Document:

KEYON COMMUNICATIONS HOLDINGS, INC.

 

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of February 5, 2010 by and among KeyOn Communications Holdings, Inc., a Delaware corporation (the “Company”), and The California Capital Limited Partnership, a California limited partnership (the “Investor”).

RECITALS

The Investor and the Company are parties to that certain Note Purchase Agreement, dated as of February 1, 2010, (the “Purchase Agreement”) relating to the issue and sale of a $15,000,000 Secured Convertible Note that is convertible into shares of Series Cal Cap Preferred Stock of the Company (the “Series Cal Cap Preferred Stock”).  

The obligations of the Company and the Investor under the Purchase Agreement are conditioned, among other things, upon the execution and delivery of this Agreement by the Investor and the Company.

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

	
 
 	
1.
 	
Definitions.  For purposes of this Agreement:
 

	
 
 	
1.1
 	
The term “Act” means the Securities Act of 1933, as amended.
 

1.2       The term “Form S-3” means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

1.3       The term “Holder” means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 11 hereof.

1.4       The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

1.5       The term “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document.

1.6       The term “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Company’s Series Cal Cap Preferred Stock and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) above.  

 

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1.7       The number of shares of “Registrable Securities then outstanding” shall be determined by the number of shares of Common Stock outstanding that are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities.

	
 
 	
1.8
 	
The term “SEC” shall mean the Securities and Exchange Commission.
 

	
 
 	
2.
 	
Request for Registration.
 

2.1       Subject to the conditions of this Section 2, if the Company shall receive at any time after the first anniversary, a written request from any Holder of a majority of the Registrable Securities then outstanding (the “Initiating Holders”) that the Company file a registration statement under the Act covering the registration of Registrable Securities provided that the anticipated aggregate offering price would exceed $20,000,000, then the Company shall, within twenty (20) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 2, use commercially reasonable efforts to effect, as soon as practicable, the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request received by the Company within twenty
(20) days of the mailing of the Company’s notice pursuant to this Section 2.1.

2.2       If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2 and the Company shall include such information in the written notice referred to in this Section 2.1.  In such event the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company).  Notwithstanding any other provision of this Section 2, if the underwriter advises the Company that marketing factors require a limitation of the number of securities underwritten (including Registrable Securities), then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis (as nearly as practicable) based on the number of Registrable Securities held by all such Holders (including the Initiating Holders), provided that no Registrable Securities shall be excluded unless and until all other securities of the Company have been excluded; and provided
further that at least 33% of the Registrable Securities requested to be included in such underwriting are in fact so included.  Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

2.3       In addition, the Company shall not be required to effect a registration pursuant to this Section 2:

 

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(a)       after the Company has effected two (2) registration pursuant to this Section 2, and such registrations have been declared or ordered effective; 

(b)       during the period starting with the date of the filing of, and ending on a date one hundred eighty (180) days following the effective date of, a Company-initiated registration subject to Section 3, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; 

(c)       if the Initiating Holders propose to dispose of Registrable Securities that may be registered on Form S-3 pursuant to Section 4;

(d)       if the Company shall furnish to Holders requesting a registration pursuant to this Section 2, a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than 90 days after receipt of the request of the Initiating Holders, provided that such right to delay a request shall be exercised by the Company not more than once in any twelve (12)-month period and provided further, that the Company shall not register any other of its shares during such twelve (12)-month period; or

(e)       in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, unless the Company is already subject to service in such jurisdiction and except as may be required under the Act.

	
 
 	
3.
 	
Company Registration.
 

3.1       If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration relating to a corporate reorganization or other transaction under Rule 145 of the Act, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered),
the Company shall, at such time, promptly give each Holder written notice of such registration.  Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company, the Company shall, subject to the provisions of Section 5.5, use commercially reasonable efforts to cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered.

3.2       Right to Terminate Registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in 

 

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such registration.  The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 7 hereof.

4.         Form S-3 Registration.  In case the Company shall receive from Holders of at least majority of the Registrable Securities then outstanding a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company shall:

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

4.2       use commercially reasonable efforts to effect, as soon as practicable, such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company, provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 4:

	
 
 	
(a)
 	
if Form S-3 is not available for such offering by the Holders;
 

 (b)       if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $10,000,000;

(c)       if the Company shall furnish to the Holders a certificate signed by the Chief Executive Officer or Chairman of the Board of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 90 days after receipt of the request of the Holder or Holders under this Section 4, provided, however, that the Company shall not utilize this right more than once in any six (6) month period and provided further, that the Company shall not register any other of its shares during such six (6) month period;

(d)       if the Company has, within the six (6) month period preceding the date of such request, already effected one registration on Form S-3 for the Holders pursuant to this Section 4; or

(e)       in any particular jurisdiction in which the Company would be required to qualify to do business, where not otherwise required, or to execute a general consent to service of process in effecting such registration, qualification or compliance.

(f)        Subject to the foregoing, the Company shall use commercially reasonable efforts to file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or 

 

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requests of the Holders.  Registrations effected pursuant to this Section 4 shall not be counted as requests for registration effected pursuant to Section 2 or Section 3.

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

5.1       prepare and file with the SEC a registration statement with respect to such Registrable Securities and use best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 120 days or, if earlier, until the distribution contemplated in the Registration Statement has been completed; provided, however, that (i) such 120 day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120 day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Act, permits an offering on a continuous or delayed basis, and provided further that applicable rules under the Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (I) includes any prospectus required by Section 10(a)(3) of the Act or (II) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (I) and (II) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the registration statement;

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

5.3       furnish to each Holder (i) a draft copy of the registration statement, and (ii) such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as it may reasonably request in order to facilitate the disposition of Registrable Securities owned by it;

5.4       use best commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business, where not otherwise required, or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Act;

5.5       in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing 

 

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underwriter of such offering.  Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.  In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required to include any of the Holders’ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company and enter into an underwriting agreement in customary form with an underwriter or underwriters selected by the Company.  If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then subject to
Section 2 above, the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders);

5.6       notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Act, of (i) the issuance of any stop order by the SEC in respect of such registration statement, or (ii) the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

5.7       cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; 

5.8       provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and

5.9       Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Agreement, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters and to the
Holders requesting registration of Registrable Securities, and (ii) a “comfort” letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the 

 

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Holders requesting registration, addressed to the underwriters and to the Holders requesting registration of Registrable Securities.

	
 
 	
6.
 	
Information from Holder.
 

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

6.2       The Company shall have no obligation with respect to any registration requested pursuant to Section 2 if, due to the operation of Section 6.1, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in subsection 2.1.

7.         Expenses of Registration.  All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Sections 2, 3 and 4, including, without limitation, all registration, filing and qualification fees (including “blue sky” fees), printers’ and accounting fees, fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder; if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holders not to exceed $50,000) shall be borne by the Company.  Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant to Section 2, or Section 4 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be registered in the withdrawn registration), provided, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 2 or 4. Except as provided in the immediately preceding sentence, all expenses
incurred in connection with a registration requested pursuant to Section 2 or 4, including, without limitation, all registration, filing and qualification fees (including “blue sky” fees), printers’ and accounting fees, fees and disbursements of counsel for the Company and the fees and disbursements of counsel for the selling Holder or Holders, shall be borne pro rata by the Holder or Holders participating in the registration.

8.         Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.

 

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9.         Indemnification.  In the event any Registrable Securities are included in a registration statement under this Agreement:

9.1       To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners or officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter, within the meaning of the Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws; and the Company will reimburse each such Holder, partner, officer, director, stockholder, counsel, accountant, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 9.1 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), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with information furnished expressly for use in connection with such registration by any such Holder, partner, officer, director, stockholder, counsel, accountant underwriter or controlling person.

9.2       To the extent permitted by law, each selling Holder, on a several and not joint basis, will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other stockholder selling securities in such registration statement and any controlling person of any such underwriter or other stockholder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation (but excluding clause (iii) of the definition thereof), in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in conformity with information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any person intended to be indemnified pursuant to this Section 9.2 for any legal or other expenses reasonably incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 9.2 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 

 

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unreasonably withheld), provided that in no event shall any indemnity under this Section 9.2 exceed the net proceeds from the offering received by such Holder.

9.3       Promptly after receipt by an indemnified party under this Section 9 of actual knowledge of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9 to the extent of such prejudice, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 9.

9.4       If the indemnification provided for in this Section 9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of and the relative benefits received by the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations, provided that no person guilty of fraud shall be
entitled to contribution.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.  The relative benefits received by the indemnifying party and the indemnified party shall be determined by reference to the net proceeds and underwriting discounts and commissions from the offering received by each such party.  In no event shall any contribution under this Section 9.4 exceed the net proceeds from the offering received by such Holder, less any amounts paid under Section 9.2.

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

 

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9.6       The obligations of the Company and Holders under this Section 9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Agreement, and otherwise.

10.       Reports Under Securities Exchange Act of 1934.  With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

10.1     take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective;

10.2     file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and

10.3     furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form.

11.       Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee, member, retired member or assignee of such securities that that (i) is a subsidiary, affiliate, parent, partner, limited partner, member, retired partner or stockholder of a Holder, (ii) is a Holder’s immediate family member (spouse or child) or trust for the benefit of an individual Holder, or (iii) after such assignment or transfer, holds at least 5% of the number of shares of Registrable Securities outstanding as of the date of this Agreement; provided: (a) the Company is, within a reasonable time after such transfer, furnished with 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; (b) such transferee or assignee agrees in writing  to be bound by and subject to the terms and conditions of this Agreement; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act.

12.       Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 3 hereof, unless under 

 

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the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders that are included or (b) to make a demand registration.

	
 
 	
13.
 	
Miscellaneous.
 

13.1     Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities).  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

13.2     Governing Law; Venue.  This Agreement is to be construed in accordance with and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties.  All disputes and controversies arising out of or in connection with this Agreement shall be resolved exclusively by the state and federal courts located in Los Angeles County in the State of California, and each party hereto agrees to submit to the jurisdiction of said courts and agrees that venue shall lie exclusively with such courts.

13.3     Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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

13.5     Notices.  Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party; (b) when sent by facsimile to the number set forth in Schedule A between 8:00 a.m. and 5:00 p.m. recipient’s local time on a business day, or on the next business day if sent by facsimile to the number set forth in Schedule A if sent other than between 8:00 a.m. and 5:00 p.m. recipient’s local time on a business day; (c) three business days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid
and addressed to the other party at the address set forth in Schedule A; or (d) the next business day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties as set forth in Schedule A with next business day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider.  Each person making a communication hereunder by facsimile shall promptly confirm by telephone to the person to whom such communication was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such 

 

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communication.  A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 13.5 by giving the other party written notice of the new address in the manner set forth above.

13.6     Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

13.7     Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of the Registrable Securities then outstanding.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities, each future holder of all such Registrable Securities and the Company.

13.8     Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

13.9     Aggregation of Stock.  All shares of Registrable Securities held or acquired by entities advised by the same investment adviser and affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

13.10   Entire Agreement.  This Agreement and the documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.

* * *

 

12

sa-60810 

 

 

        

        

        

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

 

	
COMPANY:

 

KEYON COMMUNICATIONS HOLDINGS, INC.

 

 

By:
                                                ______________________________ 

 

Name:  Jonathon Snyder                                  

 

Title:  President and CEO

 

 
 

 

 

Signature Page to Registration Rights Agreement

sa-60810  

 

        

        

        

	
INVESTOR:

 

THE CALIFORNIA CAPITAL LIMITED PARTNERSHIP

 

 

By:
                                                ______________________________ 

 

Name: ____________________________                                                      

 

Title: _____________________________                                                               

 

 

 
 

 

 

Signature Page to Registration Rights Agreement

sa-60810  

 

        

        

        

SCHEDULE A

 

ADDRESSES FOR NOTICES

 

COMPANY

 

KeyOn Communications Holdings, Inc.

	
11742 Stonegate Circle
 

Omaha, NE 68164

Attention:  Jason Lazar

Facsimile:  (402) 998-4111

 

INVESTOR

 

The California Capital Limited Partnership

149 S. Barrington Avenue, Suite 311

Los Angeles, CA 90049

Attention:  General Partner

 

 

Schedule A

sa-60810EXECUTION VERSION

        SECURITY AGREEMENT

        THIS SECURITY AGREEMENT (this “Agreement”), dated as of February 5, 2010, is made between KEYON COMMUNICATIONS HOLDINGS, INC., a Delaware corporation (“Debtor”) and THE CALIFORNIA CAPITAL LIMITED PARTNERSHIP, a California limited partnership
        (“Secured Party”).

        Secured Party and Debtor are parties to that certain Note Purchase Agreement, dated as of February 1, 2010 (the “Note Purchase Agreement”), pursuant to which, among other things, Debtor has issued that certain Secured Convertible Promissory Note, of even date herewith (the
        “Note”), to Secured Party.

        To induce Secured Party to enter into the Note Purchase Agreement and purchase the Note from Debtor, and in order to secure the Obligations of Debtor arising under the Convertible Note Documents, Debtor and Secured Party desire to enter into this Agreement for the purpose of effecting the grant by Debtor to Secured Property of the Liens in the personal property of Debtor contemplated
        hereby.

        For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor and Secured Party hereby agree as follows:

        
            	
                         

                    	
                        SECTION 1

                    	
                        Definitions; Interpretation.

                    

        

        (a) All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Note Purchase Agreement or the Note, as the context may require.

        (b) As used in this Agreement, the following terms shall have the following meanings:

        “Agreement” has the meaning set forth in the introductory paragraph hereof.

        “Collateral” has the meaning set forth in Section 2.

        “Collateral Augmentation Date” means the earlier of (i) September 30, 2010 and (ii) the date on which Debtor determines, as a result of its receipt of verbal or written notice from any applicable Governmental Authority in connection with the ARRA Grant Funding, that the conditions to the Closing set forth in the Securities
        Purchase Agreement will not be satisfied on or prior to September 30, 2010.

        “Debtor” has the meaning set forth in the introductory paragraph hereto.

        “Event of Default” has the meaning set forth in Section 7.

        “Internal Revenue Code” means the Internal Revenue Code of 1986, including (unless the context otherwise requires) any rules or regulations promulgated thereunder.

         

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        “KeyOn Communications, Inc.” means KeyOn Communications, Inc., a Nevada corporation, a wholly-owned Subsidiary of Debtor.

        “Note” has the meaning set forth in the recitals to this Agreement.

        “Note Purchase Agreement” has the meaning set forth in the recitals to this Agreement.

        “Operating Subsidiary” has the meaning set forth in Section 5(l).

        “Partnership and LLC Collateral” has the meaning set forth in Section 5.

        “Pledged Collateral” means Debtor’s (i) investment property and (ii) Partnership and LLC Collateral, including any ownership interests in any subsidiaries of Debtor.

        “Pledged Collateral Agreements” means any shareholders agreement, operating agreement, partnership agreement, voting trust, proxy agreement or other agreement or understanding with respect to any Pledged Collateral.

        “Secured Party” has the meaning set forth in the introductory paragraph hereto.

        “UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of California.

        (c) Where applicable and except as otherwise defined herein, terms used in this Agreement shall have the meanings assigned to them in the UCC.

        (d) In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; and (ii) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement.

        SECTION 2   Security Interest. As security for the payment and performance of the Obligations, Debtor hereby grants to Secured Party a security interest in all of Debtor’s right, title and interest in, to and under all of its personal property, wherever located and whether now existing or owned or hereafter acquired
        or arising, including all accounts, chattel paper, commercial tort claims, deposit accounts, documents, equipment (including all fixtures), general intangibles, instruments, inventory, investment property, letter-of-credit rights, other goods, money and all products, proceeds and supporting obligations of any and all of the foregoing (collectively, the “Collateral”). This Agreement shall create a continuing security interest
        in the Collateral which shall remain in effect until terminated in accordance with Section 18 hereof. Anything herein to the contrary notwithstanding, in no event shall the Collateral include, and Debtor shall not be deemed to have granted a security interest in, any of Debtor’s right, title or interest in any of the outstanding voting capital stock or other ownership interests of a Controlled Foreign Corporation (as defined
        below) in excess of 65% of the voting power of all classes of capital stock or other ownership interests of such Controlled Foreign Corporation entitled to vote; provided that (i) immediately upon the amendment of the Internal Revenue Code to allow the pledge of a greater percentage of the voting power of capital stock or other ownership 

         

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        interests in a Controlled Foreign Corporation without adverse tax consequences, the Collateral shall include, and Debtor shall be deemed to have granted a security interest in, such greater percentage of capital stock or other ownership interests of each Controlled Foreign Corporation; and (ii) if no adverse tax consequences to Debtor shall arise or exist in connection with the pledge of any Controlled
        Foreign Corporation, the Collateral shall include, and Debtor shall be deemed to have granted a security interest in, such Controlled Foreign Corporation. As used herein, “Controlled Foreign Corporation” shall mean a “controlled foreign corporation” as defined in the Internal Revenue Code.

        
            	
                         

                    	
                        SECTION 3

                    	
                        Financing Statements and other Action. 

                    

        

        (a) Debtor hereby authorizes Secured Party to file at any time and from time to time any financing statements describing the Collateral, and Debtor hereby authorizes Secured Party to file (with or without Debtor’s signature), at any time and from time to time, all amendments to financing statements, assignments, continuation financing statements, termination statements,
        account control agreements, and Debtor agrees to execute and deliver to Secured Party such other documents and instruments, in form reasonably satisfactory to Secured Party, as Secured Party may reasonably request, to perfect and continue perfected, maintain the priority of or provide notice of the security interest of Secured Party in the Collateral and to accomplish the purposes of this Agreement. Without limiting the generality of the foregoing, Debtor ratifies and authorizes the
        filing by Secured Party of any financing statements filed prior to the date hereof. 

        (b) Debtor will join with Secured Party in notifying any third party who has possession of any Collateral of Secured Party’s security interest therein and obtaining an acknowledgment from the third party that it is holding the Collateral for the benefit of Secured Party.

        (c) Upon request of Secured Party, Debtor (i) shall cause certificates to be issued in respect of any uncertificated Pledged Collateral, (ii) shall exchange certificated Pledged Collateral for certificates of larger or smaller denominations, and (iii) shall cause any securities intermediaries to show on their books that Secured Party is the entitlement holder with respect to any
        Pledged Collateral.

        (d) Debtor will not create any chattel paper without placing a legend on the chattel paper acceptable to Secured Party indicating that Secured Party has a security interest in the chattel paper.

        SECTION 4   Representations and Warranties. Debtor represents and warrants to Secured Party that:

        (a) Debtor’s chief executive office and principal place of business (as of the date of this Agreement) is located at the address set forth in Schedule 1; Debtor’s jurisdiction of organization and organizational identification number are set forth in Schedule 1;
        Debtor’s exact legal name is as set forth in the first paragraph of this Agreement; and all other locations where Debtor conducts business or Collateral is kept (as of the date of this Agreement) are set forth in Schedule 2.

         

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        (b) Debtor has rights in or the power to transfer the Collateral, and Debtor is the legal and beneficial owner of the Collateral, free from any Lien other than Permitted Liens, and has good and marketable title thereto.

        (c) All of Debtor’s U.S. and foreign patents and patent applications, copyrights (whether or not registered), applications for copyright, trademarks, service marks and trade names (whether registered or unregistered), and applications for registration of such trademarks, service marks and trade names, are set forth in Schedule
        2.

        (d) No control agreements exist with respect to any Collateral other than control agreements in favor of Secured Party.

        (e) The names and addresses of all financial institutions and other Persons at which Debtor maintains its deposit and securities accounts, and the account numbers and account names of such accounts, are set forth in Schedule 1.

        (f)   Schedule 3 lists Debtor’s ownership interests in each of its Subsidiaries as of the date hereof.

        (g) Except as disclosed in writing to Secured Party, there are no Pledged Collateral Agreements which affect or relate to the voting or giving of written consents with respect to any of the Pledged Collateral. Each Pledged Collateral Agreement contains the entire agreement between the parties thereto with respect to the subject matter thereof, has not been amended or modified,
        and is in full force and effect in accordance with its terms. To the best knowledge of Debtor, there exists no material violation or material default under any Pledged Collateral Agreement by Debtor or the other parties thereto. Debtor has not knowingly waived or released any of its material rights under or otherwise consented to a material departure from the terms and provisions of any Pledged Collateral Agreement.

        SECTION 5   Covenants. So long as any of the Obligations remain unsatisfied, Debtor agrees that:

        (a) Debtor shall appear in and defend any action, suit or proceeding which may affect to a material extent its title to, or right or interest in, or Secured Party’s right or interest in, the Collateral, and shall do and perform all reasonable acts that may be necessary and appropriate to maintain, preserve and protect the Collateral.

        (b) Debtor shall comply in all material respects with all laws, regulations and ordinances, and all policies of insurance, relating in a material way to the possession, operation, maintenance and control of the Collateral.

        (c) Debtor shall give prompt written notice to Secured Party (and in any event not later than 30 days following any change described below in this subsection) of: (i) any change in the location of Debtor’s chief executive office or principal place of business; (ii) any change in the locations set forth in
        Schedule 1; (iii) any change in its name; (iv) any changes in its identity or structure in any manner which might make any financing statement filed hereunder incorrect or misleading; (v) any change in its registration as an organization (or any new such registration); or (vi) any change in its jurisdiction of organization; provided that Debtor shall not
        

         

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        locate any Collateral outside of the United States nor shall Debtor change its jurisdiction of organization to a jurisdiction outside of the United States.

        (d) Debtor shall carry and maintain in full force and effect, at its own expense and with financially sound and reputable insurance companies, insurance with respect to the Collateral in such amounts, with such deductibles and covering such risks as is customarily carried by companies engaged in the same or similar businesses and owning similar properties in the localities where
        Debtor operates. At the request of Secured Party, insurance on the Collateral shall name Secured Party as additional insured and as loss payee. Upon the request of Secured Party, Debtor shall furnish Secured Party from time to time with full information as to the insurance carried by it and, if so requested, copies of all such insurance policies. Debtor shall also furnish to Secured Party from time to time upon the request of Secured Party a certificate of Debtor’s insurance
        broker or other insurance specialist stating that all premiums then due on the policies relating to insurance on the Collateral have been paid and that such policies are in full force and effect. If so requested by Secured Party, all insurance policies required under this subsection (d) shall provide that they shall not be terminated or cancelled and shall provide that no such policy be materially changed without at least 30 days’ prior written notice to Debtor and Secured
        Party. Receipt of notice of termination or cancellation of any such insurance policies or reduction of coverages or amounts thereunder shall entitle Secured Party to renew any such policies, cause the coverages and amounts thereof to be maintained at levels required pursuant to the first sentence of this subsection (d) or otherwise to obtain similar insurance in place of such policies, in each case at the expense of Debtor.

        (e) If so requested by Secured Party at any time from and after the Collateral Augmentation Date, all insurance policies shall provide that any losses payable thereunder be payable directly to Secured Party unless written authority to the contrary is obtained. In the event that Debtor shall receive any proceeds of any insurance (other than in respect of third
        party liability insurance) it shall immediately cause such proceeds to be paid over to Secured Party. If the Collateral shall be materially damaged or destroyed, in whole or in part, by fire or other casualty, Debtor shall give prompt notice thereof to Secured Party. Additionally, Debtor shall in any event promptly give Secured Party notice of all reports made to insurance companies in respect of any claim in excess of $50,000. No settlement on account of any loss covered by insurance
        shall be made for less than insured value without the consent of Secured Party. In its sole discretion Secured Party may apply all or any portion of such insurance proceeds to the payment of Obligations or may release all or any portion thereof to Debtor.

        (f)  If and when Debtor shall obtain rights to any new patents, trademarks, service marks, trade names or copyrights, or otherwise acquire or become entitled to the benefit of, or apply for registration of, any of the foregoing, Debtor (i) shall promptly notify Secured Party thereof and (ii) hereby authorizes Secured Party to modify, amend, or supplement
        Schedule 2 and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.

        (g) Without limiting the generality of subsection (i), Debtor shall notify Secured Party of any registration by Debtor with the U.S. Copyright Office of any unregistered copyrights (whether in existence on the date hereof or thereafter acquired, arising, or developed) within 5 Business Days after the date of any such registration.

         

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        (h) If so requested by Secured Party at any time from and after the Collateral Augmentation Date, Debtor will use commercially reasonable efforts to obtain from each Person from whom Debtor leases any premises, and from each other Person at whose premises any Collateral is at any time present (including any bailee, warehouseman or similar Person), any such collateral access,
        subordination, landlord waiver, bailment, consent and estoppel agreements as Secured Party may require, in form and substance satisfactory to Secured Party.

        (i)  Debtor shall comply with all of its material obligations under any Pledged Collateral Agreements to which it is a party and shall enforce all of its rights thereunder. (ii) Debtor will take all actions reasonably necessary to cause each Pledged Collateral Agreement relating to Collateral consisting of any and all limited, limited liability and general partnership
        interests and limited liability company interests of any type or nature (“Partnership and LLC Collateral”) to provide specifically at all times that: (A) no Partnership and LLC Collateral shall be a security governed by Article 8 of the applicable Uniform Commercial Code; and (B) no consent of any member, manager, partner or other Person shall be a condition to the admission as a member or partner of any transferee that
        acquires ownership of the Partnership and LLC Collateral as a result of the exercise by Secured Party of any remedy hereunder or under applicable law. Additionally, Debtor agrees that no Partnership and LLC Collateral (A) shall be dealt in or traded on any securities exchange or in any securities market, (B) shall constitute an investment company security, or (C) shall be held by Debtor in a securities account. (iii) Debtor shall not vote to enable or take any other action
        to amend or terminate, or waive compliance with any of the terms of, any Pledged Collateral Agreement, certificate or articles of incorporation, bylaws or other organizational documents, or otherwise cast any vote or grant or give any consent, waiver or ratification in respect of the Pledged Collateral, in any way that materially changes the rights of Debtor with respect to any Pledged Collateral in a manner adverse to the Secured Party or that adversely affects the validity,
        perfection or priority of Secured Party’s security interest therein.

        (j)  In the event that Debtor acquires rights in any subsidiary after the date hereof, it shall deliver to Secured Party a completed supplement to Schedule 3, reflecting such new subsidiary. Notwithstanding the foregoing, it is understood and agreed that the security interest of Secured Party shall attach to any such
        subsidiary immediately upon Debtor’s acquisition of rights therein and shall not be affected by the failure of Debtor to deliver any such supplement to Schedule 3.

        (k) Debtor shall at all times be the sole legal and beneficial owner of all of the issued and outstanding equity interests of KeyOn Communications, Inc.

        (l)  Debtor shall cause KeyOn Communications, Inc. at all times to be the sole legal and beneficial owner of all membership interests issued by KeyOn Communications, LLC, a Nevada limited liability company, KeyOn Pahrump, LLC, a Nevada limited liability company, KeyOn SIRIS, LLC, a Nevada limited liability company, KeyOn Grand Junction, LLC, a Nevada limited liability company,
        KeyOn Idaho Falls, LLC, a Nevada limited liability company, KeyOn Pocatello, LLC, a Nevada limited liability company, KeyOn SpeedNet, LLC, a Nevada limited liability company, and KeyOn Spectrum Holdings, LLC, a Nevada limited liability company (each an “Operating Subsidiary” and, collectively, the “Operating Subsidiaries”).

         

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        (m)      In the event that any portion of the Note has not been converted by the Collateral Augmentation Date in accordance with Section 5 of the Note, Debtor shall take all action necessary in the opinion of Secured Party to effect, by no later than the date occurring 20 days after such Collateral Augmentation Date, the grant to Secured Party by KeyOn
        Communications, Inc. and each Operating Subsidiary of a first priority Lien in all of such Persons’ personal property, and shall take, and shall cause KeyOn Communications, Inc. and each such Operating Subsidiary to take, all actions reasonably necessary in the opinion of Secured Party to facilitate the perfection and protection of such Liens.

        
            	
                         

                    	
                        SECTION 6

                    	
                        Rights of Secured Party; Authorization; Appointment.

                    

        

        (a) At the request of Secured Party, upon the occurrence and during the continuance of any Event of Default, all remittances received by Debtor in respect of its accounts and other rights to payment shall be held in trust for Secured Party and, in accordance with Secured Party’s instructions, remitted to Secured Party or deposited to an account of Secured Party in the form
        received (with any necessary endorsements or instruments of assignment or transfer). 

        (b) At the request of Secured Party, upon the occurrence and during the continuance of any Event of Default, Secured Party shall be entitled to receive all distributions and payments of any nature with respect to any Pledged Collateral or instrument Collateral, and all such distributions or payments received by the Debtor shall be held in trust for Secured Party and, in accordance
        with Secured Party’s instructions, remitted to Secured Party or deposited to an account designated by Secured Party in the form received (with any necessary endorsements or instruments of assignment or transfer). Further, upon the occurrence and during the continuance of any Event of Default any such distributions and payments with respect to any Pledged Collateral held in any securities account shall be held and retained in such securities account, in each case as part of the
        Collateral hereunder, and Secured Party shall have the right, following prior written notice to the Debtor, to vote and to give consents, ratifications and waivers with respect to any Pledged Collateral and instruments, and to exercise all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining thereto, as if Secured Party were the absolute owner thereof; provided that Secured Party shall have
        no duty to exercise any of the foregoing rights afforded to it and shall not be responsible to the Debtor or any other Person for any failure to do so or delay in doing so.

        (c) Secured Party shall have the right to, in the name of Debtor, or in the name of Secured Party or otherwise, upon notice to but without the requirement of assent by Debtor, and Debtor hereby constitutes and appoints Secured Party (and any of Secured Party’s officers, employees or agents designated by Secured Party) as Debtor’s true and lawful attorney-in-fact, with
        full power and authority to: (i) sign and file any of the financing statements and other documents and instruments which must be executed or filed to perfect or continue perfected, maintain the priority of or provide notice of Secured Party’s security interest in the Collateral; (ii) assert, adjust, sue for, compromise or release any claims under any policies of insurance; (iii) give notices of control, default or exclusivity (or similar notices) under any account
        control agreement or similar agreement with respect to exercising control over deposit accounts or securities accounts; and (iv) execute any and all such other documents and instruments, and do any and all acts and things for and on behalf of Debtor, which Secured Party may deem 

         

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        reasonably necessary or advisable to maintain, protect, realize upon and preserve the Collateral and Secured Party’s security interest therein and to accomplish the purposes of this Agreement. Secured Party agrees that, except upon and during the continuance of an Event of Default, it shall not exercise the power of attorney, or any rights granted to Secured Party, pursuant to clauses (ii), (iii)
        and (iv). The foregoing power of attorney is coupled with an interest and irrevocable so long as the Obligations have not been paid and performed in full. Debtor hereby ratifies, to the extent permitted by law, all that Secured Party shall lawfully and in good faith do or cause to be done by virtue of and in compliance with this Section 6.

        SECTION 7   Events of Default. Any of the following events which shall occur and be continuing shall constitute an “Event of Default”:

        (a) Any material impairment in the value of the Collateral or the priority of Secured Party’s Lien hereunder.

        (b) Any levy upon, seizure or attachment of a material portion of the Collateral which shall not have been rescinded or withdrawn within 20 days after the date of such levy, seizure or attachment.

        
            	
                         

                    	
                        (c)

                    	
                        Any “Event of Default” (as defined in the Note) shall occur.

                    

        

        (d) Any loss, theft or substantial damage to, or destruction of, any material portion of the Collateral (unless within 5 Business Days after the occurrence of any such event, Debtor furnishes to Secured Party evidence satisfactory to Secured Party that the amount of any such loss, theft, damage to or destruction of the Collateral is fully insured under policies naming Secured Party
        as an additional named insured or loss payee).

        
            	
                         

                    	
                        SECTION 8

                    	
                        Remedies.

                    

        

        (a) Upon the occurrence and during the continuance of any Event of Default, Secured Party may declare any of the Obligations to be immediately due and payable and shall have, in addition to all other rights and remedies granted to it in this Agreement or any other Convertible Note Document, all rights and remedies of a secured party under the UCC and other applicable laws. Without
        limiting the generality of the foregoing, (i) Secured Party may, subject to the UCC and other applicable law, peaceably and without notice enter any premises of Debtor, take possession of any the Collateral, remove or dispose of all or part of the Collateral on any premises of such Debtor or elsewhere, or, in the case of equipment, render it nonfunctional, and otherwise collect, receive, appropriate and realize upon all or any part of the Collateral, and demand, give receipt for,
        settle, renew, extend, exchange, compromise, adjust, or sue for all or any part of the Collateral, as Secured Party may determine; (ii) Secured Party may require any Debtor to assemble all or any part of the Collateral and make it available to Secured Party at any place and time designated by Secured Party; (iii) Secured Party may secure the appointment of a receiver of the Collateral or any part thereof (to the extent and in the manner provided by applicable law);
        (iv) Secured Party may sell, resell, lease, use, assign, license, sublicense, transfer or otherwise dispose of any or all of the Collateral in its then condition or following any commercially reasonable preparation or processing (utilizing in connection therewith any of Debtor’s assets, without charge or liability to Secured Party therefor) at public or private sale, by 

         

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        one or more contracts, in one or more parcels, at the same or different times, for cash or credit, or for future delivery without assumption of any credit risk, all as Secured Party deems advisable; provided, however, that Debtor shall be credited with the net proceeds of sale only when such proceeds are
        finally collected by Secured Party. Debtor recognizes that Secured Party may be unable to make a public sale of any or all of the Pledged Collateral, by reason of prohibitions contained in applicable securities laws or otherwise, and expressly agrees that a private sale to a restricted group of purchasers for investment and not with a view to any distribution thereof shall be considered a commercially reasonable sale. Secured Party shall have the right upon any such public sale, and, to
        the extent permitted by law, upon any such private sale, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption, which right or equity of redemption Debtor hereby releases, to the extent permitted by law. Secured Party shall give Debtor such notice of any private or public sales as may be required by the UCC or other applicable law.

        (b) For the purpose of enabling Secured Party to exercise its rights and remedies under this Section 8 during the continuance of an Event of Default, Debtor hereby grants to Secured Party an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to Debtor) to use,
        license or sublicense any intellectual property Collateral.

        (c) Secured Party shall not have any obligation to clean up or otherwise prepare the Collateral for sale. Secured Party has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them, and Secured Party may release, modify or waive any Collateral provided by any other Person to secure any of the Obligations, all without affecting
        Secured Party’s rights against Debtor. Debtor waives any right it may have to require Secured Party to pursue any third Person for any of the Obligations. Secured Party may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. Secured Party may sell the Collateral without giving any warranties as to the
        Collateral. Secured Party may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Secured Party sells any of the Collateral upon credit, Debtor will be credited only with payments actually made by the purchaser, received by Secured Party and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Secured Party
        may resell the Collateral and Debtor shall be credited with the proceeds of the sale.

        (d) The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied first, to the payment of the reasonable costs and expenses of Secured Party in exercising
        or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to Secured Party pursuant to Section 12 hereof; and second, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to Debtor or otherwise
        disposed of in accordance with the UCC or other applicable law. Debtor shall remain liable to Secured Party for any deficiency which exists after any sale or other disposition or collection of Collateral.

         

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        SECTION 9      Certain Waivers. Debtor waives, to the fullest extent permitted by law, (i) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations;
        (ii) any right to require Secured Party (A) to proceed against any Person, (B) to exhaust any other collateral or security for any of the Obligations, (C) to pursue any remedy in Secured Party’s power, or (D) to make or give any presentments, demands for performance, notices of nonperformance, protests, notices of protests or notices of dishonor in connection with any of the Collateral; and (iii) all claims, damages, and demands against Secured Party
        arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral

        SECTION 10     Notices. All notices or other communications hereunder shall be in writing (including by facsimile transmission or by email) and mailed (by certified or registered mail), sent or delivered, if to Debtor, to the address, facsimile number or email address set forth below its name on its signature
        page hereto and if to Secured Party, to the address, facsimile number or email address set forth in Schedule 4 hereto, or, in the case of either party, at or to such other address, facsimile number or email address as shall be designated by such party in a written notice to the other party. All such notices and communications shall be effective (i) if delivered by hand, sent by certified or registered mail or sent by an overnight
        courier service, when received; and (ii) if sent by facsimile transmission or electronic mail, when sent. Electronic mail may be used only for routine communications, such as distribution of informational documents or documents for execution by the parties thereto, and may not be used for any other purpose.

        SECTION 11      No Waiver; Cumulative Remedies. No failure on the part of Secured Party to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the
        exercise of any other right, remedy, power or privilege. The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to Secured Party.

        
            	
                         

                    	
                        SECTION 12

                    	
                        Costs and Expenses; Indemnification. 

                    

        

        (a) Debtor agrees to pay on demand: (i) the reasonable out-of-pocket costs and expenses of Secured Party, and the reasonable fees and disbursements of counsel to Secured Party, in connection with the administration of this Agreement, and any amendments, modifications or waivers of the terms thereof, and the custody of the Collateral; (ii) all appraisal, audit, consulting, search,
        recording, filing and similar costs, fees and expenses incurred or sustained by Secured Party in connection with this Agreement or the Collateral; and (iii) all costs and expenses of Secured Party, and the fees and disbursements of counsel, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Agreement and the Note, including in any out-of-court workout or other refinancing or restructuring or in any bankruptcy case, and
        the protection, sale or collection of, or other realization upon, any of the Collateral, including all expenses of taking, collecting, holding, sorting, handling, preparing for sale, selling, or the like, and other such expenses of sales and collections of Collateral.

         

        10

        sf-2792320

         

         

        

        

        

        (b) Any amounts payable to Secured Party under this Section 12 or otherwise under this Agreement if not paid upon demand shall bear interest from the date of such demand until paid in full, at the Post-Default Rate set forth in the Note.

        SECTION 13     Binding Effect. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Debtor, Secured Party and their respective successors and assigns and shall bind any Person who becomes bound as a debtor to this Agreement. 

        SECTION 14     Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of California, except as required by mandatory provisions of law and to the extent the validity or perfection of the security interests hereunder, or the remedies hereunder, in respect of any
        Collateral are governed by the law of a jurisdiction other than California. The provisions of Section 5.3 of the Note Purchase Agreement relating to venue, submission to jurisdiction and the waiver of the right to jury trial are by this reference incorporated herein, mutatis mutandis, as if set forth herein in full.

        SECTION 15 Entire Agreement; Amendment. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and shall not be amended except by the written agreement of the parties.

        SECTION 16     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any
        jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction.

        SECTION 17     Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic
        imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

        SECTION 18     Termination. Upon payment and performance in full of all Obligations, the security interest created under this Agreement shall terminate and Secured Party shall promptly execute and deliver to Debtor such documents and instruments reasonably requested by Debtor as shall be necessary to evidence
        termination of all security interests given by Debtor to Secured Party hereunder.

        (Remainder of page intentionally left blank; signature pages follow)

        11

        sf-2792320

         

         

        

        

        

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

        KEYON COMMUNICATIONS HOLDINGS, INC.

         

        	
                     

                	
                    By:

                	 	 
	 	 	 	 
	
                     

                	
                    Name:

                	 	 
	 	 	 	 
	
                     

                	
                    Title:

                	 	 

         

         

        Address for notices: 

         

        KeyOn Communications Holdings, Inc.

        11742 Stonegate Circle

        Omaha, Nebraska 68164

        Attention: Jason Lazar

        Facsimile: (402) 998-4111

         

        with a copy to:

        Haynes and Boone, LLP

        1221 Avenue of the Americas, 26th Floor

        New York, New York 10020

        Attention: Rick A. Werner, Esq.

        Facsimile: (212) 884-8234

        Signature Page 1 to Security Agreement

         

        

        

        

        THE CALIFORNIA CAPITAL LIMITED PARTNERSHIP

         

        	
                     

                	
                    By:

                	 	 
	 	 	 	 
	
                     

                	
                    Name:

                	 	 
	 	 	 	 
	
                     

                	
                    Title:

                	 	 

         

         

         

         

        Signature Page 2 to Security Agreement

        sf-2792320

         

        

        

        

        SCHEDULE 1

        to the Security Agreement

        
            	
                        1.

                    	
                        Jurisdiction of Organization and Organizational Identification Number

                    

        

        Delaware

        Organizational Identification Number: DE 3852792

         

        
            	
                        2.

                    	
                        Chief Executive Office and Principal Place of Business

                    

        

        KeyOn Communications Holdings, Inc.

        11742 Stonegate Circle

        Omaha, Nebraska 68164

         

        
            	
                        3.

                    	
                        Other locations where Debtor conducts business or Collateral is kept

                    

        

        KeyOn Communications Holdings, Inc.

        4067 Dean Martin Drive

        Las Vegas, NV 89103

        Leased Premises in Idaho Falls, Idaho

        Leased Premises in Grand Junction, Colorado

        Leased Premises in Centerville, Iowa

        Leased Premises in Wolffworth, Texas 

        
            	
                        4.

                    	
                        Deposit Accounts and Security Accounts

                    

        

        None.

         

        Schedule 1

        sf-2792320

         

        

        

        

        SCHEDULE 2

        to the Security Agreement

        
            	
                        1.

                    	
                        Patents and Patent Applications. 

                    	
                        None.

                    

        

        
            	
                        2.

                    	
                        Copyrights (Registered and Unregistered) and Copyright Applications. 

                    	
                        None.

                    

        

        3.   Trademarks, Service Marks and Trade Names and Trademark, Service Mark and Trade Name Applications.

        None.

         

         

         

        Schedule 2

        sf-2792320

         

        

        

        

        SCHEDULE 3

        to the Security Agreement

        SUBSIDIARIES

        1.         Interests in each limited liability company that is a Subsidiary of Debtor as follows:

        KeyOn Communications, LLC

        KeyOn Pahrump, LLC

        KeyOn SIRIS, LLC

        KeyOn Grand Junction, LLC

        KeyOn Idaho Falls, LLC

        KeyOn Pocatello, LLC

        KeyOn SpeedNet, LLC

        KeyOn Spectrum Holdings, LLC

         

        2.         Interests in each general partnership, limited partnership, limited liability partnership or other partnership that is a subsidiary of Debtor as follows:

        None.

         

        3.         Capital stock of each corporate subsidiary of Debtor, and the stock certificates with respect thereto, as follows:

        
            	
                        Subsidiary

                    	
                        No. and Class 

                        of Shares

                    
	
                         

                    	
                         

                    
	
                        KeyOn Communications, Inc.

                    	
                        216,890 shares of common stock

                    

        

         

         

        Schedule 3

        sf-2792320

         

        

        

        

        SCHEDULE 4

        to the Security Agreement

        SECURED PARTY ADDRESS

        The California Capital Limited Partnership

        149 S. Barrington Avenue, Suite 311

        Los Angeles, CA 90049

        Attention: General Partner

         

         

        Schedule 4

        sf-2792320

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