XXXXXXXX CURHAN FORD GROUP, INC.
INVESTORS' RIGHTS AGREEMENT
AUGUST 27, 2009
XXXXXXXX CURHAN FORD GROUP, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "AGREEMENT") is made as of
August 27, 2009, by and among Xxxxxxxx Curhan Ford Group, Inc., a Delaware
corporation (the "COMPANY"), and the persons and entities listed on Exhibit A or
Exhibit B hereto (each, an "INVESTOR" and collectively, the "INVESTORS"). 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 Xxxxxx Chez, or his
designee.
(j) "INVESTOR WARRANTS" shall mean the Warrants, the Xxxxxxxx
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, Xxxxxx Xxxx 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 Xxxxxx Xxxx, Xxxxxx Xxxxxxxxx,
Xxxxxxx Xxxxxx and Xxxx Xxxxx 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
Xxxxxxxx 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 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
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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 B
hereto, who are parties to the Settlement Agreement. Settling Parties shall 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.
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(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
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 Xxxxxxxx Warrants and Registration
Warrants which may be issued, or shares of Common Stock issuable pursuant to any
Xxxxxxxx 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 forth
in this SECTION 2.2, if the Company shall receive from any Major Holder a
written request signed by such
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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
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 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
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
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
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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.
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(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to SECTION 2.3(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 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
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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 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
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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
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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 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)
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
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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 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 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 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 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 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
11
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 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
12
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 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):
13
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;
14
(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 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
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 Xxxxxxxx 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 Xxxxxx 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 Xxxxxx Xxxx or his designee
("NEW YORK
15
INVESTOR"). The one (1) Xxxxxxxx designee to the Company's Board of Directors
described above (the "XXXXXXXX DESIGNEE", and collectively with the Chicago
Designees and the New York Designee, the "DESIGNEES") shall be designated by
Xxxxxxx X. Xxxxxxxx or his designee ("Xxxxxxxx"). Each Designee must be eligible
under applicable law and regulations of Nasdaq and FINRA to serve on the Board,
provided, however, that 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) Xxxxxx Chez as one of the Chicago Designees and (ii) Xxxxxx Xxxx 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 the New York Investor and Xxxxxxxx, 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.
16
SECTION 4
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, as follows:
4.1 Xxxxxxxx Warrants. If D. Xxxxxxxx Xxxxxxxx ("XXXXXXXX") 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 "XXXXXXXX WARRANTS"). Other than issue and expiration date,
the terms of the Xxxxxxxx Warrants shall be identical in all respects (including
exercise price) to the Warrants, and the Xxxxxxxx Warrants and shares of Common
Stock resulting from exercise of the Xxxxxxxx Warrants shall be Registrable
Securities. Notwithstanding the foregoing, the Xxxxxxxx Warrants shall not be
issued if
(a) Xxxxxxxx ceases to serve due to his death;
(b) Xxxxxxxx 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 Xxxxxxxx or any statutory duty
of Xxxxxxxx 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, Xxxxxxxx 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) Xxxxxxxx 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 Xxxxxxxx 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
17
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
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 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
18
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
19
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 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 Xxxxxxxx Curhan
Ford Group, Inc., 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxxxxxxx, XX 00000,
Attn: Chief Executive Officer, or at such other address as the Company shall
have furnished to the Investors, with a copy to Xxxxxxxx Curhan Ford Group,
Inc., 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxxxxxxx, XX 00000, 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
20
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.
21
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 Xxxx,
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]
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IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement effective as of the day and year first above written.
XXXXXXXX CURHAN FORD GROUP, INC.,
Delaware corporation
/s/ D. Xxxxxxxx Xxxxxxxx
-----------------------------------
D. Xxxxxxxx Xxxxxxxx
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/ X. Xxxxxxxx
----------------------------------
By: DGB Investments
Its: X. Xxxxxxxx, President
(Remaining Signature Pages Omitted)
EXHIBIT A
INVESTORS
INVESTOR
------------------------------------
EXHIBIT B
SETTLING PARTIES
------------------------------------------------------------
AEG FACILITIES, INC.
------------------------------------------------------------
XXXXX XXXXXXX
------------------------------------------------------------
DGB INVESTMENTS, INC.
------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR
SECURITY PACIFIC BANK
------------------------------------------------------------
HERITAGE BANK OF COMMERCE
------------------------------------------------------------
MODERN BANK, N.A.
------------------------------------------------------------
VALLEY COMMUNITY BANK
------------------------------------------------------------
SCHEDULE 1
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 Xxxxxxxx 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 Xxxxxxxx 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. XXXXXXXX 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.
