Unassociated Document


     

    REGISTRATION RIGHTS
AGREEMENT

     

    THIS REGISTRATION
RIGHTS AGREEMENT (the
“Agreement”)
is entered into as of May 12, 2010, between AFH Holding II, Inc.
(to be renamed First Blush Brands, Inc.), a Delaware corporation (the “Company”),
and William F. Gustafson and Prescott Interests,
Ltd. (each a “Holder”
and together, the “Holders”).

     

    WITNESSETH:

     

    WHEREAS, prior to the date
hereof, the Holders were holders of Series A Preferred Stock of First Blush,
Inc.;

     

    WHEREAS, in connection with
the transactions contemplated by the Share Exchange Agreement, dated May 12,
2010, by and among AFH Holding II, Inc. and its sole shareholder and First
Blush, Inc. and its securityholders (the “Exchange
Agreement”), the Series A Preferred Stock of First Blush, Inc. held by
the Holders was exchanged for common stock of the Company (“Common
Stock”);

     

    WHEREAS, in consideration of
the Holders’ entry into the Exchange Agreement the Company has agreed to grant
the Holders certain registration rights for the Common Stock issued to the
Holders (the “Registration
Rights”);

     

    NOW, THEREFORE, for and in
consideration of the premises and the mutual covenants hereinafter set forth,
and for other good and valuable consideration, the parties hereby agree as
follows:

     

    ARTICLE
I.

    REGISTRABLE
SECURITIES

     

    Section
1.1       Registrable
Securities.  For purposes of this Agreement, “Registrable
Securities” means all Common Stock issued or otherwise now or hereafter
owned and held by the Holders; provided that, if the
Company converts, by merger or otherwise, to another type of entity including
but not limited to a corporation or a limited partnership, the term Registrable
Securities as defined herein shall refer to the securities in the new type of
entity, in the case of a corporation, shares of common stock and in the case of
a limited partnership, partnership interests.  Common Stock,
membership interests, partnership interests or other equity securities, as the
case may be, cease to be “Registrable Securities” when they are (i) eligible for
sale without volume limitations pursuant to Rule 144 pursuant to the Securities
Act of 1933, as amended (the “Securities
Act”), (ii) registered for resale under the Securities Act and sold
pursuant to such registration, or (iii) sold without having been registered
pursuant to an exemption from the registration requirements of the Securities
Act.

    


    Registration
Rights Agreement


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    ARTICLE
II.

    PIGGYBACK
REGISTRATIONS

     

    Section
2.1       Right to
Piggyback.  If the Company proposes to register any of its
securities under the Securities Act (other than pursuant to a registration
solely in connection with an employee benefit or stock ownership plan in a
transaction described in Rule 145 under the Securities Act) and the registration
form to be used may be used for the registration of the sale of Registrable
Securities (a “Piggyback
Registration”), the Company will give prompt written notice to all
Holders of Registrable Securities of its intention to effect such a registration
(each a “Piggyback
Notice”).  Subject to Section 2.2 and Section 2.3, the Company
will include in the Piggyback Registration all Registrable Securities that
Holders of Registrable Securities request the Company to include in the
Piggyback Registration by written notice given to the Company within fifteen
(15) days after the date of the Company’s notice.  The Holders
acknowledge that the Piggyback Notice may constitute material non-public
information regarding the Company.

     

    Section
2.2       Priority on Primary
Registrations.  If a Piggyback Registration relates to an
underwritten public offering of securities by the Company and the lead managing
underwriter(s) advise the Company in writing that in the opinion of the lead
managing underwriter(s) the number of securities requested to be included in the
Piggyback Registration exceeds the number that can be sold in an orderly manner
in such offering within a price range acceptable to the Company, the Company
will include in such registration (i) first, the securities proposed to be sold
by the Company, (ii) second, the Registrable Securities requested to be included in the
Piggyback Registration, pro rata among the Holders and all other holders of
Registration Rights from the Company based on the ratio of the number of
Registrable Securities that each such individual, corporation, limited liability
company, partnership, trust or any other organization or entity (collectively,
“Person”)
has requested the Company include in the Piggyback Registration over the total
number of Registrable Securities requested to be included in the Piggyback
Registration by the Holders; and (iii) third, other securities requested to
be included in such registration, pro rata among the holders of such other
securities based on the ratio of the number of such other securities that each
such holder has requested the Company include in the Piggyback Registration over
the total number of other securities requested to be included in the Piggyback
Registration by such other holders.

     

    Section
2.3       Priority on Secondary
Registrations.  If a Piggyback Registration relates to an
underwritten public offering of securities by holders of the Company’s
securities ( the “Selling
Stockholders”) and the managing
underwriter(s) advise the Company in writing that in their opinion, the number
of securities requested to be included in the Piggyback Registration exceeds the
number that can be sold in an orderly manner in such offering within a price
range acceptable to the Selling Stockholders, the Company will include in the
Piggyback Registration (i) first, the securities of the Selling Stockholders;
(ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the Holders and all other holders of registration
rights from the Company based on the ratio of the number of Registrable
Securities that each such Person has requested the Company include in the
Piggyback Registration over the total number of Registrable Securities requested
to be included in the Piggyback Registration; and (iii) third, other
securities requested to be included in such registration, pro rata among the
holders of such securities based on the ratio of the number of such other
securities that each such holder has requested the Company include in the
Piggyback Registration over the total number of other securities requested to be
included in the Piggyback Registration by such other holders.

     

    Section
2.4       Rule 415.
Notwithstanding anything to the contrary herein, the Company shall be entitled
to limit the number of Regsitrable Securities to the extent it deems advisable,
upon advice of its legal counsel, in order to comply with Rule 415 under the
Securities Act.

     

    
      Registration
Rights Agreement

       

    

    
      
         


      

      
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    ARTICLE
III.

    REGISTRATION
PROCEDURES

     

    Section
3.1       Registration
Procedures.  Whenever the Holders of Registrable Securities
have requested that the sale of any Registrable Securities be registered
pursuant to this Agreement, the Company will use its commercially reasonable
efforts consistent with this Agreement, legal requirements and, in the case of
an offering by the Company, prevailing market conditions, to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of distribution thereof and will promptly:

     

    (a)      prepare
and file with the Securities and Exchange Commission (the “Commission”)
a registration statement with respect to such Registrable Securities and use its
commercially reasonable efforts to cause such registration statement to become
effective, provided that, before filing a registration statement or prospectus
or any amendments or supplements thereto, the Company will furnish to one
counsel selected by the Holders of a majority of the Registrable Securities
covered by such registration statement copies of all such documents proposed to
be filed, which documents will be subject to the review of such
counsel;

     

    (b)      prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for the earlier of: (i)
such time as all such Registrable Securities covered by the registration
statement have been sold or (ii) a period of one hundred eighty (180) days,
after the effective date of the registration statement covering such Registrable
Securities, and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of distribution by the
Holders set forth in such registration statement;

     

    (c)      furnish
to each Holder such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other documents as
such Holder may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Holder;

     

    (d)      use
its commercially reasonable efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions of
the United States as any Holder reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Holder, provided that the Company will not be required
(i) to qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph, (ii) to subject itself
to taxation in any such jurisdiction or (iii) to consent to general service of
process in any such jurisdiction;

     

    (e)      notify
each Holder of such Registrable Securities, 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 contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading, and, at the
request of any such Holder, the Company will prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading in light of the circumstances then existing;

     

    Registration
Rights Agreement
  

    
      
         


      

      
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    (f)       cause
all such Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Company are then listed and to be
qualified for trading on each system on which similar securities issued by the
Company are from time to time qualified;

     

    (g)      provide
a transfer agent and registrar for all such Registrable Securities not later
than the effective date of such registration statement and thereafter maintain
such a transfer agent and registrar;

     

    (h)      in
connection with any underwritten offering, enter into such customary agreements
not inconsistent with this Agreement (including underwriting agreements and
lock-up agreements in customary form) and take all such other actions as the
Holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to facilitate the disposition
of such Registrable Securities;

     

    (i)       make
available for inspection by any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company’s officers, directors, employees and independent accountants to supply
all information reasonably requested by any such underwriter, attorney,
accountant or agent in connection with such registration statement;

     

    (j)       otherwise
use its commercially reasonable efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve (12) months beginning with the first day of the Company’s first
full calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;

     

    (k)      permit
any Holder that might be deemed, in the reasonable judgment of such Holder, to
be an underwriter or a controlling Person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in the
reasonable judgment of such Holder and its counsel should be included;
and

     

    (l)       in
the event of the issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any Registrable Securities
included in such registration statement for sale in any jurisdiction, the
Company will use its commercially reasonable efforts promptly to obtain the
withdrawal of such order.
 

    Registration
Rights Agreement
 

    
      
         


      

      
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    If any
such registration or comparable statement refers to any Holder by name or
otherwise as the holder of any securities of the Company and if, in its
reasonable judgment, such Holder is or might be deemed to be a controlling
Person of the Company, such Holder shall have the right to require (a) the
inclusion in such registration statement of language, in form and substance
reasonably satisfactory to such Holder, to the effect that the holding of such
securities by such Holder is not to be construed as a recommendation by such
Holder of the investment quality of the Company’s securities covered thereby and
that such holding does not imply that such Holder will assist in meeting any
future financial requirements of the Company, or (b) in the event that such
reference to such Holder by name or otherwise is not required by the Securities
Act or any similar federal statute then in force, the deletion of the reference
to such Holder; provided, that with
respect to this clause (b) such Holder shall furnish to the Company an opinion
of counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to the Company.

     

    ARTICLE
IV.

    REGISTRATION
EXPENSES

     

    Section
4.1       Definition.  The
term “Registration
Expenses” means all reasonable expenses incident to the Company’s
performance of or compliance with Article III of this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws of jurisdictions in the United
States, printing expenses, messenger and delivery expenses, fees and expenses of
attorneys, accountants and other experts, and fees and expenses of underwriters
and their attorneys and experts, other than underwriters’ discounts and
commissions, which shall be deducted from the proceeds of the offering payable
to the selling Holders of Registrable Securities.

     

    Section
4.2       Payment.  The
Company shall pay the Registration Expenses in connection with any and all
Piggyback Registrations.  In
connection with each Piggyback Registration, the Company will reimburse the
Holders of Registrable Securities covered by such registration for the
reasonable fees and disbursements of one counsel chosen by the Holders of at
least fifty percent (50%) of all such Registrable Securities up to a maximum of
ten thousand dollars ($10,000).
 

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    ARTICLE
V.

    INDEMNIFICATION

     

    Section
5.1       Indemnification by the
Company.  The Company agrees to indemnify, to the extent
permitted by law, (i) each Holder, (ii) the officers, directors, partners,
members, managers, stockholders, accountants, attorneys, agents and employees,
of each of them, and each Person who controls such Holder (within the meaning of
the Securities Act) and (iii) such controlling Person’s officers, directors,
partners, members, managers, stockholders, accountants, attorneys, agents and
employees, in each case against all losses, claims, damages, liabilities and
expenses, costs (including, without limitation, costs of preparation and
reasonable attorneys’ fees and any legal or other fees or expenses incurred by
such party in connection with any investigation or proceeding), judgments,
fines, penalties, charges and amounts paid in settlement (collectively, “Losses”),
as incurred, caused by (i) any untrue or alleged untrue statement of material
fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, (ii) any omission or
alleged omission of a material fact required to be stated therein or necessary
to make statements therein not misleading or, with respect to any prospectus
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or (iii) any violation by the Company of
the Securities Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company under this
Agreement in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, members, managers, stockholders, accountants, attorneys,
agents and employees and each Person controlling such Holder, and the officers,
directors, partners, members, managers, stockholders, accountants, attorneys,
agents and employees of such controlling Person, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such Loss or action, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such Holder
expressly for use therein; provided, however, that the Company shall not be
required to indemnify any Person for any Losses caused by any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that (x) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in such registration statement, such
prospectus or such form of prospectus or in any amendment or supplement thereto
or (y) such Person uses an outdated or defective prospectus after the Company
has notified such Person in writing that the prospectus is outdated or
defective.  In connection with an underwritten offering, the Company
will indemnify such underwriters, their officers and directors and each Person
who controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.
  

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    Section
5.2       Indemnification by
Holders.  In connection with any registration statement in
which a Holder is participating, each such Holder will furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with any such registration statement and related prospectus
and, to the extent permitted by law, will indemnify and hold harmless, severally
and not jointly, (i) the Company, (ii) the Company’s directors, officers,
partners, members, managers, stockholders, accountants, attorneys, agents and
employees, (iii) each Person who controls the Company (within the meaning of the
Securities Act), (iv) each such controlling Person’s officers, directors,
partners, members, managers, stockholders, accountants, attorneys, agents and
employees, (v) each other Holder and (vi) such Holder’s officers, directors,
partners, members, managers, stockholders, accountants, attorneys, agents and
employees, in each case against any Losses, as incurred,  resulting
from (i) any untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, (ii) any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any prospectus, necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) any violation by such Holder of the
Securities Act or any rule or regulation thereunder applicable to such Holder
and relating to action or inaction required of such Holder in connection with
any such registration, qualification, or compliance, and will reimburse such
indemnified Persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such Loss or action, in each case
to the extent, but only to the extent, that (x) such untrue statements or
omissions is contained or should have been contained in any information or
affidavit so furnished in writing by such Holder expressly for use in such
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in such registration statement, such prospectus or such form
of prospectus or in any amendment or supplement thereto or (y) such Holder uses
an outdated or defective prospectus after the Company has notified such Holder
in writing that the prospectus is outdated or defective; provided, that the
obligation to indemnify will be individual to each Holder and will be limited to
the amount of net proceeds received by such Holder from the sale of Registrable
Securities pursuant to such registration statement.

     

    Section
5.3       Notice; Defense of
Claims.  Any Person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such indemnified
party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party.  If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld).  An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.

     

    Section
5.4       Survival.  The
indemnification provided for under this Agreement will remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
party or any officer, director, employee, agent or controlling Person of such
indemnified party and will survive the transfer of securities.

     

    Section
5.5       Contribution.  If
the indemnification provided for in this Article V is unavailable to an
indemnified party in respect of any Losses (other than in accordance with its
terms), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations.  The relative fault of such
indemnifying party, on the one hand, and indemnified party, on the other hand,
shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been taken by, or
relates to information supplied by, such indemnifying party or indemnified
party, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or
omission.
 

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    The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5.5 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding
paragraph.  Notwithstanding the provisions of this Section 5.5, an
indemnifying party that is a selling Holder of Registrable Securities shall not
be required to contribute any amount in excess of the amount by which the net
proceeds from the sale of the Registrable Securities sold by such indemnifying
party exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.  The obligation of each
selling Holder of Registrable Securities to contribute pursuant to this
Section 5.5 is several, and not joint, in proportion to the net proceeds of
the offering received by such selling Holder in relation to the total net
proceeds of the offering received by all of the selling Holders.

     

    Section
5.6       Underwriting
Agreement.  To the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into by the Company in connection with an underwritten public offering are in
conflict with the provisions of this Article V that relate to indemnification
and contribution of underwriters, the provisions contained in the underwriting
agreement shall control.

     

    ARTICLE
VI.

    PARTICIPATION
IN UNDERWRITTEN REGISTRATIONS

     

    Section
6.1       Acceptance of
Underwriting.  No Person may participate in any registration
hereunder that is underwritten unless such Holder (i) agrees to sell such
Holder’s securities on the basis provided in any underwriting arrangements
approved by the Holders entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements; provided, that no Holder included in any underwritten
registration shall be required to make any representations or warranties to the
Company or the underwriters other than representations and warranties regarding
such Holder as are reasonably required by the underwriters.

     

    ARTICLE
VII.

    REPORTING
REQUIREMENTS UNDER EXCHANGE ACT

     

    Section
7.1       Reporting.  The
Company shall keep effective the registration of its securities under Section 12
of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and shall timely file such information, documents and reports for
so long as the Commission may require or prescribe under Section 13 of the
Exchange Act.  The Company shall (whether or not it shall then be
required to do so) timely file such information, documents and reports which it
is required to file pursuant to Section 13 or 15(d) of the Exchange
Act.  The Company shall forthwith upon request furnish any Holder (i)
a written statement by the Company that it has complied with such reporting
requirements, (ii) to the extent available, a copy of the most recent
annual or quarterly report of the Company, and (iii) such other reports and
documents filed by the Company with the Commission as such Holder may reasonably
request in availing itself of an exemption for the sale of Registrable
Securities without registration under the Securities Act.  The Company
acknowledges and agrees that the purposes of the requirements contained in this
Article VII are (a) to enable any such Holder to comply with the current public
information requirement contained in paragraph (c) of Rule 144 under the
Securities Act should such Holder ever wish to dispose of any of the securities
of the Company acquired by it without registration in reliance upon Rule 144
under the Securities Act (or any other similar exemptive provision) and (b) to
qualify the Company for the use of registration statements on Form
S-3.  In addition, so long as the Company is subject to Section 13 or
15(d) of the Exchange Act, the Company shall take such other measures and file
such other information, documents and reports, as shall hereafter be required by
the Commission as a condition to the availability of Rule 144 under the
Securities Act (or any similar exemptive provision hereafter in effect) and the
use of Form S-3.
 

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Rights Agreement
 

    
      
         


      

      
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    ARTICLE
VIII.

    MISCELLANEOUS

     

    Section
8.1        Confidentiality.

     

    (a)      All
information furnished by the Company or its Representatives (as defined below),
whether furnished before or after the date hereof, and regardless of the manner
in which it is furnished, is referred to in this Agreement as "Proprietary
Information".  Proprietary Information does not include,
however, information which (a) is or becomes generally available to the public
other than as a result of a disclosure by a Holder or its Representatives, (b)
was available to a Holder on a nonconfidential basis prior to its disclosure to
a Holder by the Company or its Representatives, or (c) becomes available to
a Holder on a nonconfidential basis from a person, other than the Company or any
of its Representatives, who is not bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation to the Company.  As
used in this Agreement, the term "Representative"
means, as to any person, such person's affiliates and its and their directors,
officers, employees, agents, advisors (including, without limitation, financial
advisors, counsel and accountants) and controlling persons.  As used
in this letter agreement, the term "person" shall be broadly interpreted to
include, without limitation, any corporation, company, partnership, other entity
or individual.

     

    (b)      Each
Holder shall keep strictly confidential all Proprietary Information and will
not, without express written authorization signed by an authorized officer of
the Company, use, sell, market or disclose any Confidential Information to any
person for any purpose.  Each Holder shall be responsible for any
breach of this Agreement by any of its Representatives and shall, at its sole
expense, take all reasonable measures (including but not limited to court
proceedings) to restrain its Representatives from prohibited or unauthorized
disclosure of use of the Proprietary Information. Each Holder shall immediately
notify the Company of any unauthorized disclosure and, without affecting the
Company’s rights as a result thereof, take all steps necessary to prevent
further disclosure.
 

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    (c)      In
the event that a Holder is required by, law, regulation, legal process or
regulatory authority to disclose any Proprietary Information or any other
information concerning the Company, such Holder shall provide the Company with
prompt written notice of such request or requirement (to the extent not
prohibited by law or legal process) in order to enable the Company to seek an
appropriate protective order or other remedy, to not object to the Company's
taking steps (at its sole expense) to resist or narrow the scope of such request
or legal process, or to waive compliance, in whole or in part, with the terms of
this Agreement.  If, in the absence of a protective order or other
remedy or waiver of the terms of this letter agreement, a Holder determines upon
the opinion of its legal counsel that such Holder or any Representative is
required by, law, regulation, legal process or regulatory authority to disclose
any Proprietary Information or other information concerning the Company, such
Holder or such Representative may disclose only such Proprietary Information or
other information as must be disclosed by law, regulation, legal process or
regulatory authority and shall exercise reasonable efforts to obtain assurances
that such Proprietary Information or other information will be accorded
confidential treatment.

     

    Section
8.2        No Inconsistent
Agreements.  The Company will not hereafter enter into any
agreement with respect to its securities that is inconsistent with or violates
the rights granted to the Holders in this Agreement.

     

    Section
8.3        Adjustments Affecting
Securities.  The Company will not take any action, or permit
any change to occur, with respect to its securities for the purpose of (i)
materially and adversely affecting the ability of the Holders to include such
Registrable Securities in a registration undertaken pursuant to this Agreement
or (ii) materially and adversely affecting the marketability of such Registrable
Securities in any such registration (including, without limitation, effecting a
stock split or a combination of stock); provided that this Section 8.3 shall not
apply to actions or changes with respect to the Company’s business, earnings or
revenues in which the effect of such actions or changes on the Registrable
Securities is merely incidental.

     

    Section
8.4        Notices.  All
notices, demands or other communications to be given or delivered under or by
reason of the provisions of this Agreement will be in writing and will be deemed
to have been given when delivered personally or by overnight delivery service
with signature proof of delivery, or seventy-two (72) hours after having been
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient.  Such notices, demands and other
communications shall be sent to the Company, to the address of the Company’s
principal office, Attn.: President, or to the Holders, to their most recent
addresses as set forth in the books and records of the Company, or to such other
address or to the attention of such other Person as the recipient party has
specified by prior written notice to the sending party.  Delivery by
telecopy or electronic mail shall not be deemed to be adequate notice
hereunder.

     

    Section
8.5       Remedies.  Any
Person having rights under any provision of this Agreement will be entitled to
enforce such rights specifically and to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all other rights
granted by law.  The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this
Agreement.
 

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    Section
8.6       Amendments and
Waivers.  Except as otherwise provided herein, no amendment,
waiver, modification, termination or cancellation of this Agreement shall be
effective unless made in writing signed by the Company and the Holders of at
least 66-2/3% of the then outstanding Registrable Securities.

     

    Section
8.7       Successors and
Assigns.  The Holder may assign all or any portion of its
rights under this Agreement to any affiliate, partner, member or shareholder of
such Holder or to any Person to whom such Holder transfers at least five percent
(5%) of the Registrable Securities held by such Holder.  Subject to
the foregoing, the rights of the parties under this Agreement shall inure to the
benefit of, and this Agreement shall be binding upon, the successors and assigns
of the parties hereto.

     

    Section
8.8       Severability.  If
any provision of this Agreement shall be held to be illegal, invalid or
unenforceable under any applicable law, then such contravention or invalidity
shall not invalidate the entire Agreement.  Such provision shall be
deemed to be modified to the extent necessary to render it legal, valid and
enforceable, and if no such modification shall render it legal, valid and
enforceable, then this Agreement shall be construed as if not containing the
provision held to be invalid, and the rights and obligations of the parties
shall be construed and enforced accordingly.

     

    Section
8.9       Entire
Agreement.  This Agreement, those documents expressly referred
to herein, and the other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any
way.

     

    Section
8.10      Headings.  The
headings of this Agreement are for convenience only and do not constitute a part
of this Agreement.

     

    Section
8.11     Governing
Law.  The construction, validity and interpretation of this
Agreement will be governed by and construed in accordance with the domestic laws
of the State of California, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.

     

    Section
8.12     Further
Assurances.  Each party to this Agreement hereby covenants and
agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary or appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated
hereby.

     

    Section
8.13     Counterparts.  This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, with the same effect as if all parties had
signed the same document.  All such counterparts shall be deemed an
original, shall be construed together and shall constitute one and the same
instrument.
 

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    Section
8.14      Termination.  Subject
to Section 1.1 hereof, this Agreement shall terminate as to any Holder, when all
Registrable Securities held by such Holder no longer constitute Registrable
Securities.

     

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    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.

     

    
      
        
          	 
      	
                  COMPANY:

                
	 
      	 
      
	 
      	
                  AFH
      HOLDING II, INC.

                
	 
      	 
      	 
      
	 
      	
                  By:

                	/s/
      AMIR F. HESHMATPOUR
	 
      	 
      	
                  Name:
      Amir F. Heshmatpour

                
	 
      	 
      	
                  Title:  
      President

                


        

      

    

    


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                    HOLDERS:

                  
	 
      	 
      
	 
      	/s/
      WILLIAM
      F. GUSTAFSON
	 
      	
                    WILLIAM
      F. GUSTAFSON

                  
	 
      	 
      
	 
      	
                    PRESCOTT
      INTERESTS, LTD.

                  
	 
      	 
      
	 
      	
                    By:

                  	/s/
      JOHN PEARCY
	 
      	 
      	
                    Name:
      John Pearcy

                  
	 
      	 
      	
                    Title:  
      President

                  


          

        

      

    

    


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