PACIFIC GATEWAY PROPERTIES, INC.
REGISTRATION RIGHTS AGREEMENT
September 21, 1998
TABLE OF CONTENTS
Page
SECTION 1..........................................................1
Restrictions on Transferability of Securities;.....................1
1.1. Certain Definitions...................................1
1.2. Requested Registration................................2
1.3. Company Registration..................................5
1.4. Expenses of Registration..............................6
1.6. Registration Procedures...............................6
1.7. Indemnification.......................................7
1.7. Information by Holder................................10
1.8. Limitations on Registration of Issues of Securities..10
1.9. Rule 144 Reporting...................................10
1.10. Transfer or Assignment of Registration Rights.......10
1.11. "Market Stand-Off" Agreement........................11
1.12. Delay of Registration...............................11
1.13. Exclusion from Registration.........................11
1.14. Allocation of Registration Opportunities............12
SECTION 2........................................................13
Miscellaneous.....................................................13
2.1. Governing Law........................................13
2.2. Successors and Assigns...............................13
2.3. Entire Agreement; Amendment; Waiver..................13
2.4. Notices, etc.........................................13
2.5. Separability.........................................13
2.6. Information Confidential.............................13
2.7. Titles and Subtitles.................................14
2.8. Counterparts.........................................14
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 21st day of
September 1998, by and among Pacific Gateway Properties, Inc., a New York
corporation (the "Company"), and the undersigned investor (the "Investor")
WHEREAS, the Company and the Investor are parties to the Series 1
Preferred Stock Purchase Agreement of even date herewith (the "Series 1
Purchase Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series 1
Purchase Agreement and to induce the Investor to invest funds in the
Company pursuant to the Series 1 Purchase Agreement, the Investor and the
Company hereby agree that this Agreement shall govern the rights of the
Investor to cause the Company to register shares of Common Stock issuable
to the Investor and certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
SECTION 1
Restrictions on Transferability of Securities;
Registration Rights
1.1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Closing" shall mean the date of the initial sale of
shares of the Company's Series 1 Preferred Stock.
(b) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar successor federal statute and the rules
and regulations thereunder, all as the same shall be in effect from time to
time.
(d) "Holder" shall mean the Investor and any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in compliance with Section 1.11
hereof.
(e) "Initiating Holders" shall mean any Holder or Holders
of the outstanding Registrable Securities. For purposes of such
calculation, holders of Shares shall be considered to hold the shares of
Common Stock then issuable upon conversion of such Shares.
(f) "Investors" shall mean the Investor and any
transferees or assignees who agree to become bound by the provisions of
this Agreement in accordance with the provisions of Section 1.11.
(g) "Registrable Securities" shall mean (i) shares
of Common Stock issued or issuable pursuant to the conversion of the Shares
and (ii) any Common Stock issued as a dividend or other distribution
with respect to or in exchange for or in replacement of the shares
referenced in (i) above, provided, however, that Registrable Securities
shall not include any shares of Common Stock that are freely tranferable
without registration.
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(h) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
(i) "Registration Expenses" shall mean all expenses
incurred in effecting any registration pursuant to this Agreement,
including, without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of counsel for
the Company, blue sky fees and expenses, expenses of any regular or special
audits incident to or required by any such registration, but shall not
include Selling Expenses.
(j) "Rule 144" shall mean Rule 144 as
promulgated by the Commission under the Securities Act, as such Rule
may be amended from time to time, or any similar successor Rule
that may be promulgated by the Commission.
(k) "Rule 145" shall mean Rule 145 as
promulgated by the Commission under the Securities Act, as such Rule
may be amended from time to time, or any similar successor Rule
that may be promulgated by the Commission.
(1) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar successor federal statute and the rules
and regulations thereunder, all as the same shall be in effect from time to
time, corresponding to such Act.
(m) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for any Holder (other
than the fees and disbursements of counsel included in Registration
Expenses).
(n) "Shares" shall mean the Company's Series 1
Preferred Stock,
1.2. Requested Registration.
(a) Request for Registration. If the Company shall
receive from Initiating Holders at any time, a written request specifying
that it is made pursuant to this Section 1.2 that the Company effect
a registration with respect to all or a part of the Registrable Securities
having a reasonably anticipated aggregate offering price, net of
underwriting discounts and commissions, that exceeds $2,000,000, the
Company will:
(i) promptly give written notice of the
proposed registration to all other Holders; and
(ii) as soon as practicable, use its diligent
best efforts to effect such registration (including, without limitation,
filing post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws and appropriate
compliance with the Securities Act) as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as
are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request received by the Company within twenty
(20) days after such written notice from the Company is effective.
The Company shall not be obligated to effect, or to take any
action to such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction
in which the Company would be required to execute a general consent to
service of process in effecting such registration, qualification or
compliance, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(B) During the period starting with
the date sixty (60) days prior to the Company's good faith estimate of the
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date of filing of, and ending on a date one hundred eighty (180) days after
the effective date of, a registration pursuant to Section 1.3 hereof;
provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective;
(b) Subject to the foregoing clauses (A) and (B), the
Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Initiating Holders; provided,
however, that if (i) in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental
to the Company and the Board of Directors of the Company concludes, as a
result, that it is essential to defer the filing of such registration
statement at such time, and (ii) the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company for such registration
statement to be filed in the near future and that it is, therefore,
essential to defer the filing of such registration statement, then the
Company shall have the right to defer such filing for the period during
which such disclosure would be seriously detrimental, provided, that the
Company may not defer the filing for a period of more than one hundred
twenty (120) days after receipt of the request of the Initiating Holders,
and, provided further, that (except as provided in clause (a) above) the
Company shall not defer its obligation in this manner more than once in any
twelve-month period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Sections 1.2(d), 1.14
and 1.15 hereof, include other securities of the Company and may include
securities of the Company being sold for the account of the Company.
(c) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of
an underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 1.2 and the Company shall include
such information in the written notice referred to in Section 1.2(a)(i)
above. The right of any Holder to registration pursuant to
Section 1.2 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting (unless otherwise mutually agreed by a majority in
interest of the Initiating Holders and such Holder with respect to such
participation and inclusion) to the extent provided herein.
(d) Procedures. If the Company shall request inclusion in
any registration pursuant to Section 1.2 of securities being sold for
its own account, or if other Holders shall request inclusion in any
registration pursuant to Section 1.2, the Initiating Holders shall,
on behalf of all Holders, offer to include such securities in the
underwriting and may condition such offer on their acceptance of the
further applicable provisions of this Section 1. The Company shall
(together with all Holders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, which underwriter(s) shall be reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 1.2, if
the representative of the underwriters advises the Initiating Holders in
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writing that marketing factors require a limitation on the number of shares
to be underwritten, the number of shares to be included in the underwriting
or registration shall be allocated as set forth in Sections 1.14 and 1.15
hereof. If a Holder who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such
Holder shall be excluded therefrom by written notice from the Company, the
underwriter or the Initiating Holders. The securities so excluded shall
also be withdrawn from registration. Any Registrable Securities or other
securities excluded shall also be withdrawn from such registration. If
shares are so withdrawn from the registration and if the number of shares
to be included in such registration was previously reduced as a result of
marketing factors pursuant to this Section 1.2(d), then the Company shall
offer to all Holders who have retained rights to include securities in the
registration the right to include additional securities in the registration
in an aggregate amount equal to the number of shares withdrawn, with such
shares to be allocated among such Holders requesting additional inclusion
in accordance with Section 1.15.
1.3. Company Registration.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights (other
than pursuant to Section 1.2 hereof), other than a registration
relating solely to employee benefit plans, or a registration relating
solely to a Commission Rule 145 transaction, or a registration on any
registration Form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written
notice thereof; and
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 1.3(b) below, and in any
underwriting involved therein, all the Registrable Securities specified in
a written request or requests, made by any Holder within twenty (20) days
after the written notice from the Company described in clause (i) above is
effective. Such written request may specify all or a part of a Holder's
Registrable Securities.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the
written notice given pursuant to Section 1.3(a)(i). In such event the
right of any Holder to registration pursuant to Section 1.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company and
the holders of other securities of the Company distributing their
securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or
underwriters selected by the Company.
Notwithstanding any other provision of this Section 1.3, if
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and
underwriting. The Company shall so advise all Holders of securities
requesting registration, and the number of shares of securities that are
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entitled to be included in the registration and underwriting shall be
allocated as set forth in Sections 1.14 and 1.15. If any Holder does not
agree to the terms of any such underwriting, such Holder shall be excluded
therefrom by written notice from the Company or the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number
of shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in
the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among the persons requesting
additional inclusion in accordance with Section 1.15 hereof.
1.4. Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant
to Section 1.3 hereof shall be borne by the Company. All Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to Section 1.2 hereof shall be borne by the
Company; provided, however, that for the two year period commencing on the
date of the Closing, all Registration Expenses incurred pursuant to Section
1.2 shall be shared equally between the Company and the Initiating Holders.
All Selling Expenses relating to securities so registered shall be borne by
the holders of such securities.
1.5. Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 1, the Company will keep
each Holder advised in writing as to the initiation of each registration
and as to the completion thereof. At its expense, the Company will use its
best efforts to:
(a) Keep such registration effective for a period of
ninety (90) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (i) such 90-day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities
on Form S-3 which are intended to be offered on a continuous or
delayed basis, such 120-day period shall be extended, if necessary, to keep
the registration statement effective until all such Registrable Securities
are sold, provided that Rule 415, or any successor Rule under
the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment which (I) includes any prospectus
required by Section 10(a)(3) of the Securities Act or (II) reflects
facts or events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation by
reference of information required to be included in (I) and (II) above to
be contained in periodic reports filed pursuant to Section 13 or
15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
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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 such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(d) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed;
(e) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the effective
date of such registration;
(f) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first month after the effective date of
the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(g) In connection with any underwritten offering pursuant
to a registration statement filed pursuant to Section 1.2 hereof, the
Company will enter into an underwriting agreement reasonably necessary to
effect the offer and sale of Common Stock, provided such underwriting
agreement contains customary underwriting provisions and provided further
that if the underwriter so requests the underwriting agreement will contain
customary contribution provisions.
(h) Furnish, at the request of any Holder, on the date
that the Common Stock is delivered to the underwriters for sale in
connection with a registration being sold through underwriters, (i)
an opinion, if any, 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 to the Holders 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, if any, and to the Holders
requesting registration of Registrable Securities.
1.6. Indemnification.
(a) The Company will indemnify each Holder, each of its
officers, directors, employees, affiliates and partners, legal counsel and
accountants and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement,
and each underwriter, if any, and each person who controls within the
meaning of Section 15 of the Securities Act any underwriter, against
all expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on
any 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 to state therein
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a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of the
Securities Act or any Rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and
will reimburse each such Holder, each of its officers, directors,
employees, affiliates, partners, legal counsel and accountants 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 in connection with investigating and defending or
settling any such claim, loss, damage, liability or action, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information furnished to
the Company by such Holder or underwriter and stated to be specifically for
use therein. It is agreed that the indemnity agreement contained in this
Paragraph 1.6(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent has not been
unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each
of its directors, officers, employees, affiliates, partners, legal counsel
and accountants and 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 Section 15 of the
Securities Act, each other such Holder and each of their officers,
directors, employees, affiliates and partners, and each person controlling
such Holder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and
such Holders, directors, officers, employees, affiliates, partners, legal
counsel and accountants, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred 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 omission is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder
specifically for inclusion therein; provided, however, that the obligations
of such Holder hereunder (i) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities (or actions
in respect thereof) if such settlement is effected without the consent of
such Holder (which consent shall not be unreasonably withheld), and (ii)
shall be limited in amount to the net proceeds received by such Holder
from the sale of shares pursuant to such registration, qualification or
compliance.
(c) Any person entitled to indemnification hereunder (an
"Indemnified Party") will (i) give prompt written notice to the party
required to provide indemnification (an "Indemnifying Party") of any claim
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with respect to which it seeks indemnification and (ii) permit such
Indemnifying Party to assume the defense of such claim with counsel
reasonably satisfactory to the Indemnified Party, provided, however, that
any person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in the defense of such claim,
but the fees and expenses of such counsel shall be at the expense of such
person unless (x) the Indemnifying Party has agreed in writing to pay such
fees or expenses, or (y) the Indemnifying Party shall have failed to assume
the defense of such claim and employ counsel reasonably satisfactory to
such person or (z) in the reasonable judgment of any such person and the
Indemnifying Party, based upon advice of their respective counsel, a
conflict of interest may exist between such person and the Indemnifying
Party with respect to such claim (in which case, if the person notifies the
Indemnifying Party in writing that such person elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense of such claim on behalf of
such person). If such defense is not assumed by the Indemnifying Party, the
Indemnifying Party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably
withheld). No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnified Party of
a release from all liability in respect to such claim or litigation without
the consent of the Indemnified Party. The failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 1.7 unless the Indemnifying Party is
materially prejudiced thereby. An Indemnifying Party who is not entitled
to, or elects not to, assume the defense of a claim will not be obligated
to pay the fees and expenses of more than one counsel for all parties
indemnified by such Indemnifying Party with respect to such claim, unless
in the reasonable judgment of any Indemnified Party a conflict of interest
may exist between such Indemnified Party and any other of such Indemnified
Parties with respect to such claim, in which event the Indemnifying Party
shall be obligated to pay the fees and expenses of such additional counsel
or counsels. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting
therefrom
(d) If the indemnification provided for in this
Section 1.6 is held by a court of competent jurisdiction to be unavailable to
an Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions
which resulted in such loss, liability, claim, damage or expense as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue statement of a material
fact or the omission to state a material fact relates to information supplied
by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission.
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(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
1.7. Information by Holder. Each Holder of Registrable Securities
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.8. Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of a majority in interest of the Holders, enter into any
agreement with any holder or prospective holder of any securities of the
Company giving such holder or prospective holder any registration rights
the terms of which are superior to the rights of the Holders hereunder or
which grant such holder or prospective holder demand registration rights
exercisable prior to those of the Holders under Section 1.2 hereof.
1.9. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may
permit the sale of the Restricted Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities
Act, at all times from and after ninety (90) days following the effective
date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Exchange Act at any time after it has become subject to such
reporting requirements;
(c) So long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request a written statement by
the Company as to its compliance with the reporting requirements of Rule
144 (at any time from and after ninety (90) days following the effective
date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities
Act and 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 so filed as a
Holder may reasonably request m availing itself of any Rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.10. Transfer or Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities granted to a Holder by
the Company pursuant to this Section 1 may be transferred or assigned
by a Holder to (i) any transferee or assignee of not less than
175,000 shares of Registrable Securities (as presently constituted and
subject to subsequent adjustments for stock splits, stock dividends,
reverse stock splits and the like), (ii) any constituent partner or
member of a partnership or limited liability company Holder, respectively,
(iii) any subsidiary or parent of a corporate Holder, (iv) any
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person, trust or other entity if beneficial ownership or the power to vote or
dispose of the Registrable Securities resides in the same person or persons
after the transfer as immediately prior to such transfer or (v) any Holder to
whom rights have been transfered pursuant to clauses (i) through (iv);
provided, however, that the Company is given written notice at the time of or
within a reasonable time after such a transfer or assignment, stating the name
and address of said transferee or assignee and identifying the Securities with
respect to which such registration rights are being transferred or assigned,
and provided further that the transferee or assignee of such rights assumes in
a written instrument provided to the Company the obligations of such Holder
under this Section 1. For purposes of clause (iv) of the foregoing sentence,
where two or more persons share beneficial ownership or power to vote or
dispose of Registrable Securities and such persons take as transferees a
distributive share equal to all or less than all of the Registrable Securities
to which they shared voting or dispositive power prior to the transfer, with
respect to each such person beneficial ownership or the power to vote or
dispose of the Registrable Securities held by them shall be deemed to reside
in the same person as prior to the transfer. In addition, subject to the
approval of the Board of Directors in its sole discretion, the right to cause
the Company to register Registrable Securities granted to a Holder pursuant to
this Section 1 hereof may be assigned or transferred by a Holder to any other
transferee who is an affiliated person or entity of a Holder where such
transfer is of the type intended to be permitted by this Section 1.10. Any
transferee or assignee under the foregoing sentence must assume in a written
instrument provided to the Company the obligations of the transferring Holder
under this Section 1.
1.11. "Market Stand-Off" Agreement. If requested by the Company
and an underwriter of Common Stock (or other securities) of the Company, an
Investor shall not sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the Company held by such Investor (other
than those included in the registration) through the facilities of any
national securities exchange or inter-dealer quotation system including
sales pursuant to Rule 144 during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company
filed under the Securities Act, provided that all officers and directors of
the Company enter into similar agreements.
The obligations described in this Section 1.11 shall not
apply to a registration relating solely to employee benefit plans on
Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule
145 transaction on Form S-4 or similar forms which may be
promulgated in the future. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day
period.
1.12. Delay of Registration. No Holder shall have any right to
take any action to restrain, enjoin, or otherwise delay any registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.13. Termination of Registration Rights. The right of any Holder
to request registration or inclusion in any registration pursuant to this
Agreement shall terminate on the date on which all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
immediately be sold under Rule 144 during any ninety (90) day period.
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1.14. Exclusion from Registration. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in any offering involving an underwriting exceeds the amount of
securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder or in such other
proportions as shall mutually be agreed to by such selling shareholders) but
in no event shall (i) the amount of securities of the selling Holders included
in the offering be reduced below the greater of (A) thirty percent (30%) of
the total amount of securities included in such offering or (B) the total
percentage ownership of Investor in the outstanding Common Stock of the
Company assuming the full conversion of the Series 1 Preferred Stock, (ii) any
shares that a Holder of Registrable Securities wishes to include in the
offering be excluded from such offering until all of the shares that selling
shareholders who are not Holders of Registrable Securities wish to include in
such offering have been excluded from such offering, or (iii) notwithstanding
(i) and (ii) above, any shares being sold by a Holder exercising a
registration right granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling shareholder which is a Holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single "selling shareholder," and any pro-rata
reduction with respect to such "selling shareholder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "selling shareholder," as defined in this
sentence.
1.15. Allocation of Registration Opportunities. In any
circumstance in which all of the Registrable Securities requested to be
included in a registration on behalf of the Holders cannot be so included
as a result of limitations of the aggregate number of shares of Registrable
Securities which may be so included, the number of shares of Registrable
Securities to be included shall be allocated among the Holders requesting
inclusion of shares pro rata on the basis of the number of shares of
Registrable Securities that would be held by such Holders, assuming
conversion; provided, however, that, so that such allocation shall not
operate to reduce the aggregate number of Registrable Securities to be
included in such registration, if any Holder does not request inclusion of
the maximum number of shares of Registrable Securities allocated to him
pursuant to the above-described procedure, the remaining portion of his
allocation shall be reallocated among those requesting Holders whose
allocations did not satisfy their requests pro rata on the basis of the
number of shares of Registrable Securities that would be held by such
Holders assuming conversion, and this procedure shall be repeated until all
of the shares of Registrable Securities that may be included in the
registration on behalf of the Holders have been so allocated. The Company
shall not limit the number of Registrable Securities to be included in a
registration pursuant to this Agreement in order to include shares held by
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shareholders with no registration rights or to include any other shares of
stock issued to employees, officers, directors or consultants pursuant to the
Company's employee stock option plan or plans, or, with respect to
registrations under Section 1.2 hereof, in order to include in such
registration securities registered for the Company's own account.
SECTION 2
Miscellaneous
2.1. Governing Law. This Agreement shall be governed in all
respects by and construed in accordance with the laws of the State of
California as if entered into by and between California residents
exclusively for performance entirely within California.
2.2. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
2.3. Entire Agreement; Amendment; Waiver. This Agreement
(including the Exhibits hereto) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument
signed by the Company and the holders of at least sixty-six percent (66%)
of the Registrable Securities and any such amendment, waiver, discharge or
termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
2.4. Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by United
States first-class mall, postage prepaid, or delivered personally addressed
by hand or special courier (a) if to an Investor, as indicated on the
signature pages hereto, or at such other address as such Investor or
permitted assignee shall have furnished to the Company in writing, or
(b) if to the Company, at its headquarters, 000 Xxxxxxxxxx Xxxxxx,
Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, or at such other address as the
Company shall have furnished to each holder in writing. All such notices
and other written communications shall be effective (i) if mailed,
ten (10) days after mailing and (ii) if delivered personally, upon
delivery.
2.5. Separability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
2.6. Information Confidential. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for
its use only, and it will not use any information designated as
confidential by the Company in violation of the Exchange Act or reproduce,
disclose or disseminate such information to any other person (other than
its employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose
such information by a governmental body.
2.7. Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement.
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2.8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
2.9. No Personal Liabilty. Nothing contained in this Agreement
shall be deemed to impose any personal liability on the part of any
officer, director, shareholder, partner, member, manager or employee of the
Investor or the Company.
IN WITNESS WHEREOF, the parties hereto have executed this
Investors Rights Agreement effective as of the day and year first above
written.
PACIFIC GATEWAY PROPERTIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
Address: 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
INVESTOR:
GEM VALUE/PGP LLC
By: GEM Value Partners, L.L.C.,
Its Managing Member
By: /s/ Xxxxxxx X. Xxxxx
--------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
Address: 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
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