ON STAGE ENTERTAINMENT, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of the
13th day of March, 2001, by and among On Stage Entertainment, Inc., a Nevada
corporation (the "Company") and the investors listed on Exhibit A hereto,
referred to hereinafter as the "Investors" and each individually as an
"Investor."
Recitals
WHEREAS, the Investors are purchasing shares of the Company's Series A
Preferred Stock (the "Series A Stock") pursuant to that certain Stock and
Warrant Purchase Agreement (the "Purchase Agreement") of even date herewith;
(the "Financing").
WHEREAS, the obligations in the Purchase Agreement are conditioned upon the
execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the parties
desire to enter into this Agreement in order to grant registration, information
rights and other rights to the Investors as set forth below.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
SECTION 1. GENERAL.
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor or similar registration form under the Securities
Act subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that have
not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
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"Registrable Securities" means (a) Common Stock of the Company issued or
issuable upon conversion of the Series A Stock and (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed
twenty-five thousand dollars ($25,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock issued pursuant to the
Purchase Agreement and held by the Investors listed on Exhibit A hereto and
their permitted assigns and the Series A Stock issuable upon exercise of the
Warrants.
"Special Registration Statement" shall mean (i) a registration statement
relating to any employee benefit plan or (ii) with respect to any corporate
reorganization or transaction under Rule 145 of the Securities Act, including
any registration statements related to the resale of securities issued in such a
transaction or (iii) a registration related to stock issued upon conversion of
debt securities.
"Warrants" shall mean those certain warrants to purchase Series A Stock
held by the Investors dated as of the date set forth in the first paragraph
hereof.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any portion of
the Shares or Registrable Securities unless and until:
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(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the terms
of this Agreement, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and
(C) if reasonably requested by the Company, such Holder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of such
shares under the Securities Act. It is agreed that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144,
except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii) above,
no such registration statement or opinion of counsel shall be necessary for
a transfer by a Holder that is (A) a partnership transferring to its
partners or former partners in accordance with partnership interests, (B) a
corporation transferring to a wholly-owned subsidiary or a parent
corporation that owns all of the capital stock of the Holder, (C) a limited
liability company transferring to its members or former members in
accordance with their interest in the limited liability company, (D) an
individual transferring to the Holder's family member or trust for the
benefit of an individual Holder, or (E) any transferee who acquires at
least five hundred thousand (500,000) Registerable Securities; provided
that in each case the transferee will be subject to the terms of this
Agreement to the same extent as if he, she or it were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable Securities shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
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securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2 and from and after six
months from the date hereof, if the Company shall receive a written request from
the Holders of a majority of the Registrable Securities (the "Initiating
Holders") that the Company file a registration statement under the Securities
Act covering the registration of the Registrable Securities then outstanding and
if the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $2,500,000 (a "Qualified Public Offering"), then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, effect, as expeditiously as reasonably possible, the registration
under the Securities Act of all Registrable Securities that the Holders request
to be registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(c) The Company shall not be required to effect a registration pursuant to
this Section 2.2:
(i) after the Company has effected three (3) registrations pursuant to
this Section 2.2, and such registrations have been declared or ordered
effective;
(ii) during the period starting with the date of filing of, and ending
on the date one hundred eighty (180) days following the effective date of
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the registration statement pertaining to a public offering, other than
pursuant to a Special Registration Statement; provided that the Company
makes reasonable good faith efforts to cause such registration statement to
become effective;
(iii) if within fifteen (15) days of receipt of a written request from
Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to file a registration statement for
a public offering, other than pursuant to a Special Registration Statement
within forty-five (45) days;
(iv) if the Company shall furnish to Holders requesting a registration
statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be effected
at such time, in which event the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided that such right to delay a
request shall be exercised by the Company not more than once in any twelve
(12) month period;
(v) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below; or
(vi) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) Underwriting. If the registration statement under which the Company
gives notice under this Section 2.3 is for an underwritten offering, the Company
shall so advise the Holders of Registrable Securities. In such event, the right
of any such Holder to be included in a registration pursuant to this Section 2.3
shall be conditioned upon such Holder's participation in such underwriting and
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the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holders on a pro rata basis based on the total
number of Registrable Securities held by the Holders; and third, to any
shareholder of the Company (other than a Holder) requesting registration
pursuant to Section 2.2 on a pro rata basis. No such reduction shall reduce the
amount of securities of the selling Holders included in the registration below
twenty-five percent (25%) of the total amount of securities included in such
registration. In no event will shares of any other selling shareholder be
included in such registration that would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities
proposed to be sold in the offering. If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least ten (10) business
days prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder which is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing person shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as defined in this
sentence.
(b) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
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provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than five hundred thousand dollars ($500,000),
or
(iii) if within thirty (30) days of receipt of a written request from
any Holder or Holders pursuant to this Section 2.4, the Company gives
notice to such Holder or Holders of the Company's intention to make a
public offering within ninety (90) days, other than pursuant to a Special
Registration Statement;
(iv) if the Company shall furnish to the Holders a certificate signed
by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would
be seriously detrimental to the Company and its shareholders for such Form
S-3 registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of
the request of the Holder or Holders under this Section 2.4; provided, that
such right to delay a request shall be exercised by the Company not more
than once in any twelve (12) month period, or
(v) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
requests of the Holders. Registrations effected pursuant to this Section 2.4
shall not be counted as demands for registration or registrations effected
pursuant to Sections 2.2 or 2.3, respectively.
2.5 Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company, including the
expense of one special counsel of the selling shareholders not to exceed
twenty-five thousand dollars ($25,000). All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
registered. The Company shall not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which the Initiating Holders were not aware at the time of such request or (b)
the Holders of a majority of Registrable Securities agree to forfeit their right
to one requested registration pursuant to Section 2.2 or Section 2.4, as
applicable, in which event such right shall be forfeited by all Holders). If the
Holders are required to pay the Registration Expenses, such expenses shall be
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borne by the holders of securities (including Registrable Securities) requesting
such registration in proportion to the number of shares for which registration
was requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use all reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company will use reasonable efforts to amend or supplement such
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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 the light
of the circumstances then existing.
(g) Use its reasonable efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter, dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
2.7 Termination of Registration Rights. A Holder's registration rights
shall expire if (a) such Holder (together with its affiliates) holds less than
1% of the Company's outstanding Common Stock (treating all shares of convertible
Preferred Stock on an as converted basis) and (b) all Registrable Securities
held by and issuable to such Holder (and its affiliates) may be sold under Rule
144 during any ninety (90) day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any registration
requested pursuant to Section 2.2 or Section 2.4 if, due to the operation of
subsection 2.2(b), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in Section 2.2 or Section 2.4, whichever is
applicable.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the partners, officers and directors of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
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liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
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(c) Promptly after receipt by an indemnified party under this Section 2.9
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 2.9, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the net proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9 shall
survive completion of any offering of Registrable Securities in a registration
statement and the termination of this Agreement. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member, stockholder or shareholder of a Holder, (b) is a Holder's family
member or trust for the benefit of an individual Holder, or (c) acquires at
11
least five hundred thousand (500,000) shares of Registrable Securities (as
adjusted for stock splits and combinations); or (d) is an entity affiliated by
common control (or other related entity) with such Holder provided, however, (i)
the transferor shall, within ten (10) days after such transfer, furnish to the
Company written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
assigned and (ii) such transferee shall agree to be subject to all restrictions
set forth in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty-six and
two-thirds percent (66-2/3%) of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Section 2, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. Other than as provided
in Section 5.11, after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of at least sixty-six and
two-thirds percent (66- 2/3%) of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights senior to those
granted to the Holders hereunder, other than the right to a Special Registration
Statement.
2.13 "Market Stand-Off" Agreement . Each Holder hereby agrees that such
Holder shall not sell, transfer, make any short sale of, grant any option for
the purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any Common Stock (or other securities) of the Company
held by such Holder (other than those included in the registration) for a period
specified by the representative of the underwriters of Common Stock (or other
securities) of the Company not to exceed one hundred eighty (180) days following
the effective date of a registration statement of the Company filed under the
Securities Act; provided that all officers and directors of the Company and
holders of at least one percent (1%) of the Company's voting securities enter
into similar agreements.
2.14 Agreement to Furnish Information. Each Holder agrees to execute and
deliver such other agreements as may be reasonably requested by the Company or
the underwriter that are consistent with the Holder's obligations under Section
2.13 or that are necessary to give further effect thereto. In addition, if
requested by the Company or the representative of the underwriters of Common
Stock (or other securities) of the Company, each Holder shall provide, within
ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in Section 2.13 and this
Section 2.14 shall not apply to a Special Registration. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period. Each Holder agrees that any transferee of any
shares of Registrable Securities shall be bound by Sections 2.13 and 2.14. The
underwriters of the Company's stock are intended third party beneficiaries of
Sections 2.13 and 2.14 and shall have the right, power and authority to enforce
the provisions hereof as though they were a party hereto.
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2.15 Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to such
Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in which
full and correct entries will be made of all its business transactions pursuant
to a system of accounting established and administered in accordance with United
States generally accepted accounting principles consistently applied, and will
set aside on its books all such proper accruals and reserves as shall be
required under United States generally accepted accounting principles
consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor a balance sheet of the Company, as at the end of such
fiscal year, and a statement of operations and a statement of cash flows of the
Company, for such year, all prepared in accordance with United States generally
accepted accounting principles and the Rules and Regulations of the SEC
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report thereon by independent public
accountants of national standing selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable after
the end of the first, second and third quarterly accounting periods in each
fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a balance sheet of the Company as of the end of each such quarterly
period, and a statement of operations and a statement of cash flows of the
Company for such period and for the current fiscal year to date, prepared in
accordance with United States generally accepted accounting principles and the
Rules and Regulations of the SEC, with the exception that no notes need be
attached, except as required by the Rules and Regulations of the SEC) to such
13
statements and year-end audit adjustments may not have been made. Such
adjustments would not be material to the financial statements individually or in
the aggregate.
(d) So long as an Investor (with its affiliates) shall own not less than
two percent of the Company's outstanding Common Stock (calculated on an
as-converted basis and as adjusted for stock splits and combinations) (a "Major
Investor"), the Company will furnish each such Major Investor: (i) at least
thirty (30) days prior to the beginning of each fiscal year an annual budget and
operating plans for such fiscal year (and as soon as available, any subsequent
revisions thereto); and (ii) as soon as practicable after the end of each month,
and in any event within twenty (20) days thereafter, a balance sheet of the
Company as of the end of each such month, and a statement of operations and a
statement of cash flows of the Company for such month and for the current fiscal
year to date, including a comparison to plan figures for such period, prepared
in accordance with United States generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made. Such
adjustments would not be material to the financial statements individually or in
the aggregate.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use its
best efforts to insure that its authorized representatives use, the same degree
of care as such Investor uses to protect its own confidential information to
keep confidential any information furnished to it which the Company identifies
as being confidential or proprietary (so long as such information is not in the
public domain), except that such Investor may disclose such proprietary or
confidential information to any partner, subsidiary or parent of such Investor
for the purpose of evaluating its investment in the Company as long as such
partner, subsidiary or parent is advised of the confidentiality provisions of
this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Proprietary Information and Inventions Agreement. The Company shall
require persons classified by a majority vote of the Board of Directors to be
key employees to execute and deliver a Proprietary Information and Inventions
Agreement substantially in the form attached to the Purchase Agreement.
3.6 Assignment of Right of First Refusal. In the event the Company elects
not to exercise any right of first refusal or right of first offer the Company
14
may have on a proposed transfer of any of the Company's outstanding capital
stock pursuant to the Company's charter documents, by contract or otherwise, the
Company shall, to the extent it may do so, assign such right of first refusal or
right of first offer to each Major Investor. In the event of such assignment,
each Major Investor shall have a right to purchase its pro rata portion (as
defined in Section 4.1) of the capital stock proposed to be transferred.
3.7 Approval. The Company shall not without the approval of a majority of
the Board of Directors, with all non-interested Directors voting and the
approval at least one of the Directors designated by holders of the Series A
Stock, authorize or enter into any transactions with any director or management
employee, or such director's or employee's immediate family.
3.8 Indemnification and Advancement.
(a) The Company hereby agrees to hold harmless and indemnify the Investors,
the Investors' direct and indirect subsidiaries, affiliated entities and
corporations, and each of their partners, officers, directors, employees,
stockholders, agents, and representatives (collectively, referred to as the
"Investor Indemnitees") against any and all expenses (including attorneys'
fees), damages, judgments, fines, amounts paid in settlements, or any other
amounts that an Investor Indemnitee incurs as a result of any claim or claims
made against it in connection with any threatened, pending or completed action,
suit, arbitration, investigation or other proceeding arising out of, or relating
to the Investors' actions in connection with the purchase by the Investors of
the Series A Stock and Warrants pursuant to the Purchase Agreement (a
"Financing-Based Claim"); provided, however, that no Investor Indemnitee shall
be entitled to be held harmless or indemnified by the Company for acts, conduct
or omissions as to which there has been a final adjudication that such Investor
Indemnitee engaged in intentional misconduct or in knowing and culpable
violation of the law.
(b) The Company shall reimburse, promptly following request therefor, all
reasonable expenses incurred by an Investor Indemnitee in connection with any
threatened, pending or completed action, suit, arbitration, investigation or
other proceeding arising out of, or relating to, a Financing-Based Claim,
provided, however, that no Investor Indemnitee shall be entitled to
reimbursement in connection with acts, conduct or omissions as to which there
has been a final adjudication that such Investor Indemnitee engaged in
intentional misconduct, in knowing and culpable violation of the law.
(c) The Company's indemnity obligations set forth above are subject to the
Investors providing prompt written notice of a claim. The Company shall control
the defense of any such action and, at its discretion, may enter into a
stipulation of discontinuance or settlement thereof; provided that the Company
may not discontinue any action or settle any claim in a manner that does not
unconditionally release the Investors without the Investors' prior written
approval. The Investors shall, at the Company's expense and reasonable request,
cooperate with the Company in any such defense and shall make available to the
Company at the Company's expense all those persons, documents (excluding
attorney/client or attorney work product materials) reasonably required by the
Company in the defense of any such action. The Investors may, at their expense,
assist in such defense.
15
(d) The Company's aggregate cumulative liability under this Section shall
be limited to the amount received by the Company pursuant to the transaction
contemplated by this Agreement.
3.9 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement (other than the provisions of Section 3.8 and this
Section 3.9 shall expire and terminate as to each Investor upon the earlier of
upon (i) the sale, lease or other disposition of all or substantially all of the
assets of the Company or (ii) an acquisition of the Company by another
corporation or entity by consolidation, merger or other reorganization in which
the holders of the Company's outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) of the voting power of the corporation or other
entity surviving such transaction, provided that this Section 3.10(ii)(b) shall
not apply to a merger effected exclusively for the purpose of changing the
domicile of the Company (a "Change in Control").
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 Subsequent Offerings. Each Investor shall have a right of first refusal
to purchase its pro rata share of all Equity Securities, as defined below, that
the Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
Each Investor's pro rata share is equal to the ratio of (a) the number of shares
of the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares) which such Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares or upon
the exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" shall mean (i)
any Common Stock, Preferred Stock or other security of the Company, (ii) any
security convertible, with or without consideration, into any Common Stock,
Preferred Stock or other security (including any option to purchase such a
convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock, Preferred Stock or other security or
(iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
4.3 Issuance of Equity Securities to Other Persons. If not all of the
Investors elect to purchase their pro rata share of the Equity Securities, then
the Company shall promptly notify in writing the Investors who do so elect and
16
shall offer such Investors the right to acquire such unsubscribed shares. The
Investors shall have five (5) days after receipt of such notice to notify the
Company of its election to purchase all or a portion thereof of the unsubscribed
shares. If the Investors fail to exercise in full the rights of first refusal,
the Company shall have ninety (90) days thereafter to sell the Equity Securities
in respect of which the Investor's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Investors pursuant to
Section 4.2 hereof. If the Company has not sold such Equity Securities within
ninety (90) days of the notice provided pursuant to Section 4.2, the Company
shall not thereafter issue or sell any Equity Securities, without first offering
such securities to the Investors in the manner provided above.
4.4 Termination and Waiver of Rights of First Refusal. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the earlier of (i) the effective date of the registration statement
pertaining to the Series A Stock or (ii) a Change in Control. The rights of
first refusal established by this Section 4 may be amended, or any provision
waived with the written consent of Major Investors holding a majority of the
Registrable Securities held by all Major Investors, or as permitted by Section
5.6.
4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.6 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) up to an aggregate amount of seventeen million one hundred twenty-two
thousand nine hundred thirty-five (17,122,935) shares (provided, however, that
such amount shall be increased to reflect any shares of Common Stock (i) not
issued pursuant to the rights, agreements, options or warrants outstanding as of
the Original Issue Date ("Outstanding Options") as a result of the termination
of such Outstanding Options or (ii) reacquired by the Company from employees,
directors or consultants at cost pursuant to agreements which permit the Company
to repurchase such shares upon termination of services to the Company) of Common
Stock and/or options, warrants or other Common Stock purchase rights and the
Common Stock issued pursuant to such options, warrants or other rights (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like after the filing of the Company's Articles of Incorporation) issued or
to be issued after the Original Issue Date (as defined in the Company's Articles
of Incorporation) to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board of Directors
including the affirmative vote of the representative designated by the holders
of the Shares;
(b) stock issued or issuable pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement (including, without
limitation, any equity securities that are issued by the Company pursuant to a
$1,200,000 private placement offering dated December 2000 and a $750,000 private
placement offering dated January 2001); provided that the rights of first
17
refusal established by this Section 4 applied with respect to the initial sale
or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than cash pursuant
to a merger, consolidation, strategic alliance, acquisition or similar business
combination approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any stock split, stock
dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of shares of the
Company's Preferred Stock;
(f) any Equity Securities issued pursuant to any equipment leasing, real
property leasing or loan arrangement, or debt financing from a bank or similar
financial or lending institution approved by the Board of Directors; and
(g) any Equity Securities that are issued by the Company pursuant to a
registration statement filed under the Securities Act.
SECTION 5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
18
5.5 Severability. 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.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be amended
or modified only upon the written consent of the Company and the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the Company
and the rights of the Holders under this Agreement may be waived only with the
written consent of the holders of at least sixty-six and two-thirds percent (66
2/3%) of the Registrable Securities.
(c) For the purposes of determining the number of Holder or Investors
entitled to vote or exercise any rights hereunder, the Company shall be entitled
to rely solely on the list of record holders of its stock as maintained by or on
behalf of the Company.
5.7 Delays or Omissions. It is agreed that no delay or omission to exercise
any right, power, or remedy accruing to any Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under the Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed electronic mail or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on the signature
pages hereof or Exhibit A hereto or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
5.9 Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
19
5.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor," a "Holder" and a party hereunder. Notwithstanding anything to the
contrary contained herein, if the Company shall issue Equity Securities in
accordance with Section 4.6 (c), or (f) of this Agreement, any purchaser of such
Equity Securities may become a party to this Agreement by executing and
delivering an additional counterpart signature page to this Agreement and shall
be deemed an "Investor," a "Holder" and a party hereunder.
5.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.13 Aggregation of Stock. All shares of Registrable Securities held or
acquired by affiliated entities or persons or persons or entities under common
management or control shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
SCHEDULE OF INVESTORS
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
INVESTORS: COMPANY:
XXXXXX DE LEEUW AND COMPANY IV, LP ON STAGE ENTERTAINMENT, INC.
By:______________________________ By:______________________________
Name:____________________________ Name:____________________________
Title:___________________________ Title:___________________________
XXXXXX DE LEEUW AND COMPANY IV
ASSOCIATES, LP
By:________________________________
Name:______________________________
Title:_____________________________
DELTA FUND, LP
By:________________________________
Name:______________________________
Title:_____________________________
BOARD OF TRUSTEES OF THE XXXXXX XXXXXXXX JUNIOR UNIVERSITY
By: ____________________________
Name:___________________________
Title:__________________________
SCHEDULE OF INVESTORS
1. XxXxxx De Leeuw and Company IV, LP
2. XxXxxx De Leeuw and Company IV Associates, LP
3. Delta Fund, LP
4. Board of Trustees of the Xxxxxx Xxxxxxxx University
