Document:

EXHIBIT 10.2

 

INVESTMENT AGREEMENT

(Covered by a Resale Registration Statement)

THIS INVESTMENT AGREEMENT (“Agreement”) is made as of March 6, 2014, by and between ROYAL BANCSHARES OF PENNSYLVANIA, INC., a Pennsylvania corporation (“Issuer”), and EMERALD ADVISERS, INC., a Pennsylvania business corporation (“Investor”).  Investor is entering into this agreement on behalf of accounts that it manages or advises and for which it has discretionary authority to buy or sell shares.

WHEREAS, the Board of Directors of Issuer (the “Board of Directors”) proposes to issue to Investor, and Investor proposes to purchase from Issuer, 2,400,000 shares of Class A common stock of Issuer, $2.00 par value per share (“Issuer Class A Common Stock”), on the Closing Date (as defined in Section 2.1 hereof) (each, a “Share”, and collectively, the “Shares”);

WHEREAS, the Board of Directors also proposes to issue shares of Issuer Class A Common Stock (a) in a public rights offering (the “Rights Offering”) described in the Issuer’s Registration Statement on Form S‐1 (File No. 333‐190973) as filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 4, 2013, as amended from time to time (collectively, the “S‐1 Registration Statement”), and (b) pursuant to separate stock purchase agreements between Issuer, on the one hand, and other third parties, on the other hand (collectively, the “Private Placement”); and

WHEREAS, the Board of Directors of Issuer believes that the sale of the Shares, under the terms and conditions set forth in this Agreement, is in the best interests of Issuer;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, mutually agree as follows:

1.     Purchase and Sale of Shares.

1.1.  Subject to the terms and conditions set forth herein, on the Closing Date, Issuer shall sell, transfer, assign and deliver unto Investor, and Investor shall purchase from Issuer, the Shares.  The aggregate purchase price for the Shares is (i) $1.20 multiplied by (ii) the number of the Shares (the “Purchase Price”).  Notwithstanding the foregoing sentence, at the Closing, Issuer shall have the right to reduce proportionately (based on the total proceeds raised from other investors in the Private Placement) the number of Shares sold by Issuer to Investor, and purchased by Investor from Issuer, in the event that the aggregate proceeds necessary to repurchase shares of Issuer’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A issued to the United States Department of Treasury under the Capital Purchase Program (the “TARP Shares”) is less than an aggregate of $14,000,000.

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1.2.  Rights Offering.

 

(a)            In the event the Rights Offering is consummated after the Closing, then promptly following the closing of the Rights Offering, Investor shall be afforded the opportunity to acquire from the Issuer, for the same price and on the same terms as the Shares are offered hereunder, in the aggregate up to the number of shares of Issuer Class A Common Stock required to enable it to maintain its Percentage Interest (measured as of immediately following the Closing) (the “Participation Right”).  “Percentage Interest” means the percentage equal to (i) the number of shares of Class A Common Stock then held by Investor as of the date of determination, divided by (ii) the total number of outstanding shares of Class A Common Stock as of such date.

 

(b)            Promptly following the closing of the Rights Offering (but in no event later than five Business Days after the closing of the Rights Offering), the Issuer shall deliver a written notice (the “Offer Notice”) to Investor (i) notifying Investor of the total number of shares of Issuer Class A Common Stock sold in the Rights Offering and (ii) calculating the number of shares of Issuer Class A Common Stock that Investor has the right to acquire in order to maintain its Percentage Interest.  Investor shall then have 10 Business Days after receipt of the Offer Notice (the “Offer Period”) to notify the Issuer in writing that Investor intends to exercise its Participation Right and as to the number of shares of Issuer Class A Common Stock that Investor desires to purchase, up to the maximum amount calculated pursuant to Section 1.2(a) (the “Designated Securities”).  The failure to respond during the Offer Period constitutes a waiver of Investor’s Participation Right.  The sale of the Designated Securities shall be closed not later than 10 days after the end of the Offer Period.  The obligation of each Investor to acquire the Designated Securities at such closing shall be subject to the fulfillment to Investor’s satisfaction, on or prior to such closing sate, of each of the conditions set forth in Sections 9.1 and 9.2 hereof (as if such closing and closing date were the “Closing” and “Closing Date”, as applicable, thereunder), any of which may be waived by Investor.

1.3.  At the Closing, Investor shall pay to Issuer the Purchase Price, in cash, in consideration of its purchase of the Shares.

 

2.     The Closing.

 

2.1.  The closing of the transactions contemplated under this Agreement (the “Closing”) shall take place at 10:00 a.m. at the main office of Issuer, 732 Montgomery Avenue, Narberth, Pennsylvania, or at such other place as the parties shall agree in writing, on the date following the sixth (6th) trading day after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Sections 10, 11 and 12 (other than those conditions that by their nature are to be satisfied or waived at the Closing) and the completion of the Rights Offering and the Private Placement or such other date mutually agreed upon by the parties (the “Closing Date”).

 

2.2.  Immediately prior to the Closing (and as a condition of Investor’s obligations to purchase the Shares and otherwise perform its obligations under this Agreement), Issuer shall deliver to Investor a certificate executed by its Chief Executive Officer certifying that (a) as of such date, to his knowledge, the representations and warranties of Issuer set forth herein are accurate and complete in all material respects and (b) that there has not been since the execution of this Agreement any material adverse change to Issuer’s business.

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2.3.  Immediately prior to the Closing (and as a condition of Issuer’s obligations to deliver the Shares and otherwise perform its obligations under this Agreement), Investor shall deliver to Issuer a certificate executed by its President and Chief Investment Officer certifying to Investor that as of such date, to his or her knowledge, the representations and warranties of Investor set forth herein are accurate and complete in all material respects.

 

2.4.  At the Closing, subject to the terms and conditions hereof, Issuer shall issue the Shares to Investor and deliver to Investor a certificate representing the Shares, duly registered in the name of Investor, as specified on the signature page hereto.  In lieu of delivering physical certificates representing the Shares issuable in accordance with the previous sentence, and provided that Issuer’s transfer agent for the Issuer Common Stock (the “Transfer Agent”) then is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, upon request of Investor, but subject to the applicable provisions of Sections 7 and 8 hereof, Issuer shall use its commercially reasonable efforts to cause the Transfer Agent to electronically transmit, on the Closing Date, the Shares by crediting the account of Investor’s accounts specified by the Investor with DTC through its Deposit Withdrawal Agent Commission system, and provide proof satisfactory to Investor of such delivery.

 

2.5.  At the Closing, subject to the terms and conditions hereof, Investor shall deliver to Issuer the Purchase Price by wire transfer of immediately available funds to an account designated by Issuer.

 

3.     Representations, Warranties and Covenants of Issuer.  In addition to the warranties, representations and covenants of Issuer contained elsewhere herein, Issuer hereby warrants, represents and covenants to Investor as follows:

 

3.1.  Issuer is a corporation organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania with full corporate power and authority to own and hold its properties and to carry on its business as now conducted, and is duly registered and qualified to conduct its business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except as has not had or would not reasonably be expected to have a material adverse effect upon Issuer’s ability to conduct its business or consummate the transactions contemplated hereby.

 

3.2.  The authorized common stock of Issuer consists of 40,000,000 shares of Issuer Class A Common Stock, of which 11,016,864 shares were issued and outstanding as of the date of this Agreement, and 3,000,000 shares of Class B common stock (the “Class B Common Stock”), of which 1,987,142 were issued and outstanding as of the date of this Agreement.  The authorized preferred stock of Issuer consists of 500,000 shares of preferred stock (“Issuer Preferred Stock”), of which 30,407 TARP Shares, are issued and outstanding and held by U.S. Department of Treasury under the Capital Purchase Program as of the date of this Agreement.  Other than the Issuer Class A Common Stock, the Class B Common Stock, and the Issuer Preferred Stock, there are no other authorized classes of equity securities of Issuer.  Except as disclosed in the annual reports on Form 10- K, quarterly reports on Form 10- Q, and current reports on Form 8- K filed by the Issuer with the SEC, there are no outstanding subscriptions, options, warrants, debt instruments or other agreements obligating Issuer to issue, sell or otherwise dispose of any shares of Issuer capital stock.  As of the Closing, the Shares are being sold, and (upon receipt by Investor at the Closing) will be, free and clear of all liabilities, debts, obligations, encumbrances, leases, indebtedness, liens, charges, and pledges, of whatever nature, whether fixed or contingent, disclosed or undisclosed, foreseen or unforeseen, as of the date of this Agreement.

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3.3.  Issuer possesses the requisite corporate power and authority to execute and deliver this Agreement and to perform all of its obligations hereunder and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and no additional consent or approval of any other person, entity or governmental authority is required therefor.

 

3.4.  This Agreement has been duly executed and delivered by Issuer and (assuming it has been duly authorized, executed and delivered by Investor) is a legal, valid and binding obligation of Issuer and is fully enforceable against it in accordance with its terms and conditions, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

 

3.5.  The execution and delivery of this Agreement by Issuer, the consummation of the transactions contemplated hereby, and the compliance by Issuer with the terms and provisions hereof, will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) any agreement to which Issuer is a party or by which it or its properties or assets are bound, or violate any law, regulation, decree, writ, order or injunction which, collectively, would have a material adverse effect upon Issuer’s ability to consummate the transactions contemplated hereby.

 

3.6.  Issuer has made all necessary filings with all applicable federal, state and local authorities and/or regulatory bodies, and has complied with all applicable laws, in each case with respect to the transaction contemplated herein, and Issuer will take all such further actions as are necessary or appropriate to cause the transaction contemplated hereby to comply with all applicable laws.

 

3.7.  The audited consolidated financial statement of Issuer and its subsidiaries at and for the periods ended December 31, 2011 and 2012 fairly present in all material respects the consolidated financial position and results of operation of Issuer and such subsidiaries as, at and for such periods, in each case, in accordance with Generally Accepted Accounting Principles in the United States consistently applied during the periods involved, except in each case, as may be noted therein.  Except as disclosed in Schedule 3.7 to this Agreement, neither Issuer nor Royal Bank America (the “Bank”) has received notice from any governmental authority that the Bank’s Reports of Condition (“CALL Reports”) submitted to its primary federal regulator and the Commonwealth of Pennsylvania under applicable law fail to conform in all material respects to the Federal Financial Institutions Examination Council’s requirements for CALL Reports or the requirements of Section 37 of the Federal Deposit Insurance Act and applicable regulations thereunder.  Except as disclosed in the Issuer’s reports filed with the SEC under the Securities Act of 1934, as amended (the “Exchange Act”), since the filing of Issuer’s most recent call report, there has been no material adverse change to Issuer’s financial condition or its results of operations of the kind which would be required to be disclosed in filings with the SEC under Exchange Act which have not been so disclosed to Investor.

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4.     Representations, Warranties and Covenants of Investor.  In addition to the warranties, representations and covenants of Investor contained elsewhere herein, Investor hereby warrants, represents and covenants to Issuer as follows:

 

4.1.  Investor is a corporation organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania with full corporate power and authority to own and hold its properties and to carry on its business as now conducted, and is duly registered and qualified to conduct its business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except as has not had or would not reasonably be expected to have a material adverse effect upon Investor’s ability to conduct its business or consummate the transactions contemplated hereby.

 

4.2.  Investor possesses all requisite power and authority to execute and deliver this Agreement and to perform all of its obligations hereunder and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and no additional consent or approval of any other person, entity or governmental authority is required therefor.

4.3.  This Agreement has been duly executed and delivered by Investor and (assuming it has been duly authorized, executed and delivered by Issuer) is a legal, valid and binding obligation of Investor and is fully enforceable against it in accordance with its terms and conditions, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

 

4.4.  Investor is a registered investment adviser, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in Issuer Class A Common Stock and is able to bear the economic risk of loss with respect to its investment in Issuer Class A Common Stock.  Investor is not an officer, director or “affiliate” (as that term is defined in Rule 405 promulgated under the Securities Act) of Issuer.  As of the date hereof, Investor owns no shares of the Issuer Common Stock, and, prior to the completion of this private placement, Investor does not intend to acquire any additional shares of the Issuer Class A Common Stock, other than the Shares.  Investor acknowledges that Issuer will not sell Investor shares of the Issuer Class A Common Stock in the Rights Offering.

 

4.5.  The execution and delivery of this Agreement by Investor, the consummation of the transactions contemplated hereby, and the compliance by Investor with the terms and provisions hereof will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) any agreement to which Investor is a party or by which it or its properties or assets are bound, or violate any law, regulation, decree, writ, order or injunction which, collectively, would have a material adverse effect upon Investor’s ability to consummate the transactions contemplated hereby.

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4.6.  The representations and warranties made herein are accurate in all material respects.  Investor will have the fiduciary and legal authority of assets under management sufficient to pay the Purchase Price as of the Closing.

 

4.7.  Investor has requested and received such information and has made such due diligence investigation, including having such access to the management of Issuer and the books and records of Issuer and its affiliated companies, as Investor has deemed pertinent to its consideration of the purchase of the Shares.  Investor has had the opportunity to question, and has questioned, to the extent deemed necessary or appropriate, representatives of Issuer so as to receive answers and verify information obtained in such Investor’s examination of Issuer, including the information that Investor has received and reviewed as otherwise referenced herein in relation to its investment in the Shares.  Investor has not been furnished a prospectus or any part of a registration statement filed with the SEC or state securities agency or commission.  Investor has reviewed publicly available information regarding Issuer and the information provided to Investor by Issuer in connection with Investor’s due diligence and is familiar with the existing and proposed business operations, management and financial condition of Issuer.  Investor acknowledges and understands the risks involved in and tax consequences of this investment, including the risk of losing the entire investment in the Issuer Class A Common Stock, and the tax consequences of this investment to Investor.

 

4.8.  Investor is not relying on Issuer or on any legal or other opinion in the materials reviewed by Investor with respect to the financial or tax considerations of Investor relating to its investment in the Shares, and has consulted with its own legal, accounting, tax, investment and other advisers for legal, tax treatment or investment advice with respect to the merits and risk of an investment in Issuer Class A Common Stock, the transactions contemplated by this Agreement and the securities laws of any jurisdiction applicable to Investor.  Investor has relied solely on the representations and warranties, covenants and agreements of Issuer in this Agreement and on its examination and independent investigation in making its decision to acquire the Shares.

 

4.9.  No oral or written material representations have been made to Investor in connection with Investor’s acquisition of the Shares which were in any way inconsistent with the information reviewed by Investor.  Investor acknowledges that in deciding whether to enter into this Agreement and to purchase the Shares hereunder, it has not relied on any representations or warranties of any type or description made by Issuer or any of its representatives with regard to Issuer, any of its subsidiaries, any of their respective businesses or properties, or the prospects of the investment contemplated herein, other than the representations and warranties set forth in Section 3 hereof.

 

4.10.  The Shares are being purchased for accounts managed or advised by Investor, with their own funds and not the funds of any other person, for investment only and not with a view toward resale, assignment, fractionalization, or distribution thereof.  Investor acknowledges and agrees that it may not sell, transfer or otherwise dispose of the Shares unless the resale of such shares have been registered under the Securities Act and applicable state securities laws and such sale or other disposition is made pursuant to such registration, or an exemption from the registration requirements of the Securities Act and such laws is available, in which case, if reasonably requested by Issuer, such sale or other disposition can only be effected if (i) the purchaser or transferee agrees in writing to be bound by the applicable terms of this Agreement and (ii) unless effected pursuant to Rule 144 under the Securities Act, Investor shall have furnished Issuer with an opinion of counsel, reasonably satisfactory to Issuer, that such disposition will not require registration under the Securities Act.  Investor has no present arrangement (whether or not legally binding) at any time to transfer the Shares.  There are no agreements or other arrangements, written or otherwise, between Investor and any other person to act together for the purpose of acquiring, holding, voting or disposing of the Shares.  Investor also represents that each of the accounts which it manages or advises to which the Shares will be allocated is an “accredited investor,” as that term is defined in Rule 501 of Regulation D under the Securities Act, and either does not have the discretion to distribute or resell the Shares allocated to it or is not purchasing such allocation of Shares with a view toward resale, assignment, fractionalization, or distribution thereof.  Investor also represents that it has discretionary authority to act on behalf of such accounts.

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4.11.  Investor has not incurred any obligation for any finder’s or broker’s or agent’s fees or commissions in connection with the transactions contemplated hereby.

 

4.12.  Investor acknowledges and agrees that the Shares are not shares of capital stock in the Bank and are not savings accounts or deposits of the Bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, and that no Federal or state governmental agency has passed upon or will pass upon the offer or sale of the Shares or has made or will make any finding or determination as to the fairness of this investment.

 

4.13.  Investor acknowledges that the anti-manipulation provisions of Regulation M promulgated by the SEC may apply to sales of the Shares offered by any prospectus to the Registration Statement (defined below), and is aware of the requirements for delivery of such prospectus in connection with any sales of the Shares offered by a prospectus to the Registration Statement.

 

5.        Confidentiality Agreement.  Investor and Issuer hereby acknowledge that the Confidentiality Agreement entered into between them dated September 16, 2013 remains in full force and effect until closing is complete.

 

6.        Notices.  All notices or other communications required or permitted to be given hereunder shall be in writing and shall be by United States registered or certified mail, return receipt requested, or guaranteed overnight delivery, addressed as set forth below or as may be otherwise specified by notice meeting the requirements of this paragraph.  All notices shall be deemed given when mailed pursuant to the foregoing sentence.  Notices shall be addressed as follows:

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If to Issuer:

Royal Bancshares of Pennsylvania, Inc.

ATTN: F. Kevin Tylus

President and Chief Executive Officer

732 Montgomery Avenue

Narberth, PA 19072

Telephone: (610) 668-4700

Facsimile No.: (610) 668-1185

With a copy to:

David W. Swartz, Esq.

Stevens & Lee, P.C.

111 North 6th Street

Reading, PA 19603

Telephone: (610) 478-2184

Facsimile No.: (610) 988-0815

If to Investor:

Kenneth G. Mertz II

President and Chief Investment Officer

Emerald Advisers, Inc.

3175 Oregon Pike

Leola, PA 17540

Telephone: (717) 396-1116

Facsimile No.: (717) 735-0088

7.     Issuer Covenants.  Issuer agrees to

 

7.1.  Prepare promptly, and file with the SEC no later than fifteen (15) days after the date hereof, (x) a registration statement on Form S‐1, or any similar registration statement, of Issuer under the Securities Act with respect to resale of the Shares, or (y) an amendment to the S-1 Registration Statement to accomplish the same (either, the “Registration Statement”), and thereafter use all diligent efforts to cause such Registration Statement to become effective within five (5) business days after notice from the SEC that such Registration Statement may be declared effective, and keep the Registration Statement effective at all times until the earliest of (i) the date when Investor may sell all Shares under Rule 144 promulgated under the Securities Act without volume limitations, or (ii) the date Investor no longer owns any of the Shares (collectively, 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 the light of the circumstances under which they were made, not misleading.

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7.2.  Prepare and file with the SEC 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 and current at all times during the Registration Period, and, during the Registration Period, comply with the provisions of the Securities Act with respect to the sale or other disposition of all the Shares covered by the Registration Statement until the expiration of the Registration Period.

 

7.3.  Unless available to Investor without charge through EDGAR, the SEC’s website or Issuer’s website, furnish to Investor, (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by Issuer, one (1) copy of the Registration Statement, each preliminary prospectus and the final prospectus, and each amendment or supplement thereto, and (ii) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents, as Investor may reasonably request in order to facilitate the sale or other disposition of the Shares owned by Investor.

 

7.4.  Notify Investor at any time during the Registration Period of the happening of any event as a result of which the prospectus included in the Registration Statement or a final prospectus with respect thereto, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.  Issuer will use all commercially reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include 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 not misleading in light of the circumstances then existing.

 

7.5.  Use its commercially reasonable efforts to cause all of the Shares to be listed on the NASDAQ Capital Market.

 

8.     Investor Covenants.  In connection with registration of the Shares, Investor shall have the following obligations:

 

8.1.  It shall be a condition precedent to the obligations of Issuer to complete the registration or qualification pursuant to Section 7 of this Agreement that Investor shall timely furnish to Issuer in writing such information regarding itself and the distribution proposed by Investor as shall be reasonably requested by Issuer and as shall be required to effect such registration or qualification and shall timely execute such documents in connection with such registration as Issuer may reasonably request.

 

8.2.  Investor by such Investor’s acceptance of the Shares agrees to cooperate with Issuer as reasonably requested by Issuer in connection with the preparation and filing of the Registration Statement and the qualification of the resale of the shares under applicable Blue Sky laws hereunder.

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8.3.  Investor shall not resell any Shares pursuant to the Registration Statement upon receiving notice from Issuer pursuant to Section 7.4 hereof that the prospectus included in the Registration Statement or a final prospectus with respect thereto, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, until Issuer has provided Investor with an amendment or supplement to the prospectus in order to cause such prospectus not to include 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 not misleading in light of the circumstances then existing.

 

9.     Mutual Conditions to Closing.  The obligation hereunder of Investor to purchase, and Issuer to sell, the Shares at the Closing is subject to the satisfaction, at or before the Closing, of each of the conditions set forth below (unless waived by Investor and Issuer):

 

9.1.  All consents and approvals of any regulatory body or agency necessary to consummate the transactions contemplated by this Agreement shall have been obtained and all notice and waiting periods required by law to pass after receipt of such approvals or consents shall have passed, and all conditions to consummation of the transactions set forth in this Agreement shall have been satisfied.

 

9.2.  There shall be no actual or threatened causes of action, investigations or proceedings (i) challenging the validity or legality of this Agreement or the consummation of the transactions contemplated by this Agreement, (ii) seeking damages in connection with the transactions contemplated by this Agreement, or (iii) seeking to restrain or invalidate the transactions contemplated by this Agreement, which, in the reasonable judgment of the parties, based upon advice of counsel, would have a material adverse effect with respect to the interests of the parties to this Agreement.  No judgment, order, injunction or decree (whether temporary, preliminary or permanent) issued by any court or agency of competent jurisdiction or other legal restraints or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect.  No statute, rule, regulation, order, injunction or decree (whether temporary, preliminary or permanent) shall have been enacted, entered, promulgated or enforced by any regulatory authority that prohibits, restricts, or makes illegal the consummation of the transactions contemplated in this Agreement.

 

10.   Conditions Precedent to the Obligation of Investor to Purchase the Shares.  The obligation hereunder of Investor to purchase the Shares at the Closing is subject to the satisfaction, at or before the Closing, of each of the conditions set forth below (unless waived by the Investor):

 

10.1.  Each of the representations and warranties of Issuer contained in this Agreement shall be true and correct in all material respects, and Investor shall have received the certificate executed by Issuer’s Chief Executive Officer set forth in Section 2.2 hereof.

 

10.2.  Issuer shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Issuer at or prior to the Closing.

 

10.3.  Issuer shall have been notified that one or more of its bids to purchase shares of TARP Shares has been accepted as part of an auction by the United States Department of Treasury or its agents or representatives regarding such shares.

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10.4.  The Registration Statement, and any amendment or supplement thereto, shall have previously become effective, and such Registration Statement shall be effective on or immediately prior to the Closing Date and (i) neither Issuer nor Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC’s concerns have been addressed and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (ii) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist.

 

10.5.  The Issuer Class A Common Stock shall have been approved for listing on the Nasdaq Capital Market, trading of the Issuer Class A Common Stock shall not have been suspended by the SEC, the Nasdaq Capital Market or FINRA and the Issuer Class A Common Stock shall not have been delisted from the Nasdaq Capital Market.

 

11.   Conditions Precedent to the Obligation of Issuer to Sell the Shares.  The obligation hereunder of Issuer to sell the Shares at the Closing is subject to the satisfaction, at or before the Closing, of each of the conditions set forth below (unless waived by the Issuer):

 

11.1.  Each of the representations and warranties of Investor contained in this Agreement shall be true and correct in all material respects, and Issuer shall have received the certificate executed by Investor’s President and Chief Investment Officer set forth in Section 2.3 hereof.

 

11.2.  Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Investor at or prior to the Closing.

 

11.3.  Issuer shall have been notified that one or more of its bids to purchase shares of TARP Shares has been accepted as part of an auction by the United States Department of Treasury or its agents or representatives regarding such shares.

 

12.   [Intentionally Omitted].

 

13 .  Miscellaneous.

 

13.1.  This Agreement (including any exhibits and schedules hereto) and the other documents delivered or to be delivered hereunder set forth the entire understanding of the parties with respect to its subject matter, supersede all prior agreements and understandings between the parties in respect of its subject matter.  This Agreement shall be binding upon and inure to the benefit of the parties, their heirs, legal representatives, successors and assigns.  This Agreement is not transferable or assignable by the parties without the prior written consent of the other party.

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13.2.  This Agreement may not be modified, amended, supplemented or altered except by written agreement executed by all parties hereto.  No failure to exercise, and no delay in exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege.  No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties.  No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts.  The rights and remedies of the parties under this Agreement are in addition to all other rights and remedies, at law or equity that they may have against each other.

 

13.3.  The parties shall pay their own fees and expenses, including their own counsel fees, incurred in connection with this Agreement and the transactions contemplated hereby.

 

13.4.  The representations, warranties, covenants and agreements of Issuer and Investor contained herein or made pursuant to this Agreement which by their terms are intended to survive the consummation of the transactions contemplated by this Agreement shall survive the execution and delivery of this Agreement.

 

13.5.  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its conflicts of law principles.  Any legal proceedings with respect to this Agreement shall take place solely within the Court of Common Pleas of Montgomery County, Pennsylvania and all parties hereto consent to the jurisdiction of said Court.  THE PARTIES TO THIS AGREEMENT HEREBY WAIVE THEIR RIGHT TO A TRIAL BY JURY WITH RESPECT TO DISPUTES ARISING UNDER THIS AGREEMENT AND THE RELATED AGREEMENTS AND CONSENT TO A BENCH TRIAL WITH THE APPROPRIATE JUDGE ACTING AS THE FINDER OF FACT.  Notwithstanding the foregoing, a judgment may be enforced by any court of competent jurisdiction.

 

13.6.  Issuer will provide to Investor an advance copy of any proposed announcement to be made by Issuer with respect to this Agreement and/or the transactions contemplated hereby and Investor shall have the right to approve any information contained therein regarding Investor, its affiliates and the transactions contemplated hereby, which approval shall not be unreasonably withheld or delayed.  Further, Investor will not make any public announcement with respect to this Agreement and/or the transactions contemplated thereby without approval by Issuer of the content and timing of such announcement, which approval shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, (a) Issuer or the Bank may disclose information relating to the transactions contemplated by this Agreement without the consent of Investor to any regulatory agency with jurisdiction over Issuer or the Bank or as may be required by law, (b) Issuer may disclose information relating to the transactions contemplated by this Agreement in any filing required to be made by Investor with the SEC under the Exchange Act without the consent of Investor, and (c) Investor may disclose information relating to the transactions contemplated by this Agreement without the consent of Issuer in connection with any regulatory applications or notices or other filings made by Investor in connection with the transactions contemplated by this Agreement.

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13.7.  This Agreement may be executed by facsimile signature and in any number of counterparts, each of which shall for all purposes be deemed an original but all of which together shall constitute one and the same instrument.

 

13.8.  The section and subsection headings contained in this Agreement are included for convenience only and are not to be considered in construing this Agreement.

 

13.9.  In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

13.10.  Each of Issuer and Investor shall execute and deliver such additional instruments and other documents and shall take such further actions as may be reasonably necessary or appropriate to effectuate, carry out and comply with all of the terms of this Agreement and the transactions contemplated hereby.

 

13.11.  The obligation of Investor under this Agreement shall expire on May 30, 2014.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the day and year first above written.

 

	
 

	
ROYAL BANCSHARES OF PENNSYLVANIA, INC., Issuer

	
 

	
 

	
 

	
 

	
By:

	
F. Kevin Tylus

	
 

	
 

	
President and Chief Executive Officer

	
 

	
 

	
 

	
 

	
EMERALD ADVISERS, INC., Investor

	
 

	
 

	
 

	
 

	
By:

	
/s/Kenneth G. Mertz, II

	
 

	
 

	
Kenneth G. Mertz, II

 

 

13EXHIBIT 10.3

 

EXECUTION VERSION

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of March 10, 2014, by and among Royal Bancshares of Pennsylvania, Inc., a Pennsylvania corporation (the “Company”), and the several purchasers signatory hereto (each a “Purchaser” and collectively, the “Purchasers”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof between the Company and each Purchaser (the “Purchase Agreement”).

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each of the Purchasers agree as follows:

 

1.                   Definitions.  Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following terms shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section 6(d).

 

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person.

 

“Agreement” shall have the meaning set forth in the Preamble.

 

“Allowable Grace Period” shall have the meaning set forth in the Section 2(e).

 

“Availability Date” shall have the meaning set forth in Section 3(n).

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City and Philadelphia are open for the general transaction of business.

 

“Closing” has the meaning set forth in the Purchase Agreement.

 

“Closing Date” has the meaning set forth in the Purchase Agreement.

 

“Commission” means the Securities and Exchange Commission.

 

“Class A Common Stock” means the Class A common stock of the Company, $2.00 par value per share, and any securities into which such shares of Class A common stock may hereinafter be reclassified.

 

“Company” shall have the meaning set forth in the Preamble.

 

“Effective Date” means the date that the Registration Statement filed pursuant to Section 2(a) is first declared effective by the Commission.

“Effectiveness Deadline” means, with respect to the Initial Registration Statement or the New Registration Statement, the earlier of (i) the 90th calendar day following the Closing Date (or the 120th calendar day following the Closing Date in the event that such registration statement is subject to review by the Commission) and (ii) the 5th Trading Day after the date the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review; provided, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the Commission is open for business.

 

“Effectiveness Period” shall have the meaning set forth in Section 2(b).

 

“Event” shall have the meaning set forth in Section 2(c).

 

“Event Date” shall have the meaning set forth in Section 2(c).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Filing Deadline” means, with respect to the Initial Registration Statement required to be filed pursuant to Section 2(a), the 30th calendar day following the Closing Date, provided, however, that if the Filing Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Filing Deadline shall be extended to the next business day on which the Commission is open for business.

 

“FINRA” shall have the meaning set forth in Section 3(j).

 

“Grace Period” shall have the meaning set forth in Section 2(e)

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

 

“Indemnified Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

 

“Initial Registration Statement” means the initial Registration Statement filed pursuant to Section 2(a) of this Agreement.

 

“Liquidated Damages” shall have the meaning set forth in Section 2(c).

 

“Losses” shall have the meaning set forth in Section 5(a).

 

“New Registration Statement” shall have the meaning set forth in Section 2(a).

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Principal Market” means the Trading Market on which the Class A Common Stock is primarily listed on and quoted for trading, which, as of the Closing Date, shall be the NASDAQ Global Market.

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“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post‐effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

“Purchase Agreement” shall have the meaning set forth in the Recitals.

 

“Purchaser” or “Purchasers” shall have the meaning set forth in the Preamble.

 

“Registrable Securities” means all of the Shares and any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Shares, provided, that the Holder has completed and delivered to the Company a Selling Stockholder Questionnaire; and provided, further, that Shares shall cease to be Registrable Securities upon the earliest to occur of the following: (A) a sale pursuant to a Registration Statement or Rule 144 under the Securities Act (in which case, only such security sold shall cease to be a Registrable Security); or (B) becoming eligible for sale without the requirement for the Company to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) and without volume or manner of sale restrictions.

 

“Registration Statements” means any one or more registration statements of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement (including without limitation the Initial Registration Statement, the New Registration Statement and any Remainder Registration Statements), amendments and supplements to such Registration Statements, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.

 

“Remainder Registration Statement” shall have the meaning set forth in Section 2(a).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

"SEC Guidance" means (i) any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff and (ii) the Securities Act.

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Selling Stockholder Questionnaire” means a questionnaire in the form attached as Annex B hereto, or such other form of questionnaire as may reasonably be adopted by the Company from time to time.

 

“Shares” means the shares of Class A Common Stock issued or issuable to the Purchasers pursuant to the Purchase Agreement, including, without limitation, shares issued or issuable pursuant to Section 4.19 thereof.

 

“Trading Day” means (i) a day on which the Class A Common Stock is listed or quoted and traded on its Principal Market or (ii) if the Class A Common Stock is not quoted on any Trading Market, a day on which the Class A Common Stock is quoted in the over‐the‐counter market as reported in the “pink sheets” by OTC Markets Group Inc. (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Class A Common Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Class A Common Stock is listed or quoted for trading on the date in question.

 

2.                   Registration.

 

(a)            On or prior to the Filing Deadline, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the Registrable Securities, by such other means of distribution of Registrable Securities as the Company may reasonably determine (the “Initial Registration Statement”).  The Initial Registration Statement shall be on such form available to the Company to register for resale of the Registrable Securities as a secondary offering, subject to the provisions of Section 2(f), and shall contain (except if otherwise required pursuant to written comments received from the Commission upon a review of such Registration Statement) the “Plan of Distribution” section substantially in the form attached hereto as Annex A.    Notwithstanding the registration obligations set forth in this Section 2, in the event the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission and/or (ii) withdraw the Initial Registration Statement and file a new registration statement (a “New Registration Statement”), in either case covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such other form available to the Company to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Securities Act Rules Compliance and Disclosure Interpretation 612.09.  Notwithstanding any other provision of this Agreement and subject to the payment of Liquidated Damages in Section 2(c), if any SEC Guidance sets forth a limitation of the number of Registrable Securities or other shares of Class A Common Stock permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater number of Registrable Securities), the number of Registrable Securities or other shares of Class A Common Stock to be registered on such Registration Statement will be reduced as follows: first, the Company shall reduce or eliminate the shares of Class A Common Stock to be included by any Person other than a Holder; and second, the Company shall reduce the number of Registrable Securities to be included by all Holders on a pro rata basis based on the total number of unregistered Registrable Securities held by such Holders, subject to a determination by the Commission that certain Holders must be reduced before other Holders based on the number of Registrable Securities held by such Holders.  In the event the Company amends the Initial Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on such form available to the Company to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended, or the New Registration Statement (the “Remainder Registration Statements”).  Each Holder may be named as an “underwriter” in any Registration Statement if required by applicable law or by the staff of the Commission; provided, however, that prior to naming a Holder as an underwriter in any Registration Statement, (i) the Company shall use its commercially reasonable efforts to advocate with the Commission against naming such Holder as an underwriter in accordance with Commission rules and regulations and SEC Guidance and (ii) if, despite the Company’s commercially reasonable efforts to advocate with the Commission against naming such Holder as an underwriter, the Commission continues to require that such Holder be named as an underwriter in any Registration Statement, such Holder shall have the right (but not the obligation), prior to being so named, without any penalty to the Company, to either (A) remove itself from such Registration Statement or (B) reduce its number of Registrable Securities included in such Registration Statement such that it shall no longer be required to be named as an underwriter in such Registration Statement.

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(b)            The Company shall use its commercially reasonable efforts to cause each Registration Statement to be declared effective by the Commission as soon as practicable and, with respect to the Initial Registration Statement or the New Registration Statement, as applicable, no later than the Effectiveness Deadline, and shall use its commercially reasonable efforts to keep each Registration Statement continuously effective under the Securities Act until the earlier of (i) such time as all of the Registrable Securities covered by such Registration Statement have been publicly sold by the Holders or (ii) the date that all Registrable Securities covered by such Registration Statement may be sold by non-affiliates of the Company without volume or manner of sale restrictions under Rule 144, and without the requirement for the Company to be in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and reasonably acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).  The Company shall request effectiveness of a Registration Statement on a Trading Day.  The Company shall promptly notify the Holders via facsimile or electronic mail of a “.pdf” format data file of the effectiveness of a Registration Statement within one (1) Business Day of the Effective Date. The Company shall, by 9:30 a.m., New York City time, on the second Trading Day after the Effective Date, file a final Prospectus with the Commission, as required by Rule 424(b).

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(c)            If: (i) the Initial Registration Statement is not filed with the Commission on or prior to the Filing Deadline, (ii) the Initial Registration Statement or the New Registration Statement, as applicable, is not declared effective by the Commission (or otherwise does not become effective) for any reason on or prior to the Effectiveness Deadline, (iii) after its Effective Date, (A) such Registration Statement ceases for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), to remain continuously effective as to all Registrable Securities for which it is required to be effective or (B) the Holders are not permitted to utilize the Prospectus therein to resell such Registrable Securities (in each case of (A) and (B), other than during an Allowable Grace Period), (iv) a Grace Period exceeds the length of an Allowable Grace Period, or (v) after the date six months following the Closing Date, and only in the event a Registration Statement is not effective or available to sell all Registrable Securities, the Company fails to file with the SEC any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as a result of which the Holders who are not affiliates are unable to sell Registrable Securities without restriction under Rule 144 (or any successor thereto) (any such failure or breach in clauses (i) through (v) above being referred to as an “Event,” and, for purposes of clauses (i), (ii), (iii) or (v), the date on which such Event occurs, or for purposes of clause (iv) the date on which such Allowable Grace Period is exceeded, being referred to as an “Event Date”), then in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty (“Liquidated Damages”), equal to 1.0% of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement for any unregistered Registrable Securities held by such Holder on the Event Date.  The parties agree that notwithstanding anything to the contrary herein, no Liquidated Damages shall be payable (i) if as of the relevant Event Date, the Registrable Securities may be sold by non-affiliates without volume or manner of sale restrictions under Rule 144 and the Company is in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and delivered to the Company’s transfer agent and reasonably acceptable to the affected Holders and (ii) with respect to any period after the expiration of the Effectiveness Period (it being understood that this sentence shall not relieve the Company of any Liquidated Damages accruing prior to the expiration of the Effectiveness Period).  If the Company fails to pay any Liquidated Damages pursuant to this Section 2(c) in full within five (5) Business Days after the date payable, the Company will pay interest thereon at a rate of 1.0% per month (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such Liquidated Damages are due until such amounts, plus all such interest thereon, are paid in full.  The Liquidated Damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event, except in the case of the first Event Date.  With respect to a Purchaser, the Effectiveness Deadline for a Registration Statement shall be extended without default or Liquidated Damages hereunder in the event that the Company’s failure to obtain the effectiveness of the Registration Statement on a timely basis results from the failure of such Purchaser to timely provide the Company with information requested by the Company and necessary to complete the Registration Statement in accordance with the requirements of the Securities Act (in which case the Effectiveness Deadline would be extended with respect to Registrable Securities held by such Purchaser).

(d)            Each Holder agrees to furnish to the Company a completed Selling Stockholder Questionnaire not more than five (5) Trading Days following the date of this Agreement. At least five (5) Trading Days prior to the first anticipated filing date of a Registration Statement for any registration under this Agreement, the Company will notify each Holder of the information the Company requires from that Holder other than the information contained in the Selling Stockholder Questionnaire, if any, which shall be completed and delivered to the Company promptly upon request and, in any event, within two (2) Trading Days prior to the applicable anticipated filing date.  Each Holder further agrees that it shall not be entitled to be named as a selling securityholder in the Registration Statement or use the Prospectus for offers and resales of Registrable Securities at any time, unless such Holder has returned to the Company a completed and signed Selling Stockholder Questionnaire and a response to any requests for further information as described in the previous sentence. If a Holder of Registrable Securities returns a Selling Stockholder Questionnaire or a request for further information, in either case, after its respective deadline, the Company shall use its commercially reasonable efforts at the expense of the Holder who failed to return the Selling Stockholder Questionnaire or to respond for further information to take such actions as are required to name such Holder as a selling security holder in the Registration Statement or any pre-effective or post-effective amendment thereto and to include (to the extent not theretofore included) in the Registration Statement the Registrable Securities identified in such late Selling Stockholder Questionnaire or request for further information. Each Holder acknowledges and agrees that the information in the Selling Stockholder Questionnaire or request for further information as described in this Section 2(d) will be used by the Company in the preparation of the Registration Statement and hereby consents to the inclusion of such information in the Registration Statement.

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(e)            Notwithstanding anything to the contrary herein, at any time after the Registration Statement has been declared effective by the Commission, the Company may delay the disclosure of material non-public information concerning the Company if the disclosure of such information at the time is not, in the good faith judgment of the Company, in the best interests of the Company (a “Grace Period”); provided, however, the Company shall promptly (i) notify the Holders in writing of the existence of material non-public information giving rise to a Grace Period (provided that the Company shall not disclose the content of such material non-public information to the Holders) or the need to file a post-effective amendment, as applicable, and the date on which such Grace Period will begin, (ii) use reasonable best efforts to terminate a Grace Period as promptly as practicable and (iii) notify the Holders in writing of the date on which the Grace Period ends; provided, further, that no single Grace Period shall exceed thirty (30) consecutive days, and during any three hundred sixty-five (365) day period, the aggregate of all Grace Periods shall not exceed an aggregate of sixty (60) days (each Grace Period complying with this provision being an “Allowable Grace Period”).   For purposes of determining the length of a Grace Period, the Grace Period shall be deemed to begin on and include the date the Holders receive the notice referred to in clause (i) above and shall end on and include the later of the date the Holders receive the notice referred to in clause (iii) above and the date referred to in such notice; provided, however, that no Grace Period shall be longer than an Allowable Grace Period.    Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended Class A Common Stock to a transferee of a Holder in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which a Holder has entered into a contract for sale prior to the Holder’s receipt of the notice of a Grace Period and for which the Holder has not yet settled.

 

(f)            In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 promptly after such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.

 

3.                   Registration Procedures

 

In connection with the Company's registration obligations hereunder:

 

(a)             the Company shall not less than three (3) Trading Days prior to the filing of a Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any similar or successor reports), furnish to the Holder copies of such Registration Statement, Prospectus or amendment or supplement thereto, as proposed to be filed, which documents will be subject to the review of such Holder (it being acknowledged and agreed that if a Holder does not object to or comment on the aforementioned documents within such three (3) Trading Day or one (1) Trading Day period, as the case may be, then the Holder shall be deemed to have consented to and approved the use of such documents).  The Company shall not file any Registration Statement or amendment or supplement thereto in a form to which a Holder reasonably objects in good faith, provided that, the Company is notified of such objection in writing within the three (3) Trading Day or one (1) Trading Day period described above, as applicable.

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(b)            (i)  the Company shall prepare and file with the Commission such amendments (including post‐effective amendments) and supplements, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities for its Effectiveness Period (except during an Allowable Grace Period); (ii) the Company shall cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424 (except during an Allowable Grace Period); (iii) the Company shall respond as promptly as reasonably practicable to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible, provide the Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to the Holders as “Selling Stockholders” but not any comments that would result in the disclosure to the Holders of material and non-public information concerning the Company; and (iv) the Company shall comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement until such time as all of such Registrable Securities shall have been disposed of (subject to the terms of this Agreement) in accordance with the intended methods of disposition by the Holders thereof as set forth in such Registration Statement as so amended or in such Prospectus as so supplemented; provided, however, that each Purchaser shall be responsible for the delivery of the Prospectus to the Persons to whom such Purchaser sells any of the Registrable Securities (including in accordance with Rule 172 under the Securities Act), and each Purchaser agrees to dispose of Registrable Securities in compliance with the plan of distribution described in the Registration Statement and otherwise in compliance with applicable federal and state securities laws. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission on the same day on which the Exchange Act report which created the requirement for the Company to amend or supplement such Registration Statement was filed.

 

(c)            the Company shall notify the Holders (which notice shall, pursuant to clauses (iii) through (v) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made, but which notice shall not contain any material non-public information regarding the Company) as promptly as reasonably practicable (and, in the case of (i)(A) below, not less than two Trading Days prior to such filing, in the case of (iii) and (iv) below, not more than one Trading Day after such issuance or receipt, and in the case of (v) below, not more than one Trading Day after the occurrence or existence of such development) and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post‐effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on any Registration Statement (in which case the Company shall provide to each of the Holders true and complete copies of all comments that pertain to the Holders as a “Selling Stockholder” or to the “Plan of Distribution” and all written responses thereto, but not information that the Company believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post‐effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information that pertains to the Holders as “Selling Stockholders” or the “Plan of Distribution”; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading.

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(d)            the Company shall use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as practicable.

 

(e)             the Company shall, if requested by a Holder, furnish to such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Company shall have no obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

 

(f)              the Company agrees to promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

 

(g)            the Company shall, prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

(h)            the Company shall, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement and under law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may reasonably request.  Certificates for Registrable Securities free from all restrictive legends may be transmitted by the Company’s transfer agent to a Holder by crediting the account of such Holder’s prime broker with DTC as directed by such Holder.

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(i)              the Company shall following the occurrence of any event contemplated by Section 3(c)(iii)-(v), as promptly as reasonably practicable (taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event), prepare and file a supplement or amendment, including a post‐effective amendment, to the affected Registration Statements or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement or any Prospectus will contain an 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 the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading.

 

(j)              the Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of shares of Class A Common Stock beneficially owned by such Holder and any Affiliate thereof, (ii) any Financial Industry Regulatory Authority (“FINRA”) affiliations, (iii) any natural persons who have the power to vote or dispose of the Class A Common Stock and (iv) any other information as may be requested by the Commission, FINRA or any state securities commission. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of Registrable Securities because any Holder fails to furnish such information within three (3) Trading Days of the Company’s request, any Liquidated Damages that are accruing at such time shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended until such information is delivered to the Company.

 

(k)             the Company shall cooperate with any registered broker through which a Holder proposes to resell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as requested by any such Holder< and the Holder shall pay the filing fee required for any such filing within two (2) Business Days of the request therefore.

 

(l)              if the Company becomes eligible to use Form S-3 during the term of this Agreement, the Company shall use its commercially reasonable efforts to maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.

 

(m)            if requested by a Holder, the Company shall (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment.

 

(n)            the Company shall otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including Rule 172, notify the Holders promptly if the Company no longer satisfies the conditions of Rule 172 and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act, including Rule 158 promulgated thereunder (for the purpose of this Section 3, “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter).

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4.                   Registration Expenses.  All fees and expenses incident to the Company’s performance of or compliance with its obligations under this Agreement (excluding any underwriting discounts and selling commissions and all legal fees and expenses of legal counsel for any Holder) shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement.  The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Class A Common Stock is then listed for trading, and (B) with respect to compliance with applicable state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as requested by the Holders), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing Prospectuses if the printing of Prospectuses is reasonably requested by the Holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any underwriting, broker or similar fees or commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

 

5.                   Indemnification.

 

(a)            Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless each Holder and the officers, directors, general partners and investment advisers of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and investigation and reasonable attorneys' fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and approved by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that each Holder has approved Annex A hereto for this purpose), or (B) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(v), related to the use by a Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated and defined in Section 6(d) below, but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected.  The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party (as defined in Section 5(c)) and shall survive the transfer of the Registrable Securities by the Holders.

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(b)            Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company and its directors and officers and each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), from and against all Losses, as incurred, arising out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, or any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein or (ii) to the extent, but only to the extent, that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(v), to the extent, but only to the extent, related to the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected.  In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

(c)            Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all reasonable fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.

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An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest exists if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party); provided, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

Subject to the terms of this Agreement, all fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 5) shall be paid to the Indemnified Party, as incurred, within twenty (20) Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally judicially determined to not be entitled to indemnification hereunder).

 

(d)            Contribution.  If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 5 was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

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The indemnity and contribution agreements contained in this Section 5 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties and are not in diminution or limitation of the indemnification provisions under the Purchase Agreement.

 

6.                   Miscellaneous.

 

(a)             Remedies.  In the event of a breach by the Company or by a Holder of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

 

(b)            No Piggyback on Registrations.  Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in a Registration Statement other than the Registrable Securities and the Company shall not prior to the Effective Date enter into any agreement providing any such right to any of its security holders.

 

(c)            Compliance.  Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to the Registration Statement and shall sell the Registrable Securities only in accordance with a method of distribution described in the Registration Statement.

 

(d)            Discontinued Disposition.  By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(iii)-(v), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed.    The Company may provide appropriate stop orders to enforce the provisions of this paragraph.

 

(e)            No Inconsistent Agreements.  Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date hereof, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

 

(f)             Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, or waived unless the same shall be in writing and signed by the Company and Holders holding at least two-thirds of the then outstanding Registrable Securities, provided that any party may give a waiver as to itself.  Notwithstanding the foregoing,  a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Notwithstanding the foregoing, if any such amendment, modification or waiver would adversely affect in any material respect any Holder or group of Holders who have comparable rights under this Agreement disproportionately to the other Holders having such comparable rights, such amendment, modification, or waiver shall also require the written consent of the Holder(s) so adversely affected.

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(g)            Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement; provided that the Company may deliver to each Holder the documents required to be delivered to such Holder under Section 3(a) of this Agreement by e-mail to the e-mail addresses provided by such Holder to the Company solely for such specific purpose.

 

(h)            Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  The Company may not assign its rights (except by merger or in connection with another entity acquiring all or substantially all of the Company’s assets) or obligations hereunder without the prior written consent of all the Holders of the then outstanding Registrable Securities.  Each Holder may assign its respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.

 

(i)              Execution and Counterparts.  This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature were the original thereof.

 

(j)               Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

 

(k)             Cumulative Remedies.  Except as provided in Section 2(c) with respect to Liquidated Damages, the remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

(l)              Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their good faith reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(m)           Headings.  The headings in this Agreement are for convenience only and shall not limit or otherwise affect  the meaning hereof.

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(n)            Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder.  The decision of each Purchaser to purchase the Shares pursuant to the Transaction Documents has been made independently of any other Purchaser. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement.  Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Shares or enforcing its rights under the Transaction Documents. Each Purchaser shall be entitled to protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose.  The Company acknowledges that each of the Purchasers has been provided with the same Registration Rights Agreement for the purpose of closing a transaction with multiple Purchasers and not because it was required or requested to do so by any Purchaser.  It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

	
 

	
ROYAL BANCSHARES OF PENNSYLVANIA, INC.

	
 

	
 

	
 

	
	
 

	
By:

	
             /s/ F. Kevin Tylus

	
	
 

	
 

	
Name:  F. Kevin Tylus

	
 

	
 

	
Title:  President and Chief Executive Officer

 

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

	
 

	
NAME OF INVESTING ENTITY

	
 

	
 

	
 

	
 

	
Ithan Creek Investors USB, LLC

	
 

	
 

	
 

	
 

	
AUTHORIZED SIGNATORY

	
 

	
 

	
 

	
 

	
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Name:

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	
ADDRESS FOR NOTICE

	
 

	
 

	
 

	
 

	
c/o:

	
 

	
 

	
 

	
 

	
 

	
Street:

	
 

	
 

	
 

	
 

	
 

	
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Annex A

 

PLAN OF DISTRIBUTION

We are registering the Class A Common Stock issued to the selling stockholders to permit the resale of these shares of Class A Common Stock by the holders of the Class A Common Stock from time to time after the date of this prospectus.  We will not receive any of the proceeds from the sale by the selling stockholders of the Class A Common Stock.  We will bear all fees and expenses incident to our obligation to register the Class A Common Stock.

The selling stockholders may sell all or a portion of the Class A Common Stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents.  If the Class A Common Stock is sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions.  The Class A Common Stock may be sold on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale, in the over-the-counter market or in transactions otherwise than on these exchanges or systems or in the over-the-counter market and in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions.  The selling stockholders may use any one or more of the following methods when selling shares:

 

		·	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

		·	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

		·	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

		·	an exchange distribution in accordance with the rules of the applicable exchange;

 

		·	privately negotiated transactions;

 

		·	settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

 

		·	broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

 

		·	through the writing or settlement of options or other hedging transactions, whether such options are listed on an options exchange or otherwise;

 

		·	a combination of any such methods of sale; and

 

		·	any other method permitted pursuant to applicable law.

 

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, as permitted by that rule, or Section 4(1) under the Securities Act, if available, rather than under this prospectus, provided that they meet the criteria and conform to the requirements of those provisions.

Broker‐dealers engaged by the selling stockholders may arrange for other broker‐dealers to participate in sales. If the selling stockholders effect such transactions by selling Class A Common Stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the Class A Common Stock for whom they may act as agent or to whom they may sell as principal. Such commissions will be in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction will not be in excess of a customary brokerage commission in compliance with NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASD IM-2440.

 

In connection with sales of the Class A Common Stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Class A Common Stock in the course of hedging in positions they assume.  The selling stockholders may also sell Class A Common Stock short and if such short sale shall take place after the date that this Registration Statement is declared effective by the Commission, the selling stockholders may deliver Class A Common Stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales.  The selling stockholders may also loan or pledge Class A Common Stock to broker-dealers that in turn may sell such shares, to the extent permitted by applicable law. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). Notwithstanding the foregoing, the selling stockholders have been advised that they may not use shares registered on this registration statement to cover short sales of our Class A Common Stock made prior to the date the registration statement, of which this prospectus forms a part, has been declared effective by the SEC.

 

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the Class A Common Stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Class A Common Stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.  The selling stockholders also may transfer and donate the Class A Common Stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

The selling stockholders and any broker-dealer or agents participating in the distribution of the Class A Common Stock may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act in connection with such sales.  In such event, any commissions paid, or any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Selling Stockholders who are "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to the applicable prospectus delivery requirements of the Securities Act and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

 

Each selling stockholder has informed the Company that it is not a registered broker-dealer and does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Class A Common Stock.  Upon the Company being notified in writing by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of Class A Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the Class A Common Stock was sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction.  In no event shall any broker-dealer receive fees, commissions and markups, which, in the aggregate, would exceed eight percent (8%).

Under the securities laws of some states, the Class A Common Stock may be sold in such states only through registered or licensed brokers or dealers.  In addition, in some states the Class A Common Stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

There can be no assurance that any selling stockholder will sell any or all of the Class A Common Stock registered pursuant to the shelf registration statement, of which this prospectus forms a part.

 

Each selling stockholder and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the Class A Common Stock by the selling stockholder and any other participating person.  To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the Class A Common Stock to engage in market-making activities with respect to the Class A Common Stock.  All of the foregoing may affect the marketability of the Class A Common Stock and the ability of any person or entity to engage in market-making activities with respect to the Class A Common Stock.

 

We will pay all expenses of the registration of the Class A Common Stock pursuant to the registration rights agreement, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that each selling stockholder will pay all underwriting discounts and selling commissions, if any and any related legal expenses incurred by it.  We will indemnify the selling stockholders against certain liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreement, or the selling stockholders will be entitled to contribution.  We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholders specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

Annex B

ROYAL BANCSHARES OF PENNSYLVANIA, INC.

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

The undersigned holder of Class A common stock, $2.00 par value per share, of Royal Bancshares of Pennsylvania, Inc., a Pennsylvania corporation (the “Company”), issued pursuant to a certain Securities Purchase Agreement by and among the Company and the Purchasers named therein, dated as of March 7, 2014, understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-3 (the “Resale Registration Statement”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of a certain Registration Rights Agreement by and among the Company and the Purchasers named therein, dated as of March 7, 2014 (the “Agreement”).  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Agreement.

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the “Prospectus”), deliver the Prospectus to purchasers of Registrable Securities (including pursuant to Rule 172 under the Securities Act) and be bound by the provisions of the Agreement (including certain indemnification provisions, as described below).  Holders must complete and deliver this Notice and Questionnaire in order to be named as selling stockholders in the Prospectus.  Holders of Registrable Securities who do not complete, execute and return this Notice and Questionnaire within five (5) Trading Days following the date of the Agreement (1) will not be named as selling stockholders in the Resale Registration Statement or the Prospectus and (2) may not use the Prospectus for resales of Registrable Securities.

Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus.  Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not named as a selling stockholder in the Resale Registration Statement and the Prospectus.

 

NOTICE

 

The undersigned holder (the “Selling Stockholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Item (3), unless otherwise specified in Item (3), pursuant to the Resale Registration Statement.  The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire and the Agreement.

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

QUESTIONNAIRE

 

	1.	Name.

 

		(a)	Full Legal Name of Selling Stockholder:

 

		(b)	Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held:

 

 

		(c)	Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):

 

 

2.  Address for Notices to Selling Stockholder:

 

	
Telephone:

	
 

	
Fax:

	
 

	
Contact Person:

	
 

	
E-mail address of Contact Person:

3.  Beneficial Ownership of Registrable Securities Issuable Pursuant to the Purchase Agreement:

 

		(a)	Type and Number of Registrable Securities beneficially owned and issued pursuant to the Agreement:

 

		(b)	Number of shares of Class A Common Stock to be registered pursuant to this Notice for resale:

 

4.  Broker-Dealer Status:

 

		(a)	Are you a broker-dealer?

 

Yes o  No o

		(b)	If “yes” to Section 4(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

 

Yes o  No o

 

	Note:	If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

		(c)	Are you an affiliate of a broker-dealer?

 

Yes o  No o

 

		Note:	If yes, provide a narrative explanation below:

 

 

		(c)	If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes o  No o

 

		Note:	If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

5.  Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.

 

Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.

 

Type and amount of other securities beneficially owned:

 

 

6.  Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

7.  Plan of Distribution:

 

The undersigned has reviewed the form of Plan of Distribution attached as Annex A to the Registration Rights Agreement, and hereby confirms that, except as set forth below, the information contained therein regarding the undersigned and its plan of distribution is correct and complete.

 

State any exceptions here:

 

 

***********

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the Resale Registration Statement and the Prospectus.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of any such Registration Statement and the Prospectus.

 

By signing below, the undersigned acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M in connection with any offering of Registrable Securities pursuant to the Resale Registration Statement.  The undersigned also acknowledges that it understands that the answers to this Questionnaire are furnished for use in connection with Registration Statements filed pursuant to the Registration Rights Agreement and any amendments or supplements thereto filed with the Commission pursuant to the Securities Act.

 

I confirm that, to the best of my knowledge and belief, the foregoing statements (including without limitation the answers to this Questionnaire) are correct.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

	
Dated:

	  		
Beneficial Owner:

	  

 

				
By:

	  
					
Name:

		
 

	
 

	
 

	
Title:

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