Document:

Exhibit 10.2

 

EXECUTION COPY

 

UNI-PIXEL, INC.

 

INVESTOR’S RIGHTS AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“SEC” means the
Securities and Exchange Commission.

 

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

 

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

 

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

 

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

 

2.             Demand
Registration.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.             “Piggyback”
Registration.

 

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

 

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

 

6

 

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

 

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

 

4.                                       Registration
on Form S-3.

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

(a)           To the fullest extent
permitted by law, the Company will indemnify and hold harmless the Investor and
each officer, director, fiduciary, agent, investment advisor, employee, member
(or other equity holder), general partner and limited partner (and Affiliates
thereof) of the Investor, each broker, underwriter or other person acting on
behalf of the Investor and each person, if any, who controls the Investor
within the meaning of the Securities Act, against any losses, claims, damages
or liabilities, or administrative, judicial, regulatory or civil proceedings,
joint or several (the “Losses”)
to which they may become subject under the Securities Act or otherwise, insofar
as such Losses (or actions in respect thereof) arise out of or relate to any
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, or arise out of or relate to the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act or state securities or blue sky laws
applicable to the Company or the relevant registration and leading to action or
inaction required of the Company in connection with such registration or
qualification under such Securities Act or state securities or blue sky laws;
and, subject to the provisions of Section 7(c) hereof, the Company will
reimburse on demand, upon receipt of written evidence, the Investor, such
broker or other person acting on behalf of the Investor or such officer,
director, fiduciary, employee, member (or other equity holder), general
partner, limited partner, affiliate or controlling person for any legal or
other expenses reasonably incurred by any of them in connection with
investigating or defending any such Losses (or actions in respect thereof); provided, however, that
the indemnity agreement contained in this Section 7(a) or Section
7(e) shall not apply to amounts paid in settlement of, or pursuant to any
judgment relating to, any such Losses if such settlement is effected, or
consent to such judgment is entered, without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such Losses (or actions in respect thereof), to the
extent that it arises out of or is based upon (i) an untrue statement of any
material fact contained in the Registration Statement or omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, in reliance upon and in conformity with written
information furnished by the Investor to the Company expressly for use in such
Registration Statement, or (ii) the failure of the Investor to cease all offers
and sales of Registrable Securities when required to do so pursuant to Sections
4(c), 5(c) and (d) hereof.

 

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

 

12

 

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

 

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

 

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

 

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

 

13

 

subject to the
maximum aggregate liability of such indemnifying party hereunder, contribute to
the amount paid or payable by such indemnified party as a result of such Losses
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative faults of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Section 7(a), (b), (c) and (d),
any legal or other fees, charges or expenses reasonably incurred by such party
in connection with any investigation or proceeding. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of fraudulent misrepresentation. The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 7(e)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
paragraph.

 

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

 

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

 

9.             Restrictions on
Transfer.

 

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

 

14

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

17

 

14.           Investor’s
Participation Rights in Subsequent Financings.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

19.           Miscellaneous.

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

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

 

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

 

21

 

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

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNI-PIXEL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Reed J. Killion

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
  INVESTOR:

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH PIERCE, FENNER & SMITH

  
	
   

  	
  INCORPORATED

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

22

 

EXHIBIT A

 

NOTICES

 

All
correspondence to the Company shall be addressed as follows:

 

Uni-Pixel,
Inc.

8708
Technology Forest Place

Suite 100

The Woodlands,
Texas 77381

Attention:
James Tassone

Facsimile:
(281) 825-4599

Email:
jtassone@unipixel.com

 

with copies
to:

 

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

Four United
Plaza

8555 United
Plaza Boulevard

Baton Rouge,
LA 70809

Attention:
Scott D. Chenevert, Esq.

Facsimile:
(225) 248-2010

Email:
schenevert@joneswalker.com

 

All
correspondence to the Investor shall be addressed as follows:

 

Merrill Lynch
Pierce, Fenner & Smith Incorporated

4 World
Financial Center

New York, NY
10080

Attention:
Lawrence A. First

Telecopy
No.:  (212) 449-4296

 

with a copy
to:

 

Skadden, Arps,
Slate, Meagher & Flom LLP

1000
Louisiana, Suite 6800

Houston, TX
77002

Attention:
Frank E. Bayouth

Telecopy No.:
(713) 655-5115Exhibit 10.3

 

NEITHER
THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY BE SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, REGISTRATION UNDER SAID ACT AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

September 28, 2007

 

UNI-PIXEL, INC.

 

COMMON STOCK PURCHASE WARRANT

 

Void after September 28, 2017

 

This WARRANT (this “Warrant”) entitles Merrill Lynch Pierce, Fenner &
Smith Incorporated (including any successors or assigns, the “Holder”), for value
received, to purchase from Uni-Pixel,
Inc., a Delaware corporation, at any time and from time to time, subject
to the terms and conditions set forth herein, all or any portion of the Warrant
Shares (as defined in Section 1 below) at the Exercise Price (as defined
in Section 1 below), during the period starting from 5:00 a.m. on the
Initial Exercise Date (as defined in Section 1 below) to 5:00 p.m.,
Eastern time, on the Expiration Date (as defined in Section 1 below), at
which time this Warrant shall expire and become void. This Warrant is subject
to the following terms and conditions:

 

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

 

“Affiliate”
of any Person means any other Person that, directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, such Person, as such terms are used and construed under Rule 144 under
the Securities Act of 1933, as amended (the “Securities
Act”), including, without limitation, any other Person that
serves as a general partner, managing member and/or investment adviser or in a
similar capacity of such Person or any other Person for which such Person serves
as a general partner, managing member and/or investment adviser or in a similar
capacity.

 

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

 

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

 

 

“Certificate
of Designations” means the Certificate of Designations of the
Series C Preferred Stock filed on or before the Closing (as defined in the
Securities Purchase Agreement) by the Company with the Secretary of State of
the State of Delaware, establishing the rights, preferences and privileges of
the Series C Preferred Stock.

 

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

 

“Company”
means Uni-Pixel, Inc., a Delaware corporation.

 

“Exercise Price”
means $1.40 per share of Common Stock, subject to adjustment under the terms of
this Warrant.

 

“Expiration Date”
means September 28, 2017.

 

“Fair Market
Value” on any date of determination shall mean (i) if the Common
Stock is listed on a national securities exchange or admitted to quotation on a
national automated quotation system, then the last reported sale price per
share of Common Stock on such exchange or quotation system, as the case may be,
on the date immediately preceding the date of determination or, if no such sale
price is reported on such date, such price on the next preceding trading day in
which such price was reported, (ii) if the Common Stock is not listed on a
national securities exchange or quoted on a national automated quotation
system, but is actively traded over-the-counter, then the average of the
closing bid and asked prices over the five (5) trading days ended on the
trading day immediately preceding the date of determination or (iii) if such
Common Stock is not traded, quoted or listed on any national securities
exchange, national automated quotation system or the over-the-counter market,
then the fair market value of a share of Common Stock, as determined in good
faith by the Board.

 

“Holder”
has the meaning set forth in the preamble of this Warrant.

 

“Initial
Exercise Date” means September 28, 2007.

 

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

 

“Investor’s
Rights Agreement” means that certain Investor’s Rights Agreement
dated September 28, 2007, by and between the Company and the Holder.

 

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

 

2

 

“SEC”
means the Securities and Exchange Commission.

 

“Securities
Purchase Agreement” means that certain Securities Purchase
Agreement dated September 28, 2007, by and between the Company and the Holder.

 

“Series C Preferred” means the
Company’s Series C Preferred Stock, par value $0.001 per share.

 

“Warrant Shares”
means an aggregate of 3,214,289 shares
of Common Stock, subject to adjustments under the terms of this Warrant, issued
or issuable upon the exercise of this Warrant.

 

2.             Exercise of Warrant.

 

2.1           Method of Exercise. Subject to all of the terms and conditions hereof,
this Warrant may be exercised, in whole or in part, at any time and from time
to time during the period commencing on the Initial Exercise Date and ending on
the Expiration Date. Exercise shall be by the presentation and surrender to the
Company at its principal office, or to the transfer agent of the Company, of
this Warrant and the Notice and Subscription form attached hereto as Exhibit
1, executed by the Holder, which shall indicate the number of Warrant
Shares for which the Holder intends to exercise this Warrant, together with
payment to the Company in accordance with Section 3 hereof in an amount
equal to the product of (x) the Exercise Price multiplied by (y) the number of
Warrant Shares issuable upon such exercise. Upon and as of receipt by the
Company (or the transfer agent) of such properly completed and duly executed
Notice and Subscription form accompanied by payment as herein provided, the
Holder (or its designee) shall be deemed to be the Holder of record of the
Warrant Shares issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then actually be, or have been,
delivered to the Holder.

 

2.2           Delivery of Stock
Certificates on Exercise. As soon as practicable after an
exercise of this Warrant, and in any event within five (5) Business Days
thereafter, the Company, at its expense, and in accordance with applicable
securities laws, shall cause to be issued in the name of and delivered to the
Holder, or as the Holder may direct (subject in all cases, to the provisions of
Section 8 hereof), a certificate or certificates for the number of
Warrant Shares issued on the date of such exercise, plus,  in lieu of any fractional share to which the
Holder would otherwise be entitled, an amount of cash equal to such fraction
multiplied by the Fair Market Value.

 

2.3           Shares To Be Fully Paid
and Nonassessable. All Warrant Shares issued upon
an exercise of this Warrant shall be validly issued, fully paid and
nonassessable, free of all liens, taxes, charges and other encumbrances or
restrictions on sale (other than those expressly set forth herein).

 

2.4           Fractional Shares. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issued upon the
exercise of this 

 

3

 

Warrant. With respect to any
fraction of a share of Common Stock otherwise issuable upon any exercise
hereof, the Company shall make a cash payment to the Holder as set forth in Section
2.2 hereof.

 

2.5           Issuance of New Warrants;
Company Acknowledgment. Upon any partial exercise of
this Warrant, the Company, at its expense, will as soon as practicable and, in
any event within five (5) Business Days thereafter, issue and deliver to the
Holder a new Warrant, registered in the name of the Holder, exercisable, in the
aggregate, for the balance of the Warrant Shares and substantially identical to
this Warrant. Moreover, the Company shall, at the time of any exercise of this
Warrant, upon the request of the Holder, acknowledge in writing its continuing
obligation to afford to the Holder any rights to which the Holder shall
continue to be entitled after such exercise in accordance with the provisions
of this Warrant; provided, however,
that if the Holder does not make any such request, the continuing obligation of
the Company to afford to the Holder any such rights shall not be affected.

 

2.6           Payment of Taxes and
Expenses.
The Company shall pay any recording,
filing, stamp or similar tax which may be payable in respect of any transfer
involved in the issuance of, and the preparation and delivery of certificates
(if applicable) representing, (i) any Warrant Shares issued upon exercise of
this Warrant and (ii) new or replacement Warrants in the Holder’s name or the
name of any transferee of all or any portion of this Warrant; provided, however, that
any tax payable as a result of such transfer by the Holder to a transferee
shall be paid by the Holder.

 

3.             Payment of Exercise Price. The Exercise Price for the Warrant Shares being
purchased upon any exercise of this Warrant may be paid, at the election of the
Holder (i) in cash, by certified check or by wire transfer to an account
designated in writing by the Company, (ii)
by cancellation of indebtedness owing from the Company to the Holder, (iii) by
the Holder surrendering a number of Warrant Shares having a Fair Market Value on
the date of exercise equal to, greater than (but only if by a fractional share)
or less than the Exercise Price, in which case the Holder shall receive the
number of Warrant Shares to which it would otherwise be entitled upon such
exercise, less the surrendered shares, or (iv) any combination of the methods
described in the foregoing clauses (i), (ii) and (iii).

 

4.             Adjustment of Exercise
Price and Number of Warrant Shares. The
Exercise Price and number of Warrant Shares shall be subject to adjustment from
time to time upon the occurrence of certain events as follows:

 

4.1.          Subdivision or Combination
of Stock.
If at any time or from time to time
after the date hereof, the Company shall subdivide (by way of stock dividend,
stock split or otherwise) its outstanding shares of Common Stock, the Exercise
Price in effect immediately prior to such subdivision shall be reduced
proportionately and the number of Warrant Shares (calculated to the nearest
whole share) shall be increased proportionately, and conversely, in the event
the outstanding shares of Common Stock shall be combined (whether by stock
combination, reverse stock split or otherwise) into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall be
increased 

 

4

 

proportionately and the number of
Warrant Shares (calculated to the nearest whole share) shall be decreased
proportionately. The Exercise Price and the number of Warrant Shares, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 4.1.

 

4.2           Adjustment for Stock
Dividends.
If at any time after the date hereof,
the Company shall declare a dividend or make any other distribution upon any
class or series of capital stock of the Company payable in shares of Common
Stock or other rights or securities convertible into or exercisable for shares
of Common Stock (other than the payment of dividends on the Series A Preferred
Stock of the Company (the “Series A Preferred”)
in accordance with the terms of the Certificate of Designations for the Series
A Preferred as in effect on the date hereof, the Exercise Price and the number
of Warrant Shares shall be adjusted proportionately. The Exercise Price and the
number of Warrant Shares, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described in this Section
4.2.

 

4.3           Adjustments for
Reclassifications. If the Common Stock issuable
upon exercise of this Warrant shall be changed into, or the right to receive,
the same or a different number of shares of any other class(es) or series of
stock or other securities or property, whether by reclassification,
reorganization or otherwise (other than an adjustment under Section 4.1
and Section 4.2 or a merger, consolidation, or sale of assets provided
for under Section 4.4), then and in each such event, the Holder
hereof shall have the right thereafter to receive upon exercise of this Warrant
the kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reclassification, reorganization or other
change in respect of a number of shares of Common Stock equal to the number of
Warrant Shares otherwise issuable upon such exercise of this Warrant, all
subject to successive adjustments thereafter from time to time pursuant to and
in accordance with the provisions of this Section 4.

 

4.4           Sale of
Shares Below Exercise Price.

 

(a)           If at
any time or from time to time after the Initial Exercise Date, the Company
issues or sells, or is deemed by the express provisions of this Section 4.4(a)
to have issued or sold, Additional Shares of Common Stock (as defined below),
other than as provided in Section 4.1, Section 4.2 or Section
4.3, for an Effective Price (as defined below) less than the then effective
Exercise Price (such issuance, a “Qualifying Dilutive Issuance”),
then and in each such case, the then existing Exercise Price shall be reduced,
as of the opening of business on the date immediately after such issue or sale,
(x) in the event such date occurs within twenty-four (24) months following the
date hereof, to a price equal to the Effective Price and (y) in the event such
date occurs after twenty-four (24) months following the date hereof,  to a price determined by multiplying the
Exercise Price in effect immediately prior to such issuance or sale by a
fraction:

 

(i)            the numerator of which shall be (x) the
number of shares of Common Stock deemed outstanding (as determined below)
immediately prior to such issue or sale, plus (y) the number of shares
of Common Stock which the Aggregate Consideration (as defined 

 

5

 

below) received or deemed received by the Company for the total number
of Additional Shares of Common Stock so issued would purchase at the then
effective Exercise Price (prior to such adjustment); and

 

(ii)           the denominator of which shall be the number
of shares of Common Stock deemed outstanding (as determined below) immediately
prior to such issue or sale plus the total number of Additional Shares
of Common Stock so issued.

 

For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of
(x) the number of shares of Common Stock outstanding and (y) the number of
shares of Common Stock into which the then outstanding shares of Series C
Preferred could be converted if fully converted on the day immediately
preceding the given date.

 

(b)           No
adjustment shall be made to the Exercise Price in an amount less than one cent
per share. Any adjustment otherwise required by this Section 4.4 that is
not required to be made due to the preceding sentence shall be included in any
subsequent adjustment to the Exercise Price.

 

(c)           For the
purpose of making any adjustment required under this Section 4.4, the
aggregate consideration received by the Company for any issue or sale of
Additional Shares of Common Stock (the “Aggregate Consideration”)
shall be defined as: (i) to the extent it consists of cash, the amount of cash
received by the Company before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale and without deduction of any expenses
payable by the Company in connection with such issue or sale, (ii) to the
extent it consists of property other than cash, the fair market value of that
property as determined in good faith by the Board (irrespective of accounting
treatment), and (iii) if Additional Shares of Common Stock, Convertible
Securities (as defined below) or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Company for a
consideration which covers both, the portion of the consideration so received
that may be reasonably determined in good faith by the Board to be allocable to
such Additional Shares of Common Stock, Convertible Securities or rights or
options.

 

(d)           For the
purpose of the adjustment required under this Section 4.4, if the
Company issues or sells (x) preferred stock or other stock, options, warrants,
purchase rights or other securities convertible into Additional Shares of
Common Stock (such convertible stock or instruments being herein referred to as
“Convertible Securities”) or (y) rights or options
for the purchase of Additional Shares of Common Stock or Convertible Securities
and if the Effective Price (defined below) of such Additional Shares of Common
Stock is less than the then effective Exercise Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock

 

6

 

issuable upon exercise or conversion in full thereof and to have
received as consideration for the issuance of such shares an amount equal to
the total amount of the consideration, if any, received by the Company for the
issuance of such rights or options or Convertible Securities plus:

 

(i)            in the case of such rights or options, the
minimum amount of consideration, if any, payable to the Company upon the
exercise of such rights or options; and

 

(ii)           in the case of Convertible Securities, the
minimum amount of consideration, if any, payable to the Company upon the
conversion thereof (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities); provided, however, that if the minimum amount of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amount of
consideration without reference to such clauses.

 

If the minimum amount of consideration payable to the Company upon the
exercise or conversion of rights, options or Convertible Securities is reduced
over time or on the occurrence or non-occurrence of specified events other than
by reason of antidilution adjustments, the Effective Price shall be
recalculated using the decreased minimum amount of consideration; provided further, however, that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased (other than
by reason of antidilution adjustments), the Effective Price also shall be
recalculated using the increased minimum amount of consideration.

 

No further adjustment of the Exercise Price, as adjusted upon the
issuance of such rights, options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock or the
exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire or
terminate without having been exercised, the then effective Exercise Price,
which was adjusted upon the issuance of such rights, options or Convertible
Securities, shall be readjusted on the basis of the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or
options or rights of conversion of such Convertible Securities, the
consideration actually received by the Company upon such exercise (other than
by cancellation of liabilities or obligations evidenced by such Convertible
Securities) and the consideration, if any, actually received by the Company
upon the original issuance of all such rights or options or Convertible
Securities, whether or not exercised; provided, however,
that such readjustment shall not apply to prior exercises of Warrants. No
adjustments made pursuant to this Section 4.4 shall apply to prior
exercises of Warrants.

 

(e)           For the
purpose of making any adjustment to the Exercise Price required under this Section
4.4, “Additional Shares of Common Stock” shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this 

 

7

 

Section 4.4 (including shares of Common
Stock subsequently reacquired or retired by the Company), other than:

 

(i)            shares of Common Stock issued upon conversion
of shares of Series A Preferred, Series B Preferred Stock of the Company or
Series C Preferred or exercise of any other Convertible Securities (including
the other warrants issued concurrently with the Series C Preferred under the
Securities Purchase Agreement or the other warrants issued concurrently with
the Series B Preferred) outstanding as of the Initial Exercise Date;

 

(ii)           the payment of dividends on the Series A
Preferred in additional shares of Series A Preferred in accordance with the
terms of the Certificate of Designations for the Series A Preferred as in
effect on the date hereof;

 

(iii)          the shares of Common Stock (or options
thereon) issued after the Initial Exercise Date to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary pursuant
to stock purchase or stock option plans or other compensatory arrangements
which, if required by the Certificate of Designations, have been approved by
the requisite holders of Series C Preferred (collectively, “Plans”); provided, however, that any such issuances are approved by the Board;

 

(iv)          shares of Common Stock or Convertible
Securities issued pursuant to any equipment loan or leasing arrangement, real
property leasing arrangement or debt financing from a bank or similar financial
institution approved by the Board;

 

(v)           shares of Common Stock or Convertible
Securities issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board; or

 

(vi)          shares of Common Stock or Convertible Securities
issued to any person as a component of any business relationship with such
person primarily for (A) joint venture, technology licensing or development
activities purposes, (B) purposes of distribution, supply or manufacture of the
Company’s products or services or (C) any purposes other than raising capital,
the terms of which are approved by the Board.

 

References to Common Stock in the subsections of this clause (e) above
shall mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this Section 4.4.

 

8

 

(f)            The “Effective
Price” of Additional Shares of Common Stock shall mean the quotient determined
by dividing the total number of Additional Shares of Common Stock issued or
sold, or deemed to have been issued or sold by the Company under this Section
4.4, into the Aggregate Consideration received, or deemed to have been
received, by the Company for such issue under this Section 4.4, for such
Additional Shares of Common Stock. In the event that the number of shares of
Additional Shares of Common Stock or the Effective Price cannot be ascertained
at the time of issuance, such Additional Shares of Common Stock shall be deemed
issued immediately upon the occurrence of the first event that makes such
number of shares or the Effective Price, as applicable, determinable.

 

(g)           In the
event that the Company issues or sells, or is deemed to have issued or sold,
Additional Shares of Common Stock in a Qualifying Dilutive Issuance (the “First
Dilutive Issuance”) and then issues or sells, or is deemed to have
issued or sold, Additional Shares of Common Stock in additional Qualifying
Dilutive Issuances as part of the same transaction or series of related
transactions as the First Dilutive Issuance (a “Subsequent
Dilutive Issuance”), then and in each such case upon a Subsequent
Dilutive Issuance the Exercise Price shall be reduced to the Exercise Price
that would have been in effect had the First Dilutive Issuance and each
Subsequent Dilutive Issuance all occurred on the closing date of the First
Dilutive Issuance.

 

4.5           Adjustments for Merger or
Consolidation. In the event that, at any time
or from time to time after the date hereof, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other Person, or (c)
sell or transfer all or substantially all of its properties or assets or more
than fifty percent (50%) of the voting capital stock of the Company (whether
issued and outstanding, newly issued, from treasury, or any combination
thereof) to any other person under any plan or arrangement contemplating the
consolidation or merger, sale or transfer, or dissolution of the Company, then,
in each such case, the Holder, upon the exercise of this Warrant at any time or
from time to time after the consummation of such reorganization, consolidation,
merger or sale or the effective date of such dissolution, as the case may be,
shall receive, in lieu of the Warrant Shares otherwise issuable upon such
exercise, the stock and property (including cash) to which the Holder would
have been entitled upon the consummation of such consolidation or merger, or
sale or transfer, or in connection with such dissolution, as the case may be,
if the Holder had exercised this Warrant immediately prior thereto (assuming
the payment by the Holder of the Exercise Price therefor as required hereby,
which payment shall be included in the assets of the Company for the purposes
of determining the amount available for distribution), all subject to successive
adjustments thereafter from time to time pursuant to, and in accordance with,
the provisions of this Section 4.

 

4.6           Continuation
of Terms. Upon any reorganization, consolidation, merger or transfer (and any
dissolution following any such transfer) referred to in this Section 4,
this Warrant shall continue in full force and effect and the terms hereof shall
be applicable to the shares of stock and other securities and property to which
the Holder has a right to receive upon the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any 

 

9

 

such
transfer, as the case may be, and shall be binding upon the issuer or owner of
any such stock or other securities and property, including, in the case of any
such transfer, the Person acquiring all or substantially all of the properties
or assets or more than fifty percent (50%) of the voting capital stock of the
Company (whether issued and outstanding, newly issued or from treasury or any
combination thereof), whether or not such Person shall have expressly assumed
the terms of this Warrant.

 

4.7           Certificate as to
Adjustments. Upon the occurrence of each
event requiring adjustment or readjustment of the Exercise Price and number of
Warrant Shares pursuant to this Section 4, this Warrant shall, without
any action on the part of the Holder, be adjusted in accordance with this Section
4, and the Company, at its expense, promptly shall compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
the Holder a certificate setting forth such adjustment or readjustment, showing
in reasonable detail the facts and calculations upon which such adjustment or
readjustment is based. The Company will forthwith send a copy of each such
certificate to the Holder in accordance with Section 10.4 below.

 

4.8           Delivery.
The Holder shall have the right to have the shares of Common Stock delivered to
a designee of the Holder upon the exercise of this Warrant.

 

5.             Registration Rights. The Warrant Shares shall be entitled to registration
rights and all other rights as applicable to such shares in accordance with the
Investor’s Rights Agreement.

 

6.             Notices of Record Date. Upon (a) any establishment by the Company of a
record date of the holders of Common Stock for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
or right or option to acquire securities of the Company, or any other right, or
(b) any capital reorganization, reclassification, recapitalization, merger
or consolidation of the Company with or into any other corporation, any
transfer of all or substantially all the assets of the Company, or any voluntary
or involuntary dissolution, liquidation or winding up of the Company, or the
sale, in a single transaction, of more than fifty percent (50%) of the Company’s
voting capital stock (whether newly issued, or from treasury, or previously
issued and then outstanding, or any combination thereof), the Company shall
mail to the Holder at least ten (10) Business Days, or such longer period as
may be required by law, prior to the applicable record date or effective date,
a notice specifying (i) the date established as the record date for the purpose
of such dividend, distribution, option or right and a description of such
dividend, distribution, option or right, (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up, or sale is expected to become effective and (iii)
the date, if any, fixed as to when the holders of record of Common Stock shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.

 

7.             Exchange
of Warrant. Subject to the provisions of Section 8 hereof (if and to the
extent applicable), this Warrant shall be exchangeable, upon the surrender
hereof by the 

 

10

 

Holder at
the principal office of the Company, for new Warrants, each registered in the
name of the Holder or in the name of such other persons as the Holder may
direct (upon payment by the Holder of any applicable transfer taxes). Each of
such new Warrants shall be exercisable for such number of Warrant Shares as the
Holder shall direct; provided, however, that all of such new Warrants shall represent, in
the aggregate, the right to purchase the same number of Warrant Shares and
cash, securities or other property, if any, which may be purchased by the
Holder upon exercise of this Warrant at the time of its surrender and shall
otherwise be substantially identical as this Warrant.

 

8.             Transfer Provisions, etc.

 

8.1           Legends. Each certificate representing
Warrant Shares issued upon exercise of this Warrant shall bear the following
legend:

 

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

 

8.2           Mechanics of Transfer.

 

(a)           Subject to compliance with the
Investor’s Rights Agreement and the Securities Purchase Agreement, any transfer of
all or any portion of this Warrant, or of any interest herein, that is
otherwise in compliance with applicable law and the Securities Purchase
Agreement shall be effected by surrendering this Warrant to the Company at its
principal office, together with a duly executed form of assignment, in the form
attached as Exhibit 2 hereto.

 

(b)           In the event of any transfer
of all or any portion of this Warrant in accordance with Section 8.2(a)
above, the Company shall issue (i) a new Warrant to the transferee,
representing the right to purchase the number of Warrant Shares, and cash,
securities or other property, if any, which were purchasable by the Holder of
the transferred portion of this Warrant, and (ii) a new Warrant to the Holder,
representing the right to purchase the number of Warrant Shares, and cash,
securities or other property, if any, purchasable by the Holder of the balance
of this Warrant. Until this Warrant or any portion thereof is transferred on
the books of the Company, the Company may treat the Holder as the absolute
holder of this Warrant and all right, title and interest therein for all
purposes, notwithstanding any notice to the contrary.

 

8.3           No Restrictions on Transfer. Subject to compliance with
applicable securities laws, the Securities Purchase Agreement and the Investor’s Rights
Agreement (including, but not limited to, the transfer restrictions in the
Investor’s Rights Agreement), this
Warrant and any portion hereof, the Warrant Shares and the rights hereunder may
be transferred by the Holder in its sole discretion at any time and to any
Person or Persons, 

 

11

 

including,
without limitation, Affiliates and affiliated groups of such Holder, without
the consent of the Company.

 

8.4           Warrant Register. The Company shall keep at its principal office a
register for the registration, and registration of transfers, of the Warrants. The
name and address of each Holder of one or more of the Warrants, each transfer
thereof and the name and address of each transferee of one or more of the
Warrants shall be registered in such register. The Company shall give to any Holder
of a Warrant promptly upon request therefor, a complete and correct copy of the
names and addresses of all registered Holders of the Warrants.

 

9.             Lost, Stolen or Destroyed
Warrant. Upon receipt by the Company of evidence satisfactory
to the Company of loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of a customary affidavit
of the Holder and indemnity agreement, or, in the case of mutilation, upon
surrender of this Warrant, the Company at its expense will execute and deliver,
or will instruct its transfer agent to execute and deliver, a new Warrant and
any such lost, stolen or destroyed Warrant thereupon shall become void.

 

10.           General.

 

10.1         Authorized Shares, Reservation of Shares for Issuance. At all times while this
Warrant is outstanding, the Company shall maintain its corporate authority to
issue, and shall have authorized and reserved for issuance upon exercise of
this Warrant, such number of shares of Common Stock and any other capital stock
or other securities as shall be necessary to perform its obligations under this
Warrant, taking into account any and all adjustments to the Warrant Shares
under this Warrant.

 

10.2         No Dilution or Impairment. The Company will not, by
amendment of its Certificate of Incorporation or Bylaws or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issuance or sale of securities, sale or other transfer of any of its assets or
properties, 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 Holder hereunder against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of Common Stock issuable upon the exercise
of this Warrant above the amount payable therefor on such exercise, and (b)
will take all action that may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock (and any other capital stock or other securities) upon the
exercise of this Warrant.

 

10.3         No Rights as Stockholder. The Holder shall not be entitled to vote or to
receive dividends or to be deemed the holder of the shares of Common Stock that
may at any time be issuable upon exercise of this Warrant for any purpose
whatsoever, nor shall anything contained herein be construed to confer upon the
Holder any of the rights of a 

 

12

 

stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger or conveyance or otherwise), or to receive notice
of meetings (except to the extent otherwise provided in this Warrant), or to
receive dividends or subscription rights, until the Holder shall have exercised
this Warrant and been issued Warrant Shares or other securities in accordance
with the provisions hereof.

 

10.4         Notices. All notices, requests,
consents and other communications (hereinafter collectively referred to as “correspondence”)
required or permitted to be given hereunder shall be given in writing and shall
be deemed given if sent by certified or registered mail (return receipt
requested), overnight courier or telecopy (with confirmation of receipt), or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. An electronic communication (“Electronic Notice”) shall be deemed
written notice for purposes of this Section 10.4 if sent with return
receipt requested to the electronic mail address specified by the receiving party
in this Section 10.4. A copy of any such communication shall also be
sent in accordance with the first sentence of this Section 10.4. Electronic
Notice shall be deemed received at the time the party sending Electronic Notice
receives verification of receipt by the receiving party. All correspondence
shall be addressed as follows:

 

	
   

  	
  (a) if to the Company at:

  
	
   

  	
   

  
	
   

  	
  Uni-Pixel, Inc.

  
	
   

  	
  8708 Technology Forest Place

  
	
   

  	
  Suite 100

  
	
   

  	
  The Woodlands, Texas 77381

  
	
   

  	
  Attention: James Tassone

  
	
   

  	
  Facsimile: (281) 825-4599

  
	
   

  	
  Email: jtassone@unipixel.com

  
	
   

  	
   

  
	
   

  	
  with copies to:

  
	
   

  	
   

  
	
   

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

  
	
   

  	
  Four United Plaza

  
	
   

  	
  8555 United Plaza Boulevard

  
	
   

  	
  Baton Rouge, LA 70809

  
	
   

  	
  Attention: Scott D. Chenevert,
  Esq.

  
	
   

  	
  Facsimile: (225) 248-2010

  
	
   

  	
  Email:
  schenevert@joneswalker.com

  

 

(b)  if to the Holder, at the
Holder’s address appearing in the books maintained by the Company.

 

13

 

11.           Amendment and Waiver. No failure or delay of the
Holder in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The terms of this Warrant may be amended, modified
or waived only with the written consent of the Company and the Holder.

 

12.           Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, as such laws are applied to
contracts entered into and wholly to be performed within the State of Delaware
and without giving effect to any principles of conflicts or choice of law that
would result in the application of the laws of any other jurisdiction.

 

13.           Covenants
To Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the
Company shall bind its successors and assigns, whether so expressed or not.

 

14.           Severability. In case any one or more of the
provisions contained in this Warrant shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

 

15.           Construction. The definitions of this
Warrant shall apply equally to both the singular and the plural forms of the
terms defined. Wherever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The section and paragraph
headings used herein are for convenience of reference only, are not part of
this Warrant and are not to affect the construction of or be taken into
consideration in interpreting this Warrant.

 

16.           Remedies. The Holder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate. In any action
or proceeding brought to enforce any provision of this Warrant or where any
provision hereof is validly asserted as a defense, the successful party to such
action or proceeding shall be entitled to recover reasonable attorneys’ fees in
addition to any other available remedy.

 

[The remainder of this page is left intentionally
blank.]

 

14

 

IN WITNESS WHEREOF, the Company has executed this Common Stock Purchase
Warrant as of the date set forth above.

 

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNI-PIXEL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Reed J. Killion

  
	
   

  	
   

  	
  Title:

  	
  President

  
					

 

 

SIGNATURE PAGE TO COMMON STOCK PURCHASE
WARRANT OF

UNI-PIXEL, INC.

 

 

EXHIBIT 1

 

NOTICE AND

SUBSCRIPTION

 

 

	
  To:

  	
  Uni-Pixel, Inc.

  	
  Date:

  	
   

  
	
   

  	
  8708 Technology Forest Place

  	
   

  	
   

  
	
   

  	
  Suite 100

  	
   

  	
   

  
	
   

  	
  The Woodlands, Texas 77381

  	
   

  	
   

  

 

The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to exercise thereunder,                      
shares of Common Stock of Uni-Pixel, Inc., a Delaware corporation, and tenders
herewith payment of $                      ,
representing the aggregate purchase price for such shares based on the price
per share provided for in such Warrant. Such payment is being made in
accordance with [Section 3(i)] [Section 3(ii)] [Section 3(iii)] [Section 3(iv)]
of the attached Warrant.

 

Please issue a certificate or
certificates for such shares of Common Stock in the following name or names and
denominations and deliver such certificate or certificates to the person or
persons listed below at their respective addresses set forth below:

 

 

If said number of shares of Common
Stock shall not be all the shares of Common Stock issuable upon exercise of the
attached Warrant, a new Warrant is to be issued in the name of the undersigned
for the balance remaining of such shares of Common Stock less any fraction of a
share of Common Stock paid in cash.

 

	
  Dated:                            
  ,        

  	
   

  	
   

  
	
   

  	
  Signature

  

 

 

EXHIBIT 2

 

FORM OF ASSIGNMENT

 

 

For value received,                                                                    
hereby sells, assigns and transfers unto                                  
the attached Warrant [a portion of the attached Warrant representing the right
to purchase            ,
of the total           ,
shares of Common Stock issuable upon exercise of this Warrant, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint                                             
attorney to transfer said Warrant [said portion of said Warrant] on the books
of Uni-Pixel, Inc., a Delaware corporation, with full power of substitution in
the premises.

 

If only a portion of the attached Warrant is to be so transferred, a
new Warrant is to be issued in the name of the undersigned for the balance of
said Warrant.

 

The undersigned hereby agrees that it will not sell, assign, or
transfer the right, title and interest in and to the Warrant unless applicable
federal and state securities laws have been complied with.

 

 

	
  Dated:                           
  ,          

  	
   

  	
   

  
	
   

  	
  Signature

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