Document:

Exhibit
4.1

INVESTOR
RIGHTS AGREEMENT

THIS INVESTOR RIGHTS
AGREEMENT (this “Agreement”) is dated as of July 24, 2007 by and among
(i) Fairground Media, LLC, a Colorado limited liability company (the “Company”),
(ii) Waveland Colorado Ventures, LLC, a Colorado limited liability company (the
“Investor”), and (iii) the members of the Company listed on Schedule
I hereto, (the “Original Members”). The Investor and the Original
Members are hereinafter collectively referred to as the “Members”.  Certain terms used in this Agreement are
defined in Exhibit A hereto. 
Capitalized terms used but not otherwise defined in this Agreement shall
have the meanings ascribed to such terms in the Investment Agreement (as
defined below).

RECITALS

A.            The Investor has agreed to purchase from the Company, and
the Company has agreed to issue and sell to Investor a Membership Interest in
the Company on the terms and conditions set forth in the Investment Agreement
by and between the Company and the Investor, dated of even date herewith (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the “Investment Agreement”).

B.            Immediately after the closing of the transactions
contemplated in the Investment Agreement, the Company and the Members, pursuant
to a separate agreement (the “Exchange Agreement”), have agreed to
exchange all of the outstanding Membership Interests of the Company for shares
of Common Stock of Mauna Kea Enterprises, Inc., a Colorado corporation (“MK”).  References to “the Company” in those sections
which apply to events or undertakings to occur after the closing of the
transactions contemplated by the Exchange Agreement shall be construed to mean
MK in its capacity as the parent entity of the Company.

C.            In connection with the Investment
Agreement and the Exchange Agreement, and to induce Investor to consummate its
investment in the Company, the Company, the Original Members and Investor
desire to enter into this Agreement.

AGREEMENT

NOW,
THEREFORE, in
consideration of the foregoing and of the mutual promises and covenants
contained herein, the Members and the Company (collectively, the “Parties”)
agree as follows:

1.             BOARD OF DIRECTORS REPRESENTATION
AND APPROVAL RIGHTS

1.1.          Representation. 
From and after the date of the closing of the transactions contemplated
by the Exchange Agreement, at each election of or action by written consent to
elect directors, each Member shall vote all of the voting securities of the
Company over which such Member has voting control so as to effect the following:

(a)           Number.  The
authorized number of directors of the Company’s Board of Directors (the “Board”)
shall be established at three (3) members. 
At the closing of the 

 

transaction contemplated by the
Exchange Agreement, the existing Director shall appoint Mark Kreloff to fill an
existing vacancy on the Board of MK in accordance with the Bylaws of MK.

(b)           Appointments. 
The following persons shall be elected to the Board at each election of
directors during the term of this Agreement:

(i)            At each election of
or action by written consent to elect directors, the Company’s Chief Executive
Officer, initially Mark Kreloff; and .

(ii)           At each election of
or action by written consent to elect directors, two persons designated by the
majority of the Common Stockholders of MK and approved by Investor, which
approval shall not be unreasonably withheld (the “Common Directors”).

(c)           Expansion. 
Upon the approval of a majority of the Board, the number of directors
comprising the Board may be increased to five (5) members, with such additional
members to be independent directors having relevant industry experience and
acceptable to a majority of the Board and Investor.

(d)           Observers. 
One or more designees of the Investor (each an “Observer,” and
collectively, the “Observers”) may be invited to attend all meetings of
the Board and each committee thereof in a non-voting observer capacity.  The Company shall provide the Observers
notice of each meeting of the Board and of each committee thereof at the same
time and in the same manner as notice is given to the Company’s directors.  The Company shall provide to the Observers in
connection with each meeting at which he or she is entitled to attend, whether
or not present at such meeting, copies of all notices, minutes, consents and
all other materials or information that it provides to the Company’s directors
with respect to such meeting, at the same time such materials and information
are given to the directors; provided, however, that the Company
reserves the right to exclude such Observers from access to any material or
meeting or portion thereof if the Company reasonably believes upon advice of
counsel that such exclusion is necessary to preserve the attorney-client
privilege or to protect highly confidential information.  The decision of the Board with respect to the
privileged and confidential nature of such information shall be final and
binding.  The Company may condition the
foregoing on the execution by such Observers of a confidentiality agreement
reasonably acceptable to the Company.

(e)           Committees. 
The Board shall form a finance committee (the “Finance Committee”),
which shall work in consultation with management of the Company, including the
Company’s Chief Executive Officer.  It is
anticipated that the Board shall form an audit committee and a compensation
committee.

1.2.          Investor Approval Items.  The Company covenants and agrees that the
neither the Company nor any of its subsidiaries shall take any of the following
actions without the prior approval of a majority of the Board and the
Investor:

(a)           Authorize or issue any preferred stock or any other
security senior to the Common Stock;

 

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(b)           Materially alter the business strategy of the Company or
undertake a significant change in the business of the Company as conducted as
of the Closing;

(c)           Acquire another entity;

(d)           Liquidate or wind up the Company or any of its
subsidiaries;

(e)           Merge the Company or any of its subsidiaries, or cause the
sale by the Company or any of its subsidiaries of all or substantially all of
its respective assets or issue or grant an exclusive license to all or
substantially all of the intellectual property of the Company or any of its
subsidiaries;

(f)            Increase in the number of shares issuable pursuant to the
Company’s stock option plan;

(g)           Declare or pay any dividend on, or repurchase or redeem
any security;

(h)           Amend the Company’s Articles of Incorporation or Bylaws;

(i)            Change the number of authorized shares of the Common
Stock;

(j)            Hire any executive officer of the Company or any
subsidiary of the Company;

(k)           Enter into any executive employment agreement;

(l)            Adopt compensation programs, including base salaries and
bonus programs for all officers and key employees;

(m)          Adopt any stock option programs;

(n)           Ratify any annual budgets, business plans, and financial
plans;

(o)           Acquire any real estate or undertake any leasehold
obligation;

(p)           Execute entrance obligations or commitments, including
capital equipment leases or purchases, with total value greater than $100,000
and which are outside the most recent business plan or budget approved by the
Board of Directors and Investor;

(q)           Seek credit accommodation, borrow money or issue any debt,
other than trade payables or similar items that occur in the ordinary course of
the business of the Company;

(r)            Grant any security interest, other than security
interests under typical leasing arrangements or tax, statutory and other
similar liens; or

                (t)            relocate
the principal executive offices of the Company outside of the metropolitan area
of Denver/Boulder, Colorado;

 

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2.             REGISTRATION RIGHTS

2.1.          Transfer of Registration Rights.  Investor may transfer its registration rights
with respect to the Registrable Securities to any party or parties to which it
may from time to time transfer Registrable Securities pursuant to the terms of
this Agreement, provided that the transferee agrees in writing to be bound by
Section 2 of this Agreement.  Prior to any
transfer contemplated by this Section 2.1, (i) the transferor shall
furnish to the Company written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned and (ii) such transferee shall agree to
be subject to all restrictions set forth in this Agreement.

2.2.          Demand Registration. 
At any time following the closing of the transaction contemplated by the
Exchange Agreement, Investor may request that the Company file a registration
statement under the Securities Act, covering the shares of Common Stock
requested to be registered (the “Demand Registration”), the Company
shall use its best efforts to, as soon as practicable and in no event later
than 60 days after the receipt of such request, effect such registration
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other government
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of Investor’s
Registrable Securities as are specified in such Demand Registration.  The Company shall not be obligated to effect
and consummate more than two (2) Demand Registrations for Investor, excluding
registrations on Form S-3 or any equivalent successor form.  A request shall not be counted as a Demand
Registration unless the registration statement pursuant to which such
Registrable Securities are being registered is declared effective by the
Commission, or at the request of the Investor, such registration statement is
withdrawn by the Company.

2.3.          Piggy-Back Registration.  Whenever the Company proposes to file a
registration statement with respect to an offering or sale of its Shares (other
than (i) a registration of Shares undertaken pursuant to Section 2.2 above or
(ii) any shelf registration of its Shares to be used as consideration for
acquisitions of businesses or assets by the Company, (iii) a registration
relating to employee benefit, dividend reinvestment, direct stock purchase or
other similar plans, or (iv) a registration on Form S-4 with respect
to any merger, consolidation or acquisition) it will, prior to such filing,
give written notice to the Members and all persons who held shares of capital
stock of MK prior to the consummation of the transaction contemplated by the Exchange
Agreement (the “Original MK Stockholders”) of its intention to do so and, upon
the written request of the Members or Original MK Stockholders holding at least
30% of the Registrable Securities held by all such Holders given within fifteen
(15) days after the Company provides such notice, the Company shall use its
best efforts to cause such Registrable Securities to be included in such
registration, provided, that, (x) the Company shall have the
right to postpone or withdraw any registration effected pursuant to this
Section commenced for its benefit without obligation to the Holders, and (y)
the Holders may be subject to (A) a pro rata cutback at the underwriter’s
discretion (up to a full cutback in a public offering and cutbacks to not less
than 20% of the aggregate number of Shares to be offered in all other
registrations, but if Investor is so limited no party shall sell Shares in such
registration other than the Company or the Investor) and (B) customary
exclusions for registrations effected in connection with acquisitions or
employee

 

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benefit plans.  Except as set forth in this Agreement, no
Person shall be granted piggy-back registration rights that would reduce the
number of Registrable Securities includable by the Investor without the consent
of the Investor.

2.4.          Form S-3 Registration.

(a)            At any time that the Company is
qualified to use Form S-3 (or a successor short form registration
form, if applicable) for registration for shares of its own stock or for shares
of its stockholders and if the Company shall receive from the Holders a written
request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to Registrable
Securities owned by such Holder or Holders in an amount equal to or in excess
of $250,000, the Company will:

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

(ii)           as soon as practicable,
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
government requirements or regulations) 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 Holder
or Holders joining in such request as are specified in a written request given
within 30 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 Agreement if the
Company is not entitled to use Form S-3 for registration for shares of its own
stock or for shares of its stockholders; and provided  further
that the Company shall not be obligated to file more than two registration
statements on Form S-3 (or any successor form) during any twelve month period,
or four registrations in total.  Subject
to the foregoing, the Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Holders.

(b)           Registrations pursuant to this Section 2.4 shall be filed
as a “shelf” registration statement pursuant to Rule 415 under the Securities
Act (or any successor rule), unless the Holder or Holders making such request
state otherwise.  The Company shall use
its best efforts to keep such “shelf” registration continuously effective as
long as the delivery of a prospectus is required under the Securities Act in
connection with the disposition of the Registrable Securities registered
thereby and in furtherance of such obligation, shall supplement or amend such
registration statement if, as and when required by the rules, regulations and
instructions applicable to the form used by the Company for such registration
or by the Securities Act or by any other rules and regulations thereunder
applicable to shelf registrations.

(c)           Notwithstanding anything to the contrary in this
Section 2.4 hereof, a registration shall not be effected pursuant to
Section 2.4 hereof once the Registrable Securities otherwise may be sold
to the public without restriction.

 

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(d)           Registrations pursuant to this Section 2.4 shall not
be counted as requests for registration effected pursuant to Section 2.1.

2.5.          Underwritten Offerings.  If a requested registration pursuant to
Sections 2.1 or 2.4 involves an underwritten public offering and the managing
underwriter of such offering determines in good faith that the number of
securities sought to be offered should be limited due to market conditions,
then the number of securities to be included in such underwritten public
offering shall be reduced to a number deemed satisfactory by such managing
underwriter; provided that the shares to be excluded shall be determined in the
following sequence: (i) first, securities held by any Persons not having any
contractual, incidental piggy back registration rights to include such
securities in the registration statement, (ii) second, securities held by any
other Persons (other than the Holders) having contractual, incidental “piggy
back” rights to include such securities in the registration statement, (iii)
third, securities sought to be registered by the Company for its own account,
(iv) fourth, Registrable Securities sought to be registered by the Holders
other than the Investor, and (v) fifth, Registrable Securities sought to be
registered by the Investor pursuant to Sections 2.1 or 2.4.  If there is a reduction of the number of
Registrable Securities pursuant to clause (iv), such reduction shall be made on
a pro rata basis (based upon the respective holdings of Registrable Securities
held by such Holders).  To facilitate the
allocation of shares in accordance with the above provisions, the Company or
underwriters may round the number of shares of Registrable Securities allocated
to any Holder to be included in the registration to the nearest 100
shares.  With respect to a request for
registration pursuant to Sections 2.1 or 2.4 which is for an underwritten
public offering, the managing underwriter shall be of national reputation and
shall be chosen by a majority of the Board of Directors with the consent of a
majority of the Registrable Securities (determined on an as-converted to Common
Stock basis) held by all Holders requesting such registration, which consent
shall not be unreasonably withheld.  If
the managing underwriter has not limited the number of Registrable Securities
or other securities to be underwritten, the Company may include securities for
its own account in such registration if the managing underwriter so agrees and
if the number of Registrable Securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.

2.6.          Registration Procedures.

(a)           In the case of each registration, qualification or
compliance effected by the Company subject to this Section 2, the Company
shall keep each participating Holder advised in writing as to the initiation of
each such registration, qualification and compliance and as to the completion
thereof.  In addition, the Company shall
at its own expense:

(i)            prepare and file
with the Commission such amendments and supplements to such registration
statement as may be necessary to keep such registration, qualification or
compliance effective for a period of not less than 120 days (or until such
earlier time when all shares covered thereby are sold) and comply with
provisions of the Securities Act with respect to the disposition of all
securities covered thereby during such period; provided, however, that at any
time, upon written notice to the participating Holders and for a period not to
exceed ninety (90) days thereafter (the “Suspension Period”), the
Company may delay the filing or effectiveness of any registration statement or
suspend the use or effectiveness of any registration statement (and the Holders
hereby agrees not to offer or sell any Registrable 

 

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Securities
pursuant to such registration statement during the Suspension Period) if the
Company reasonably believes that it would be materially detrimental to the
Company and its stockholders for such registration statement to become
effective or to remain effective as long as such registration statement would
otherwise be required to remain effective because such action (x) would
materially interfere with a significant acquisition, corporate reorganization
or other similar transaction involving the Company, (y) would require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential or (z) would render the Company unable
to comply with requirements under the Securities Act or the Exchange Act.  In the event that the Company shall exercise
its right to delay or suspend the filing or effectiveness of a registration
hereunder, the applicable time period during which the registration statement
is to remain effective shall be extended by a period of time equal to the
duration of the Suspension Period.  The
Company may extend the Suspension Period for an additional consecutive sixty (60)
days with the consent of the holders of a majority of the Registrable
Securities registered under the applicable registration statement, which
consent shall include Investor, if Investor is a Holder registered under such
registration statement.  No more than two
(2) such Suspension Periods shall occur in any twelve (12) month period.  If so directed by the Company, all Holders
registering shares under such registration statement shall (i) not offer to
sell any Registrable Securities pursuant to the registration statement during
the period in which the delay or suspension is in effect after receiving notice
of such delay or suspension; and (ii) use their best efforts to deliver to the
Company (at the Company’s expense) all copies, other than permanent file copies
then in such Holder’s possession, of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice.  Notwithstanding the foregoing, the Company
shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement other than a registration statement
on Form S-3 that contemplates a distribution of securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act.

(ii)           update, correct,
amend and supplement such registration, qualification or compliance as
necessary;

(iii)          furnish such number
of prospectuses, including preliminary prospectuses, and other documents
incident thereto as each Holder may reasonably request from time to time;

(iv)          register or qualify
such Registrable Securities under such other securities or blue sky laws of
such jurisdictions of the United States as each Holder may reasonably request
to enable it to consummate the disposition in such jurisdiction of the
Registrable Securities (provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this provision, or (ii) consent to
general service of process in any such jurisdiction);

(v)           notify each Holder
at any time when a prospectus relating to the Registrable Securities is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statement therein not misleading, and at the request of
Holder, the Company will prepare a supplement or amendment to such prospectus,
so that, as thereafter delivered to purchasers of such shares, such prospectus 

 

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will
not contain any untrue statements of a material fact or omit to state any fact
necessary to make the statements therein not misleading;

(vi)          cause all such
Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed;

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

(viii)        upon the sale of any
of the Registrable Securities pursuant to such registration statement, remove
all restrictive legends from all certificates or other instruments evidencing
the Registrable Securities.

(b)           Except as required by law, all expenses incurred by the
Company in complying with this Section 2, including but not limited to,
all registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, blue sky fees and
expenses (including fees and disbursements of counsel related to all blue sky
matters) incurred in connection with any registration, qualification or
compliance pursuant to this Section 2 shall be borne by the Company.  In addition, the fees and expenses of one
counsel selected by the holders of a majority of the Registrable Securities
held by the Holders participating in such registration shall be borne by the
Company; provided, however, that the maximum amount of such expenses which the
Company shall be responsible shall be $20,000. 
Notwithstanding the above, the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 2.2 if
the registration request is subsequently withdrawn at the request of Investor
(in which case Investor shall bear such expenses), unless Investor agrees to
forfeit its right to one demand registration pursuant to Section 2.2; provided,
further, however, that if at the time of such withdrawal, Investor has learned
of a material adverse change in the condition, business or prospects of the
Company from that known to Investor at the time of its request and has
withdrawn the request with reasonable promptness after learning of such
information, then the Investor shall not be required to pay any of such expenses
and shall retain its rights pursuant to Section 2.2.  All underwriting discounts and selling
commissions applicable to a sale incurred in connection with a registration of
the Registrable Securities shall be borne by each Holder participating in such
registration according to such Holder’s proportionate share (based on the total
number of shares sold in such registration other than for the account of the
Company).

2.7.          Furnish Information. 
If the Registrable Securities owned by a Holder are included in any
registration, it shall be a condition precedent to the obligations of the
Company to take any actions pursuant to this Section 2 that all such Holders
shall furnish the Company such information regarding itself as the Company may
reasonably request and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement and all
such Holders shall indemnify the Company with respect thereto in accordance
with Section 2.9 hereof.  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.

 

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2.8.          Current Public Information.  At all times after the Company has filed a
registration statement with the Commission pursuant to the requirements of
either the Securities Act or the Exchange Act, the Company shall file all
reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Commission thereunder, and
shall take such further action as any holder or holders of Registrable
Securities may reasonably request, all to the extent required to enable such
holders to sell Registrable Securities pursuant to Rule 144 adopted by the
Commission under the Securities Act or any similar rule or regulation hereafter
adopted by the Commission.  Upon request,
the Company shall deliver to any holder of Registrable Securities a written
statement as to whether it has complied with such requirements.  The provisions of this Section 2.8 shall
terminate on the date on which there are no holders of Registrable Securities.

2.9.          Indemnification Relating to Registration Rights.

(a)           With respect to any registration, qualification or
compliance effected or to be effected pursuant to Section 2 of this Agreement,
to the extent permitted by law, the Company shall indemnify each Holder whose
securities are included or are to be included therein, each of such Holder’s
directors, officers, managers, members or partners, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any
such Holder or underwriter (a “Controlling Person”) from and against all
losses, damages, liabilities, claims, charges, actions, proceedings, demands,
judgments, settlement costs and expenses of any nature whatsoever (including,
without limitation, attorneys’ fees and expenses) (“Losses”) concerning:

(i)            any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance;

(ii)           any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make a statement therein, in the light of the
circumstances under which it was made, not misleading; or

(iii)          any violation by
the Company of the Securities Act or any rule or regulation promulgated
thereunder applicable to the Company, or of any blue sky or other state
securities laws or any rule or regulation promulgated thereunder applicable to
the Company, in each case, relating to any action or inaction required of, or
any information provided by, the Company in connection with any such
registration, qualification or compliance, and subject to Section 2.10
below, will reimburse each such Person entitled to indemnity under this Section
for all legal and other expenses reasonably incurred in connection with
investigating or defending any such Losses; provided, however,
that the foregoing indemnity and reimbursement obligation shall not be
applicable to the extent that any such information was furnished to the Company
in writing by such Holder, specifically for use in such prospectus, offering
circular or other document; and provided, further, that the
indemnity agreement contained in this Section 2.9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld.

 

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(b)           With respect to any registration, qualification or
compliance effected or to be effected pursuant to this Agreement, each Holder
whose securities are included or are to be included therein, shall, to the
extent permitted by law, indemnify the Company and each of the Company’s
directors, officers and Controlling Persons from and against all Losses
concerning:

(i)            any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance; or

(ii)           any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statement therein, in the light of the
circumstances under which it was made, not misleading, or any violation or
alleged violation by the Company of the Securities Act, in each case, to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement), omission (or alleged omission) or violation (or alleged violation)
was based on any written information furnished to the Company by such Holder
and stated to be specifically for use in connection with any such registration,
qualification or compliance, and subject to Section 2.10 below, will
reimburse the Company for all legal and other expenses reasonably incurred in
connection with investigating or defending any such Losses; provided, however,
that, the obligation of the Holder hereunder shall be limited to an amount
equal to the net proceeds to the Holder of the Registrable Securities sold as
contemplated hereunder; and provided, further, that the indemnity
agreement contained in this Section 2.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld.

2.10.        Indemnification Procedures.  Each person entitled to indemnification under
this Section (an “Indemnified Party”) shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an “Indemnifying Party”) of any action commenced against
or by it in respect of which indemnity may be sought hereunder, but failure to
so notify an Indemnifying Party shall not relieve such Indemnifying Party from
any liability that it may have otherwise than on account of this indemnity
agreement so long as such failure shall not have materially prejudiced the
position of the Indemnifying Party.  Upon
such notification, the Indemnifying Party shall assume the defense of such
action if it is a claim brought by a third party, and after such assumption the
Indemnified Party shall not be entitled to reimbursement of any expenses
incurred by it in connection with such action except as described below.  In any such action, any Indemnified Party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
contrary, (ii) the Indemnifying Party shall have failed to assume the defense
of such action or proceeding and employ counsel reasonably satisfactory to such
Indemnified Party in any such action or proceeding or (iii) the named parties
in any such action (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
or conflicting interests between them. 
The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent (which shall not be
unreasonably withheld or delayed by such Indemnifying Party), but if settled
with such consent or if there is a final

 

 

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judgment
for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party
from and against any Losses by reason of such settlement or judgment.

2.11.        Survival; Contribution.  The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Party and shall survive the transfer of
securities and shall survive completion of any offering of Registrable
Securities in a registration statement. 
The Indemnifying Party also agrees to make such provisions, as are
reasonably requested by any Indemnified Party, for contribution to such party
in the event the Indemnifying Party’s indemnification is unavailable for any
reason.

2.12.        The Original MK Stockholders are intended third-party
beneficiaries of this Section 2 and shall have the right, power and authority
to enforce the provisions hereof as though they were a party hereto.

3.             INFORMATION AND INSPECTION RIGHTS

3.1.          Information. 
Until such time as the Investor no longer holds any Registrable
Securities, upon the request of the Investor, the Company shall deliver to
Investor:

(a)           A report in a form to be provided by Investor, discussing
the achievement of milestones established by the Investor and Company;

(b)           as soon as practicable, but in any event at least 30 days
prior to the end of each fiscal year, a budget and business plan of the Company
for the next fiscal year, prepared on a monthly basis, including balance sheets
and statements of cash flows for such months and, as soon as prepared, any
other budgets or revised budgets prepared by the Company;

(c)           notice of material changes to the Company’s budget
immediately upon actual knowledge of the Company of the occurrence of such
material change; and

(d)           such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as such
Investor may from time to time request.

3.2.          Inspection. 
During any period in which Investor is entitled to receive the materials
specified in Section 3.1 hereof, the Company shall permit such Investor,
at its expense, to visit and inspect the Company’s and its subsidiaries’
properties, to examine its books of account and records and to discuss the
Company’s affairs, finances and accounts with its officers, all at such
reasonable times and upon reasonable notice as may be requested by Investor.

3.3.          Confidentiality of Records.  Investor agrees to keep confidential any
information furnished to it that the Company identifies as being confidential
or proprietary (so long as such information is not in the public domain or has
not otherwise been provided to Investor by a party other than the Company),
except that Investor may disclose such proprietary or confidential information
(i) to any partner, subsidiary or parent of Investor as long as such partner,
subsidiary or parent is advised of and agrees or has agreed to be bound by the
confidentiality provisions of this Section 3.3 or comparable restrictions; (ii)
at such time as it enters the public domain through no fault of Investor; (iii)
that is communicated to it free of any obligation of 

 

 

11

 

confidentiality; (iv) that is developed
by Investor or its agents independently of and without reference to any
confidential information communicated by the Company; or (v) as required by
applicable law.

4.             DRAG-ALONG RIGHTS

4.1.          Applicability. 
In the event the holders of a majority of the outstanding Membership
Interests of the Company (or Common Stock issued in exchange therefor in
connection with the Exchange Agreement), including Investor (the “Proposing
Stockholders”), approve a Change of Control Transaction (an “Approved
Sale”), then the Members other than the Proposing Stockholders (collectively,
the “Remaining Holders”) shall each consent to, vote for and raise no
objections to the Approved Sale.  If the
proposed acquiror is an Affiliate of any Member of the Proposing Stockholders,
then this Section 4.1 shall only apply to the Approved Sale if the
Approved Sale is approved by the holders of a majority of the Common Stock held
of record by holders that are not Affiliates of such proposed acquiror.  If the Approved Sale will take the form of an
asset sale, merger or consolidation, the Remaining Holders shall vote in favor
of such transaction and shall thereby waive any appraisal rights or dissenters’
rights in connection with such transaction. 
If the Approved Sale is structured as a sale of the stock of the
Company, each Remaining Holder shall agree to sell all capital stock in the
Company then held by such Remaining Holder on the terms and conditions approved
by the Proposing Stockholders.  A
Remaining Holder shall have no obligations under this Section 4.1 to the
extent that the terms of the Approved Sale provide that such Remaining Holder
would receive less than the amount that would be distributed to such Remaining
Holder in the event that the proceeds were distributed in accordance with the
Company’s Operating Agreement or Articles of Incorporation.  All capital stock transferred by the
Remaining Holders pursuant to this Section 4.1 shall be sold at the same
price and otherwise treated identically with the capital stock of the same
class and series being sold by the Proposing Stockholders in all respects.  The Remaining Holders shall each take such
actions as may be reasonably required and otherwise cooperate in good faith
with the Proposing Stockholders in connection with consummating the Approved
Sale, including the execution of such agreements and such instruments and other
actions reasonably necessary to (i) provide reasonable representations,
warranties, indemnification and other provisions and agreements relating to
such Approved Sale and (ii) effectuate the allocation and distribution of the
aggregate consideration upon the Approved Sale.

4.2.          Notice of Sale. 
The Proposing Stockholders shall give the Remaining Holders at least ten
days prior written notice of any Approved Sale as to which the Proposing
Stockholders intend to exercise their rights under this Section 4.

5.             REDEMPTION

5.1.          Obligation to Redeem. The Company shall be obligated
to redeem all outstanding Registrable Securities held by Investor as follows:

(a)           On or after the 90th day after the closing of
the transactions contemplated by the Investment Agreement, if the Company has
not filed a registration statement with respect to the Registrable Securities
held by Investor (the “Investor Shares”), the Investor shall have the right to
compel the Company to redeem all of the Investor Shares by delivery of a
written notice 

 

 

12

 

to the Company which shall be
deliverer, if at all, no later than the 150th day after the Closing
(the “Redemption Notice”).  The Company
shall redeem all of the Investor Shares within thirty (30) days of receipt the
Redemption Notice (the “Redemption Date”).

(b)           The Investor Shares shall be redeemed by paying Investor
an aggregate amount of $375,000 (the “Redemption Price”) as follows:  50% of the Redemption Price shall be paid on
the Redemption Date and the balance of the Redemption Price shall be payable on
the first anniversary of the Redemption Date (the “Final Redemption Payment
Date”).  Such payments shall be made by
the Company from funds legally available therefor on the Redemption Date and
the Final Redemption Payment Date.

(c)           From and after the close of business on the Redemption
Date and the Final Redemption Payment Date, unless there shall have been a
default in the payment of the Redemption Price, all rights of Investor shall
cease with respect to the Investor Shares redeemed on such respective date, and
such shares shall not thereafter be transferred on the books of the Company or
be deemed to be outstanding for any purpose whatsoever.  If the funds of the Company legally available
for redemption of Investor Shares on either such date are insufficient to
redeem the total number of Investor Shares to be redeemed on such date, the
shares required to be redeemed but not so redeemed shall remain outstanding and
entitled to all rights and preferences provided herein.  At any time thereafter when additional funds
of the Company are legally available for the redemption of such shares, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available. Interest on all unpaid portion of the Redemption Price shall
accrue at the rate of twelve percent (12%) (or, if lower, the maximum amount
permitted under applicable law) per annum from such date and shall be payable
quarterly in arrears to Investor.

(d)           In the event that as a result of the death or disability
of Mark Kreloff, and the Company at such time maintains life or disability
insurance for him, and the benefits thereof are paid to the Company, then
within thirty (30) days of the receipt of such payment, the Company shall
notify the Investor of such event.  The
Investor shall have the right to compel the Company to redeem the Investor
Shares at the Redemption Price by delivery of a written notice to the Company
within thirty (30) days of receipt of such notice from the Company.

6.             CALL OPTION ON SHARES HELD BY
ORIGINAL MEMBERS

6.1.          Grant of Call Option. For a period of five years
from the date hereof, Investor shall have the right (the “Option”) to cause the
Original Members to sell to Investor all of the shares of the Company held by
them for an aggregate purchase price of $100 if, at any time during such period
(i) neither the Company nor its subsidiaries are pursuing an internet community
auction business (or related or similar social networking site) (the “Business”)
and (ii) the Company has demonstrably abandoned the pursuit of the Business (an
“Option Trigger Event”); provided, however, that the Investor shall not have
the right to exercise the Option if (A) the Company has abandoned the Business
in favor of a different business plan or model which has been approved by the
Board of Directors of the Company and Investor or (B) at the time of abandonment
of the Business, Investor no longer holds at least 50% of the Registrable
Securities issued to Investor at the closing of the transaction contemplated by
the Exchange Agreement.

 

13

 

6.2.          Exercise of Option. 
The Option may be exercised by written notice given by Investor to each
of the Original Members within 90 days of Investor first becoming aware of the
Option Trigger Event (the “Exercise Notice”).

6.3.          Closing. 
Closing of the purchase and sale of the Original Member Shares (“Option
Closing”) shall occur at a time and location mutually determined by Investor
and the Original Members, within thirty days following the deliver of the
Exercise Notice.  At the Option Closing,
the Investor shall pay the $100 purchase price (to be allocated pro rata among
the Original Members) and the Original Members shall deliver or cause to be
delivered to the Company instruments of transfer for the shares in form
reasonably acceptable to Company and the Investor, warranting title thereto and
the absence of liens and encumbrances with respect thereto.

7.             MISCELLANEOUS PROVISIONS

7.1.          Termination. 
This Agreement shall terminate as to any specific Member at such time as
such Member shall no longer own shares of Common Stock or securities of the
Company convertible or exercisable for shares of Common Stock.

7.2.          Other Agreements.

(a)           Insurance. 
As soon as reasonably practicable following the Closing, the Company
shall obtain insurance policies in nature and amounts as would be typical for a
company engaged in the business conducted by the Company.

(b)           Non-Competition, Non-Solicitation and Non-Disclosure
Agreement.  The Company shall enter
into with Founder and each employee an Employee Nondisclosure, Non-compete,
Non-solicitation and Invention Assignment Agreement, all such agreements to be
in a form reasonably acceptable to the Investor (the “NDA”).  Following the Closing, the Company shall
enter into a non-disclosure agreement substantially similar in form to the NDA
with each new employee of or consultant to the Company or any present or future
subsidiary of the Company, with any changes to such form to be approved in
advance by the Investor.

(c)           Key Man Life Insurance.  The Company will maintain life insurance,
with benefits payable to the Company, for Mark Kreloff, with such premium
amounts being reasonably satisfactory to Investor; provided however,
that at the election of the Investor, such proceeds shall be used to redeem the
Investor Shares pursuant to Section 5.1(d).

(d)           Additional Covenants.  So long as Investor holds any Registrable
Securities,  the Company covenants and
agrees that it will perform and observe the following covenants and provisions
and will cause each of its subsidiaries to perform and observe such of the
following covenants and provisions as are applicable to such subsidiary:

(i)            Payment of Taxes
and Trade Debt.  Pay and discharge
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or business, or upon any properties belonging to it,
prior to the date on which penalties attach thereto, and all lawful claims,
which, if unpaid, might become a lien or charge upon any properties of the
Company or any of its subsidiaries, other than those which are being contested 

 

 

14

 

in
good faith if the Company shall have set aside on its books and shall have
provided, in accordance with generally accepted accounting principles, adequate
reserves with respect thereto; and pay in conformity with customary trade
terms, all lease obligations, all trade debt, and all other indebtedness
incident to its operations, except such as are being contested in good faith if
the Company shall have set aside on its books and shall have provided, in
accordance with generally accepted accounting principles, appropriate reserves
with respect thereto.

(ii)           Maintenance of
Insurance.  Maintain with responsible
and reputable insurance companies or associations, insurance in such amounts
and covering such risks as the Company reasonably deems advisable.

(iii)          Preservation of
Corporate Existence.  Preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
required, unless the failure to so qualify does not and will not have a
material and adverse effect on the business, operations or financial condition
of the Company; and preserve and maintain all material licenses and other
rights to use patents, processes, licenses, trademarks, trade names,
inventions, intellectual property rights or copyrights owned or possessed by it
as are reasonably necessary or advisable for it to conduct its business.

(iv)          Compliance with
Laws.  Comply with all applicable
laws, rules, regulations and orders of any governmental authority,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise, except non-compliance being contested in
good faith through appropriate proceedings so long as the Company shall have
set up and funded sufficient reserves, if any, required under generally
accepted accounting principles with respect to such items.

(v)           Keeping of Records
and Books of Account.  Keep adequate
records and books of account, in which complete entries will be made in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Company, and in which, for each
fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection within its
business shall be made.

(vi)          Maintenance of
Properties, etc.  Maintain and
preserve all of its properties that the Company reasonably deems necessary or
useful in the proper conduct of its business in good repair, working order and
condition, ordinary wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and comply with the provisions of all material leases to
which it is a party or under which it occupies property so as to prevent any
material loss or forfeiture thereof or thereunder.

7.3.          Notices.  All
notices, requests and other communications hereunder shall be in writing and
shall be deemed to have been duly given at the time of receipt if delivered by
hand or by facsimile transmission or three days after being mailed, registered
or certified mail, return receipt requested, with postage prepaid, to the
address or facsimile number (as the case may be) listed below the signature of
each Person on such Person’s signature page hereto if any Person 

 

 

15

 

shall have designated a different
address or facsimile number by notice to the other parties given as provided
above, then to the last address or facsimile number so designated.

7.4.          Severability. 
In the event one or more of the provisions of this Agreement should, for
any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed and
interpreted in such manner as to be effective and valid under applicable law.

7.5.          Waiver or Modification.  This Agreement may be amended or terminated
and the observance of any term of this Agreement may be waived with respect to
all parties to this Agreement only with the written consent of (i) Investor,
(ii) holders of a majority of the Common Stock, on an As-Converted Basis, and
(iii) to the extent such amendment or termination affects the rights of the
Company or creates obligations on behalf thereof, the Company.

7.6.          Governing Law. 
This Agreement shall be governed by the laws of the State of Colorado
without regard to the conflicts of law provisions thereof.

7.7.          Further Assurances. 
Each Party agrees to act in accordance herewith and not to take any
action that is designed to avoid the intention hereof.

7.8.          Successors and Assigns.  This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.  Each Member may assign its rights hereunder
to (i) the ancestors, descendants, siblings or spouse of such Member or to
trusts for the benefit of such persons or such Member, (ii) to such Affiliates,
or (iii) in the case of a Member that is a private investment company, to the
partners, members, stockholders or other investors of such Member as a
distribution or similar transfer from such Member; provided that in each of the
foregoing cases, the transferee shall furnish the other Members and the Company
with a written agreement to be bound by and comply with all provisions of this
Agreement.  Such transferee shall be
treated as a “Member” for the purposes of this Agreement, and shall have the
same rights and obligations as those granted to or imposed upon the transferor
of such shares.

7.9.          Aggregation of Stock.  For purposes of determining the availability
of any rights under this Agreement, the number of shares of Common Stock or
other securities of the Company deemed to be owned by a Member or other Person
shall include all such shares or other securities owned by such Member or other
Person, such Member’s (or other Person’s) Affiliates and their respective
partners, members, or shareholders, and any other person or entity that
acquires any such shares or other securities from any of the foregoing by gift,
will or intestate succession.

7.10.        Arbitration. 
Any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, shall be settled by arbitration administered by the
American Arbitration Association under its Commercial Arbitration Rules, and
judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.  Such
arbitration shall take place in Denver, Colorado, and be conducted by a panel
of three arbitrators, 

 

 

16

 

with each party having the right to
select one arbitrator and the third arbitrator to be selected in accordance
with the rules of the American Arbitration Association.

7.11.        NO RIGHT TO JURY TRIAL.  EACH PARTY HEREBY IRREVOCABLY WAIVES, AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR
OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT ANY RIGHT
TO A TRIAL BY JURY.

7.12.        Legends.  Any
stock certificate issued by the Company representing securities subject to this
Agreement shall contain the following legend:

THE SALE, PLEDGE,
HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO, AND IN SOME CASES PROHIBITED BY, THE TERMS AND CONDITIONS OF A
CERTAIN INVESTOR RIGHTS AGREEMENT, BY AND AMONG THE STOCKHOLDER, THE COMPANY,
AND CERTAIN OTHER STOCKHOLDERS, WHICH CAN BE OBTAINED UPON WRITTEN REQUEST,
WITHOUT CHARGE TO THE HOLDER HEREOF, FROM THE COMPANY.

[signatures follow on the next page]

 

 

17

 

IN WITNESS WHEREOF, the undersigned has
executed this Agreement as of the day and year first above written.

	
   

  	
  FAIRGOUND
  MEDIA, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Kreloff

  
	
   

  	
  Name:

  	
  Mark Kreloff

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address
  for Notice:

  
	
   

  	
  1701 Pearl Street

  
	
   

  	
  Boulder, CO 80302

  
	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  303-786-7676

  
	
   

  	
  Attn:

  	
  Andrew Brandt

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  
	
   

  	
  Faegre & Benson LLP

  
	
   

  	
  1900 Fifteenth Street

  
	
   

  	
  Boulder, CO 80302

  
	
   

  	
  Facsimile No.:

  	
  (303) 447-7800

  
	
   

  	
  Attn:

  	
  Christopher M. Hazlitt,
  Esq.

  
				

 

[Company Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Mark H. Kreloff

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:  

  
	
   

  	
  /s/
  Mark H. Kreloff

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Andrew Brandt

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:  

  
	
   

  	
  /s/
  Andrew Brandt

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Dave Rogers

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:  

  
	
   

  	
  /s/
  Dave Rogers

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Luke Miller

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
  /s/ Luke Miller

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Bret Orton

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
  /s/ Bret Orton

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Kevin A. Kerndt

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
  /s/ Kevin A. Kerndt

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Joe Pezzillo

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
  /s/ Joe Pezzillo

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Brad Buikema

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
  /s/ Brad Buikema

  

 

[Member Signature Page to Investor Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned Member has
executed this Agreement as of the day and year first above written.

	
   

  	
  Waveland Colorado
  Ventures, LLC

  
	
   

  	
  [Name of
  Member]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chester P. Schwartz

  
	
   

  	
   

  
	
   

  	
  Name: Chester P. Schwartz

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: Manager

  
	
   

  	
   

  
	
   

  	
  Address
  for Notice:

  	
  4725
  S. Monaco St.

  
	
   

  	
   

  	
  Suite
  210

  
	
   

  	
   

  	
  Denver, CO 80237

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
					

 

 

[Investor Signature Page to Investor Rights
Agreement]

 

SCHEDULE
I

ORIGINAL
MEMBERS

Mark Kreloff

 

Andrew Brandt

 

Dave Rogers

 

Luke Miller

 

Bret Orton

 

Kevin Kerndt

 

Joseph Pezzillo

 

Bradley Buikema

 

 

EXHIBIT
A

CERTAIN
DEFINITIONS

For purposes of the
Agreement to which this Exhibit A is attached, the following terms
have the following meanings:

“Change of Control
Transaction” means (i) any consolidation, reorganization, acquisition or
merger (collectively, a “Reorganization”) of the Company with or into
any other entity or entities in which the holders of the Company’s outstanding
capital stock immediately before such Reorganization do not, immediately after
such Reorganization, retain stock representing a majority of the voting power
of the surviving entity of such Reorganization or stock representing a majority
of the voting power of an entity that wholly owns directly or indirectly, the
surviving entity of such Reorganization; (ii) the sale, transfer or
assignment of securities of the Company representing a majority of the voting
power of all the Company’s outstanding voting securities by the holders thereof
to an acquiring party (or related parties) who is not affiliated with the
Company’s stockholders in a single transaction or series of related
transactions; (iii) the sale of the Company’s assets representing a majority of
the value of the Company’s assets provided that in the case of either
(i) or (ii) above, any transaction or series of transactions principally for bona fide equity financing purposes in
which cash is received by the Company or any successor or indebtedness of the
Company is cancelled or converted or a combination thereof shall not constitute
a reorganization or sale, transfer or assignment of securities; or (iv) the
license, directly or indirectly, in a single transaction or a series of related
transactions, of all or substantially all of the assets of the Company that
results in the Company having no significant business operations

“Closing Date”
means the date upon which the closing of the Series B Purchase Agreement
occurs.

“Commission” means
the Securities and Exchange Commission or any successor thereto.

“Common Stock
Equivalents” means all shares of Common Stock that are issued and
outstanding or are issuable upon the exchange, exercise or conversion of any
other security of the Company.  The
number of Common Share Equivalents owned by a Person shall equal the sum of the
number of shares of Common Stock owned by such Person plus the number of shares
of Common Stock issuable upon the exchange, exercise or conversion of any other
security of the Company owned by such Person.

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, or any successor
statute.

“Founder” means
Mark Kreloff.

“GAAP” means
United States generally accepted accounting principles consistently applied.

“Holder” means (i)
the Investor, (ii) the Original MK Stockholders, (iii) with respect to Section
2.3 only, the Original Members, and (iv) any person or entity to whom a Holder
sells,

 

A-1

 

transfers or
assigns Registrable Securities in an amount and on terms sufficient to comply
with Section 2.1 hereof, other than in a sale pursuant to Rule 144 under the
Securities Act or a registration effected pursuant to this Agreement.

 “Register,” “registered,” and “registration”
refer to an underwritten registration effected by preparing and filing with the
Commission  a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering by the Commission of effectiveness of such registration statement or
document.

“Registrable
Securities” means (i) shares of Common Stock issuable or issued in exchange
for a Membership Interest in the Company, and (ii) any other shares of Common
Stock acquired by a Holder from the Company.

“Share” means any
share of any class of capital stock of the Company and securities of the
Company convertible into or exercisable for any share of any class of the
Company’s capital stock.

 

 

 

A-2Exhibit 4.2

 

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED
UPON ITS

EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON

            TRANSFER
SET FORTH IN SECTION 5 OF THIS
WARRANT       

 

	
  Date of Issuance: July
  24, 2007

  	
  Number of
  Shares: 1,000,000 

  (subject to adjustment)

  

 

MAUNA KEA ENTERPRISES, INC.

Common Stock Purchase Warrant

(Void after July 31, 2012)

                Mauna Kea Enterprises, Inc., a Colorado corporation
(the “Company”), for value received, hereby certifies that Waveland Colorado
Ventures, LLC or its registered assigns (the “Registered Holder”), is entitled,
subject to the terms and conditions set forth below, to purchase from the
Company, at any time or from time to time on or after the date of issuance and
on or before 5:00 p.m. (Mountain time) on July 31, 2012, 1,000,000 shares of
Common Stock, no par value per share, of the Company (“Common Stock”), at a
purchase price of $0.2813 per share.  The
shares of Common Stock purchasable upon exercise of this Warrant, and the
purchase price per share, each as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the “Warrant Shares”
and the “Purchase Price,” respectively.

1.             Exercise.

(a)           Exercise
for Cash.  The Registered Holder may,
at its option, elect to exercise this Warrant, in whole or in part and at any
time or from time to time, by surrendering this Warrant, with the purchase form
appended hereto as Exhibit I duly executed by or on behalf of the
Registered Holder, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full,
in lawful money of the United States, of the Purchase Price payable in respect
of the number of Warrant Shares purchased upon such exercise.

(b)           Cashless Exercise.

(i)            The
Registered Holder may, at its option, elect to exercise this Warrant, in whole
or in part and at any time or from time to time, on a cashless basis, by
surrendering this Warrant, with the purchase form appended hereto as Exhibit
I duly executed by or on behalf of the Registered Holder, at the principal
office of the Company, or at such other office or agency as the Company may
designate, by canceling a portion of this Warrant in payment of the Purchase
Price payable in respect of the number of Warrant Shares purchased upon such
exercise.  In the event of an exercise
pursuant to this subsection 1(b), the number of Warrant Shares issued to the
Registered Holder shall be determined according to the following formula:

 

	
  X = Y(A-B)

  	
   

  	
   

  
	
   

  	
  A

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Where:

  	
   X =

  	
  the number of
  Warrant Shares that shall be issued to the Registered Holder;

  
	
   

  	
   

  	
   

  
	
   

  	
  Y =

  	
  the number of
  Warrant Shares for which this Warrant is being exercised (which shall include
  both the number of Warrant Shares issued to the Registered Holder and the
  number of Warrant Shares subject to the portion of the Warrant being
  cancelled in payment of the Purchase Price);

  
	
   

  	
   

  	
   

  
	
   

  	
  A =

  	
  the Fair Market
  Value (as defined below) of one share of Common Stock; and

  
	
   

  	
   

  	
   

  
	
   

  	
  B =

  	
  the Purchase
  Price then in effect.

  
				

 

(ii)           The
Fair Market Value per share of Common Stock shall be determined as follows:

(A)          If
the Common Stock is listed on a national securities exchange, the Nasdaq
National Market or another nationally recognized trading system as of the
Exercise Date, the Fair Market Value per share of Common Stock shall be deemed
to be the average of the high and low reported sale prices per share of Common
Stock thereon for the 10 day trading period immediately preceding the Exercise
Date or, if otherwise traded in an over-the-counter market, the fair market
value per share of the Common Stock shall be deemed to be the average of the
reported closing bid and ask prices of the Common Stock on the day immediately
prior to the exercise of this Warrant; (provided that if no such price
is reported on such day, the Fair Market Value per share of Common Stock shall
be determined pursuant to clause (B)).

(B)           If
the Common Stock is not listed on a national securities exchange, the Nasdaq
National Market or another nationally recognized trading system as of the
Exercise Date, the Fair Market Value per share of Common Stock shall be deemed
to be the amount most recently determined by the Board of Directors of the
Company (the “Board”) to represent the fair market value per share of the Common
Stock (including without limitation a determination for purposes of granting
Common Stock options or issuing Common Stock under any plan, agreement or
arrangement with employees of the Company); and, upon request of the Registered
Holder, the Board (or a representative thereof) shall, as promptly as
reasonably practicable but in any event not later than 10 days after such
request, notify the Registered Holder of the Fair Market Value per share of
Common Stock and furnish the Registered Holder with reasonable documentation of
the Board’s determination of such Fair Market Value.  Notwithstanding the foregoing, if the Board
has not made such a determination within the three-month period prior to the
Exercise Date, then (A) the Board shall make, and shall provide or cause
to be provided to the Registered Holder notice of, a determination of the Fair
Market Value per share of the Common Stock within 15 days of a request by the
Registered Holder that

 

2

 

it do so,
and (B) the exercise of this Warrant pursuant to this subsection 1(b)
shall be delayed until such determination is made and notice thereof is
provided to the Registered Holder.

(c)           Exercise
Date.  Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of
business on the day on which this Warrant shall have been surrendered to the
Company as provided in subsection 1(a) or 1(b) above (the “Exercise Date”).  At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 1(d) below shall be deemed to have become
the holder or holders of record of the Warrant Shares represented by such
certificates.

(d)           Issuance
of Certificates.  As soon as
practicable after the exercise of this Warrant in whole or in part, and in any
event within 10 days thereafter, the Company, at its expense, will cause to be
issued in the name of, and delivered to, the Registered Holder, or as the Registered
Holder (upon payment by the Registered Holder of any applicable transfer taxes)
may direct:

(i)            a
certificate or certificates for the number of full Warrant Shares to which the
Registered Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which the Registered Holder would otherwise be entitled,
cash in an amount determined pursuant to Section 3 hereof; and

(ii)           in
case such exercise is in part only, a new warrant or warrants (dated the date
hereof) of like tenor, calling in the aggregate on the face or faces thereof
for the number of Warrant Shares equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of this Warrant
minus the number of Warrant Shares for which this Warrant was so exercised
(which, in the case of an exercise pursuant to subsection 1(b), shall include
both the number of Warrant Shares issued to the Registered Holder pursuant to
such partial exercise and the number of Warrant Shares subject to the portion
of the Warrant being cancelled in payment of the Purchase Price).

2.             Adjustments.

(a)           Adjustment
for Stock Splits and Combinations. 
If the Company shall at any time or from time to time after the date of
this Warrant effect a subdivision of the outstanding Common Stock, the Purchase
Price then in effect immediately before that subdivision shall be
proportionately decreased.  If the
Company shall at any time or from time to time after the Date of this Warrant
combine the outstanding shares of Common Stock, the Purchase Price then in
effect immediately before the combination shall be proportionately
increased.  Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.

(b)           Adjustment
for Certain Dividends and Distributions. 
In the event the Company at any time, or from time to time after the
date of this Warrant shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then and in
each such event the Purchase Price then in effect immediately before such event
shall be decreased as

 

3

 

of the time
of such issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date, by multiplying the Purchase Price
then in effect by a fraction:

(A)          the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and

(B)           the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution;

provided, however, that if such record date shall have
been fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Purchase Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Purchase Price shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions.

(c)           Adjustment
in Number of Warrant Shares.  When
any adjustment is required to be made in the Purchase Price pursuant to
subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon
the exercise of this Warrant shall be changed to the number determined by
dividing (i) an amount equal to the number of shares issuable upon the
exercise of this Warrant immediately prior to such adjustment, multiplied by
the Purchase Price in effect immediately prior to such adjustment, by
(ii) the Purchase Price in effect immediately after such adjustment.

(d)               Adjustments
for Other Dividends and Distributions. 
In the event the Company at any time or from time to time after the date
of this Warrant shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Company (other than shares of Common
Stock) or in cash or other property (other than regular cash dividends paid out
of earnings or earned surplus, determined in accordance with generally accepted
accounting principles), then and in each such event provision shall be made so
that the Registered Holder shall receive upon exercise hereof, in addition to
the number of shares of Common Stock issuable hereunder, the kind and amount of
securities of the Company, cash or other property which the Registered Holder
would have been entitled to receive had this Warrant been exercised on the date
of such event and had the Registered Holder thereafter, during the period from
the date of such event to and including the Exercise Date, retained any such
securities receivable during such period, giving application to all adjustments
called for during such period under this Section 2 with respect to the rights
of the Registered Holder.

(e)           Adjustment
for Reorganization.  If there shall
occur any reorganization, recapitalization, reclassification, consolidation or
merger involving the Company in which the Common Stock is converted into or
exchanged for securities, cash or other property (other than a transaction
covered by subsections 2(b), 2(c) or 2(e)) (collectively, a “Reorganization”),
then, following such Reorganization, the Registered Holder shall receive upon
exercise hereof the kind 

 

4

 

and
amount of securities, cash or other property which the Registered Holder would
have been entitled to receive pursuant to such Reorganization if such exercise
had taken place immediately prior to such Reorganization.  Notwithstanding the foregoing sentence, if
(x) there shall occur any Reorganization in which the Common Stock is
converted into or exchanged for anything other than solely equity securities,
and (y) the common stock of the acquiring or surviving company is publicly
traded, then, as part of such Reorganization, (i) the Registered Holder
shall have the right thereafter to receive upon the exercise hereof such number
of shares of common stock of the acquiring or surviving company as is
determined by multiplying (A) the number of shares of Common Stock subject
to this Warrant immediately prior to such Reorganization by (B) a
fraction, the numerator of which is the Fair Market Value per share of Common
Stock as of the effective date of such Reorganization, as determined pursuant
to subsection 1(b)(ii), and the denominator of which is the fair market value
per share of common stock of the acquiring or surviving company as of the
effective date of such transaction, as determined in good faith by the Board
(using the principles set forth in subsection 1(b)(ii) to the extent
applicable), and (ii) the exercise price per share of common stock of the
acquiring or surviving company shall be the Purchase Price divided by the
fraction referred to in clause (B) above. 
In any such case, appropriate adjustment (as determined in good faith by
the Board) shall be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the Registered Holder,
to the end that the provisions set forth in this Section 2 (including
provisions with respect to changes in and other adjustments of the Purchase
Price) shall thereafter be applicable, as nearly as reasonably may be, in relation
to any securities, cash or other property thereafter deliverable upon the
exercise of this Warrant.

(f)            Certificate
as to Adjustments.  Upon the
occurrence of each adjustment or readjustment of the Purchase Price pursuant to
this Section 2, the Company at its expense shall, as promptly as reasonably
practicable but in any event not later than 10 days thereafter, compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
the Registered Holder a certificate setting forth such adjustment or
readjustment (including the kind and amount of securities, cash or other
property for which this Warrant shall be exercisable and the Purchase Price)
and showing in detail the facts upon which such adjustment or readjustment is
based.  The Company shall, as promptly as
reasonably practicable after the written request at any time of the Registered
Holder (but in any event not later than 10 days thereafter), furnish or cause
to be furnished to the Registered Holder a certificate setting forth (i) the
Purchase Price then in effect and (ii) the number of shares of Common
Stock and the amount, if any, of other securities, cash or property which then
would be received upon the exercise of this Warrant.

3.             Fractional Shares.  The Company shall not be
required upon the exercise of this Warrant to issue any fractional shares, but
shall pay the value thereof to the Registered Holder in cash on the basis of
the Fair Market Value per share of Common Stock, as determined pursuant to
subsection 1(b)(ii) above.

4.             Investment Representations.  The initial
Registered Holder represents and warrants to the Company as follows:

(a)           Investment.  It is acquiring the Warrant, and (if and when
it exercises this Warrant) it will acquire the Warrant Shares, for its own account
for investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of 

 

5

 

distributing
or selling the same; and the Registered Holder has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.

(b)           Accredited
Investor.  The Registered Holder is
an “accredited investor” as defined in Rule 501(a) under the Securities Act of
1933, as amended (the “Act”).

(c)           Experience.  The Registered Holder has made such inquiry
concerning the Company and its business and personnel as it has deemed
appropriate; and the Registered Holder has sufficient knowledge and experience in
finance and business that it is capable of evaluating the risks and merits of
its investment in the Company.

5.             Transfers, etc.

(a)           This
Warrant and the Warrant Shares shall not be sold or transferred unless either
(i) they first shall have been registered under the Act, or (ii) the
Company first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Act.  Notwithstanding the foregoing, no
registration or opinion of counsel shall be required for (i) a transfer by
a Registered Holder which is an entity to an affiliate or wholly owned
subsidiary of such entity, a transfer by a Registered Holder which is a
partnership to a partner of such partnership or a retired partner of such
partnership or to the estate of any such partner or retired partner, or a
transfer by a Registered Holder which is a limited liability company to a
member of such limited liability company or a retired member or to the estate
of any such member or retired member, provided that the transferee in
each case agrees in writing to be subject to the terms of this Section 5,
or (ii) a transfer made in accordance with Rule 144 under the Act.

(b)           Each
certificate representing Warrant Shares shall bear a legend substantially in
the following form:

“The securities
represented by this certificate have not been registered under the Securities
Act of 1933, as amended, and may not be offered, sold or otherwise transferred,
pledged or hypothecated unless and until such securities are registered under
such Act or an opinion of counsel satisfactory to the Company is obtained to
the effect that such registration is not required.”

The foregoing legend shall be removed from the
certificates representing any Warrant Shares, at the request of the holder
thereof, at such time as they become eligible for resale pursuant to
Rule 144(k) under the Act.

(c)           The
Company will maintain a register containing the name and address of the Registered
Holder of this Warrant.  The Registered
Holder may change its address as shown on the warrant register by written
notice to the Company requesting such change.

(d)           Subject
to the provisions of Section 5 hereof, this Warrant and all rights hereunder
are transferable, in whole or in part, upon surrender of this Warrant with a
properly 

 

6

 

executed
assignment (in the form of Exhibit II hereto) at the principal
office of the Company (or, if another office or agency has been designated by
the Company for such purpose, then at such other office or agency).

6.             No Impairment.  The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Registered
Holder against impairment.

7.             Notices of Record Date, etc.  In the event:

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

(b)           of
any capital reorganization of the Company, any reclassification of the Common
Stock of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity and its Common Stock is not converted into or exchanged
for any other securities or property), or any transfer of all or substantially
all of the assets of the Company; or

(c)           of
the voluntary or involuntary dissolution, liquidation or winding-up of the
Company, then, and in each such case, the Company will send or cause to be sent
to the Registered Holder a notice specifying, as the case may be, (i) the
record date for such dividend, distribution or right, and the amount and
character of such dividend, distribution or right, or (ii) the effective date
on which such reorganization, reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record of Common Stock
(or such other stock or securities at the time deliverable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. 
Such notice shall be sent at least 10 days prior to the record date or
effective date for the event specified in such notice.

8.             Reservation of Stock.  The Company
will at all times reserve and keep available, solely for issuance and delivery
upon the exercise of this Warrant, such number of Warrant Shares and other
securities, cash and/or property, as from time to time shall be issuable upon
the exercise of this Warrant.

 

7

 

9.             Exchange or Replacement of Warrants.

(a)           Upon
the surrender by the Registered Holder, properly endorsed, to the Company at
the principal office of the Company, the Company will, subject to the
provisions of Section 5 hereof, issue and deliver to or upon the order of the
Registered Holder, at the Company’s expense, a new Warrant or Warrants of like
tenor, in the name of the Registered Holder or as the Registered Holder (upon
payment by the Registered Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock (or other securities, cash and/or property) then issuable upon
exercise of this Warrant.

(b)           Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement (with surety if reasonably
required) in an amount reasonably satisfactory to the Company, or (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company
will issue, in lieu thereof, a new Warrant of like tenor.

10.           Notices. 
All notices and other communications from the Company to the Registered
Holder in connection herewith shall be mailed by certified or registered mail,
postage prepaid, or sent via a reputable nationwide overnight courier service
guaranteeing next business day delivery, to the address last furnished to the
Company in writing by the Registered Holder. 
All notices and other communications from the Registered Holder to the
Company in connection herewith shall be mailed by certified or registered mail,
postage prepaid, or sent via a reputable nationwide overnight courier service
guaranteeing next business day delivery, to the Company at its principal office
set forth below.  If the Company should
at any time change the location of its principal office to a place other than
as set forth below, it shall give prompt written notice to the Registered
Holder and thereafter all references in this Warrant to the location of its
principal office at the particular time shall be as so specified in such
notice. All such notices and communications shall be deemed delivered
(i) two business days after being sent by certified or registered mail,
return receipt requested, postage prepaid, or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery.

11.           No
Rights as Stockholder.  Until the exercise of this
Warrant, the Registered Holder shall not have or exercise any rights by virtue
hereof as a stockholder of the Company.  Notwithstanding
the foregoing, in the event (i) the Company effects a split of the Common
Stock by means of a stock dividend and the Purchase Price of and the number of
Warrant Shares are adjusted as of the date of the distribution of the dividend
(rather than as of the record date for such dividend), and (ii) the
Registered Holder exercises this Warrant between the record date and the
distribution date for such stock dividend, the Registered Holder shall be
entitled to receive, on the distribution date, the stock dividend with respect
to the shares of Common Stock acquired upon such exercise, notwithstanding the
fact that such shares were not outstanding as of the close of business on the
record date for such stock dividend.

12.           Amendment
or Waiver.  Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the change or waiver is sought. 
No waivers of any term, condition or provision of this Warrant, 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.

 

8

 

13.           Section
Headings.  The section headings in this Warrant are for
the convenience of the parties and in no way alter, modify, amend, limit or
restrict the contractual obligations of the parties.

14.           Governing
Law.  This Warrant will be governed by and
construed in accordance with the internal laws of the State of Colorado
(without reference to the conflicts of law provisions thereof).

15.           Facsimile
Signatures. This
Warrant may be executed by facsimile signature.

EXECUTED as of the Date of Issuance indicated above.

	
   

  	
  MAUNA KEA ENTERPRISES,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Kreloff

  
	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

9

 

EXHIBIT I

PURCHASE FORM

	
  To:

  	
   

  	
  Dated:

  

 

The undersigned, pursuant to the provisions set forth
in the attached Warrant, hereby elects to purchase (check
applicable box):

o                     
shares of the Common Stock of Mauna Kea Enterprises, Inc. covered by such
Warrant; or

o            the
maximum number of shares of Common Stock covered by such Warrant pursuant to
the cashless exercise procedure set forth in subsection 1(b).

The undersigned herewith makes payment of the full
purchase price for such shares at the price per share provided for in such
Warrant.  Such payment takes the form of (check applicable box or boxes):

o            $         
in lawful money of the United States; and/or

o            the cancellation of such portion of the attached
Warrant as is exercisable for a total of          
Warrant Shares (using a Fair Market Value of $         
per share for purposes of this calculation) ; and/or

o            the cancellation of such number of Warrant Shares as
is necessary, in accordance with the formula set forth in subsection 1(b),
to exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in
subsection 1(b).

	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  

 

 

10

 

EXHIBIT II

ASSIGNMENT FORM

FOR VALUE RECEIVED,                                                                
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant with respect to the number of shares of Common Stock of
Mauna Kea Enterprises, Inc. covered thereby set forth below, unto:

	
  Name of
  Assignee

  	
   

  	
  Address

  	
   

  	
  No. of
  Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Dated:

  	
   

  	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signature
  Guaranteed:

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  

 

The signature should 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) pursuant to Rule 17Ad-15 under the Securities Exchange Act
of 1934.

 

 

11

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