1
RIGHTS AGREEMENT
This Agreement is made by and among BigStar Entertainment, Inc., a
Delaware corporation (the "Company") and each of the Stockholders set forth in
the signature lines below.
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.1. Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Agreement" means this Rights Agreement as from time to time amended
and in effect between the parties, including all Exhibits hereto.
"Approved Sale" shall mean the meaning assigned to it in Section
3.1.
"Board" or "Board of Directors" means the board of directors of the
Company as constituted from time to time.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act or Exchange Act.
"Common Stock" means the Company's Common Stock.
"Common Shares" means shares of the Company's Common Stock.
"Company" means BigStar Entertainment, Inc., a Delaware corporation.
"Directors" means the members from time to time of the Board of
Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission (or of any other federal agency then administering the Exchange Act)
thereunder, all as the same shall be in effect at the time.
"Holder" means any person owning or having the right to acquire
Registrable Shares or any assignee thereof in accordance with Section 2.14
hereof.
"Immediate Family" means any spouse, child, grandchild, brother,
parent or sister of a Holder.
2
"Initial Public Offering" means the first public offering of Common
Stock of the Company for the account of the Company pursuant to an offering
registered under the Securities Act with the Commission.
"Person" means an individual, corporation, partnership, joint
venture, trust, university, or unincorporated organization, or a government, or
any agency or political subdivision thereof.
"Recapitalization Events" means stock splits, stock dividends,
recapitalizations, reclassifications and similar events.
"Registrable Shares" shall mean and include (i) shares of Common
Stock held by a Stockholder; and (ii) any shares of Common Stock issuable upon
exercise of warrants or options, if the Company expressly accords to such shares
the registration rights contained in this Agreement; provided, however, that
shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon the consummation of any sale of such shares pursuant to
a registration statement or Rule 144 under the Securities Act.
"Sale of the Company" means the sale of the Company by way of (i)
merger, consolidation or sale or transfer of at least a majority of the
Company's capital stock, or (ii) the transfer of all or substantially all of the
Company's assets.
"Securities" means any shares of capital stock of the Company or any
securities convertible into or exchangeable for any class of capital stock of
the Company and all securities into which such Securities may be converted or
reclassified as a result of any merger, consolidation, stock split, stock
dividend or other recapitalization of the Company whether now owned or hereafter
acquired.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission (or
of any other federal agency then administering the Securities Act) thereunder,
all as the same shall be in effect at the time.
"Stockholders" means (i) Persons listed as Stockholders on the
signature page hereof, (ii) any Person who purchases from the Company after the
date hereof newly issued shares of Securities of the Company and who, as
permitted by this Agreement, becomes a party to this Agreement and executes a
counterpart of this Agreement, and (iii) any permitted assignee or transferee
from any of the foregoing of Registrable Shares who is not a competitor of the
Company pursuant to the terms of this Agreement.
"Subsidiary" or "Subsidiaries" means any Person of which the Company
and/or any of its other Subsidiaries (as herein defined) directly or indirectly
owns at the time at least fifty percent (50%) of the outstanding voting
securities.
2
3
ARTICLE 2
REGISTRATION RIGHTS
2.1. Piggy-Back Registrations. If at any time the Company shall determine
to register for its own account or the account of others under the Securities
Act (including without limitation pursuant to the Initial Public Offering or a
demand for registration of any Stockholder of the Company) any of its equity
securities, other than on Form S-8 or Form S-4 or their then equivalents (a
"Piggy-Back Registration"), it shall send to each Holder, written notice of such
determination and, if within fifteen (15) days after receipt of such notice,
such Holder shall so request in writing, the Company shall use its diligent
efforts to include in such registration statement all or any part of the
Registrable Shares such Holder requests to be registered, except that if, in
connection with any offering involving an underwriting of Common Stock to be
issued by the Company, the managing underwriter shall impose a limitation on the
number of shares of Common Stock which may be included in the registration
statement because, in its judgment, such limitation is necessary to effect an
orderly public distribution, then the Company shall be obligated to include in
such registration statement only such limited portion (or none, if so required
by the managing underwriter) of the Registrable Shares with respect to which
such Holder has requested inclusion hereunder. No right under this Section 2.1
shall be construed to limit any registration required under Section 2.2.
2.2. Demand Registration. If on any occasion Holders holding at least 25%
of the then outstanding Registrable Shares shall notify the Company in writing
that it or they intend to offer or cause to be offered for public sale at least
25% of the then outstanding Registrable Shares, the Company will so notify all
Holders. Upon written request of any Holder given within fifteen (15) days after
the receipt by such Holder from the Company of such notification, the Company
will use its diligent efforts to cause such of the Registrable Shares as may be
requested by any Holder (including the Holder giving the initial notice of
intent to offer) to be registered under the Securities Act as expeditiously as
possible (a "Demand Registration"). The Company shall not be required to effect
more than two Demand Registrations. If in the good faith judgment of the Board
of Directors of the Company, a Demand Registration would be detrimental to the
Company and the Board of Directors of the Company concludes, as a result, that
it is important to defer the filing of such registration statement at such time,
then the Company shall have the right to defer such filing, provided that the
Company may not defer the filing for a period of more than 180 days after
receipt of the request for a Demand Registration, or more than once in any
12-month period. Unless otherwise agreed to by the Company, the Holders may not
exercise their rights under this Section 2.2 until the earlier to occur of (i)
forty-eight (48) months following the date of this Agreement or (ii) one hundred
eighty (180) after the effectiveness of any registration statement covering the
Initial Public Offering. The Holders may not exercise their right under this
Section 2.2 for an effective date that is one hundred eighty (180) days of the
effective date of any registration statement (other than on Form S-8) covering
capital stock of the Company.
2.3. Registrations on Form S-3. In addition to the rights provided the
Holders in Sections 2.1 and 2.2 above, if the registration of Registrable Shares
under the Securities Act can be effected on Form S-3 (or any equivalent
successor form promulgated by the Commission), then the Company shall provide
the Holders with the following rights:
3
4
(a) For the Holders. Upon the written request of one or more
Holders, the Company will so notify each Holder, and then will, as expeditiously
as possible, use its diligent efforts to effect qualification and registration
under the Securities Act on Form S-3 of all or such portion of the Registrable
Shares as the Holders shall specify; provided, however, the Company shall not be
required to effect a registration pursuant to this Section 2.3(a) unless the
market value of the Registrable Shares to be sold by the Holders in any such
registration shall be at least $1,000,000 at the time of filing such
registration statement, and further provided that the Company shall not be
required to effect more than one registration during any 12 month period
pursuant to this Section 2.3(a) or more than four registrations in the aggregate
pursuant to this Section 2.3(a).
(b) Conflicts. In the event that, in a registration under this
Section 2.3 which is effected through an underwriter, the underwriter imposes a
limitation on the number of Registrable Shares which may be included in the
registration statement in order to effect an orderly public distribution, then
the Company shall exclude from such registration statement, first, all shares
which are not Registrable Shares, and second, Registrable Shares which are
requested to be included pursuant to Section 2.1.
2.4. Effectiveness. The Company will use its diligent efforts to maintain
the effectiveness for up to one hundred twenty (120) days (or such shorter
period of time as the underwriters need to complete the distribution of the
registered offering, or ninety (90) days in the case of a "shelf" registration
statement on Form S-3) of any registration statement pursuant to which any of
the Registrable Shares are being offered, and from time to time will amend or
supplement such registration statement and the prospectus contained therein to
the extent necessary to comply with the Securities Act and any applicable state
securities statute or regulation. The Company will also provide each Holder with
as many copies of the prospectus contained in any such registration statement as
it may reasonably request.
2.5. Indemnification of Holders.
(a) In the event that the Company registers any of the Registrable
Shares under the Securities Act, the Company will indemnify and hold harmless
each Holder and each underwriter of the Registrable Shares (including their
officers, directors, affiliates and partners) so registered (including any
broker or dealer through whom such shares may be sold) and each Person, if any,
who controls such Holder or any such underwriter within the meaning of Section
15 of the Securities Act from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them become
subject under the Securities Act, applicable state securities laws or under any
other statute or at common law or otherwise, as incurred, and, except as
hereinafter provided, will reimburse each such Holder, each such underwriter and
each such controlling Person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions whether or not resulting in any liability, as incurred, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the final prospectus (or the registration statement
or prospectus as from time to time amended or supplemented by the Company) or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated
4
5
therein or necessary in order to make the statements therein not misleading, or
any violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities laws applicable to the Company and
relating to action or inaction required of the Company in connection with such
registration, unless (i) such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration statement,
preliminary or amended preliminary prospectus or final prospectus in reliance
upon and in conformity with information furnished in writing to the Company in
connection therewith by any such holder of Registrable Shares or its controlling
person (in the case of indemnification of such holder or its controlling
person), or any such underwriter or its controlling person (in the case of
indemnification of such underwriter or its controlling person) expressly for use
therein, or unless (ii) in the case of a sale directly by such Holder of
(including a sale of such Registrable Shares through any underwriter retained by
such holder of Registrable Shares to engage in a distribution on behalf of such
Holder), such untrue statement or alleged untrue statement or omission or
alleged omission was contained in a preliminary prospectus and corrected in a
final or amended prospectus copies of which were delivered to such Holder or
such underwriter on a timely basis, and such Holder failed to deliver a copy of
the final or amended prospectus at or prior to the confirmation for the sale of
the Registrable Shares to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the Securities Act.
(b) Promptly after receipt by any Holder, any underwriter or any
controlling Person of notice of the commencement of any action in respect of
which indemnity may be sought against the Company, such Holder, or such
underwriter or such controlling person, as the case may be, will notify the
Company in writing of the commencement thereof (provided, that failure to so
notify the Company shall not relieve the Company from any liability it may have
hereunder) and, subject to the provisions hereinafter stated, the Company shall
be entitled to assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to such Holder, of such
underwriter or such controlling Person, as the case may be), and the payment of
expenses insofar as such action shall relate to any alleged liability in respect
of which indemnity may be sought against the Company.
(c) Such Holder, any such underwriter or any such controlling Person
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
subsequent to any assumption of the defense by the Company shall not be at the
expense of the Company unless the employment of such counsel has been
specifically authorized in writing by the Company. The Company shall not be
liable to indemnify any Person for any settlement of any such action effected
without the Company's written consent. The Company shall not, except with the
approval of each party being indemnified under this Section 2.5, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which any Holder exercising
rights under this Article 2, or any controlling Person of any such Holder, makes
a claim for indemnification pursuant to this Section 2.5 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of
5
6
appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 2.5 provides for indemnification in
such case, then, the Company and such Holder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the Holder on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Holder on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or by the Holder on the other, and each party's relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, however, that, in any such case, (A) no
such Holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Shares offered by such Holder pursuant to
such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
2.6. Indemnification of Company.
(a) In the event that the Company registers any of the Registrable
Shares under the Securities Act, each Holder so registered will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed or otherwise participated in the preparation of the registration
statement, each underwriter of the Registrable Shares so registered (including
any broker or dealer through whom such of the shares may be sold) and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, applicable state securities laws or under any other
statute or at common law or otherwise, and, except as hereinafter provided, will
reimburse the Company and each such director, officer, underwriter or
controlling Person for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any actions whether
or not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement, in any preliminary or amended preliminary prospectus or
in the final prospectus (or in the registration statement or prospectus as from
time to time amended or supplemented) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by such Holder expressly for use therein;
provided, however, that such Holder's obligations hereunder shall be limited to
an amount equal to the proceeds received by such Holder sold in such
registration.
(b) Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against such Holder, the
Company will notify such Holder in writing of the commencement thereof
(provided, that failure to so notify such Holder
6
7
shall not relieve such holder from any liability it may have hereunder), and
such Holder shall, subject to the provisions hereinafter stated, be entitled to
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to the Company) and the payment of
expenses insofar as such action shall relate to the alleged liability in respect
of which indemnity may be sought against such holder of Registrable Shares. The
Company and each such director, officer, underwriter or controlling Person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel subsequent to
any assumption of the defense by such Holder shall not be at the expense of such
Holder unless employment of such counsel has been specifically authorized in
writing by such Holder. Such Holder shall not be liable to indemnify any Person
for any settlement of any such action effected without such Holder's written
consent.
(c) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which the Company exercising
its rights under this Article 2 makes a claim for indemnification pursuant to
this Section 2.6, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding that this
Section 2.6 provides for indemnification, in such case, then, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and of the Holder on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the Holder
on the other, and each party's relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission; provided,
however, that, in any such case, (A) no such Holder will be required to
contribute any amount in excess of the public offering price of all such
Registrable Shares offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
2.7. Exchange Act Registration. If the Company at any time shall list any
class of equity securities of the type which may be issued upon the conversion
of the Preferred Stock on any national securities exchange and shall register
such class of equity securities under the Exchange Act, the Company will, at its
expense, simultaneously list on such exchange and maintain such listing of, the
Common Stock. If the Company becomes subject to the reporting requirements of
either Section 13 or Section 15(d) of the Exchange Act, the Company will use its
diligent efforts to timely file with the Commission such information as the
Commission may require under either of said Sections; and in such event, the
Company shall use its diligent efforts to take all action as may be required as
a condition to the availability of Rule 144 or Rule 144A under the Securities
Act (or any successor exemptive rule hereinafter in effect) with respect to such
Common Stock. The Company shall furnish to any Holder forthwith upon request (i)
a written statement by the Company as to its compliance with the reporting
requirements of Rule
7
8
144, (ii) a copy of the most recent annual or quarterly report of the Company as
filed with the Commission, and (iii) such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing a Holder to sell any such Registrable Securities without
registration. After the occurrence of the Initial Public Offering, the Company
agrees to use its diligent efforts to facilitate and expedite transfers of
Common Stock pursuant to Rule 144 under the Securities Act, which efforts shall
include timely notice to its transfer agent to expedite such transfers of Common
Stock.
2.8. Further Obligations of the Company. Whenever under the preceding
Sections of this Article 2, the Company is required hereunder to register
Registrable Shares, it agrees that it shall also do the following:
(a) Furnish to each selling Holder such copies of each preliminary
and final prospectus and such other documents as said holder may reasonably
request to facilitate the public offering of its Registrable Shares;
(b) Use its diligent efforts to register or qualify the Registrable
Shares covered by said registration statement under the applicable securities or
"blue sky" laws of such jurisdictions as any selling Holder may reasonably
request; provided, however, that the Company shall not be obligated to qualify
to do business in any jurisdictions where it is not then so qualified or to take
any action which would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by the
registration statement in any jurisdiction where it is not then so subject;
(c) Furnish to each selling Holder a signed counterpart, addressed
to the selling holders, of
(i) an opinion of counsel for the Company, dated the effective
date of the registration statement, and
(ii) "comfort" letters signed by the Company's independent
public accountants who have examined and reported on the Company's financial
statements included in the registration statement, to the extent permitted by
the standards of the American Institute of Certified Public Accountants,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities;
(d) Make available for inspection to each selling Holder a copy of
all documents filed with and all correspondence from or to the Commission in
connection with any such offering of securities; and
(e) Cooperate to the extent reasonably requested to obtain all
necessary approvals from the National Association of Securities Dealers, Inc.
2.9. Stockholder Acts. Whenever under the preceding Sections of this
Article 2 the Holders are registering such shares pursuant to any registration
statement, each such Holder
8
9
agrees to (i) timely provide to the Company, at its request, such information
and materials as it may reasonably request in order to effect the registration
of such Registrable Shares and (ii) convert all shares of Preferred Stock
included in any registration statement to shares of Common Stock, such
conversion to be effective at the closing of such offering pursuant to such
registration statement.
2.10. Expenses. In the case of all Piggy-Back Registrations effected under
Section 2.1, two Demand Registrations effected under Section 2.2, and one
registration per 12-month period effected under Section 2.3 up to the maximum
number specified therein, the Company shall bear all reasonable costs and
expenses of each such registration, including, but not limited to, the Company's
printing, legal and accounting fees and expenses, Commission and NASD filing
fees and "Blue Sky" fees and expenses; provided, however, that the Company shall
have no obligation to pay or otherwise bear any portion of the underwriters'
commissions or discounts attributable to the Registrable Shares being offered
and sold by the Holders, or the fees and expenses of counsel for the selling
Holders in connection with the registration of the Registrable Shares. The
Company shall pay all expenses in connection with any registration initiated
pursuant to this Article 2 which is withdrawn, delayed or abandoned at the
request of the Company, except if such withdrawal, delay or abandonment is
caused by the fraud, material misstatement or omission of a material fact by a
Holder to be included in such registration.
2.11. Market Stand-Off" Agreement. Each Holder hereby agrees that, during
the period of duration (up to, but not exceeding, 180 days) specified by the
Company and an underwriter of Common Stock or other securities of the Company,
following the effective date of a registration statement of the Company filed
under the Securities Act, it shall not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that:
(a) such agreement shall be applicable only during the three-year
period following the date of the final prospectus distributed pursuant to the
first such registration statement of the Company which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company, all five-percent (5%)
security holders, and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 2.11.
9
10
Notwithstanding the foregoing, the obligations described in this
Section 2.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future.
2.12. Other Registration Rights. The Company shall not grant any
registration rights to any other Person which registration rights are senior to
the registration rights of the Holders, unless the Company shall first obtain
the written consent of a majority-in-interest of the Holders. The Company may
grant registration rights in the future to any future purchaser of the
Securities of the Company which are on parity with the Holders, without the
consent of the Holders, provided that such purchasers agree in writing to be
bound by the provisions of this Agreement. The Company has the right to add
employees of the Company who have options or Securities of the Company as
parties to this Agreement.
2.13. S-8 Registration. Reasonably promptly after completion of the
Initial Public Offering, the Company shall use its diligent efforts to file with
the Commission a registration statement on Form S-8 (or its equivalent successor
form) to register all shares of Common Stock issuable pursuant to options
granted under the Company's stock option plans adopted by the Company's Board of
Directors and approved by the Company's Stockholders.
2.14. Assignment of Registration Rights. The rights to cause the Company
to register Registrable Shares pursuant to this Article 2 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee,
provided (i) the Company is, within a reasonable time before such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (ii) that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and (iii) the
assignee, in the Company's judgment, is not a competitor of the Company.
2.15. Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in this Article 2 after the earlier of (i) five
(5) years following the consummation of the sale of securities in an Initial
Public Offering, (ii) such time as Rule 144 or another similar exemption under
the Act is available for the sale of all of such Holder's shares during a three
(3)-month period without registration.
2.16. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article 2.
ARTICLE 3
SALE OF COMPANY
3.1. Sale. If the Board of Directors and the holders of a majority of the
outstanding Securities entitled to vote approve a Sale of the Company (the
"Approved Sale"), all of the Stockholders shall consent to and raise no
objections against an Approved Sale, and if the Approved Sale is structured as a
sale of stock or merger, all of the Stockholders shall agree to
10
11
sell their securities on the terms and conditions of the Approved Sale. All of
the Stockholders shall take all reasonably necessary and desirable actions in
connection with the consummation of the Approved Sale.
3.2. Expenses. The Stockholders shall bear their pro rata share (based
upon the number of shares sold) of the costs of any sale of Securities pursuant
to an Approved Sale to the extent such costs are incurred for the benefit of all
holders of the Company's Securities and are not otherwise paid by the Company or
the acquiring party. Costs incurred by the Stockholders on their own behalf
shall not be considered costs of the transaction hereunder.
3.3. Termination. The provisions of this Article 3 shall terminate upon
the completion of an Initial Public Offering.
ARTICLE 4
MISCELLANEOUS
4.1. No Waiver; Cumulative Remedies. No failure or delay on the part of
any party to this Agreement in exercising any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
4.2. Amendments, Waivers and Consents. Any provision in the Agreement to
the contrary notwithstanding, and except as hereinafter provided, changes in,
termination or amendments of or additions to this Agreement may be made, and
compliance with any covenant or provision set forth herein may be omitted or
waived, if the Company shall obtain consent thereto in writing from the holder
or holders of at least a majority of the Registrable Shares, provided that no
consents shall be effective to reduce the percentage of the Registrable Shares
the consent of the holders of which is required under this Section 4.2. Any
waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
4.3. Addresses for Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telegraphic
communication) and mailed, telegraphed or delivered to each applicable party at
the address set forth in the records of the Company or at such other address as
to which such party may inform the other parties in writing in compliance with
the terms of this Section.
If to any Stockholder: at such Stockholder's address for notice as
set forth in the register maintained by the Company, or at such other address as
shall be designated by such Person in a written notice to the other parties
complying as to delivery with the terms of this Section.
If to the Company: at the address set forth on page 1 hereof, or at
such other address as shall be designated by the Company in a written notice to
the other parties complying as to delivery with the terms of this Section.
11
12
All such notices, requests, demands and other communications shall,
shall be deemed delivered: three days after mailed (which mailing must be
accomplished by certified mail, return receipt requested and postage prepaid);
when transmitted by successful facsimile transmission; one business day after
deposited with a guaranteed overnight courier service (charged to sender); or
when delivered in hand or dispatched by telegraph.
4.4. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company. This Agreement is not assignable by the
Stockholders without the consent of the Company, except as provided for in
Section 2.14.
4.5. Entire Agreement. This Agreement constitutes the entire agreement
among the parties and supersedes any prior or contemporaneous understandings,
representations or agreements concerning the subject matter hereof.
4.6. Severability. The provisions of this Agreement are severable and, in
the event that any court of competent jurisdiction one or more of the provisions
or part of a provision contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement, but this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of a
provision, had never been contained herein, and such provisions or part reformed
so that it would be valid, legal and enforceable to the maximum extent possible.
4.7. Confidentiality. Each Stockholder agrees that it will keep
confidential and will not disclose, or divulge any confidential, proprietary,
secret or non-public information which such Stockholder may obtain from the
Company and not use such information other than for the benefit of the Company
or in furtherance of the Stockholder's rights as a Stockholder of the Company,
provided that no such information shall be deemed to be non-public if it (i) is
or becomes generally available to the public other than as a result of a
disclosure by the Stockholder or its respective agents, representatives or
employees; (ii) is or becomes available to the Stockholder on a non-confidential
basis from a source (other than the Company or one of its officers, directors,
agents, representatives or employees) that is not prohibited from disclosing
such information by a legal, contractual or fiduciary obligation; or (iii) was
known to the Stockholder on a non-confidential basis prior to its disclosure to
it by the Company and provided further that, any other term of this Agreement to
the contrary notwithstanding, the Company shall not be obligated to disclose any
information, the disclosure of which it believes in good faith would be
detrimental to the Company or its Stockholders.
4.8. Governing Law and Construction. This Agreement will be governed by
and construed in accordance with the laws of New York, without regard to the
principles of conflicts of law. The language of this Agreement shall be deemed
to be the result of negotiation among the parties and their respective counsel
and shall not be construed strictly for or against any party. Each party (i)
agrees that any action arising out of or in connection with this Agreement shall
be brought solely in federal or state courts in New York, New York, (ii) hereby
consents to the sole jurisdiction of such courts, and (iii) agrees that,
whenever a party is requested to executed one or more documents evidencing such
consent, it shall do so immediately.
12
13
4.9. Headings. Article, section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
4.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
4.11. Further Assurances. From and after the date of this Agreement, upon
the request of any Stockholder or the Company, the Company and the Stockholder
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
4.12. Aggregation of Stock. All shares of Company stock held or acquired
by a Stockholder and its Affiliates and Immediate Family shall be aggregated
together for purposes of determining the availability of any rights under this
Agreement.
4.13. Attorney's Fees. In the event that any dispute among the parties to
this Agreement should result in a legal proceeding, the prevailing party shall
be entitled to recover from the other party(ies) to such dispute, all fees,
costs and expenses of enforcing any right under or with respect to this
Agreement, including without limitation, such fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
13
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the ____________________, 199__.
BIGSTAR ENTERTAINMENT, INC.
By:________________________________
Title:_____________________________
COMMON STOCKHOLDERS
_______________________________ _______________________________
Signature Signature
_______________________________ _______________________________
Title Title
_______________________________ _______________________________
Printed Name Printed Name
_______________________________ _______________________________
Signature Signature
_______________________________ _______________________________
Title Title
_______________________________ _______________________________
Printed Name Printed Name
BIGSTAR
RIGHTS AGREEMENT SIGNATURE PAGE
