INVESTORS' RIGHTS AGREEMENT
This INVESTORS' RIGHTS AGREEMENT (this "Agreement") is
made as of April 26, 2002, by and among CONCEPTS DIRECT, INC., a
Delaware corporation (the "Company"), ST. CLOUD CAPITAL PARTNERS,
LP, a Delaware limited partnership ("St. Cloud"), XXXXXXX X.
XXXXXX, an individual ("X. Xxxxxx"), and XXXXX X. XXXXXX
("X. Xxxxxx", and together with X. Xxxxxx referred to herein as
"Xxxxxx"), and each other person who becomes a Holder (as defined
below) hereunder. St. Cloud and Xxxxxx are at times together
referred to herein as the "Investors" or individually without
distinction as an "Investor." X. Xxxxxx and X. Xxxxxx shall act
jointly for all purposes of this Agreement and the other
Transaction Documents and shall together be considered one
Investor. Capitalized terms used but not otherwise defined herein
shall have the respective meanings assigned thereto in the
Purchase Agreement (as defined below).
RECITALS
WHEREAS, pursuant to that certain Note and Warrant
Purchase Agreement, dated as of even date hereof (the "Purchase
Agreement"), by and among the Company and the Investors, each
Investor is purchasing a 10.0% Senior Secured Promissory Note of
the Company and a Common Stock Purchase Warrant, representing the
right to acquire certain shares of the Company's common stock, par
value $0.10 per share (the "Common Stock");
WHEREAS, the Company's shares of Common Stock are
registered with the Securities and Exchange Commission (the "SEC")
and quoted on the Nasdaq Small Cap Market;
WHEREAS, to induce the Investors to execute and deliver
the Purchase Agreement, the Company has agreed to provide to the
Holders certain rights to register shares of Common Stock issuable
upon exercise of the Warrant and preemptive rights with respect to
certain issuances by the Company of its securities; and
WHEREAS, the execution and delivery of this Agreement by
the parties hereto is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth herein and in the Purchase Agreement, and
other valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as
follows:
1. REGISTRATION RIGHTS.
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and
filing one or more Registration Statements or similar document in
compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of
effectiveness of such Registration Statement or document;
(b) The term "Registrable Securities" refers to the
(i) Common Stock issued or issuable upon exercise of the Warrants
and (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above by way of stock
dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization; provided that any securities deemed Registrable
Securities in accordance herewith shall cease to be Registrable
Securities (A) upon the sale of such Securities to or through a
broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) upon the sale of such
Securities in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon
the consummation of such sale;
(c) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of
Common Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities;
(d) The term "Registration Statement" means a
registration statement on Form S-1 or Form S-3 or any similar or
successor form then appropriate for or applicable to the offer and
sale of the Registrable Securities and filed under the Securities
Act.
(e) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof
in accordance with Section 1.8 of this Agreement; and
1.2 REGISTRATION.
(a) Right to Include Registrable Stock. If the
Company proposes to register any of its securities under the
Securities Act in connection with the public offering of such
securities solely for cash (other than a registration on Form S-4
or Form S-8, or any successor or similar forms), it will each such
time promptly (but not later than 30 days before the anticipated
date of filing such Registration Statement) give written notice to
each Holder. Upon the written request of any of the Holders made
within 15 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed
of by such Holders and the intended method of distribution
thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable
Securities which the Company has been requested to register by any
of the Holders in accordance with the intended methods of
distribution specified in such request; provided that (i) if, at
any time after giving written notice of its intention to register
any securities and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company
determines for any reason not to proceed with such registration,
the Company may, upon giving written notice of such determination
to the Holders, be relieved of its obligation to register any
Registrable Securities in connection with such registration and
(ii) in case of a determination by the Company to delay
registration of its securities, the Company will be permitted to
delay the registration of Registrable Securities for the same
period as the delay in registering such other securities;
provided, however, that the provisions of this Section 1.2(a) will
not be deemed to limit or otherwise restrict the rights of the
Holders under Section 1.2(b).
(b) Mandatory Registration. In addition to the
foregoing, the Company shall prepare and file with the SEC prior
to the nine month anniversary of the Closing Date a Registration
Statement or Registration Statements (as necessary) covering all
of the Holders' Registrable Securities. The Company shall cause
such Registration Statement to be declared effective by the SEC no
later than the first year anniversary of the Closing Date.
(c) Priority. If the managing underwriter for a
registration (other than with respect to a Registration Statement
filed pursuant to Section 1.2(b) above) involving an underwritten
offering advises the Company in writing that, in its opinion, the
number of securities of the Company (including Registrable
Securities) requested to be included in such registration by the
holders thereof exceeds the number of securities of the Company
(the "Sale Number") which can be sold in an orderly manner in such
offering within a price range acceptable to the Company, the
Company will include (i) first, all securities of the Company that
the Company proposes to register for its own account and (ii)
second, to the extent that the number of securities to be included
by the Company for its own account is less than the Sale Number, a
number of the Registrable Securities (the "Adjusted Allocation")
equal to the difference between the Sale Number and the securities
proposed to be sold by the Company. The Adjusted Allocation shall
be allocated among the Holders pro rata based on the number of
Registrable Securities initially sought to be registered by the
Holder.
(d) Legal Counsel. The Holders shall have the right to
select one legal counsel to review any offering pursuant to this
Section 1.2 (the "Legal Counsel"). The Company shall cooperate
with the Legal Counsel in performing the Company's obligations
under the terms of this Agreement.
(e) Ineligibility of Form S-3. In the event that Form
S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register
the resale of the Registrable Securities on another appropriate
form and (ii) undertake to register the resale of the Registrable
Securities on Form S-3 as soon as such form is available, provided
that the Company shall use its best efforts to maintain the
effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.
(f) Sufficient Number of Shares Registered. Without
limiting the Company's obligation to cover all the outstanding
Registrable Securities in the Registration Statement contemplated
by Section 1.2(b), in the event the number of shares available
under a Registration Statement filed pursuant to Section 1.2(b) is
for any reason insufficient to cover all of the Registrable
Securities which such Registration Statement is required to cover,
the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefore, if
applicable), or both, so as to cover at least 100% of the
Registrable Securities (based on the market price of the Common
Stock on the trading day immediately preceding the date of filing
of such amendment or new Registration Statement), in each case, as
soon as reasonably practicable, but in any event not later than
thirty (30) business days after the necessity therefor arises. The
Company shall use its best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if the number of Registrable
Securities issued or issuable upon exercise of the Warrants
covered by such Registration Statement is greater than the number
of shares of Common Stock available for resale under the
Registration Statement to cover shares issued or issuable upon
exercise of the Warrants.
1.3 OBLIGATIONS OF THE COMPANY. Whenever required under
Section 1.2 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a Registration
Statement contemplated by Section 1.2(b) with respect to such
Registrable Securities and use its best efforts to cause such
Registration Statement to become effective;
(b) Keep the Registration Statement contemplated by
Section 1.2(b) effective until April 26, 2005;
(c) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used
in connection with the 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;
(d) Permit Legal Counsel to review and comment upon the
Registration Statements and all amendments and supplements to the
Registration Statements (except for Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
any similar or successor report and registration statements on
Form S-8) at least seven (7) business days prior to their filing
with the SEC and not file any document containing information
relating to Holders to which Legal Counsel reasonably objects. The
Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or
supplement thereto without the prior approval of Legal Counsel,
which consent shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) any
correspondence from the SEC or the staff of the SEC to the Company
or its representatives relating to any Registration Statement,
(ii) promptly after the same is prepared and filed with the SEC,
one copy of any Registration Statement and any amendment(s)
thereto, including financial statements and schedules and all
exhibits and (iii) upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto.
The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations pursuant to this Section 1.3;
(e) 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;
(f) Use its best efforts to register and qualify the
securities covered by the 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
will 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;
(g) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations
under such an agreement;
(h) 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 in the
light of the circumstances then existing. Upon the occurrence of
any event contemplated by this Section 1.3(h), prepare a
supplement or post-effective amendment to each Registration
Statement or a supplement to the related Prospectus or any
document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain 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, in light of
the circumstances under which they were made, not misleading;
(i) Use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction,
however, if such an order or suspension is issued, the Company
shall use its best efforts to obtain the withdrawal of such order
or suspension at the earliest possible moment and to notify Legal
Counsel and each Holder who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or
its receipt of actual notice of the initiation or threat of any
proceeding for such purpose;
(j) Use its best efforts to cause all such Registrable
Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the
Company are then listed; and
(k) Use its best efforts to provide a transfer agent
and registrar for all Registrable Securities registered pursuant
hereunder and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such
registration.
1.4 UNDERWRITING REQUIREMENTS. In connection with
any offering involving an underwriting of shares of the Company's
capital stock, the Company shall not be required under Section
1.2(a) to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as
agreed upon between the Company and the underwriters selected by
it, and then only in such quantity as the underwriters determine
in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities,
including Registrable Securities, requested by Holders to be
included in such offering exceeds the amount of securities sold
other than by the Company that the underwriters determine in their
sole discretion is compatible with the success of the offering,
then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included
to be apportioned pro rata among the selling Holders according to
the total amount of securities entitled to be included therein
owned by each selling Holder or in such other proportions as shall
mutually be agreed to by such selling Holders). For purposes of
the preceding parenthetical concerning apportionment, 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," and any
pro-rata reduction with respect to such "selling Holder" shall be
based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such
"selling Holder," as defined in this sentence.
1.5 EXPENSES OF REGISTRATION. All expenses incurred in
connection with any registration, qualification or compliance
pursuant to the terms of this Agreement, including, without
limitation, all registration, filing and qualification fees,
printing expenses, reasonable fees and disbursements of counsel
for the Company and expenses of any special audits incidental to
or required by such registration, qualification or compliance will
be borne by the Company. In addition, the Company shall reimburse
the Holders for the reasonable fees and disbursements of Legal
Counsel in connection with registrations, filings or
qualifications pursuant to Section 1.2 of this Agreement.
1.6 INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under Section 1.2:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if
any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively
a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto, (ii) the 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 state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity
agreement contained in this Section 1.10(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), nor shall the Company be liable to any Holder,
underwriter or controlling person for any such loss, claim,
damage, liability, or ac tion to the extent that it arises out of
or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter
or controlling person.
(b) To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who has signed the
Registration Statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such Registration Statement
and any controlling person of any such underwriter or other
Holder, against any losses, claims, damages, or liabilities (joint
or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified
pursuant to this Section 1.6(b), in connection with investigating
or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
Section 1.6(b) 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 Holder, which
consent shall not be unreasonably withheld; provided further that
in no event shall any indemnity under this Section 1.6(b) exceed
the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.6 of notice of the commencement of any action
(including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.6, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, 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, with the reasonable fees and expenses to be paid
by the indemnifying party, if there may be one or more legal
defenses available to such indemnified party or parties that are
different from or additional to those available to the
indemnifying party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Section 1.6, except
to the extent such indemnifying party is materially prejudiced.
The omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.6.
(d) If the indemnification provided for in this
Section 1.6 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 therein, 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 that in no event shall any contribution
by a Holder under this Section 1.6(d) 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.
(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 Section
1.2 and otherwise.
1.7 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With
a view to making available to the Holders the benefits of Rule 144
promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all
times;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting
requirements of SEC Rule 144, the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after
it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder
of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.
1.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to Section 1.2
may be assigned by a Holder to a transferee or assignee of at
least 30,000 shares of such securities (provided that the assignee
assumes all related obligations); provided that the Company is,
within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or
assignee and the securities with respect to which such
registration rights are being assigned; provided further that such
assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act. For
the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of
transferees and assignees of (a) a partnership who are partners or
retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or
intestate succession) or (b) a limited liability company who are
members or former members of such limited liability company
(including spouses and ancestors, lineal descendants and siblings
of such members or spouses who acquire Registrable Securities by
gift, will or intestate succession) shall be aggregated together
and with the partnership or limited liability company, as
applicable; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights
shall have a single attorney-in-fact for the purpose of exercising
any rights, receiving notices or taking any action under Section
1.2.
1.9 FURNISH INFORMATION. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to
this Section 1 with respect to the Registrable Securities of any
selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder's
Registrable Securities.
1.10 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From
and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of seventy-five
percent (75%) or more of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or
prospective holder (a) to include such securities in any
registration filed under Section 1.2(b) hereof, (b) to include
such securities in any registration filed under Section 1.2(a)
hereof unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such
registration only on a pro rata and pari passu basis with the
Registrable Securities that the Holders desire to include in such
registration, or (c) to make a demand registration which could
result in such registration statement being declared effective
prior to one hundred eighty (180) days of the effective date of
the Registration Statement filed pursuant to Section 1.2(b)
hereof. Notwithstanding the foregoing, the Company may include up
to 550,000 shares of Common Stock not constituting Registrable
Securities in the registration contemplated by Section 1.2(b)
hereof or in any registration statement otherwise prohibited by
clause (c) of the preceding sentence.
1.11 TERMINATION OF REGISTRATION RIGHTS. No Holder shall
be entitled to exercise any right provided for in Section 1.2 after
such time as Rule 144 or another similar exemption under the
Securities Act is available for the sale of all of such Holder's
shares during a three (3)-month period without registration.
2. PREEMPTIVE RIGHTS.
2.1 PREEMPTIVE RIGHTS. Subject to the terms and
conditions specified in this Section 2.1, the Company hereby
grants to each Investor a right to participate in future issuances
by the Company of its Shares (as hereinafter defined) in
accordance with this Section 2.1. Nothing contained in this
Section 2.1 shall limit the Company's ability to negotiate the
terms and conditions of such future issuances with third parties
so long as the transactions relating to such issuances are not
consummated until the Company has complied with the provisions set
forth herein. Each time the Company proposes to offer or sell any
shares of, or securities convertible into or exercisable for any
shares of, any class of its capital stock ("Shares"), the Company
shall offer such Shares to each Investor in accordance with the
following provisions:
(a) The Company shall deliver a notice by certified
mail (a "Notice") to each Investor stating (i) its bona fide
intention to offer or sell such Shares, (ii) the number of such
Shares to be offered or sold, and (iii) the price and terms, if
any, upon which it proposes to offer or sell such Shares.
(b) Within five (5) Business Days after delivery of
the Notice, each Investor may elect to purchase or obtain, at the
price and on the terms specified in the Notice, up to that portion
of such Shares which equals the proportion that the sum of the
number of shares of Common Stock plus the number of shares of
Common Stock issuable upon exercise of the Warrants, in each case,
then held by such Investor bears to the total number of shares of
Common Stock then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities).
(c) The Company may, during the ninety (90) day period
following the expiration of the period provided in Section 2.1(b)
hereof, offer the remaining unsubscribed portion of the Shares to
any Person or Persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice.
If the Company does not enter into an agreement for the sale of
the Shares within such period, or if such agreement is not
consummated within ninety (90) days of the execution thereof, the
right provided hereunder shall be deemed to be revived and such
Shares shall not be sold unless reoffered to each Investor in
accordance herewith.
(d) The preemptive rights in this Section 2.1
shall not be applicable (i) to the issuance or sale by the Company
of any of its capital stock pursuant to any benefit, option,
restricted stock, stock purchase or similar plans or arrangements,
including pursuant to or upon the exercise of option rights,
warrants or other securities or agreements, (ii) to or after
consummation of any underwritten public offering or any other
public offering by the Company in which shares are offered at
market price, (iii) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities,
(iv) to the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or
otherwise, (v) to the issuance of securities to financial
institutions or lessors in connection with commercial credit
arrangements, equipment financings, or similar transactions, which
issuances are primarily for other than equity financing purposes,
or (vi) to any issuance in connection with a stock split, reverse
stock split, reclassification, recapitalization, consolidation,
merger or similar event.
(e) The agreements and covenants contained in this Section
2 shall terminate on the Cessation Date.
3. TRANSFER RESTRICTIONS.
3.1 LIMITATIONS ON TRANSFER OF WARRANTS. No Investor
shall be permitted to transfer, sell or otherwise dispose of any
Warrant or Common Stock issued or issuable upon exercise of its
Warrant to any Person (except as set forth in Section 3.2 below),
provided that this transfer restriction shall expire with respect
to twenty-five percent (25%) of the Common Stock issued or
issuable upon exercise of each such Warrant on each of the
following dates: April 26, 2003, October 26, 2003, April 26, 2004
and October 26, 2004.
3.2 PERMITTED TRANSFERS. Notwithstanding the foregoing,
each Investor shall be permitted to transfer, sell or otherwise
dispose of any Common Stock issued or issuable upon exercise of
its Warrants to: (a) the Company, (b) any Affiliate of such
Investor, (c) any immediate family member of such Investor or to
any trust, limited liability company or partnership for the
benefit of an immediate family member of such Investor, (d) any
partners, limited partners, stockholders or members of such
Investor or an Affiliate of such Investor, or (e) any transferee
who receives the transfer by way of gift or by way of bequest or
inheritance upon death, so long as each such transferee or donee
agrees to be bound by this Section 3.
4. BOARD REPRESENTATION AND OBSERVER RIGHTS; VOTING AGREEMENT.
4.1 BOARD REPRESENTATION. The Company agrees to take at
any time and from time to time all action necessary to ensure that
two members of the Board are persons designated by the Investors
(it being understood that St. Cloud and Xxxxxx each shall have the
right to designate one such member (each, an "Investor Director"
and together, the "Investor Directors"). If at any time, the
Board does not for any reason include an Investor Director
(including by virtue of the suspension, removal, retirement,
resignation or death of any such Investor Director), then the
Company shall, at the request of the Investor whose Investor
Director designee is no longer serving on the Board, use its best
efforts to cause another designee of such Investor to be nominated
to serve as a member of the Board. In the event the Company
enters into indemnification agreements with any directors of the
Company, the Company shall enter into an indemnification agreement
with each Investor Director and provide indemnification to each
such Investor Director on the same terms and conditions as is
provided to the other directors of the Company. The Company shall
maintain officers and directors and officers liability insurance
in amounts reasonably similar to what it has maintained in the
past. St. Cloud's designee shall initially be Xxxxxxxx X. Xxxxxx
and Xxxxxx'x designee shall initially be X. Xxxxxx. Each Investor
Director shall agree to be bound by the confidentiality
restrictions applicable to each director of the Company.
4.2 OBSERVER RIGHTS. If the SBA prohibits any Investor
Director from serving as a member on the Board, each Investor
whose Investor Director designee is being prohibited from so
serving shall have the right to designate one observer (any such
persons shall be referred to herein as an "Investor Observer").
The Company shall provide written notice of each meeting of the
Board (which shall be held at least quarterly) and each committee
thereof at the same time and in the same manner as notice is given
to the directors (which notice shall be promptly confirmed in
writing to each Investor Observer). Each Investor Observer shall
have the right to attend as an observer all meetings of the Board
and all committees thereof, and shall be entitled to receive all
written materials and other information (including copies of
meeting minutes) given to directors in connection with such
meetings at the same time such materials and information are given
to the directors. If the Company proposes to take any action by
written consent in lieu of a meeting of the Board or of any
committee thereof, the Company shall give written notice thereof
to each Investor Observer prior to the effective date of such
consent describing in reasonable detail the nature and substance
of such action.
4.3 REIMBURSEMENT OF COSTS. The Company shall pay the
reasonable out-of-pocket expenses of each Investment Director
and/or each Investor Observer, as applicable, incurred in
connection with attending such board and committee meetings.
4.4 VOTING AGREEMENT. Each Investor hereby irrevocably and
unconditionally agrees to vote all shares of capital stock of the
Company that such Investor is entitled to vote and/or to cause
such shares to be voted in favor of each Investor Director and
against any action which would reasonably be expected to result in
a failure of such Investor Director to serve on the Board at any
meeting of the stockholders of the Company where such Investor
Director is nominated for election (if one is held) or in
connection with any consent solicitation conducted for such
purpose.
4.5 TERMINATION OF SECTION 4. The agreements and
covenants contained in this Section 4 shall terminate on the
Cessation Date.
5. MISCELLANEOUS.
5.1 FURTHER ASSURANCES. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to
use all best efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper, or
advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement,
including using its best efforts to obtain all necessary waivers,
consents, and approvals, and effecting all necessary registrations
and filings.
5.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
5.3 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed by, and construed in accordance
with, the internal law of the State of California, without regard
to conflicts of laws.
5.4 NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and
shall be deemed given if delivered personally or sent by overnight
courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall
be specified by like notice):
If to St. Cloud: St. Cloud Capital Partners, LP
000 Xxxxx Xxxxxx Xxxxx, Xxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Managing Partner - Finances &
Administration
with copies to: Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: W. Xxxx Xxxxxx, Esq.
If to Xxxxxx: Xxxxxxx X. Xxxxxx
c/o Concepts Direct, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
If to the Company: Concepts Direct, Inc,
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. XxXxxxxxxx
with copies to: XxXxxxx Xxxxx LLP
One Xxxxx Center
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
5.5 AMENDMENTS. Any term of this Agreement may be
amended only with the written consent of the Company and the
holders of sixty-six and two-third percent (66 2/3%) of the
Registrable Securities then outstanding. Any amendment effected
in accordance with this Section 5.5 shall be binding upon each
holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and the Company;
provided that any amendment that treats any Holder in a materially
adverse manner that is different than any other holder will
require the separate approval of such Holder.
5.6 SEVERABILITY. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision or portion of any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been herein.
5.7 DELAYS OR OMISSIONS. No delay or omission to
exercise any right, power or remedy accruing to any party under
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-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an
acquiescence therein, or of 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, shall be cumulative and not alternative.
5.8 ENTIRE AGREEMENT. This Agreement, the Purchase
Agreement and each of the other Transaction Documents collectively
constitute the entire agreement among the parties with respect to
the transactions contemplated hereby, thereby and related matters
and collectively supersede any prior negotiations, understandings
or agreements with respect hereto or thereto. The
representations, warranties, covenants and agreements set forth in
this Agreement, the Purchase Agreement and any other Transaction
Documents (a) shall survive the Closing, (b) shall terminate only
in accordance with their respective terms and (c) are the only
representations, warranties, covenants and agreements among the
parties.
5.9 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original and all of which
together shall constitute one and the same instrument.
5.10 DESCRIPTIVE HEADINGS. The descriptive headings used
in this Agreement are inserted for convenience of reference and
are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
5.11 AGGREGATION OF STOCK. All shares of Common Stock
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.
[Signature page follows]
The parties have executed this Investors' Rights
Agreement as of the date first set forth above.
THE COMPANY:
CONCEPTS DIRECT, INC.
By: /s/Xxxx X. XxXxxxxxxx
Xxxx X. XxXxxxxxxx
Chief Financial Officer
THE INVESTORS:
ST. CLOUD CAPITAL PARTNERS, LP
By:/s/Xxxx Xxxxxxx
Xxxx Xxxxxxx
XXXXXXX X. XXXXXX
By: /s/Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
XXXXX X. XXXXXX
By: /s/Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx