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COALOGIX INC.
STOCKHOLDERS’ AGREEMENT
TABLE OF CONTENTS
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Page
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1.
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Definitions.
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1
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2.
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Registration
Rights.
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3
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2.1.
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Participation
in Subsequent Registration Rights.
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3
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3.
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Information
Rights
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3
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3.1.
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Delivery
of Financial Statements
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3
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3.2.
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Inspection.
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5
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3.3.
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Termination
of Information and Inspection Covenants
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5
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3.4.
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Confidentiality
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6
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4.
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Right
of First Offer on Company Offerings
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6
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4.1.
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Right
of First Offer.
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6
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4.2.
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Termination.
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7
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5.
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Rights
of Refusal and Co-Sale
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8
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5.1.
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Company
Right of First Refusal
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8
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5.2.
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Secondary
Refusal Right of Key Holders
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8
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5.3.
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Consideration;
Closing
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9
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5.4.
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Right
of Co-Sale.
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9
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5.5.
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Drag-Along
Right
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10
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5.6.
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Effect
of Failure to Comply
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11
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5.7.
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Assistance
with Pledging of Interests
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12
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6.
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Exempt
Transfers.
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12
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6.1.
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Transfers
to Affiliates, Etc
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12
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6.2.
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Public
Offering
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13
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7.
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Key
Holder Buy/Sell
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13
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7.1.
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Triggering
Notice
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13
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7.2.
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Response
Notice
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13
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7.3.
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Cure
Period
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13
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7.4.
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Closing
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13
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8.
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Management
Option Plan
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14
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9.
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Additional
Covenants
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14
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9.1.
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Insurance.
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14
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9.2.
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Employee
Agreements.
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14
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9.3.
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Employee
Vesting
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14
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9.4.
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Board
of Directors
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14
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9.5.
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Meetings
of the Board of Directors
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15
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9.6.
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Successor
Indemnification
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15
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9.7.
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Transactions
with Related Parties
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15
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9.8.
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Actions
Requiring Majority Stockholder Approval
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15
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9.9.
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Actions
Requiring Super-Majority Stockholder Approval
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15
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9.10.
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Termination
of Covenants.
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16
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10.
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Miscellaneous
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16
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10.1.
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Transfers,
Successors and Assigns.
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16
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10.2.
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Governing
Law.
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17
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10.3.
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Counterparts.
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17
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10.4.
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Titles
and Subtitles.
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17
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10.5.
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Notices
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17
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10.6.
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Amendments
and Waivers.
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18
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10.7.
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Severability.
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18
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10.8.
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Additional
Stockholders
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18
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10.9.
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Entire
Agreement.
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18
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10.10.
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Transfers
of Rights
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18
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10.11.
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Delays
or Omissions
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19
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10.12.
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Effectiveness
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19
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10.13.
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Legend
on Stock Certificates
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19
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Schedule
A
- Schedule of
Investors
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STOCKHOLDERS’ AGREEMENT
THIS STOCKHOLDERS’ AGREEMENT (the
“
Agreement ”)
is made as of February 29, 2008 by and among CoaLogix Inc., a
Delaware corporation (the “
Company ”),
and each of the stockholders or option holders listed on
Schedule A hereto, each person to whom the rights of a
Stockholder are assigned pursuant to Section 10.1 and each person
who hereafter becomes a signatory to this Agreement pursuant to
Section 10.9 (each, a “
Stockholder ”
and, collectively, the “
Stockholders ”).
RECITALS
WHEREAS ,
the Company and EnerTech (as defined below) are parties to the
Common Stock Purchase Agreement of even date herewith (the
“
Purchase Agreement ”);
and
WHEREAS ,
in order to induce EnerTech to enter into the Purchase Agreement
and to induce EnerTech to invest funds in the Company pursuant to
the Purchase Agreement, the Stockholders and the Company hereby
agree that this Agreement shall govern the rights of the
Stockholders to receive certain information from the Company, to
participate in future equity offerings by the Company and certain
other matters as set forth in this Agreement;
1.
Definitions.
For
purposes of this Agreement:
“
Acorn Energy ”
shall mean Acorn Energy, Inc and it Affiliates.
“
Affiliate ”
shall mean with respect to any individual, corporation,
partnership, association, trust, or any other entity (in each case,
a “
Person ”),
any Person which, directly or indirectly, controls, is controlled
by or is under common control with such Person, including, without
limitation any general partner, officer or director of such Person
and any venture capital fund now or hereafter existing which is
controlled by or under common control with one or more general
partners or shares the same management company with such
Person.
“
Common Stock ”
shall mean shares of the Company’s common stock, $0.001 par
value per share.
“
Company Notice ”
means written notice from the Company notifying a selling
Stockholder that the Company intends to exercise its Right of First
Refusal as to some or all of the Transfer Stock with respect to any
Proposed Transfer.
“
EnerTech ”
shall mean EnerTech Capital Partners III L.P. and its
Affiliates.
“
Exchange Act ”
shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“
GAAP ”
shall mean U.S. generally accepted accounting
principles.
“
IPO ”
means the Company’s first underwritten public offering of its
Common Stock under the Securities Act.
“
Key Holders ”
means Acorn Energy and EnerTech, so long as they are Stockholders
owning at least five percent (5.0%) of the issued and outstanding
capital stock of the Company. If either Acorn Energy or EnerTech no
longer owns at least five percent of the issued and outstanding
capital stock of the Company, but still owns some capital stock of
the Company, such former Key Holder shall still be a
Stockholder.
“Key Holder Secondary Notice ”
means written notice from a Key Holder notifying the Company and
the selling Key Holder or Stockholder, as the case may be, that
such Key Holder intends to exercise its Secondary Refusal Right as
to a portion of the Transfer Stock with respect to any Proposed
Transfer.
“Key Holder Stock ”
means any Common Stock now owned or subsequently acquired by any
Key Holder or such Key Holder’s permitted transferees or
assigns.
“
Management Stockholder ”
means a Stockholder currently employed in the management of the
Company, for so long as such Stockholder is employed in such a
capacity.
“
New Securities ”
shall mean equity securities of the Company, whether now authorized
or not, or rights, options, or warrants to purchase said equity
securities, or securities of any type whatsoever that are, or may
become, convertible into or exchangeable into or exercisable for
said equity securities (collectively “
New Securities ”).
“
Proposed Transfer ”
means any proposed assignment, sale, offer to sell, pledge,
mortgage, hypothecation, encumbrance, disposition of or any other
like transfer or encumbering of any Common Stock (or any interest
therein) proposed by any of the Stockholders;
provided that
Proposed Transfer shall not include any merger, consolidation or
like transfer effected pursuant to a vote of the Stockholders of
Common Stock of the Company.
“
Proposed Transfer Notice ”
means written notice from a Stockholder setting forth the terms and
conditions of a Proposed Transfer.
“
Prospective Transferee ”
means any Person to whom a Stockholder proposes to make a Proposed
Transfer.
“
Registrable Securities ”
means (i) the Common Stock owned by either Key Holder, and (ii) any
Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of the shares referenced
in clause
(i) ,
excluding in all cases, however, any Registrable Securities sold by
a Person in a transaction in which such Person’s rights
under
Section 2 hereof
are not assigned or any shares for which registration rights have
terminated.
“
Right of Co-Sale ”
means the right, but not an obligation, of a Key Holder or
Management Stockholder to participate in a Proposed Transfer on the
terms and conditions specified in the Proposed Transfer
Notice.
“
Right of First Refusal ”
means the right, but not an obligation, of a Key Holder or the
Company, as the case may be, or his, her or its permitted
transferees or assigns, to purchase some or all of the Transfer
Stock with respect to a Proposed Transfer, on the terms and
conditions specified in the Proposed Transfer Notice.
“
Securities Act ”
means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“
Secondary Notice ”
means written notice from the Company notifying the selling Key
Holder and the other Key Holder that the Company does not intend to
exercise its Right of First Refusal as to all shares of Transfer
Stock with respect to any Proposed Transfer.
“
Secondary Refusal Right ”
means the right, but not an obligation, of each Key Holder to
purchase up to its pro rata portion (based upon the total number of
shares of Common Stock then held by all Key Holders) of Transfer
Stock not purchased pursuant to the Company’ s Right of First
Refusal, on the terms and conditions specified in the Proposed
Transfer Notice.
“
Transfer Stock ”
means shares of Common Stock subject to a Proposed
Transfer.
2.
Registration Rights
. The
Company covenants and agrees as follows:
2.1.
Participation in Subsequent Registration Rights.
So
long as either Key Holder remains a Key Holder, from and after the
date of this Agreement, the Company shall not, without the prior
written consent of each Key Holder, enter into any agreement with
any stockholder or prospective stockholder of any securities of the
Company which would grant such stockholder or prospective
stockholder registration rights in respect of Registrable
Securities, unless the Company shall thereunder grant each Key
Holder registration rights identical to the most favorable
registration rights provided to any other stockholder or
prospective stockholder of any securities of the
Company.
3.
Information Rights.
3.1.
Delivery of Financial Statements. So long as EnerTech owns one
percent (1.0%) of the issued and outstanding capital stock of the
Company, t he
Company shall deliver to EnerTech or its Affiliate, as the case may
be:
(a)
as
soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, a balance
sheet and income statement as of the last day of such year; a
statement of cash flows for such year and a comparison between
the actual figures for such year, the comparable figures for
the prior year and the comparable figures included in the
Budget (as defined below) for such year, with an explanation
of any material differences between them and a schedule as to
the sources and applications of funds for such year, such
year-end financial reports to be in reasonable detail,
prepared in accordance with GAAP, of the Company;
(b)
as
soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited income
statement, schedule as to the sources and application of funds
for such fiscal quarter, an unaudited balance sheet and a
statement of stockholder’s equity as of the end of such
fiscal quarter;
(c)
as
soon as practicable, but in any event with forty-five (45)
days after the end of each of the first three (3) quarters of
each fiscal year of the Company, 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 and number of shares of issued stock options
and stock options not yet issued but reserved for
issuance, if any, all in sufficient detail as to permit
EnerTech or its Affiliate to calculate its percentage equity
ownership in the Company and certified by the Chief Financial
Officer or Chief Executive Officer of the Company as being
true, complete and correct;
(d)
as
soon as practicable, but in any event within thirty (30) days
of the end of each month, an unaudited income statement, an
unaudited profit or loss statement;
(e)
as
soon as practicable, but in any event thirty (30) days prior
to the end of each fiscal year, a budget and business plan for
the next fiscal year (collectively, the “
Budget ”),
prepared on a monthly basis, including balance sheets and sources
and applications of funds statements for such months and, as soon
as prepared, any other budgets or revised budgets prepared by the
Company;
(f)
with
respect to the financial statements called for in
subsections (a) and(b) of
this
Section 3.1 ,
an instrument executed by the Chief Financial Officer and President
or Chief Executive Officer of the Company and certifying that such
financials were prepared in accordance with GAAP consistently
applied with prior practice for earlier periods (with the exception
of footnotes that may be required by GAAP) and fairly present the
financial condition of the Company and its results of operation for
the periods specified therein, subject to year-end audit
adjustment;
(g)
such
other information relating to the financial condition,
business, prospects or corporate affairs of the Company as
EnerTech or any assignee of EnerTech may from time to time
reasonably request,
provided, however ,
that the Company shall not be obligated under this
subsection (g) or
any other subsection of
Section 3.1 to
(i) provide information which the Company reasonably deems in good
faith to be a trade secret or similar confidential information
(unless covered by an enforceable confidentiality agreement, in
form acceptable to the Company) or (ii) would adversely affect the
attorney-client privilege between the Company and its
counsel;
(h)
if
for any period the Company shall have any subsidiary whose
accounts are consolidated with those of the Company, then in
respect of such period the financial statements delivered
pursuant to the foregoing sections shall be the consolidated
and consolidating financial statements of the Company and all
such consolidated subsidiaries.
(i)
notices describing in reasonable detail any claim, action,
suit, proceeding, arbitration, complaint, charge or
investigation pending or to the knowledge of the Company
threatened against the Company or any officer or director of
the Company involving the Company or any default or breach by
any party under any agreement of the Company as soon as
practicable, but in any event within five (5) days after the
Company becomes aware of such litigation or contract
default.
3.2.
Inspection.
So
long as EnerTech owns one percent (1.0%) of the issued and
outstanding capital stock of the Company, the
Company shall permit, at EnerTech’s expense, EnerTech to
visit and inspect the Company’s properties, to examine its
books of account and records and to discuss the Company’s
affairs, finances and accounts with its officers, all at such
reasonable times as may be reasonably requested by at
EnerTech;
provided, however ,
that the Company shall not be obligated pursuant to this
Section 3.2 to
provide access to any information which it reasonably considers to
be a trade secret or similar confidential information (unless
covered by an enforceable confidentiality agreement in a form
acceptable to the Company) or would adversely affect the
attorney-client privilege between the Company and its
counsel.
3.3.
Termination of Information and Inspection Covenants.
The
covenants set forth in
Section 3.1 and
Section 3.2 shall
terminate as to EnerTech and be of no further force or effect
immediately prior to the consummation of the sale of shares of
Common Stock in the Company’s IPO or when the Company first
becomes subject to the periodic reporting requirements of Sections
12(g) or 15(d) of the Exchange Act, unless EnerTech ceases
to own
one percent (1.0%) of the issued and outstanding capital stock of
the Company prior
to the occurrence of such events, in which case the covenants shall
terminate as of the date that EnerTech no longer
owns one percent (1.0%) of the issued and outstanding capital stock
of the Company .
3.4.
Confidentiality. Each
Stockholder agrees that such Stockholder will keep confidential and
will not disclose, divulge or use for any purpose, other than to
monitor its investment in the Company, any confidential information
obtained from the Company pursuant to the terms of this Agreement,
unless such confidential information (i) is known or becomes known
to the public in general (other than as a result of a breach of
this
Section 3.4 by
such Stockholder), (ii) is or has been independently developed or
conceived by the Stockholder without use of the Company's
confidential information or (iii) is or has been made known or
disclosed to the Stockholder by a third party without a breach of
any obligation of confidentiality such third party may have to the
Company;
provided, however ,
that a Stockholder may disclose confidential information
(a) to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in
connection with monitoring its investment in the Company,
(b) to any prospective purchaser of any Registrable Securities
from such Stockholder as long as such prospective investor agrees
to be bound by the provisions of this
Section 3.4 ,
(c) to any Affiliate, partner, member, stockholder or wholly
owned subsidiary of such Stockholder in the ordinary course of
business, as long as such Affiliate, partner, member stockholder or
wholly owned subsidiary of such Stockholder agrees to be bound by
the provisions of this
Section 3.4 ,
or (d) as may otherwise be required by law, provided that the
Stockholder takes reasonable steps to minimize the extent of any
such required disclosure. The Company, EnerTech, and the
Stockholders hereby acknowledge that EnerTech invests in numerous
companies, some of which may be competitive with the
Company’s business. The Company, EnerTech and the
Stockholders agree that EnerTech shall not be liable for any claim
arising out of, or based upon, (i) the investment by EnerTech in
any entity competitive to the Company, (ii) actions taken by any
partner, officer or other representative of EnerTech to assist any
such competitive company, whether or not such action was taken as a
board member of such competitive company, or otherwise, and whether
or not such action has a detrimental effect on the Company, unless
such claim arises directly from the EnerTech’s misuse of
confidential information in material breach of this
Section 3.4 .
4.
Right
of First Offer on Company Offerings
4.1.
Right of First Offer. Subject
to the terms and conditions specified in this
Section 4.1 ,
and applicable securities laws, in the event the Company proposes
to offer or sell any New Securities, the Company shall first make
an offering of such New Securities to EnerTech in accordance with
the following provisions of this
Section 4.1 .
EnerTech shall be entitled to apportion the right of first offer
hereby granted it among itself and its partners, members and
Affiliates in such proportions as it deems
appropriate.
(a)
The
Company shall deliver a notice, in accordance with the
provisions of
Section 10.5 hereof,
(the “
Offer Notice ”)
to EnerTech stating (i) its bona fide intention to offer such
New Securities, (ii) the number of such New Securities to be
offered, and (iii) the price and terms, if any, upon which it
proposes to offer such New Securities.
(b)
By
written notification received by the Company, within twenty
(20) calendar days after mailing of the Offer Notice, EnerTech
may elect to purchase or obtain, at the price and on the terms
specified in the Offer Notice, up to that portion of such New
Securities which equals the proportion that the number of
shares of Common Stock issued and then held by EnerTech bears
to the total number of shares of Common Stock of the Company
issued and the n
held by all the Stockholders.
(c)
In
the event that the Company proposes to offer New Securities
contingently, EnerTech will be issued warrants (“
Contingent Warrants ”)
to purchase its pro rata portion of equity securities which may be
purchased pursuant to such New Securities, or into which such New
Securities may become convertible, as the case may be, in lieu of
receiving such New Securities on the same terms as stated in the
Offer Notice. The exercise of such Contingent Warrants will be
subject to the same contingencies as the New Securities proposed to
be offered. EnerTech must exercise such Contingent Warrants within
twenty (20) calendar days after the Company has properly delivered
a notice to EnerTech, in accordance with
Section 10.5 hereof,
that such Contingent Warrants may be exercised.
(d)
If
the consideration proposed to be paid for New Securities is in
property, services or other non-cash consideration, the value
of the consideration shall be as agreed in good faith by
EnerTech and the Company. If EnerTech and the Company fail to
agree in good faith as to the value of such consideration, the
price paid for such offered New Securities shall be deemed to
be the value of such consideration as calculated in accordance
with GAAP.
(e)
The
right of first offer in this
Section 4.1 shall
not be applicable to: (i) up to 14,706 shares of Common Stock
properly issued or deemed issued to employees or directors of, or
consultants to, the Company or any of its subsidiaries pursuant to
the Management Option Plan (as defined in
Section 8 );
or (ii) securities issued in connection with any stock split or
stock dividend of the Company.
(f)
The
right of first offer set forth in this
Section 4.1 may
not be assigned or transferred except that such right is
assignable by EnerTech to any of its Affiliates.
(g)
If
(i) the Company proposes to issue New Securities at any time
before the provisions of this
Section 4 have
terminated pursuant to
Section 4.2 ,
(ii) EnerTech has been issued Contingent Warrants pursuant to
Section 4.1(c), and (iii) EnerTech would be barred from exercising
its rights under this
Section 4, pursuant
to
Section 4.2 had
the Contingent Warrants been exercised prior to the delivery of the
Offer Notice because Acorn Energy’s ownership of the
Company’s Common Stock would be less than seventy-five
percent (75%) of the Company’s capital stock calculated on a
fully diluted basis, then EnerTech shall not have the right to
purchase or obtain New Securities proposed to be offered, but
rather EnerTech will be issued warrants (“
Secondary Contingent Warrants ”)
to purchase its pro rata portion of equity securities which may be
purchased pursuant to such New Securities, or into which such New
Securities may become convertible, as the case may be, in lieu of
receiving such New Securities on the same terms as stated in the
Offer Notice. Any Secondary Contingent Warrants shall become
exercisable upon the lapse of Contingent Warrants referenced
in
subsection (iii) of
this
Section 4.1(g) .
EnerTech must exercise such Secondary Contingent Warrants within
twenty (20) calendar days after the Company has properly delivered
a notice to EnerTech, in accordance with
Section 10.5 hereof,
that such Secondary Contingent Warrants may be
exercised.
4.2.
Termination .
The
provisions of this
Section 4 shall
terminate upon the first to occur of (i) the consummation of an
IPO, (ii) a failure by EnerTech to elect to purchase a portion of
New Securities to which it is entitled under
Section 4.1(b) ,
or to exercise its Contingent Warrants or Secondary Contingent
Warrants, if any, as provided under
Sections 4.1(c) and
4.1(g) ,
respectively and (iii) the point at which Acorn Energy’s
ownership of the Company’s Common Stock is equal to
seventy-five percent (75%) of the Company’s capital stock
calculated on a fully diluted basis after giving effect to any
proposed issuance of New Securities and the corresponding exercise
by EnerTech of its rights under this
Section 4 ,
but excluding shares issued or reserved for issuance under the
Management Option Plan (as hereinafter defined). For the avoidance
of doubt, Enertech shall have the ability to exercise such right
with respect to the proposed issuance of New Securities to the
extent that the exercise of such right will not reduce Acorn
Energy’s ownership of the Company’s Common Stock below
seventy-five percent (75%) of the Company’s capital stock.
For illustrative purpose, in the event of a proposed issuance of
New Securities that would reduce Acorn Energy’s ownership of
the Company’s Common Stock below seventy-five percent (75%)
of the Company’s capital stock, EnerTech shall have the right
to purchase or obtain only that portion of such New Securities as
it would be entitled to purchase or obtain if the size of the
proposed issuance of New Securities were such that it would result
in Acorn Energy owning exactly seventy-five percent (75%) of the
Company’s capital stock calculated on a fully diluted basis
after giving effect to any proposed issuance of New Securities and
the corresponding exercise by EnerTech of its rights under
this
Section 4 .
5.
Rights
of Refusal and Co-Sale
5.1.
Company Right of First Refusal .
Each Stockholder hereby unconditionally and irrevocably grants to
the Company a Right of First Refusal to purchase all or any portion
of Transfer Stock that such Stockholder may propose to transfer in
a Proposed Transfer, at the same price and on the same terms and
conditions as those offered to the Prospective Transferee. Each
Stockholder proposing to
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