RIGHT OF FIRST REFUSAL AND
CO-SALE AGREEMENT
This Right of
First Refusal And Co-Sale Agreement (this “ Agreement
”) is made and entered into as of February 12, 2004 by
and among NGTV, a California corporation (the “
Company ”), each of the persons and entities listed on
Schedule A (collectively referred to as the “
Investors ”), Kourosh Taj, Janak Vibhakar (each
referred to herein as a “ Founder ” and
collectively as the “ Founders ”) and Gene
Simmons LLC, Allan Brown and Richard Abramson LLC (each referred to
herein as a “ Principal Shareholder ” and
collectively as the “ Principal Shareholders
”).
WHEREAS ,
the Founders are the beneficial owners of Common Stock of the
Company in the amounts set forth on Schedule B
hereto;
WHEREAS ,
the Principal Shareholders are the beneficial owners of Common
Stock of the Company in the amounts set forth on Schedule C
hereto;
WHEREAS,
the Investors acquired their shares of Common Stock as set forth in
Schedule A pursuant to a financing of up to $7,000,000 of
units of the Company each unit consisting of one share of Common
Stock in the capital of the Company and one-half of one common
stock purchase warrant (the “ Financing ”);
and
WHEREAS ,
the parties desire to enter into this Agreement to grant first
refusal and co-sale rights to the Company and to the
Investors.
NOW,
THEREFORE , in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree hereto as
follows:
1.1 “ Agency Agreement ” means
the agency agreement dated the date hereof by and between the
Company and Standard Securities Capital Corporation;
1.2 “ Common Stock ” shall mean
the Company’s Common Stock and shares of Common Stock issued
or issuable upon exercise of any option, warrant or other security
or right of any kind convertible into or exchangeable for Common
Stock.
1.3 “ Founder Stock ” shall mean
all shares of Common Stock now owned or subsequently acquired by
the Founders whether or not registered in a Founder’s name or
beneficially owned by such Founder, including any interest of a
spouse in any of the Founder Stock, whether that interest is
asserted pursuant to marital property laws or otherwise. The number
of shares of Founder Stock owned by the Founders as of the date
hereof are set forth on Schedule B, which Exhibit may be
amended from time to time by the Company to reflect changes in the
number of
2.
shares owned by
the Founders, but the failure to so amend shall have no effect on
such Founder Stock being subject to this Agreement.
1.4
“Go Public Transaction” means a transaction whereby the Company becomes
a publicly traded company on a recognized stock exchange in Canada
or the United States (including but not limited to the
Over-the-counter bulletin board) whether pursuant to: (i) a
final prospectus for which a receipt has been issued by a
securities commission or similar regulatory body in Canada or
pursuant to an effective registration statement filed with the
United States Securities and Exchange Commission; or
(ii) pursuant to a reverse take-over, statutory amalgamation,
statutory arrangement or similar transaction involving the Company
and which, in each case, results in the common stock of the Company
or the common stock of the resulting issuer being listed on a
recognized stock exchange in Canada or the United
States;
1.5 “ Investor Stock ” shall mean
the shares of Common Stock now owned pursuant to the Financing or
subsequently acquired by the Investors whether or not such
securities are only registered in an Investor’s name or
beneficiary or otherwise legally owned by such Investor.
1.6 “ Principal Shareholder Stock
” shall mean all shares of Common Stock now owned or
subsequently acquired by the Principal Shareholder whether or not
registered in a Principal Shareholder’s name or beneficially
owned by such Principal Shareholder, including any interest of a
spouse in any of the Principal Shareholder Stock, whether that
interest is asserted pursuant to marital property laws or
otherwise. The number of shares of Principal Shareholder Stock
owned by the Principal Shareholders as of the date hereof are set
forth on Schedule C, which Exhibit may be amended from time to
time by the Company to reflect changes in the number of shares
owned by the Principal Shareholders, but the failure to so amend
shall have no effect on such Principal Shareholder Stock being
subject to this Agreement.
1.7 “ Subscription Agreements ”
means the subscription agreements entered into between the
Investors and the Company in respect of the purchase of
Units;
1.8 “ Transfer ” shall include
any sale, assignment, encumbrance, hypothecation, pledge,
conveyance in trust, gift, transfer by request, devise or descent,
or other transfer or disposition of any kind, including, but not
limited to, transfers to receivers, levying creditors, trustees or
receivers in bankruptcy proceedings or general assignees for the
benefit of creditors, whether voluntary or by operation of law,
directly or indirectly, of any of the Founder Stock or Principal
Shareholder Stock.
ARTICLE II — TRANSFERS
BY A FOUNDER OR PRINCIPAL SHAREHOLDER
2.1 Notice
of Transfer. If a Founder
or Principal Shareholder proposes to Transfer any shares of Founder
Stock or Principal Shareholder Stock, as the case may be, then the
Founder or Principal Shareholder shall promptly give written notice
(the “ Notice ”) simultaneously to the Company
and to each of the Investors at least thirty (30) days prior
to the closing of such Transfer. The Notice shall describe in
reasonable detail the proposed Transfer including, without
limitation, the number of shares of Founder Stock or Principal
Shareholder Stock to be transferred, the nature of such Transfer,
the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer
is being made pursuant
3.
to the
provisions of Section 3.1, the Notice shall state under which
section the Transfer is being made.
2.2 Company
Right of First Refusal. For a period of fifteen (15) days following
receipt of any Notice described in Section 2.1, the Company
shall have the right to purchase all or a portion of the Founder
Stock or Principal Shareholder Stock subject to such Notice on the
same terms and conditions as set forth therein. The Company’s
purchase right shall be exercised by written notice signed by an
officer of the Company (the “ Company Notice ”)
and delivered to the Founder or Principal Shareholder. The Company
shall effect the purchase of the Founder Stock or Principal
Shareholder Stock, including payment of the purchase price in full,
not more than five (5) business days after delivery of the
Company’s Notice, and at such time the Founder or Principal
Shareholder shall deliver to the Company the certificate(s)
representing the Founder Stock or Principal Shareholder Stock to be
purchased by the Company, each certificate to be properly endorsed
for transfer. The Founder Stock or Principal Shareholder Stock so
purchased shall thereupon be cancelled and cease to be issued and
outstanding shares of the Company’s Common Stock.
2.3 Investor
Right of First Refusal.
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(a)
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In
the event that the Company does not elect to purchase all of the
Founder Stock or Principal Shareholder Stock available pursuant to
its rights under Section 2.2 within the period set forth
therein, the Founder or Principal Shareholder shall promptly give
written notice (the “ Second Notice ”) to each
of the Investors, which shall set forth the number of shares of
Founder Stock or Principal Shareholder Stock not purchased by the
Company and which shall include the terms of Notice set forth in
Section 2.1. Each Investor shall then have the right,
exercisable upon written notice to the Founder or Principal
Shareholder (the “ Investor Notice ”) within
fifteen (15) days after the receipt of the Second Notice, to
purchase such Investor’s pro rota share of the Founder
Stock or Principal Shareholder Stock subject to the Second Notice
on the same terms and conditions as set forth therein. The
Investors who so exercise their rights (the “
Participating Investors ”) shall effect the purchase
of the Founder Stock or Principal Shareholder Stock, including
payment of the purchase price in full, not more than five
(5) days after delivery of the Investor Notice, and at such
time the Founder or Principal Shareholder shall deliver to such
Participating Investors the certificate(s) representing the Founder
Stock or Principal Shareholder Stock to be purchased by the
Participating Investors, each certificate to be properly endorsed
for transfer.
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(b)
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Each Investor’s pro
rata share shall be equal to the product obtained by
multiplying (x) the aggregate number of shares of Founder
Stock or Principal Shareholder Stock covered by the Second Notice
and (y) a fraction, the numerator of which is the number of
shares of Common Stock owned by the Participating Investor at the
time of the Transfer and the denominator of which is the total
number of shares of Investor Stock owned by all of the Investors at
the time of the Transfer.
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4.
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(c)
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In
the event that not all of the Investors elect to purchase their
pro rata share of the Founder Stock or Principal Shareholder
Stock available pursuant to their rights under Section 2.3(a)
within the time period set forth therein, then the Founder or
Principal Shareholder shall promptly give written notice to each of
the Participating Investors, which shall set forth the number of
shares of Founder Stock or Principal Shareholder Stock not
purchased by the other Investors, and shall offer such
Participating Investors the right to acquire such unsubscribed
shares. The Participating Investors shall have five (5) days
after receipt of such notice to notify the Founder or Principal
Shareholder of their election to purchase the unsubscribed shares
on the same terms and conditions as set forth in the Second Notice
(with such shares allocated pro rata if necessary).
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(d)
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Notwithstanding the provisions of
Sections 2.2 or 2.3, no Founder or Principal Shareholder shall
be required to sell their Founder Stock or Principal Shareholder
Stock, as the case may be, if the election to purchase by the
Company or Investors pursuant to the rights of first refusal
contained in Sections 2.2 or 2.3 is not exercised for all (and
not less than all) of the Founder Stock or Principal Shareholder
Stock so subject to the rights of first refusal.
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(a)
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In
the event the Company and/or the Investors do not exercise their
respective rights to purchase all, but not less than all, of the
Founder Stock or Principal Shareholder Stock subject to
Sections 2.2 or 2.3 hereof, following the exercise or
expiration of the rights of purchase set forth in Sections 2.2
and 2.3, then the Founder or Principal Shareholder shall deliver to
the Company and each Investor written notice (the “
Co-Sale Notice ”) that each Investor shall have the
right, exercisable upon written notice to such Founder or Principal
Shareholder within fifteen (15) days after receipt of the
Co-Sale Notice, to participate in such Transfer of Common Stock on
the same terms and conditions as such Founder or Principal
Shareholder. Such notice shall indicate the number of shares of
Investor Stock such Investor wishes to sell under his or her right
to participate. To the extent one or more of the Investors exercise
such right of participation in accordance with the terms and
conditions set forth below, the number of shares of Founder Stock
or Principal Shareholder Stock that such Founder or Principal
Shareholder may sell in the transaction shall be correspondingly
reduced.
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(b)
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Each Investor may sell all or any
part of that number of shares equal to the product obtained by
multiplying (i) the aggregate number of shares of Founder
Stock or Principal Shareholder Stock covered by the Co-Sale Notice
by (ii) a fraction the numerator of which is the number of
shares of Investor Stock owned by such Investor at the time of the
Transfer and the denominator of which is the total number of shares
of Common Stock
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5.
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owned by such
Founder or Principal Shareholder and the total number of Investor
Stock owned by the Investors at the time of the
Transfer.
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(c)
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Each Investor who elects to
participate in the Transfer pursuant to this Section 2 (a
“ Co-Sale Participant ”) shall effect its
participation in the Transfer by promptly delivering to such
Founder or Principal Shareholder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer,
which represent the number of shares of Investor Stock which such
Co-Sale Participant elects to sell.
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(d)
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The
stock certificate or certificates that the Co-Sale Participant
delivers to such Founder or Principal Shareholder pursuant to
Section 2.4(c) shall be transferred to the prospective
purchaser in consummation of the sale of the Common Stock pursuant
to the terms and
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