INVESTOR RIGHTS AGREEMENT
THIS AGREEMENTis dated for reference as of the ●th day of ●, 2014
AMONG:
- , a corporation incorporated under the laws of ●, and having an office at ●, ●, , ●, Facsimile No. (514) ●
(the “Corporation”)
AND:
INVESTOR INC., a corporation incorporated under the federal laws of Canada and having an address at <INSERT ADDRESS>
(“INVESTOR”)
WHEREAS:
INVESTOR intends to grant a convertible loan to the Corporation in the principal amount of $10,000 pursuant to a convertible loan agreement dated the date hereof (the “INVESTOR Loan Agreement”);It is a condition of INVESTOR’s loan that the Corporation grant it certain pre-emptive and information rights;The Corporation desires to induce INVESTOR to grant the loan by agreeing to the terms and conditions set forth in this Agreement. NOW THEREFORE THIS AGREEMENT WITNESSESthat in consideration of, and in reliance on, the premises, the representations, warranties, covenants and agreements set forth in this Agreement, the parties hereby agree as follows:
1. Interpretation – In this Agreement, unless otherwise provided:
(a) “Board” means the board of Directors of the Corporation as constituted from time to time;
(b) “Common Shares” means the shares of any class of common shares in the share capital of the Corporation;
(c) “Directors” means the persons who are, from time to time, elected or appointed directors of the Corporation and a “Director” means any one of them;
(d) “Equity Securities” means:
(i) Shares or any other security of the Corporation that carries the residual right to participate in the earnings of the Corporation and, on liquidation, dissolution or winding-up, in the assets of the Corporation, whether or not the security carries voting rights;
(ii) any warrants, options or rights entitling the holders thereof to purchase or acquire any such securities; or
(iii) any securities issued by the Corporation which are convertible or exchangeable into such securities;
(e) “Fully Converted Basis” at any time means that all Shares and other securities of the Corporation (including all options, warrants, units, rights of conversion or other rights that carries a right to acquire shares in the capital of the Corporation) then outstanding which are convertible or exchangeable into Common Shares (directly or indirectly) shall be deemed to have been fully converted and exchanged into Common Shares, in accordance with the rights, privileges, restrictions and conditions attached thereto, and Common Shares issuable as a result thereof shall be deemed to have been issued and to form part of the holdings of the Person(s) entitled to receive such Common Shares;
(f) “Indebtedness” has the meaning ascribed to such term in the INVESTOR Loan Agreement;
(g) “Person” means any individual, partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, trust, trustee, executor, administrator, or other legal personal representatives, regulatory body or agency, government or governmental agency, authority or entity howsoever designated or constituted;
(h) “Shares” means shares of any class in the share capital of the Corporation from time to time;
(i) “Significant Financing” means a private placement of equity securities of the Corporation or an initial public offering of equity securities of the Corporation (such securities or units of securities are referred to as the “Significant Financing Securities”) for gross proceeds of at least $500,000 (which does not include any Indebtedness converted pursuant to the INVESTOR Loan Agreement);
(j) Any words defined elsewhere in the Agreement shall have the particular meaning ascribed thereto;
(k) Words (including defined terms) using or importing the singular number include the plural and vice versa and words importing one gender only shall include all genders and words importing persons in this Agreement shall include individuals, partnerships, corporations and any other entities, legal or otherwise;
(l) The headings used in this Agreement are for ease of reference only and shall not affect the meaning or the interpretation of this Agreement; and
(m) Unless otherwise specified, all references to the symbol “$” are to lawful money of Canada.
2. Reporting Requirements – The Corporation shall provide to INVESTOR, as long as any Indebtedness under the INVESTOR Loan Agreement is outstanding or it holds any Equity Securities, the following documents, to be provided to INVESTOR concurrent with the Board:
(a) Financial Statements – comprehensive consolidated quarterly and annual unaudited financial statements prepared by the Corporation in accordance with generally accepted accounting principles in Canada or international financial reporting standards, as applicable to the Corporation (including its income statement, balance sheet and cash flow) with management’s analysis of the results and comments on variances from the annual budget and a summary President/CEO’s report with a more detailed description of the general affairs of the Corporation;
(b) Annual Budget – an annual operating and capital budget for the Corporation showing all significant expenditures to be made during the next fiscal year;
(c) Annual Audited Statements – if prepared, annual audited consolidated financial statements for the Corporation (including its income statement, balance sheet and cash flow); and
(d) Progress Reports – any other progress reports as are provided to Directors and the Corporation’s shareholders.
Treasury Offerings – Except as otherwise agreed to by the parties hereto, each offering by the Corporation of additional Equity Securities shall be made in accordance with Sections 4 and 5. Pro-Rata Preemptive Right – Subject to Section 5 and unless waived in writing by INVESTOR, each time the Corporation proposes to allot, issue, sell or resell any Equity Securities (a “Treasury Offer”), the Corporation shall first offer INVESTOR its pro rata share of such Equity Securities on the following basis: (a) Pro Rata Portion – The number of Equity Securities INVESTOR shall be offered and may purchase shall be determined by the following formula:
Number of Equity Securities which INVESTOR shall be offered and may purchase
=
Number of Common Shares held by INVESTOR on a Fully Converted Basis immediately prior to the Treasury Offer
X
Total Number of Equity Securities being offered
Number of Common Shares held by all shareholders of the Corporation on a Fully Converted Basis immediately prior to the Treasury Offer
(b) Notice of Offer – Each Treasury Offer shall be made by written notice to INVESTOR specifying:
(i) the total number and class of Equity Securities offered;
(ii) INVESTOR’s pro rata portion thereof as determined by the formula in (a) above;
(iii) the price at which the Equity Securities are being offered;
(iv) any other terms and conditions applicable to the offer not set out in this Section 4; and
(v) that INVESTOR shall have fifteen (15) business days (the “Acceptance Period”) following receipt of the notice to accept the Treasury Offer;
(c) Acceptance – Acceptance of a Treasury Offer shall be made by notice in writing to the Corporation within the Acceptance Period specifying the number of Equity Securities up to the pro rata number determined above that INVESTOR wishes to purchase. INVESTOR may also specify in such notice an additional number of the Equity Securities (“Specified Additional Amounts”) offered for sale that INVESTOR is prepared to purchase if the Treasury Offer is not fully subscribed by the shareholders of the Corporation. If INVESTOR does not accept the Treasury Offer before expiration of the Acceptance Period, then INVESTOR shall be deemed to have refused the Treasury Offer. Additionally, if INVESTOR notifies the Corporation in writing that it accepts or declines the Treasury Offer before the end of the Acceptance Period, then the Acceptance Period shall be deemed to have ended on the date the last such notice is received by the Corporation;
(d) Sale to Third Party – The Corporation shall be entitled to allot, issue or sell the balance of any of the offered Equity Securities which are not purchased by INVESTOR upon completion of the above process to any Person(s), provided that such allotment, issuance or sale:
(i) shall not be effected at a price which is less than the price or on terms and conditions which are more favourable (from the purchaser’s perspective) than those set forth in the written notice to INVESTORs concerning the Treasury Offer; and
(ii) shall be effected within a 3 month period following the expiration of the Acceptance Period, after which period has expired, the Corporation shall comply with this Section 4 before offering Equity Securities to any Person.
Permitted Non-Pro rata Offerings – The Corporation may directly allot, issue or sell Equity Securities without complying with Section 4 in the following circumstances: (a) Stock Option Plan – the Equity Securities are being issued pursuant to a duly approved grant or exercise of options under the Corporation’s stock option plan or to directors and officers of the Corporation;
(b) Subdivision etc. – the Equity Securities are being issued pursuant to a duly approved subdivision, amalgamation, reorganization, or dividend payable in Equity Securities;
(c) Conversion etc. – the Equity Securities are being issued in accordance with the rights, privileges, restrictions and conditions attached to Shares;
(d) Existing Options etc. – the Equity Securities are being issued pursuant to the options, warrants or other rights disclosed in writing to INVESTOR as of the date of this Agreement;
(e) Convertible Securities – the Equity Securities are being issued pursuant to the rights attaching to Equity Securities which were issued in accordance with Section 4 or 5; or
(f) IPO – the Equity Securities are being offered as part of an initial public offering.
6. Time of the Essence – Time shall be of the essence of this Agreement.
Further Acts – Each of the parties shall at the request of the other party, and at the expense of the Corporation, execute and deliver any further documents and do all acts and things as that party may reasonably require in order to carry out the true intent and meaning of this Agreement. No Partnership – Nothing in this Agreement or in the relationship of the parties hereto shall be construed as in any sense creating a partnership between the parties or as giving to either party any of the rights or subjecting either party to any of the creditors of the other parties. Parties of Interest – This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns; it being understood and agreed that the Corporation shall not have the right to assign this Agreement, nor any of its rights or obligations hereunder, without the prior written consent of INVESTOR, acting in its sole discretion. Governing Law – This Agreement shall be construed and governed exclusively by the laws in force in Québec and the laws of Canada applicable therein and, except as provided in Section 11, the courts of Québec (and Supreme Court of Canada, if necessary) shall have exclusive jurisdiction to hear and determine all disputes arising hereunder. Except as provided in Section 11, each of the parties hereto irrevocably attorns to the jurisdiction of said courts and consents to the commencement of proceedings in such courts. This Section shall not be construed to affect the rights of a party to enforce a judgment or award outside said province, including the right to record and enforce a judgment or award in any other jurisdiction. Arbitration – In the event of a dispute hereunder which does not involve a party seeking a court injunction, the matter in dispute shall be referred to a single arbitrator under the Code of Civil Procedure of Québec, whose decisions shall be final and binding on the parties. The arbitrator shall be appointed by agreement between the parties, or in default of agreement, the arbitrator shall be appointed by a judge of the Superior Court of Québec, upon the application of any party to this Agreement. The arbitration shall be conducted in the city of Montreal, at a location and according to a procedure to be agreed by the parties, or in default of agreement, determined by the arbitrator. Payment of the costs of the arbitration shall be determined by the arbitrator. Survival – Each party hereby agrees that all representations, warranties and other provisions contained in this Agreement shall survive the execution and delivery of this Agreement. Notices – All notices, demands and payments under this Agreement must be in writing and may be delivered personally or by facsimile transmission to the addresses as first written above and on any document pursuant to which a Person becomes party hereto or such other addresses as may from time to time be notified in writing by the parties. All notices shall be deemed to have been given and received on the next business day following the date of transmission or delivery, as the case may be. Severability – The invalidity or unenforceability of any provision in this Agreement shall not affect the validity or enforceability of any other provision or part of this Agreement, and the parties hereby undertake to renegotiate in good faith any such invalid or unenforceable provision, with a view to concluding valid and enforceable arrangements as nearly as possible the same as those contained in this Agreement. Entire Agreement – The provisions contained in this Agreement constitute the entire agreement between the parties with respect to the subject matter and supersede all prior communications, proposals, representations and agreements, whether oral or written, with respect to the subject matter of this Agreement. Waiver – Failure by any party hereto to insist in any instance upon the strict performance of any one of the covenants contained herein shall not be construed as a waiver or relinquishment of such covenant. No waiver by any party hereto of any such covenant shall be deemed to have been made unless expressed in writing and signed by the waiving party. Amendments – No term or provision hereof may be amended except by an instrument in writing signed by all of the parties to this Agreement. Language – The parties have requested that this Agreement be drafted in the English language. Les parties ont exigé que cette convention soit rédigée en langue anglaise. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
Counterparts – This Agreement may be executed in counterpart and such counterparts together will constitute a single instrument. Delivery of an executed counterpart of this Agreement by electronic means, including by facsimile transmission or by electronic delivery in portable document format (“.pdf”), will be equally effective as delivery of a manually executed counterpart hereof. The parties acknowledge and agree that in any legal proceedings between them respecting or in any way relating to this Agreement, each waives the right to raise any defence based on the execution hereof in counterparts or the delivery of such executed counterparts by electronic means. IN WITNESS WHEREOF the parties have signed and delivered this Agreement as of the date first written above.
Per: ________________________
(Authorized Signatory)
INVESTOR INC.
Per: _________________________
Investor’s Name
Per: _________________________
Witness
