▇▇▇▇▇▇▇▇ CURHAN FORD GROUP, INC.
INVESTORS' RIGHTS AGREEMENT
AUGUST 27, 2009
▇▇▇▇▇▇▇▇ CURHAN FORD GROUP, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "AGREEMENT") is made as of
August 27, 2009, by and among ▇▇▇▇▇▇▇▇ Curhan Ford Group, Inc., a Delaware
corporation (the "COMPANY"), and the persons and entities listed on Exhibit A
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or Exhibit B hereto (each, an "INVESTOR" and collectively, the "INVESTORS").
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Unless otherwise defined herein, capitalized terms used in this Agreement have
the meanings ascribed to them in SECTION 1.
RECITALS
WHEREAS, the Investors are parties to the Series D Preferred Stock
Purchase Agreement of even date herewith, among the Company and the Investors
listed on the Schedule of Investors thereto (the "PURCHASE AGREEMENT"), or the
Settlement Agreement of even date herewith by and among the Company and the
parties listed on the signature pages thereto (the "SETTLEMENT AGREEMENT") and
it is a condition to the Closing that the Investors and the Company execute
and deliver this 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
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "CLOSING" shall mean the date of the initial sale of shares
of Series D Preferred Stock and Warrants pursuant to the Purchase Agreement.
(b) "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
(c) "COMMON STOCK" means the Common Stock of the Company.
(d) "CONVERSION SHARES" shall mean shares of Common Stock
issued upon conversion of the Shares.
(e) "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.
(f) "HOLDER" shall mean any Investor or Settling Party who
holds Registrable Securities and any holder of Registrable Securities to whom
the registration rights conferred by this Agreement have been duly and validly
transferred in accordance with SECTION 2.10 of this Agreement.
(g) "INDEMNIFIED PARTY" shall have the meaning set forth in
SECTION 2.4(C) hereto.
(h) "INDEMNIFYING PARTY" shall have the meaning set forth in
SECTION 2.4(C) hereto.
(i) "INVESTOR REPRESENTATIVE" shall mean ▇▇▇▇▇▇ Chez, or his
designee.
(j) "INVESTOR WARRANTS" shall mean the Warrants, the ▇▇▇▇▇▇▇▇
Warrants, the Registration Warrants and the Key Man Warrants.
(k) "MAJOR HOLDERS" shall mean each Holder who together with
its Permitted Transferees owns at least 5,000,000 shares of Common Stock
(calculated on an as converted or exercisable to common stock basis, and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like) resulting from its holding of Shares, Conversion
Shares, Investor Warrants or common stock issued as a result of exercise of
the Investor Warrants; provided that in determining whether the New York Group
is deemed to be a "Major Holder", the Shares,
Conversion Shares, Investor Warrants or common stock issued as a result of
exercise the Investor Warrants held by the other members of the New York Group
and their respective Permitted Transferees shall also be included in such
determination. In providing any notice or exercising any right reserved for
Major Holders hereunder, ▇▇▇▇▇▇ ▇▇▇▇ shall be the representative of the New
York Group and shall have the right to make decisions and execute documents on
behalf of all members of the New York Group.
(l) "NEW YORK GROUP" shall mean ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ and affiliated investors.
(m) "PURCHASE AGREEMENT" shall have the meaning set forth in
the Recitals hereto.
(n) "REGISTRABLE SECURITIES" shall mean (i) shares of Common
Stock issued or issuable pursuant to the conversion of the Shares, the
Warrants, the ▇▇▇▇▇▇▇▇ Warrants, Registration Warrants and the Key Man
Warrants or any other warrants issued by the Company to an Investor; and (ii)
any Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to or in exchange for or in replacement of the
shares referenced in (i) above, or (iii) shares of Common Stock issued or
issuable pursuant to the exercise of the warrants issued to the Settling
Parties pursuant to the Settlement Agreement, subject to adjustments in
accordance with the terms hereof; provided, however, that Registrable
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Securities shall not include any shares of Common Stock described in clause
(i), (ii), or (iii) above which have previously been registered or 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.
(o) The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall
refer to a registration effected 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.
(p) "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company and the reasonable fees of
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.
(q) "RESTRICTED SECURITIES" shall mean any Registrable
Securities required to bear the first legend set forth in SECTION 2.8(C)
hereof.
(r) "REGISTRATION STATEMENT" shall mean Shelf Registration
Statement as defined in SECTION 2.1(A) hereof or Requested Registration
Statement as defined in SECTION 2.2(A).
(s) "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 or analogous successor rule that may be promulgated by
the Commission.
(t) "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.
(u) "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).
(v) "SETTLING PARTIES" shall mean the parties listed in Exhibit
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B hereto, who are parties to the Settlement Agreement. Settling Parties shall
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be Holders under this Agreement and shall have all the rights of a Holder
under this Agreement. The warrants received by the Settling Parties under the
Settlement Agreement shall be Registrable Securities. For the avoidance of
doubt, the Settling Parties shall be Investors under this Agreement.
(w) "SERIES D PREFERRED STOCK" shall mean the shares of Series
D Convertible Preferred Stock of the Company issued pursuant to the Purchase
Agreement.
(x) "SETTLEMENT AGREEMENT" shall have the meaning set forth in
the Recitals.
(y) "SHARES" shall mean the Company's Series D Preferred Stock.
(z) "WARRANTS" shall mean the warrants issued to Investors
pursuant to the Purchase Agreement.
SECTION 2
REGISTRATION RIGHTS
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2.1 Shelf Registration.
(a) The Company covenants and agrees with each Investor to make
reasonable best efforts to prepare and file, as soon as practicable, with the
Commission a registration statement covering the resale of the Registrable
Securities issued at the Closing under the Purchase Agreement and the
Settlement Agreement for an offering to be made on a continuous basis pursuant
to Rule 415 (the "SHELF REGISTRATION STATEMENT"). The Shelf Registration
Statement shall be on Form S-3 (or if the Company is not eligible to use Form
S-3 for the Shelf Registration Statement, Form S-1) or such other form as the
rules of the Commission may prescribe. The Company shall use its reasonable
best efforts to cause the Registration Statement to be declared effective
under the Securities Act (the "EFFECTIVE DATE") as promptly as possible after
the filing thereof, and to keep the Registration Statement continuously
effective under the Securities Act until the date which is the earlier of when
(i) all Registrable Securities have been sold; (ii) all Registrable Securities
may be sold immediately without registration under the Securities Act and
without volume restrictions pursuant to Rule 144, as determined by the counsel
to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent and the affected
Holders; or (iii) the date which is three years following the Effective Date
(provided, however, upon the request of any Major Holder, such date may be
extended by an additional three years). The Company will make commercially
reasonable efforts to amend the Registration Statement to include any
Registrable Securities issuable under this Agreement which are not outstanding
on the date hereof, including the ▇▇▇▇▇▇▇▇ Warrants and Registration Warrants
which may be issued, or shares of Common Stock issuable pursuant to any
▇▇▇▇▇▇▇▇ Warrants or Registration Warrants which may be issued, as promptly as
practicable after the issuance of such additional Registrable Securities.
2.2 Additional Rights. If, due to SEC requirements, (i) the Company
is not able to utilize Rule 415 for the Shelf Registration Statement, or (ii)
is allowed to utilize Rule 415 but for less than 80% of all of the Registrable
Securities outstanding at the time, or (iii) the Holders of a majority in
interest of the Registrable Securities advise the Company in writing that they
wish to withdraw the Shelf Registration Statement because of conditions to be
imposed upon them as a result of SEC review (either of the events in (i) or
(ii), an "SEC EVENT"), to the Holders shall have the additional rights
provided in this SECTION 2.2 and in SECTION 2.3 until such time as a Shelf
Registration Statement is effective which covers the Registrable Securities.
(a) Request for Registration. Subject to the conditions set
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forth in this SECTION 2.2, if the Company shall receive from any Major Holder
a written request signed by such Major Holder that the Company effect any
registration with respect to all or a part of the Registrable Securities (such
request shall state the number of shares of Registrable Securities to be
disposed of by such Major Holder)("Initiating Holder"), the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable and in any event within sixty
(60) days of the receipt of such request, file a registration statement (a
"REQUESTED REGISTRATION STATEMENT") and use its commercially reasonable
efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue
sky or other state securities laws, and appropriate compliance with the
Securities Act) and to permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any Holder or Holders joining in such request as are specified in a written
request received by the Company within twenty (20) days after such written
notice from the Company is mailed or delivered provided that the aggregate
amount of Registrable Securities Holders seek to sell in a Requested
Registration is expected to result in at least $1 million in gross proceeds.
(b) Cutback Due to SEC Review. If the Company is advised by the
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SEC that not all of the Registrable Securities which the Holders wish to
register may be included in a Requested Registration Statement, the securities
to be included shall be allocated as follows: (i) first, all securities being
sold for the account of the Company or any parties other than Holders shall be
excluded; (ii) second, if additional cutbacks are required, the securities to
be included shall be allocated pro rata among the Holders wishing to include
their Registrable Securities assuming the conversion or exercise of such
Registrable Securities.
(c) Limitations on Requested Registration. The Company shall
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not be obligated to effect, or to take any action to effect, any such
registration pursuant to this SECTION 2.2 if, within twelve months of such
written request, the Company has effected two (2) such registrations pursuant
to this SECTION 2.2 and such registrations have been ordered or declared
effective for a period of the earlier of 30 business days or the date of final
sale of all Registrable Securities registered pursuant to the Requested
Registration Statement;
(d) Other Shares. The Requested Registration Statement filed
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pursuant to the request of the Major Holder may, subject to the provisions of
SECTION 2.2(B) and SECTION 2.2(E), include securities of the Company being
sold for the account of the Company.
(e) Underwriting. If the Major Holder requesting registration
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under this SECTION 2.2 intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to SECTION 2.2(A), and the Company
shall include such information in the written notice referred to in SECTION
2.2(A). In such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. If
the Company shall request inclusion in any registration pursuant to SECTION
2.2(A) of securities being sold for its own account, the Major Holders shall,
on behalf of all Holders, offer to include such securities in the
underwriting, and such offer shall be conditioned upon the participation of
the Company in such underwriting and the inclusion of the Company's
securities. The Company shall (together with all Holders 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 for such underwriting by the Company,
which underwriters are reasonably acceptable to a majority-in-interest of the
initiating Holders, unless the Company itself shall be the selected
underwriter, in which case the consent of the Holders shall not be required.
Notwithstanding any other provision of this SECTION 2.2, if the
underwriters advise the Initiating Holders in writing that marketing factors
require a limitation on the number of shares to be underwritten, the number of
Registrable Securities and Company securities that may be so included shall be
allocated as follows: (i) first, among all Holders requesting to include
Registrable Securities in such Registration Statement based on the pro rata
percentage of Registrable Securities held by such Holders, assuming conversion
or exercise; (ii) second, to the Company, which the Company may allocate, at
its discretion, for its own account, or for the account of other holders or
employees of the Company.
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 be excluded therefrom by written notice from the Company, the
underwriter or the Major Holders. The securities so excluded shall also be
withdrawn from registration. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall also be withdrawn from such
registration.
2.3 Company Registration.
(a) 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 2.3(B) below, and in any
underwriting involved therein, all of such Registrable Securities as are
specified in a written request or requests made by any Holder or Holders
received by the Company within ten (10) days after such written notice from
the Company is mailed or delivered. Such written request may specify all or a
part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company
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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 2.3(A)(I). In such event, the right of any Holder to
registration pursuant to this SECTION 2.3 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 Selling Stockholders of
securities of the Company with registration rights to participate therein
distributing 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.
2.4 Registration Penalties
(a) The "REGISTRATION PENALTY DATE" shall mean (i) if no SEC
Event has occurred, the date which is 200 days after the Closing if, unless
due to the fault of an Investor, no Shelf Registration Statement has been
declared effective by such date; or (ii) If an SEC Event has occurred, the
date which is 150 days after any Request for Registration if no Requested
Registration Statement has been declared effective by such date (unless due to
the fault of an Investor or due to being subsequently withdrawn by the
Holders).
(b) For each 30-calendar day period following the Registration
Penalty Date in which there is not an effective registration statement
covering the Registrable Securities, the Company shall pay to the Investors
pro-rata, in proportion to the number of shares of Series D Preferred Stock
purchased by such Investor pursuant to the Purchase Agreement, five year
warrants to purchase 150,000 shares of the Company's Common Stock at $0.65 per
share, on terms identical to those issued to the Investors under the Purchase
Agreement (the "REGISTRATION WARRANTS"), as liquidated damages and not as a
penalty, subject to an overall limit of liquidated damages in the aggregate of
900,000 Registration Warrants. The liquidated damages pursuant to the terms
hereof shall apply on a daily pro-rata basis for any portion of a month prior
to securing an effective Registration Statement. The foregoing shall in no way
limit any equitable remedies available to
Investors for failure to secure an effective Registration Statement by the
Registration Penalty Date. Investors shall also be able to pursue monetary
damages for failure to secure an effective Registration Statement by the
Registration Penalty Date but only if such failure is due to the willful or
deliberate action or inaction of the Company in breach of the covenants
contained herein. Except as provided for in the preceding sentence, each
Investor agrees that the liquidated damages provided for in this section shall
be its sole remedy for the failure to secure an effective Registration
Statement for any Registrable Securities on a timely basis.
2.5 Expenses of Registration. All Registration Expenses incurred in
connection with registrations pursuant to SECTIONS 2.1, 2.2 AND 2.3 hereof
shall be borne by the Company; provided, however, that the Company shall not
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be required to pay for any expenses of any registration proceeding begun
pursuant to SECTION 2.1 if the registration request is subsequently withdrawn
at the request of the Holders of a majority of the Registrable Securities to
be registered (in which case all participating Holders shall bear such
expenses pro rata among each other based on the number of Registrable
Securities held), unless such withdrawal is based upon a Material Adverse
Effect (as defined in the Purchase Agreement) or other material adverse
information that the Company had not publicly disclosed in a report filed with
the Commission prior to such request. All Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the holders
of securities included in such registration pro rata among each other on the
basis of the number of Registrable Securities or other securities so
registered (or otherwise as they so agree).
(a) Registration Procedures. In the case of each registration
affected 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, as expeditiously as
reasonably possible: Prepare and file with the Commission the Registration
Statement (including all required exhibits) 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 section 2.1(a)
above, and, to the extent reasonably practicable, not less than five business
days prior to the filing of any such amendment or supplement, furnish to
Investor Representative on behalf of the Investors copies of all such
documents proposed to be filed and give reasonable consideration to the
inclusion in such documents of comments made by Investor Representative
(provided, however, that the Company shall include in any such documents any
comments necessary to correct any material misstatement or omission regarding
a Holder);
(b) Furnish such number of prospectuses, including any
preliminary prospectuses, and other documents incident thereto, including any
amendment of or supplement to the prospectus and such other documents, as a
Holder from time to time may reasonably request to facilitate disposition of
the Registrable Securities;
(c) Use its reasonable 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 the
Holders and to keep such registration or qualification in effect so long as
the registration statement remains in effect; provided that the Company shall
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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.
(d) Enter customary agreements and take such other actions as
are reasonably required in order to facilitate the disposition of such
Registrable Securities, including, if the method of distribution of
Registrable Securities is by means of an underwritten offering, using
commercially reasonable efforts to, (i) participate in and make documents
available for the reasonable and customary due diligence review of
underwriters during normal business hours, on reasonable advance notice and
without undue burden or hardship on the Company, (ii) cause the chief
executive officer and chief financial officer to be available at reasonable
dates and times to participate in "road show" presentations and/or investor
conference calls to market the Registrable Securities during normal business
hours, on reasonable advance notice and without undue burden or hardship on
the Company, (iii) negotiate and execute an underwriting agreement in
customary form with the managing underwriter(s) of such offering and such
other documents reasonably required under the terms of such underwriting
arrangements, including using commercially reasonable efforts to procure a
customary legal opinion and auditor "comfort" letters. The Holders selling
Registrable Securities shall also enter into and perform their obligations
under such underwriting agreement.
(e) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in light of the
circumstances then existing, and, promptly following such notification,
promptly prepare and furnish to such Holder 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) 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;
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange and/or trading system on
which similar securities issued by the Company are then listed;
(h) Give notice to the Holders as promptly as reasonably
practicable: (i) when any registration statement filed pursuant to this
Section 2 or any amendment to such registration statement has been filed with
the Commission and when such registration statement or any post-effective
amendment to such registration statement has become effective; (ii) of any
request by the Commission for amendments or supplements to any registration
statement (or any information incorporated by reference in, or exhibits to,
such registration statement) filed pursuant to this Section 2 or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any registration statement filed
pursuant to this Section 2 or the initiation of any
proceedings for that purpose (and the Company agrees to use commercially
reasonable efforts to prevent the issuance or obtain the withdrawal of any
order suspending the effectiveness of any such registration statement at the
earliest possible time); (iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of the
qualification of the Common Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(i) Use commercially reasonable efforts to procure the
cooperation of the Company's transfer agent in settling any offering or sale
of Registrable Securities, including with respect to the transfer of physical
stock certificates into book-entry form in accordance with any procedures
reasonably requested by the Holders or the managing underwriter(s). In
connection therewith, if reasonably required by the Company's transfer agent,
the Company shall promptly after the effectiveness of the registration
statement cause an opinion of counsel as to the effectiveness of the
registration statement to be delivered to and maintained with its transfer
agent, together with any other authorizations, certificates and directions
required by the transfer agent which authorize and direct the transfer agent
to issue such Registrable Securities without legend upon sale by the holder of
such shares of Registrable Securities under the registration statement.
2.6 Indemnification.
(a) The Company will indemnify and hold harmless each Holder
(including the Investor Representative), each of its officers, directors,
members, former members, agents, partners, former partners, stockholders,
representatives, affiliates, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act and the officers, directors agents and
employees of such controlling person (collectively, "HOLDER INDEMNITEES"),
with respect to any registration or qualification that 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), joint or
several, and including the fees expenses and disbursements of attorneys and
professionals, 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 registration statement, preliminary or final prospectus,
offering circular, or other document (including any related registration
statement, notification, or the like) incident to any such registration or
qualification, (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, the Exchange Act, any rule or
regulation promulgated under the Securities Act or 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 or qualification, and the Company
will reimburse, as incurred, each such Holder Indemnitees 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
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that any such claim, loss, damage, liability, or action arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by such Holder, any of such Holder's officers,
directors, members, former members, agents, partners, former 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 for inclusion in such
registration statement, prospectus, offering circular or other document; and
provided further that the indemnity agreement contained in this SECTION 2.6(A)
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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 or delayed).
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration or
qualification is being effected, severally, and not jointly, 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,
members, agents 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, as incurred, the Company and such Holders,
directors, officers, members, agents, 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 and stated to be specifically for use therein; provided
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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 or delayed); and
provided further that in no event shall any indemnity under this SECTION 2.6
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exceed the net proceeds received by such Holder from the offering or offerings
that gives rise to such indemnification obligation.
(c) Each party entitled to indemnification under this SECTION
2.6 (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
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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 or delayed), and the
Indemnified Party may participate in such defense at such party's expense;
provided further that an Indemnified Party (together with all other
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Indemnified Parties that may be represented without conflict by one counsel)
shall have the right to retain its own counsel, with the reasonable fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential conflicting interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding or should the Indemnifying Party have failed to promptly assume the
defense of such proceeding; and provided further that the failure of any
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Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this SECTION 2.6, to the extent such failure is not
materially 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
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. All
reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such proceeding in a manner not inconsistent with this
SECTION 2.6) shall be paid to the Indemnified Party, as incurred, within ten
business days of written notice thereof to the Indemnifying Party (regardless
of whether it is ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).
(d) If the indemnification provided for in this SECTION 2.6 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 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; provided, however, that no contribution by any
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Holder payable pursuant to this Section 2.6(d) shall exceed the net proceeds
from the offering received by such Holder. 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. The Company, the
Investor Representative and the Investors agree that it would not be just and
equitable if contribution pursuant to this SECTION 2.6(D) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in this SECTION 2.6(D).
Notwithstanding the foregoing, no Indemnified Party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from an Indemnifying Party 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) The obligations of the Company and the Holders under this
SECTION 2.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this SECTION 2, the termination
of this Agreement and otherwise.
2.7 Information by Holder. As a condition to the obligations of the
Company to register securities of a Holder hereunder, 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 or qualification referred to in this
SECTION 2.
2.8 Restrictions on Transfer.
(a) The holder of each certificate representing Registrable
Securities by acceptance thereof agrees to comply in all respects with the
provisions of this SECTION 2.8. Each Holder agrees not to make any sale,
assignment, transfer, pledge or other disposition of all or any portion of the
Restricted Securities, or any beneficial interest therein, 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 such
Holder shall give prompt written notice to the Company of such Holder's
intention to make such disposition and shall furnish the Company with a
detailed description of the manner and circumstances of the proposed
disposition and such disposition is being made pursuant to Rule 144; or
(ii) (A) Such Holder shall give prompt written notice to
the Company of such Holder's intention to make such disposition and shall
furnish the Company with a detailed description of the manner and
circumstances of the proposed disposition, and, if requested by the Company,
such Holder shall furnish the Company, at its expense, with an opinion of
counsel to the effect that such disposition will not require registration of
such Restricted Securities under the Securities Act, 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; and (B) the transferee thereof has agreed in writing for the
benefit of the Company to take and hold such Restricted Securities subject to,
and to be bound by, the terms and conditions set forth in this Agreement,
including this SECTION 2.8.
(b) Notwithstanding the provisions of SECTION 2.8(A) above, no
such restriction shall apply to a transfer by a Holder that is (i) a
partnership transferring to its partners or former partners in accordance with
partnership interests or to any affiliated entity, (ii) a corporation
transferring to a wholly-owned subsidiary or a parent corporation that owns
all of the capital stock of the Holder, (iii) a limited liability company
transferring to its members or former members in accordance with their
interest in the limited liability company or to any affiliated entity, or (iv)
an individual transferring to the Holder's family member or trust or other
estate planning entity for the benefit of an individual Holder or a member of
his or her immediate family, provided that the Holder has provided the Company
with notice of such transfer; provided that in each case the transferee will
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agree in writing to be subject to the terms of this Agreement to the same
extent as if such transferee were an original Holder hereunder (such persons,
"PERMITTED TRANSFEREES").
(c) Each certificate representing stock certificates which are
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 ANY STATE. 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 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
(1) RESTRICTIONS ON TRANSFERABILITY AND RESALE, AND (2)
VOTING RESTRICTIONS, AS SET FORTH IN AN INVESTOR RIGHTS
AGREEMENT, AMONG THE COMPANY AND THE ORIGINAL HOLDERS OF
THESE SHARES, 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
2.8.
(d) The first legend referring to federal and state securities
laws identified in SECTION 2.8(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 promptly 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, which may, at the option of the Company, include an opinion of
counsel satisfactory to the Company, that such securities can be sold pursuant
to Section (k) of Rule 144 under the Securities Act. It is agreed that the
Company will not require opinions of counsel for transactions made pursuant to
Rule 144.
2.9 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 reasonable best efforts to:
(a) 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; and
(c) So long as a Holder owns any Restricted Securities, furnish
to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, 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.
2.10 Registration Rights. During the term of this Agreement, the
Company shall not grant or agree to grant, any rights to register securities
under the Securities Act to any other person without the consent of the
Holders of a majority of Registered Securities.
2.11 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.
2.12 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register securities granted to a Holder by the Company
under this SECTION 2 may be transferred or assigned by a Holder only to (a) a
transferee or assignee of at least 250,000 shares of Registrable Securities
(as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits, and the like), or (b) its
stockholders, partners, limited partners, members, agents, affiliated
entities, former partners or former members (or their estates), subsidiaries
or affiliates; provided that (i) such transfer or assignment of Registrable
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Securities is effected in accordance with the terms of SECTION 2.8 hereof,
(ii) the Company is given prompt written notice of said transfer or
assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
intended to be transferred or assigned and (iii) the transferee or assignee of
such rights assumes in writing the obligations of such Holder under this
Agreement.
SECTION 3
VOTING
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3.1 Voting. During the term of this Agreement, each Holder of Shares
agrees to vote all Shares in such manner as may be necessary to elect (and
maintain in office) as members of the Company's Board of Directors two (2)
Chicago Designees (as defined below), one (1) New York Designee (as defined
below) and one ▇▇▇▇▇▇▇▇ Designee (as defined below) as the Preferred
Directors.
3.2 Designation of Directors. The two (2) Chicago designees to the
Company's Board of Directors described above (each a "CHICAGO DESIGNEE") shall
be designated by ▇▇▇▇▇▇ Chez, or his affiliates or designee ("CHICAGO
INVESTOR"). The one (1) New York designee to the Company's
Board of Directors described above (the "NEW YORK DESIGNEE", and collectively
with the Chicago Designees, the "Designees") shall be designated by ▇▇▇▇▇▇
▇▇▇▇ or his designee ("NEW YORK INVESTOR"). The one (1) ▇▇▇▇▇▇▇▇ designee to
the Company's Board of Directors described above (the "▇▇▇▇▇▇▇▇ DESIGNEE", and
collectively with the Chicago Designees and the New York Designee, the
"DESIGNEES") shall be designated by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or his designee
("▇▇▇▇▇▇▇▇"). Each Designee must be eligible under applicable law and
regulations of Nasdaq and FINRA to serve on the Board, provided however, that
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the Designees shall not be required to be "independent" under Nasdaq Listing
Rules.
3.3 Current Designees. As of the date of this Agreement, the
Designees shall be (i) ▇▇▇▇▇▇ Chez as one of the Chicago Designees and (ii)
▇▇▇▇▇▇ ▇▇▇▇ as the New York Designee. The other Chicago Designee shall be
vacant until subsequently designated by Chicago Investor.
3.4 Changes in Designees. From time to time during the term of this
Agreement, Chicago Investor or New York Investor may, in their sole
discretion:
(a) notify the Company in writing of an intention to remove
from the Company's Board of Directors any then incumbent Designee who occupies
a Board of Directors seat for which Chicago Investor or New York Investor,
respectively, are entitled to choose the Designee; or
(b) notify the Company in writing of an intention to select a
new Designee for election to a Board seat for which Chicago Investor or New
York Investor, respectively, are entitled to choose the Designee (whether to
replace a prior Designee or to fill a vacancy in such Board of Directors
seat);
In the event of such an initiation of a removal or selection of a Designee
under this section, the Company shall take such actions as are necessary to
facilitate such removals or elections, including soliciting the votes of the
appropriate stockholders, and the Holders shall vote their Shares to cause:
(y) the removal from the Company's Board of Directors of the Designee or
Designees so designated for removal; and (z) the election to the Company's
Board of Directors of any new Designee or Designees so designated.
Notwithstanding the foregoing sentence, the Company shall not be required to
hold a special meeting of stockholders to replace a Designee.
3.5 The rights to designate directors granted under this SECTION 3
shall terminate as follows:
(a) with respect to either the New York Investor or ▇▇▇▇▇▇▇▇,
at such time as the total number of Shares and Conversion Shares held by such
investor is less than 50% of the number purchased at the Closing by that
investor; and
(b) with respect to the Chicago Investor the right to one
Chicago Designee shall terminate at such time as the total number of Shares
and Conversion Shares held by the Chicago Investor is less than 50% of the
number purchased at the Closing; and the right the other Chicago Designee
shall terminate at such time as the total number of Shares and Conversion
Shares held by the Chicago Investor is less than 25% of the number purchased
at the Closing.
SECTION 4
COVENANTS OF THE COMPANY
------------------------
The Company hereby covenants and agrees, as follows:
4.1 ▇▇▇▇▇▇▇▇ Warrants. If D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") ceases to
serve as Chief Executive Officer of the Company prior to the third anniversary
of the date hereof, the Company will promptly issue a number of additional
five year warrants, pro rata to the then holders of Shares and Conversion
Shares, equal to the number of Warrants but not including any Registration
Warrants (such warrants, the "▇▇▇▇▇▇▇▇ WARRANTS"). Other than issue and
expiration date, the terms of the ▇▇▇▇▇▇▇▇ Warrants shall be identical in all
respects (including exercise price) to the Warrants, and the ▇▇▇▇▇▇▇▇ Warrants
and shares of Common Stock resulting from exercise of the ▇▇▇▇▇▇▇▇ Warrants
shall be Registrable Securities. Notwithstanding the foregoing, the ▇▇▇▇▇▇▇▇
Warrants shall not be issued if
(a) ▇▇▇▇▇▇▇▇ ceases to serve due to his death;
(b) ▇▇▇▇▇▇▇▇ is terminated without Cause. "Cause" shall mean
the happening of one or more of the following events: (i) conviction of any
felony or any crime involving moral turpitude or dishonesty; (ii)
participation in a fraud or act of dishonesty against the Company; (iii)
intentional, material violation of any contract between the Company and
▇▇▇▇▇▇▇▇ or any statutory duty of ▇▇▇▇▇▇▇▇ to the Company that is not
corrected within thirty (30) days after written notice thereof; or (iv) in the
good faith judgment of the Company's Board of Directors, which must include
the affirmative vote of at least two of the Preferred Directors, ▇▇▇▇▇▇▇▇ has
engaged in misconduct or neglect of his responsibilities as Chief Executive
Officer of the Company; or conduct on Merriman's part that makes his continued
employment prejudicial to the Company's best interests which conduct has not
been cured within thirty (30) days after written notice thereof; or
(c) ▇▇▇▇▇▇▇▇ resigns for Good Reason. "Good Reason" shall mean
(i) the failure of the Company to pay or cause to be paid Merriman's base
salary or annual bonus, as agreed from time to time, (ii) any substantial and
sustained unreasonable diminution in Merriman's title, authority or
responsibilities from those enjoyed by ▇▇▇▇▇▇▇▇ at this time, or (iii) any
relocation of Merriman's principal place of employment by more than 50 miles
from the Company's current offices in San Francisco, CA, without Merriman's
consent.
4.2 Key Man Warrants. Until the first to occur of the (x) 5th
anniversary of this Agreement, or (y) the Company reporting six (6)
consecutive quarters of positive net earnings (calculated in accordance with
GAAP and as reported in the SEC Filings) the Company will keep the "Life
Insurance Policy" (as such term is defined in the Purchase Agreement) in
place. If the Company fails to keep the Life Insurance Policy in place, prior
to the dates provided in the preceding sentence, the Company will promptly
issue an aggregate of 30,000 additional five year warrants, pro rata to the
then holders of Shares and Conversion Shares for each full calendar quarter in
which the Life Insurance Policy is not in place (such warrants, the "KEY MAN
WARRANTS"). Other than issue and expiration date, the terms of the Key Man
Warrants shall be identical in all respects (including exercise price) to the
Warrants, and the Key Man Warrants and shares of Common Stock resulting from
exercise of the Key Man Warrants shall be Registrable Securities.
SECTION 5
RIGHT OF FIRST REFUSAL
----------------------
5.1 Right of First Refusal to Major Holders. The Company hereby
grants to each Major Holder and its Permitted Transferees the right of first
refusal to purchase its pro rata share of New Securities (as defined in
Section 5.1(a)) which the Company may, from time to time, propose to sell and
issue after the date of this Agreement. A Major Holder's and its Permitted
Transferees pro rata share, for purposes of this right of first refusal, is
equal to the ratio of (a) the total number of shares of Common Stock owned by
such Major Holder or Permitted Transferee (assuming full conversion of the
Shares and conversion or exercise of all Investor Warrants) immediately prior
to the issuance of New Securities to (b) the total number of shares of Common
Stock outstanding immediately prior to the issuance of New Securities
(assuming full conversion of the Shares and conversion or exercise of all
Investor Warrants).
(a) "NEW SECURITIES" shall mean any capital stock (including
Common Stock and/or Shares) of the Company whether now authorized or not, and
rights, convertible securities, options or warrants to purchase such capital
stock, and securities of any type whatsoever that are, or may become,
exercisable or convertible into capital stock; provided that the term "NEW
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SECURITIES" does not include:
(i) the Shares and the Conversion Shares;
(ii) securities issued or issuable to officers, directors
and employees of, or consultants to, the Company pursuant to stock grants,
option plans, purchase plans or other employee stock incentive programs or
arrangements approved by the Board of Directors, or upon exercise of options
or warrants granted to such parties pursuant to any such plan or arrangement;
(iii) securities issued pursuant to the conversion or
exercise of any outstanding convertible or exercisable securities as of the
date of this Agreement;
(iv) securities issued or issuable as a dividend or
distribution on the Shares or pursuant to any event for which adjustment is
made pursuant to the Certificate of Designation with respect to the Shares;
(v) securities issued or issuable pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other reorganization or to a joint venture
agreement, provided that such issuances are approved by the Board of
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Directors, including at least one of the Preferred Directors;
(vi) securities issued or issuable to banks, equipment
lessors or other financial institutions pursuant to a commercial leasing or
debt financing transaction that is not effected primarily for capital raising
and that is approved by the Board of Directors, including at least one of the
Preferred Directors;
(vii) securities issued or issuable in connection with
collaboration, technology license, marketing or other similar agreements or
strategic partnerships approved by the Board of Directors, including at least
one of the Preferred Directors; and
(viii) securities issued to suppliers or third party
service providers in connection with the provision of goods or services
pursuant to transactions approved by the Board of Directors, including at
least one of the Preferred Directors.
(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Major Holder and its Permitted
Transferees written notice of its intention, describing the type and number of
New Securities, and their price and the general terms upon which the Company
proposes to issue the same. Each Major Holder and its Permitted Transferees
shall have ten (10) days after any such notice is mailed or delivered (the
"ELECTION PERIOD") to agree to purchase such Holder's pro rata share of such
New Securities for the price and upon the terms specified in the notice by
giving written notice to the Company, in substantially the form attached
hereto as Schedule 1, and stating therein the quantity of New Securities to be
----------
purchased (each participating Major Holder or Permitted Transferee, a
"PARTICIPANT"). Each Participant may allocate such New Securities among
themselves and their affiliates in their sole discretion.
(c) In the event the Major Holders and its Permitted
Transferees fail to exercise the right of first refusal, prior to the
expiration of the Election Period, the Company shall have sixty (60) days
thereafter to sell or enter into an agreement (pursuant to which the sale of
New Securities covered thereby shall be closed, if at all, within thirty (30)
days from the date of said agreement) to sell that portion of the New
Securities with respect to which the Major Holders' right of first refusal set
forth in this SECTION 5.1 was not exercised, at a price and upon terms no more
favorable to the purchasers thereof than specified in the Company's notice to
Major Holders delivered pursuant to SECTION 5.1(B). In the event the Company
has not sold within such sixty (60) day period following the Election Period,
or closed within such thirty (30) day period following the date of said
agreement, the Company shall not thereafter issue or sell any New Securities,
without first again offering such New Securities to the Major Holders and its
Permitted Transferees in the manner provided in this SECTION 5.1.
(d) The right of first refusal granted under this SECTION 5
shall expire at such time as the total number of Shares and Conversion Shares
outstanding is less than 2,325,000.
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 and signed by
the Company and the Holders holding a majority of the Registrable Securities
(calculated by assuming all Shares have been converted to Conversion Shares as
of the date of such amendment, waiver, discharge or termination, and excluding
any of such shares that have been sold to the public or pursuant to Rule 144);
provided that any amendment or waiver that affects the rights or obligations
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of a Holder hereunder in a different manner than other Holders shall require
the written consent of such Holder. Any such amendment, waiver, discharge or
termination effected in accordance with this paragraph shall be binding upon
each Holder and each future holder of all such securities of Holder. Subject
to the terms of this paragraph 5.1, each Holder acknowledges that by the
operation of this paragraph, the holders of a majority of the
Registrable Securities (excluding any of such shares that have been sold to
the public or pursuant to Rule 144) will have the right and power to diminish
or eliminate all rights of such Holder under this Agreement.
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 an Investor, at the Investor's address, facsimile
number or electronic mail address as shown in the Company's records, as may be
updated in accordance with the provisions hereof;
(b) if to any Holder, at such address, facsimile number or
electronic mail address as shown in the Company's records, or, until any such
holder so furnishes an address, facsimile number or electronic mail address to
the Company, then to and at the address of the last holder of such shares for
which the Company has contact information in its records; or
(c) if to the Company, one copy should be sent to ▇▇▇▇▇▇▇▇
Curhan Ford Group, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attn: Chief Executive Officer, or at such other address as the Company
shall have furnished to the Investors, with a copy to ▇▇▇▇▇▇▇▇ Curhan Ford
Group, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn:
Chief Compliance Officer.
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 3
business days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid or, if sent by facsimile, the business day following confirmation of
facsimile transfer or, if sent by electronic mail, the business day following
confirmation of delivery when directed to the electronic mail address provided
pursuant hereto, or, if sent by nationally recognized overnight delivery
service, on the date when delivered.
6.3 Governing Law. This Agreement shall be governed in all respects
by the internal laws of the State of Delaware, without regard to principles of
conflicts of law.
6.4 Successors and Assigns. Except as set forth herein (including,
without limitation, Section 2.8), this Agreement, and any and all rights,
duties and obligations hereunder, shall not be assigned or transferred, by any
Investor without the prior written consent of the Company. Any attempt by an
Investor without such permission to assign or transfer 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.
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.
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 the city of Chicago, and
county of ▇▇▇▇, Illinois (or in the event of exclusive federal jurisdiction,
the courts of the Northern District of Illinois). EACH OF THE PARTIES
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY. The Company agrees and acknowledges that any violation
or breach of its covenants, agreements and undertakings contained in this
Agreement or in the other Investment Agreements shall cause Investors and/or
Holders irreversible injury and,
in addition to any other right or remedy available to a party at law or in
equity, an Investor or Holder shall be entitled to enforcement by court
injunction for specific performance of the obligations of the other party
hereunder (without the requirement of posting a bond). Notwithstanding the
foregoing sentence, but subject to the provisions of this Agreement, including
SECTION 2.4(B), nothing herein shall be construed as prohibiting a party from
also pursuing any other rights, remedies or defenses, for such breach or
threatened breach, including receiving damages and attorneys' fees. The
election of any remedy shall not be construed as a waiver on the part of any
party of any rights such party might otherwise have at law or in equity. Said
rights and remedies shall be cumulative.
6.12 Further Assurances. Each party hereto agrees to execute and
deliver, by the proper exercise of its corporate, limited liability company,
partnership 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.
6.13 Aggregation of Stock. All shares of Registrable Securities 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.
6.14 Best Efforts. For the purposes of this Agreement, "best efforts"
shall not be interpreted to require the Company to undertake any activity that
will violate a state or federal statute, law, rule, order or regulation.
6.15 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 such
reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
6.16 Construction. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement. When used in this Agreement, the word "including" means "including,
without limitation", and the word "person" means any natural person,
corporation, limited liability company, trust, joint venture, association,
company, governmental authority, or other entity.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement effective as of the day and year first above written.
▇▇▇▇▇▇▇▇ CURHAN FORD GROUP, INC.,
Delaware corporation
By: /s/ D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Chief Executive Officer
IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement effective as of the day and year first above written.
INVESTORS:
By: /s/ ▇▇▇▇▇ ▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇, Vice President & Trust Officer,
First Bank & Trust, as Custodian of ▇▇▇▇▇▇ ▇.
Chez ▇▇▇
[Remaining Signature Pages Omitted]
SCHEDULE 1
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FORM OF NOTICE
NOTICE AND WAIVER/ELECTION OF
RIGHT OF FIRST REFUSAL
I DO HEREBY WAIVE OR EXERCISE, AS INDICATED BELOW, MY RIGHTS OF FIRST REFUSAL
UNDER THE INVESTORS' RIGHTS AGREEMENT DATED AS OF _____________ (THE
"AGREEMENT"):
1. Waiver of 10 Days' Initial Notice Period in Which to Exercise Right of
First Offer: (PLEASE CHECK ONLY ONE)
( ) WAIVE in full, the 10-day notice period provided to
exercise my right of first refusal granted under the
Agreement.
( ) DO NOT WAIVE the notice period described above.
2. Issuance and Sale of New Securities: (PLEASE CHECK ONLY ONE)
( ) WAIVE in full the right of first refusal granted under the
Agreement with respect to the issuance of the New
Securities.
( ) ELECT TO PARTICIPATE in $__________ [PLEASE PROVIDE
AMOUNT] in New Securities proposed to be issued by ▇▇▇▇▇▇▇▇
Curhan Ford Group, Inc., representing less than my pro rata
----
portion of the aggregate of $x in New Securities being
offered in the financing.
( ) ELECT TO PARTICIPATE in $__________ in New Securities
proposed to be issued by ▇▇▇▇▇▇▇▇ Curhan Ford Group, Inc.,
representing my full pro rata portion of the aggregate of $x
in New Securities being offered in the financing.
( ) ELECT TO PARTICIPATE in my full pro rata portion of the
aggregate of $x in New Securities being made available in
the financing and, to the extent available, the greater of
---
(x) an additional $__________ [PLEASE PROVIDE AMOUNT] or (y)
my pro rata portion of any remaining investment amount
available in the event other Significant Holders do not
exercise their full rights of first refusal with respect to
the $x in New Securities being offered in the financing.
Date: ___________, 20__ _____________________________
Signature of Stockholder or
Authorized Signatory
_____________________________
Title, if applicable
THIS IS NEITHER A COMMITMENT TO PURCHASE NOR A COMMITMENT TO ISSUE THE NEW
SECURITIES DESCRIBED ABOVE. SUCH ISSUANCE CAN ONLY BE MADE BY WAY OF
DEFINITIVE DOCUMENTATION RELATED TO SUCH ISSUANCE. ▇▇▇▇▇▇▇▇ CURHAN FORD GROUP,
INC. WILL SUPPLY YOU WITH SUCH DEFINITIVE DOCUMENTATION UPON REQUEST OR IF YOU
INDICATE THAT YOU WOULD LIKE TO EXERCISE YOUR FIRST OFFER RIGHTS IN WHOLE OR
IN PART.