Exhibit 10.2


 


EXECUTION COPY


 


UNI-PIXEL, INC.


 


INVESTOR’S RIGHTS AGREEMENT


 


This INVESTOR’S
RIGHTS AGREEMENT (this “Agreement”)
is made as of September 28, 2007, by and between UNI-PIXEL, INC., a Delaware
corporation, (the “Company”),
and Merrill Lynch Pierce, Fenner & Smith Incorporated, a Delaware
corporation (the “Investor”).


 


WHEREAS the Investor is a party to the
Securities Purchase Agreement of even date herewith by and among the Company
and the Investor (the “Securities Purchase
Agreement”), and it is a condition to the closing of the sale of
the Company’s Series C Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), and
Warrants (as defined below) to the Investor that the Company execute and
deliver this Agreement with the Investor.


 


NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto hereby agree as follows:


 


1.             Definitions.
As used in this Agreement, the following terms shall have the respective
meanings set forth below or elsewhere in this Agreement as described below:


 


“Affiliate” of any
Person means any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person, as such terms are used and construed under Rule 144 (as defined
below).


 


“Board” means the
Board of Directors of the Company.


 


“Business Day” means
any day except Saturday, Sunday and any day which is a federal legal holiday or
a day on which banking institutions in the State of New York or Texas are
authorized or required by law or other governmental action to close.


 


“Certificate of Designations”
means the Certificate of Designations of the Series C Preferred Stock filed by
the Company with the Secretary of State of the State of Delaware establishing
the rights, preferences and privileges of the Series C Preferred Stock.


 


“Closing Date” has the
meaning set forth in the Securities Purchase Agreement.


 


“Common Stock” means
the Company’s common stock, par value $0.001 per share, (including any
securities into which or for which such shares may be exchanged, or converted,
pursuant to any stock dividend, stock split, stock combination,
recapitalization, reclassification, reorganization or other similar event).


 


“Conversion Shares”
means the shares of Common Stock issuable upon conversion of the shares of
Series C Preferred Stock, as set forth in the Certificate of Designations.


 

















 


“Equity Securities” means (i) any
Common Stock, preferred stock or other equity security of the Company, (ii) any
security convertible into or exercisable or exchangeable for, with or without
consideration, any Common Stock, preferred stock or other equity security of
the Company (including any option to purchase such a convertible security),
(iii) any security carrying any option, warrant or right to subscribe to or
purchase any Common Stock, preferred stock or other equity security or (iv) any
such option, warrant or right.


 


“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.


 


“Fully Diluted Common Stock” means
the outstanding Common Stock and the shares of Common Stock issued or issuable
upon conversion in full of the shares of Series C Preferred Stock and exercise
in full of the Warrants, together with all other Equity Securities of the
Company outstanding as of any applicable record or measure date, treated on an
as-if-converted or as-if-exercised basis, as applicable.


 


“Holder” means the Investor so long
as it holds Registrable Securities (as defined below) and any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been duly and validly transferred in accordance with Section
9 of this Agreement.


 


“Initial Public Offering” means the
closing of the Company’s first public offering of the Company’s Common Stock
registered under the Securities Act.


 


“Person” (whether or
not capitalized) means an individual, partnership, limited liability company,
corporation, association, trust, joint venture, unincorporated organization,
and any government, governmental department or agency or political subdivision
thereof.


 


“Prospectus” means the
prospectus included in any Registration Statement (as defined below)
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.


 


“Qualified Public Offering” means a
bona fide public offering, pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company, by a reputable investment bank on a firm commitment
underwriting basis in which (x) the price per share of Common Stock is at least
five times (5x) the then applicable Series C Preferred Conversion Price (as
defined in the Certificate of Designations), and (y) the gross cash proceeds to
the Company (before underwriting discounts, commissions and fees) are
$75,000,000 or more (or such other amount as approved by the Board), and
following which offering the Common Stock is listed on the New York Stock
Exchange or admitted to quotation on NASDAQ (or such other appropriate
securities exchange as approved by the Board).


 


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


 


“Registrable Securities”
means, at the relevant time of reference thereto, the Conversion Shares and the
Warrants Shares (including any shares of capital stock that may be issued in
respect thereof pursuant to a stock split, stock dividend, recombination,
reclassification or the like); provided,
however, that the term “Registrable Securities” shall not include any
of the Conversion Shares or Warrant Shares that (a) are actually sold pursuant
to a registration statement that has been declared effective under the
Securities Act by the SEC, (b) may be sold at such time by the holder thereof
pursuant to Rule 144(k) under the Securities Act, or (c) cease to be
outstanding.


 


“Registration Statement”
means any registration statements contemplated by this Agreement, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, pre- and post-effective amendments thereto, all
exhibits thereto, and all material incorporated by reference in such
registration statement or Prospectus.


 


“Restricted Securities” means any
Registrable Securities required to bear the legend set forth in Section 9(b)
of this Agreement.


 


“Rule 144” means Rule
144 promulgated under the Securities Act and any successor or substitute rule,
law or provision.


 


“SEC” means the
Securities and Exchange Commission.


 


“Securities Act” means
the Securities Act of 1933, as amended, and all of the rules and regulations
promulgated thereunder.


 


“Shares” means the shares of Series C
Preferred Stock issued and sold by the Company to the Investor pursuant to the
Securities Purchase Agreement.


 


“Warrant Shares” means the shares of
Common Stock issued or issuable upon the exercise of the Warrants.


 


“Warrants” means the warrants to
purchase up to in aggregate 3,214,289 shares of Common Stock issued to the
Investor pursuant to Section 2.3 of the Securities Purchase Agreement.


 


2.             Demand
Registration.


 


(a)           Request for Registration. If the
Company shall receive at any time after one hundred eighty (180) days following
the effective date of the registration statement for the Initial Public
Offering a written request from the Investor, provided at such time it holds
shares


 


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of Common Stock (on an as-if-converted to Common Stock basis in respect
of the Shares and as-if-exercised basis in respect of the Warrants)
representing in aggregate five percent (5%) or more of the Fully Diluted Common
Stock, that the Company effect any registration with respect to all or a part
of the Registrable Securities held by the Investor, then the Company shall,
subject to the conditions set forth in this Section 2, use its
reasonable best efforts to:


 


(i)            as soon as
practicable, prepare and file with the SEC a Registration Statement on such
form under the Securities Act then available to the Company for the purpose of
registering under the Securities Act all or such portion of the Registrable
Securities as are specified in such request (together with any shares of Common
Stock desired to be included in such Registration Statement for the account of
the Company and/or the account of holders of piggy-back registration rights
with respect to the Common Stock, subject to any limitations that may be
advised by the managing underwriter regarding the maximum size of the offering
pursuant to Section 2(d)); and


 


(ii)           cause such Registration
Statement to be declared effective as soon as practicable but in no event later
than (x) the date that is ninety (90) days following the receipt of such
request, in the event that such Registration Statement is not reviewed by the
SEC or (y) the date that is one hundred twenty (120) days following the receipt
of such request in the event such review takes place (including filing with the
SEC, within three (3) Business Days of the date that the Company is notified in
writing by the SEC that such Registration Statement will not be reviewed or
will not be subject to further review, a request for acceleration of
effectiveness in accordance with Rule 461 promulgated under the Securities Act,
which request shall request an effective date that is within three (3) Business
Days of the date of such request), and to remain effective, subject to the
provisions of Section 2(c), for not less than 180 days. The Company
shall notify the Investor in writing promptly (and in any event within three
(3) Business Days) after such Registration Statement has been declared
effective by the SEC.


 


(b)           Limitations. The Company shall not be
obligated to effect, or to take any action to effect, any registration pursuant
to this Section 2:


 


(i)            in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process, qualify to do business as a foreign corporation
or become subject to taxation in such jurisdiction, in effecting such
registration, qualification or compliance, unless the Company is already
subject to service, qualified to do business or subject to taxation in such
jurisdiction and except as may be required by the Securities Act;


 


(ii)           after the Company has
effected two (2) such registrations pursuant to this Section 2 (counting
for these purposes only registrations which have been (A) declared or ordered
effective and pursuant to which securities have been sold as contemplated in
the Registration Statement or (B) withdrawn at the request of the requesting
Investor other than as a result of a material adverse change to the Company);


 


(iii)          during the period
starting with the date sixty (60) days prior to the


 


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Company’s good faith estimate of the date of
the filing of and ending on a date one hundred eighty (180) days following
the effective date of a registration for the Company’s account that is subject
to Section 3 hereof; provided, however, that the Company is actively employing in good
faith its best efforts to cause such registration statement to become
effective; or


 


(iv)          if the Investor proposes
to dispose of Registrable Securities that may be immediately registered on
Form S-3 pursuant to Section 4 hereof for disposal in the
manner requested.


 


(c)           Deferral. Notwithstanding anything in
this Section 2 to the contrary, if the Company shall furnish to the
Investor a certificate signed by the President, Chief Executive Officer or
Chief Financial Officer of the Company stating that the Board has made the good
faith determination (i) that the filing of a Registration Statement pursuant to
this Section 2 covering the Registrable Securities would require, under
the Securities Act, premature disclosure in such Registration Statement (or the
Prospectus relating thereto) of material, nonpublic information concerning the
Company, its business or prospects or any proposed material transaction
involving the Company, (ii) that such premature disclosure would be materially
adverse to the Company, its business or prospects or any such proposed material
transaction or otherwise would not be in the best interests of the Company and
(iii) that it is therefore essential to defer the filing of such Registration
Statement (and the Prospectus relating thereto), then the Company shall have
the right to defer the filing of such Registration Statement (and the
Prospectus relating thereto) for a period not greater than sixty (60)
consecutive days; provided, however,
that the Company shall not defer its obligation in this manner more than twice
in any consecutive twelve (12) month period. The Company agrees that, as
promptly as possible after the consummation, abandonment or public disclosure
of the circumstances that caused the Company to defer the filing of such
Registration Statement (and the Prospectus relating thereto) pursuant to this Section
2(c), the Company will as soon as practicable file such Registration
Statement.


 


(d)           Underwriting. If the Investor intends
to distribute the Registrable Securities covered by its request by means of an
underwriting, it shall so advise the Company as a part of its request made
pursuant to this Section 2. In such event, the right of the Investor to
include all or any portion of its Registrable Securities in such registration
pursuant to this Section 2 shall be conditioned upon the Investor’s
participation in such underwriting and the inclusion of the Investor’s
Registrable Securities to the extent provided herein. The Company shall
(together with the Investor) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Investor, which underwriters are reasonably acceptable
to the Company.


 


If the
managing underwriter advises the Investor in writing that, in its opinion, the
number of shares requested by the Investor to be included in such registration,
as well as any other shares requested by other shareholders to be included in
such registration pursuant to any piggy-back registration rights or proposed to
be included by the Company, is likely to affect materially and adversely the
success of the offering, the timing, the method of distribution or the price
that would be received for any shares of Common Stock offered in such offering,
then, notwithstanding anything in this Section 2 or any other agreements
of the Company with any other shareholders to the contrary, the Company shall
be required to include in such registration


 


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the Registrable Securities requested to be
included in such registration for the account of the Investor, in priority to
any other shareholders and the Company.


 


If the
Investor has requested inclusion of Registrable Securities in such registration
as provided above and does not agree to the terms of any such underwriting, the
Investor’s Registrable Securities may be excluded therefrom. Any Registrable
Securities excluded or withdrawn from such underwriting shall also be withdrawn
from such registration. If Registrable Securities are so withdrawn from the
registration, and if the number of Registrable Securities to be included in
such registration was previously reduced as a result of marketing factors
pursuant to this Section 2(d),
then the Company shall then offer to other shareholders who have retained
rights to include securities in the registration the right to include
additional shares in the registration in an aggregate amount equal to the
number of shares so withdrawn.


 


3.             “Piggyback”
Registration.


 


(a)           Company
Registration. If at any time the Company proposes to register any of its
Common Stock under the Securities Act for an underwritten offering, whether for
its own account (other than in connection with the Initial Public Offering) or
the account of others (but excluding any registrations to be effected on Forms
S-4 or S-8 or other applicable successor forms), the Company shall, each such
time, give to all Holders twenty (20) days’ prior written notice of its intent
to do so, and such notice shall describe the proposed registration and shall
offer such Holders the opportunity to include in such registration such number
of Registrable Securities as each such Holder may request. Upon the written
request of any Holder given to the Company within fifteen (15) days after the
receipt of any such notice by the Company, the Company shall include in such
Registration Statement the Registrable Securities of such Holder requested to
be registered, subject to cut-back as provided in Section 3(b) below. The
Holders of Registrable Securities shall be permitted to join in any demand for
registration by any other shareholders of the Company pursuant to any
registration rights that they may have (including in respect of an Initial
Public Offering), and in such event the Registrable Securities held by such Holders
shall be counted for purposes of determining whether the minimum number of
shares entitled to demand registration shall have made such demand (to the
extent required) and the Holders shall be entitled to the piggyback
registration rights provided in this Section 3 in any registration
effected by the Company pursuant to such demand.


 


(b)           If the managing
underwriter advises the Company in writing that, in its opinion, the number of
shares requested by the Holders to be included in such registration is likely
to affect materially and adversely the success of the offering, the timing, the
method of distribution or the price that would be received for any shares of
Common Stock offered in such offering, then, notwithstanding anything in this Section
3 to the contrary, the Company shall only be required to include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering without such effect (the “Maximum Number”), a number of shares
of Common Stock requested to be included in such registration: (i) if such
registration is being made pursuant to the exercise of the demand registration
rights of a shareholder of the Company, then those shares to be registered for
the account of the demanding shareholder up to the Maximum Number, and if all
such shares do not exceed the Maximum Number, then such other shares to be
registered for the account of the


 


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Company, such
Holders and such other stockholders of the Company exercising their piggy-back
registration rights, in an amount up to the remaining balance of the Maximum
Number, pro rata on the basis of the number of shares of Common Stock that each
of them has requested or proposed to be included in such registration; and (ii)
if such registration is being made for the Company’s own account, then those
shares to be registered for the Company up to the Maximum Number, and if all
such shares do not exceed the Maximum Number, then such other shares to be
registered for the account of the Holders and such other stockholders of the
Company exercising their piggy-back registration rights, in an amount up to the
remaining balance of the Maximum Number, pro rata on the basis of the number of
shares of Common Stock that each of them has requested or proposed to be
included in such registration. Notwithstanding the foregoing, in no event shall
the amount of securities of the selling Holders included in the offering be
less than thirty percent (30%) of the total number of shares originally
requested by the Holders to be included in such offering. For purposes of the
preceding sentence concerning apportionment, for any selling shareholder that
is a Holder of Registrable Securities and that is an investment fund,
partnership or corporation, the affiliated investment funds, partners, retired
partners and shareholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single selling Holder, and any
pro rata reduction with respect to such selling Holder, shall be based upon the
aggregate amount of Registrable Securities requested to be included in such
registration by all such related entities and individuals.


 


(c)           The Company shall not
be required under this Section 3 or otherwise to include the Registrable
Securities of any Holder in any such registration unless such Holder accepts
and agrees to the terms of the underwriting, which shall be reasonable and
customary, as agreed upon between the Company and the underwriters selected by
the Company, and such Holder complies with its obligations under Section 8
hereof.


 


4.                                       Registration
on Form S-3.


 


(a)           Request for Form S-3 Registration. After
the Initial Public Offering, the Company shall use its reasonable best efforts
to qualify for registration on Form S-3 or any comparable or successor form or
forms. After the Company has qualified for the use of Form S-3, in addition to
the rights contained in Sections 2 and 3 and subject to the
conditions set forth in this Section 4, if the Company shall receive
from a Holder or Holders of Registrable Securities a written request that the
Company effect any registration on Form S-3 or any similar short form
registration statement with respect to all or part of the Registrable
Securities, the Company shall take all such action with respect to the
registration of such Registrable Securities as required by Section 2(a)(i)
and (ii), and upon the effectiveness of the Registration Statement, to
maintain such effectiveness for offers and sales from time to time, on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, of
the Registrable Securities requested to be included until all of the Registrable
Securities registered thereunder shall have been sold in the matter
contemplated therein.


 


(b)           Limitations on Form S-3 Registration.
The Company shall not be obligated to effect, or take any action to effect, any
such registration pursuant to this Section 4 in any of the circumstances
described in Section 2(b)(i) or (iii), and shall not be required
to effect


 


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more than two registrations per year pursuant to Section 4(a).


 


(c)           Deferral;
Suspension. Notwithstanding anything in this Section 4 to the
contrary, if the Company shall furnish to the Investor a certificate signed by
the President, Chief Executive Officer or Chief Financial Officer of the
Company stating that the Board has made the good faith determination (i) that
upon the advice of counsel the continued use by the Investor of a Registration
Statement pursuant to this Section 4 for purposes of effecting offers or
sales of Registrable Securities pursuant thereto would require, under the Securities
Act, premature disclosure in such Registration Statement (or the Prospectus
relating thereto) of material, nonpublic information concerning the Company,
its business or prospects or any proposed material transaction involving the
Company and (ii) that such premature disclosure would be materially adverse to
the Company, its business or prospects or any such proposed material
transaction or otherwise would not be in the best interests of the Company,
then the right of the Investor to use such Registration Statement (and the
Prospectus relating thereto) for purposes of effecting offers or sales of
Registrable Securities pursuant thereto and the filing of such Registration
Statement pursuant to a request under this Section 4 may be suspended or
deferred, as the case may be, for a period (the “Suspension
Period”) not greater than sixty (60) consecutive days and with
not more than two (2) Suspension Periods in any consecutive twelve (12) month
period. During the Suspension Period, the Investor shall not offer or sell any
Registrable Securities pursuant to or in reliance upon such Registration
Statement (or the Prospectus relating thereto). The Company agrees that, as
promptly as possible after the consummation, abandonment, public disclosure or
other appropriate resolution of the event or transaction that caused the
Company to suspend the use or delay the filing of such Registration Statement
(and the Prospectus relating thereto) pursuant to this Section 4(c), the
Company shall as promptly as possible lift any suspension or terminate any
delay, as the case may be, provide the Investor with revised Prospectuses, if
required, and notify the Investor of their ability to effect offers or sales of
Registrable Securities pursuant to or in reliance upon such Registration
Statement.


 


(d)           Underwriting. If the Holders
requesting registration under this Section 4 intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
the provisions of Section 2(d) shall apply to such registration. Notwithstanding
anything contained herein to the contrary, registrations effected pursuant to
this Section 4 shall not be counted as requests for registration or
registrations effected pursuant to Section 2.


 


5.             Obligations of the Company. In
connection with the Company’s registration obligations hereunder, the Company
shall, as expeditiously as practicable:


 


(a)           (i) Furnish to each Holder copies of all
Registration Statements filed with the SEC prior to their being filed with the
SEC, (ii) use commercially reasonable efforts to cause its officers and
directors, counsel and certified public accountants to respond to such
inquiries and provide such certification, opinions and review letters as shall
be necessary, in the reasonable opinion of such Holder or its counsel, to
conduct a reasonable investigation within the meaning of the Securities Act and
customary for the registration and distribution pursuant thereto, and (iii)
notify the Holders of any stop order issued or threatened by the SEC and use best
efforts to prevent the entry of such stop order or to remove it if entered.


 


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(b)           Prepare
and file with the SEC such amendments and supplements, including post-effective
amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to comply with the Securities Act and
to keep the Registration Statement continuously effective as required herein,
and prepare and file with the SEC such additional Registration Statements as
necessary to register for resale under the Securities Act all of the
Registrable Securities to include naming any permitted transferees of
Registrable Securities as selling stockholders in such Registration Statement
and otherwise as required pursuant to Sections 5(c) or (d) below;
(ii) cause any related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as practicable to any comments received
from the SEC with respect to each Registration Statement or any amendment
thereto and as promptly as practicable provide the Holders true and complete
copies of all correspondence from and to the SEC relating to the Registration
Statement (other than correspondence containing material nonpublic
information); and (iv) comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by such Registration Statement as so amended or in such Prospectus as
so supplemented.


 


(c)           Notify the Holders and
their counsel as promptly as practicable: 
(i) when the SEC notifies the Company whether there will be a “review”
of a Registration Statement and whenever the SEC comments in writing on such
Registration Statement and (ii) when a Registration Statement, or any
post-effective amendment or supplement thereto, has become effective, and after
the effectiveness thereof:  (A) of any
request by the SEC or any other federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (B) of the issuance by the SEC or any state securities
commission of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation
of any proceedings for that purpose; and (C) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any proceeding for such
purpose. Without limitation of any remedies to which the Investor may be
entitled under this Agreement, if any of the events described in Section
5(c)(ii)(A), (B), and (C) occurs, the Company shall use best
efforts to respond to and correct the event. Upon its receipt of written
notification from the Company of the occurrence of any of the events described
in Section 5(c)(ii)(A),  (B) and (C), each Holder shall not
offer or sell any of its Registrable Securities pursuant to the Prospectus
until it has been advised in writing by the Company that it may resume sales,
either under such Prospectus or pursuant to any amendment or supplement thereto
delivered by the Company to such Holder.


 


(d)           Notify the Holders and their counsel as
promptly as practicable of the occurrence (but not the nature or details) of
any event as a result of which the Prospectus included in or relating to a Registration
Statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading; and, thereafter, the
Company shall as promptly as practicable prepare (and, when completed, give
notice to the Investor) 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


 


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of a material fact or omit to state any fact necessary to make the
statements therein not misleading; provided, however, that upon such notification by the Company, the
Holders shall not offer or sell Registrable Securities pursuant to such
Prospectus until the Company has notified the Investor that it has prepared a
supplement or amendment to such Prospectus and delivered copies of such
supplement or amendment to the Investor (it being understood and agreed by the
Company that the foregoing proviso shall in no way diminish or otherwise impair
the Company’s obligation to as promptly as practicable prepare a Prospectus
amendment or supplement as above provided in this Section 5(d) and
deliver copies of same as above provided in Section 5(h) hereof).


 


(e)           Upon the occurrence of any event described
in Section 5(d) hereof, as promptly as practicable, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading.


 


(f)            Use reasonable best efforts to avoid the
issuance of or, if issued, obtain the withdrawal of, (i) any order suspending
the effectiveness of any Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as promptly as possible.


 


(g)           Furnish to the Holders
and their counsel, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, and all exhibits to the
extent requested by such Holder or their counsel (including those previously
furnished or incorporated by reference) as promptly as practicable after the
filing of such documents with the SEC.


 


(h)           As promptly as
practicable furnish to each selling Holder, without charge, such number of
copies of a Prospectus, including a preliminary Prospectus, in conformity with
the requirements of the Securities Act, and such other documents (including,
without limitation, Prospectus amendments and supplements) as each such selling
Holder may reasonably request in order to facilitate the disposition of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto to the extent permitted
by federal and state securities laws and regulations.


 


(i)            Use reasonable best
efforts to register and qualify (or obtain an exemption from such registration
and qualification of) the Registrable Securities under such other securities or
blue sky laws of the states of residence of each Holder and such other
jurisdictions as each Holder shall reasonably request, to keep such
registration or qualification (or exemption therefrom) effective during the
periods each Registration Statement is effective, and do any and


 


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all other acts
or things which may be reasonably necessary or advisable to enable each Holder
to consummate the public sale or other disposition of Registrable Securities in
such jurisdiction; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business, to
file a general consent to service of process or become subject to taxation in
any such states or jurisdictions where it is not then qualified or subject to
process or taxation.


 


(j)            Cooperate with the
Holders to facilitate the timely preparation and delivery of certificates
representing the Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to the
extent permitted by this Agreement, the Securities Purchase Agreement and
applicable law, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as such
Holders may request.


 


(k)           Cooperate with any
reasonable due diligence investigation undertaken by the Holders, any managing
underwriter participating in any disposition pursuant to a Registration
Statement, Holders’ counsel and any attorney, accountant or other agent
retained by Holders or any managing underwriter, in connection with the sale of
the Registrable Securities, including, without limitation, making available any
documents and information; provided, however, that the Company will not deliver or make available
to any Holder material, nonpublic information unless such Holder specifically
requests and consents in advance in writing to receive such material, nonpublic
information and, if requested by the Company, such Holder agrees in writing to
treat such information as confidential and use its reasonable best efforts to
maintain the confidentiality thereof.


 


(l)            At the request of an
Affiliate of a Holder, the Company shall amend any Registration Statement to
include such Affiliate as a selling stockholder in such Registration Statement.


 


(m)          Comply with all
applicable rules and regulations of the SEC.


 


6.             Expenses of Registration.
The Company shall pay for all expenses (exclusive of underwriting discounts and
commissions, if any) incurred in connection with a registration pursuant to
this Agreement and compliance with Section 5 of this Agreement,
including, without limitation, (i) all registration, filing and qualification
fees and expenses (including without limitation those related to filings with
the SEC, or any national securities exchange or automated quotation system upon
which the Company’s securities are listed or admitted for quotation and in
connection with applicable state securities or blue sky laws), (ii) all
printing expenses, (iii) all messenger, telephone and delivery expenses
incurred by the Company, (iv) all fees and disbursements of counsel for the
Company and of one counsel for the Holders, such fees and disbursements of
counsel for the Holders not to exceed $75,000, and (v) all fees and expenses of
all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement.


 


7.             Indemnification.
In the event that any Registrable Securities of the Investor are included in a
Registration Statement pursuant to this Agreement:


 


11

















 


(a)           To the fullest extent
permitted by law, the Company will indemnify and hold harmless the Investor and
each officer, director, fiduciary, agent, investment advisor, employee, member
(or other equity holder), general partner and limited partner (and Affiliates
thereof) of the Investor, each broker, underwriter or other person acting on
behalf of the Investor and each person, if any, who controls the Investor
within the meaning of the Securities Act, against any losses, claims, damages
or liabilities, or administrative, judicial, regulatory or civil proceedings,
joint or several (the “Losses”)
to which they may become subject under the Securities Act or otherwise, insofar
as such Losses (or actions in respect thereof) arise out of or relate to any
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, or arise out of or relate to 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 any violation by
the Company of the Securities Act or state securities or blue sky laws
applicable to the Company or the relevant registration and leading to action or
inaction required of the Company in connection with such registration or
qualification under such Securities Act or state securities or blue sky laws;
and, subject to the provisions of Section 7(c) hereof, the Company will
reimburse on demand, upon receipt of written evidence, the Investor, such
broker or other person acting on behalf of the Investor or such officer,
director, fiduciary, employee, member (or other equity holder), general
partner, limited partner, affiliate or controlling person for any legal or
other expenses reasonably incurred by any of them in connection with
investigating or defending any such Losses (or actions in respect thereof); provided, however, that
the indemnity agreement contained in this Section 7(a) or Section
7(e) shall not apply to amounts paid in settlement of, or pursuant to any
judgment relating to, any such Losses if such settlement is effected, or
consent to such judgment is entered, 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 Losses (or actions in respect thereof), to the
extent that it arises out of or is based upon (i) an untrue statement of any
material fact contained in the Registration Statement or omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, in reliance upon and in conformity with written
information furnished by the Investor to the Company expressly for use in such
Registration Statement, or (ii) the failure of the Investor to cease all offers
and sales of Registrable Securities when required to do so pursuant to Sections
4(c), 5(c) and (d) hereof.


 


(b)           To the fullest extent
permitted by law, the Investor 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 and each broker, underwriter or other person acting on
behalf of the Company, against any Losses to which any of them may become
subject under the Securities Act or otherwise, insofar as and to the extent
such Losses (or actions in respect thereto) arise out of or are based upon any
untrue statement of any material fact contained in the Registration Statement,
or arise out of or relate to the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement in reliance upon and in conformity with written information furnished


 


12

















 


by the
Investor to the Company expressly for use in such Registration Statement, or to
the extent such Losses (or actions in respect thereof) arise out of or are
based upon the failure of the Investor to cease all offers and sales of
Registrable Securities when required to do so pursuant to Sections 4(c),
5(c) and (d); and, subject to the provisions of Section 7(d)
hereof, the Investor will reimburse on demand, upon receipt of written
evidence, any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, or such broker, underwriter or
other person acting on behalf of the Company, in connection with investigating
or defending any such Losses; provided, however, that the maximum aggregate amount of liability of
the Investor under this Section 7 shall be limited to the proceeds (net
of underwriting discounts and commissions, if any) actually received by the
Investor from the sale of Registrable Securities covered by such Registration
Statement; and provided  further,
however, that the indemnity agreement
contained in this Section 7(b) or Section 7(e) shall not apply to
amounts paid in settlement of, or pursuant to any judgment relating to, any
such Losses if such settlement is effected, or consent to such judgment is
entered, without the consent of the Investor against which the request for
indemnity is being made (which consent shall not be unreasonably withheld).


 


(c)           As promptly as
practicable after receipt by an indemnified party under this Section 7
of notice of the threat, assertion or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify the indemnifying party
in writing of the commencement thereof and the indemnifying party shall have
the right to participate in and, to the extent the indemnifying party desires,
jointly with any other indemnifying party similarly noticed, to assume at its
expense the defense thereof with counsel mutually satisfactory to the parties; provided, however, that,
the failure to notify an indemnifying party promptly of the threat, assertion
or commencement of any such action shall not relieve such indemnifying party of
any liability to the indemnified party under this Section 7 except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced
the indemnifying party.


 


(d)           If any indemnified
party shall have reasonably concluded that there may be one or more legal
defenses available to such indemnified party which are different from or
additional to those available to the indemnifying party, or that such claim or
litigation involves or could have an effect upon matters beyond the scope of
the indemnity agreement provided in this Section 7, the indemnifying
party shall not have the right to assume the defense of such action on behalf
of such indemnified party, and such indemnifying party shall reimburse such
indemnified party and any person controlling such indemnified party for the
fees and expenses of one counsel retained by the indemnified party which are
reasonably related to the matters covered by the indemnity agreement provided
in this Section 7. Subject to the foregoing, an indemnified party shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall not be
at the expense of the indemnifying party.


 


(e)           If the indemnification
provided for in this Section 7 from the indemnifying party is applicable
by its terms but unavailable to an indemnified party hereunder in respect of
any Losses, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall,


 


13

















 


subject to the
maximum aggregate liability of such indemnifying party hereunder, 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 and indemnified party in connection with the actions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative faults of such indemnifying party and indemnified party 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 made 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 such action. The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Section 7(a), (b), (c) and (d),
any legal or other fees, charges or expenses reasonably incurred by such party
in connection with any investigation or proceeding. 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 fraudulent misrepresentation. The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 7(e)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
paragraph.


 


(f)            The indemnity and
contribution agreements contained in this Section are in addition to (not in
lieu of) any liability that any indemnifying party may have to any indemnified
party.


 


8              Information by
Holder. Each Holder shall, as a condition to the inclusion of any of its
Registrable Securities in any registration hereunder, furnish to the Company
such information regarding itself and the Registrable Securities held by it and
the method or proposed method of disposition of such securities as the Company
may reasonably request in writing as necessary to effect the registration,
qualification or compliance referred to in Sections 2, 3, 4
or 5 or as otherwise necessary to comply with the Securities Act and any
applicable state securities laws.


 


9.             Restrictions on
Transfer.


 


(a)           The holder of each
certificate representing Registrable Securities by acceptance thereof agrees to
comply in all respects with the provisions of this Section 9. Each Holder agrees not to make any sale,
assignment, transfer, pledge or other disposition of all or any portion of the
Restricted Securities, or any beneficial interest therein, except (i) pursuant
to an effective registration statement under the Securities Act, including such
as required hereunder, or (ii) pursuant to an available exemption from
registration under the Securities Act (including sales permitted pursuant to
Rule 144) and applicable state securities laws. Any transfer or purported
transfer of the Restricted Securities in violation of this Section 9
shall be void. The Company shall not be required to register any transfer of
the Restricted Securities in violation of this Section 9. The Company
may, and may instruct any transfer agent for the Company, to place such stop
transfer orders as may be required on the transfer books of the Company in
order to ensure compliance with the provisions of this Section 9.


 


14

















 


(b)           Each certificate
representing Registrable Securities shall (unless otherwise permitted by the
provisions of this Agreement) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required
under applicable state securities laws):


 


THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
REGISTRATION UNDER SAID ACT.


 


(c)           The legend set forth in
Section 9(b) shall be removed from the certificates evidencing the
Restricted Securities, (i) in connection with any sale of such Restricted
Securities pursuant to Rule 144 or any effective registration statement,
including such as required hereunder, or (ii) if such Restricted Securities are
eligible for sale under Rule 144(k) (and the holder of such Restricted
Securities has submitted a written request for removal of the legend certifying
that the holder is in compliance with the applicable provisions of Rule 144(k))
or (iii) if such legend is not required under applicable requirements of the
Securities Act (including interpretations and pronouncements issued by the
Staff of the SEC) (and the holder of such Restricted Securities has submitted a
written request for removal of the legend certifying that such legend is not
required under applicable requirements of the Securities Act (including such
interpretations and pronouncements)) and, if reasonably requested by the
Company, the Company has received from the Holder’s counsel an opinion, in such
form as is reasonably satisfactory to Company’s counsel, that such legend is
not so required. The Company shall cause its counsel to issue a legal opinion
to the Company’s transfer agent, if required, promptly upon the occurrence of
any of the events in clauses (i), (ii) or (iii) above to effect the removal of
the legend on certificates evidencing the Restricted Securities and shall also
cause its counsel to issue a “blanket” legal opinion to the Company’s transfer
agent, if required, promptly after the effective date of any registration
statement, including such as required hereunder, covering the resale of the
Restricted Securities to allow sales without restriction pursuant to such
registration statement. The Company agrees that at such time as such legend is
no longer required under this Section 9, it will, promptly following the
delivery by a Holder to the Company or the Company’s transfer agent of a
certificate representing the Restricted Securities issued with such legend,
deliver or cause to be delivered to or as directed by such Holder a certificate
representing such Restricted Securities that is free from such legend; provided, however, that
in the case of removal of the legend in connection with a sale pursuant to Rule
144, the holder of such Restricted Securities has submitted a written request
for removal of the legend indicating that the holder has complied with the
applicable provisions of Rule 144, including delivery of a broker’s
representation letter and a copy of a Form 144 filed in connection with such
sale. The Company may not make any notation on its records or give instructions
to any transfer agent of the Company that enlarge the restrictions on transfer
set forth in this Section.


 


15

















 


10.           Reports Under the
Exchange Act. With a view to making available to the Holders the benefits
of Rule 144 and any other rule or regulation of the SEC that may at any time
permit the Holders to sell the Registrable Securities to the public without
registration, the Company agrees to use best efforts to: (i) make and keep
public information available, as those terms are understood and defined in Rule
144; (ii) file with the SEC in a timely manner all reports and other documents
required to be filed by an issuer of securities registered under the Securities
Act or the Exchange Act; (iii) as long as any Holder owns any Restricted
Securities, to furnish in writing upon such Holder’s request a written
statement by the Company that it has complied with the reporting requirements
of Rule 144 and of the Securities Act and the Exchange Act, and to furnish to
such Holder a copy of the most recent annual and quarterly reports of the
Company, and such other reports and documents so filed by the Company as may be
reasonably requested in availing such Holder of any rule or regulation of the
SEC permitting the selling of any such Restricted Securities without
registration; and (iv) undertake any additional actions reasonably necessary to
maintain the availability of a Registration Statement, including on any
successor or substitute forms, and the use of Rule 144.


 


11.           Limitations on
Subsequent Registration Rights. From and after the date of this Agreement,
the Company shall not, without the prior written consent of the Holders of a
majority of the then outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the
Company giving such holder or prospective holder any registration rights the
term of which are senior to the registration rights granted to the Holders
hereunder.


 


12.           Information
Covenants of the Company. If at any time the Company shall cease to be a
reporting company under the Exchange Act, the Company shall furnish the
following reports to the Investor (but only so long as the Investor, together
with its Affiliates, holds Series C Preferred Stock and/or Warrants representing
(on an as-if-converted and/or as-if-exercised basis, respectively) five percent
(5%) or more of the Company’s Fully Diluted Common Stock):


 


(a)           As soon as practicable
after the end of each fiscal year of the Company, and in any event within
ninety (90) days after the end of each fiscal year of the Company, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated statements of income and cash
flows of the Company and its subsidiaries, if any, for such fiscal year,
prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), applied on a consistent
basis during the periods involved, except as indicated therein or in the notes
thereto, audited by nationally recognized independent accounting firm
experienced with rapidly growing companies selected by the Company.


 


(b)           As
soon as practicable after the end of each of the first three (3) quarterly
accounting periods in each fiscal year of the Company, and in any event within
forty five (45) days after the end of each such quarterly accounting period,
(i) an unaudited consolidated balance sheet of the Company and its
subsidiaries, if any, as at the end of such quarterly accounting period, and
unaudited consolidated statements of income and cash flows of the Company and
its subsidiaries, if any, for such fiscal period, prepared in accordance with
GAAP, applied on a consistent basis during the periods involved, subject to
normal year-end audit adjustments, together with an appropriately detailed and
informative discussion and review by


 


16

















 


management of the financial results and performance of the Company and
material developments in its business during such fiscal period, and (ii) a
statement showing the number of shares of each class and series of capital
stock and securities convertible into or exercisable for shares of capital
stock outstanding at the end of the period, the number of common shares
issuable upon conversion or exercise of any outstanding securities convertible
or exercisable for common shares and the exchange ratio or exercise price
applicable thereto, all in sufficient detail as to permit the Investor to
calculate its percentage equity ownership in the Company.


 


(c)           As
soon as practicable after the end of each month, and in any event within thirty
(30) days after the end of each month, an unaudited consolidated balance sheet
of the Company and its subsidiaries, if any, as at the end of such month, and
unaudited consolidated statements of income and cash flows of the Company and
its subsidiaries, if any, for such month, prepared in accordance with GAAP,
applied on a consistent basis during the period involved, subject to normal
year-end audit adjustments.


 


(d)           At least thirty (30)
days prior to the beginning of each fiscal year, an annual budget and operating
plans of the Company for such fiscal year (and as soon as available, any
subsequent revisions thereto), such annual budget and operating plans
(including an subsequent revisions thereto) to be approved by the Board.


 


13.           “Market Stand-Off” Agreement. The Investor hereby agrees
that it will not, without the prior written consent of the managing
underwriter, during the period commencing on the date of the final prospectus
relating to the Initial Public Offering and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred
eighty (l80) days) (i) lend, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
held immediately prior to the effectiveness of the Registration Statement for
such offering, or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or
other securities, in cash or otherwise. The foregoing provisions of this Section 13
shall only be applicable to the Investor if all officers, directors and greater
than one percent (1%) shareholders of the Company enter into similar agreements.
The underwriters in connection with the Initial Public Offering are intended
third-party beneficiaries of this Section 13 and shall have the
right, power and authority to enforce the provisions hereof as though they were
a party hereto. The Investor further agrees to execute such agreements as may
be reasonably requested by the underwriters in the Initial Public Offering that
are consistent with this Section 13 or that are necessary to give
further effect thereto. Any discretionary
waiver or termination of the restrictions of any or all of such agreements by
the Company or the underwriters shall apply to all of the parties subject thereto,
including the Investor, pro rata based on the number of shares subject to such
restrictions.


 


17

















 


14.           Investor’s
Participation Rights in Subsequent Financings.


 


(a)           Subject to applicable
securities laws, following the Closing and prior to the Qualified Public
Offering, the Company shall not, and shall not agree to, issue, sell or
exchange any debt securities or Equity Securities in a financing transaction
(any transaction other than the excluded transactions described in subsection
(b) below being deemed to be a financing transaction) (a “Financing”),
unless the Company shall have first complied with this Section 14. The
Company shall deliver to the Investor a written notice (the “Offer”) of any proposed or intended
Financing and the Investor shall have the right of first refusal to participate
in the Financing, up to 50% of the amount of such Financing. The Offer shall
describe the terms, including price and amount, of the Financing and include a
reasonably detailed calculation of the Investor’s participation right in
accordance with the foregoing. The Investor shall provide written notice to the
Company within ten (10)  Business Days from the giving of the Offer (the “Election Period”) of the amount, if
any, of the Financing as to which it intends to exercise its participation
right as provided above. The Investor’s rights under this Section 14 shall
terminate at such time as the aggregate amount of Financings subject to this
Section 14 and completed by the Company after the Closing equals or exceeds $70
million.


 


(b)           The foregoing right of
first refusal shall not apply to any of the following:


 


(i)            the conversion of the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;


 


(ii)           the
exercise of warrants issued in connection with the Series B Preferred Stock or
Series C Preferred Stock;


 


(iii)          shares of Common Stock
(or options thereon) (subject to adjustment for any stock splits, reverse stock
splits, combinations or similar events affecting the Common Stock after the
date of this Agreement) issued after the Closing Date to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary
thereof pursuant to stock purchase or stock option plans or other compensatory
arrangements (collectively, “Plans”); provided, however, that
any such issuances are approved in accordance with the Certificate of
Designations;


 


(iv)          Equity Securities issued
pursuant to any rights or agreements, options, warrants or convertible
securities that are outstanding as of the date of this Agreement or that are
issued or granted thereafter; provided, however, that the transaction pursuant to which such rights
or agreements, options, warrants or convertible securities are issued or granted
after the date of this Agreement was conducted in compliance with this Section
14;


 


(v)           any Equity Securities
issued or issuable in connection with any stock split, stock dividend or
recapitalization by the Company for which adjustment is made pursuant to
Section 5 of the Certificate of Designations;


 


(vi)          any Equity Securities
that are issued by the Company in a Qualified Public Offering;


 


18

















 


(vii)         any Equity Securities
issued in connection with bona fide acquisitions, mergers or other strategic
transactions approved by the Board; and


 


(viii)        any
Equity Securities issued to any Person as a component of any business
relationship with such Person, the terms of which business relationship and
transaction are approved by the Board, primarily for (x) joint venture,
technology licensing or development activities purposes, (y) purposes of
distribution, supply or manufacture of the Company’s products or services or
(z) any purposes other than raising capital.


 


15.           Pre-Emptive Rights.
In the event that the Company desires to issue any Common Stock or other
securities at any time and from time to time, the Investor shall have the
pre-emptive right to purchase such Common Stock or other securities from the
Company in connection with and on the same terms as any such proposed issuance
in proportion to the Investor’s Fully Diluted Common Stock. The timing of
exercising such pre-emptive rights, the terms of exercise and the timing of the
closing of any purchase thereof shall be determined for each issuance of Common
Stock or other securities by the Board in good faith and shall be conveyed to
the Investor in writing in connection with the notice of such issuance of
Common Stock or such other securities. Notwithstanding the foregoing, the
Investor shall not be entitled to any pre-emptive rights with respect to
issuance of Common Stock or other securities in connection with (i) issuances
of options, warrants or restricted stock to employees, consultants or managers
of the Company approved by the Investor pursuant to the Certificate of
Designations and by the Board in an appropriate amount, in the aggregate, not
to exceed 2% of the Fully Diluted Common Stock (plus that number of reserved
but unissued shares of Common Stock that is reserved for outstanding options
under the Company’s 2005 Equity Incentive Plan as of the date hereof) after the
exercise of such options, warrants or restricted stock (as such number may be
adjusted from time to time to address stock splits, dividends,
recapitalizations and the like); (ii) in connection with any merger or
acquisition of another unaffiliated business, entity or intellectual property
by the Company approved by the Board and the Investor to the extent required by
the Certificate of Designation; and (iii) the conversion of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock or the
exercise of warrants issued in connection with the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock; provided,
that in all cases, the Investor’s rights under this Section 15  shall terminate if the Investor or its affiliates, in the
aggregate, cease to maintain beneficial ownership of (or the right to acquire
beneficial ownership of) a number of shares of Series C Preferred Stock equal
to at least fifty (50%) of the Series C Preferred Stock (as such numbers may be
adjusted from time to time to address changes in capitalization or otherwise).


 


16.           Entire Agreement.
This Agreement, the Securities Purchase Agreement, the Certificate of
Designations and the Warrants constitute and contain the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersede any and all prior negotiations, correspondence, agreements or understandings
with respect to the subject matter hereof.


 


17.           Transfer of Rights.
Subject to Section 9, the Investor may assign or transfer any or all of
its rights under this Agreement to any Person, provided such assignee or
transferee agrees in writing to be bound by the provisions hereof. Upon any
such, and each successive,


 


19

















 


assignment or
transfer to any permitted assignee or transferee in accordance with the terms
of this Section 17, such permitted assignee or transferee shall be
deemed to be an “Investor” for all purposes of
this Agreement.


 


18.           Inspection Rights.
So long as the Investor, together with its Affiliates, holds Series C Preferred
Stock and/or Warrants representing (on an as-if-converted and/or
as-if-exercised basis, respectively) five percent (5%) or more of the Company’s
Fully Diluted Common Stock), it, or any of its officers, employees, agents or
representatives, shall have the right to visit and inspect any of the
properties of the Company and its subsidiaries and to review and copy such
information regarding the affairs, finances, accounts and operations of the
Company and its subsidiaries as reasonably requested from time to time.


 


19.           Miscellaneous.


 


(a)           This Agreement, and any
right, term or provision contained herein, may not be amended, modified or
terminated, and no right, term or provision may be waived, except with the
written consent of (i) the holders of a majority of the Series C Preferred
Stock and (ii) the Company.


 


(b)           This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware, without giving effect to conflicts of laws principles thereof. Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement shall be adjudicated in the Supreme Court of the
State of New York, New York County, or the United States District Court for the
Southern District of New York and each party expressly consents to the
jurisdiction of such courts in any such adjudication and expressly waives any
objection to venue laid therein.


 


(c)           This Agreement shall be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns and transferees, provided
that, with respect to any transfer of rights by the Investor, the terms and
conditions of Section 17 are satisfied.


 


(d)           Any notices to be given
pursuant to this Agreement shall be in writing and shall be given by certified
or registered mail, return receipt request. Notices shall be deemed given when
personally delivered or when mailed to the addresses of the respective parties
as set forth on Exhibit A hereto, or to such changed address of which
any party may notify the others pursuant hereto, except that a notice of change
of address shall be deemed given when received. An electronic communication (“Electronic Notice”)
shall be deemed written notice for purposes of this Section 19(d) if
sent with return receipt requested to the electronic mail address specified by
the receiving party on Exhibit A hereto. A copy of any such communication shall also be sent in accordance with
the first sentence of this Section 19(d). Electronic Notice shall
be deemed received at the time the party sending Electronic Notice receives
verification of receipt by the receiving party.


 


(e)           The parties acknowledge
and agree that in the event of any breach of this Agreement, remedies at law
will be inadequate, and each of the parties hereto shall be entitled to


 


20

















 


specific
performance of the obligations of the other parties hereto and to such
appropriate injunctive relief as may be granted by a court of competent
jurisdiction. All remedies, either under this Agreement or by law or otherwise
afforded to any of the parties, shall be cumulative and not alternative.


 


(f)            This Agreement may be executed in a number
of counterparts. All such counterparts together shall constitute one Agreement
and shall be binding on all the parties hereto notwithstanding that all such
parties have not signed the same counterpart. The parties hereto confirm that
any facsimile copy of another party’s executed counterpart of this Agreement
(or its signature page thereof) will be deemed to be an executed original
thereof.


 


(g)           Except as contemplated in Section 7, Section
14, and Section 17 hereof, this Agreement is intended solely for the
benefit of the parties hereto and is not intended to confer any benefits upon,
or create any rights in favor of, any Person (including, without limitation,
any stockholder or debt holder of the Company) other than the parties hereto.


 


(h)           If any provision of
this Agreement is invalid, illegal or unenforceable, such provision shall be
ineffective to the extent, but only to the extent of, such invalidity,
illegality or unenforceability, without invalidating the remainder of such
provision or the remaining provisions of this Agreement, unless such a
construction would be unreasonable.


 


21

















 


IN WITNESS
WHEREOF, the parties hereto have executed this Investor’s Rights Agreement as
of the date and year first above written.


 


	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNI-PIXEL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Reed J. Killion

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
  INVESTOR:

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH PIERCE, FENNER & SMITH

  
	
   

  	
  INCORPORATED

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 


22

















 


EXHIBIT A


 


NOTICES


 


All
correspondence to the Company shall be addressed as follows:


 


Uni-Pixel,
Inc.


8708
Technology Forest Place


Suite 100


The Woodlands,
Texas 77381


Attention:
James Tassone


Facsimile:
(281) 825-4599


Email:
jtassone@unipixel.com


 


with copies
to:


 


Jones, Walker,
Waechter, Poitevent, Carrère & Denègre, L.L.P.


Four United
Plaza


8555 United
Plaza Boulevard


Baton Rouge,
LA 70809


Attention:
Scott D. Chenevert, Esq.


Facsimile:
(225) 248-2010


Email:
schenevert@joneswalker.com


 


All
correspondence to the Investor shall be addressed as follows:


 


Merrill Lynch
Pierce, Fenner & Smith Incorporated


4 World
Financial Center


New York, NY
10080


Attention:
Lawrence A. First


Telecopy
No.:  (212) 449-4296


 


with a copy
to:


 


Skadden, Arps,
Slate, Meagher & Flom LLP


1000
Louisiana, Suite 6800


Houston, TX
77002


Attention:
Frank E. Bayouth


Telecopy No.:
(713) 655-5115