CIM Securities, LLC

Member FINRA / SIPC

Picture 1 [applex10z11.jpg] 

A Choice for ALL Seasons

 

July 9, 2019

 

Via Email: mreid@applifedigital.com or michael.t@fingermotion.com

 

PERSONAL & CONFIDENTIAL

 

Mr. Matthew Reid

Chief Executive Officer

APPlife Digital Solutions, Inc.

555 California Street, Suite 4925

San Francisco, CA  94104

 

Dear Mr. Reid,

 

This letter (together with Exhibit A and Exhibit B) annexed hereto and made a
part hereof, all of which taken together constitute this entire engagement
(“Agreement”) or confirms our complete understanding with respect to the
retention of CIM Securities, LLC (“CIM”) as a non-exclusive Financial Advisor
and Selling Agent to APPLife Digital Solutions, Inc.  (the “Company”) a
corporation formed under the laws of the state of Nevada with its principal
offices located at 555 California Street, Suite 4925, San Francisco, CA  94104
in connection with a Best Efforts REG D 506c general solicitation equity
offering (final terms and structure to be mutually agreed upon) of up to
$2,500,000 million gross proceeds with an overallotment to go up to $3,000,000,
equity financing, separately a future i) debt financing, ii) a merger /
acquisition and/or iii) a business development transaction (any of these defined
as a “Transaction”). The initial period will expire after the first three (3)
months (“Term”) from the date of this fully executed Agreement. After the Term,
this Agreement will continue on a “month-to-month” basis until either party
cancels the Agreement in writing giving 10 days written notice to either Party. 

 

It is understood that at least one objective of this Agreement is a private
capital raise with Accredited Investors, whether to obtain equity financing
and/or debt financing, then it is on a “Best Efforts” basis only. CIM makes no
representation or promise as to whether its efforts will be successful.
 Consequently, the Company should not make any reliance whatsoever that this
“Best Efforts” capital raise will actually succeed.

  

Upon the terms and subject to the conditions set forth hereinafter, the parties
hereto agree as follows:

 

1.   Appointment.  The Company hereby retains CIM through certain individuals
who are registered and licensed with FINRA as investment bankers (the
“Representatives”) associated and supervised by CIM.  CIM and the
Representatives hereby agree to act as a Financial Advisor and Selling Agent in
connection with any possible Transaction and the financial advisory services as
more specifically set forth in paragraph 2 below, effective as of the date
hereof (the “Effective Date”).  Nothing in this Agreement shall be construed so
as to (i) obligate the Company to complete the Transaction or any other
transaction or (ii)  entitle CIM to any fees or other compensation with respect
to potential investors with whom the Company declines, in its sole and absolute
discretion, to pursue the Transaction.  

 

2.Scope and Certain Conditions of Services.  The Company hereby engages CIM and
the Representatives to consult with and advise the Company with respect to the
Transaction and anything incidental thereto, as directed by the Company.  The
Company expressly acknowledges and agrees that the obligations of CIM and the
Representatives hereunder with respect to the Transaction are on a reasonable
“best efforts” basis only and that the execution of this Agreement does not
constitute a commitment by CIM and the Representatives to provide financing to
the Company and does not ensure the success of securing any financing on behalf
of the Company.  CIM and the Representatives’ services will include, if
appropriate or if reasonably requested by the Company: (a) reviewing the
Company’s financial condition, operations, competitive environment, prospects,
market viability, and related matters for potential investors; (b)  

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reviewing and editing the related due diligence information package / dataroom
and confidential review memorandum and/or private placement memorandum; (c)
soliciting, coordinating conference calls / setting up meetings, and evaluating
indications of interest and proposals regarding a Transaction; (d) advising the
Company as to the structure of a Transaction; (e) helping the Company be
introduced to other retail & institutional investors via an investor relations
firm and direct investment banking & corporate finance bankers after the Capital
Raise portion of this Agreement  and (f) providing such other financial advisory
and investment banking services reasonably necessary to accomplish the
foregoing. Please be advised material prepared by CIM and/or any terms of any
proposed transaction and/or any portion of this material that is used to secure
a transaction will be considered brought to the Company by and/or from CIM.  

3.CIM Securities, LLC.  The Representatives are registered and supervised by CIM
Securities, LLC, a registered broker/dealer and member of FINRA/SiPC.  All
securities contemplated herein will be offered through CIM.  Required
supervision by CIM of registered investment bankers includes, among other
things, approval of executed Engagement Agreements and due diligence oversight.
 In the event the registered banker resigns from CIM, the Agreement is still in
full force and effect with CIM and can only be assigned to another registered
broker dealer upon the approval of CIM executive management. 

 

4.Fees and Compensation.  In consideration for the services rendered hereunder,
the Company agrees to pay CIM the following fee and other compensation:    

a.Success Fee.  Upon the successful completion of the Transaction, CIM shall be
entitled to the following: 

i)Equity / Mezzanine / Structured Debt Transaction - If the Company consummates
an Equity Financing defined as a corporate investment or financial investment
of/with/into the Company, or if stock/equity is purchased directly from a
shareholder(s) of the Company, in the course of one or more rounds of
investments including, without limitation, a minority or majority investment of
either equity securities, research and development funding or non-recurring
funding, CIM shall receive a cash placement fee equal to Five Percent (5.0%) of
the gross proceeds and an extra Two Percent (2.0%) non-accountable expense /
wholesaling fee that will only be charged on monies & subscriptions that are
brought in from any other FINRA member broker dealer other than CIM.   CIM may
“re allow” any portion it negotiates with other FINRA licensed brokers as well
but cash commissions will not be more than Seven Percent (7.0%). If the Company
consummates any Debt Financing defined as mezzanine financing, unitranche,
and/or structured debt finance (to include debt which is convertible into equity
and/or include warrants), then CIM shall receive a cash placement fee equal to
Three Percent (3.0%) of the gross proceeds and an extra Two Percent (2.0%)
non-accountable expense / wholesaling fee that will only be charged on monies &
subscriptions that are brought in from any other FINRA member broker dealer
other than CIM. CIM may “re allow” any portion it negotiates with other FINRA
licensed brokers as well but cash commissions will not be more than Five Percent
(5.0%) on Debt Financing.  Should the Company source any accredited, suitable &
sophisticated investors on its own efforts during the Agreement then no fees
shall be paid to CIM.  

 

ii) M&A Transaction - The Company agrees to pay a M&A fee equal to Five Percent
(5%) of total aggregate consideration (“Aggregate Consideration”) paid for any
transaction completed between the Company and any targeted buyout, acquisition
and/or merger (the “Target”) worked or introduced, directly or indirectly, by
CIM and/or its introduced affiliates. For purposes of this Agreement, the
“Aggregate Consideration” shall mean the total value received by the Company or
paid for a Target in any transaction(s) and shall include (i) the aggregate
value of all cash, securities, the assumption (or forgiveness) of debt and
minority interest obligations, and any other forms of payment received or to be
received, directly or indirectly, or paid, by the Company/Target (or any of its
subsidiaries), its stockholders, or a third party, as the case may be; (ii)  

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amounts received under the terms of any “seller note financing” and/or
“earn-out” provision, rights to receive periodic payments and all other rights
that may be at any time transferred or contributed to, or by, the Company/Target
(or any of its subsidiaries), its affiliates or shareholders in connection with
an acquisition of or by the Company/Target or of the assets thereof; and (iii)
amounts receivable or payable under consulting agreements in lieu of purchase
price, above-market employment contracts to the extent above market, all
non-compete agreements or similar arrangements, and all contingent payments in
connection with any transaction.  CIM will be paid a full fee based on the
entire Aggregate Consideration at the time of closing the Target Transaction
payable in cash.  Any stock or equity compensation paid to CIM would need to be
mutually agreed upon in writing before the Target Transaction closes by a
superseding new agreement covering this Section 4(a)(ii)

 

iii)Business Development Transaction - The Company shall pay a business
development fee equal to Five Percent (5%) of the total gross value to the
Company of any and all contracts and/or other business development deals with
any party worked or introduced, directly or indirectly, by CIM and/or its
introduced affiliates. All such fees due hereunder shall be payable as the
Company is paid on any and all such contracts, and which fees shall be payable
through to the completion or termination of the contract(s), inclusive of any
and all change orders, amendments and extensions, irrespective of the term and
termination provisions of this Agreement.  

The Transaction Success Fees mentioned in Section 4(a) is due and payable
immediately upon the closing of the Transaction and shall be dispersed directly
to CIM simultaneously with the delivery of the proceeds of the Transaction to
the Company.  

b.Selling Agent Warrants. In addition to compensation described in Section
4(a.), CIM will also be entitled to the issuance of three (3) year term cashless
exercisable selling agent warrants (“Selling Agent Warrants” or “Warrants”) as
described herein.  Upon successful completion of an Equity, Mezzanine, and/or
Structured Debt Transaction, the Company shall issue to CIM, or its assignees,
warrants for the purchase of an amount equal to Five (5.0%) Percent of the
number of total shares of stock, funding amount and/or warrants at the same
exercise price as paid for the Common Equity, Mezzanine or Structured Debt stock
in equity.  The Selling Agent Warrants shall be substantially in the form
attached hereto as Exhibit B and be exercisable into common stock as well as
will be dated for three (3) years after the Transaction closes, non-callable,
non-cancelable, assignable Warrants with immediate piggy-back registration
rights and cashless exercise provisions. The warrants shall also have customary
anti-dilution provisions for stock dividends, splits, mergers, stock issuances
etc. at a price(s) below said exercise price per share and shall provide for
automatic exercise immediately prior to expiration. (Exhibit B).  Such Warrants
would not be payable until a Transaction is consummated and Warrants shall be
paid for by a minimal $100 cost for said Warrants but then shall be subsequently
exercisable at the same price the investors receive in the Transaction whether
that is an Equity, Mezzanine Debt w Warrants Deal, Structured Debt and/or Senior
Debt. Warrants will be issued in a single transaction at the close of the round.
 Should the Company source any accredited, suitable & sophisticated investors on
its own then no warrants shall be issued to CIM. 

c.Advisory Fee. A non-contestable and non-refundable upfront retainer For
Advisory Services rendered, the Company shall pay CIM a Fifteen Thousand
($15,000) Dollar cash advisory and due diligence fee, payable by paying $7,500
at signing to CIM and another $7,500 upon $50,000 being raised by CIM. The
Company shall wire the second payment within 3 business days following the
closing of $50,000 for the Company by CIM or CIM may in its sole discretion can
choose to halt all work related to this Agreement until such time as it is paid
in full. 

d.Expense Reimbursement.  The Company agrees to reimburse CIM for all of its
reasonable out-of-pocket expenses incurred by the Representative or CIM;
however, any expense in excess of five hundred dollars ($500) shall be
pre-approved in writing or email by the Company which may include Background
Checks and Selling Agents Counsel which is not to exceed $5,000 in total to
review final PPM and provide Legal Services as it would pertain to any questions
that arise in the  

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PPM or Info Materials which shall be approved by the Company prior to
distribution to investors.  Any such costs would be in writing before hiring
Selling Agents Legal Counsel and CIM will share the fee agreement between our
firm and our Legal Counsel.  The Company is expressly expected to reimburse CIM
Securities for its background checks on all Officers, Directors and 20%
Beneficial Holders which shall not exceed $500 per background check.

d. Escrow Account. All amounts payable (not to include the non-refundable
retainer) hereunder shall be paid to CIM out of a Third Party escrow account
paid for by the Company and located here in the United States of America at a
FDIC Insured Banking Institution that is acceptable to CIM at the closing or by
such other means acceptable to CIM during the time of any Offering.  The Company
and CIM may choose during the course of this Agreement and Term to do a best
efforts with a “no minimum offering” offering at which time there would be no
Escrow Account.  In such case, the Company will be obligated to make payment of
Commissions or Advisory Fees to CIM within five (5) business days of receiving
funds from said Transaction. 

e. Finder’s Fees.  The Company is not obligated to pay, and there are no
outstanding claims for, any type finder’s fees or other introducing
non-registered broker fees in connection with the Offering or Transaction of
securities that CIM will be assisting the Company during the Term of this
Agreement.  The Company warrants and attests that no unregistered “finders” or
“brokers” will be paid any success fee based compensation with respect to any
Transaction CIM is paid on if successful at such Transaction. 

 

5.Payment Instructions.  All success fees, expense reimbursements, retainer and
other payments made by the Company pursuant to this Engagement Agreement shall
be made directly to CIM. All payments shall be made by wire and wiring
instructions are below. 

Wire Instructions to CIM are as follows:

ABA/Routing Number: 107 005 953 

Bank Name:Citywide Banks 

Address:10660 E. Colfax Ave 

Aurora, CO 80010 

 

Account Number:1868522 

Beneficiary Name:CIM Securities, LLC 

Beneficiary Address:6898 S. University Blvd, Suite 270 

Centennial, CO 80122 

Attn: Al Porterfield – Managing Director  

 

CIM, pursuant to separate agreements, may retain or allocate any or all of the
compensations or other amounts payable under this Agreement among the
Representatives or their assigns.  This  Agreement shall not be terminated by
virtue of any change in employment of the Representatives or a termination of
the Representatives’ supervision by CIM; and in such event, CIM shall remain
entitled to receive the compensation hereunder and may adjust allocations among
the Representatives and others to account for relative efforts and success in
regard to a Transaction.

6.Term of Retention.  This Agreement shall expire three (3) months from the date
of its execution or terminate upon ten (10) days’ written notice by either party
(“Termination”).  Notwithstanding the foregoing, no expiration or termination of
this Agreement shall affect: (a) CIM’s right to receive, and the Company’s
obligation to pay, any Transaction Success Fee (as set forth in paragraphs 4 and
5); (b) the choice of law and forum, and (c) the indemnification provisions set
forth in Exhibit A.  If within twelve (12) months following the Termination of
this Agreement, the Company enters into an agreement to accept any type of
capital from any prospective target/partner introduced to the Company by or
through CIM or the Representatives prior to or during the term of this
Agreement, the Company’s obligations to pay fees and compensation, as defined in
paragraphs 4 and 5, are triggered.  At the end of the term, this Agreement shall
continue on a month by month basis until ten (10) day notice of written
termination by either party.  

7.Non-Circumvention.  The CIM introduction of investors and/or other
counter-parties in any Transaction, and the potential investors or other
counter-parties who are introduced to the Company by the Representatives or CIM
before or during the term of this Agreement, and all of their respective
affiliates currently existing or formed hereafter (collectively “Purchasers” or
“Covered Persons”), shall be considered, for purposes of this Agreement, the
property of CIM.  The Company on behalf of itself, its parent company and/or any
of its  

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subsidiaries agree not to circumvent, directly or indirectly, CIM’s relationship
with these purchasers, investors or Covered Persons, their parent companies and
/ or any of the Purchasers’ subsidiaries or Affiliates and Company will not
directly or indirectly contact or negotiate with any of the Covered Persons
regarding a Transaction with the Company, or with any other company, and will
not enter into any agreement or transaction with Covered Persons, or disclose
the names of Covered Persons, except as such disclosure may be required by any
law, rule, regulation, regulatory body, court or administrative agency, during
the applicable Non-Circumvention Period (12 months) without the prior written
approval of CIM, and the Representatives.  In the event that the Company enters
into a Transaction or a “Subsequent Transaction” from a Covered Person in any
placement during the applicable Non-Circumvention Period (regardless of whether
such placement is arranged without an agent or through an agent other than CIM),
the Company agrees to pay to CIM a fee equal to as disclosed herein of sales
commissions, warrants, and / or aggregate consideration received by the Company
provided under this Agreement.

8.Due Diligence. The Company agrees to furnish the Representatives and CIM with
such information regarding the business and financial condition of the Company
as is reasonably requested, all of which will be, to the Company’s best
knowledge, after due inquiry, accurate and complete at the time furnished.  The
Company will promptly notify the Representatives and CIM if it learns of any
material misstatement in, or material omission from, any information previously
delivered to the Representatives or CIM.  The Representatives and CIM will
conduct independent due diligence on the Company and may terminate this
Agreement should its due diligence findings not be reasonably consistent with
the representations (oral and written) made by the Company.  The Company will
also be required to keep a VPN Dataroom open and available to the Principals and
Registered Reps and Investment Bankers of CIM during the full Term of this
Agreement and for 30 days following any Termination in writing by either Party. 

9.Public Announcements. Prior to any press release or other public disclosure
relating to any and all investment banking or advisory services hereunder in
this Agreement which is legally permissible, the Company, and CIM shall confer
and reach agreement upon the contents and method of any such disclosure and get
it in writing.  No Press Release or General Statement may be made to the Public
about any such Offering unless mutually agreed to in writing by both Parties. 

10.Confidentiality.  The Representatives and CIM shall keep all information
obtained from the Company strictly confidential except: (a) for information
which is otherwise publicly available, or previously known to the
Representatives or CIM or was obtained by the Representatives or CIM
independently of the Company and without breach, the respective Representatives’
or CIM’s agreements with the Company; (b) the Representatives or CIM may
disclose such information to its affiliates, shareholders, officers, directors,
representatives, agents, employees, regulatory administrators and attorneys, and
to financial institutions, but shall ensure, to the best of its ability, that
all such persons will keep such information strictly confidential; (c) pursuant
to any order of a court of competent jurisdiction or other governmental or
quasi-governmental body (the Representatives or CIM, as the case may be, will
give written notice to the Company of such order within forty-eight (48) hours
of receipt of such order); and (d) upon prior written consent of the Company.
 The Company agrees that any report or opinion, oral or written, delivered to it
by the Representatives or CIM is prepared solely for its confidential use and
shall not be reproduced, summarized, or referred to in any public document or
given or otherwise divulged to any other person, other than its employees,
attorneys and prospective investors that the Representatives or CIM have
introduced to the Company, without the prior written consent of CIM and if the
same was prepared and delivered by CIM the prior written consent of CIM, except
disclosure by the Company as may be required by applicable law or regulation, in
which event CIM’s Registered Representative consent shall not be unreasonably
withheld or delayed. 

11.Other Engagements. The Company acknowledges that CIM, the Representatives and
its respective affiliates may have, and may continue to have, investment banking
or other relationships with persons and entities other than the Company, about
or from which the representatives, CIM may acquire information of interest to
the Company. The Representatives and CIM shall have no obligation to disclose
such information to the Company or to use such information in connection with
this Agreement. 

12.Indemnification.  The Company agrees to provide indemnification,
contribution, and reimbursement to CIM and certain other persons in accordance
with, and further agrees to be bound by, the provisions set forth in Exhibit A
attached to, incorporated in, and made an integral part of, this Agreement by
this reference. 

13.Specific Performance.  The Company acknowledges and agrees that, if it
breaches its obligations under this Agreement to issue warrants, damages at law
will be an insufficient remedy to CIM and that CIM would  

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suffer irreparable damage as a result of such violation.  Accordingly, it is
agreed that CIM shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief against the breaching party to enforce
the provisions of such sections, which injunctive relief shall be in addition to
any other rights or remedies available to CIM.

14.Authority.  By signing this Agreement, each signing party represents that its
representative or representatives signing this Agreement have unconditional
authority to enter into this Agreement on behalf of the party. 

15.Company’s Business Model.  The Company agrees to not substantially change
their business model after signing this Agreement.  Substantially changing the
business model may result in CIM terminating this Agreement and /retainer fees
will not be returned.  If a change must be made, CIM has the right to approve
the change and move forward as the financial advisor with a revised  agreement
or terminate this agreement with no refund of fees paid by the Company. 

16.Entire Agreement.  Any amendment to this Agreement must be in writing signed
by duly authorized representatives of the parties hereto and stating the intent
of the parties to amend this  Agreement.  This Agreement contains the entire
understanding between the parties relating to the subject matter of this
Agreement.  All prior or contemporaneous agreements, understandings,
representations and statements, whether direct or indirect, oral or written, are
merged into and superseded by this Agreement and shall be of no further force or
effect.  This Agreement shall be binding upon, and shall inure to the benefit
of, the parties and their respective successors and assigns.  This is a fully
integrated Agreement.  Each party represents, warrants, agrees and admits that
it has not entered into this Agreement in reliance upon any promise or
representation not expressly set forth in this Agreement.  

17.Severability.  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect in accordance
with the terms hereof.  The Company agrees that it will be solely responsible
for ensuring that the Transaction or any transaction complies with applicable
law.   

18.Attorneys’ Fees.  In any litigation, arbitration, or other proceeding by
which one party either seeks to enforce its rights under this Agreement or seeks
a declaration of any rights or obligations under this  Agreement, the prevailing
party shall be awarded reasonable attorneys’ fees, together with any costs and
expenses, including expert witness fees, to resolve the dispute and to enforce
the final judgment. 

19.Arbitration. All claims and disputes arising under or relating to this
Agreement are to be settled by binding arbitration in the State of New York or
in the federal court sitting in the New York County, New York, or another
location mutually agreeable to the parties subsequent to either party making a
claim to adjudicate. The arbitration shall be conducted on a confidential basis
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. Any decision or award as a result of any such arbitration
proceeding shall be in writing and shall provide an explanation for all
conclusions of law and fact and shall include the assessment of costs, expenses,
and reasonable attorneys' fees. Any such arbitration shall be conducted by an
arbitrator experienced in the securities industry and shall include a written
record of the arbitration hearing. The parties reserve the right to object to
any individual who shall be employed by or affiliated with a competing
organization or entity. An award of arbitration may be confirmed in a court of
competent jurisdiction. 

20.Notices.  Unless otherwise provided by statute or by agreement of the
parties, all notices herein shall be in writing and shall be delivered to the
other party by registered or certified mail, or personally delivered.  Such
notice shall be deemed received on the date the notice is actually received or
(5) days after the date is mailed by registered or certified mail whichever
occurs first.  

21.Jurisdiction.  Each party hereby irrevocably (a) agrees that any suit or
other legal proceeding arising out of or relating to this Agreement may be
brought only in a court of the State of New York or in the or in the federal
court sitting in the New York County, New York , (b) consents, for itself and in
respect of its property, to the jurisdiction of each such court in any such suit
or proceeding, and (c) waives any objection that it may have to the laying of
venue of any such suit or proceeding in any of such courts and any claim that
any such suit or proceeding has been brought in an inconvenient forum.  This
Agreement shall be  

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governed by the laws of the state of New York without regard to such state’s
rules concerning conflicts of laws.  

 

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

 

 

 

 

Please confirm that the foregoing terms are in accordance with your
understanding by signing and returning the enclosed duplicate original of this
Agreement.

 

ACCEPTED AND AGREED TO:

 

COMPANY, INC.

 

Signature:  /s/ Matt Reid________________

Name:     Matt Reid___________________ 

Title:     CEO_______________________ 

Date:     7/10/19_____________________ 

Email:        ______________________________

 

 

CIM Securities, LLCOn behalf of the CIM Representative 

 

 

Signature:/s/ Alfred PorterfieldSignature: /s/ John Myers            

Name:Alfred PorterfieldName:     John G. “Jack” Myers 

Title:Managing DirectorTitle:        Registered Rep          

Date:7/12/19Date:        7/12/19 

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EXHIBIT A

INDEMNIFICATION

 

The Company (the “Indemnifying Party”) agrees to indemnify and hold harmless the
Representatives, CIM, its respective affiliates and each of their respective
officers, directors, employees, agents and controlling persons within the
meaning of Section 15 of the Securities Act of 1933, as amended (the “Act”) or
Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (each, an “Indemnified Party”), against any and all loss, charge, claim,
damage, expense and liability whatsoever, including, but not limited to, all
attorneys’ fees and expenses (hereinafter a “Claim” or “Claims”), related to or
arising in any manner out of, based upon, in connection with or contemplated by
this Engagement Agreement.  No Indemnified Party shall be liable in respect of
any Claims that a court of competent jurisdiction has judicially determined by
final judgment (and the time to appeal has expired or the last right of appeal
has been denied) resulted solely from the gross negligence or willful misconduct
of an Indemnified Party.  Each party further agrees that it will not, without
the prior written consent of each Indemnified Party, settle, compromise or
consent to the entry of any judgment in any pending or threatened proceeding in
respect of which indemnification may be sought hereunder (whether or not any
Indemnified Party is an actual or potential party), unless such settlement,
compromise or consent (i) includes an unconditional release of each Indemnified
Party from all liability arising out of such pending or threatened proceeding
and (ii) does not contain any factual or legal admission by or with respect to
any Indemnified Party or any adverse statement with respect to the character,
professionalism, expertise or reputation of any Indemnified Party or any action
or inaction of any Indemnified Party. 

 

In order to provide for just and equitable contribution in any case in which (i)
an Indemnified Party is entitled to indemnification pursuant to this Engagement
Agreement but it is judicially determined by the entry of a final judgment
decree by a court of competent jurisdiction (and the time to appeal has expired
or the last right of appeal has been denied) that such indemnification may not
be enforced in such case as to the full extent of the Claims, or (ii)
contribution may be required by the Indemnifying Party in circumstances for
which an Indemnified Party is otherwise entitled to indemnification under this
Engagement Agreement, then, and in each such case, the Indemnifying Party shall
contribute to the Claims in an amount, in addition to the amount for which
indemnification was held available, and in such proportion as is appropriate to
reflect the relative benefits to the Indemnifying Party and/or its stockholders
on the one hand, and the Indemnified Party on the other hand, in connection with
the matters covered by this Engagement Agreement or, if the foregoing allocation
is not permitted by applicable law, not only to reflect such relative benefits
but also to reflect the relative faults of such parties as well as any other
relevant equitable considerations. The Indemnifying Party agrees that for
purposes of this paragraph the relative benefits to the Indemnifying Party
and/or its stockholders and the Indemnified Party in connection with the matters
covered by this Engagement Agreement will be deemed to be in the same proportion
that the total value paid or received or to be paid or received by the
Indemnifying Party and/or its stockholders in connection with the transactions
contemplated by this Engagement Agreement, whether or not consummated, bears to
the fees to be paid to the Indemnified Party under this Engagement Agreement;
provided, that in no event will the total contribution of each respective
Indemnified Parties to all such Damages exceed the amount of fees actually
received and retained by such Indemnified Party under this Engagement Agreement
(excluding any amounts received by such Indemnified Party as reimbursement of
expenses).  Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission or any alleged conduct
relates to information provided by the Indemnifying Party or other conduct by
the Indemnifying Party (or its employees or other agents) on the one hand, or by
the Indemnified Party, on the other hand.  Notwithstanding the foregoing, each
respective Indemnified Party shall not be obligated to contribute any amount
hereunder that exceeds the amount of fees previously received by such
Indemnified Party pursuant to this Engagement Agreement. 

 

The indemnity, reimbursement and contribution obligations of the Indemnifying
Party set forth herein shall be in addition to any liability which the
Indemnifying Party may otherwise have and shall be binding upon any successors,
assigns, heirs and personal representatives of the Indemnifying Party and inure
to the benefit of any successors, assigns, heirs and personal representatives of
an Indemnified Party. 

 

The indemnity, reimbursement and contribution provisions set forth herein shall
remain operative and in full force and effect regardless of (i) any withdrawal,
termination or consummation of or failure to initiate or consummate any
transaction contemplated by this Engagement Agreement; (ii) any investigation
made by or on behalf of any party hereto or any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any party
hereto; (iii) any termination or the completion or expiration of this Engagement
 

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Agreement; and (iv) whether or not either party shall, or shall not be called
upon to, render any formal or informal advice in the course of such engagement.

 

Unless otherwise defined, capitalized terms used herein shall have the meaning
ascribed to them in this Engagement Agreement. 

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EXHIBIT B

FORM OF WARRANT

(ATTACHED)

 

 

THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SEC RULE 144.

WARRANT TO PURCHASE COMMON STOCK
OF
[_____________]

NO. ________ ___, 20__ 

THIS CERTIFIES THAT, for $_____________ and other valuable consideration
received by [______________], a [__________] corporation (the “Company”),
[______________], or its permitted registered assigns (“Holder”), is entitled,
subject to the terms and conditions of this Warrant, at any time or from time to
time after the issuance date of this Three (3) Year Warrant (the “Effective
Date”), and before 5:00 p.m. Pacific Time on the second (2nd) anniversary of the
Effective Date (the “Expiration Date”), to purchase from the Company,
[___________] shares of Common Stock of the Company at a price per share equal
to $[______] (the “Purchase Price”).  Both the number of shares of Common Stock
purchasable upon exercise of this Warrant and the Purchase Price are subject to
adjustment and change as provided herein.    

1.CERTAIN DEFINITIONS.  As used in this Warrant the following terms shall have
the following respective meanings: 

1.1“Fair Market Value” of a share of Common Stock as of a particular date shall
mean: 

(a)If traded on a securities exchange or the Nasdaq National Market, the Fair
Market Value shall be deemed to be the average of the closing prices of the
Common Stock of the Company on such exchange or market over the five (5) trading
days ending immediately prior to the applicable date of valuation; 

(b)If actively traded over-the-counter, the Fair Market Value shall be deemed to
be the average of the closing bid prices over the thirty (30)-day period ending
immediately prior to the applicable date of valuation; and 

(c)If there is no active public market, the Fair Market Value shall be the value
thereof, as agreed upon by the Company and the Holder; provided, however, that
if the Company and the Holder cannot agree on such value, such value shall be
determined by an independent valuation firm experienced in valuing businesses
such as the Company and jointly selected in good faith by the Company and the
Holder.  Fees and expenses of the valuation firm shall be paid for by the
Company. 

1.2“Registered Holder” shall mean any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company. 

1.3“Warrant” as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein. 

1.4“Common Stock” shall mean the Common Stock of the Company and any other
securities at any time receivable or issuable upon exercise of this Warrant. 

2.EXERCISE OF WARRANT. 

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2.1Payment.  Subject to compliance with the terms and conditions of this Warrant
and applicable securities laws, this Warrant may be exercised, in whole or in
part at any time or from time to time, on or before the Expiration Date by the
delivery (including, without limitation, delivery by facsimile) of the form of
Notice of Exercise attached hereto as Exhibit A (the “Notice of Exercise”), duly
executed by the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering  

(a)this Warrant at the principal office of the Company, and 

(b)payment, (i) in cash (by check) or by wire transfer, (ii) by cancellation by
the Holder of indebtedness of the Company to the Holder; or (iii) by a
combination of (i) and (ii), of an amount equal to the product obtained by
multiplying the number of shares of Common Stock being purchased upon such
exercise by the then effective Purchase Price (the “Exercise Amount”). 

2.2Net Issue Exercise. In lieu of the payment methods set forth in Section
2.1(b) above, the Holder may elect to exchange all or some of this Warrant for
shares of Common Stock equal to the value of the amount of the Warrant being
exchanged on the date of exchange.  If Holder elects to exchange this Warrant as
provided in this Section 2.2, Holder shall tender to the Company the Warrant for
the amount being exchanged, along with written notice of Holder’s election to
exchange some or all of the Warrant, and the Company shall issue to Holder the
number of shares of the Common Stock computed using the following formula: 

X =

Y (A-B)

 

A

Where:   X =

the number of shares of Common Stock to be issued to Holder.

Y =

the number of shares of Common Stock purchasable under the amount of the Warrant
being exchanged (as adjusted to the date of such calculation).

A =

the Fair Market Value of one share of the Common Stock.

B =

Purchase Price (as adjusted to the date of such calculation).

2.3“Easy Sale” Exercise.  In lieu of the payment methods set forth in Section
2.1(b) above, when permitted by law and applicable regulations (including Nasdaq
and FINRA rules), the Holder may pay the Purchase Price through a “same day
sale” commitment from the Holder (and if applicable a broker-dealer that is a
member of the Financial Industry Regulatory Authority (a “FINRA Dealer”)),
whereby the Holder irrevocably elects to exercise this Warrant and to sell a
portion of the shares so purchased to pay the Purchase Price and the Holder (or,
if applicable, the FINRA Dealer) commits upon sale (or, in the case of the FINRA
Dealer, upon receipt) of such shares to forward the Purchase Price directly to
the Company. 

2.4Stock Certificates; Fractional Shares.  As soon as practicable on or after
the date of any exercise of this Warrant, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of whole shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share equal to such fraction of
the current Fair Market Value of one whole share of Common Stock as of such date
of exercise.  No fractional shares or scrip representing fractional shares shall
be issued upon an exercise of this Warrant. 

2.5Partial Exercise; Effective Date of Exercise.  In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Common Stock purchasable hereunder.  This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above.  The
person entitled to receive the shares of Common Stock issuable upon exercise of
this Warrant shall be treated for all purposes as the holder of record of such
shares as of the close of business on the date the Holder is deemed to have
exercised this Warrant. 

2.6Vesting.  This Warrant shall vest fully upon issuance. 

3.VALID ISSUANCE:  TAXES.  All shares of Common Stock issued upon the exercise
of this Warrant shall be validly issued, fully paid and nonassessable, and the
Company shall pay all taxes and other  

--------------------------------------------------------------------------------

governmental charges that may be imposed in respect of the issue or delivery
thereof.  The Company shall not be required to pay any tax or other charge
imposed in connection with any transfer involved in the issuance of any
certificate for shares of Common Stock in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established to the Company’s
reasonable satisfaction that no tax or other charge is due.

4.ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.  The number of shares of
Common Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities or property receivable or issuable upon exercise of this
Warrant) and the Purchase Price are subject to adjustment upon occurrence of the
following events: 

4.1Adjustment for Stock Splits, Stock Subdivisions or Combinations of Shares.
 The Purchase Price of this Warrant shall be proportionally decreased and the
number of shares of Common Stock issuable upon exercise of this Warrant (or any
shares of stock or other securities at the time issuable upon exercise of this
Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company’s Common Stock.  The Purchase Price of this Warrant
shall be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company’s Common
Stock. 

4.2Adjustment for Dividends or Distributions of Stock or Other Securities or
Property.  In case the Company shall make or issue, or shall fix a record date
for the determination of eligible holders entitled to receive, a dividend or
other distribution with respect to the Common Stock (or any shares of stock or
other securities at the time issuable upon exercise of the Warrant) payable in
(a) securities of the Company or (b) assets (excluding cash dividends paid or
payable solely out of retained earnings), then, in each such case, the Holder of
this Warrant on exercise hereof at any time after the consummation, effective
date or record date of such dividend or other distribution, shall receive, in
addition to the shares of Common Stock (or such other stock or securities)
issuable on such exercise prior to such date, and without the payment of
additional consideration therefor, the securities or such other assets of the
Company to which such Holder would have been entitled upon such date if such
Holder had exercised this Warrant on the date hereof and had thereafter, during
the period from the date hereof to and including the date of such exercise,
retained such shares and all such additional securities or other assets
distributed with respect to such shares as aforesaid during such period giving
effect to all adjustments called for by this Section 4. 

4.3Reclassification.  If the Company, by reclassification of securities or
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change, and the Purchase Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 4.  No adjustment
shall be made pursuant to this Section 4.3 upon any conversion or redemption of
the Common Stock which is the subject of Section 4.5. 

4.4Adjustment for Capital Reorganization, Merger or Consolidation.  In case of
any capital reorganization of the capital stock of the Company (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or any merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all the assets of the
Company then, and in each such case, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
Holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment of the
Purchase Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 4.  The
foregoing provisions of this Section 4.4 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant.  If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company’s Board of Directors.  In all events,
appropriate adjustment (as determined in good faith by the Company’s Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end  

--------------------------------------------------------------------------------

that the provisions of this Warrant shall be applicable after that event, as
near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.

4.5Conversion of Common Stock.  In case all or any portion of the authorized and
outstanding shares of Common Stock of the Company are redeemed or converted or
reclassified into other securities or property pursuant to the Company’s
Certificate of Incorporation or otherwise, or the Common Stock otherwise ceases
to exist, then, in such case, the Holder of this Warrant, upon exercise hereof
at any time after the date on which the Common Stock is so redeemed or
converted, reclassified or ceases to exist (the “Termination Date”), shall
receive, in lieu of the number of shares of Common Stock that would have been
issuable upon such exercise immediately prior to the Termination Date, the
securities or property that would have been received if this Warrant had been
exercised in full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination Date, all subject
to further adjustment as provided in this Warrant.  Additionally, the Purchase
Price shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Purchase Price of the maximum number of shares of Common Stock
for which this Warrant was exercisable immediately prior to the Termination Date
by (y) the number of shares of Common Stock of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein. 

5.CERTIFICATE AS TO ADJUSTMENTS.  In each case of any adjustment in the Purchase
Price, or number or type of shares issuable upon exercise of this Warrant, the
Chief Financial Officer or Controller of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price.  The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder. 

6.LOSS OR MUTILATION.  Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant. 

7.RESERVATION OF COMMON STOCK.  The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Common Stock or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon exercise of this Warrant.  All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company’s Officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant. 

8.TRANSFER AND EXCHANGE.  Subject to the terms and conditions of this Warrant
and compliance with all applicable securities laws, this Warrant and all rights
hereunder may be transferred to any Registered Holder’s parent, subsidiary or
affiliate, or, if the Registered Holder is a partnership, to any partner of such
Registered Holder, in whole or in part, on the books of the Company maintained
for such purpose at the principal office of the Company referred to above, by
the Registered Holder hereof in person, or by duly authorized attorney, upon
surrender of this Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer.  Upon any
permitted partial transfer, the Company will issue and deliver to the Registered
Holder a new Warrant or Warrants with respect to the shares of Common Stock not
so transferred.  Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that when this Warrant shall have been so endorsed,
the person in possession of this Warrant may be treated by the Company, and all
other persons dealing with this Warrant, as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding; provided, however, that until a
transfer of this Warrant is duly registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner for all purposes. 

9.RESTRICTIONS ON TRANSFER.  The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “Securities Act”) covering the disposition or sale of this Warrant or the
Common  

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Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all of this
Warrant or such Common Stock, as the case may be, unless either (i) the Company
has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
is made pursuant to SEC Rule 144.

10.COMPLIANCE WITH SECURITIES LAWS.  By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of stock purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection with, any distribution thereof; that the
Holder has had such opportunity as such Holder has deemed adequate to obtain
from representatives of the Company such information as is necessary to permit
the Holder to evaluate the merits and risks of its investment in the Company;
that the Holder is able to bear the economic risk of holding such shares as may
be acquired pursuant to the exercise of this Warrant for an indefinite period;
that the Holder understands that the shares of stock acquired pursuant to the
exercise of this Warrant will not be registered under the Securities Act (unless
otherwise required pursuant to exercise by the Holder of the registration
rights, if any, granted to the Registered Holder) and will be “restricted
securities” within the meaning of Rule 144 under the Securities Act and that the
exemption from registration under Rule 144 will not be available for at least
one (1) year from the date of exercise of this Warrant, subject to any special
treatment by the SEC for exercise of this Warrant pursuant to Section 2.2, and
even then will not be available unless a public market then exists for the
stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and that
all stock certificates representing shares of stock issued to the Holder upon
exercise of this Warrant or upon conversion of such shares may have affixed
thereto a legend substantially in the following form: 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF
ANY STATE.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.  THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

11.REGISTRATION RIGHTS.  All shares of Common Stock issuable upon exercise of
this Warrant shall be “Registrable Securities” or such other definition of
securities entitled to registration rights pursuant to Exhibit C to this
Warrant. 

12.NO RIGHTS OR LIABILITIES AS STOCKHOLDERS.  This Warrant shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Company.  In
the absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant or Common Stock upon conversion thereof, no provisions
of this Warrant, and no enumeration herein of the rights or privileges of the
Holder hereof shall cause such Holder hereof to be a stockholder of the Company
for any purpose. 

13.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby represents
and warrants to Holder that: 

13.1Due Authorization; Consents.  All corporate action on the part of the
Company, its officers, directors and stockholders necessary for (a) the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and (b) the authorization, issuance,
reservation for issuance and delivery of all of the Common Stock issuable upon
exercise of this Warrant, has been duly taken.  This Warrant constitutes a valid
and binding obligation of the Company enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors’ rights
generally and to general equitable principles.  All consents, approvals and
authorizations of, and registrations, qualifications and filings with, any
federal or state governmental agency, authority or body, or any third party,
required in connection with the execution, delivery and performance of this
Warrant and the consummation of the transactions contemplated hereby and thereby
have been obtained. 

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13.2Organization.  The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power to own, lease and operate its property and to carry on
its business as now being conducted and as currently proposed to be conducted. 

13.3Valid Issuance of Stock.  The outstanding shares of the capital stock of the
Company are duly and validly issued, fully paid and nonassessable, and such
shares, and all outstanding options and other securities of the Company, have
been issued in full compliance with the registration and prospectus delivery
requirements of the Securities Act and the registration and qualification
requirements of all applicable state securities laws, or in compliance with
applicable exemptions therefrom, and all other provisions of applicable federal
and state securities laws, including without limitation, anti-fraud provisions. 

13.4Governmental Consents.  All consents, approvals, orders, authorizations or
registrations, qualifications, declarations or filings with any federal or state
governmental authority on the part of the Company required in connection with
the consummation of the transactions contemplated herein shall have been
obtained prior to and be effective as of the Effective Date. 

14.NOTICES.  Except as may be otherwise provided herein, all notices, requests,
waivers and other communications made pursuant to this Agreement shall be in
writing and shall be conclusively deemed to have been duly given (a) when hand
delivered to the other party; (b) when received when sent by facsimile at the
address and number set forth below; (c) three business days after deposit in the
U.S. mail with first class or certified mail receipt requested postage prepaid
and addressed to the other party as set forth below; or (d) the next business
day after deposit with a national overnight delivery service, postage prepaid,
addressed to the parties as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery service provider. 

To the Company:

To the Holder:

 

 

 

 

 

 

 

 

 

 

 

 

Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication.  A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 13 by giving the other party written
notice of the new address in the manner set forth above.

15.HEADINGS.  The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof. 

16.LAW GOVERNING.  This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of California, with regard to
conflict of law principles of such state. 

17.NO IMPAIRMENT.  The Company will not, by amendment of its Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment.  Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock issuable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon exercise of this Warrant. 

18.NOTICES OF RECORD DATE.  In case: 

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18.1the Company shall take a record of the holders of its Common Stock (or other
stock or securities at the time receivable upon the exercise of this Warrant),
for the purpose of entitling them to receive any dividend or other distribution,
or any right to subscribe for or purchase any shares of stock of any class or
any other securities or to receive any other right; or 

18.2of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the capital stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company’s stock are to receive stock, securities or property of another
corporation; or 

18.3of any voluntary dissolution, liquidation or winding-up of the Company; or 

18.4of any redemption or conversion of all outstanding Common Stock; 

then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up.  The Company shall use all reasonable
efforts to ensure such notice shall be delivered at least thirty (30) days prior
to the date therein specified.

19.SEVERABILITY.  If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated. 

20.COUNTERPARTS.  For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and each such executed
counterpart shall be, and shall be deemed to be, an original instrument. 

21.NO INCONSISTENT AGREEMENTS.  The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders of this Warrant or otherwise
conflicts with the provisions hereof.  The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to holders of the Company’s securities under any other
agreements, except rights that have been waived. 

22.SATURDAYS, SUNDAYS AND HOLIDAYS.  If the Expiration Date falls on a Saturday,
Sunday or legal holiday, the Expiration Date shall automatically be extended
until 5:00 p.m. the next business day. 

23.ENTIRE AGREEMENT.  This Warrant contains the sole and entire agreement and
understanding of the parties with respect to the entire subject matter of this
Warrant, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of this
Warrant are hereby merged herein. 

[Signatures appear on following page.]

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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.

 

[HOLDER]

 

 

 

[COMPANY]

By:  

 

By:  

Its:

 

Its:  

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK

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EXHIBIT A

NOTICE OF EXERCISE

(To be executed upon exercise of Warrant)

[COMPANY]

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of the Company, as provided for therein, and (check the
applicable box):

 

tenders herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in same-day funds in the amount of
$____________ for _________ such securities.

 

elects the [Net Issue Exercise][Easy Sale Exercise] option pursuant to Section
2.2 or 2.3 of the Warrant, and accordingly requests delivery of a net of
______________ of such securities.

Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):

Name:

 

Address:

 

Signature:

 

Note:  The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.

If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.

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EXHIBIT B

ASSIGNMENT

(To be executed only upon assignment of Warrant Certificate)

For value received, hereby sells, assigns and transfers unto
____________________________ the within Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company with respect to the number
of Warrants set forth below, with full power of substitution in the premises:

Name(s) of Assignee(s)

Address

# of Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.

Dated:

 

Signature:

 

Notice:  The signature to the foregoing Assignment must correspond to the name
as written upon the face of this security in every particular, without
alteration or any change whatsoever; signature(s) must be guaranteed by an
eligible guarantor institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and Exchange Commission Rule
17Ad-15.

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1

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EXHIBIT C

1.REGISTRATION RIGHTS. 

1.1Definitions.  For purposes of this Section 1: 

(a)Registration.  The terms “register,” “registered,” and “registration” refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended, (the “Securities Act”),
and the declaration or ordering of effectiveness of such registration statement 

(b)Registrable Securities.  The term “Registrable Securities” means:  (1) any
Common Stock of the Company issued or to be issued upon exercise of the Warrant
and (2) any shares of Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, any shares of Common Stock described in clause (1) of this
subsection (b).  Notwithstanding the foregoing, “Registrable Securities” shall
exclude any Registrable Securities sold by a person in a transaction in which
rights under this Section 1 are not assigned in accordance with this Warrant or
any Registrable Securities sold in a public offering, whether sold pursuant to
Rule 144 promulgated under the Securities Act, or in a registered offering, or
otherwise or securities which can be sold in accordance with Rule 144(k)
promulgated under the Securities Act.. 

(c)Registrable Securities Then Outstanding.  The number of shares of
“Registrable Securities then outstanding” shall mean the number of shares of
Common Stock of the Company that are Registrable Securities and (l) are then
issued and outstanding or (2) are then issuable pursuant to an exercise of the
Warrant or pursuant to conversion of securities issuable pursuant to an exercise
of the Warrant. 

(d)Holder.  For purposes of this Section 1, the term “Holder” means any person
owning of record Registrable Securities or any permitted assignee of record of
such Registrable Securities to whom rights under this Section 1 have been duly
assigned in accordance with this Warrant. 

(e)Form S-3.  The term “Form S-3” means such form under the Securities Act as is
in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC. 

(f)SEC.  The term “SEC” or “Commission” means the U.S. Securities and Exchange
Commission. 

1.2Piggyback Registrations. The Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public offering
of securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any registration under
Section 1.3, below, or to any employee benefit plan or a corporate
reorganization) and will afford each such Holder an opportunity to include in
such registration statement all or any part of the Registrable Securities then
held by such Holder.  Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such Holder
shall within twenty (20) days after receipt of the above-described notice from
the Company, so notify the Company in writing, and in such notice shall inform
the Company of the number of Registrable Securities such Holder wishes to
include in such registration statement.  If a Holder decides not to include all
of its Registrable Securities in any registration statement thereafter filed by
the Company, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent  

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1

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registration statement or registration statements as may be filed by the Company
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.

(a)Underwriting.  If a registration statement under which the Company gives
notice under this Section 1.2 is for an underwritten offering, then the Company
shall so advise the Holders of Registrable Securities.  In such event, the right
of any such Holder’s Registrable Securities to be included in a 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.  All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting
(including a market stand-off agreement of up to 180 days if required by such
underwriters).  Notwithstanding any other provision of this Exhibit 3, if the
managing underwriter(s) determine(s) in good faith that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall include in such offering (i) first, all the securities the Company
proposes to register for its own account, and (ii) second, Holder’s Registrable
Securities and other shares of Common Stock of the Company requested to be
included by other investors having written registration rights agreements with
the Company respecting such shares (“Other Registrable Securities”), with Holder
and each such investor proposing to sell such shares participating in such
registration on a pro rata basis, such participation to be based upon the number
of shares of Registrable Securities and Other Registrable Securities then held
by the Holder and each such investor, respectively;  provided, however, that the
right of the underwriters to exclude shares (including Registrable Securities)
from the registration and underwriting as described above shall be restricted so
that all shares that are not Registrable Securities or Other Registrable
Securities and are held by any other person, including, without limitation, any
person who is an employee or officer of the Company (or any subsidiary of the
Company) shall first be excluded from such registration and underwriting before
any Registrable Securities and Other Registrable Securities are so excluded.  If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter(s), delivered at least ten (10) business days prior to the effective
date of the registration statement.  Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration.  For any Holder that is a partnership, the Holder and the partners
and retired partners 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, and for any Holder that is a corporation, the Holder and all
corporations that are affiliates of such Holder, shall be deemed to be a single
“Holder,” and any pro rata reduction with respect to such “Holder” shall be
based upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such “Holder,” as defined in this
sentence. 

(b)Expenses.  All expenses incurred in connection with a registration pursuant
to this Section 1.2 (excluding underwriters’ and brokers’ discounts and
commissions relating to shares sold by the Holders and legal fees of counsel for
the Holders), including, without limitation all federal and “blue sky”
registration, filing and qualification fees, printers’ and accounting fees, and
fees and disbursements of counsel for the Company, shall be borne by the
Company. 

(c)No Limit on Registrations.  Except as otherwise provided herein, there shall
be no limit on the number of times the Holders may request registration of
Registrable Securities under this Section 1.2. 

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Corporate Headquarters: 6898 South University Boulevard, Suite 270 Centennial CO
80122

Securities offered through CIM Securities, LLC, a broker-dealer, Member
FINRA/SiPC

 

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1.3Form S-3 Registration.  In case the Company shall at any time after the date
of a Qualified Public Offering receive from any Holder or Holders of a majority
of all Registrable Securities then outstanding a written request or requests
that the Company effect a registration on Form S-3 and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, then the Company will: 

(a)Notice.  Promptly give written notice of the proposed registration and the
Holder’s or Holders’ request therefor, and any related qualification or
compliance, to all other Holders of Registrable Securities; and 

(b)Registration.  As soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holders or
Holders’ Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
twenty (20) days after the Company provides the notice contemplated by
Section 1.3(a); provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 1.3: 

(1)if Form S-3 is not available for such offering by the Holders: 

(2)if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $1,000,000; 

(3)if the Company shall furnish to the Holders a certificate signed by the
President or Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be materially
detrimental to the Company and its shareholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement no more than once during
any twelve month period for a period of not more than ninety (90) days after
receipt of the request of the Holder or Holders under this Section 1.3; 

(4)if the Company has, within the six (6) month period preceding the date of
such request, already effected a registration under the Securities Act other
than a registration from which the Registrable Securities of Holders have been
excluded (with respect to all or any portion of the Registrable Securities the
Holders requested be included in such registration) pursuant to the provisions
of Section 1.2(a); or 

(5)in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance. 

(c)Expenses.  The Company shall pay all expenses incurred in connection with
each registration requested pursuant to this Section 1.3, (excluding
underwriters’ or brokers’ discounts and commissions relating to shares sold by
the Holders and legal fees of counsel for the Holders and excluding expenses
required to be paid by a Holder pursuant to Section 1.4(g) below), including
without limitation federal and “blue sky” registration, filing and qualification
fees, printers’ and accounting fees, and fees and disbursements of counsel. 

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Corporate Headquarters: 6898 South University Boulevard, Suite 270 Centennial CO
80122

Securities offered through CIM Securities, LLC, a broker-dealer, Member
FINRA/SiPC

 

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(d)Deferral.  Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting the filing of a registration statement pursuant to this
Section 1.3, a certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the Board, it would be
materially detrimental to the Company and its stockholders for such registration
statement to be filed, then the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve (12) month period. 

(e)Limit on Registrations.  The Holders shall be entitled to request
registration of Registrable Securities under this Section 1.3 on two (2)
occasions. 

1.4Obligations of the Company.  Whenever required to effect the registration of
any Registrable Securities under this Warrant the Company shall, as
expeditiously as reasonably possible: 

(a)Registration Statement.  Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its commercially
reasonable efforts to cause such registration statement to become effective,
provided, however, that the Company shall not be required to keep any such
registration statement effective for more than ninety (90) days. 

(b)Amendments and Supplements.  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. 

(c)Prospectuses.  Furnish to the Holders such number 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 the Registrable Securities owned by them that
are included in such registration. 

(d)Blue Sky.  Use its commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such states 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 to file a
general consent to service of process in any such states or jurisdictions. 

(e)Underwriting.  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(s) of such offering.  Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement. 

(f)Notification.  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. 

(g)Opinion and Comfort Letter.  Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes  

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Corporate Headquarters: 6898 South University Boulevard, Suite 270 Centennial CO
80122

Securities offered through CIM Securities, LLC, a broker-dealer, Member
FINRA/SiPC

 

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of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities and (ii) a “comfort” letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities provided however, that the Company’s obligation to obtain a “comfort”
letter shall be limited to commercially reasonable efforts.  If such securities
are not being sold through underwriters, then the Company shall furnish, at the
request and at the sole expense of any Holder requesting registration of
Registrable Securities, on the date that the registration statement with respect
to such securities becomes effective, an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities.

1.5Furnish Information.  It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Sections 1.2 or 1.3 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to timely effect the Registration of their
Registrable Securities. 

1.6Indemnification.  In the event any Registrable Securities are included in a
registration statement under Sections 1.2 or 1.3: 

(a)By the Company.  To the extent permitted by law; the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as determined 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 “1934 Act”), against any losses, claims, damages, or Liabilities
(joint or several) to which they may become subject under the Securities Act,
the 1934 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 1934 Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the 1934 Act or any federal or state
securities law in connection with the offering covered by such registration
statement; 

and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by

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Corporate Headquarters: 6898 South University Boulevard, Suite 270 Centennial CO
80122

Securities offered through CIM Securities, LLC, a broker-dealer, Member
FINRA/SiPC

 

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them, as incurred, in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 1.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action 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 such Holder, partner, officer, director, underwriter
or controlling person of such Holder.

(b)By Selling Holders.  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 have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such registration statement or any
of such other Holder’s partners, directors or officers or any person who
controls such Holder within the meaning of the Securities Act or the 1934 Act,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, partner or director, officer or controlling person of such
other Holder may become subject under the Securities Act, the 1934 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 reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, partner, officer, director or controlling person of such other Holder 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; and
provided, further, that the total amounts payable in indemnity by a Holder under
this Section 1.6(b) in respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered offering out of which such
Violation arises. 

(c)Notice.  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 shall
have the right to retain its own 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 conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding.  The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 1.6 to the extent the
indemnifying party is prejudiced as a result thereof, but the omission so to
deliver written notice to the indemnified party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.6. 

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Corporate Headquarters: 6898 South University Boulevard, Suite 270 Centennial CO
80122

Securities offered through CIM Securities, LLC, a broker-dealer, Member
FINRA/SiPC

 

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(d)Defect Eliminated in Final Prospectus.  The foregoing indemnity agreements of
the Company and Holders are subject to the condition that, insofar as they
relate to any Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the “Final Prospectus”), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was timely furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act. 

(e)Contribution.  In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
Holder exercising rights under this Warrant, or any controlling person of any
such Holder, makes a claim for indemnification pursuant to this Section 1.6 but
it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 1.6 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this
Section 1.6; then, and in each such case, the Company and such Holder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that such
Holder is responsible for the portion represented by the percentage that the
public offering price of its Registrable Securities offered by and sold under
the registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case: (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation. 

(f)Survival.  The obligations of the Company and Holders under this Section 1.6
shall survive until the fifth anniversary of the completion of any offering of
Registrable Securities in a registration statement, regardless of the expiration
of any statutes of limitation or extensions of such statutes. 

1.7Termination of the Company’s Obligations.  The Company shall have no
obligations pursuant to Sections 1.2 and 1.3 with respect to any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to
Section 1.2 or 1.3 more than ten (10) years after the date of this Warrant, or,
if, in the opinion of counsel to the Company, all such Registrable Securities
proposed to be sold by a Holder may then be sold under Rule 144 in one
transaction without exceeding the volume limitations thereunder. 

--------------------------------------------------------------------------------

Corporate Headquarters: 6898 South University Boulevard, Suite 270 Centennial CO
80122

Securities offered through CIM Securities, LLC, a broker-dealer, Member
FINRA/SiPC

 

Page 7