EXHIBIT 10.4
GARDENBURGER, INC.
INVESTOR RIGHTS AGREEMENT
April 14, 1999
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TABLE OF CONTENTS
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Page
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1. Definitions and Accounting Terms........................................1
1.1 Certain Defined Terms..........................................1
1.2 Accounting Terms...............................................4
2. Covenants of the Company................................................4
2.1 Affirmative Covenants of the Company Other
Than Reporting Requirements..................................4
2.2 Reporting Requirements of the Company..........................5
2.3 Inspection of Property.........................................6
2.4 Confidentiality................................................6
3. Registration............................................................7
3.1 Mandatory Registration.........................................7
3.2 Conversion by the Company......................................8
3.3 Piggyback Registration.........................................8
3.4 Expenses of Registration.......................................9
3.5 Further Obligations of the Company.............................9
3.6 Further Information Furnished by Holders......................11
3.7 Indemnification...............................................11
3.8 Rule 144 Reporting............................................13
3.9 Transfer of Registration Rights...............................14
3.10 Subsequent Registration Rights................................14
3.11 `Market Stand-off'Agreement...................................14
3.12 Delay of Registration.........................................14
4. Miscellaneous..........................................................15
4.1 Governing Law.................................................15
4.2 Survival......................................................15
4.3 Successors and Assigns........................................15
4.4 Entire Agreement..............................................15
4.5 Amendments; Waivers...........................................15
4.6 Notices.......................................................15
4.7 Attorneys'Fees................................................16
4.8 Delays or Omissions...........................................16
4.9 Severability of this Agreement................................16
4.10 Titles and Subtitles..........................................16
4.11 Counterparts..................................................16
4.12 Gender........................................................16
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EXHIBITS
INITIAL EXHIBIT
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A Schedule of Investors
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GARDENBURGER, INC.
INVESTOR RIGHTS AGREEMENT
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THIS INVESTOR RIGHTS AGREEMENT ("Agreement") is made as of the ____ day
of April, 1999, by and among GARDENBURGER, INC., an Oregon corporation (the
"Company"), and the investors identified on Exhibit A attached hereto
(collectively, the "Investors").
R E C I T A L S:
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A. The Company and the Investors have entered into the Stock Purchase
Agreement dated March 29, 1999 (the "Stock Purchase Agreement"), pursuant to
which the Investors have purchased an aggregate of two million seven hundred
sixty two thousand five hundred (2,762,500) shares of Series A Convertible
Preferred Stock of the Company and four hundred eighty seven thousand five
hundred (487,500) shares of Series B Convertible Preferred Stock of the Company.
B. As a condition to the Investors' obligations under the Stock
Purchase Agreement, the Company desires to grant the Investors certain rights as
set forth herein.
A G R E E M E N T:
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Now, therefore, in consideration of the foregoing premises and the
mutual covenants set forth herein, the parties agree as follows:
1. DEFINITIONS AND ACCOUNTING TERMS.
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Investor Rights Agreement as from time
to time amended and in effect between the parties.
"Board" or "Board of Directors" means the board of directors
of the Company as constituted from time to time.
"Common Stock" includes (a) the Company's Common Stock, and
(b) any other securities into which or for which any of the Company's Common
Stock may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Directors" means the members from time to time of the Board
of Directors.
"Holder" shall mean any person who holds Registrable
Securities or the rights to hold Registrable Securities which have not been sold
to the public, or any Person to whom any Holder shall sell or transfer pursuant
to Section 3.9 of this Agreement its Registrable Securities and expressly
transfer its rights hereunder.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (b) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
"Preferred Holder" means the Investors and any Person to whom
an Investor shall sell or transfer its Shares pursuant to the terms of this
Agreement and expressly transfer its rights hereunder whether or not Shares are
converted.
"Preferred Holders Designees" means the two members of the
Board of Directors of the Company elected by the Preferred Holders, in
accordance with the Company's Restated Articles.
"Preferred Stock" means the Shares.
"Registrable Securities" shall mean and include all shares of
Common Stock issued or issuable upon conversion of the Preferred Stock or any
security issued in exchange or replacement for the Preferred Stock; PROVIDED,
HOWEVER, that (a) Registrable Securities shall cease to be Registrable
Securities upon the consummation of any sale of such securities pursuant to a
registration statement or Rule 144 under the Securities Act and (b) shall cease
to be Registrable Securities if sold in a transaction in which rights under
Article 3 of this Agreement are not assigned.
"Register", "registered" and "registration" refer to a
registration effected through the preparation and filing of a registration
statement or similar document in compliance with the Securities Act and the
declaration or ordering of effectiveness of such registration statement or
document.
"Registration Expenses" shall mean all expenses incurred by
the Company 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, the expense of any special audits incident to or required
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by any such registration and the reasonable fees and disbursements of one
special legal counsel to represent all of the Holders together (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Registration Statement" means a registration statement on
Form S-3 (if prepared pursuant to Section 3.1) or any other appropriate form (if
prepared pursuant to Section 3.3) prepared and filed with the Securities and
Exchange Commission by the Company pursuant to Section 3 of this Agreement.
"Restated Articles" means the Company's Restated Articles of
Incorporation, as amended, as of the Closing Date as defined in the Stock
Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at the
time.
"Securities and Exchange Commission" means the United States
Securities and Exchange Commission including any governmental body or agency
succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules and regulations
of the Securities and Exchange Commission thereunder, all as the same shall be
in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the Registrable
Securities.
"Series A Stock" means the Series A Convertible Preferred
Stock of the Company.
"Series B Stock" means the Series B Convertible Preferred
Stock of the Company.
"Shares" means the two million seven hundred sixty two
thousand five hundred (2,762,500) shares of Series A Stock and four hundred
eighty seven thousand five hundred (487,500) shares of Series B Stock purchased
by the Investors pursuant to the Stock Purchase Agreement and any securities of
the Company which the Investors or Preferred Holders shall be entitled to
receive, or shall have received, because of the Investors' ownership of such
securities, such as additional securities received upon stock dividends, stock
splits, recapitalizations and the like.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
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or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity. Where not otherwise indicated, the term "Subsidiary" refers to a
Subsidiary of the Company.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
2. COVENANTS OF THE COMPANY.
2.1 AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Except to the extent the following covenants and provisions of
this Section 2.1 are waived in any instance by a majority of the Preferred
Holders, the Company covenants and agrees that so long as not less than three
hundred fifty thousand (350,000) shares of the Preferred Stock outstanding as of
the date hereof remain outstanding, it will perform and observe the following
covenants and provisions:
(a) MEETING OF DIRECTORS AND COMMITTEES. The
Company's Board of Directors shall hold meetings at least quarterly.
(b) INDEMNIFICATION. The Company shall at all times
maintain provisions in its Bylaws or Articles exculpating and indemnifying all
Directors from and against liability to the maximum extent permitted under the
laws of the state of its incorporation.
(c) EXPENSES OF DIRECTORS. The Company shall promptly
reimburse in full the Preferred Holders Designees for all of his reasonable
out-of-pocket expenses incurred in attending each meeting of the Board of
Directors of the Company or any committee thereof.
(d) SHAREHOLDER APPROVAL. The Company shall promptly
seek shareholder approval for any adjustment to the conversion price of the
Series A Stock or Series B Stock required under the terms of the Restated
Articles, including, but not limited to, the preparation of any proxy statement
which shall include, subject to the exercise of fiduciary obligations, a
unanimous recommendation by the Board to approve any such adjustments.
(e) AVAILABLE SHARES. The Company shall have at all
times authorized and reserved for issuance, free from preemptive rights, shares
of Common Stock sufficient to yield the number of shares of Common Stock
issuable at conversion as may be required to satisfy the conversion rights of
the Investors pursuant to the terms and conditions of the Preferred Stock,
including the maximum conversion of Series B Stock under the Restated Articles.
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2.2 REPORTING REQUIREMENTS OF THE COMPANY. Until less than
three hundred fifty thousand (350,000) shares of Preferred Stock is outstanding,
the Company will furnish the following to Rosewood Capital III, L.P. and
Farallon Capital Management LLC, so long as such Investor (or their affiliates)
continues to own shares of Preferred Stock:
(a) MONTHLY REPORTS. As soon as available but in any
event within 30 days after the end of each monthly accounting period in each
fiscal year, unaudited consolidating and consolidated statements of income of
the Company and its Subsidiaries for such monthly period and for the period from
the beginning of the fiscal year to the end of such month, and unaudited
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting forth in each case
comparisons to the Company's annual budget and to the corresponding period in
the preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to the absence of footnote disclosures and to normal year-end
adjustments, and shall be certified by the Company's chief financial officer.
(b) NO DEFAULT. Accompanying the financial statements
referred to in subsection 2.2(a) is an officer's certificate stating that there
is no event of default in existence and that neither the Company nor any of its
Subsidiaries is in default under any of its other material agreements or, if any
event of default or any such default exists, specifying the nature and period of
existence thereof and what actions the Company and its Subsidiaries have taken
and propose to take with respect thereto.
(c) ANNUAL REPORTS. Within 90 days after the end of
each fiscal year, consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, all prepared in accordance with
generally accepted accounting principles, consistently applied, setting forth in
each case comparisons to the Company's annual budget and to the preceding fiscal
year, and accompanied by (a) with respect to the consolidated portions of such
statements, an opinion of an independent accounting firm of recognized national
standing, (b) a certificate from such accounting firm, addressed to the
Company's board of directors, stating that in the course of its examination
nothing came to its attention that caused it to believe that there was an event
of default in existence or that there was any other default by the Company or
any Subsidiary under any material agreement to which the Company or any
Subsidiary is a party or, if such accountants have reason to believe any event
of default or other default by the Company or any Subsidiary exists, a
certificate specifying the nature and period of existence thereof, and (c) a
copy of such firm's annual management letter to the board of directors.
(d) AUDITOR REPORTS. Promptly upon receipt thereof,
any additional reports, management letters or other detailed information
concerning significant aspects of the Company's or any Subsidiary's operations
or financial affairs given to the Company or any Subsidiary by its independent
accountants (and not otherwise contained in other materials provided hereunder).
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(e) ANNUAL BUDGET. At least 30 days but not more than
90 days prior to the beginning of each fiscal year, an annual budget prepared on
a monthly basis for the Company and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and cash flows and balance sheets),
and promptly upon preparation thereof any other significant budgets prepared by
the Company or any Subsidiary and any revisions of such annual or other budgets,
and within 30 days after any monthly period in which there is a material adverse
deviation from the annual budget, an officer's certificate explaining the
deviation and what actions the Company and its Subsidiaries have taken and
propose to take with respect thereto.
(f) DEFAULT NOTICE. Promptly (but in any event within
five business days) after the discovery or receipt of notice of any event of
default or any default under any material agreement to which the Company or any
of its Subsidiaries is a party or any other material adverse change, event or
circumstance affecting the Company or any Subsidiary, an officer's certificate
specifying the nature and period of existence thereof and what actions the
Company and its Subsidiaries have taken and propose to take with respect
thereto.
(g) STOCKHOLDER INFORMATION. Within two days after
transmission thereof, copies of all financial statements, proxy statements,
reports and any other general written communications which the Company sends to
its stockholders and copies of all registration statements and all regular,
special or periodic reports which it files, or any of its officers or directors
file with respect to the Company, with the Securities and Exchange Commission or
with any securities exchange on which any of its securities are then listed, and
copies of all press releases and other statements made available generally by
the Company to the public concerning material developments in the Company's and
its Subsidiaries' businesses.
(h) OTHER INFORMATION. With reasonable promptness,
such other information and financial data concerning the Company and its
Subsidiaries as any Investor may reasonably request. Any financial statements
provided in accordance with Section 2.2 shall be true and correct in all
material respects as of the dates and for the periods stated therein, subject in
the case of the unaudited financial statements to changes resulting from normal
year-end adjustments.
2.3. INSPECTION OF PROPERTY. The Company shall permit any
representatives designated by any Preferred Holder of at least 25% of the
Preferred Stock originally issued, upon reasonable notice and during normal
business hours and at such other times as any such holder(s) may reasonably
request, to (i) visit and inspect any of the properties of the Company and its
Subsidiaries, (ii) examine the corporate and financial records of the Company
and its Subsidiaries and make copies thereof or extracts therefrom and (iii)
discuss the affairs, finances and accounts of the Company with its directors,
officers, and, upon notice to the Company, its independent accountants.
2.4 CONFIDENTIALITY. With respect to the information and other
material furnished under or in connection with this Agreement or any Ancillary
Agreement (whether furnished before, on or after the date hereof) which
constitutes or contains non-public business, financial or other information of
the Company ("Non-Public Information"), each Purchaser covenants that it will
use due care to prevent its officers, directors, employees, counsel, accountants
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and other representatives from (x) disclosing any Non-Public Information to
Persons other than Purchaser's authorized employees, counsel, accountants,
financial advisors, shareholders, members, partners and limited partners or (y)
using Non-Public Information in any manner that would constitute a violation of
federal or state securities laws; provided, however, that the Purchaser may
disclose or deliver any Non-Public Information if the Purchaser is advised by
its counsel that such disclosure or delivery is required by law, regulation or
judicial or administrative order. The Company shall notify the Purchasers of any
restricted trading periods under the Company's xxxxxxx xxxxxxx policy in effect
from time to time. For purposes of this Section 2.4, "due care" means at least
the same level of care that the Purchaser would use to protect the
confidentiality of its own sensitive or proprietary information, and this
obligation shall survive termination of this Agreement. A Purchaser shall not be
prohibited from transferring its beneficial interest in the Shares and after
reasonable notice to the Company, disclosing any Non-Public Information to any
Person who agrees to be bound by the provisions of this Section 2.4.
3. REGISTRATION.
3.1 MANDATORY REGISTRATION. The Company shall prepare and file
with the Securities and Exchange Commission, no later than May 31, 1999, a
Registration Statement registering for resale by the Holders a sufficient number
of shares of Common Stock for the Preferred Holders to sell the Registrable
Securities into which the Preferred Stock would be convertible at the time of
filing of such Registration Statement (assuming for such purposes that all
shares of Preferred Stock had been converted into Common Stock in accordance
with their terms, including, with respect to the Series B Stock, that the
Company did not achieve the performance targets set forth in the Designation of
Terms of the Series B Stock attached to the Company's Restated Articles). The
Registration Statement (i) shall include only the Registrable Securities and
(ii) shall also state that, in accordance with Rule 416 under the Securities
Act, it also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock resulting
from adjustment in the conversion price or to prevent dilution resulting from
stock splits or stock dividends. The Company will use its reasonable best
efforts to cause such Registration Statement to be declared effective no later
than the earlier of (x) five (5) days after notice by the Securities and
Exchange Commission that it may be declared effective or (y) one hundred twenty
(120) days after the Closing Date as defined in the Stock Purchase Agreement
(the "Required Effective Date"). If at any time the number of shares of Common
Stock into which the Preferred Stock may be converted exceeds the aggregate
number of shares of Common Stock then registered, the Company shall either (i)
amend the Registration Statement filed by the Company pursuant to the preceding
provisions of this Section 3.1, if such Registration Statement has not been
declared effective by the Securities and Exchange Commission at that time, to
register all shares of Common Stock into which the Preferred Stock may currently
or in the future be converted, or (ii) if such Registration Statement has been
declared effective by the Securities and Exchange Commission at that time, file
with the Securities and Exchange Commission an amendment to or an additional
Registration Statement to register the shares of Common Stock into which the
Preferred Stock may currently or in the future be converted that exceed the
aggregate number of shares of Common Stock already registered.
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3.2 CONVERSION BY THE COMPANY. The Company's Restated Articles
shall provide that if the Registration Statement covering the Registrable
Securities is not effective by the Required Effective Date, then the conversion
price of the Preferred Stock shall be reduced five percent (5%) for each ninety
(90) day period or portion thereof after the Required Effective Date that the
Registration Statement is not effective; provided, that this provision in the
Restated Articles shall expire if the Registration Statement covering the
Registrable Securities is effective by the Required Effective Date.
3.3 PIGGYBACK REGISTRATION.
(a) NOTICE OF REGISTRATION. If, at any time or from
time to time the Company shall determine to register any of its securities for
its own account or for the account of any person or shareholder in connection
with an offering of its securities to the general public for cash on a form
which would permit the registration of Registrable Securities, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after mailing or
personal delivery of such written notice from the Company, by any Holders,
except as set forth in Section 3.3(b).
(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 3.3(a)(i). In such event, the right of any
Holder to registration pursuant to this Section 3.3 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through
such underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. Notwithstanding any other provision of this
Section 3.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the Company shall so
advise all Holders whose securities would otherwise be registered and
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting determined pursuant to
the following priority: (i) shares to be offered by the holders of the 7%
Convertible Senior Subordinated Notes dated March 27, 1998 (the "Dresdner
Notes"), (ii) shares to be offered by the holders of Series A Preferred and
Series B Preferred, on a pro rata basis in proportion to the relative number of
shares requested to be included by them and (iii) shares of Common Stock to be
offered by holders other than the holders of the Dresdner Notes and/or the
Series A Preferred and Series B Preferred; or, if so determined by the
underwriter, all Registrable Securities shall be excluded from each registration
and underwriting. If any Holder disapproves of the terms of any such
underwriting, the Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter. Any Registrable Securities excluded or
withdrawn from such underwriting shall not be transferred in a public
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distribution prior to ninety (90) days after the effective date of such
registration statement.
3.4 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, filing, qualification or
compliance pursuant to Sections 3.1 or 3.3 shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to securities registered by the
Holders shall be borne by the holders of such securities pro rata on the basis
of the number of shares so registered.
3.5 FURTHER OBLIGATIONS OF THE COMPANY. For purposes of
Sections 3.5(a) and (b), the term "Registration Statement" specifically refers
to the Registration Statement required by Section 3.1. For purposes of Sections
3.5(c) and (d), the term "Registration Statement" specifically refers to the
Registration Statement required by Section 3.3. For all other subsections in
this Section 3.5, the term "Registration Statement" refers to the Registration
Statement required by either Sections 3.1 or 3.3, as the case may be. Whenever
required under this Section 3 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously and as reasonably possible:
(a) Use its reasonable efforts to keep the
Registration Statement effective at all times until the date the Holders no
longer own any of the Registrable Securities (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(b) Prepare and file with the Securities and
Exchange Commission such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement.
(c) Prepare and file with the Securities and
Exchange Commission 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 the Holders of a majority of the
Registrable Securities registered thereunder, keep such Registration Statement
effective for up to one hundred twenty (120) days or until the Holder or Holders
have completed the distribution described in the Registration Statement,
whichever first occurs.
(d) Prepare and file with the Securities and
Exchange Commission 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
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respect to the disposition of all securities covered by such Registration
Statement.
(e) The Company shall permit one or more counsel
designated by the Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (but not less
than three (3) business days) prior to their filing with the Securities and
Exchange Commission, and not file any document in a form to which such counsel
reasonably objects.
(f) Furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel
identified to the Company, (i) promptly after the same is prepared and publicly
distributed, filed with the Securities and Exchange Commission, or received by
the Company, one (1) copy of the Registration Statement, each preliminary
prospectus and prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a prospectus, and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor.
(g) As promptly as practicable after becoming aware
thereof, notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the 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, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
Securities and Exchange Commission to correct such untrue statement or omission,
and deliver a number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request.
(h) As promptly as practicable after becoming aware
thereof, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Securities and Exchange Commission of any notice of
effectiveness or any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time.
(i) Notwithstanding the foregoing, if at any time or
from time to time after the date of effectiveness of the Registration Statement,
the Company notifies the Investors of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
for more than two thirty (30) day periods in the aggregate during any 12-month
period with at least a ten (10) business day interval between such periods,
during the periods the Registration Statement is required to be in effect.
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(j) Use its reasonable efforts to obtain and
maintain designation of all the Registrable Securities covered by the
Registration Statement on the "National Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the Securities and Exchange Commission under the Securities
Exchange Act, and the quotation of the Registrable Securities on The NASDAQ
National Market; or if, despite the Company's reasonable efforts to satisfy the
preceding clause, the Company is unsuccessful in doing so, to secure NASDAQ/OTC
Bulletin Board authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. as such with respect to such Registrable Securities.
(k) Provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(l) Cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the Securities and Exchange Commission, the Company shall deliver,
and shall cause legal counsel selected by the Company to deliver, to the
transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement) an
appropriate instruction and opinion of such counsel.
(m) 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. Each Holder participating in such underwriting shall also enter into
and perform his or its obligations under such agreement.
(n) Take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of the Registrable
Securities pursuant to the Registration Statement.
3.6 FURTHER INFORMATION FURNISHED BY HOLDERS. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Section 3 that the Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities as shall be required to
effect the registration of their Registrable Securities.
3.7 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, each of the officers, directors,
partners, legal counsel and other agents of each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
-11-
controls such Holder or underwriter within the meaning of the Securities Act or
Securities Exchange Act, against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Securities Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading; or (iii) any violation or alleged
violation by the Company of the Securities Act, the Securities Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Securities Exchange Act or any state securities law; and the Company
will reimburse each such Holder, officer, director, partner or agent,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this Section 3.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each Holder
will, if Registrable Securities held by such person are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify and hold harmless the Company, each of its directors and
officers, each legal counsel and independent accountant of the Company, each
person, if any, who controls the Company within the meaning of the Securities
Act, each underwriter (within the meaning of the Securities Act) of the
Company's securities covered by such a registration statement, any person who
controls such underwriter, and any other Holder selling securities in such
registration statement and each of its directors, officers, partners or agents
or any person who controls such Holder, against any losses, claims, damages, or
liabilities (joint or several) to which the Company or any such underwriter,
other Holder, director, officer, partner or agent or controlling person may
become subject under the Securities Act, the Securities Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration, and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such underwriter, other Holder, officer, director, partner or
agent or controlling person in connection with investigating or defending any
such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 3.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder which consent shall not
be unreasonably withheld, and PROVIDED, FURTHER, that the liability of any
-12-
Holder for indemnification pursuant to this Section 3.7(b) shall not exceed the
net cash proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 3.7 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 3.7,
notify the indemnifying party in writing of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure of any
indemnified party to notify an indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 3.7 only to the extent that such failure to
give notice shall materially prejudice the indemnifying party in the defense of
any such claim or any such litigation, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 3.7.
(d) Notwithstanding the conditions provided in this
Section 3, the Holders shall not be required to enter into an underwriting
agreement that contains indemnification and contribution provisions which, in
the sole discretion of the Holder, materially differ from those contained in
this Section 3.7.
3.8 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Securities and Exchange Commission that may at
any time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available as
those terms are understood and defined in the Securities and Exchange Commission
Rule 144;
(b) use its best efforts to take such action,
including the voluntary registration of its Common Stock under Section 12 of the
Securities Exchange Act, as is necessary to enable the Holders to utilize Form
S-3 for the sale of their Registrable Securities;
(c) use its best efforts to file with the Securities
and Exchange Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Securities Exchange Act
(at any time after it has become subject to such reporting requirements); and
13-
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Securities and
Exchange Commission Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company), the
Securities Act and the Securities Exchange Act (at any time after it has become
subject to such reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the Securities and Exchange Commission which permits
the selling of any such securities without registration or pursuant to such
form.
3.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of such Holder's Registrable
Securities, provided that the Company is, prior to such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
PROVIDED, HOWEVER, that the transferee or assignee becomes a party to this
Agreement.
3.10 SUBSEQUENT REGISTRATION RIGHTS. From and after the date
of this Agreement and so long as at least 20% of the Shares (including the
Registrable Securities) originally issued remain outstanding, the Company may
not, without the prior written consent of the Holders of a majority of the
outstanding Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which provides such holder
or prospective holder of securities of the Company comparable information and
registration rights granted to the Holders hereby.
3.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees
that it will not, to the extent requested by the Company and an underwriter of
Common Stock (or other securities) of the Company sell or otherwise transfer or
dispose of any Registrable Securities to the public, except Common Stock
included in such registration, during the ninety (90) day period following the
effective date of a registration statement of the Company filed under the
Securities Act; PROVIDED, HOWEVER, that all other Persons with registration
rights (whether or not pursuant to this Agreement) and all officers, directors
and holders of more than five percent (5%) of the then outstanding voting
capital stock of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such 90-day period.
3.12 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 3.
-14-
4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Oregon without application of principles of
conflicts of law.
4.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchasers
and the closing of the transactions contemplated hereby.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
4.4 ENTIRE AGREEMENT. This Agreement delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties.
4.5 AMENDMENTS; WAIVERS. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) by the written
consent provided (i) as to the Company, only by the Company, (ii) as to the
Preferred Holders, by persons holding more than fifty percent (50%) in interest
of the outstanding Preferred Stock (including any Common Stock issued upon
conversion thereof, and including shares transferred to any assignee of the
right or obligation to be amended or waived), PROVIDED, HOWEVER, that any
Preferred Holder may waive any of his or its rights hereunder without obtaining
the consent of any other Preferred Holder. Any amendment or waiver effected in
accordance with this Section 4.5 excluding the proviso in the previous sentence
shall be binding upon each holder of any of the Preferred Stock (including
shares of Common Stock issued upon conversion thereof), its successors and
assigns and the Company.
4.6 NOTICES. All notices, requests, demands and other
communications required to or permitted to be given under this Agreement shall
be in writing and shall be conclusively deemed to have been duly given when hand
delivered to the other party; when received when sent by facsimile; PROVIDED,
HOWEVER, that notices given by facsimile shall not be effective unless either a
duplicate copy of such facsimile notice is promptly given by depositing same in
a United States post office with first-class postage prepaid, or the receiving
party delivers a written confirmation of receipt for such notice either by
facsimile or any other method permitted under this paragraph; ADDITIONALLY, any
notice given by facsimile shall be deemed received on the next business day if
such notice is received after 5:00 p.m. (recipient's time) or on a non-business
day; three (3) business days after the same have been deposited in a United
States post office with first class or certified mail return receipt requested
postage prepaid; or the next business day after same have been deposited with a
national overnight delivery service, postage prepaid with next-business-day
delivery guaranteed; PROVIDED that the sending party receives a confirmation of
delivery from the delivery service provider. If notice is to be given to the
Investors, such notice will be given, delivered or sent to the address appearing
on Exhibit A, and if notice is to be given to the Company, such notice will be
given to Gardenburger, Inc., 0000 X.X. Xxxxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx
00000, telephone number: (000) 000-0000, facsimile number: (000) 000-0000,
Attention: President.
-15-
Each party shall make an ordinary, good faith effort to ensure that it
will accept or receive notices that are given in accordance with this Section
and that any person to be given notice actually receives such notice. A party
may change or supplement its address for notice, or designate additional
addresses, for purposes of this Section by giving the other party written notice
of the new address in the manner set forth above.
4.7 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, at trial and on appeal, in addition to any other relief to which
each party may be entitled.
4.8 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach or default of
another party under this Agreement, shall impair any such right, power or remedy
of such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies either under this Agreement, or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
4.9 SEVERABILITY OF THIS AGREEMENT. In case any provision of
this 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.
4.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
4.11 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.
4.12 GENDER. The use of the neuter gender herein shall be
deemed to include the masculine and feminine gender, if the context so requires.
-16-
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement as of the
date first above written.
"THE COMPANY"
GARDENBURGER, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxx, Executive Vice
President and Chief Financial Officer
"INVESTORS"
ROSEWOOD CAPITAL III, L.P.
By: Rosewood Capital Associates, LLC, General
Partner
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------------
Xxxx X. Xxxxxxxx, Principal
FARALLON CAPITAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P.
TINICUM PARTNERS, L.P.
FARALLON CAPITAL (CP) INVESTORS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Managing Member
Investor Rights Agreement Signature Page
FARALLON CAPITAL OFFSHORE INVESTORS, INC.
THE COMMON FUND
By: Farallon Capital Management, L.L.C., its
Agent and Attorney-in-Fact
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Managing Member
U.S. Development Capital Investment Company
By: /s/ Xxxxx X. Xxxx
----------------------------------------------
Xxx Xxxx, Secretary
BT Capital Investors, L.P.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------------
Xxxxxxx X. Xxxxx, III, Partner
BT Investment Partners, Inc.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------------
Xxxxxxx X. Xxxxx, III, Partner
/s/ Xxxxx X. Xxxx
-------------------------------------------------
Xxxxx X. Xxxx
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------------
Xxxxxxx X. Xxxxxxxxx
Lagunitas Partners, X.X.
Xxxxxx & McBaine International
Lockheed Xxxxxx
Xxxxxxxx College
By: /s/ Xxxxxxx XxXxxxx
----------------------------------------------
X. Xxxxxxxxx XxXxxxx,
Xxxxxx & McBaine Capital Management LLC,
Member Manager
Lagunitas Partners, L.P. - General Partner
Xxxxxx & XxXxxxx International - Attorney in
Fact
Lockheed Xxxxxx - Attorney in Fact
Xxxxxxxx College - Attorney in Fact
Investor Rights Agreement Signature Page
(continued)
EXHIBIT A
SCHEDULE OF INVESTORS
TOTAL PURCHASE
PURCHASER NAME, NO. OF SHARES NO. OF SHARES AMOUNT
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
------------------------------------------------- ----------------- ----------------- --------------
Rosewood Capital III, L.P. 850,000 150,000 $10,000,000
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
(000) 000-0000
Farallon Capital Partners, L.P* 238,000 42,000 $2,800,000
Farallon Capital Institutional Partners, L.P.* 255,000 45,000 $3,000,000
Farallon Capital Institutional Partners II, L.P.* 42,500 7,500 $500,000
Farallon Capital Offshore Investors, Inc.* 212,500 37,500 $2,500,000
The Common Fund* 8,500 1,500 $100,000
Farallon Capital (CP) Investors, L.P.* 25,500 4,500 $300,000
Farallon Capital Institutional Partners III, L.P.* 51,000 9,000 $600,000
Tinicum Partners, L.P.* 17,000 3,000 $200,000
BT Capital Investors, L.P. 425,000 75,000 $5,000,000
Attn: Xxxxxxx X. Xxxxx III
000 Xxxxxxx Xxxxxx, Mailstop 2255
Xxx Xxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
BT Investment Partners, Inc. 127,500 22,500 $1,500,000
--------
**c/o Farallon Capital Management LLC, Xxx Xxxxxxxx Xxxxx, Xxxxx 0000, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000, Attn: Xxxxx Xxxx and Xxxxx Xxxxx,
Facsimile: (000) 000-0000.
A-1
TOTAL PURCHASE
PURCHASER NAME, NO. OF SHARES NO. OF SHARES AMOUNT
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
------------------------------------------------- ----------------- ----------------- --------------
U.S. Development Capital Investment Company 127,500 22,500 $1,500,000
Attn: Xxx Xxxx, Secretary
000 Xxxxxxxxx Xxxx Xxxxxx, Xxxxx 000
1000 Xxxxxxxxx Road, N.E.
Xxxxxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
Lagunitas Partners, L.P. 191,250 33,750 $2,250,000
Attn: X. Xxxxxxxxx McBaine, Member Manager
00 Xxxxxx Xxxxx, Xxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
Xxxxxx & McBaine International 63,750 11,250 $750,000
Lockheed Xxxxxx 59,500 10,500 $700,000
Xxxxxxxx College 25,500 4,500 $300,000
Xxxxx X. Xxxx 21,250 3,750 $250,000
00 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
Xxxxxxx X. Xxxxxxxxx 21,250 3,750 $250,000
000 X. Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
Total 2,762,500 487,500 $32,500,000
A-2
