INVESTORS RIGHTS AGREEMENT
THIS INVESTORS RIGHTS AGREEMENT (this "Agreement") is made as of
January 9, 1998, by and among Oregon Baking Company, dba ▇▇▇▇▇▇ Baking (the
"Company"), and each purchaser of the Company's Series C Preferred Stock and
Series D Preferred Stock who executes a signature page to this Agreement
(individually, an `Investor" and collectively, the "Investors").
The parties hereby agree as follows:
1. GENERAL
1.1 DEFINITIONS. As used in this Agreement, the following terms will
have the following respective meanings:
(a) "Agreement" has the meaning set forth in the first paragraph
hereof.
(b) "Company" has the meaning set forth in the first paragraph of
this Agreement.
(c) "Equity Securities" means (i) any Common Stock, Preferred
Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security of the
Company (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security of the Company or (iv) any such
warrant or right.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Holder" means any person owning of record Registrable
Securities or any assignee of record of such Registrable Securities in
accordance with section 2.9 hereof.
(f) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
(g) "Initiating Holders" means the Holders of at least 20% of the
Registrable Securities then outstanding.
(h) "Investor" has the meaning set forth in the first paragraph
of this Agreement.
(i) "Qualified Public Offering" means a public offering of equity
securities of the Company having an aggregate offering price to the public in
excess of $7,500,000.
INVESTORS RIGHTS AGREEMENT
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(j) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
(k) "Registrable Securities" means (i) Common Stock of the
Company issued or issuable upon conversion of the Shares; and (ii) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities will not include any securities sold by a person to the public either
pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
(l) "Registrable Securities then outstanding" means the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (i) are then issued and
outstanding or (ii) are issuable pursuant to then exercisable or convertible
securities.
(m) "Registration Expenses" means all expenses incurred by the
Company in complying with Sections 2.2 and 2.3, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which will be paid in any
event by the Company).
(n) "Securities Act" means the Securities Act of 1933, as
amended.
(o) "Selling Expenses" means all underwriting discounts and
selling commissions applicable to the sale.
(p) "Shares" means the Company's Series C Preferred Stock and/or
Series D Preferred Stock sold to an Investor.
(q) "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC that permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Violation" has the meaning set forth in Section 2.8(a) of
this Agreement.
INVESTORS RIGHTS AGREEMENT
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2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER
(a) No Holder will make any disposition of all or any portion of
the Shares or Registrable Securities unless and until:
(1) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(2) (a) The transferee has agreed in writing to be bound by this
Section 2.1, (b) such Holder has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (c) if reasonably
requested by the Company, such Holder has furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Securities Act.
(3) Notwithstanding the provisions of sections 2.1(a)(1) and
2.1(a)(2), no such registration statement or opinion of counsel will be
necessary for a transfer by a Holder that is (a) a partnership to its partners
or former partners in accordance with partnership interests, (b) a corporation
to its shareholders in accordance with their interests in the corporation, (c) a
limited liability company to its members or former members in accordance with
their interests in the limited liability company, or (d) to a Holder's family
member or trust for the benefit of an individual Holder or a Holder's family
member or members, provided that the transferee will be subject to the terms of
this Section 2.1 to the same extent as if he, she or it were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable
Securities will be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company will reissue promptly unlegended certificates at
the request of any holder thereof if the holder has obtained an opinion of
counsel (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities represented by such certificate,
INVESTORS RIGHTS AGREEMENT
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may lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities will be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 PIGGYBACK REGISTRATION
(a) The Company will notify all Holders of Registrable Securities
in writing at least 30 days prior to the filing of any registration statement
under the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans or with respect to corporate
reorganizations or other business combination or acquisition transactions under
Rule 145 of the Securities Act, as amended from time to time, or any successor
rule thereto) and will afford each such Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder. Each Holder desiring to include in any such registration statement all
or any part of the Registrable Securities (in the case of a Holder) held by it
will, within 15 days after the above-described notice from the Company, so
notify the Company in writing. Such notice will state the intended method of
disposition of the securities by such person. If a Holder decides not to include
all such securities in any registration statement thereafter filed by the
Company, such person will nevertheless continue to have the right to include any
such securities in any subsequent such registration statement or registration
statements as may be filed by the Company with respect to offerings or its
securities, all upon the terms and subject to the conditions set forth herein.
(b) If the registration statement under which the Company gives
notice under this Section 2.2 is for an underwritten offering, the Company will
so advise the Holders of Registrable Securities as a part of such notice. In
such event, the right of any Holder to be included in a registration pursuant to
this Section 2.2 will be conditioned upon Holder's participation in such
underwriting and the inclusion of such person's securities as described above in
the underwriting to the extent provided herein. All such persons proposing to
distribute their securities through such underwriting will 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 the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting will
be allocated on a pro rata basis based upon the number of shares entitled to be
included in such registration between the Holders and any other shareholders to
whom the Company hereinafter grants such registration rights. Notwithstanding
the foregoing, in no event will the amount of securities of the selling holders
included in the registration be reduced below 20% of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
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shareholders, in which event any or all of the securities of Holders may be
excluded in accordance with the advice of the Company's underwriters.
(c) The Company will have the right to terminate or withdraw any
registration initiated by it under this Section 2.2 prior to the effectiveness
of such registration whether or not any Holder has elected to include securities
in such registration. The Registration Expenses of such withdrawn registration
will be borne by the Company in accordance with Section 2.4.
2.3 FORM S-3 REGISTRATION
(a) If the Company receives a written request from the Initiating
Holders that the Company file a registration statement on Form S-3 under the
Securities Act covering the registration of Registrable Securities having an
aggregate offering price to the public in excess of $1,000,000, then the Company
will, within 10 days of the receipt thereof, give written notice of such request
to all other Holders and effect, as soon as practicable, the registration on
Form S-3 under the Securities Act of all Registrable Securities that the Holders
request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they will so advise the Company as a part of their request made pursuant to this
Section 2.3 and the Company will include such information in the written notice
referred to in Section 2.3(a). In such event, the right of any Holder to include
its Registrable Securities in such registration will 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) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company (which underwriter or underwriters will be reasonably acceptable to a
majority in interest of the Initiating Holders). Notwithstanding any other
provision of this Section 2.3, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company will so advise
all Holders of Registrable Securities that would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting will be allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting will be withdrawn from the registration.
(c) The Company will not be required to effect more than one (1)
registration pursuant to this Section 2.3 per any twelve (12) month period or
if:
(1) Form S-3 (or any similar form) is not available for such
offering by the Holders, or
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(2) the Company furnishes to the Holders a certificate signed by
the Board of Directors stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration to be effected at such time, in which
event the Company will have the right to defer such filing for a period of not
more than 120 days after receipt of the request of the Initiating Holders;
provided that such right to delay a request will be exercised by the Company nor
more than once in any one-year period.
2.4 EXPENSES OF REGISTRATION. Except as specifically provided in this
Agreement, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.2 or 2.3 will be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder will be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company will not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.3, the request of which has been
subsequently withdrawn by the Initiating Holders unless the withdrawal is based
upon material adverse information concerning the Company of which the Initiating
Holders were not aware at the time of such request. If the Holders are required
to pay the Registration Expenses, such expenses will be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company will, as soon as
practicable:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective and keep such registration
statement effective for up to 120 days or, if earlier, until the participating
Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as will be reasonably requested by the Holders.
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(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter or underwriters of such offering. Each
Holder participating in such underwriting will also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(g) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (1) an opinion, dated as of 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 and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (2) a letter,
dated as of such date, from the independent certified public accountants to the
Company, in form and substance as is customarily given to underwriters in an
underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.
2.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 2 will terminate and be of no further force and
effect three years after the closing of the Company's Initial Offering. In
addition, a Holder's registration rights will expire if (a) the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act and (b) all Registrable Securities held by such Holder (together with its
affiliates, partners and former partners) may be sold under Rule 144 during any
91-day period.
2.7 DELAY OF REGISTRATION; FURNISHING INFORMATION
(a) No Holder will have any right to obtain or seek an injunction
restraining or otherwise delaying any registration hereunder as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It will be a condition precedent to the obligations of the
Company to take any action pursuant to Sections 2.2 or 2.3 that the selling
Holders will furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as will be requested by the Company and required to effect the
registration of such Holder's Registrable Securities.
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2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2 or 2.3:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, shareholders, officers, directors
and legal counsel of such Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages, or liabilities (joint or several) to which any of
such persons may become subject 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 (individually a
"Violation") by the Company: (1) 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; (2) 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 (3) any violation of any rule or
regulation promulgated under the Securities Act, the Exchange Act, or any state
securities law in connection with the offering covered by such registration
statement; and the Company will reimburse each such Holder, partner,
shareholder, officer, director, 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 2.8(a) will 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 will not be unreasonably withheld, nor will 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 that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration is being effected, indemnify and hold harmless the
Company, each of its directors, officers and legal counsel, any underwriter (as
defined in the Securities Act) for the Company and each person, if any, who
controls the Company or underwriter within the meaning of the Securities Act,
and any other Holder selling securities under such registration statement, any
of such of the Holder's partners, shareholders, directors, officers, or legal
counsel, any underwriter (as defined in the Securities Act) for such Holder or
any person who controls such Holder or underwriter, against any losses, claims,
damages or liabilities (joint or several) to which any of such persons may
become subject under the Securities Act, the 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 by the Company, 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 under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by any such
INVESTORS RIGHTS AGREEMENT
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person in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.8(b) will 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 will not be unreasonably withhold; provided
further, that in no event will any indemnity under this Section 2.8(b) exceed
the net proceeds from the offering received by the indemnifying Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.8 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 2.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party will 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 will
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 to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, will relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.8.
(d) If the indemnification provided for in this Section 2.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, will to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage, or liability 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 Violation or Violations that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party will be determined by a court of law by reference to,
among other things, whether the untrue or alleged 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; provided, that in no event will any contribution by
a Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and the Holders under this
Section 2.8 will survive completion of any offering of Registrable Securities in
a registration statement. No indemnifying party, in the defense of any such
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claim or litigation, will, except with the consent of each indemnified party,
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 such Indemnified Party of a release from all liability in respect to such
claim or litigation.
(f) The obligations of the Holders under this section 2.8 are
several and not joint.
2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner, or retired partner of a
Holder, provided the transferee agrees in writing to be subject to the terms of
this Agreement to the same extent as if the transferee were the original Holder
hereunder, (b) is a Holder's family member or trust for the benefit of an
individual Holder or a Holder's family member of members, or (c) acquires at
least 10,000 shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, that the transferor will, within 10 days after
such transfer, furnish to the Company 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 and such transferee will agree to be
subject to all restrictions set forth in this Agreement.
2.10 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively) only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
2.10 will be binding upon each Holder and Company.
2.11 "MARKET STAND-OFF" AGREEMENTS. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder will not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by
representative of the underwriters not to exceed 180 days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided that the obligations described in this Section 2.11
will not apply to a registration relating solely to employee benefit plans or a
registration relating solely to a SEC Rule 145 transaction. The Company may
impose stop-transfer instructions with respect to the shares of Common Stock (or
other securities) subject to the foregoing restriction until the end of said
period.
2.12 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Registrable Securities to the public without registration, the
Company will:
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(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish
to such Holder promptly upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING
(a) The Company will maintain true books and records of account
in which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as will be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of
the Company, and in any event within 90 days thereafter, the Company will
furnish each Investor an audited consolidated balance sheet of the Company as at
the end of such fiscal year, and audited consolidated statements of income, cash
flows and shareholders' equity of the Company for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements will be
accompanied by a report and opinion thereon by independent public accountants
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within 30 days
thereafter, a consolidated balance sheet of the Company as of the end of each
such quarterly period and consolidated statements of income, cash flows and
stockholders' equity of the Company for the same period, and a consolidated
balance sheet of the Company as of the end of each such current fiscal year to
date and consolidated statements of income cash flows and stockholders' equity
of the Company for the same period, prepared in accordance with generally
accepted accounting principles consistently applied, with the exception that no
INVESTORS RIGHTS AGREEMENT
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notes need to be attached to such statements and year-end audit adjustments need
not have been made.
3.2 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Series C and Series D Preferred Stock, all Common Stock issuable from
time to time upon such conversion.
3.3 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 will expire and terminate at the same time as the Registration
Rights terminate under Section 2.6.
4. RIGHTS OF FIRST REFUSAL
4.1 SUBSEQUENT OFFERINGS BY THE COMPANY. Subject to the terms and
conditions specified in this Section 4.1, the Company hereby grants to the
Investor a right of first offer with respect to future sales by the Company of
its First Offer Shares (as hereinafter defined). For purposes of this Section
4.1, Investor includes any general partners and affiliates of Investor. Investor
shall be entitled to apportion the right of first offer hereby granted it among
itself and its partners and affiliates in such proportions as it deems
appropriate. Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("First Offer Shares"), the Company shall first make an offering
of such First Offer Shares to the Investor in accordance with the following
provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Investor stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after giving of the Notice, the
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock held by or issuable to
Investor upon conversion of the shares of Series C Preferred Stock and/or Series
D Preferred Stock then held by such Investor bears to the total number of shares
of Common Stock of the Company then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities) issued and held.
(c) If all Shares referred to in the Notice which Investor is
entitled to obtain pursuant to subsection 4.1(b) are not elected to be obtained
as provided in such subsection, the Company may, during the 120-day period
following the expiration of the period provided in subsection 4.1(b) hereof,
offer the remaining unsubscribed portion of such Shares to any person or persons
at a price not less than and upon terms no more favorable to the offeree, than
as specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such 120-day period, or if such agreement is not
consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the subscriber in accordance herewith.
INVESTORS RIGHTS AGREEMENT
Page 12
(d) The right of first offer in this Section 4.1 shall not be
applicable (i) to the issuance or sale of shares of common stock (or options
therefor) to directors, employees or consultants under any stock issuance or
option plan now in effect or hereafter adopted by the Company for the primary
purpose of soliciting or retaining their services, (ii) to or after consummation
of bona fide, firmly underwritten public offering of shares of common stock,
registered under the Securities Act of 1933, as amended, at an offering price of
at least $10.00 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and $7,500,000 in the aggregate, (iii)
the issuance of securities pursuant to the conversion or exercise of convertible
or exercisable securities, (iv) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise; (v) any
shares of the Company's capital stock or warrants to purchase such shares issued
pursuant to any equipment leasing arrangement, or banking financing; (vi) shares
of the Company's Common Stock or Preferred Stock issued in connection with
strategic transactions involving the Company and other entities, including joint
ventures, manufacturing, marketing or distribution arrangements; provided that
such strategic transactions and the issuance of shares therein has been approved
by the Company's Board of Directors; or (vii) sale of shares, or warrants to
purchase shares of up to 105,000 of the Company's Series C Preferred Stock at a
purchase or exercise price not less than $4.00 per share.
(e) AMENDMENTS AND WAIVERS. The rights of the Investor under
Section 4.1 may be amended and the observance of any term of such rights may be
waived (either generally or in a particular instance and either retroactively or
prospectively), (i) with the written consent of the Company and the Investor, or
(ii) with the written consent of the Company and the holders of a majority of
the shares of Common Stock that have been issued or shall be issuable upon
conversion of the Series C Preferred Stock and/or Series D Preferred Stock
(whether or not such shares are sold of the date hereof). Any amendment or
waiver effected in accordance with item (ii) above shall be binding upon each
Investor even though such Investor was not party to such consent.
5. MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement will be governed by and construed
under the laws of the State of Oregon as applied to agreements among Oregon
residents entered into and to be performed entirely within Oregon. The Company
and each Investor hereby consent to jurisdiction and venue in any state court or
federal court located in Multnomah County, Oregon in the event suit is brought
for the interpretation or enforcement of any provision of this Agreement.
Jurisdiction and venue in Multnomah County, Oregon shall be exclusive with
respect to any disputes arising out of the transactions contemplated by this
Agreement, except for actions for the enforcement of judgments.
5.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein will survive any investigation made by any Holder and the
closing of the transactions contemplated hereby. All statements as to factual
INVESTORS RIGHTS AGREEMENT
Page 13
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby will be deemed to be representations and warranties by the
Company solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors, and administrators of the parties
hereto and will inure to the benefit of and be enforceable by each person who is
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes.
5.4 SEVERABILITY. In case any provisions of the Agreement is invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any be affected or impaired thereby.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement only
may be amended or modified upon the written consent of the Company and the
Holders of a majority of the Registrable Securities and only with such requisite
consent.
(b) Except as otherwise expressly provided, any obligation of the
Company and any right of the Holders under this Agreement only may be waived, in
whole or in part, with the written consent of the Company and the Holders of a
majority of the Registrable Securities.
(c) Any amendment or waiver effected pursuant to this Section 5.5
shall be effective against all Investors even though one or more of such
Investors may not have agreed to such amendment or waiver.
(d) The parties acknowledge that the Company intends to sell
shares of its Series C Preferred Stock after the date hereof and that any person
who hereinafter purchases shares of the Company's Series C Preferred Stock may,
at such person's sole election, become a party to this Agreement, and that the
addition of such parties to this Agreement shall not be considered an amendment
of this Agreement requiring the consent of the parties hereto.
5.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder upon any breach, default or noncompliance
of the Company under this Agreement will impair any such right, power or remedy,
nor will it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Any waiver, permit, consent, or approval of
any kind or character on any Holder's part of any breach, default, or
noncompliance under this Agreement must be in writing and will be effective only
INVESTORS RIGHTS AGREEMENT
Page 14
to the extent specifically set forth in such writing. All remedies, either under
this Agreement, by law or otherwise afforded to Holders, will be cumulative and
not alternative.
5.7 NOTICES. All notices required or permitted hereunder will be
in writing and will be deemed effectively given: (1) upon personal delivery to
the party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications will be sent to the party to
be notified at the address as set forth on the signature pages hereof or at such
other address as such party may designate by 10 days' advance written notice to
the other parties hereto.
5.8 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute will be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement including, without limitation, reasonable fees and
expenses of attorneys and accountants, which will include, without limitation,
all fees, costs and expenses of appeals.
5.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience or reference only and are not
to be considered in construing this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which will be an original, but all of which together
will constitute one instrument.
5.11 FURTHER ASSURANCES. Each party to this Agreement shall do
and perform or cause to be done and performed all such further acts and things
and shall execute and deliver all such other agreements, certificates,
instruments or documents as any other party may reasonably request from time to
time in order to carry out the intent and purposes of this Agreement. No party
to this Agreement shall voluntarily undertake any course of action inconsistent
with satisfaction of the requirements applicable to them set forth in such
instruments and documents, and each party shall promptly do all such acts and
take all such measures as may be appropriate to enable them to perform as early
as practicable the obligations herein and therein required to be performed by
them.
5.12 ENTIRE AGREEMENT. This Agreement and the Purchase Agreement
constitute the entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by an warranties, representations, or
covenants except as specifically set forth in this Agreement or the Purchase
Agreement. Nothing in this Agreement, express or implied, is intended to confer
upon any third party any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.
INVESTORS RIGHTS AGREEMENT
Page 15
The parties have executed this Agreement as of the date set forth in
the first paragraph hereof.
OREGON BAKING COMPANY, dba
▇▇▇▇▇▇ BAKING
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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Its: ------------------------------------
Address:
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---------------------------------
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address:
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/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
--------------------------
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
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INVESTORS
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Address:
---------------------------
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/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address:
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ROITENBERG INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------
Its: President
--------------------------------
Address: Suite 1065
----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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BERNIE'S BAGELS, INC., a Washington
corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Its: Co-President
--------------------------------
Address:
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AMENDMENT TO INVESTORS RIGHTS AGREEMENT
This Amendment is made effective as of the 11th day of September, 1998,
by and among Oregon Baking Company, dba ▇▇▇▇▇▇ Baking (the "Company"), and
certain holders of the Company's Series C Preferred Stock and Series D Preferred
Stock who together hold a majority of the Series C and Series D Preferred Stock
outstanding on the date hereof (the "Majority Investors").
RECITALS
A. The Company and the Majority Investors, and certain other
investors (the "Other Investors") are parties to that certain
Investors Rights Agreement dated January 9, 1998 (the
"Agreement").
B. The Company and the Majority Investors desire to amend the final
sentence of Section 4.1(d) of the Agreement (Rights of First
Refusal upon Subsequent Offerings by the Company), in order to
effect the following: (i) the repricing of the Company's Series C
Preferred Stock to $32.50 per share from $40.00 per share, (ii)
the increase the number of shares of Series C Preferred Stock
approved for issuance from 105,000 to 168,000 shares, and (iii) to
exempt from application of the right of first refusal issuances of
shares of the Company's Common Stock to shareholders of the
Company who make loans to the Company or guarantee the Company's
debts.
NOW, THEREFORE, in consideration of the premises, provisions and the
respective agreements hereinafter set forth, the parties hereby agree as
follows:
1. Section 4.1(d) of the Agreement is hereby restated in its entirety
to read:
(d) The right of first offer in this Section 4.1 shall not be
applicable (i) to the issuance or sale of shares of common stock (or options
therefor) to directors, employees or consultants under any stock issuance or
option plan now in effect or hereafter adopted by the Company for the primary
purpose of soliciting or retaining their services, (ii) to or after consummation
of bona fide, firmly underwritten public offering of shares of common stock,
registered under the Securities Act of 1933, as amended, at an offering price of
at least $10.00 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and $7,500,000 in the aggregate, (iii)
the issuance of securities pursuant to the conversion or exercise of convertible
or exercisable securities, (iv) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise; (v) any
shares of the Company's capital stock or warrants to purchase such shares issued
pursuant to any equipment leasing arrangement, or banking financing; (vi) shares
of the Company's Common Stock or Preferred Stock issued in connection with
strategic transactions involving the Company and other entities, including joint
ventures, manufacturing, marketing or distribution arrangements; provided that
such strategic transactions and the issuance of shares therein has been approved
by the Company's Board of Directors; (vii) sale of shares, or warrants to
purchase shares, of up to 168,000 the Company's Series C Preferred Stock at a
purchase or exercise price not less than $32.50 per share; or (viii) the
issuance of shares of the Company's Common Stock or options therefor to
shareholders of the Company who make loans to the Company or guarantee the
Company's debts.
2. This Amendment shall be effective as to all prior issuances that
would have been excluded from the Investors' Right of First Refusal under
section 4.1(d) of the Agreement, had the amended provision been in effect at the
time of such issuance.
3. This Amendment shall be effective as to the Majority Investors and
the Other Investors even though the Other Investors did not they execute this
Amendment, pursuant to Section 4.1(e) of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth in the first paragraph hereof.
OREGON BAKING COMPANY, dba
▇▇▇▇▇▇ BAKING
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------
Its: Exec VP/Secretary
------------------------------
Address:
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2287 ▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth in the first paragraph hereof.
INVESTOR: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
INVESTOR: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
INVESTOR: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
INVESTOR: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
INVESTOR: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇