Document:

Exhibit 4.1

 

GenuTec
Business Solutions, Inc.

 

INCORPORATED UNDER THE LAWS OF
THE STATE OF MONTANA

AUTHORIZED: 100,000,000 COMMON SHARES, $.01 PAR VALUE

 

 

	
   

  	
  SEE REVERSE FOR

  
	
  This Certifies That

  	
  CERTAIN DEFINITIONS

  
	
   

  	
  CUSIP 37250F105

  
	
   

  	
   

  
	
  is the owner of

  	
   

  

 

FULLY PAID AND NON-ASSESSABLE
COMMON SHARES, $.01 PAR VALUE

 

GenuTec
Business Solutions, Inc.

 

transferable on the books of this Corporation
in person or by attorney upon surrender of this Certificate duly endorsed or
assigned. This Certificate and the shares represented hereby are subject to the
laws of the State of Montana, and to the Articles of Incorporation and Bylaws
of the Corporation, as now or hereafter amended. This Certificate is not valid
until countersigned by the Transfer Agent.

 

In Witness Whereof, the Corporation has caused this Certificate to be signed by the
facsimile signatures of its duly authorized officers and to be sealed with the
facsimile seal of the Corporation.

 

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
  /s/ Lee J. Danna

  	
   

  	
  /s/ Farzod Hoorizadeh

  
	
  PRESIDENT

  	
   

  	
  SECRETARY

  

 

 

	
  COUNTERSIGNED:

  
	
  CORPORATE STOCK TRANSFER, INC.

  
	
  3200 Cherry Creek South Drive, Suite 430,
  Denver. CO 80209

  
	
   

  
	
  By:

  	
   

  
	
  Transfer
  Agent and Registrant Authorized Officer

  

 

 

GenuTec
Business Solutions, Inc.

Corporate
Stock Transfer, Inc.

Transfer
Fee: As Required

 

 

The following
abbreviations, when used in the Inscription on the face of this certificate,
shall be construed as though they were written out in full according to
applicable laws or regulations:

 

	
  TEN COM

  	
   

  	
  o

  	
  as tenants
  in common

  	
  UNIF GIFT
  MIN ACT-                 

  	
  Custodian
  for                        

  
	
   

  	
   

  	
   

  	
   

  	
  (Cust.)      

  	
  (Minor)        

  
	
  TEN ENT

  	
   

  	
  o

  	
  as tenants
  by the entireties

  	
   

  	
  under Uniform Gift to Minors

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IT TEN

  	
   

  	
  o

  	
  as joint
  tenants with right of survivorship and not as tenants in common

  	
   

  	
  Act of                                                                                   

  (State)

  

 

Additional abbreviations may also be used though not in the above list.

 

For value
received                                                                  hereby
sell, assign and transfer unto

 

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

 

 

Please print or type name and address of assignee

 

 

                                                                                                                                                                             Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint 

 

 

Attorney to
transfer the said stock on the books of the within-named Corporation, with full
power of substitution in the premises.

 

Dated                          20     

 

	
  SIGNATURE
  GUARANTEED:

  	
  X

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  X

  	
   

  

 

THE SIGNATURE
TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit
Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM.Exhibit
4.3

INVESTOR
RIGHTS AGREEMENT

 

 

THIS INVESTOR RIGHTS
AGREEMENT (the “Agreement”) is entered into as of July 14, 2004, by and
among GenuTec Business Solutions, Inc., a Montana corporation (the “Company”),
the executive officers of the Company holding the shares of Common Stock or
options to purchase shares of the Company’s Common Stock (the “Management
Shares”) listed on Schedule A hereto (the “Management
Holders”), Sound Media Group, Inc., a California corporation (“SMG”)
and Trefethen Capital Partners, LLC, a Delaware limited liability company (the “Senior
Lender”).

RECITALS

WHEREAS, on the date
hereof, the Company and GenuTec Marketing, Inc., a California corporation and a wholly-owned
subsidiary of the Company (the “Subsidiary”) entered into an Asset
Purchase Agreement (the “Asset Purchase Agreement”) with SMG, Breaking
Free, Inc., a California corporation (“BFI”) and Scott Presta, Tony Tseng, Aaron Jones and Andy Salisbury, who collectively hold all of
the outstanding shares of capital stock of SMG (each, an “SMG Holder”
and, collectively, the “SMG Holders”), pursuant to which the Subsidiary
purchased substantially all of the assets of SMG and BFI for the consideration
specified in the Asset Purchase Agreement, which consideration was comprised of
cash, shares of the Company’s Common Stock and a secured subordinated
promissory note;

WHEREAS, on the date
hereof, the Company and the Subsidiary entered into a Financing Agreement with
the Senior Lender (the “Financing Agreement”), pursuant to which, among
other things, the Subsidiary borrowed $7.3 million to finance the transactions
contemplated in the Asset Purchase Agreement; and

WHEREAS, pursuant to the
terms of the Financing Agreement, the Senior Lender can elect to receive
Additional Interest (as such term is defined in the Financing Agreement) in
shares of the Company’s Common Stock, on the terms and conditions set forth
therein.

NOW THEREFORE, in
consideration of the mutual agreements, covenants and conditions and releases
contained herein, the parties hereby agree as follows:

1.             DEFINITIONS.  For purposes
of this Agreement, the following terms shall have the meanings set forth below:

1.1          “Affiliate” means with respect to any person,
any other person that, directly or indirectly through one of more intermediaries,
controls, is controlled by, or is under common control with such person.  For purpose of the foregoing, “controls,” “controlling,”
“controlled by” and “under common control with” means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise.

1.2          “Common Stock” means shares of the Company’s
common stock, par value $0.01.

1.3          “Financing Agreement” is defined in the
recitals.

 

1

 

1.4          “Holder” means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 2.6 of this Agreement.

1.5           “Management Holder” means those executive
officers of the Company set forth on Schedule A attached hereto.

1.6          “Permitted Transferee” means (i) any
transfer by Senior Lender pursuant to Section 5 of this Agreement, (ii) any
transfer from SMG to a SMG Holder, (iii) any transfer from a SMG Holder to
another SMG Holder, (iv) any transfer to the partners from any party hereto in
connection with partnership distributions of such party, or (v) any
transfer of shares to ancestors or descendants or spouse or to a trustee for
their benefit or the transferring party’s benefit; provided that (1) such
transferring party shall inform the Company of such transfer prior to effecting
it and (2) the transferee shall furnish the Company with a written
agreement to be bound by and comply with all provisions of this Agreement as
were applicable to the transferring party.

1.7          “Qualified Offering” means the first sale of
Common Stock of the Company to the public pursuant to a registration statement
filed with, and declared effective by, the SEC (as defined hereafter) under the
1933 Act (as defined hereafter).

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

1.9          The term “Registrable Securities” means
(i) SMG Shares presently held or hereafter acquired by SMG or a SMG
Holder; (ii) Senior Lender Shares presently held or hereafter acquired by the
Senior Lender and (iii)  Common Stock of the Company 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 or in replacement of, the Registrable Securities set forth in
subsections (i) through (iii) above presently held or hereafter acquired by a Holder.  In the event of any recapitalization by the
Company, whether by stock split, reverse stock split, stock dividend or the
like, the number of shares of Registrable Securities used throughout this
Agreement for various purposes shall be proportionately increased or decreased,
provided, however, that any such security shall cease to be a Registrable
Security at such time as it is publicly saleable without restriction pursuant
to Rule 144(k) of the SEC, or otherwise.

1.10        The term “Senior Lender Shares” means any
shares of Common Stock of the Company issued to the Senior Lender pursuant to
the terms of the Financing Agreement or any of the other agreements entered
into between the Senior Lender and the Company in connection therewith.

1.11        The term “SMG Shares” means any shares of
Common Stock of the Company issued to SMG pursuant to the terms of the Asset
Purchase Agreement or any of the other agreements entered into between the SMG
and the Company in connection therewith.

 

2.             REGISTRATION RIGHTS

The Company hereby grants
to each of the Holders the registration rights set forth in this
Section 2, with respect to the Registrable Securities owned by such
Holders.  The Company and the

 

2

 

Holders agree that
the registration rights provided herein set forth the sole and entire agreement
on the subject matter between them.

2.1          Company
Registration.

2.1.1        Demand Registration. In case the
Company shall receive from a Holder or Holders of at least 20% of the Registrable
Securities a written request or requests that the Company effect a registration
on Form S-3 (or any similar form promulgated by the Securities and Exchange
Commission) and any related qualification or compliance with respect to all or
a part of the Registrable Securities owned by such Holder or Holders, the
Company will:

(a)           promptly give written notice of the
proposed registration, and any related qualification or compliance, to all
other Holders; and

(b)           as soon as practicable, use its best
efforts to effect such registration and all such qualifications and compliances
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder’s or Holders’ Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within twenty (20) days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 2.1:  (1) if Form S-3 is not available for such
offering by the Holders; (2) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not
more than ninety (90) days after receipt of the request of the Holder or
Holders under this Section 2.1; provided, however, that the Company shall not
utilize this right more than once in any twelve month period; (3) if such Form
S-3 registration covers an offering with reasonably anticipated aggregate
proceeds of less than $500,000; or (4) if the Company has effected two (2)
registrations pursuant to this Section 2.1 within the past twelve (12) months
and such registrations have been declared or ordered effective.

2.1.2        Piggyback Registration.  If at any time or from time to time the
Company shall determine to register any of its securities, either for its own
account or the account of security holders, other than a registration of
securities as it relates to an offering and sale by the Company or by the
employees of the Company solely pursuant to any employee stock plan or other
employee benefit plan arrangement or a registration on Form S-4, or on any
successor form, relating solely to an SEC Rule 145 transaction, the
Company will:

(a)           promptly give to each of the Holders
written notice thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and

(b)           include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after receipt of such
written notice from the Company, by any of the Holders, except as set forth in
Section 2.1.3 below.

 

3

 

2.1.3        Underwriting.  If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 2.1.1(a) or 2.1.2(a).  In such event, the right of any of the
Holders to registration pursuant to this Section 2.1 shall be conditioned
upon such persons’ participation in such underwriting and the inclusion of such
persons’ Registrable Securities in the underwriting to the extent provided
herein.  Each of the Holders proposing to
distribute their securities through such underwriting shall, together with the
Company and the other parties distributing their securities through such
underwriting, enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.  Notwithstanding any other provision of this
Section 2.1, if the underwriter determines that to include the Holder’s
Registerable Securities in such offering would be reasonably likely to
adversely affect such offering (including the price, timing or distribution of
the securities in such offering) and therefore determines to limit the number
of shares to be underwritten, the Company will first include securities being
sold for the account of the Company and then Registrable Securities; provided,
however, for any registration other than the registration for the initial
public offering of shares of the Company, the limitation shall not reduce the
number of Registrable Securities to be included in the offering below twenty
percent (20%) of the total number of shares to be included in the offering
unless the Holders otherwise consent to or approve the limitation of the number
of shares to be underwritten.  In such
event, the Company shall so advise the Holders of the Company’s securities that
would otherwise be registered and underwritten pursuant hereto.  For purposes of any underwriter cutback, all
Registrable Securities held by a stockholder which is a partnership or
corporation shall also include any Registrable Securities held by the partners,
retired partners, stockholders or affiliated entities of such stockholder, or
the estates and family members of any such partners and retired partners and
any trusts for the benefit of any of the foregoing persons, and such
stockholder and other persons shall be deemed to be a single “Holder,” and any
pro rata reduction with respect to such “Holder” shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such “Holder,” as defined in this sentence.  No securities excluded from the underwriting
by reason of the underwriter’s marketing limitation shall be included in such
registration.  If any of the Holders
disapproves of the terms of the underwriting, it may elect to withdraw
therefrom by written notice to the Company and the underwriter.  The Registrable Securities so withdrawn shall
also be withdrawn from registration.

2.2          Expenses of Registration. 
All expenses incurred in connection with registrations effected pursuant
to Section 2.1, including without limitation all registration, filing, and
qualification fees (including blue sky fees and expenses), printing expenses,
escrow fees, fees and disbursements of counsel for the Company and of one
special counsel for the Holders, and expenses of any special audits incidental
to or required by such registration, shall be borne by the Company; provided,
however, that the Holders of Registrable Securities included in such
registration shall, on a pro-rata basis, be required to pay underwriters’
discounts or commissions relating to Registrable Securities.

2.3          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:

2.3.1        Prepare and file with the SEC a
registration statement or registration statements with respect to such
Registrable Securities, including all exhibits and financial statements
required by the SEC to be filed therewith, and use its best efforts to cause
such registration statement to become effective, and keep such registration
statement effective for up to one hundred eighty (180) days or until the
Holders have completed the distribution relating thereto, provided however,

 

4

 

that such one hundred
eighty (180) day period shall be extended for a period of time equal to the
period the Holders refrain from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company.

2.3.2        Prepare and file with the SEC such
amendments, post effective amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the 1933 Act
with respect to the disposition of all securities covered by such registration
statement.

2.3.3        Furnish to the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the public sale or other disposition
of Registrable Securities owned by them.

2.3.4        Use its best 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 Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions and do any and all other acts or things which may be necessary or
advisable to enable such Holders to consummate the public sale or other
disposition in such jurisdiction of such Registrable Securities.

2.3.5        In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering.  Each of the Holders
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

2.3.6        Notify each of the Holders covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and, at
the request of the Holders, promptly prepare, file with the SEC and furnish to
the Holders a reasonable number of copies of a supplement to, or an amendment
of, such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein as necessary to make the statements therein not misleading in
light of the circumstances then existing.

2.3.7        Cause all such Registrable Securities
registered hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed and to maintain the accuracy
and effectiveness of such listing.

2.3.8        Provide a transfer agent and registrar
for all Registrable Securities registered hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.

2.3.9        Furnish, at the request of any of the
Holders, if requesting registration of Registrable Securities pursuant to this
Section 2, on the date that such Registrable Securities are

 

5

 

delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 2, if such securities are being sold through underwriters, or on
the date that the registration statement with respect to such securities
becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to each Holder, if
requesting registration of Registrable Securities, and (ii) to the extent
permitted under the rules of the American Institute of Certified Public
Accountants (“AICPA”), a letter, dated such date, from the independent
accountants of the Company, in form and substance as is customarily given by
independent accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to each Holder, if requesting
registration of Registrable Securities.

2.3.10      Make every reasonable effort to obtain the
withdrawal of any stop order or other order suspending the use of any
preliminary prospectus or prospectus or suspending any qualification of the
registered securities.

2.4          Indemnification.

2.4.1        The Company will, and does hereby
undertake to, indemnify and hold harmless each Holder, each of their officers,
directors, partners and agents, and each person controlling such Holder, with
respect to any registration, qualification, or compliance effected pursuant to
this Section 2, and each underwriter, if any, and each person who controls
any underwriter, of the Registrable Securities held by or issuable to such
Holder, against all claims, losses, damages, and liabilities (or actions in
respect thereto) to which they may become subject under the 1933 Act, the
Securities Exchange Act of 1934, as amended (the “1934 Act”), or other
federal or state law arising out of or based on (i) any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular, or other similar document or any amendment or supplement
thereto (including any related Registration Statement, notification, or the
like) incident to any such registration, qualification, or compliance, or based
on any 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 (ii) any violation or alleged violation by the Company of
any federal, state or common law rule or regulation applicable to the Company
in connection with any such registration, qualification, or compliance, and
will reimburse, as incurred, each Holder, each underwriter, and each director,
officer, partner, agent and controlling person, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action; provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense, arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by any of the Holders or underwriter and stated to be
specifically for use therein.

2.4.2        Each Holder will, if Registrable
Securities held by or issuable to such person are included in such
registration, qualification, or compliance, severally and not jointly,
indemnify the Company, each of its directors, and each officer who signs a
Registration Statement in connection therewith, and each person controlling the
Company, each underwriter, if any, and, each person who controls any
underwriter, of the Company’s securities covered by such a Registration
Statement, against all claims, losses, damages, and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular, or other document, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the

 

6

 

statements therein not
misleading, and will reimburse, as incurred, the Company, and each such
underwriter or other person, for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) was made in such Registration Statement, prospectus,
offering circular, or other document, in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein; provided, however,
that the liability of each such Holder hereunder shall be limited to the net
proceeds received by such Holder from the sale of securities under such
Registration Statement.  In no event will
any Holder be required to enter into any agreement or undertaking in connection
with any registration under this Section 2 providing for any
indemnification or contribution obligations on the part of such Holder greater
than such Holder’s obligations under this Section 2.4.

2.4.3        Each party entitled to indemnification
under this Section 2.4 (the “Indemnified Party”) shall give notice
to the party required to provide such indemnification (the “Indemnifying
Party”) of any claim as to which indemnification may be sought promptly
after such Indemnified Party has actual knowledge thereof, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be subject to approval
by the Indemnified Party (whose approval shall not be unreasonably withheld)
and the Indemnified Party may participate in such defense with its separate
counsel at the Indemnifying Party’s expense if representation of such
Indemnified 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 proceeding; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.4, except to
the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such
litigation.  No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff therein, to such Indemnified Party, of a release from
all liability in respect to such claim or litigation.

2.5          Information by the Holders. 
If any Holder includes Registrable Securities in any registration, such
person shall furnish to the Company such information regarding such person, and
the distribution proposed by such person, as the Company may reasonably request
in writing and as shall be required in connection with any registration,
qualification, or compliance referred to in this Section 2.

2.6          Transfer of Registration Rights. 
The rights of the Holders contained in Section 2.1 hereof, to cause the
Company to register the Registrable Securities, may be assigned or otherwise
conveyed to a transferee or assignee of Registrable Securities, who shall be
considered a “Holder” for purposes of this Section 2; provided that such
transferee or assignee (a) is a Permitted Transferee and (b) holds at
least 100,000 (as adjusted for stock splits, dividends or recapitalizations
after the date hereof) shares of the Registrable Securities held by the
transferring Holder; and, provided further, that the Company is given written
notice by such Holder at the time of or within a reasonable time after said
transfer stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned.

 

7

 

2.7          Delay of Registration. 
No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or implementation
of this Section 2, except with respect to a registration initiated by the
Holders pursuant to Section 2.1 or 2.8 hereof.

2.8          Limitations on Subsequent Registration
Rights.  From and after the date of this Agreement,
the Company shall not, without the prior written consent of Holders of a
majority of the Registrable Securities enter into any agreement with any holder
or prospective holder of any securities of the Company which would allow such
holder or prospective holder to include any securities in any registration
filed under Section 2.1 hereof, unless, under the terms of such agreement,
such holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of such securities will not
diminish the amount of Registrable Securities which are included in such
registration and includes the equivalent of Section 5 as a term.

2.9          Rule 144
Reporting.  With a view to making available to the
Holders, the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its commercially reasonable best
efforts to:

2.9.1        Make and keep public information
available, as those terms are understood and defined in SEC Rule 144 or
any similar or analogous rule promulgated under the 1933 Act, at all times
commencing ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public or the first registration statement filed by the Company to register its
securities under Section 12 of the 1934 Act;

2.9.2        File with the SEC, in a timely manner,
all reports and other documents required of the Company under the 1933 Act and
1934 Act; and

2.9.3        So long as a Holder owns any Registrable
Securities, furnish to such Holder upon request:  a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the 1933
Act, and of the 1934 Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report
of the Company; and such other reports and documents as such persons may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.

2.10        Amendment of Registration Rights. 
Any provision of this Section 2 may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company
and of  Holders of a majority of the Registrable Securities, voting as a
single class.  Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each Holder,
each future holder of Registrable Securities, and the Company.

3.             RIGHTS OF CO-SALE.

3.1          Notice and Rights. 
In the event that any Management Holder (each, a “Selling Holder”)
desires, at any time, to transfer, whether by sale, assignment, encumbrance,
hypothecation, pledge or conveyance or otherwise (a “Transfer”) any
shares of the Company’s securities (the “Offered Shares”) and such
Selling Holder receives a bona fide offer (the “Purchase Offer”) from a
third party to purchase such Offered Shares, such Selling Holder shall deliver
a notice (the “Co-Sale

 

8

 

Notice”) to the Company at least thirty (30)
days prior to the closing of such Transfer, stating (i) such Selling
Holder’s bona fide intention to sell or transfer the Offered Shares,
(ii) the number of such Offered Shares to be sold or transferred,
(iii) the price for which such Selling Holder proposes to sell or transfer
such Offered Shares, (iv) the name of the proposed purchaser or
transferee, or class of purchaser or transferee, and (v) all other
material terms and provisions relating to the proposed sale or transfer.  The Secretary of the Company shall then
promptly give notice of the contemplated transfer to each SMG Holder and the
Senior Lender, who shall have the right, exercisable upon written notice to the
Selling Holder holding such Offered Shares within thirty (30) days after
receipt by an SMG Holder and/or the Senior Lender (the “Electing Holder”)
from the Company of the notice described above, to participate in such Selling
Holder’s sale of Offered Shares.  To the
extent such Electing Holder exercises such right of participation in accordance
with the terms and conditions set forth below, the number of Offered Shares
which such Selling Holder may sell pursuant to the Co-Sale Notice shall be
correspondingly reduced.  The right of
participation of such Electing Holder shall be subject to the following terms
and conditions:

3.1.1        The Electing Holder may sell all or any
part of that number of shares of Common Stock of the Company equal to the
product obtained by multiplying (i) the aggregate number of Offered Shares
covered by the Co-Sale Notice by (ii) a fraction, the numerator of which
is the number of shares of Common Stock of the Company held by the Electing
Holder and the denominator of which is the combined number of shares of Common
Stock of the Company held by all of the Electing Holders and the shares of
Common Stock  owned by the Selling
Holder.

3.1.2        The Electing Holder may effect its
participation in the sale by delivering to the Selling Holder for transfer to
the proposed purchaser one or more certificates, properly endorsed for
transfer, which represent the number of shares of Common Stock which the
Electing Holder elects to sell pursuant to this Section 3.

3.1.3        The Company shall reimburse the Electing
Holders for any and all reasonable fees and expenses, including attorneys’ fees
and expenses incurred pursuant to the exercise of the rights under this Section
3.1.

3.2          Deliveries. 
The stock certificate or certificates which an Electing Holder delivers
to a Selling Holder pursuant to this Section shall be transferred by such
Selling Holder to the proposed purchaser in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Co-Sale
Notice, and such Selling Holder shall promptly thereafter remit to such
Electing Holder that portion of the sale proceeds to which such Electing Holder
is entitled by reason of its participation in such sale.

3.3          Subsequent Sales of Shares. 
The exercise or non-exercise of the rights of an Electing Holder
hereunder to participate in one or more sales of the shares made by a Selling
Holder shall not adversely affect its rights to participate in subsequent sales
by such Selling Holder pursuant to this Section 3.

3.4          Prohibited Transfers. 
In the event any Selling Holder should sell any shares in contravention
of the restrictions of Section 3 (a “Prohibited Transfer”), an
Electing Holder in addition to such other remedies as may be available at law
or in equity or hereunder, shall have the put option provided in
Section 3.5 below, and such Selling Holder shall be bound by the
applicable provisions of such put option.

 

9

 

3.5          Put Option. 
In the event of a Prohibited Transfer, each Electing Holder shall have
the right (but shall not be obligated) to sell to the Selling Holder who made
the Prohibited Transfer a number of shares of Common Stock of the Company equal
to the number of shares the Electing Holder would have been entitled to
transfer to the proposed purchaser in the Prohibited Transfer pursuant to this
Section 3 assuming such Electing Holder elected to exercise its co-sale
rights under Section 3 to their fullest extent.  Such sale shall be made on the following
terms and conditions:

3.5.1        The price per share at which the shares
are to be sold to any such Selling Holder shall be equal to the price per share
paid by the purchaser to such Selling Holder in the Prohibited Transfer.  Such Selling Holder shall also reimburse the
Electing Holder for any and all reasonable fees and expenses, including
attorneys’ fees and expenses, incurred pursuant to the exercise of such
Electing Holder’s rights under this Section 3.5.

3.5.2        Within ninety (90) days after the later
of the dates on which the Electing Holder (i) received notice from such
Selling Holder of the Prohibited Transfer or (ii) otherwise have actual
knowledge of the Prohibited Transfer, the Electing Holder shall, if exercising
the put option created hereby, deliver to such Selling Holder the certificate
or certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.  The failure of
the Electing Holder to exercise the put option in such ninety (90) day period
shall constitute a waiver of the Electing Holder’s right under this
Section 3.5.

3.5.3        Such Selling Holder shall, upon receipt
of the certificate or certificates for the shares to be sold by the Electing
Holder, pursuant to Section 3.5.2, pay the aggregate purchase price
therefor and the amount of fees and expenses reimbursable under
Section 3.5.1, by check made payable to the order of such Electing Holder.

3.6          Permitted Transfers. 
The rights of the Electing Holder under this Section 3 shall not pertain
or apply to (i) any sale or transfer by a Management Holder of not more
than one percent (1%) of the shares such party then owned in a single
transaction or series of related transactions, or (ii) any transfer to a
Permitted Transferee.

3.7          Termination.  The provisions of this Section 3 shall terminate upon
the closing of a Qualified Offering.

3.8          Amendment of Co-Sale Rights. 
Any provision of this Section 3 may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of holders of a
majority of the Electing Holders.

4.             DRAG-ALONG RIGHT.

4.1          Approved Sale. 
If a majority of the issued and outstanding shares of Common Stock held
by the Management Holders approves a sale of all or substantially all of the
assets of the Company, a sale of the Company’s outstanding capital stock or a
merger or consolidation in which (x) the purchaser is a third party that is not
an Affiliate of the Management Holders; (y) the sale, merger or consolidation
is made in accordance with the terms of the Financing Agreement and (z).
(i) the Company is not the surviving corporation or (ii) if the
Company is the surviving corporation, there has been a change in more than 50%
of the ownership of the Company’s voting stock (an “Approved Sale”),
then, subject to Section 2.2 below: 
(i) the Holders shall consent to and raise no

 

10

 

objections against the
Approved Sale; (ii) if the Approved Sale is structured in whole or part as
a merger or consolidation, or a sale of all or substantially all assets, the
Holders shall waive any dissenter’s rights, appraisal rights or similar rights
in connection with such merger, consolidation or asset sale; (iii) if the
Approved Sale is structured in whole or part as a sale of securities, the
Holders agree to sell their respective securities on the terms and conditions
approved by the Company’s stockholders; and (iv) the Holders shall take
all necessary and desirable actions approved by the Company’s stockholders in
connection with the consummation of the Approved Sale, including the execution
of such agreements and such instruments and other actions reasonably necessary
to provide the representations, warranties, indemnities, covenants, conditions,
escrow agreements and other provisions and agreements relating to such Approved
Sale, and effectuate the allocation and distribution of the aggregate
consideration upon the Approved Sale as set forth in Section 4.2 below.

4.2          Conditions. 
The obligations of the Holders pursuant to this Section 4 are
subject to the satisfaction of the following conditions:

4.2.1        upon the consummation of the Approved
Sale, the Holders shall receive the same proportion of the aggregate
consideration from such Approved Sale that such Holders would have received
pursuant to the liquidation rights as provided in the Company’s Certificate of
Incorporation, as then currently in effect;

4.2.2        if the Holders are given an option as to
the form and amount of consideration to be received, each Holder will be given
the same option with respect to his or her shares of Common Stock;

4.2.3        the Holders shall not be obligated to
make any out-of-pocket expenditure prior to the consummation of the Approved
Sale (excluding modest expenditures for his own postage, copies, etc., and the
fees and expenses of his own counsel), and the Holders shall not be obligated
to pay more than his or her pro  rata share (based upon the amount
of consideration received for or with respect to their shares of stock and
vested stock equivalents) of reasonable expenses incurred in connection with
such Approved Sale to the extent such costs are incurred for the benefit of all
Holders and are not otherwise paid by the Company or the acquiring party (costs
incurred by or on behalf of a stockholder for its or his sole benefit will not
be considered costs of the transaction hereunder); and

4.2.4        (i) in the event that any Holder is
required to provide any representations or warranties in connection with the
Approved Sale, the Holder shall only be required to represent and warrant as to
its or his title to its or his stock and stock equivalents to be transferred,
and such person’s authority, power, and right to enter into and consummate such
purchase or merger agreement without violating any other agreement or legal
requirement, and (ii) in the event that the Holders are required to
provide any indemnities in connection with the Approved Sale, then each Holder
shall not be liable for more than his pro  rata share (based upon
the amount of consideration received for or with respect to his shares of
stock) of any liability for indemnity and such liability shall not exceed the
total purchase price received by such Holder for his stock.

4.3          Termination. 
The provisions of this Section 4 shall terminate upon the closing of a
Qualified Offering.

4.4          Amendment of Drag-Along Rights. 
Any provision of this Section 4 may be amended and the observance
thereof may be waived (either generally or in a particular instance and

 

11

 

either retroactively or
prospectively) only with the written consent of holders of a majority of the
shares of Registrable Securities held by the Holders.

5.             Permitted Transfers by Senior
Lender.  In accordance with Section 9 of the Financing
Agreement, and subject to compliance with applicable law, Senior Lender shall
have the right at any time or from time to time, to sell, transfer, convey or
assign all or any portion of its Senior Lender Shares and all or any portion of
its rights or obligations under this Agreement to one or more of its Affiliates
or Assignees (as defined in the Financing Agreement).  Any Permitted Transferee of the Senior Lender
shall acquire all of the rights and obligations of the Senior Lender under this
Agreement and shall have the right to enforce any provision of this agreement
as the Permitted Transferee of the Senior Lender.

6.             “MARKET STAND-OFF” AGREEMENT. 
Each Holder and each Management Holder hereby agrees that during the
180-day period following the effective date of a registration statement of the
Company filed in connection with a Qualified Offering in which such Holder or
Management Holder elects to include all or any portion of its Registerable
Securities, he, she or it shall not, to the extent requested by the Company and
any underwriter, sell or otherwise transfer or dispose of (other than to donors
who agree to be similarly bound) any Common Stock of the Company held by him,
her or it at any time during such period except Common Stock included in such
registration; provided, however, that all officers and directors of the Company
and all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements. 
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder and the Management Shares of each Management Holder (and the shares or
securities of every other person subject to the foregoing restriction) until
the end of such period.  Any Holder or
Management Holder who elects not to include any portion of its Registerable
Securities as part of a Qualified Offering shall not be obligated to agree to
such restrictions.

7.             LEGENDS.  Each
certificate representing SMG Shares, Senior Lender Shares or Management Shares
now or hereafter owned by such parties or issued to any Permitted Transferee
shall be endorsed with the following legend:

THIS CERTIFICATE
AND THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF
THE INVESTOR RIGHTS AGREEMENT DATED JULY__, 2004, AS AMENDED THEREAFTER,
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). 
SUCH AGREEMENT GRANTS CERTAIN CO-SALE RIGHTS AND DRAG ALONG RIGHTS TO
CERTAIN OF THE CORPORATION’S STOCKHOLDERS (OR THEIR ASSIGNEES) UPON THE SALE,
ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF THE CORPORATION’S
SHARES.  THE CORPORATION WILL, UPON
WRITTEN REQUEST, FURNISH A COPY OF SUCH AGREEMENT TO THOSE PERSONS OR ENTITIES
HAVING A LEGITIMATE INTEREST WITHOUT CHARGE.

 

12

 

8.             MISCELLANEOUS

8.1          Governing
Law.  This Agreement shall be governed by and
construed under the laws of the State of California without regard to conflicts
of law principles.

8.2          Entire Agreement. 
This Agreement constitutes the full and entire understanding and
agreement between the parties with respect to the subject matter hereof.

8.3          Notices. 
Any notice, request or other communication required or permitted
hereunder shall be given in writing and shall be deemed to have been duly given
if personally delivered or if telegraphed, or mailed by registered or certified
mail, postage prepaid, at the respective addresses of the parties as set forth
below each signature and shall be deemed to have been received when delivered.  Any party hereto may by notice so given
change its address for future notices hereunder.

8.4          Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

8.5          Severability. 
In the event that any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision.

8.6          Captions. 
The captions and headings to Sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used
to construe the meaning or the interpretation of this Agreement.

8.7          References. 
Any references to forms or schedules governed by the 1933 Act or 1934
Act means such forms or schedules under the 1933 Act and 1934 Act as in effect
on the date hereof or any successor forms or schedules subsequently adopted by
the SEC.

 

13

IN
WITNESS WHEREOF, this Investor Rights Agreement has been duly
executed and delivered by the parties as of the date first above written.

 

 

	
  Address:

  	
  GENUTEC BUSINESS SOLUTIONS,
  INC.

  
	
  27121 Aliso Creek Road,
  Suite 130

  	
  By:

  	
  /s/ Lee Danna

  
	
  Aliso Viejo, California
  92656

  	
   

  	
  Lee Danna

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  SOUND MEDIA GROUP, INC.

  
	
   

  	
   

  
	
  1 Park Plaza, Suite 430

  	
  By: 

  	
  /s/ Tony Tseng

  
	
  Irvine, California 92614

  	
   

  	
  Tony Tseng

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  TREFETHEN CAPITAL PARTNERS, LLC

  
	
  c/o Sextant Corporate Finance

  	
   

  	
   

  
	
  1175 Peachtree Street,
  N.E.

  	
  By:

  	
  /s/ Manager

  
	
  Suite 1900

  	
   

  	
   

  
	
  Atlanta, Georgia 30361

  	
  Its:

  	
  Manager

  
	
  Attn: Genutec Account
  Manager

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  MANAGEMENT HOLDERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  27121 Aliso Creek Road,
  Suite 130

  	
   

  	
   

  	
   

  
	
  Aliso Viejo, California
  92656

  	
  /s/ Lee Danna

  
	
   

  	
  Lee Danna

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  27121 Aliso Creek Road,
  Suite 130

  	
  /s/ Steve Gomes

  
	
  Aliso Viejo, California
  92656

  	
  Steve Gomes

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  27121 Aliso Creek Road,
  Suite 130

  	
   

  	
   

  	
   

  
	
  Aliso Viejo, California
  92656

  	
  /s/ Mike Fannin

  
	
   

  	
  Mike Fannin

  	
   

  	
   

  
					

 

14

 

SCHEDULE A

 

MANAGEMENT
HOLDERS

 

 

Lee
Danna

Steve
Gomes

Mike
Fannin

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}]]