Document:

Converted by EDGARwiz

Exhibit 10.3 

INVESTORS’ RIGHTS AGREEMENT

THIS INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) is made as of the 31st day of May, 2012, by and among COUPON EXPRESS, INC., a Nevada corporation (the “Company”) and each of the investors listed on Schedule A hereto (the “Investors”) who have purchased Cumulative Convertible Senior Notes (“Senior Notes”) and Warrants (“Warrants”) of the Company.

RECITALS

WHEREAS, the Company and certain investors (“Prior Investors”) entered into that certain Cumulative Convertible Senior Note and Warrant Purchase Agreement dated as of October 24, 2011 pursuant to which the Prior Investors purchased certain senior notes (the “2011 Senior Notes” and together with the Senior Notes, the “Collective Senior Notes”); 

WHEREAS, the Company and the Prior Investors are parties to that certain Investors’ Rights Agreement dated as of October 24, 2011 pursuant to which the Company granted the Prior Investors certain rights attached hereto as Exhibit A; 

WHEREAS, the Company and the new investors listed on Schedule A hereto (“Investors”) are parties to a Cumulative Convertible Senior Note and Warrant Purchase Agreement dated even date herewith;

WHEREAS, the Senior Notes issued to the Investors are convertible into the Company’s Series A Preferred Stock, par value $0.001 (“Preferred Stock”); 

WHEREAS, the Preferred Stock is convertible into, and the Warrants are exercisable for, the Company’s Common Stock, $0.001 par value (“Common Stock”);

WHEREAS, the Company and the Investors desire for this Agreement to govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors, to receive certain information from the Company, and to participate in future equity offerings by the Company, and to govern certain other matters as set forth in this Agreement.

NOW, THEREFORE, the parties hereby agree as follows:

1.

Definitions.  For purposes of this Agreement:

1.1

“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

1.2

 “Collective Senior Notes” shall have the meaning specified in the preamble. 

1.3

 “Common Stock” means shares of the Company’s common stock, par value $0.001 per share.

1.4

“Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law. 

1.5

“Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants. 

1.6

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

1.7

“Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; or (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities.

1.8

“Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

1.9

 “GAAP” means generally accepted accounting principles in the United States.

1.10

“Holder” means any holder of Registrable Securities who is a party to this Agreement.

1.11

“Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.

2

1.12

“Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

1.13

“Investors” shall have the meaning specified in the preamble. 

1.14

 “Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds at least 50% of the Registrable Securities then outstanding.

1.15

“New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.

1.16

“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

1.17

“Purchase Agreement” means that certain Cumulative Convertible Senior Note and Warrant Purchase Agreement, dated May 31, 2012, between the Company and the purchasers party thereto.

1.18

“Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock which in turn is issuable upon conversion of the Collective Senior Notes; (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities (including the Warrants) of the Company, held by the Prior Investors and the Investors as of the date hereof; and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; excluding in all cases, however, (A) any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 5.1 and (B) shares that have been sold pursuant to SEC Rule 144 or under a registration statement, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.13 of this Agreement.

1.19

“Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock that are Registrable Securities  issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities.

1.20

“Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.12(b) hereof.

1.21

“SEC” means the Securities and Exchange Commission.

1.22

“SEC Rule 144” means Rule 144 promulgated by the SEC under 

3

the Securities Act.

1.23

“SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

1.24

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

1.25

“Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6.

1.26

“Senior Notes” shall have the meaning specified in the preamble. 

1.27

“Warrants” shall have the meaning specified in the preamble.

2.

Registration Rights. The Company covenants and agrees as follows:

2.1

Demand Registration.

(a)

Form S-1 Demand. If at any time the Company receives a request from the Holders of a majority of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to Registrable Securities, then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within ninety (90) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement (or other form the Company is eligible to file to effect the registration of the Registrable Securities specified in the Demand Notice under the Securities Act covering all Registrable Securities, in accordance with the intended method of disposition specified in such Demand Notice, that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(b) and Section 2.3.

(b)

Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the 

4

right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period.

(c)

The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective, and provided further such registration does not include securities owned by directors and officers of the Company and is not otherwise an Excluded Registration; or (ii) after the Company has effected one registration pursuant to Section 2.1(a); A registration shall not be counted as “effected” for purposes of this Section 2.1(c) until such time as the applicable registration statement has been declared effective by the SEC and such registration statement has remained effective for a period of not less than one year, with such period extended to the extent any stop order, injunction or other commission or governmental agency orders precludes the use of such registration statement by the Holders, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(c).

2.2

Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

2.3

Underwriting Requirements.

(a)

If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s 

5

Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2.3, if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

(b)

In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by
the Company) are first entirely excluded from the offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members 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 number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

6

(c)

For purposes of Section 2.1(c) a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than all of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included, unless otherwise agreed to by the Holders of a majority of the Registrable Securities then outstanding.

2.4

Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a)

prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one year or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that such one year period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;

(b)

prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

(c)

furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities; 

(d)

use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e)

in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

(f)

use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

(g)

provide a transfer agent and registrar for all Registrable 

7

Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(h)

promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, 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 seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(i)

notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

(j)

after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

(k)

make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction, as soon as practicable;

(l)

cooperate with the selling Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends unless required by applicable law; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to the closing of any sale of Registrable Securities to the underwriters; and

(m)

enter into such agreements (including an underwriting agreement) and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities and in connection therewith, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the Holders of such Registrable Securities with respect to the registration statement, prospectus and documents incorporated by reference, if any, in form, substance and scope as are customarily made by issuers in similar offerings and confirm the same if and when requested; (ii) obtain opinions of counsel to the Company (which may be the general counsel) and updates thereof in the form, scope and substance as are customary in similar offerings; (iii) in the case of an underwritten offering, enter into an underwriting agreement in form, scope and substance as is customary in underwritten 

8

offerings; (iv) furnish to each selling Holder a signed counterpart, addressed to such Holder (and the underwriters, if any) of a “comfort” letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company’s financial statements included in such registration statement, covering the matters with respect to such registration statement (and the prospectus included therein) and with respect to events subsequent to the date of such financial statements, as are customarily covered in accountants’ letters delivered to the underwrites in underwritten public offerings of securities and such other financial matters as such Holder (or the underwrites, if any) may reasonably request; (v) if an underwriting agreement is entered into, the same shall set forth in full the indemnification provisions and procedures of Section 2.8 with respect to all parties to be indemnified pursuant to such section, with such other indemnification provisions as are customary and acceptable to the underwriters, the selling Holders and the Company; and (vi) the Company shall deliver such documents and certificates as may be requested by the selling Holders and the managing underwriters, if any, to evidence compliance with this paragraph (k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.  The above shall be done at each closing under such underwriting or similar agreement or as and to the extent required thereunder.

2.5

Preparation; Reasonable Investigation.  In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company shall give the selling Holders, their underwriters, and their respective counsel and accountants, a reasonable opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto (other than documents filed under the Exchange Act and incorporated by reference therein), and shall give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary in the opinion of such Holders’ and such underwiters’ respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act.

2.6

Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.  

2.7

Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all 

9

selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2.1(a). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

2.8

Indemnification.  If any Registrable Securities are included in a
registration statement under this Section 2:

(a)

To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

(b)

To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

10

(c)

Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

(d)

To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such
Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses) paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

11

(e)

Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f)

Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

2.9

Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company shall:

(a)

make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;

(b)

use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

(c)

furnish to any Holder, so long as the Holder owns any Registrable Securities, promptly upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144; (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration.

2.10

Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would provide to such holder the right to include securities in any registration on other than a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder.

2.11

“Market Stand-off’ Agreement. Each Holder 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 registration by the Company for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1, and ending on the date specified by the Company and the managing underwriter not to exceed ninety (90) days (which may be extended for such longer period, not to exceed 34 days after the 

12

expiration of the 90-day period, as the underwriters of the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rules of regulations)), (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 (directly or indirectly) for Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired) 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 such securities, 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 2.11 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than two percent (2%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such
registration that are consistent with this Section 2.11 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 pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.  The Company represents and warrants that as of the date hereof, there are no agreements granting registration rights to any Person other than this Agreement.

2.12

Restrictions on Transfer.

(a)

The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

(b)

Each certificate or instrument representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i), (ii) and (iii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c)) be stamped or otherwise imprinted with a legend substantially in the following form:

13

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in Sections 2.11 and 2.12.

(c)

The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such
Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 2.12.  Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(b), except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

2.13

Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:

14

(a)

when all of such Holder’s Registrable Securities could be sold without restriction under SEC Rule 144 during any 90-day period; and

(b)

the tenth anniversary of the date of this Agreement.

3.

Information and Board Rights.

3.1

Delivery of Financial Statements. Commencing after the first anniversary of the date hereof, the Company, upon written request, shall deliver to each Investor, provided that the Board of Directors has not reasonably determined that such Investor is a competitor of the Company:

(a)

as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and (iii) a statement of stockholders’ equity as of the end of such year;

(b)

as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and of cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year­end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP);

(c)

as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, 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 Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company, and certified by the chief financial officer or chief executive officer of the Company as being true, complete, and correct;

(d)

as soon as practicable, but in any event within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows for such month, and an unaudited balance sheet and statement of stockholders’ equity as of the end of such month, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP);

(e)

as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), approved by the Board of Directors and prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets 

15

prepared by the Company;

(f)

with respect to the financial statements called for in Section 3.1(a), Section 3.1(b) and Section 3.1(d), an instrument executed by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (except as otherwise set forth in Section 3.1(b) and Section 3.1(d)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein; and 

(g)

 such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Section 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

3.2

Inspection. The Company shall permit each Major Investor (provided that the Board of Directors has not reasonably determined that such Major Investor is a competitor of the Company), at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

3.3

Observation Rights.  The holders of (i) a majority of the Series A Preferred Stock, voting as a separate class, or (ii) if a majority of the outstanding aggregate principal amount of Collective Senior Notes shall not have been converted into Series A Preferred Stock at such time, a majority of the then outstanding aggregate 

16

principal balance of the Collective Senior Notes, shall be entitled to have one representative attend all meetings of the Board of Directors of the Company in a nonvoting observer capacity and to receive notice, consents, minutes and other materials that it provides to its Board of Directors; provided, that the Major Investor shall, and shall cause each of its representatives who may have access to any of the information made available at any meeting of the Company’s Board of Directors or provided by the Company to its Board of Directors, hold in confidence and not disclose or use, directly or indirectly any such information, other than in connection with the investment in the Company; provided further, that the Company reserves the right not to provide information to the Major Investor or its representatives and to exclude them from any meeting or portion thereof if attendance at such meeting by them would adversely affect the attorney-client privilege between the Company and its counsel or if the Major Investor or its representatives is or becomes a competitor, or affiliated in any manner with a competitor, of the Company.

3.4

Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.4 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.4; (iii) to any existing Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.  Company agrees not to divulge any confidential information to any Investor
without such Investor’s prior consent.

4.

Additional Covenants.

4.1

Matters Requiring Director Approval. The Company shall not, without approval of the Board of Directors (in addition to any approval required under the Preferred Stock):

(a)

make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

(b)

make, or permit any subsidiary to make, any loan or advance 

17

to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;

(c)

guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;

(d)

make any investment inconsistent with any investment policy approved by the Board of Directors;

(e)

incur any aggregate indebtedness in excess of $100,000 that is not already included in a budget approved by the Board of Directors, other than trade credit incurred in the ordinary course of business;

(f)

otherwise enter into or be a party to any transaction with any director, officer, or employee of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, except for transactions contemplated by this Agreement, the Purchase Agreement; transactions resulting in payments to or by the Company in an aggregate amount less than $100,000 per year; or transactions made in the ordinary course of business and pursuant to reasonable requirements of the Company’s business and upon fair and reasonable terms that are approved by a majority of the Board of Directors; 

(g)

hire, terminate, or change the compensation of the executive officers, including approving any option grants or stock awards to executive officers;

(h)

change the principal business of the Company, enter new lines of business, or exit the current line of business;

(i)

sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

(j)

enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $100,000.

4.2

Board Matters. The Board of Directors shall be comprised of five (5) directors and meet at least quarterly in person in accordance with an agreed-upon schedule. The Company shall reimburse the directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors. In addition to any manner of calling for special meetings of the Board of Directors in the Company’s Bylaws, the holders of (i) a majority of the Series A Preferred Stock, voting as a separate class, or (ii) if a majority of the outstanding aggregate principal amount of Collective Senior Notes shall not have been converted into Series A Preferred Stock at such time, a majority of the then outstanding aggregate principal balance of the Collective Senior Notes, may call a 

18

special meeting of the Board of Directors at any time by written notice to the Board of Directors, provided that the right to call a special meeting in accordance with this Section 4.2, shall be limited to two (2) meetings within any twelve month period.

4.3

Independent Director.  One director shall at all times (i) be independent of the Company, its executive officers and directors and their respective affiliates and (ii) approved by the holders of (i) a majority of the Series A Preferred Stock, voting as a separate class, or (B) if a majority of the outstanding aggregate principal amount of Collective Senior Notes shall not have been converted into Series A Preferred Stock at such time, a majority of the then outstanding aggregate principal balance of the Collective Senior Notes. The Board of Directors shall take all actions in support of such designee for election to the Board of Directors, whether at an annual shareholders meeting, a special meeting or action by written consent.

4.4

Operations Committee.  The Board of Directors shall establish, pursuant to the authority granted under Section 78.125 of the Nevada Corporations Code and Section 2.15 of the By-Laws of the Corporation, an operations committee of the Board of Directors (the “Operations Committee”), whose purpose and power shall be, to the extent permitted by law, to (a) supervise and manage the Chief Operating Officer (“COO”) of the Corporation, who shall report directly to the Operations Committee, (b) review and provide strategic advice and counsel to the Corporation regarding the business operations, (c) present to the Board of Directors an independent assessment of the Corporation’s business operations as it relates to strategic initiative, (d) exercise such other powers and authority as are set forth in a charter of the Operations Committee of the Board of Directors and (e) exercise such other powers and authority as shall from time to time be assigned thereto by resolution of the Board under the procedures set forth in the Operating Committee Charter.

(a)

Joseph Heller, Herbert Soroca and James Tamara shall be appointed as members of the Operations Committee, and except for Joseph Heller, shall be appointed by the Board of Directors and shall serve until such member’s successor is duly elected and qualified or until such member’s earlier resignation or removal, and may be removed, with or without cause, by a majority vote of the Board of Directors.

(b)

Joseph Heller shall be appointed as the chairman with sole voting power of the Operations Committee and to hold such position in accordance with the Operations Committee Charter.

4.5

Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, its Certificate of Incorporation, or elsewhere, as the case may be.

4.6

Annual Budget and Business Plan.  Prior to the beginning of each 

19

fiscal year, the Board shall prepare a business plan and budget for the succeeding fiscal year that shall be approved by the holders of (i) a majority of the Series A Preferred Stock, voting as a separate class, or (ii) if a majority of the outstanding aggregate principal amount of Collective Senior Notes shall not have been converted into Series A Preferred Stock at such time, a majority of the then outstanding aggregate principal balance of the Collective Senior Notes.

4.7

Right of First Refusal.  The Company hereby grants to each Investor the right of first refusal to purchase that portion of all “New Securities” (as defined below) from the date hereof until the later of (i) three years or (ii) that date when the Holders own, in the aggregate, less than 25% of the Shares of Common Stock (on an as converted or exercised basis) owned by the Investors, in the aggregate, on the closing of the transactions effected in connection with the purchase of Senior Notes  by the Investors party hereto (the date hereof referred to as the “Closing”) as the number of shares owned and/or issuable or purchasable under convertible debt, equity securities, options, warrants or other rights held by each such  Investor on the date that each receives the “Offer” (as defined below) bears to the total number of shares of the Company issued and outstanding on the date of the Offer on the following terms and conditions (the “Preemptive Rights”);

(a)

“New Securities” shall mean any capital stock of the Company issued after the Closing, whether now authorized or not, and rights, options, or warrants to purchase said capital stock, and securities of any type whatsoever that are, or may become, convertible into said common stock or preferred stock of the Company issued after the Closing; provided, however, that “New Securities” shall not include (i) existing indebtedness of the Company which is convertible into shares of the Company’s Common Stock and the shares issuable thereunder, (ii) options and/or warrants to employees and consultants of the Company at exercise prices no less than fair market value on date of grant (adjusted appropriately for stock splits, combinations and the like), and (iii) any Common Stock or other securities issued or issuable under the Transaction Documents (as defined in the Purchase Agreement) or the anti-dilution provisions thereof.

(b)

If the Company intends to issue New Securities after the Closing, it shall give written notice of its intention, describing the type of New Securities, the price, and the terms upon which the Company proposes to issue the same (the “Offer”).  With respect to any New Securities proposed to be issued for assets or property other than cash, the price set forth in the notice shall be based upon the fair market value of such assets or property as determined by the Board of Directors of the Company in its reasonable good faith judgment.  The Investors shall each have twenty (20) days from the effective date of such notice to agree to purchase its respective portion of the New Securities for the cash equivalent price and upon the other general terms specified in the Offer by giving written notice to the Company and stating therein the quantity of New Securities to be purchased accompanied by the cash equivalent purchase price as set forth in the Offer.

(c)

If any Investor fails to notify the Company during such 

20

twenty (20) day notice period of its respective election to exercise its respective Preemptive Rights, the Company will give notice to those Investors who have exercised their respective Preemptive Rights who will then have an additional ten (10) day period (the “Secondary Preemptive Right”) to purchase such portion of the New Securities as to which Investors have not initially exercised their rights to purchase, pro-rata in proportion to those exercising the Secondary Preemptive Right,.  If the Company fails to sell such portion of the New Securities for which Preemptive Rights have not been exercised on the terms set forth in the Offer within ninety (90) days after the termination of such thirty (30) day notice period, it must once again comply with the Preemptive Rights provisions set forth herein.

(d)

If an Investor is also a party to the Investor Rights’ Agreement with the Company dated October
24, 2011, the rights set forth in this Section 4.7 shall not serve to enlarge the amount of New Securities purchasable by such Investor (as the numerator in each such agreement refers to all securities owned by an Investor).

4.8

Right of Co-Sale.  

(a)

In the event that the individuals set forth in Exhibit B
(“Seller”) proposes to sell, assign, transfer or otherwise convey (herein a “sale”) any shares of Common Stock or securities convertible into, exchangeable for or exercisable
for Common Stock (“Co-Sale Securities”), the Seller shall offer in writing to the Investors the right to participate in such sale on the same terms and conditions available to the Seller.
Upon written notice to the Seller within fifteen (15) days of receipt by the Investor of notification from the Seller of the proposed sale, each Investor may sell that number of shares of Co-Sale Securities
equal to the total number of shares to be sold by the Seller  in the transaction, multiplied by (b) a fraction, the numerator of which is the number of shares of Co-Sale Securities held by the Investor
and the denominator of which is the number of shares of Co-Sale Securities held by all Investors exercising co-sale rights plus the Seller.  To the extent the Investor exercises such right of participation,
the number of shares of Co-Sale Securities that the Seller may sell in the transaction shall be correspondingly reduced.  For purposes of this Section 4.7(a), the number of shares of Co-Sale Securities other
than Common Stock shall be that number of shares of Common Stock the Co-Sale Securities are, directly or indirectly,  convertible into, exchangeable for, or exercisable for.

(b)

The amount of Co-Sale Securities so transferred shall not include the sale, assignment, transfer or other conveyance  of Co-Sale Securities by the Seller:  (a) to the Seller’s spouse or former spouse, parents, or children or other members of the Seller’s family (including relatives by marriage), or to a custodian, trustee or other fiduciary for the company or other entity or person in connection with a bona fide estate planning transaction; (b) by way of bequest or inheritance upon death;; (c) by way of a bona fide gift or (d) by way of any pledge of Co-Sale Securities made by the Seller pursuant to a bona fide loan transaction with an established financial institution that creates a mere security interest; provided, however, that any transferees pursuant to this Section 4.7(b) shall receive and hold such Co-Sale Securities subject in all respects to the provisions of this Agreement including, for sake of clarity, the provisions of Section 4.7(a), and that there shall no further transfer of such shares except in accordance herewith.

21

4.9

In the event that a sale under this paragraph 4.9 is deemed a liquidation under Article 3 of the Company’s Amended and Restated Articles of Incorporation, the provision of such Section shall control the allocation of consideration between the participating Investors and the Seller under this paragraph 4.8.

5.

Miscellaneous.

5.1

Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least five percent (5%) of the shares of Registrable Securities then outstanding; provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective
successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

5.2

Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

5.3

Counterparts; Facsimile. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

5.4

Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

5.5

Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when 

22

sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 5.5. If notice is given to the Company, a copy shall also be sent to Meyer, Suozzi, English & Klein, P.C., 990 Stewart Avenue, Suite 300, Garden City, New York  11530, Attention:  Richard G. Satin, Esq., Facsimile:  (516) 741-6706.   If notice is to be given to the Investors at their address as provided to the Company and in case of a notice to the Lead Purchaser (as defined in the Purchase Agreement of even date herewith), with a copy to:  Allan Grauberd, Esq., Moses & Singer LLP, 405 Lexington Avenue, New York, NY  10174-1299, Facsimile:  212-554-7700.

5.6

Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided that Sections 3.3, 4.2, 4.3 and 4.5 may only be amended with the written consent of the holders of (i) a majority of the Series A Preferred Stock, voting as a separate class, or (B) if a majority of the outstanding aggregate principal amount of Collective Senior Notes shall not have been converted into Series A Preferred Stock at such time, a majority of the then outstanding aggregate principal balance of the Collective Senior Notes; provided further that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in
such transaction). The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 5.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

5.7

Severability.  In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any 

23

respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

5.8

Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

5.9

Entire Agreement. This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

5.10

Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

[Remainder of page intentionally left blank. Signature pages follow. ]

24

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

COMPANY:

COUPON EXPRESS, INC.

By: ____________________________

Name:  Eric L. Kash 

Title: Chief Executive Officer

INVESTORS:

Signature of Investor

Name of Investor

[Signature Page of Investors’ Rights Agreement.]

25

SCHEDULE A

LIST OF INVESTORS

Principal Amount of

Name and Address

Cumulative Convertible Senior Note

26

EXHIBIT A

INVESTORS’ RIGHTS AGREEMENT DATED AS OF OCTOBER 24, 2011

27

EXHIBIT B

RIGHT OF CO-SALE: SELLING STOCKHOLDER

Eric L. Kash

28Converted by EDGARwiz

  Exhibit 10.4 

THE WARRANT REPRESENTED HEREBY AND THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE HEREOF NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER.

	Warrant No. PS-1 
	Dated:  May 31, 2012

COMMON STOCK WARRANT

COUPON EXPRESS, INC.

THIS IS TO CERTIFY THAT for value received, NextLevel VIII, LLC (the “Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from Coupon Express, Inc., a Nevada corporation (the “Company”), Twenty Million (20,000,000) shares (the “Warrant Shares”) of common stock, par value $0.001 per share, of the Company (“Common Stock”), at a price per share equal to $0.04 (the “Exercise Price”). The number of Warrant Shares purchasable upon exercise of this warrant (this “Warrant”) and the Exercise Price shall be subject to adjustment from time to time as described herein. This Warrant is being issued in connection with the purchase of Cumulative Convertible Senior Notes pursuant to that certain Cumulative Convertible Senior Note and Warrant Purchase Agreement, dated as of May 31, 2012 (“Purchase Agreement”), by and among the Company, the Holder and the other parties thereto.

1.

Manner of Exercise: Expiration Date.

(a)

This Warrant shall be exercisable in accordance with this Section 1 and Section 2 below from and after the date hereof until 5:00 p.m., New York time on May 31, 2017 (the “Expiration Date”). The Holder may, at any time and from time to time to and until the Expiration Date, exercise this Warrant, for all or any part of the Warrant Shares purchasable at such time hereunder, by delivering to the Company at its principal office on any business day (i) a written notice of the Holder’s election to exercise this Warrant (an “Exercise Notice”), which Exercise Notice shall be irrevocable and shall specify the number of Warrant Shares to be purchased, (ii) payment of the aggregate Exercise Price for the applicable number of Warrant Shares to be purchased by check or wire transfer of immediately available funds to an account then specified by the Company and (iii) this Warrant (the date on which the foregoing items are delivered to the Company being hereinafter referred to as the “Exercise Date”). Such Exercise Notice shall be in the form of Annex A hereto, duly executed by the Holder or its duly authorized agent.

(b)

Upon receipt of the items specified in Section 1(a), the Company shall, as promptly as practicable, and in any event within five (5) business days thereafter, execute (or cause to be executed) and deliver (or cause to be

delivered) to the Holder or its designee a certificate or certificates representing the aggregate number of full Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The Company understands that a delay in the delivery of the Warrant Shares could result in economic loss to the Holder.  This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or its designee shall be deemed to have become a Holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(c)

If this Warrant is exercised in part, the Company shall, at its expense, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(d)

The Company shall pay any and all issue and other taxes (other than income taxes) that may be payable in respect of the issuance of this Warrant or any issuance or delivery of Warrant Shares on exercise of this Warrant; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder of record of this Warrant in connection with any such exercise.

(e)

The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance and delivery on the exercise of this Warrant, all shares of Common Stock as shall from time to time be issuable on the exercise of this Warrant, and, upon such issuance, all of such shares of Common Stock will be validly issued, fully paid and non-assessable.  If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect such exercise of this Warrant for the maximum number of shares of Common Stock then issuable upon exercise hereunder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, obtaining the requisite stockholder approval of any necessary amendment to the Company’s Certificate of Incorporation (as amended from time to time). The Company will not at any time close its stock transfer books in a manner which prevents the timely exercise of this Warrant.

(f)

No fractional shares shall be issued upon the exercise of this Warrant. All shares of Common Stock (including fractions thereof) issuable upon exercise of this Warrant as to each share of Common Stock shall be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional shares. If, after the aforementioned aggregation, the exercise of this Warrant would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the Holder a sum of cash equal to the Fair Market Value (as defined below) of such fraction on the Exercise Date.

2

2.

Net Exercise. Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

			
	X

	=

	Y (A-B)

A

			
	Where X

	=

	the number of Warrant Shares to be issued to the Holder

	            Y

	=

	the number of Warrant Shares purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being exercised (at the date of such calculation)

	            A

	=

	the Fair Market Value of one share of Common Stock (at the date of such calculation)

	            B

	=

	Exercise Price (as adjusted to the date of such calculation)

For purposes of the above calculation, the “Fair Market Value” of one share of Common Stock shall be:

(a)

the average daily closing Market Price (as defined below) during the period of the most recent 10 trading days, ending on the last business day before the effective date of exercise of this Warrant, on which the national securities exchanges or over-the-counter market in which the shares of Common Stock is quoted were open for trading. If the Common Stock is traded on a national securities exchange or admitted to unlisted trading privileges on such an exchange, or is quoted on the NASDAQ Global Market, the NASDAQ Capital Market, the OTC Bulletin Board or by OTC Markets Group, Inc. (each, a “Trading Market”), the Market Price as of a specified day shall be the last reported sale price of Common Stock on such exchange or on the applicable Trading Market on such date or if no such sale is made on such day, the mean of the closing bid and asked prices for such day on such exchange or on the applicable Trading Market (the “Market Price”); or 

(b)

if the Common Stock is not then listed or admitted to trading on any national securities exchange or quoted on any Trading Market, the Fair Market Value shall be determined in good faith by the mutual agreement of the Holder and the Board of Directors of the Company. In the event of any dispute between the Holder and the Company regarding the determination of Fair Market Value, at the option of the Holder, the Company shall engage a consulting firm or investment banking firm selected by the Holder to prepare an independent appraisal of the Fair Market Value, which appraisal shall be deemed for purposes 

3

hereof to be a conclusive, final and binding determination of the Fair Market Value. The expenses of such appraisal shall be borne by the Company.

3.

Adjustments.  Subject and pursuant to the provisions of this Section 3, the Exercise Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter.

(a)

If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock, then the number of Warrant Shares purchasable upon exercise of this Warrant and the Exercise Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Holder thereafter exercising this Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Holder would have received if this Warrant had been exercised immediately prior to such event upon payment of a Exercise Price that has been adjusted to reflect a fair allocation of the economics of such event to the Holder.  Such adjustments shall be made successively whenever any event listed above shall occur.

(b)

If any capital reorganization, reclassification of the capital stock of the Company (other than a transaction covered in Section 3(a) above), consolidation or merger of the Company with another corporation in which the Company is not the survivor (or if it is the survivor, the shares of Common Stock outstanding prior to such event are converted into cash, securities or other property in connection therewith), or sale, transfer or other disposition of all or substantially all of the Company’s assets to another individual, corporation, partnership, trust, limited liability company, association, joint venture or other entity or group of any kind (each, a “Person”) shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant, such cash, securities or other property  as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Exercise Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any securities or property thereafter deliverable upon the exercise hereof.
 The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the Person purchasing or otherwise acquiring such assets or other appropriate 

4

Person shall assume by written instrument the obligation to deliver to the Holder, at the last address of the Holder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase, and the other obligations under this Warrant.  The provisions of this Section 3(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions.

(c)

In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 3(a)), or subscription rights or warrants, the Exercise Price to be in effect after such payment date shall be determined by multiplying the Exercise Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price per share of Common Stock immediately prior to such payment date, less the fair market value (as determined below) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date. The fair market value of said assets or evidences of indebtedness so distributed shall be determined in good faith by the mutual agreement of the Holder and the Board of Directors of the Company. In the event that the Board of Directors of the Company and the Holder are unable to agree upon the fair market value in respect of this Section 3(c), the Company and the Holder shall jointly select an appraiser, who is experienced in such matters.  The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne equally by the Company and the Holder. Such adjustment shall be made successively whenever such a payment date is fixed.

(d)

An adjustment to the Exercise Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.

(e)

In the event that, as a result of an adjustment made pursuant to this Section 3, the Holder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant.

(f)

Except as provided in Section 3(g), if and whenever the Company shall issue or sell, or is, in accordance with any of Sections 3(f)(i) through 3(f)(vi), deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the lesser of (i) the Trigger Issuance Price (as defined below) in effect immediately prior to the time 

5

of such issue or sale and (ii) $0.02, then and in each such case (a “Trigger Issuance”) the then-existing Exercise Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, by multiplying the then-existing Exercise Price by a ratio where the numerator is the Net Consideration Per Share (as defined below), if any, with respect to such Trigger Issuance and the denominator is the lesser of (i) the Trigger Issuance Price in effect immediately prior to the time of such Trigger Issuance and (ii) $0.02; provided, however, that in no event shall the Exercise Price after giving effect to such Trigger Issuance be greater than the Exercise Price in effect prior to such Trigger Issuance. For example, in the case of a Trigger Issuance with consideration of $.01 per share and a then-existing Exercise Price of $.04, the Exercise Price would be reduced to $.02 ((.01/.02) X .04). “Trigger Issuance Price” shall mean the lesser of (i) the Exercise Price in effect immediately prior to any Trigger Issuance, and (ii) the lowest Net Consideration Per Share from all Trigger Issuances from and after the issuance date of this Warrant.

For purposes of this Section 3(f), the following Sections 3(f)(i) to (f)(vi) shall also be applicable:

i.

Issuances of Warrants, Options and Rights to Common Stock or Convertible Securities.

1.  For the purposes of this Section 3(f), the issuance of any warrants, options, subscription or purchase rights with respect to shares of Common Stock and the issuance of securities convertible into or exchangeable for shares of Common Stock, or the issuance of any warrants, options, subscription or purchase rights with respect to such convertible or exchangeable securities (collectively, “Common Stock Equivalents”), shall be deemed an issuance of Common Stock.

2.  Any obligation, agreement or undertaking to issue Common Stock Equivalents at any time in the future shall be deemed to be an issuance at the time of such obligation, agreement or undertaking is made or arises.

3.  No adjustment of the Exercise Price shall be made under this Section 3(f)(i) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise, conversion or exchange of any Common Stock Equivalents if any adjustment shall previously have been made upon the issuance of such Common Stock Equivalents as above provided.  No adjustment shall be made upon exercise, conversion or exchange of any Common Stock Equivalents if no adjustment was required by the initial issuance of the Common Stock Equivalents. 

6

ii.

“Net Consideration Per Share” shall mean (i) with in case of an issuance of Common Stock, the amount equal to the total amount of consideration, if any, received by the Company for such issuance divided by the aggregate number of shares of Common Stock issued, and (ii) in the case of an issuance of Common Stock Equivalents, the total amount of consideration, if any, received by the Company for such issuance plus the minimum amount of consideration, if any, payable to the Company upon exercise, conversion or exchange thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such Common Stock Equivalents were exercised, exchanged or converted for Common Stock. The Net Consideration Per Share which may be received by the Company shall be determined in each instance as of the date of issuance of Common Stock Equivalents, without giving effect to any possible future upward price adjustments or rate adjustments which may be applicable with respect to such Common Stock Equivalents.

iii.

Adjustments for Cancellation or Expiration of Common Stock Equivalents. Any adjustment of the Exercise Price with respect to this paragraph which relates to Common Stock Equivalents shall be disregarded if, as and when all of such Common Stock Equivalents expire or are canceled without being exercised, so that the Exercise Price immediately upon such cancellation or expiration shall be equal to the Exercise Price in effect at the time of the issuance of the expired or canceled Common Stock Equivalents, with such additional adjustments as would have been made to the Exercise Price had the expired or canceled Common Stock Equivalents not been issued.

iv.

Should the Net Consideration Per Share of any Common Stock Equivalents be decreased from time to time, then, upon the effectiveness of each such change, the Exercise Price will be that which would have been obtained (y) had the adjustments made upon the issuance of such Common Stock Equivalents been made upon the basis of the actual Net Consideration Per Share of such securities, and (z) had adjustments made to the Exercise Price since the date of issuance of such Common Stock Equivalents been made to such Exercise Price as adjusted pursuant to (y) above.

v.

Stock Dividends for Holders of Capital Stock other than Common Stock. In the event that the Company shall make or issue, or shall fix a record date for the determination of holders of any capital stock of the Company (other than Common Stock) entitled to receive a dividend or other distribution payable in Common Stock or Common Stock Equivalents, then such Common Stock or Common Stock Equivalents issued in payment of such dividend shall be deemed to have been issued without consideration. 

vi.

Consideration other than Cash.  For purposes of this Section 3(f), if a part or all of the consideration received by the Company in connection with the issuance of shares of the Common Stock or Common Stock Equivalents consists of property other than cash, such 

7

consideration shall be deemed to have a fair market value as is reasonably determined in good faith by the Board of Directors and holders of Warrants representing a majority of the aggregate Common Stock issuable upon the exercise of all then outstanding Warrants issued under the Purchase Agreement and the Cumulative Convertible Senior Note and Warrant Purchase Agreement dated as of October 24, 2011.  In the event of any dispute between such holders and the Board of Directors regarding the determination of fair market value, at the option of such holders, the Company shall engage a consulting firm or investment banking firm selected by the Holder to prepare an independent appraisal of the fair market value of such property to be distributed, which appraisal shall be deemed for purposes hereof to be a conclusive, final and binding determination of the fair market value of such property. The expenses of such appraisal shall be borne by the Company.

(g)

Exceptions. Section 3(f) shall not apply to, and the Company shall not be required to make any adjustment to the Exercise Price in connection with the issuance of (u) up to an aggregate amount of twenty million (20,000,000) shares of Common Stock, or options exercisable therefor (such number to be equitably adjusted in the event of stock splits, stock dividends, recapitalizations or other similar events) issued to officers, directors, consultants or employees of the Company or any subsidiary in connection with services performed or to be performed, pursuant to the Company’s 2011 Non-Qualified Stock Option Plan or any other qualified or non-qualified stock option plan or agreement, stock purchase plan or agreement, employee stock ownership plan, consulting agreement or other arrangements, agreements or plans approved by a majority of the Board of Directors and (i) the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock, par value $.0001 per share or (ii) if a majority of the outstanding aggregate principal amount of Senior Notes (as defined in the Amended Certificate of Designations filed on or about May 30, 2012) shall not have been converted into Series A Preferred Stock at such time, a majority of the then outstanding aggregate principal balance of the Senior Notes; (v) any shares of Common Stock issuable upon conversion, exercise or exchange of Common Stock Equivalents that are issued and outstanding as date of the Purchase Agreement; provided such Common Stock Equivalents are not amended after the date of the Purchase Agreement; (w) any shares issuable in accordance with the terms of the (i) Yellow Box Master Lease Agreement dated as of June 17, 2011; (ii) SB Communications, Inc. Consulting Agreement dated as of October 5, 2009; (x) one million four hundred thousand (1,400,000) shares of Common Stock
for issuance as payment of interest on notes outstanding as of October 24, 2011; (y) any Common Stock, Common Stock Equivalents or other securities issued or issuable under the Transaction Documents (as defined in the Purchase Agreement or the Cumulative Convertible Senior Note and Warrant Purchase Agreement dated as of October 24, 2011; and (z) any of the circumstances in which an adjustment is made under Sections 3(a)-3(c).

(h)

Record Date.  In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock or Common Stock Equivalents, or (ii) to subscribe for or purchase Common Stock or Common Stock Equivalents, then such record date shall be deemed to be the date of the 

8

issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(i)

Treasury Shares.  The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, if any, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of Section 3(f).

(j)

Upon any adjustment to the Exercise Price pursuant to Section 3(f), the number of Warrant Shares purchasable hereunder shall be adjusted by multiplying such number of Warrant Shares by a fraction, the numerator of which shall be the Exercise Price in effect immediately prior to such adjustment and the denominator of which shall be the Exercise Price in effect immediately thereafter.

(k)

No Avoidance. The Company shall not, by amendment of its Certificate of Incorporation, By-Laws or other organizational documents, or through any reorganization, transfer of assets, consolidation, merger, dissolution, sale of securities or other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Section 3 by the Company, but shall at all times in good faith assist in the carrying out of all provisions of this Section 3. Without limiting the generality of the foregoing, the Company shall not consolidate with or merge into any other Person or permit any such Person to consolidate with or merge into the Company (if the Company is not the surviving Person) or transfer all or substantially all of the assets of the Company to another Person, unless such other Person shall expressly assume in writing and will be bound by all of the terms of this Warrant, including the provisions of Section 3(b). If any event occurs as to which the other provisions of this Section 3 are not strictly applicable or, if strictly applicable, would not fairly protect the rights of the Holder in accordance with the essential intent and principles of this Warrant, then the Board of Directors shall make an adjustment in the provisions of this Warrant, in accordance with such essential intent and principles, so as to protect such rights.

(l)

The Company acknowledges that the Holder has acquired the Warrant in reliance on a pre-investment capitalization of 456,344,941 shares (the “Baseline Shares”) of Common Stock outstanding, on a fully diluted and as converted and exercised basis, as of the date of the Cumulative Convertible Senior Note and Warrant Purchase Agreement dated as of October 24, 2011.  The Company has undertaken to obtain waivers, on or before September 30, 2012, of the application of the Anti-Dilution Adjustments (as defined below) from the holders of various instruments previously issued that contain certain “weighted average ratchet” or “full ratchet” anti-dilution adjustments (the “Anti-Dilution Adjustments”).  The Corporation agrees that if, on October 1, 2012 (the “Measurement Date”) the total number of shares of Common Stock issued or issuable upon conversion or exercise of any Common Stock Equivalents outstanding immediately prior but after giving effect to the transactions contemplated by the Purchase Agreement is, or becomes, as a result of any 

9

issuances of Common Stock or Common Stock Equivalents up to and through the date of the investments made pursuant to the Transaction Documents, greater than the Baseline Shares as a result of the operation of the Anti-Dilution Adjustments (such number hereinafter referred to as the “Additional Common Stock Equivalent Shares”), the Exercise Price as of the date of the Purchase Agreement (the “Initial Exercise Price”) shall be decreased, retroactive to the date of the Purchase Agreement, to reflect the same valuation based on the adjusted amount of shares of Common Stock issued or issuable as follows:  The Initial Exercise Price shall be adjusted by multiplying (i) the Initial Exercise Price by (ii) the quotient of (A) 1 divided by (B) the quotient of (x) the sum of 456,344,941 plus the total number of Additional Common Stock Equivalent Shares divided by (y) 456,344,941.  For example, given the .04 Initial Exercise Price, if the total number of shares of Common Stock issued or issuable upon conversion or exercise of any Common Stock Equivalents, as of the measurement Date, exceeds the Baseline Shares by 30,000,000 shares, the Exercise Price would be adjusted to 0.03753 (.04 X (1/((456,344,941 + 30,000,000)/456,344,941).  The adjustments, if any, to the Initial Exercise Price pursuant to this Section 3(l) shall also apply to applications, if any, of the Anti-Dilution Adjustments after the Measurement Date.  Any adjustments otherwise provided for elsewhere in this Warrant shall be recalculated using the decreased Initial Exercise Price, once the decrease (if any) has been determined (whether at the Measurement Date or at any time thereafter and for as many times as applicable), so that such other adjustments (if any) will only be those that would have been made had the decreased Initial Exercise Price been in effect on the date of the
Purchase Agreement.  In the case of any adjustments to the Initial Exercise Price, the Baseline Trigger Issuance Price shall also be decreased  to an amount equal to the Initial Exercise Price as adjusted pursuant to this Section 3(l) multiplied by 0.5.  For purposes of the Warrant “Baseline Trigger Issuer in Price” shall mean $.02, as adjusted by this Section 3(l).  In no event shall the number of Baseline Shares be deemed to have been reduced as a result of any cancellation of Common Stock or Common Stock Equivalents or any other factors, and all such Baseline Shares shall be deemed outstanding for purposes of the adjustments set forth herein.

4.

Replacement of Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

5.

Notices to Holder.  Upon the happening of any event requiring an adjustment of the Exercise Price, the Company shall promptly give written notice thereof to the Holder at the address appearing in the records of the Company, stating the adjusted Exercise Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Failure to give such notice to the Holder or any defect therein shall not affect the legality or validity of the event giving rise to, or the, subject adjustment.

6.

Remedies.  The Company stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Company in the 

10

performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

7.

Negotiability, Registration Rights, etc.  This Warrant is issued upon the following terms, all of which the Holder hereof by the taking hereof consents and agrees:

(a)

The Holder shall be entitled to pledge, mortgage, transfer, endorse or otherwise convey this Warrant (a “Transfer”), in whole or in part, without the prior written consent of the Company. The Holder and its direct and indirect transferees may Transfer all or any portion of this Warrant by surrendering this Warrant to the Company together with a completed assignment in the form attached hereto as Annex B. Upon such surrender, the Company shall deliver a new Warrant or Warrants to the person or persons entitled thereto and, if applicable, shall deliver to Holder a new Warrant evidencing the right of Holder to purchase the balance of the Warrant Shares subject to purchase hereunder. The term “Holder” as used herein shall include any transferee to whom this Warrant has been transferred in accordance with this Section 6.

(b)

Except as set forth in the Purchase Agreement, the Holder of this Warrant shall not be entitled to vote or to receive dividends or to be deemed the Holder of Common Stock that may at any time be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the Holder any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until the Holder shall have exercised this Warrant and been issued shares of Common Stock in accordance with the provisions hereof.

(c)

Neither this Warrant nor any shares of Common Stock or other securities purchased pursuant to this Warrant have been registered under the Act or applicable state securities laws. Therefore, the transfer or exchange of this Warrant or such shares may be made only in a transaction permitted under the Act and applicable state securities laws or pursuant to an exemption therefrom. Prior to registration, the certificates evidencing the Warrant Shares or other securities issued on the exercise of this Warrant shall bear a legend to the effect that the shares evidenced by such certificates have not been registered under the 1933 Act and applicable state securities laws. This Warrant, and the shares of Common Stock issuable upon exercise hereof, shall be “Registrable Securities” pursuant to that certain Investors’ Rights Agreement, dated the date hereof (the “Investors’ Rights Agreement”), by and among the Company and the parties thereto, as the same may be amended from time to time.

(d)

The initial Holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Investors’ Rights Agreement.

11

(e)

Until this Warrant is transferred on the books of the Company, the Company may treat the record Holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

8.

Investment Representations. The Holder represents and warrants to the Company that the representations and warranties in Sections 3.2 through 3.8 of the Purchase Agreement made by the Holder as a Purchaser (as defined in the Purchase Agreement) under the Purchase Agreement are true and correct as of the date hereof.   

9.

Successors.  All the covenants and provisions hereof by or for the benefit of the Holder shall bind and inure to the benefit of its respective successors and permitted assigns and transferees hereunder and shall be binding upon any corporation or other entity succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets (to the extent provided in Section 3(b)), and all of the obligations of the Company relating to the Warrant Shares shall survive the exercise, conversion and termination of this Warrant, and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder.  The Company will, at the time of the exercise of this Warrant, in whole or in part, upon request of the Holder but at the Company’s expense, acknowledge in writing its continuing obligation to the Holder in respect of any rights (including, without limitation, any right to registration of the Warrant Shares) to which the Holder shall continue to be entitled after such exercise in accordance with this Warrant; provided that the failure of the Holder to make any such request shall not affect the continuing obligation of the Company to the Holder hereof in respect of such rights.

10.

Notices, etc.  All notices and other communications from the Company to the Holder of this Warrant shall be in writing and sent by facsimile or overnight courier or shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. All such notices and communications shall, when mailed, be effective when deposited in the mails and, when sent by facsimile or overnight courier, delivered, be effective when received.

11.

Amendments.  This Warrant and any term hereof may be changed, waived, discharged or terminated only with the consent of holders of Warrants representing a majority of the aggregate Common Stock issuable upon the exercise of all then outstanding Warrants issued under the Purchase Agreement and the Cumulative Convertible Senior Note and Warrant Purchase Agreement dated as of October 24, 2011.

12.

Governing Law.  This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of New York without regard to the laws that might be applied under any conflict of laws principles.

13.

Headings.  The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

14.

Severability.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

12

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by a duly authorized officer as of the date first written above.

COUPON EXPRESS, INC.

By:__________________________________

Name:

 Eric L. Kash 

Title: 

 Chief Executive Officer

[SIGNATURE PAGE FOR WARRANT]

13

Annex A

Form of Exercise Notice

(To be executed if Holder desires to exercise this Warrants evidenced by this Warrant Certificate). 

TO COUPON EXPRESS, INC.

		
	ð

	The undersigned hereby (1) irrevocably elects to exercise this Warrant for ___________ Warrant Shares represented by this Warrant, (2) makes payment in full of the aggregate Exercise Price for such Warrant Shares by enclosure of a certified or bank cashier’s check therefor, upon condition that a new Warrant be issued for the balance of the Warrant Shares remaining, if any, and (3) requests that a certificate for the shares of Common Stock purchased hereunder be issued in the name of and delivered to:

	ð

	The undersigned hereby elects to purchase _______ Warrant Shares, by net exercise of this Warrant pursuant to the provisions of Section 2 of this Warrant.

(Please print name and address)

The undersigned hereby reaffirms, as of the date hereof, the investment representations in Section 8 of this Warrant.

If such number of Warrant Shares not be all of the Warrant Shares evidenced by this Warrant Certificate, a new Warrant for the balance remaining of such Warrant Shares shall be registered in the name of and delivered to:

(Please print name and address)

Dated:__________________

Signature________________________________

14

Annex B

Form of Assignment

(To be executed by the registered Holder if such Holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED,

hereby sells, assigns, and transfers unto a Warrant to purchase shares of common stock, par value $0.001 per share, of Coupon Express, Inc., a Nevada corporation (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint attorney to transfer such Warrant on the books of the Company, with full power of substitution.

The undersigned represents, unless the sale of this Warrant has been registered under the Securities Act of 1933, as amended (the “Securities Act”), that the undersigned is acquiring such Warrant for its own account for investment and not with a view to or for sale in connection with any distribution thereof (except for any resale pursuant to a Registration Statement under the Securities Act).

Dated:__________________

Signature________________________________

15

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00205-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00205-of-00352.parquet"}]]