Exhibit 2
INVESTOR RIGHTS AGREEMENT
THIS AGREEMENT is entered into as of May 29, 1997 by and between Coda
Music Technology, Inc. (the "Company"); ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Founding Partners II
Limited Partnership and Cherry Tree Ventures IV (collectively, the "Insiders");
and ▇. ▇. ▇▇▇▇▇ Partners LLC ("▇▇▇▇▇").
RECITALS:
A. Pursuant to a Confidential Private Placement Memorandum dated May 5,
1997 (the "Memorandum"), the Company is offering (the "Offering") for sale a
minimum of 1,153,846 and a maximum of 1,730,769 shares (the "Shares") of its
common stock, $.01 per share par value ("Common Stock"), at $1.30 per Share. In
addition, the Company will issue to purchasers of the Shares warrants
("Warrants") to purchase one share of Common Stock for every two Shares
purchased. The Shares and Warrants are collectively referred to herein as the
"Securities." All capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them under the Memorandum.
B. Contemporaneously with the execution of this Agreement, ▇▇▇▇▇ has
executed a subscription agreement for the purchase (the "▇▇▇▇▇ Purchase") of
769,231 Shares and Warrants to purchase an additional 384,615 Shares.
C. As partial inducement for the ▇▇▇▇▇ Purchase, the Company has agreed
that the obligation of ▇▇▇▇▇ to consummate the ▇▇▇▇▇ Purchase be conditioned
upon the execution and delivery of this Agreement by all of the parties hereto.
AGREEMENT:
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Right of First Refusal.
▇. ▇▇▇▇▇ of Right. The Company hereby grants to ▇▇▇▇▇ upon the closing of
the ▇▇▇▇▇ Purchase a right of first refusal to purchase all or part of
its pro rata share of any New Securities (as defined below) which the
Company may, from time to time, propose to sell and issue, subject to
the terms and conditions set forth below.
i. Pro Rata Share. ▇▇▇▇▇'▇ pro rata share, for purposes of this
Section, shall equal a fraction:
(1) the numerator of which is the number of shares of Common
Stock then held by ▇▇▇▇▇ or issuable upon the conversion or
exercise of any convertible securities, options, rights or
warrants then held by ▇▇▇▇▇, and
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(2) the denominator of which is the total number of shares of
Common Stock then outstanding plus the number of shares of
Common Stock issuable upon conversion or exercise of then
outstanding convertible securities, options, rights or
warrants.
ii. New Securities. "New Securities" shall mean any capital stock of
the Company whether now authorized or not, and rights, options or
warrants to purchase capital stock, and securities of any type
whatsoever which are, or may become, convertible into capital
stock; provided, however, that the term New Securities does not
include
(1) Shares or Warrants issued as part of the Offering or the
shares of Common Stock issued or issuable upon exercise of
the Warrants ("Warrant Shares");
(2) securities offered to the public pursuant to registration
under the Securities Act of 1933, as amended;
(3) securities issued for the acquisition of another corporation
by the Company by merger, purchase of substantially all the
assets of such corporation or another reorganization
resulting in the ownership by the Company of not less than a
majority of the voting power of such corporation;
(4) securities issued pursuant to convertible securities,
warrants or options outstanding on the date hereof;
(5) shares of Common Stock issued to directors or employees of
or consultants to the Company, or to endorsers of the
Company's products or services, pursuant to a stock option
plan, employee stock purchase plan, restricted stock plan or
other employee stock plan or agreement approved by the board
of directors and shareholders of the Company (and, in the
case of rights, options or warrants, the Common Stock issued
or issuable upon exercise thereof); or
(6) securities issued as a result of any stock split, stock
dividend or reclassification of Common Stock, distributable
on a pro rata basis to all holders of Common Stock.
iii. Required Notices. In the event the Company intends to issue New
Securities, it shall give ▇▇▇▇▇ written notice of such intention,
describing the type of New Securities to be issued, the price
thereof and the general terms upon which the Company proposes to
effect such issuance. ▇▇▇▇▇ shall have 30 days from the date of
any such notice to agree to purchase all or part of its pro rata
share of such New Securities for the price and upon the general
terms and conditions specified in the Company's notice by giving
written notice to the Company stating the quantity of New
Securities to be so purchased.
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iv. Failure to Exercise Rights. In the event ▇▇▇▇▇ fails to exercise
the foregoing right of first refusal with respect to any New
Securities within such 30-day period, the Company may within 180
days thereafter sell any or all of such New Securities not agreed
to be purchased by ▇▇▇▇▇, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the
notice given to ▇▇▇▇▇ pursuant to Section 1.a.(iii) above. In the
event the Company has not sold such New Securities within such
180-day period, the Company shall not thereafter issue or sell
any New Securities without first offering such New Securities to
▇▇▇▇▇ in the manner provided above.
v. Termination. ▇▇▇▇▇'▇ right of first refusal under this Section 1
shall terminate upon the earlier to occur of the complete
exercise or expiration of the Warrants issued to ▇▇▇▇▇ in
connection with the ▇▇▇▇▇ Purchase.
2. Board Representation. Upon the closing of the ▇▇▇▇▇ Purchase and so long as
▇▇▇▇▇ owns or controls four percent (4%) or more of the Company's
outstanding Common Stock, ▇▇▇▇▇ shall have the right to designate one
individual to serve on the Board of Directors of the Company (the "Board")
and the Company and Insiders shall use their best efforts to cause such
individual's election to the Board, including the following:
a. Voting by Insiders. In any and all elections of directors of the
Company (whether at a meeting or by written consent in lieu of a
meeting), each Insider shall vote or cause to be voted all shares of
Common Stock owned by him, her or it, or over which he, she or it has
voting control, in favor of electing to the Board the one individual
designated by ▇▇▇▇▇ pursuant to this Section 2.
b. Notice of Election of Directors. The Company shall provide ▇▇▇▇▇ with
20 days' prior written notice of any intended mailing of a notice to
stockholders for a meeting at which directors are to be elected. ▇▇▇▇▇
shall give written notice to the Company, no later than 10 days prior
to such mailing, of the person designated by ▇▇▇▇▇ pursuant to this
Section 2 as nominee for election as director. If ▇▇▇▇▇ shall fail to
give notice to the Company as provided above, it shall be deemed that
the designee of ▇▇▇▇▇ then serving as a director shall be its designee
for reelection.
3. Director and Officer Insurance. The Company shall as soon as practicable
increase its director and officer insurance coverage to an amount to be
determined by negotiation between the Company and ▇▇▇▇▇.
4. Information Rights. The Company shall as soon as practicable notify ▇▇▇▇▇
of the occurrence of any event materially affecting the business, business
prospects, properties, management, financial position, stockholders'
equity, results of operations or general condition of the Company,
including, but not limited to, litigation and alleged violations of
contracts or obligations. ▇▇▇▇▇'▇ rights to such information under this
Section 4 shall terminate upon the earlier to occur of the complete
exercise or expiration of the Warrants issued to ▇▇▇▇▇ in connection with
the ▇▇▇▇▇ Purchase.
5. Merger/Sales. During the twenty-four (24) month period beginning on the
date of first closing of the Offering, any transaction that would result in
the division or separate sale
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of the Finale and Vivace product lines must be approved by ▇▇▇▇▇ unless
such transaction is unanimously approved by the Company's directors
excluding the director designated by ▇▇▇▇▇ pursuant to Section 2 above.
6. Opinion of Counsel. ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., counsel for the Company,
shall have furnished to ▇▇▇▇▇ as of the closing of the ▇▇▇▇▇ Purchase such
opinion in form and substance satisfactory to ▇▇▇▇▇, to the effect that:
a. The Company has been duly incorporated and is validly existing in good
standing under the laws of the State of Minnesota with the corporate
power to own, lease and operate its properties and conduct its
business as described in the Memorandum.
b. The number of authorized shares of capital stock of the Company are as
set forth in the Memorandum and the outstanding capital stock have
been duly authorized and validly issued, and are fully paid and
nonassessable. Upon delivery of and payment for the Securities, ▇▇▇▇▇
will acquire the Securities free and clear of all liens, encumbrances
or claims created by actions of the Company. To such counsel's
knowledge, no preemptive rights, contractual or otherwise, of
securities holders of the Company exist with respect to the issuance
or sale of the Securities by the Company pursuant to the Memorandum or
the issuance of the Warrant Shares upon exercise of the Warrants. The
Shares and Warrants conform as to matters of law in all material
respects to the description of these securities made in the Memorandum
and such description accurately sets forth the material legal
provisions thereof required to be set forth in the Memorandum.
c. The Shares have been duly authorized and, upon delivery to ▇▇▇▇▇
against payment therefor, will be validly issued, fully paid and
nonassessable.
d. The certificates evidencing the Shares comply as to form with the
applicable provisions of the laws of the State of Minnesota.
e. The Warrants have been duly authorized, executed and delivered by the
Company and are the valid and binding obligations of the Company,
enforceable in accordance with their terms, except as enforceability
may be limited by the application of bankruptcy, insolvency,
moratorium, or other laws of general application affecting the rights
of creditors generally and by judicial limitations on the right of
specific performance and other equitable remedies, and except as the
enforceability of indemnification or contribution provisions hereof
may be limited by federal or state securities laws. The Warrant Shares
when issued in accordance with the terms of the Memorandum and
pursuant to the Warrants will be validly issued, fully paid and
nonassessable. A sufficient number of shares of Common Stock has been
reserved for issuance upon exercise of the Warrants.
f. No authorization, approval or consent of any governmental authority or
agency is necessary in connection with the issuance and sale of the
Securities as contemplated under the Memorandum, except such as may be
required and obtained under the Securities Act of 1933, as amended or
under state or other securities laws in connection with the sale of
the Securities.
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g. This Agreement and the Registration Rights Agreement have been duly
authorized, executed and delivered by, and, assuming the due
authorization, execution and delivery of thereof by the other parties
thereto, is a valid and binding agreement of the Company, enforceable
in accordance with its terms, except as enforceability may be limited
by the application of bankruptcy, insolvency, moratorium or similar
laws affecting the rights of creditors generally and judicial
limitations on the right of specific performance, and except as the
enforceability of indemnification or contribution provisions hereof
may be limited by federal or state securities laws.
7. Expenses. Upon closing of the ▇▇▇▇▇ Purchase, the Company shall promptly
pay the accountable expenses of ▇▇▇▇▇ related to the Offering (including
but not limited to reasonable legal fees), to a maximum amount of $15,000.
8. General.
a. No Assignment. The rights granted pursuant to this Agreement may not
be transferred or assigned by any party.
b. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
c. Amendments and Waivers. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and ▇▇▇▇▇. No
waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term,
condition or provision.
d. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
e. Headings. The headings of the sections, subsections, and paragraphs of
this Agreement have been added for convenience only and shall not be
deemed to be a part of this Agreement.
f. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision.
g. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota, without giving
effect to conflict of laws provisions.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
day and year first above written.
CODA MUSIC TECHNOLOGY, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Chief Executive Officer ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
FOUNDING PARTNERS II LIMITED /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
PARTNERSHIP ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Managing General Partner ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CHERRY TREE VENTURES IV /s/ ▇▇▇▇▇ ▇. Paper
▇▇▇▇▇ ▇. ▇▇▇▇
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: General Partner /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇
▇. ▇. ▇▇▇▇▇ PARTNERS LLC /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Managing Member
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