EXHIBIT 10.13
ONESOURCE TECHNOLOGIES, INC.
INVESTOR'S RIGHTS AGREEMENT
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TABLE OF CONTENTS
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Page
I. GENERAL 1
1.1 Definitions 1
II. REGISTRATION; RESTRICTIONS ON TRANSFER 3
2.1 Restrictions on Transfer 3
2.2 Demand Registration 4
2.3 Piggyback Registration 5
2.4 Form S-3 Registration 6
2.5 Expenses of Registration 7
2.6 Registration Procedures 7
2.7 Termination of Registration Rights 8
2.8 Delay of Registration 8
2.9 Indemnification 8
2.10 Assignment of Registration Rights 10
2.11 Amendment of Registration Rights 10
2.12 Limitation on Subsequent Registration Rights 10
2.13 Suspension of Sales under Certain Circumstances 11
2.14 Information by Holder 11
2.15 Current Public Information 11
2.16 No Inconsistent Agreements 11
III. COVENANTS OF THE COMPANY 12
3.1 Basic Financial Information and Reporting 12
3.2 Inspection Rights 13
3.3 Confidentiality of Records 13
3.5 Expense Reimbursement 13
3.6 Termination of Covenants 13
IV. LIMITATIONS ON ISSUANCES, RIGHTS OF FIRST REFUSAL 13
4.1 Subsequent Offerings 13
4.2 Exercise of Rights 13
4.3 Issuance of Equity Securities to Other Persons 14
4.4 Termination of Rights of First Refusal 14
4.5 Transfer of Rights of First Refusal 14
4.6 Excluded Securities 14
V. MISCELLANEOUS 15
5.1 Governing Law 15
5.2 Survival 15
5.3 Successors and Assigns 15
5.4 Separability 15
5.5 Amendment and Waiver 15
5.6 Delays or Omissions 16
5.7 Notices 16
5.8 Attorneys' Fees 16
5.9 Titles and Subtitles 16
5.10 Construction 16
5.11 Entire Agreement 17
5.12 Counterparts 17
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INVESTOR'S RIGHTS AGREEMENT
This INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is entered into as
of May 26, 1999, by and between OneSource Technologies, Inc., a Delaware
corporation (the "Company") and Blackwater Capital Partners II, L.P., a Delaware
limited partnership (the "Investor").
RECITALS
WHEREAS, the Company and the Investor are parties to a Stock Purchase
Agreement dated the date hereof (the "Stock Purchase Agreement"); and
WHEREAS, pursuant to the Stock Purchase Agreement, Holder is
acquiring 2,905,828 shares (the "Shares") of the Company's common stock, par
value $.001 per share ("Common Stock"); and
WHEREAS, the Shares will not be registered under the Securities Act
of 1933, as amended, or under the securities laws of any state, in reliance upon
exemptions from registration thereunder; and
WHEREAS, the parties desire to enter into this Agreement for the
purposes, among others, of providing the registration rights, information rights
and a right of first refusal as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth herein, the
parties mutually agree as follows:
I. GENERAL
1.1 Definitions . As used in this Agreement the following terms shall
have the meanings set forth below:
"Affiliate" of any Person means any other Person who either directly
or indirectly is in control of, is controlled by or is under common control with
such Person; provided that for purposes of this definition an investment entity
shall be deemed to be controlled by its investment manager, investment advisor
or general partner.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in the City of Phoenix
are authorized by law, regulation or executive order to close.
"Equity Securities" means (i) any stock or similar security of the
Company, (ii) any security convertible, with or without consideration, into any
stock or similar security (including any option to purchase such a convertible
security), (iii) any security carrying any warrant or right to subscribe to or
purchase any stock or similar security or (iv) any such warrant or right.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any similar successor federal statue), and the rules and regulations
thereunder, as the same are in effect from time to time.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor 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 the Investor or any assignee of record of Registrable
Securities owned by the Investor in accordance with Section 2.10 hereof. For the
purposes of this Agreement, the Company may deem the registered holder of a
Registrable Security as the Holder of it.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by a prospectus supplement with respect to
the terms of the offering of any portion of the Registrable Securities covered
by such Registration Statement and by all other amendments and supplements to
the Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
"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.
"Registrable Securities" means (i) all shares of the Company's Common
Stock issued or issuable to Holder pursuant to the Stock Purchase Agreement as
further described in the Recitals hereto; and (ii) any other securities issued
as a result of or in connection with any stock dividend, stock split or reverse
stock split, combination, recapitalization, reclassification, merger or
consolidation, exchange or distribution in respect of the shares of Common Stock
referred in to (i) above.
"Registration Expenses" means 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, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of one
counsel in connection with blue sky qualifications or registrations (or the
obtaining of exemptions therefrom) of the Registrable Securities, printing
expenses (including expenses of printing Prospectuses), messenger and delivery
expenses, internal expenses (including all salaries and expenses of its officers
and employees performing legal or accounting duties), fees and disbursements of
its counsel and its independent certified public accountants (including the
expenses of any special audit or "comfort" letters required by or incident to
such performance or compliance), securities acts liability insurance (if the
Company elects to obtain such insurance), fees and expenses of any special
experts retained by the Company in connection with any registration hereunder
and the fees and expenses of any other Person retained by the Company (but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company).
"Registration Statement" means any registration statement which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus included therein, all amendments and
supplements to such Registration Statement including post effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
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"Securities Act" means the Securities Act of 1933, as amended (or any
similar successor federal statue), and the rules and regulations thereunder, as
the same are in effect from time to time.
"Selling Expenses" means all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of negotiable
securities.
"SEC" or "Commission" means the Securities and Exchange Commission,
or any other United States federal agency at the time administering the
Securities Act.
"Underwritten Offering" means an offering that is registered under
the Securities Act in which securities of the Company are sold pursuant to a
firm commitment underwriting, to an underwriter at a fixed price for reoffering
to the public or pursuant to agency or best efforts arrangements with an
underwriter.
II. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until the transferee has agreed
in writing for the benefit of the Company to be bound by this Section 2.1,
provided and to the extent such Section is then applicable and:
(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) 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 (B) if
reasonably requested by the Company, 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 which is (A) a partnership to its
partners in accordance with partnership interests, or (B) to Holder's family
member or trust for the benefit of an individual Holder, provided the transferee
will be subject to the terms of this Section 2.1 to the same extent as if he
were the original Holder hereunder.
(b) Each certificate representing 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 or as
provided elsewhere in the Agreement):
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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, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN
EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Holder thereof if 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 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 .
2.2.1 Upon the written request of Holder at any time after
the date one year after the closing of the Company's first Underwritten Offering
of Common Stock of the Company made pursuant to an effective Registration
Statement under the Securities Act (the "Initial Offering") that the Company
file a Registration Statement under the Securities Act covering the registration
of Registrable Securities, the Company shall effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that Holder
requests to be registered; provided that the number of securities to be
registered shall be not less than 50% of the Registrable Securities held by
Holder.
2.2.2 The Company shall not be obligated to effect more
than two (2) registrations pursuant to this Section 2.2.
2.2.3 The Company shall not be required to effect a
registration pursuant to this Section 2.2 during the period starting with the
date of filing of, and ending on the date 90 days following the effective date
of the Registration Statement pertaining to the Initial Offering, provided that
the Company is making reasonable and good faith efforts to cause such
Registration Statement to become effective. In addition, the Company shall not
be required to effect a registration pursuant to this Section 2.2 if within 30
days of receipt of a written request from Holder pursuant to Section 2.2.1, the
Company gives notice to Holder of the Company's intention to file a Registration
Statement for its Initial Offering within 90 days.
2.2.4 Notwithstanding the foregoing, if the Company shall
furnish to Holder 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 stockholders for such Registration Statement
to be filed and it is therefore essential to defer the filing of such
Registration Statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of Holder;
provided that such right to delay a request shall be exercised by the Company no
more than twice in any one-year period.
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2.3 Piggyback Registration . If the Company at any time proposes to
file a Registration Statement with respect to any class of Equity Securities,
whether for its own account (other than a Registration Statement on Form S-4 or
S-8, or any successor or substantially similar form or a Registration Statement
covering (i) an employee stock option, stock purchase or compensation plan or
securities issued or issuable pursuant to any such plan or (ii) a dividend
reinvestment plan) or for the account of a holder of securities of the Company
pursuant to registration rights granted by the Company (a "Requesting
Securityholder"), then the Company shall in each case give written notice of
such proposed filing to Holder at least 30 Business Days before the anticipated
filing date of any such Registration Statement by the Company, and such notice
shall offer to Holder the opportunity to have any or all of the Registrable
Securities held by Holder included in such Registration Statement. If Holder
desires to have the Registrable Securities registered under this Section 2.3,
Holder must so advise the Company in writing within 20 Business Days after the
date of receipt of such notice (which request shall set forth the amount of
Registrable Securities for which registration is requested), and the Company
shall include in such Registration Statement all the Registrable Securities so
requested to be included therein; If Holder decides not to include all of its
Registrable Securities in any Registration Statement thereafter filed by the
Company, 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.
2.3.1 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 Holder. In such event, the right of Holder
to be included in a registration pursuant to this Section 2.3 shall be
conditioned upon Holder's participation in such underwriting and the inclusion
of Holder's Registrable Securities in the underwriting to the extent provided
herein. Holder shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting. Notwithstanding
any other provision of the 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 Holder (or, if Holder has
assigned Registrable Securities in accordance with Section 2.10 hereof, Holders
on a pro rata basis based on the total number of Registrable Securities held by
such Holders); and third, to any stockholder of the Company (other than a
Holder) on a pro rata basis. No such reduction shall reduce the securities being
offered by the Company for its own account to be included in the registration
and underwriting, except that in no event shall the amount of securities of
Holder included in the registration be reduced below 30% of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
Stockholders, in which event any or all of the Registrable Securities of Holder
may be excluded in accordance with the immediately preceding sentence. In no
event will shares of any other selling Stockholder be included in such
registration which would reduce the number of shares which may be included by
Holder without the written consent of Holder.
2.4 Form S-3 Registration .
2.4.1 After its Initial Offering, the Company shall use
its best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms. After the Company has qualified for the use of Form
S-3, in addition to the rights contained in the foregoing provisions of this
Section 2, Holder shall have the right to request registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of disposition
of such shares by Holder).
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2.4.2 As soon as practicable after receiving written
notice of the proposed registration from Holder, effect such registration and
all related qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of
Holder's Registrable Securities as are specified in such request; 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 Holder, (ii) if Holder, 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 $500,000,
(iii) if the Company shall furnish to Holder 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 Stockholders 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 120 days after receipt of the request of Holder under this Section 2.4, or
(iv) if the Company has, within the 12 month period preceding the date of such
request, already effected one registration on Form S-3 for Holder pursuant to
this Section 2.4.
2.4.3 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 request or requests of Holder.
2.5 Expenses of Registration . All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 2.2, 2.3 or 2.4 herein 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. 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 Holder unless the
withdrawal is based upon material adverse information concerning the Company of
which Holder was not aware at the time of such request. If Holder is required to
pay the Registration Expenses, such expenses shall be 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 Section 2.5(a), then Holder shall not forfeit their rights pursuant
to Section 2.2 or Section 2.4 to a demand registration.
2.6 Registration Procedures . Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
2.6.1 Prepare and file with the SEC a Registration
Statement with respect to such Registrable Securities or such amendments and
post effective amendments to an existing Registration Statement and use its best
efforts to cause such Registration Statement to become effective, and keep such
Registration Statement effective for up to 90 days; provided, however, that no
Registration Statement shall be required to remain in effect after all
Registrable Securities covered by such Registration Statement have been sold and
distributed as contemplated by such Registration Statement.
2.6.2 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
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provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
2.6.3 Furnish to Holder, without charge, at least one
manually signed or "Edgarized" copy and as many conformed copies as may
reasonable be requested, of the then effective Registration Statement and any
post-effective amendment thereto, and one copy of all financial statements and
schedules, all documents incorporated therein by reference and all exhibits
thereto (including those incorporated by reference).
2.6.4 Deliver to each selling Holder, without charge, as
many copies of the then effective Prospectus (including each Prospectus subject
to completion) and any amendments or supplements thereto as such Holder may
reasonably request.
2.6.5 Use its best 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 Holder,
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.
2.6.6 In the event of an Underwritten Offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering.
2.6.7 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 or 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.
2.6.8 Cause all such Registrable Securities registered
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
2.6.9 Provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such legislation and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration.
2.7 Termination of Registration Rights . All registration rights
granted under this Article II shall terminate and be of no further force and
effect seven (7) years after the date following the Company's Initial Offering.
2.8 Delay of Registration . Holder shall not 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 Article II.
2.9 Indemnification.
2.9.1 Indemnification by the Company. The Company agrees
to indemnify and hold harmless, to the full extent permitted by law, but without
duplication, each Holder of Registrable Securities, any their respective
officers and directors, if any, and each Person who controls such Holder within
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the meaning of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement of a
material fact in, or any omission of a material fact required to be stated in,
any Registration Statement or in any preliminary or final Prospectus, or any
amendment or supplement thereto, or necessary to make the statements therein (in
the case of a Prospectus in light of the circumstances under which they were
made) not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by any Holder or any
underwriter expressly for use therein; provided that the Company will not be
liable pursuant to this Section 2.9.1 if such losses, claims, damages,
liabilities or expenses have been caused by the failure of any selling Holder to
deliver a copy of the Registration Statement or Prospectus, or any amendments or
supplements thereto, after the Company has furnished such copies to such Holder.
2.9.2 Indemnification by Holders of Registrable Securities.
In connection with any Registration Statement covering Registrable Securities of
any Holder, such Holder will furnish to the Company in writing such information
as the Company reasonably requests for use in connection with any such
Registration Statement or Prospectus and agrees to indemnify and hold harmless,
to the full extent permitted by law, but without duplication, the Company, its
officers, directors, stockholders, employees, advisors and agents, and each
Person who controls the Company (within the meaning of the Securities Act),
against any losses, claims, damages, liabilities and expenses resulting from any
untrue statement of a material fact in, or any omission of a material fact
required to be stated in, the Registration Statement or in any preliminary or
final Prospectus, or any amendment or supplement thereto, or necessary to make
the statements therein (in the case of a Prospectus in light of the
circumstances under which they were made) not misleading, but only to the extent
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
therein. If the offering to which the Registration Statement relates is an
Underwritten Offering, each Holder agrees to enter into an underwriting
agreement in customary form with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each Person who controls
such underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by such Holder of the
Company.
2.9.3 Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification,
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided, however,
that any Person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in, but not control, the defense of
such claim, but the fees and expenses of such counsel shall be at the expense of
such indemnified Person, unless (A) the indemnifying party shall have failed to
assume the defense of such claim and employ counsel reasonably, satisfactory to
the indemnified party in a timely manner, or (B) in the reasonable judgment of
any such Person, based upon written advice of its counsel, a conflict of
interest may exist between such Person and the indemnifying party with respect
to such claims (in which case, if the Person notifies the indemnifying party in
writing, that such Person elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of any such claim as to which such conflict of interest may
exist). The indemnifying party will not be subject to any liability for any
settlement made without its consent. No indemnified party will be required to
consent to the 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 of such
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claim or litigation. An indemnifying party who is not entitled to, or elects not
to, assume the defense of the claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, as well as one local counsel in
each relevant jurisdiction.
2.9.4 Contribution. If for any reason the indemnification
provided for in Section 2.9.1 or 2.9.2 hereof is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by Sections 2.9.1 and
2.9.2 hereof, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party and the indemnified
party, but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11 (f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentations.
2.10 Assignment of Registration Rights . The rights to cause the
Company to register Registrable Securities pursuant to this Article II may be
assigned by Holder to a transferee or assignee of Registrable Securities;
provided, however, that no such transferee or assignee shall be entitled to
registration rights under Sections 2.2, 2.3 or 2.4 hereof unless it acquires at
least 10% of such transferring Holder's shares of Registrable Securities (as
adjusted for stock splits and combinations) and the Company shall, within 20
days after such transfer, be furnished with written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned. Notwithstanding the foregoing,
rights to cause the Company to register securities may be assigned to any
subsidiary, parent, general partner, limited partner or other affiliate of
Holder.
2.11 Amendment of Registration Rights . Any provision of this Article
II 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 Holders of at least 60% of the
Registrable Securities. 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 Article II, Holder hereby agrees to be bound by the
provisions hereunder.
2.12 Limitation on Subsequent Registration Rights . After the date of
this Agreement, the Company shall not, without the prior written consent of
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company that
would permit such holder to require that the Company register any securities
held by such holder.
2.13 Suspension of Sales under Certain Circumstances.
2.13.1 Upon receipt of any notice from the Company that
dispositions under the then current Prospectus must be discontinued and
suspended, Holder will forthwith discontinue and suspend disposition of
Registrable Securities pursuant to such Prospectus until (i)Holders is advised
in writing by the Company that a new Registration Statement covering the offer
of Registrable Securities has become effective under the Securities Act, or (ii)
Holder receives copies of a supplemented or amended Prospectus contemplated by
Section 4(a) hereof, or (iii) Holder is advised in writing by the Company that
the use of the Prospectus may be resumed.
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2.13.2 If at any time following the date hereof any of the
Company's shares of Common Stock are to be sold pursuant to an Underwritten
Offering, then for the period commencing 45 days prior to, and expiring 180 days
after, the effective date of such Underwritten Offering, Holder will not effect
any public sale or distribution of any Registrable Securities or any other
shares of Common Stock of the Company then owned by Holder, other than pursuant
to such Underwritten Offering (if any Registrable Securities are included in
such Underwritten Offering).
2.14 Information by Holder. Each Holder of Registrable Securities
shall furnish the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 2.
2.15 Current Public Information . The Company agrees that it will
file all reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
it ceases to be required to file such reports, it will, upon the request of
Holders owning a majority of the Registrable Securities (excluding any
Registrable Securities that have previously been sold pursuant to a Registration
Statement hereunder or Rule 144 under the Securities Act), make publicly
available other information), and it will take such further action as may
reasonably be required, in each case to the extent required from time to time to
enable Holder to sell Registrable Securities without registration under the
Securities Act within the limitations of the applicable exemptions provided by
(x) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (y) any similar regulation hereinafter adopted by the SEC.
2.16 No Inconsistent Agreements . The Company has not previously
entered into and shall not in the future enter into any agreement, arrangement
or understanding with respect to its securities which is inconsistent with the
rights granted to Holders in this Agreement.
III. COVENANTS OF THE COMPANY.
3.1 Basic Financial Information and Reporting .
3.1.1 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.
3.1.2 As soon as practicable after the end of each fiscal
year of the Company, and in any event within 90 days thereafter, the Company
will furnish the Investor a consolidated balance sheet of the Company, as at the
end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all prepared
in accordance with generally accepted accounting principles 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
and unqualified opinion thereon by independent public accountants of national
standing selected by the Company's Board of Directors, together with a copy of
the auditor's letter to management.
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3.1.3 The Company will furnish the Investor (i) at least
30 days prior to the beginning of each fiscal year an annual budget including a
projected income statement, cash flow statement and balance sheet, and operating
plans for such fiscal year, together with a brief qualitative description of the
Company's plan by the Chief Executive Officer in support of such budget; and
(ii) within 20 business days after the end of each month, an unaudited balance
sheet and statements of income and cash flows for such month and year-to-date,
prepared in accordance with generally accepted accounting principles, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made, but such statement shall set forth
applicable budget figures and variances from budget, and such statement shall be
accompanied by a brief written report of the Chief Executive Officer with
respect to operations, problems and achievements during the prior period and
setting forth goals for the ensuing month or months as appropriate.
3.1.4 Within 20 days after the discovery by the Company
of any default or breach by the Company of any of the terms of this Agreement or
the Stock Purchase Agreement or of a material adverse event affecting the
operations or finances of the Company, the Company shall provide to the Investor
a statement outlining such default or event and management's proposed response.
3.1.5 The Company will furnish the Investor promptly after
transmission or filing, and in any event within 10 days thereafter, any reports,
including communications with stockholders or the financial community, filed by
the Company or its officers or directors with the Securities and Exchange
Commission. 3.2 Inspection Rights . The 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, 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 . The Investor agrees to use, and to
use its best efforts to insure that its authorized representatives use, the same
degree of care as the 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 the Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
the 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.
3.5 Expense Reimbursement . The Company shall pay the directors
$2,500 per month together with a reimbursement for reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings of
the Board of Directors and any committee thereof.
3.6 Termination of Covenants . All covenants of the Company contained
in Article III of this Agreement shall expire and terminate as to the Investor
after the time of effectiveness of the Company's Initial Offering.
IV. LIMITATIONS ON ISSUANCES, RIGHTS OF FIRST REFUSAL.
<PAGE>
4.1 Subsequent Offerings . Without the unanimous approval of the
Board of Directors, the Company shall not propose to sell or issue after the
date of this Agreement any Equity Securities which shall cause the Investor to
own less than 20% of all of the issued and outstanding Equity Securities of the
Company, other than the Equity Securities excluded by Section 4.6 hereof. If the
Board of Directors unanimously approves such an issuance, the Investor shall
have a right of first refusal to purchase its pro rata share of all or any
portion of such Equity Securities, other than the Equity Securities excluded by
Section 4.6 hereof. The Investor's pro rata share is equal to the ratio of the
number of shares of Registrable Securities which the Investor has purchased
pursuant to the Stock Purchase Agreement, to the total number of shares of the
Company's Registrable Securities purchased by the Investor pursuant to the
Purchase Agreement.
4.2 Exercise of Rights . If the Company proposes to issue any Equity
Securities, it shall give the 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. The Investor shall have 15
business 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 the Investor if the Investor 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 the Investor
elects not to purchase its pro rata share of the Equity Securities, then the
Company shall have 60 days thereafter to sell the Equity Securities in respect
of which the Investor's rights were not exercised, at a price and upon terms and
conditions no more favorable to the Investor thereof than specified in the
Company's notice to the Investor pursuant to Section 4.2 hereof. If the Company
has not sold such Equity Securities within such 60 days, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Investor in the manner provided above.
4.4 Termination of Rights of First Refusal . The rights of first
refusal established by this Article IV shall terminate upon the closing of the
Company's Initial Offering.
4.5 Transfer of Rights of First Refusal . The rights of first refusal
of the Investor under this Article IV may be transferred to any constituent
partner or affiliate of the Investor, to any successor in interest to all or
substantially all the assets of the Investor, or to a transferee who acquires at
least 10% of the Investor's shares of Registrable Securities.
4.6 Excluded Securities . The rights of first refusal established by
this Article IV shall have no application to any of the following Equity
Securities:
4.6.1 shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights issued pursuant to such options, warrants or
other rights) issued or to be issued 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, up to an aggregate amount equal to 10% of the of all of the
issued and outstanding Equity Securities of the Company;
<PAGE>
4.6.2 stock issued 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, provided that the rights
of first refusal established by this Article IV applied with respect to the
initial sale or grant by the Company of such rights or agreements;
4.6.3 any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar business
combination;
4.6.4 any Equity Securities that are issued by the Company
as part of an Initial Offering; or
4.6.5 shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company.
V. MISCELLANEOUS.
5.1 Governing Law . This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Arizona
without reference to principles of conflict of laws. The parties to this
Agreement hereby consent to the jurisdiction in personam of the Superior Court
of the State of Arizona, in and for the County of Maricopa or of the United
States District Court for the District of Arizona, in any legal proceeding to
enforce any obligations under this Agreement, and agree that venue in Maricopa
County is not inconvenient.
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 Separability . In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 Amendment and Waiver .
5.5.1 Except as otherwise expressly provided, this
Agreement may be amended or modified only upon the written consent of the
Company and the holders of more than a majority of the Registrable Securities.
<PAGE>
5.5.2 Except as otherwise expressly provided, the
obligations of the Company and the rights of Holder under this Agreement may be
waived only with the written consent of the holders of more than a majority of
the Registrable Securities.
5.6 Delays or Omissions . It is agreed that no delay or omission to
exercise any right. power, or remedy accruing to 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
Holder's part of any breach, default or noncompliance under the Agreement or any
waiver on 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 Holder, shall be cumulative and not alternative.
5.7 Notices . All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, confirmed facsimile with copy by first-class mail, or
air-courier guaranteeing overnight delivery:
(a) If to a Holder of Registrable Securities, at the most current
address for such Holder, as it appears on the books of the Company; and
(b) If to the Company: OneSource Technologies, Inc., 2329 West
Mescal, Suite 304, Phoenix, Arizona 85029, Attention: Chief Executive Officer;
fax (602) 216-9611, or at such other address as may be designated from time to
time by notice given in accordance with the provisions of this Section 5.7.
All such notices and other communications shall be deemed to have
been delivered and received (i) in the case of personal delivery or facsimile,
on the date of such delivery, (ii) in the case of overnight courier, on the
Business Day after the date when sent, and (iii) in the case of mailing, on the
fifth Business Day following such mailing.
5.8 Attorneys' Fees . In the event that any dispute among the parties
to this Agreement should result in litigation, 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.
5.9 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.
5.10 Construction . The Section headings contained in this Agreement
are for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. All terms used in one number or gender shall
be construed to include any other number or gender as the context may require.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
5.11 Entire Agreement . This Agreement, together with any other
documents and certificates delivered hereunder and the Stock Purchase Agreement,
state the entire agreement of the Company and the Investor with respect to the
<PAGE>
subject matter hereof, merge all prior negotiations, agreements and
understandings, if any, and state in full all representations, warranties and
agreements which have induced this Agreement.
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.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date set forth in the first paragraph hereof.
COMPANY:
ONESOURCE TECHNOLOGIES, INC.
a Delaware corporation
By: /s/ Jerry Washburn
--------------------------------------
Jerry Washburn
President and Chief Executive Officer
INVESTOR:
BLACKWATER CAPITAL PARTNERS II, L.P.
a Delaware Limited Partnership
By: Blackwater Capital Group II, L.L.C.
a Delaware limited liability company
Its: General Partner
By: /s/ Steven R. Green
----------------------------------------
Steven R. Green
Managing Member
