeding relating to the Registration Statement,
each party against whom contribution may sought under this Section 3.7 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that processing issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
3.8 Limitation on Subsequent Registration Rights. After the date
hereof, the Company shall not, without Investor's prior written consent, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights senior to the
rights granted to Investor hereunder.
3.9 Rule 144 Reporting. With a view to making available to Investor the
benefits of certain rules and regulations of the SEC which may permit the sale
of Registrable Securities to the public without registration, the Company agrees
to use its best efforts, until the Rule 144(k) period has passed, to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act or any similar
or analogous rule promulgated under the Securities Act, at all times after the
effective date of the first registration filed by the Company for an offering of
its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as Investor owns any Registrable Securities,
furnish to Investor forthwith upon request: a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 under the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as Investor may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
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ARTICLE IV
TAG ALONG RIGHTS
4.1 General. In the event a Management Shareholder shall desire to sell
any shares of Common Stock to a Proposed Buyer, he may do so only if he complies
with the provisions of this Article 4, except that this Article 4 shall not
apply to (i) a sale by a Management Shareholder of his shares in a registered
public offering or (ii) a transfer by a Management Shareholder to Members of the
Immediate Family of the Management Shareholder, to another Management
Shareholder or to a trust of which the Management Shareholder, individually or
together with one or more Members of the Immediate Family of the Management
Shareholder, are the sole trustees; provided, however, that any transferee under
clause (ii), above shall be subject to the terms of this Agreement as though he
or it were a Management Shareholder, but only to the extent of the shares so
transferred.
4.2 Offer. A Tag-Along Notice shall be delivered by the Selling
Shareholder to Investor at least 30 days prior to the date of any Proposed Sale.
The Tag-Along Notice shall include:
(a) A copy of a bona fide offer from the Proposed Buyer, which
shall set forth the complete terms of the Proposed Sale, including the number of
Shares proposed to be purchased, the purchase price, the name and address of the
Proposed Buyer and the other principal terms of the Proposed Sale.
(b) Subject to the consent of the 1999 Investors, an offer by
the Selling Shareholder to include in the Proposed Sale to the Proposed Buyer,
at Investor's option, that number of Registrable Securities as is determined in
accordance with Section 4.3, on the same terms and conditions as the Selling
Shareholder shall sell his Shares; and
(c) An agreement from the Proposed Buyer to purchase such
number of the of Registrable Securities as shall be includable in such Proposed
Sale pursuant to Section 4.3.
4.3 Time and Manner of Exercise. If Investor desires to accept the
offer contained in the Tag-Along Notice, Investor shall notify the Selling
Shareholder in writing within 20 days after receipt of the Tag-Along Notice. If
Investor has not accepted such offer in writing, Investor shall be deemed to
have waived all of its rights with respect to the Proposed Sale. Any acceptance
by Investor of the offer contained in the Tag-Along Notice shall be irrevocable
except as hereinafter provided.
4.4 Time and Manner of Closing. Investor shall take such actions and
execute such documents and instruments as shall be reasonably necessary in order
to consummate the Proposed Sale expeditiously on the same terms as the Selling
Shareholder. If at the end of 90 days following the date on which the Tag-Along
Notice was given the Selling Shareholder has not completed the Proposed Sale in
accordance with the terms hereof, Investor shall be released from its
obligations hereunder. At the closing of any sale under this Section 4.4,
Investor shall deliver certificates representing the Registrable Securities to
be sold by Investor, duly endorsed for transfer and (if requested in writing by
the Proposed Buyer) with signature guaranteed, and with any stock transfer tax
stamps affixed, against delivery of the applicable purchase price. Any shares
sold to the Proposed Buyer in accordance with this Section 4.4 shall no longer
be subject to this Agreement.
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ARTICLE V
RIGHT OF FIRST REFUSAL
5.1 Right of First Refusal. Until the consummation of a Qualified
Public Offering, the Company shall not issue or sell any Offered Shares without
first providing Investor the right to subscribe for its Proportionate Percentage
of the Offered Shares at a price and on such other terms which are at least as
favorable as the Company shall have offered or proposes to offer and which the
Company shall have specified in a notice delivered to Investor (the "Proposal").
The Proposal by its terms shall remain open and irrevocable for a period of 30
days from the date it is delivered by the Company to Investor (the "Exercise
Period").
5.2 Notice. Notice of the intention of Investor to accept the Proposal
shall be evidenced by a writing signed by Investor and delivered to the Company
prior to the end of the Exercise Period (the "Notice of Purchase") setting forth
that portion of the Offered Shares Investor elects to purchase (the "Accepted
Shares").
5.3 Full Acceptance. In the event that Investor elects to purchase all
of the Offered Shares, the Company shall sell to Investor the number of Accepted
Shares set forth in the Notices of Purchase.
5.4 Partial Acceptance. In the event that Investor elects not to
purchase all of the Offered Shares, the Company shall sell to Investor the
number of Accepted Shares, if any, set forth in the Notice of Purchase.
5.5 Sale of Shares. No later than 30 days after the expiration of the
Exercise Period, the Company shall deliver to Investor a notice indicating the
number of Offered Shares which the Company shall sell to Investor pursuant to
this Article 5 and the terms and conditions of such sale, which shall be in all
respects (including, without limitation, unit price and interest rates) the same
as specified in the Proposal. The sale to such holders of such Offered Shares
shall take place not later than 10 days after receipt of such notice.
Any sale of Offered Shares that were not selected for purchase by
Investor as provided above shall take place not later than 90 days after the
expiration of the Exercise Period. Such sale shall be upon terms and conditions
in all respects (including, without limitation, unit price and interest rates)
which are not less favorable to the Company than those set forth in the
Proposal. Any refused Offered Shares not purchased as contemplated by the
Proposal within the 90-day period specified above shall remain subject to this
Article 5.
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5.6 Exclusion of Certain Shares. Offered Shares shall not include (i)
shares of Common Stock issuable pursuant to plans, options, warrants or rights
outstanding on the date hereof or contemplated by this Agreement or the
Memorandum, (ii) shares of capital stock issued pursuant to an effective
Registration Statement, (ii) shares of capital stock issued in connection with
the acquisition by the Company of another corporation or other entity by merger,
purchase of all or substantially all of the assets or otherwise, or (iv) shares
of capital stock issued other than for cash in connection with a strategic
business transaction.
5.7 Waiver. Investor hereby waives its rights under this Article 5 in
connection with the offering by the Company of up to an aggregate of 200,000
shares of Series A Preferred Stock, Common Stock or warrants, or any combination
thereof, within ninety (90) days of the date of this Agreement on terms
substantially similar to (including, without limitation, at a per share purchase
price not less than) the securities purchased pursuant to the Purchase
Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
BY THE COMPANY
The Company represents and warrants to Investor that, as of the date
hereof:
6.1 Due Incorporation and Qualification. The Company has been duly
incorporated, chartered or organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware, and has full corporate or
other power and authority to own or lease, as the case may be, its properties
and to conduct its business as described in the Memorandum. The Company is duly
qualified to do business as a foreign entity and is in good standing under the
laws of each jurisdiction which requires such qualification wherein it owns or
leases properties or conducts business except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect.
6.2 Authorization and Validity of Agreements. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and the Purchase Agreement and to consummate
the transactions contemplated hereby and thereby. This Agreement has been duly
authorized, executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by Investor, constitutes the
legal, valid and binding and enforceable instrument of the Company (subject, as
to the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights generally from
time to time and to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity).
6.3 No Conflict. Neither the execution and delivery of this Agreement
or the Purchase Agreement nor the consummation of the transactions contemplated
hereby, thereby or in the Memorandum nor the fulfillment of the terms hereof and
thereof will (i) conflict with or result in a violation of the charter or bylaws
of the Company or (ii) except as would not, individually or in the aggregate,
have a Material Adverse Effect, conflict with or result in a breach or violation
of, or imposition of any lien, charge or encumbrance upon any property or assets
of the Company pursuant to (A) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the Company is a party or
by which it is or may be bound or to which any of its assets may be subject or
(B) any statute, law, rule, regulation, judgment, order or decree applicable to
the Company or the Bank of any governmental or regulatory authority.
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ARTICLE VII
GENERAL
7.1 Notices. All notices or other communications required or permitted
to be delivered hereunder shall be in writing and shall be delivered to each of
the parties at their respective addresses as set forth on the signature page
hereto.
Any party to this Agreement may at any time change the address
to which notice to such party shall be delivered by giving notice of such change
to the other party and such notice shall be deemed given when received by the
other party. Notices shall be deemed effectively given when personally delivered
or sent to the recipient at the address set forth above by telex or facsimile
transmission, one business day after having been delivered to a receipted,
nationally recognized courier, properly addressed, or five business days after
having been deposited into the United States mail, postage prepaid, provided,
that any notice to any party outside of the United States shall be sent by
telecopy and confirmed by overnight or two-day courier.
7.2 Amendments, Waivers and Consents. Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only upon the prior written consent of the Company and
Investor.
7.3 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the personal representatives, successors and assigns
of the respective parties hereto. The Company shall not have the right to assign
its rights or obligations hereunder or any interest herein without obtaining the
prior written consent of Investor.
7.4 Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable and, as modified, shall be
enforced as any other provision hereof, all of the other provisions hereof
continuing in full force and effect.
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7.5 Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous understandings, whether written or oral.
7.6 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
7.7 Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
7.8 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of laws rules) of the State of
Delaware.
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IN WITNESS WHEREOF, the parties hereof have caused this Investor Rights
Agreement to be executed on their behalf on the date first above written.
THE XXXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxx X. Xxxx
Title: Chief Financial Officer
Address: 000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Fax Number: (000) 000-0000
COMMERCE BANCORP, INC.
By: /s/ Xxxxxxx Xxx
-------------------------------------
Name: Xxxxxxx Xxx
Title: Senior Vice President
Address: 0000 Xxxxx 00 Xxxx
Xxxxxx Xxxx, XX 00000-0000
Fax Number: 000.000.0000
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