INVESTOR'S RIGHTS AGREEMENT
Exhibit
10.2
INVESTOR'S
RIGHTS AGREEMENT
This
INVESTOR'S RIGHTS AGREEMENT ("Agreement") is entered into on this 7th day of
August, 2007 by and between PREMIERE PUBLISHING GROUP, INC., a Nevada
corporation (the "Company") and TOTOWA CONSULTING GROUP, INC., a Nevada
corporation (the "TCG").
WITNESSETH:
WHEREAS,
the Company and TCG have entered into a Consulting Agreement of even date
herewith (the), pursuant to which TCG has agreed to accept shares of the
Company’s $0.001 par value restricted common stock (as hereinafter defined);
and
WHEREAS,
TCG shall invest substantial time and expense in the performance of its duties
pursuant to the Consulting Agreement, and
WHEREAS,
by this Agreement, the Company and TCG each desire to set forth certain rights
of the parties with respect to the shares of Common Stock as set forth
below.
NOW,
THEREFORE, in consideration of good and valuable consideration, the receipt
and
sufficiency of which is acknowledged by each party hereto, and of the mutual
premises and the agreements and covenants contained herein, the parties,
intending to be legally bound, hereby agree as follows:
Defined
Terms. As used in this Agreement, the following terms shall have the
following respective meanings:
(a) The
term "Approved Transferees" means each of the officers, directors and
shareholders of TCG.
(b) "Beneficial
owner," "beneficially owned" or "beneficial ownership" have the respective
meanings assigned to such terms in Rule 13d-3 under the Exchange
Act.
(c) The
term "TCG Percentage" means on the date of determination for purposes of Section
2.4 of this Agreement, the percentage determined by dividing (i) the number
of
shares of Common Stock then held by TCG and its Permitted Transferees by (ii)
the aggregate shares of Common Stock outstanding immediately prior to the event
giving rise to the determination of the TCG Percentage in this Agreement;
provided, however, that if the TCG Percentage has been reduced as a result
of
(i) an issuance of securities by the Company after the date hereof pursuant
to
clause (v) of the definition of New Securities (below) for which TCG was not
offered an opportunity to maintain its ownership percentage at the level
existing before such issuance by the purchase of additional securities or (ii)
an issuance of securities by the Company in an underwritten offering after
the
date hereof for which TCG was not permitted to maintain its ownership percentage
at the level existing before such issuance by the purchase of additional
securities as a result of the provisions of Section 2.4(d) hereof, then the
TCG
Percentage shall be what it otherwise would have been but for any such issuance.
The TCG Percentage shall in no event be less than 51%.
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(d) "Change-of-Control
Transaction" means any transaction, upon the consummation of which, any Person
or "group" (within the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), of Persons (other than TCG,
the
Permitted Transferees or any of their respective affiliates) would own in excess
of 50% of the outstanding Common Stock.
(e) The
term "Common Stock" means the common stock, $0.001 par value per share, of
the
Company.
(f) "Consulting
Agreement".
(g) The
term "Derivative Securities" means any options, warrants, rights, preferred
stock or other securities that are convertible, exercisable or exchangeable
into
Common Stock or other capital stock of the Company that is entitled by its
terms
to vote generally in the election of directors of the Company.
(h) The
terms "Holder" or "Holders" means TCG and any of its Permitted
Transferees.
(i) The
term "Initiating Holder" means any Holder or Holders of 25% or more of the
aggregate Registrable Securities then outstanding.
(j) The
term "New Securities" means any voting securities, Common Stock or Derivative
Securities issued by the Company in either a private placement or a registered
public offering, including (i) any shares of Common Stock issuable upon the
conversion, exercise or exchange of Derivative Securities of the Company issued
and in effect as of the date of this Agreement; (ii) the issuance or sale by
the
Company of Common Stock or Derivative Securities to any directors, officers,
employees, contractors, advisors or consultant of the Company or any
of its subsidiaries provided such issuance or sale is pursuant to agreements
or
employee plans in the ordinary course of business of the Company consistent
with
past practice; (iii) shares of Common Stock issued in connection with any stock
split, stock dividend, recombination or other recapitalization transaction
in
respect of the Common Stock; (iv) shares of Common Stock or Derivative
Securities issued as collateral in connection with any equipment lease, real
property lease, loan, credit line, guarantees of indebtedness or similar
financing; (v) Common Stock or Derivative Securities issued in connection with
or pursuant to any merger, acquisition, consolidation, amalgamation, business
combination, reorganization, or reincorporation by or involving the Company
or
any of its subsidiaries; or (vi) Common Stock or Derivative Securities issued
by
the Company in any arms'-length transaction whose primary purpose is to provide
carriage to the web sites operated by the Company in an amount not to exceed,
in
the aggregate, 4.99% of the aggregate shares of Common Stock
outstanding.
(k) The
terms "register," "registered" and "registration" refer to a registration
effected by the preparation and filing of a registration statement in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and the
declaration or ordering of the effectiveness of such registration statement
by
the SEC.
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(l) The
term "Registrable Securities" means (i) any and all shares of Common Stock
issued to TCG pursuant to the Consulting Agreement; (ii) any and all shares
of
Common Stock issued to TCG or any "Permitted Transferee" (as defined in Section
2.3 hereof) pursuant to this Agreement; and (iii) any and all shares of Common
Stock issued in respect of the securities referred to in (i) and (ii) as a
result of a stock split, dividend, recapitalization or the like, which has
not
been sold to the public. As to any particular Registrable Securities, such
securities shall cease to be such when (i) a registration statement registering
such securities under the Securities Act has been declared or ordered effective
by the SEC and such securities have been sold or otherwise transferred by the
holder thereof pursuant to and in accordance with the plan of distribution
with
respect to such securities disclosed in the prospectus (compliant with Rule
424(b) under the Securities Act) forming part of such registration statement;
(ii) such securities have been sold in accordance with the resale requirements
of Rule 144 (or any successor rule or provision) adopted by the SEC under the
Securities Act; (iii) such securities shall have been transferred, new
certificates evidencing such securities without legends restricting further
transfer shall have been delivered by the Company and subsequent public
distribution of such securities shall neither require registration under the
Securities Act nor qualification (or any similar filing) under any state
securities or "blue sky" law then in effect; or (iv) such securities no longer
shall be issued and outstanding.
(m) The
term "Registration Expenses" means all expenses incurred in complying with
Sections 1.2 and 1.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, reasonable fees and disbursements
of
one counsel (or firm of counsel) for TCG, "blue sky" qualification fees and
expenses, and the expenses of any special audits incident to or required by
any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
(n) The
term "SEC" means the Securities and Exchange Commission.
Section
1. Registration
Rights.
1.1. [Intentionally
left blank.]
1.2. Demand
Registration.
(a) Request
for Registration. If the Company shall receive from any Initiating
Holder a written request that the Company effect any registration, qualification
or compliance with respect to Registrable Securities (a "Demand"), the Company
will:
(i) promptly
give written notice ("Company Notice") of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as
soon as practicable, use its best efforts to effect all such registrations,
qualifications and compliances (including, without limitation, the execution
of
an undertaking to file post-effective amendments, appropriate qualifications
under applicable "blue sky" or other state securities laws and appropriate
compliance with exemptive regulations promulgated under the Securities Act
and
any other governmental requirements or regulations) as may be so requested
and
as would permit or facilitate the public sale and distribution of all or such
portion of such Initiating Holder's or Initiating Holders' Registrable
Securities as are specified in such Demand, together with all or such portion
of
the Registrable Securities of any Holder or Holders joining in such Demand
as
are specified in a written request given within 20 days after receipt of the
Company Notice; provided, however, that the Company shall not be obligated
to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 1.2:
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(A) during
the period commencing on the 10th day next preceding the effective date of
a
registration statement filed with SEC pursuant to this Section 1.2 and ending
on
the 180th day next following such effective date;
(B) during
the period commencing on the 60th day next preceding the Company's good faith
estimate of the date of filing of, and ending on the 60th day next following
the
effective date of, a Company registration pursuant to Section 1.3 hereof,
provided the Company is actively employing in good faith all reasonable efforts
to cause such registration statement to become effective;
(C) in
any particular jurisdiction in which the Company would be required to qualify
to
do business or become subject to taxation or general service of process, unless
the Company already is so subject to service in such jurisdiction;
or
(D) after
the Company has effected four (4) such registrations pursuant to this Section
1.2(a) and such registrations have been declared or ordered effective by the
SEC.
Subject
to the foregoing clauses (A) through (D), the Company shall file a registration
statement covering the Registrable Securities so requested to be registered
as
soon as practicable, but in no event later than 60 days after receipt of the
request(s) of the Initiating Holder(s) therefor.
(b) Underwriting.
If the Holders intend to distribute the Registrable Securities covered by their
request by means of an underwritten offering, they shall so advise the Company
as part of their request made pursuant to this Section 1.2 and the Company
shall
include such information in the Company Notice. In such case, the underwriter
shall be selected by the Company and shall be reasonably acceptable to a
majority-in-interest of the Initiating Holders. The right of any Holder to
registration pursuant to this Section 1.2 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. The
Company shall (together with all Holders proposing to distribute their
securities by means of such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters. Notwithstanding any
other provision of this Section 1.2, if the "Managing Underwriter" (as such
term
is used in Rule 12b-2 under the Exchange Act) advises the Initiating Holders
in
writing that marketing factors require a limitation of the number of shares
to
be offered or sold, the Initiating Holders shall so advise all Holders, and
the
number of shares of Registrable Securities that may be included in the
underwritten registration shall be allocated among all Holders thereof in the
proportion, as nearly as practicable, that the respective amounts of Registrable
Securities held by each such Holder bears to the aggregate amount of Registrable
Securities held by all such Holders. If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such Holder may elect to withdraw
its Registrable Securities therefrom by written notice to the Company, the
underwriter and the Initiating Holders. Any Registrable Securities which are
excluded from the underwriting by reason of the Managing Underwriter's marketing
limitation or withdrawn from such underwriting forthwith shall be withdrawn
from
such registration.
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(c) Company
Shares. If the Managing Underwriter has not limited the number of
Registrable Securities to be underwritten, the Company may include therein
securities for its own account or for the account of others if the Managing
Underwriter so agrees and if the number of Registrable Securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
1.3. "Piggyback"
Registration.
(a) Registration.
If at any time or from time to time, the Company shall determine to register
shares of Common Stock for its own account or the account of any of its
stockholders, other than a registration on Form S-1 or S-8 relating solely
to
employee stock option or purchase plans, or a registration on Form S-4, or
a
registration on any other form (other than Form X-0, X-0, X-0, XX-0 or SB-2,
or
their successor forms) or any successor to such forms, which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly
give to each Holder written notice thereof; and
(ii) include
in such registration, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made within
20 days after receipt of such written notice from the Company, by any Holder,
except as set forth in Section 1.3(b) below.
(b) Underwriting.
If the registration as to which the Company gives notice is in respect of a
registered underwritten public offering the Company shall so advise the Holders
as a part of the written notice given pursuant to Section 1.3(a)(i). In such
event the right of any Holder to registration pursuant to this Section 1.3
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
stockholders distributing their securities through such underwriting) enter
into
an underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. If the Managing Underwriter
of an
offering of securities effected pursuant to this Section 1.3 reasonably shall
determine and advise the Company in writing that in its opinion the aggregate
number of Registrable Securities requested to be included in the Company's
registration statement creates a substantial risk that the proceeds or the
price
per share that the Company (or in the case of a registration which does not
include any securities being offered or sold for the Company's own account,
the
person(s) for whose account the registration statement is filed) would receive
pursuant to the offering would be materially reduced or that the success of
the
offering otherwise would be materially adversely affected, then the number
of
Registrable Securities to be included in the Company's registration statement
for the account of the Holders thereof shall be reduced pro rata among such
Holders to the aggregate amount deemed appropriate by such Managing Underwriter;
provided, however, if securities are being offered for the account of other
persons or entities as well as the Company, then with respect to the Registrable
Securities intended to be included for the account of the Holder thereof, the
proportion by which the number of Registrable Securities intended to be included
by such Holders is reduced shall not exceed the proportion by which the number
of securities intended to be registered by such other persons or entities is
reduced. If any Holder disapproves of the terms of the underwriting, he may
elect to withdraw therefrom by written notice to the Company and the Managing
Underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting forthwith shall be withdrawn from such registration. No Holder
shall have any right to participate in, and Section 1.3(a) shall not apply
to,
the first registered public offering involving an underwriting consummated
by
the Company after the date of this Agreement (the "Follow-on Offering");
provided that each such Holder shall have a right to participate in the
Follow-on Offering, irrespective of the date of consummation thereof, if the
Follow-on Offering is not consummated within one year from the date hereof,
subject, however, in any case to approval of such participation by the Managing
Underwriter therefor.
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For
any
selling Holder which is a partnership or corporation, the partners, retired
partners and stockholders of such Holder, or the estates and family members
of
any such partners and retired partners and any trusts for the benefit of any
of
the foregoing persons shall be deemed to be a single selling Holder such that
any pro rata reduction with respect to such selling Holder shall be based upon
the aggregate amount of Registrable Securities owned by all entities and
individuals included in such selling Holder.
(c)
Company shall have the right to withdraw a "piggyback" registration for any
reason upon reasonable notice to each Holder.
1.4. Expenses
of Registration. All Registration Expenses incurred in connection with
any registration, qualification or compliance pursuant to this Section shall
be
borne by the Company. The Company shall not be required to pay
underwriters' fees, discounts or commissions relating to Registrable Securities
or any broker or dealer concessions or allowances relating to the distribution
thereof.
1.5. Registration
Procedures. In the case of each registration, qualification or
compliance effected by the Company pursuant to this Agreement, the Company
will
keep each Holder participating therein advised in writing as to the initiation
of each registration, qualification and compliance and as to the completion
thereof. Except as otherwise provided in Section 1.4, at its expense the Company
will:
(a) Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to 180 days.
(b) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement.
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(c) Furnish
to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use
its best efforts to register and qualify the securities covered by such
registration statement under such other securities or "blue sky" laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that
the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or, except as required under the Securities Act,
to
file a general consent to service of process in any such states or
jurisdictions.
(e) Cause
all such Registrable Securities registered pursuant hereunder to be listed
on
each securities exchange or U.S. automated inter-dealer quotation system of
a
registered national securities association on which similar securities issued
by
the Company are then listed.
1.6. Indemnification.
(a) The
Company will indemnify and hold harmless each Holder of Registrable Securities
and each of its officers, directors and partners, and each person controlling
such Holder, with respect to which such registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls any underwriter of the Registrable
Securities held by or issuable to such Holder, against all claims, losses,
expenses, damages and liabilities (or actions in respect thereto) arising out
of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus or registration statement (including any
supplement or amendment thereto), or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to
make the statements therein (in the case of any prospectus, in light of the
circumstances under which they were made) not misleading, or any violation
or
alleged violation by the Company of the Securities Act, the Exchange Act and
any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law and relating to action or
inaction legally required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
within a reasonable amount of time after incurred (not to exceed 45 days) for
any reasonable legal and any other expenses incurred by them in connection
with
investigating, defending or settling any such claim, loss, damage, liability
or
action; provided, however, that the indemnity agreement contained in this
Section 1.6(a) shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld);
and
provided further, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is based
on any untrue statement or omission based upon written information furnished
to
the Company by an instrument duly executed by such Holder, controlling person
or
underwriter specifically for use therein or upon such Holders failure to deliver
a copy of a current prospectus (compliant with Section 10 of the Securities
Act)
or any amendment or supplement thereto (which does not contain any aforesaid
misrepresentation or omissions) if the Company theretofore has furnished such
Holder with a sufficient number of the copies of the same for delivery by the
Holder in connection with the offer and sale of Registrable
Securities.
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(b) Each
Holder will, if Registrable Securities held by or issuable to such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected pursuant to this Agreement, indemnify and hold
harmless the Company, each of its directors and officers, each underwriter,
if
any, of the Company's securities covered by such a registration statement,
each
person who controls the Company within the meaning of the Securities Act, and
each other such Holder, each of its officers, directors and partners and each
person controlling such Holder, against all claims, losses, expenses, damages
and liabilities (or actions in respect thereof) arising out of or based on
any
untrue statement (or alleged untrue statement) of a material fact contained
in
any such registration statement or prospectus (including any supplement or
amendment thereto) or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in case of any prospectus, in light of the circumstances under which
they were made) not misleading, and will reimburse the Company, such Holders,
such directors, officers, partners, persons or underwriters for any reasonable
legal or any other expenses incurred in connection with investigating, defending
or settling 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 or prospectus (including any supplement or amendment thereto) in
reliance upon and in conformity with written information furnished to the
Company by the Holder in an instrument duly executed by such Holder specifically
for use therein; provided, however, that the indemnity agreement contained
in
this Section 1.6(b) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if such settlement is effected without
the consent of the Holder (which consent shall not be unreasonably withheld);
and provided further, that the total amount for which any Holder shall be liable
under this Section 1.6(b) shall not in any event exceed the aggregate proceeds
received by such Holder from the sale of Registrable Securities held by such
Holder in connection with the offering that gave rise to this indemnification
obligation.
(c) Each
party entitled to indemnification under this Section 1.6 (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 any such claim or any litigation
resulting therefrom; provided that counsel for the Indemnifying Party, who
shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and
the
Indemnified Party may participate in such defense at such party's expense;
and
provided further, that the failure of any Indemnified Party to give notice
as
provided herein shall not relieve the Indemnifying Party of its obligations
hereunder, unless such failure resulted in material prejudice to the
Indemnifying Party; and provided further, that an Indemnified Party (together
with all other Indemnified Parties which may be represented without conflict
by
one counsel) shall have the right to retain one separate counsel (or firm of
counsel), with the 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 differing
interests between such Indemnified Party and any other party represented by
such
counsel in such proceeding. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
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(d) If
recovery is not available under the foregoing indemnification provisions for
any
reason or reasons other than as specified therein, any person who otherwise
would be entitled to indemnification by the terms thereof nevertheless shall
be
entitled to contribution with respect to any losses with respect to which such
person would be entitled to such indemnification but for such reason or reasons.
In determining the amount of contribution to which the respective persons are
entitled, there shall be considered the persons' relative knowledge and access
to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission,
and
other equitable considerations appropriate under the circumstances. It is hereby
agreed that it would not necessarily be equitable if the amount of such
contribution were determined by pro rata or per capita allocation. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Securities Act) shall be entitled to contribution from any person who was
found guilty of such fraudulent misrepresentation. Notwithstanding the
foregoing, no Holder of Registrable Securities shall be required to make a
contribution in excess of the aggregate proceeds received by such Holder from
the sale of Registrable Securities held by such Holder in connection with the
offering that gave rise to the contribution obligation.
(e) The
obligations of the Company and Holders under this Section 1.6 shall survive
the
completion of any offering of Registrable Securities in a registration statement
under this Section 1, and otherwise.
1.7. Information
by Holder. Any Holder or Holders of Registrable Securities included in
any registration shall promptly furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by such Holder
or
Holders as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to
herein.
1.8. Rule
144 Reporting. From and after such time as the Holders are eligible
under Rule 144 to effect resales of Registrable Securities held by them, the
Company hereby agrees to file with the SEC all periodic and other reports
required to be so filed by it under the Securities Act and the Exchange Act
and
the rules and regulations thereunder (or, if the Company is not then required
to
file such reports, it shall, as promptly as reasonably practicable after the
written request of any Holder of Registrable Securities therefore, make publicly
available the requisite "Rule 15c2-11 information" in respect of the Company
so
long as and solely to the extent necessary to permit resales of Registrable
Securities pursuant to Rule 144), and it shall take such further reasonable
action, to the extent required from time to time, to enable such Holder to
resell Registrable Securities without registration under the Securities Act.
Upon the reasonable request of any Holder of Registrable Securities, the Company
shall as promptly as reasonably practicable deliver to such Holder a written
statement as to whether it has complied with the foregoing information and
filing requirements.
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1.9. "Market
Stand-Off" Agreement. Each Holder hereby agrees that, during the
period (not to exceed 180 days with respect to the Follow-on Offering, provided
the Follow-on Offering is consummated within one year from the date hereof,
and
90 days with respect to every other registration) specified by the Company
and
an underwriter of Common Stock or other securities of the Company following
the
effective date of a registration statement of the Company filed under the
Securities Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase,
pledge or otherwise transfer or dispose of (other than to donees who agree
to be
similarly bound) any securities of the Company held by it at any time during
such period except securities included in such registration; provided, however,
that such agreement shall not be required unless all officers and key employees
of the Company enter into similar agreements.
In
order
to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to any securities of the Company held by any Holder
(and the shares of securities of every other person subject to the foregoing
restriction) until the end of such period.
Section
2. Restrictions.
2.1. Restrictions
on Transfer. No Holder may effect any sale, exchange, transfer,
assignment, gift, pledge, encumbrance, hypothecation or alienation of any shares
of any series or class of capital stock of the Company (the "Stock") or any
direct or indirect interest in or right to such shares, now held by or hereafter
acquired by such stockholder, whether voluntarily or involuntarily or by
operation of law (hereinafter collectively referred to as a "Transfer"), for
a
period of one year after the date hereof, except to a Permitted
Transferee.
2.2. [Intentionally
left blank.]
2.3. Permitted
Transferees. "Permitted Transferee" shall mean any subsidiary of TCG
and which agrees to be bound by the terms and subject to the conditions of
this
Agreement. All Stock transferred to a Permitted Transferee shall continue to
constitute and remain "Stock" hereunder and each such transferee shall be
treated as a Holder for all purposes of this Agreement. The prohibitions and
restrictions contained in Section 2.1 and 2.2 hereof shall not apply to a
transfer to any Permitted Transferees.
Notwithstanding
the foregoing, any attempt by TCG to transfer Stock in violation of this Section
2, whether voluntary or involuntary, shall be null and void, and the Company
neither shall effect such a transfer nor treat any purported transferee as
a
Holder in respect of any shares intended to be transferred.
2.4. Preemptive
Rights.
(a) Until
the seventh anniversary of the date hereof and subject to the terms and
conditions specified in this Section 2.4, TCG shall have the right to purchase
the TCG Percentage of all (or any portion of) New Securities that the Company
may from time to time issue.
10
(b) If
the Company proposes to issue New Securities, it shall give TCG written notice
of its intention to do so (the "Notice"), describing the type of New Securities
and the price and the terms upon which the Company proposes to issue such New
Securities. TCG shall have thirty business days from the date of delivery of
any
such Notice to agree in writing to purchase for up to the TCG Percentage of
New
Securities for the price and upon the terms equivalent to the initial issuance
of Common Stock pursuant to the Consulting Agreement by giving written notice
to
the Company and stating therein the quantity of New Securities to be purchased
(not to exceed the TCG Percentage). The purpose of the Preemptive
Right is grant to TCG a continuing right to own securities with an aggregate
voting percentage equal to no less than the TCG Percentage during the term
of
this Agreement.
(c) Notwithstanding
any other provision of this Section 2.4, if an issuance of New Securities by
the
Company is by means of an underwritten offering, and the managing underwriter
advises the Company in writing that marketing or other factors require a
limitation on the number of shares to be acquired by TCG in such offering,
then
the Company shall so advise TCG, and TCG's right to acquire New Securities
in
such offering shall be so limited.
2.5. [Intentionally
left blank.]
2.6. Legends.
Each certificate representing shares of Common Stock will be endorsed with
the
following legends:
(a) THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR UNDER THE SECURITIES LAWS OF
ANY STATE (BLUE SKY LAWS”), AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING
OF RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD
OR
OTHERWISE TRANSFERRED, EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE BLUE SKY LAWS, (ii) IN COMPLIANCE WITH
THE RESALE LIMITATIONS OF RULE 144 UNDER THE ACT, OR (iii) PURSUANT TO AN
APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE BLUE SKY
LAWS, AND SUBJECT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR
TRANSFER.
THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN AGREEMENT BETWEEN THE COMPANY
AND THE HOLDER DATED AS OF JULY ___, 2007, THAT RESTRICTS THE SALE, ASSIGNMENT
AND TRANSFER OF THE SECURITIES REPRESENTED HEREBY. A COPY OF SUCH AGREEMENT
IS
AVAILABLE, WITHOUT CHARGE, FROM THE SECRETARY OF THE COMPANY.
(b) Any
other legends required by applicable federal or state blue-sky
laws.
11
(c) The
Company need not register a transfer of legended shares of Common Stock and
may
also instruct its transfer agent not to register the transfer of the shares
of
Common Stock, unless the conditions specified in each of the foregoing legends
are satisfied.
2.7. Removal
of Legend and Transfer
Restrictions. Any
legend endorsed on a certificate pursuant to subsection 2.7(a) and/or 2.7(b)
and
the "stop transfer" instructions with respect to such legended securities shall
be removed, and the Company shall issue a certificate without such legend to
the
holder of such securities if (a) such securities are registered and sold
pursuant to an effective registration statement under the Securities Act and
a
prospectus meeting the requirements of Section 10 of the Securities Act is
available and delivered in connection with such sale or (b) if the Holder
satisfies the requirements of Rule 144(k) and, where reasonably deemed necessary
by the Company, if the Company is provided with an opinion of counsel
(reasonably satisfactory to the Company), to the effect that the Holder meets
the requirements of Rule 144(k) and a public sale, transfer or assignment of
such Securities may be made without registration under the Securities
Act.
Section
3. Other
Covenants.
3.1. Standstill.
Until the seventh anniversary of the date hereof, TCG agrees (and shall cause
its Permitted Transferees to agree) that except as specifically permitted or
contemplated by this Agreement or the Stock Purchase Agreement, TCG and its
Permitted Transferees and each of their respective Affiliates shall not,
directly or indirectly, in one or in a series of related transactions (and
whether acting alone or together in concert with others):
(i) except
as may be required by applicable laws, rules or regulations, make any public
announcement or disclosure in respect of any plan, commitment, contract,
arrangement or understanding relating to any acquisition of capital stock of
the
Company or a merger, business combination, sale of assets, liquidation,
restructuring, recapitalization or other extraordinary corporate transaction
relating to the Company or any of its successors or subsidiaries;
(ii) deposit
capital stock of the Company into a voting trust or subject capital stock of
the
Company to voting agreements, or grant to or constitute any Persons(s) with
any
proxy or power-of-attorney with respect to any capital stock of the Company
to
any person not designated by the Company who is not an officer, director or
employee of TCG or a Permitted Transferee;
(iii) disclose
publicly any intention, plan or arrangement inconsistent with the foregoing
or
the other provisions of this Agreement relating to any capital stock of the
Company; or
(iv) enter
into any discussions, negotiations, arrangements or understandings with any
third party with a view to, or advising, aiding, abetting, soliciting, inducing
or encouraging, any action prohibited by any of the foregoing.
Notwithstanding
the foregoing, if the Company's Board of Directors approves and/or recommends
to
its stockholders for approval any Change-in-Control Transaction, then the
restrictions contained in this Section 3.1 shall not apply to TCG during the
pendency of any such approved or recommended Change-in-Control Transaction
and
said restrictions shall cease to be of any further force or effect upon the
consummation of any such approved or recommended Change-in-Control
Transaction.
12
3.2. Voting
by TCG and its Affiliates.
(a) Notwithstanding
the number of shares of Common Stock owned by TCG and its Affiliates, TCG shall
have the discretionary right to vote up to 100.0% of the outstanding shares
of
the Common Stock at any meeting of the shareholders of the Company or otherwise
at any time that a vote of the shareholders of the Company is taken (by written
consent or otherwise).
(b) Until
the seventh anniversary of the date hereof, TCG and its Affiliates, as holders
of Common Stock, shall be present, in person or by proxy, at all meetings of
shareholders of the Company so that all shares of Common Stock directly or
indirectly owned by them may be counted for the purpose of determining the
presence of a quorum at any such meeting.
3.3. Financial
Information. Until such time as the TCG Percentage is equal to or less
than 10%, beginning with the first full monthly period after the date hereof,
the Company shall provide TCG with unaudited monthly, quarterly, and annual
financial information, as appropriate, consisting of summarized financial
information as described in SEC Regulation S-X, each prepared in accordance
with
generally accepted accounting principles in the U.S. ("GAAP") within 30 days
following each period end. The Company will promptly notify TCG of any
adjustment made to this financial information. In addition, the Company shall
provide TCG with annual audited financial statements prepared in accordance
with
GAAP, together with an audit opinion from a public accounting firm acceptable
to
TCG no later than 90 days following period end.
Until
such time as the TCG Percentage is equal to or less than 10%, if TCG or any
of
its Affiliates notifies the Company that it is required to include summarized
Company financial information in its consolidated financial statements, then
the
Company shall provide TCG or the affiliate with (a) audited annual financial
statements of the Company prepared in accordance with GAAP and applicable SEC
regulations within 75 days following period end; and (b) reviewed (by a public
accounting firm acceptable to TCG) quarterly financial statements within 40
days
following period end.
Until
such time as the TCG Percentage is equal to or less than 10%, if TCG or any
of
its Affiliates notifies the Company that it has determined that the Company
constitutes an unconsolidated subsidiary qualifying as a "significant
subsidiary" (as defined by SEC Regulation S-X) at the 20% level, then the
Company shall provide to TCG or the Affiliate (w) draft audited annual financial
statements within 50 days following period end, (x) audited annual financial
statements within 75 days following period end; (y) reviewed (by
a public accounting firm acceptable to TCG) quarterly financial
statements within 35 days following period end; and (z) final quarterly
financial statements within 40 days following period end in accordance with
the
requirements of Form 10-QSB promulgated by the SEC.
13
Section
4. General.
4.1. Amendments.
Any amendment or modification to this Agreement or the rights of either party
must be by the written agreement of the parties hereto.
4.2. Governing
Law and Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada. This Agreement
is executed in _____ County, New Jersey. Venue for any action or suit
brought hereunder or in connection herewith, or relating hereto, shall lie
with
the federal and state courts of competent jurisdiction located in ______ County,
New Jersey.
4.3. Successors
and Assigns. Nothing in this Agreement, express or implied, is
intended to confer on any party other than the signatories hereto any rights,
remedies, obligations or liabilities under of by reason of this Agreement.
Except as otherwise expressly provided herein, the provisions hereof shall
inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
4.4. Entire
Agreement. This Agreement and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and this Agreement
shall
supersede and cancel all prior agreements between the parties hereto with regard
to the subject matter hereof.
4.5. Severability.
If any provision of this Agreement, or the application thereof, is for any
reason and to any extent determined by a court of competent jurisdiction to
be
invalid or unenforceable, the remainder of this Agreement and the application
of
such provision to other persons or circumstances will be interpreted so as
best
to reasonably effect the intent of the parties hereto. The parties agree to
use
their best efforts to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision which will achieve, to the
extent greatest possible, the economic, business and other purposes of the
void
or unenforceable provision.
4.6. Notices,
etc. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
|
COMPANY:
|
CONSULTANT:
|
|
|
Totowa
Consulting Group, Inc.
|
||
|
217
Broadway, Suite 412
|
264
Union Blvd.
|
|
|
New
York, NY 10007
|
Toxxxx,
XX 00000
|
|
|
Fax:
000-000-0000
|
||
|
With
a copy to:
|
||
|
Xxxxxxx
X. Xxxxxx Esq
|
||
|
320
X. Xxxx Xxxxxx, Xxxxx 000
|
||
|
Xxxxxxxx,
Xxxx 00000
|
||
|
Fax:
000-000-0000
|
14
4.7. Titles
and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered
in
construing this Agreement.
4.8. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.
IN
WITNESS WHEREOF, the parties hereby have executed this Agreement on the date
first above written.
|
COMPANY:
|
||
|
By:
/s/ Xxxxxxx Xxxxxxxx
|
July
16, 2007
|
|
|
Print
Name: Xxxxxxx Xxxxxxxx
|
Date
|
|
|
Print
Title: President
|
||
|
TCG:
|
||
|
TOTOWA
CONSULTING GROUP, INC.
|
||
|
By:/s/
Xxxx Xxxxxxxxxx
|
August
7, 2007
|
|
|
Print
Name:
|
Date
|
|
|
Print
Title: President
|
||
