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DIVERSE MEDIA GROUP, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into as of May 15, 2007, by and among Diverse Media Group, Inc., a Delaware
corporation (the "Company"), and Diverse Media Group Corp., a Utah corporation
("Investor").
Recitals
A. The Company's affiliates, Diverse Talent Group, Inc. ("DTG") and
Xxxxxxxxxxx Xxxxxx ("Xxxxxx" and, together with DTG, "DT"), and Investor's
parent CirTran Corporation and Investor are parties to that certain Settlement
and Release dated as of the date hereof (the "Settlement Agreement"), whereby
DTG agreed to cause the Company to issue shares of the Company's common stock,
$0.001 par value to Investor in settlement of certain claims of the parties to
the Settlement Agreement.
B. Pursuant to the Settlement Agreement, the Investor has, among
other things, assigned back the talent contracts, name rights and other assets
of DT (the "Assets") originally assigned to Investor, and such Assets are, or
will be following execution of this Agreement, owned by the Company, either
directly or through a wholly owned subsidiary.
C. The Settlement Agreement requires that the Company and Investor
enter into this Agreement with respect to the Shares to provide for certain
registration rights, information rights and other rights and obligations of the
parties as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and other consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1
Definitions
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1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
(b) "Common Stock" means the common stock, $0.001 par value, of
the Company.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(d) "Holder" means (i) the Investor and (ii) any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been duly and validly transferred in accordance with Section 2.6
of this Agreement.
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(e) "Indemnified Party" shall have the meaning set forth in
Section 2.4(c) hereto.
(f) "Indemnifying Party" shall have the meaning set forth in
Section 2.4(c) hereto.
(g) "Other Shares" shall mean shares of Common Stock, other than
Registrable Securities (as defined below) sought to be included in any
registration.
(h) The terms "register," "registered" and "registration" shall
refer to a registration effectuated by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
(i) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company and one special
counsel for the Holders, blue sky fees and expenses, and expenses of any regular
or special audits incident to or required by any such registration, but shall
not include Selling Expenses, fees and disbursements of other counsel for the
Holders, and the compensation of regular employees of the Company, which shall
be paid in any event by the Company.
(j) "Registrable Securities" shall mean (i) the Shares as of the
date of this Agreement, (ii) any Common Stock issued pursuant to the
antidilution provisions of Section 4.1 and (iii) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the Shares referenced in (i) above; provided, however, that
Registrable Securities shall not include any shares of Common Stock described in
clause (i), (ii) or (iii) above which have been sold to the public either
pursuant to a registration statement or Rule 144, or which have been sold in a
private transaction in which the transferor's rights under this Agreement are
not validly assigned in accordance with this Agreement.
(k) "Restricted Securities" shall mean any Registrable Securities
required to bear the first legend set forth in Section 2.6(c) hereof.
(l) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(m) "Rule 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(o) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities and fees and disbursements of counsel for any Holder
(other than the fees and disbursements of one special counsel to the Holders
included in Registration Expenses).
(p) "Shares" shall mean the shares of Common Stock issued to the
Investor pursuant to the Settlement Agreement, (ii) any Common Stock issued
pursuant to the antidilution provisions of Section 4.1 and (iii) any Common
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Stock or other security issued as a dividend or other distribution with respect
to or in exchange for or in replacement of the Shares referenced in (i) above.
Section 2
Registration Rights
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2.1 Company Registration.
(a) Company Registration. If the Company shall determine to
register any of its securities either for its own account or the account of a
security holder or holders, other than a registration relating solely to
employee benefit plans, a registration relating to the offer and sale of debt
securities, a registration relating to a corporate reorganization or other Rule
145 transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give written notice of the proposed
registration to all Holders; and
(ii) use its commercially reasonable efforts to include in
such registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 2.1(b) below or Section 5, and in
any underwriting involved therein, all of such Registrable Securities as are
specified in a written request or requests made by any Holder received by the
Company within 20 calendar days after such written notice from the Company is
mailed; provided, however, that the Company shall not be obligated to include or
make any effort to include in such registration (and any related qualification
under blue sky laws or other compliance) any Registrable Securities in excess of
25% of the Shares. Such written request may specify all or a part of a Holder's
Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.1(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 2.1 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
(together with the Company and the other holders of securities of the Company
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 2.1, if the
underwriters advise the Company in writing that marketing factors require a
limitation on the number of shares to be underwritten, the underwriters may
(subject to the limitations set forth below) limit the number of Registrable
Securities to be included in the registration and underwriting. The Company
shall so advise all holders of securities requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated, as follows: (i) first, to the
Company for securities being sold for its own account, (ii) second, to the
Holders requesting to include Registrable Securities in such registration
statement based on the pro rata percentage of Registrable Securities held by
such Holders and (iii) third, to other shareholders of the Company having been
granted "piggy-back" registration rights and requesting to include Other Shares
in such registration statement (the "Other Selling Shareholders"), based on the
pro rata percentage of Other Shares held by such Other Selling Shareholders (or
on such other bases as may be established pursuant to the registration rights
granted to such Other Selling Shareholders).
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If a person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such person
shall also be excluded therefrom by written notice from the Company or the
underwriter. The Registrable Securities or other securities so excluded shall
also be withdrawn from such registration. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration. If shares are so withdrawn from the registration and if the
number of shares of Registrable Securities to be included in such registration
was previously reduced as a result of marketing factors pursuant to Section
2.1(b), the Company shall then offer to all persons who have retained the right
to include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among the persons
requesting additional inclusion, in the manner set forth above.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.1 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
(d) Information from Holder. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
such Holder's Registrable Securities.
2.2 Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with registrations pursuant to
Sections 2.1 hereof shall be borne by the Company. 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.
2.3 Registration Procedures. In the case of each registration
effectuated by the Company pursuant to Section 2, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will use its commercially
reasonable efforts to and as expeditiously as possible:
(a) Keep such registration effective for a period ending on the
earlier of the date which is 180 days from the effective date of the
registration statement or such time as the Holder or Holders have completed the
distribution described in the registration statement relating thereto; provided,
however, that (i) such 180-day period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of securities of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, subject to
compliance with applicable SEC rules, such 180-day period shall be extended for
up to 90 days, if necessary, to keep the registration statement effective until
all such Registrable Securities are sold;
(b) Prepare and file with the Commission 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
subsection (a) above;
(c) Furnish such number of prospectuses, including any preliminary
prospectuses, and other documents incident thereto, including any amendment of
or supplement to the prospectus, as a Holder from time to time may reasonably
request;
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(d) 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) Notify each seller 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 or incomplete in light of the circumstances
then existing, and following such notification promptly prepare and furnish to
such seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in light of the circumstances then existing;
(f) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, 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 reasonably satisfactory to
a majority in interest of the Holders requesting registration of Registrable
Securities.
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;
(h) Otherwise comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least 12
months, but not more than 18 months, beginning with the first month after the
effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(i) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed, if any.
2.4 Indemnification.
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, each of its officers, directors, managers, members
and partners, legal counsel, and accountants and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification, or compliance has been effected pursuant to
this Section 2, and each underwriter, if any, and each person who controls
within the meaning of Section 15 of the Securities Act any underwriter, against
all expenses, claims, losses, damages, and liabilities (or actions, proceedings,
or settlements in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained or
incorporated by reference in any prospectus, offering circular, or other
document (including any related registration statement, notification, or the
like) incident to any such registration, qualification, or compliance, (ii) any
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,
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the Exchange Act, any state securities laws or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any offering covered by such registration,
qualification, or compliance, and the Company will reimburse each such Holder,
each of its officers, directors, managers, members, partners, legal counsel, and
accountants and each person controlling such Holder, each such underwriter, and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action; provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or action arises out of or is based on any untrue
statement or omission based or made in reliance upon written information
furnished to the Company by such Holder, any of such Holder's officers,
directors, managers, members, partners, legal counsel or accountants, any person
controlling such Holder, such underwriter or any person who controls any such
underwriter and stated to be specifically for use therein; provided, further
that, the indemnity agreement contained in this Section 2.4(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); and, provided further, however,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Holder, any of such Holder's
officers, directors, managers, members, partners, legal counsel or accountants,
any person controlling such Holder, such underwriter or any person who controls
any such underwriter, from whom the person asserting any such losses, claims,
damages or liabilities purchased shares in the offering, if a copy of the
prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Holder or underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the shares to
such person, and if the prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability.
(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, qualification, or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, officers,
partners, legal counsel, and accountants and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Holder, and each of their officers, directors,
and partners, and each person controlling such Holder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained or incorporated by reference in any such registration statement,
prospectus, offering circular, or other document, or (ii) any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and such Holders, directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder for
use therein; provided, however, that the obligations of such Holder hereunder
shall not apply to amounts paid in settlement of any such claims, losses,
damages, or liabilities (or actions in respect thereof) if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld); and provided that in no event shall any indemnity under
this Section 2.4 exceed the net proceeds from the offering received by such
Holder.
(c) Each party entitled to indemnification under this Section 2.4
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.4, to the extent such
failure is not prejudicial. 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 that does not
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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. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.4 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
(provided that in no event shall the amount of any such contributions, in the
aggregate, exceed the maximum amount that would be applicable if such
contribution were made pursuant to an indemnification obligation under this
Section 2.4) 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 statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined 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. No person guilty of fraudulent misrepresentation (within
the meaning of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) 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.
2.5 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 2.
2.6 Restrictions on Transfer.
(a) Each Holder agrees not to make any sale, assignment, transfer,
pledge or other disposition of all or any portion of the Registrable Securities,
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or any beneficial interest therein, unless and until the transferee thereof has
agreed in writing for the benefit of the Company to take and hold such
Registrable Securities subject to, and to be bound by, the terms and conditions
set forth in this Agreement, including without limitation, this Section 2.6 and
Section 2.7(c), and a copy of such writing is provided to the Company at the
time of transfer, except for transfers permitted under Section 2.6(b) or unless
(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) Such Holder has given prior written notice to the
Company of such Holder's intention to make such disposition and shall have
furnished the Company with a description of the manner and circumstances of the
proposed disposition, and, if requested by the Company, such Holder has
furnished the Company, at such Holder's expense, with (i) evidence of compliance
with Rule 144 (other than Rule 144(k)) satisfactory to the Company in its
reasonable judgment, (ii) an opinion of counsel, reasonably satisfactory to the
Company, to the effect that such disposition will not require registration of
such Restricted Securities under the Securities Act or (ii) a "no action" letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the Holder to the
Company.
(b) Permitted transfers include (i) a transfer not involving a
change in beneficial ownership, (ii) transactions involving the distribution
without consideration of Restricted Securities by any Holder to (x) a parent,
subsidiary or other affiliate of Holder, or (y) any of its partners, members or
other equity owners, or retired partners, retired members or other equity
owners, or to the estate of any of its partners, members or other equity owners
or retired partners, retired members or other equity owners, (iii) transfers by
a Holder to members of the Holder's family or to a trust for the benefit of such
Holder or members of such Holder's family, or (iv) transfers in compliance with
Rule 144(k), as long as the Company is furnished with satisfactory evidence of
compliance with such Rule; provided, in each case, that the Holder thereof shall
give written notice to the Company of such Holder's intention to effect such
disposition and shall have furnished the Company with a description of the
manner and circumstances of the proposed disposition and, except for transferees
under clause (iv) above, each such transferee furnishes the Company with a
written agreement to be bound by and comply with all provisions of this
Agreement and a copy of such writing is provided to the Company at the time of
transfer.
(c) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this 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, AS AMENDED (THE "ACT"),
OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT
TO REGISTRATION OR AN EXEMPTION THEREFROM. THE ISSUER OF
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THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE, AS SET FORTH IN
AN INVESTOR RIGHTS AGREEMENT, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.
The Holders consent to the Company making a notation on its records and
giving instructions to any transfer agent of the Restricted Securities in order
to implement the restrictions on transfer established in this Section 2.6.
(d) The legend identified in Section 2.6(c) hereof stamped on a
certificate evidencing the Restricted Securities and the stock transfer
instructions and record notations with respect to such Restricted Securities
shall be removed and the Company shall issue a certificate without such legend
to the holder of such Restricted Securities if (i) such securities are
registered under the Securities Act, or (ii) such holder provides the Company
with an opinion of counsel reasonably acceptable to the Company to the effect
that a public sale or transfer of such securities may be made without
registration under the Securities Act, or (iii) such holder provides the Company
with reasonable assurances, that such securities can be sold pursuant to Section
(k) of Rule 144 under the Securities Act.
2.7 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to use its commercially reasonable efforts to do the following:
(a) Commencing not later than one year after the date of this
agreement, to make and keep public information regarding the Company available
as those terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as a Holder owns any Registrable Securities, furnish
to the Holder forthwith upon written request a written statement by the Company
as to its compliance with the public information requirements of Rule 144, and
the reporting requirements of the Securities Act and the Exchange Act (at any
time after it has become subject to such information and reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as a Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration.
2.8 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.9 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders holding at least 50% of the Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company that would allow such holder or prospective holder (a) to include such
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securities in any registration filed under Section 2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the amount of the Registrable Securities of the
Holders that are included or (b) which would not allow the Company to perform
its obligations hereunder.
2.10 Limitation on Registration Rights. Nothing contained in this
Agreement shall create any obligation on the part of the Company to register
under the Securities Act any securities that are not Registrable Securities.
2.11 Termination of Registration Rights. The right of any Holder to
request registration or inclusion in any registration pursuant to Section 2.1
shall terminate on the earlier to occur of (a) the third anniversary of the
underwritten initial public offering of the Common Stock of the Company to the
general public which is effected pursuant to a registration statement filed
with, and declared effective by, the Commission under the Securities Act; or (b)
if the Company is in compliance with Section 2.7(a), then with respect to each
Holder, whenever such Holder (and any affiliate of the Holder with whom such
Holder must aggregate its sales under Rule 144) is eligible to sell of such
Holder's Registrable Securities pursuant to Rule 144 within a three month
period.
2.12 Market Stand-Off Agreement. Each Holder hereby agrees that it will
not, directly or indirectly, without the prior written consent of the Company
and the managing underwriter, during the period commencing on the date of the
final prospectus relating to any public offering by the Company and ending on
the date specified by the Company and the managing underwriter (such period not
to exceed 180 days) (a) lend, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (whether such shares or any
such securities are then owned by the Holder or are thereafter acquired), or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing provisions of this Section 2.12 shall not apply to the
sale of any shares to an underwriter pursuant to an underwriting agreement, and
shall only be applicable to the Holders if all officers and directors and
greater than 10% shareholders of the Company enter into similar agreements. The
underwriters in connection with any public offering by the Company are intended
third party beneficiaries of this Section 2.12 and shall have the right, power
and authority to enforce the provisions hereof as though they were a party
hereto; further, each Holder hereby agrees to enter into written agreements with
such underwriters containing terms substantially equivalent to the terms of this
Section 2.12, and each Holder hereby agrees that such underwriters shall be
entitled to require each such Holder to enter into such a written agreement.
Notwithstanding the foregoing, nothing in this Section 2.12 shall prevent a
Holder from making a transfer of any Common Stock that was listed on a national
stock exchange, actively traded over-the-counter or traded on the Nasdaq
National Market at the time it was acquired by the Holder or was acquired by
such Holder pursuant to Rule 144A of the Securities Act, including any shares
acquired in any public offering by the Company. 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.
Section 3
Covenants of the Company
------------------------
The Company hereby covenants and agrees as follows:
10
3.1 Financial Information. So long as Investor and its transferees
permitted pursuant to Section 2.6(b) together hold more than 4% of the
outstanding Common Stock (as adjusted for any stock splits, consolidations and
the like), the Company will maintain true books and records of account in which
full and correct entries will be made of all its business transactions pursuant
to a system of accounting established and administered in accordance with
generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied. Unless the
Company is subject to and in full compliance with the reporting requirements of
the Exchange Act, the Company will furnish the following reports to Investor:
(a) as soon as practicable after the end of each calendar quarter
in each fiscal year of the Company, and in any event within 45 days after the
end of each calendar quarter in each fiscal year of the Company, the Company
will furnish to each Holder an unaudited financial statement of the Company and
its subsidiaries, if any, as of the end of each such calendar quarter;
(b) as soon as practicable after the end of each fiscal year of
the Company, and in any event within 90 days after the end of each fiscal year
of the Company, the Company will furnish to each Holder a financial statement of
the Company and its subsidiaries, if any, as at the end of such fiscal year,
certified by the Company's Chief Executive Officer or Chief Financial Officer;
(c) such information provided pursuant to Sections 3.1(a) and (b)
shall (i) include balance sheets, statement of shareholder equity and statement
of cash flows, (ii) be accompanied by a written report of the Chief Executive
Officer or Chief Financial Officer of the Company identifying operating
highlights, and (iii) for annual information, include a comparison for such
annual financial statements to the Company's budget for the corresponding
period, as well as to the Company's performance during the prior year, and (iv)
confirm that the presented financial information fairly presents the financial
condition of the Company and its results of operations for the periods
specified, subject to year end audit adjustments.
3.2 Inspection. The Company shall permit Investor and its transferees
permitted pursuant to Section 2.6(b) who hold Registrable Securities
representing 4% or more of the Common Stock then outstanding, at Investor or
such permitted transferee's expense but without charge by the Company, to visit
and inspect the Company's premises and properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be reasonably requested
by Investor such permitted transferee; provided, however, that such rights shall
be exercised in a manner so as not to disrupt the ordinary course of business of
the Company or any of its subsidiaries, if any; and provided, further, that any
such representative shall have executed an appropriate confidentiality
agreement, in the Company reasonable discretion, regarding the Company's trade
secrets and other confidential information.
3.3 Confidentiality. Each Holder agrees that such Holder will keep
confidential and will not disclose, divulge or use for any purpose, other than
to monitor its investment in the Company, any confidential information obtained
from the Company pursuant to the terms of this Agreement, unless such
confidential information (i) is known or becomes known to the Holder or the
public in general (other than through disclosure pursuant to an obligation of
confidentiality owed to the Company or as a result of a breach of this Agreement
by such Holder), (ii) is or has been independently developed or conceived by the
Holder without use of the Company's confidential information or (iii) is or has
been made known or disclosed to the Holder by a third party without a breach of
any obligation of confidentiality such third party may have; provided, however,
that a Holder may disclose confidential information (a) to its attorneys,
accountants, consultants and other professionals to the extent necessary to
obtain their services in connection with monitoring its investment in the
Company, (b) to any prospective purchaser or transferee of any Shares (or Common
Stock issued on conversion thereof) from such Holder as long as such prospective
purchaser or transferee agrees to be bound by the provisions of this Section
11
3.2, (c) to any parent, affiliate, partner, member, shareholder, director,
manager or officer or wholly owned subsidiary of such Holder in the ordinary
course of business of evaluating or monitoring the Holder's investment in the
Company, so long as such person or entity is advised of the obligations of
confidentiality associated with such information, or (d) as may be otherwise
required by law, regulation or judicial or administrative order, in which case
the Holder shall promptly notify the Company in writing of such requirement and
shall use its best efforts to obtain assurances that confidential treatment will
be given to such information. Nothing in this Agreement shall preclude or in any
way restrict the Holders from investing or participating in any particular
enterprise, whether or not such enterprise has products, services or
technologies which compete with those of the Company, provided that such Holder
complies with its obligations under this Agreement.
3.4 Observer to the Board Rights.
(a) So long as Investor and its transferees permitted pursuant to
Section 2.6(b) hold more 3% of the outstanding Common Stock (as adjusted for any
stock splits, consolidations and the like), one representative (the
"Representative") selected by the Investor and its transferees permitted
pursuant to Section 2.6(b), and subject to reasonable approval by the Company's
Board of Directors, shall have the right to attend all meetings of the Company's
Board of Directors, including the right to participate in any telephonic Board
meetings (the "Visitation Rights"). The Representative shall be provided with
notice of the meetings in the same manner and at the same time as the members of
the Board of Directors, and shall receive copies of all minutes, consents,
correspondence and other material provided to the Board of Directors.
(b) Notwithstanding the foregoing, the Company reserves the right
to limit the Representative's Visitation Rights and to exclude the
Representative from access to any material or portion thereof if upon advice of
counsel, that such limitation and exclusion is reasonably necessary to preserve
the attorney-client privilege or to protect a trade secret or similar
confidential information.
(c) Each Holder and its Representative agrees to hold in
confidence and trust, and not to use or disclose, any confidential or
proprietary information provided to or learned by it in connection with its
rights under this Section 3.4. Each Representative further acknowledges that
information obtained pursuant to this Section 3.4 may be considered "inside"
non-public information and that such information may not be utilized by the
Holder or the Representative in connection with purchases and sales of the
Company's securities except in compliance with applicable state and federal
anti-fraud statutes.
Section 4
Antidilution
------------
4.1 Anitdilution. If the Company shall, at any time or from time to
time after the date hereof, issue any Common Stock (which shall be deemed to
include for purposes of this Section 4 all other securities convertible into, or
exchangeable or exercisable for, Common Stock or options to purchase or other
rights to subscribe for such convertible or exchangeable securities)
("Additional Shares"), in each case, other than Common Stock sold in a bona fide
arms length transaction to professional investors in the Company who are not
affiliates (as such term is defined in Rule 144(a)(1) of the Securities Act) of
the Company, for a consideration (the "Dilutive Price") per share less than the
Investor Price (a "Dilutive Issuance"), the Company shall issue to the Holders
concurrently with the Additional Shares additional shares of Common Stock (the
"Antidilution Issuance") equal to (a) the number of Shares held by such Holder,
multiplied by (b) (i) the difference between the Investor Price and the Dilutive
Price, divided by (ii) the Dilutive Price. The Investor Price shall initially be
$.55 per share and after each Antidilution Issuance shall be immediately reduced
12
to the Dilutive Price. The Dilutive Price shall be the lowest price per share of
Common Stock at which the Additional Shares were issued in each transaction.
Additional Shares issued without consideration shall be deemed to have been
issued at a consideration of $.01 per share. Notwithstanding anything to the
contrary herein, the foregoing calculation shall not take into account shares
issued pursuant to the exercise, conversion, purchase or exchange (whether
before, on or after the date hereof) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities if such shares were previously
deemed to have been issued pursuant to the first sentence of this Section 4.1.
4.2 Determination of Consideration. For the purposes of this Section
4, the following provisions shall be applicable:
(a) In the case of the issuance of Additional Shares of Common
Stock in whole or in part for cash, the consideration shall be deemed to be the
amount of cash paid therefor, plus the value of any property other than cash
received by the Company as provided in Section 4.2(b), less any discounts,
commissions or other expenses allowed, paid or incurred by the Company for any
underwriting or otherwise in connection with the issuance and sale thereof.
(b) In the case of the issuance of Additional Shares of Common
Stock for consideration in whole or in part in property or consideration other
than cash, the value of such property or consideration other than cash shall be
deemed to be the fair market value thereof as determined in good faith by the
Board of Directors of the Company, irrespective of any accounting treatment;
provided, however, that such fair market value shall not exceed the aggregate
current market price of the shares of the Additional Shares of Common Stock
being issued, less any cash consideration paid for such shares.
(c) In the case of the issuance of Additional Shares of Common
Stock for forgiveness of all or any part of any loan, note or debt instrument of
the Company, the consideration shall be computed as the aggregate amount of
indebtedness forgiven on the face value of the note, loan or debt instrument by
the Company.
(d) In the case of the issuance of (i) options to purchase or
rights to subscribe for Common Stock, (ii) securities convertible into or
exchangeable for Common Stock or (iii) options to purchase or rights to
subscribe for such convertible or exchangeable securities, (1) the aggregate
maximum number of shares of Common Stock deliverable upon exercise of such
options to purchase, or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
paragraphs (a) and (b) above), if any, received by the Corporation upon the
issuance of such options or rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby; or (ii) the
aggregate maximum number of shares of Common Stock deliverable upon conversion
of, or in exchange for, any such convertible or exchangeable securities or upon
the exercise of options to purchase, or rights to subscribe for, such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Company upon the conversion or exchange of such securities or the exercise
of any related options or rights (determined in the manner provided in
paragraphs (a) and (b) above).
13
Section 5
Limitations on Shares
---------------------
5.1 Lock-up and Volume Limitations. Except for transfers permitted
under Section 2.6(b), Holders shall not sell any Shares during the one-year
period following the date of this Agreement. Thereafter, Holders agree that
sales of Shares by the Holders, other than transfers permitted under Section
2.6(b) and sales pursuant to underwritten registered offerings, will not exceed
15% of the overall monthly trading volume of the Common Stock of the Company.
For purposes of calculating this limit, the overall monthly trading volume will
be calculated on a week by week basis as the trading volume reported by the
principal market(s) or exchange(s) on which the Common Stock trades for the four
trading weeks (Monday through Friday) immediately preceding the trading week in
which Holder's sale occurs. If there is more than one Holder desiring to sell
Shares and the total number of Shares requested to be sold would exceed the 15%
limit, the Escrow Agent (as defined in the Settlement Agreement) shall sell a
number of Shares equal to the 15% limit and the proceeds of the sale will be
pro-rated among the requesting Holders based on the total Shares owned by each.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Shares. Notwithstanding anything to the
contrary herein, Investor shall act reasonably, responsibly and in good faith
when conducting transactions in the Shares so as not to unreasonably affect the
market price of the Common Stock.
5.2 Maximum Proceeds. Once Investor has sold Shares for net proceeds
equal to an aggregate of $2,000,000, any remaining Shares shall be transferred
back to the Company and retired by the Company for no additional consideration.
For purpose of this Section 5.2, Investor shall include each transferee pursuant
to Section 2.6(b).
5.3 Bankruptcy, Insolvency, etc. If (i) Investor or any transferee
permitted pursuant to Section 2.6(b), pursuant or within the meaning of any
Bankruptcy Law (as defined below) (1) has commenced a voluntary case or
proceeding, (2) has consented to the entry of an order for relief against it in
an involuntary case or proceeding, (3) has consented to the appointment of a
Custodian (as defined below) of it or for all or substantially all of its
property, or (4) has made a general assignment for the benefit of its creditors;
or (ii) a court of competent jurisdiction has entered an order or decree under
any bankruptcy law that is for relief against Investor or a permitted transferee
in an involuntary case or proceeding, appointed a Custodian of Investor or a
permitted transferee for all or substantially all of its property, or has
ordered the liquidation of the Investor or a transferee permitted pursuant to
Section 2.6(b), and such order has not been stayed for 60 days, then the Company
is granted the following first right of refusal to purchase the remaining Shares
from the Investor or permitted transferee's estate, as applicable. If the
Custodian intends to sell the Shares in the public market, it shall so notify
the Company. Such notice shall constitute an offer to sell to the Company the
number of Shares specified in the notice (subject to the limitation as to
consideration for returned Shares set forth in Section 5.2) at the market price
of the Common Stock on the date of the notice. The market price is (i) the last
sale price during regular trading hours if the Common Stock trades on a national
securities exchange in the United States, or (ii) the average of the closing bid
and asked prices on the principal market for the Common Stock for the five
preceding trading days if the Common Stock does not trade on a national exchange
in the United States [What if no bid or asked?]. If the Company does not accept
such offer within a reasonable time, not to exceed ten business days, the
Custodian may sell on the public market the number of Shares specified in the
notice. If the Custodian has determined to accept a bid in a private sale to
purchase Shares, it shall so notify the Company and the Company shall have a
reasonable time, not to exceed five business days, to match the bid price and
purchase the number of Shares covered by the bid.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
14
Section 6
Miscellaneous
-------------
6.1 Amendment. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument referencing this Agreement, signed by the
Company and the Holders of at least a majority of the Registrable Securities.
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
be amended without the consent of any party hereto solely to add additional
holders of Common Stock as "Holders" under this Agreement to the extent required
by Sections 2.6(a) and (b). In furtherance of the preceding sentence, Investor
covenants that each additional person or entity who purchases or receives any
shares of Common Stock or securities of the Company convertible into Common
Stock from Investor pursuant to Section 2.6(b) or to the extent required by
Section 2.6(a) shall, as a condition to the purchase or receipt of such shares
or as a condition to the exercise or receipt of such convertible securities,
become a party to this Agreement upon execution by such person or entity and the
Company of a counterpart of this Agreement and an amendment adding its name
hereto. By virtue of the execution of a counterpart signature page to this
Agreement, such person shall be deemed an Investor or Holder, as applicable,
hereunder. In lieu of becoming a party to this Agreement, each such additional
person or entity who purchases or receives from Investor any shares of Common
Stock or securities of the Company convertible into Common Stock shall enter
into an agreement, the form of which shall be approved by the Company's Board of
Directors.
6.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by facsimile or electronic mail or
otherwise delivered by hand or by messenger addressed:
(a) if to a Holder, at the address, facsimile number or electronic
mail address as shown in the Company's records, as may be updated in accordance
with the provisions hereof, and send a second copy to Xxxx X. Xxxxxxxx, Esq.,
Xxxxxxxxx Xxxxxxx & XxXxxxxxxx, 0000 Xxxxx 0000 Xxxx, Xxxxx 000, Xxxx Xxxx Xxxx,
XX 00000; or
(b) if to the Company, one copy should be sent to
________________, Attn: Chief Executive Officer, or at such other address as the
Company shall have furnished to Holders, and send a second copy to Xxxxxx X.
Xxxxx, Esq., Xxxxxx Xxxxxx Xxxxxxxx LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx
Xxxxxxx, XX 00000.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 48
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of United States mail, addressed and mailed as aforesaid or, if sent
by facsimile, upon confirmation of facsimile transfer.
6.3 Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of California, without regard to principles of
conflicts of law.
6.4 Successors and Assigns. This Agreement, and any and all rights,
duties and obligations hereunder, shall not be assigned, transferred, delegated
or sublicensed by any Holder without the prior written consent of the Company,
except as specifically provided herein. Any attempt by a Holder without such
permission to assign, transfer, delegate or sublicense any rights, duties or
obligations that arise under this Agreement shall be void. Subject to the
foregoing and except as otherwise provided herein, the provisions of this
Agreement shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
15
6.5 Entire Agreement. This Agreement and the exhibits hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof. No party hereto shall be liable or bound to
any other party in any manner with regard to the subjects hereof or thereof by
any warranties, representations or covenants except as specifically set forth
herein.
6.6 Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement
shall impair any such right, power or remedy of such non-defaulting party, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring, nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party 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 or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
6.7 Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, portions of such provision, or such provision in its entirety, to the
extent necessary, shall be severed from this Agreement, and such court will
replace such illegal, void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
same economic, business and other purposes of the illegal, void or unenforceable
provision. The balance of this Agreement shall be enforceable in accordance with
its terms.
6.8 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs and exhibits shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits attached hereto.
6.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties that
execute such counterparts, and all of which together shall constitute one
instrument.
6.10 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto and
delivered by such party by facsimile or any similar electronic transmission
device pursuant to which the signature of or on behalf of such party can be
seen. Such execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all parties
hereto agree to execute and deliver an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.
6.11 Jurisdiction; Venue. With respect to any disputes arising out of
or related to this Agreement, the parties consent to the exclusive jurisdiction
of, and venue in, the state courts in Los Angeles County in the State of
California (or in the event of exclusive federal jurisdiction, the courts of the
Southern District of California).
6.12 Further Assurances. Each party hereto agrees to execute and
deliver, by the proper exercise of its corporate, limited liability company,
partnership, individual or other powers, all such other and additional
instruments and documents and do all such other acts and things as may be
necessary to more fully effectuate this Agreement.
16
6.13 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.
6.14 Obligation of Company. The Company agrees to use its commercially
reasonable efforts to enforce the terms of this Agreement, to inform the Holders
of any breach hereof (to the extent the Company has knowledge thereof) and to
assist the Holders in the exercise of their rights and the performance of their
obligations hereunder.
6.15 Aggregation of Shares. All Shares held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
[Signature page follows.]
17
IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement effective as of the day and year first above written.
COMPANY:
DIVERSE MEDIA GROUP, INC.
a Delaware corporation
By:
-------------------------------------
Name:
Title:
INVESTOR:
DIVERSE MEDIA GROUP CORP.
a Utah corporation
By:
-------------------------------------
Xxxxx X. Xxxxxxxx
President
(Signature Page to Investor Rights Agreement)
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