EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
December 16, 2004, is made by and among QSound Labs, Inc., a corporation
organized under the laws of Alberta, Canada (the "COMPANY"), and the undersigned
(together with their affiliates, the "INITIAL INVESTORS").
BACKGROUND
A. In connection with that certain Securities Purchase Agreement of
even date herewith by and among the Company and the Initial Investors (the
"SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and
subject to the conditions contained therein, to issue and sell to the Initial
Investors (i) shares of the Company's Common Stock, no par value (the "COMMON
STOCK"), (ii) Series A Warrants (the "SERIES A WARRANTS") to acquire shares of
Common Stock; and (iii) Series B Warrants (the "SERIES B WARRANTS") to acquire
units consisting of shares of Common Stock and Series C Warrants (the "SERIES C
WARRANTS") to acquire additional shares of Common Stock. The Series A Warrants
and the Series B Warrants are referred to herein as the "INITIAL WARRANTS," and
the shares of Common Stock issuable upon exercise of the Initial Warrants are
referred to herein as the "INITIAL WARRANT SHARES." The shares of Common Stock
issuable upon exercise of the Series C Warrants are referred to herein as the
"SERIES C SHARES." The Initial Warrants and the Series C Warrants are referred
to herein as the "WARRANTS" and shares of Common Stock issuable upon exercise of
the Warrants are referred to herein as the "WARRANT SHARES."
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, and to consummate the transactions contemplated
thereby, the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "SECURITIES ACT"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "INITIAL REGISTRABLE SECURITIES" means (a) the Common Stock,
(b) the Initial Warrant Shares, and (c) any shares of capital stock issued or
issuable, from time to time, as a distribution on or in exchange for or
otherwise with respect to any of the foregoing, whether as default payments, on
account of anti-dilution or other adjustments or otherwise.
(ii) "INVESTOR" means the Initial Investors and any transferees or
assignees who agree to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "REGISTRABLE SECURITIES" means all Initial Registrable
Securities and, upon issuance of the Series C Warrants, all Secondary
Registrable Securities.
(v) "REGISTRATION STATEMENT" means a registration statement of the
Company under the Securities Act.
(vi) "SECONDARY REGISTRABLE SECURITIES" means (a) the Series C
Warrant Shares and (b) any shares of capital stock issued or issuable, from time
to time, as a distribution on or in exchange for or otherwise with respect to
any of the Series C Warrants, whether as default payments, on account of
anti-dilution or other adjustments or otherwise.
(b) Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
(a) First Mandatory Registration. The Company shall prepare promptly and
file with the SEC as soon as practicable, but in no event later than the
twentieth (20th) day following the date hereof (the "FIRST FILING DATE"), a
Registration Statement on Form F-3 (or, if Form F-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of all of the Initial Registrable Securities, subject to the
consent of the Initial Investors) covering the resale of at least 125% of the
Initial Registrable Securities (the "FIRST REGISTRATION STATEMENT"). The First
Registration Statement, to the extent allowable under the Securities Act and the
Rules promulgated thereunder (including Rule 416), shall state that the First
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Initial
Warrants to prevent dilution resulting from stock splits, stock dividends or
other transactions as more specifically provided therein. The Initial
Registrable Securities included on the First Registration Statement shall be
allocated among the Investors as set forth in Section 11(k) hereof. The First
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the approval of) the Initial Investors and their counsel prior to its
filing or other submission.
(b) Second Mandatory Registration. The Company shall prepare promptly
and file with the SEC as soon as practicable following the exercise of Series B
Warrants and resulting issuance of Series C Warrants, but in no event later than
the twentieth (20th) day following the earlier of (i) the exercise of all Series
B Warrants and (ii) the Termination Date (as defined in the
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Series B Warrants) (the "SECOND FILING DATE"), a Registration Statement on Form
F-3 (or, if Form F-3 is not then available, on such form of Registration
Statement as is then available to effect a registration of all of the Secondary
Registrable Securities, subject to the consent of the Initial Investors)
covering the resale of at least 125% of the Secondary Registrable Securities.
(the "SECOND REGISTRATION STATEMENT"). Notwithstanding the foregoing, the
Company shall have no obligation to file the Second Registration Statement if no
Investor exercises any Series B Warrant. The Second Registration Statement, to
the extent allowable under the Securities Act and the Rules promulgated
thereunder (including Rule 416), shall state that such Second Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon exercise of the Series C Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Secondary Registrable Securities included on the Second Registration
Statement shall be allocated among the Investors as set forth in Section 11(k)
hereof. The Second Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of) the Investors and their counsel
prior to its filing or other submission.
(c) Payments by the Company.
(i) The Company shall use its best efforts to cause the First
Registration Statement hereof to become effective as soon as practicable, but in
no event later than the ninetieth (90th) day following the filing date of the
First Registration Statement (the "FIRST REGISTRATION DEADLINE"). At the time of
effectiveness, the Company shall ensure that the First Registration Statement
covers at least 125% of the Initial Registrable Securities (without giving
effect to any limitations on exercise contained in the Initial Warrants),
including, if necessary, by filing an amendment prior to the effective date of
the Initial Registration Statement to increase the number of Initial Registrable
Securities covered thereby.
(ii) The Company shall use its best efforts to cause the Second
Registration Statement to become effective as soon as practicable, but in no
event later than the ninetieth (90th) day following the filing date of the
Second Registration Statement (the "SECOND REGISTRATION DEADLINE"). At the time
of effectiveness, the Company shall ensure that the Second Registration
Statement covers at least 125% of the Secondary Registrable Securities (without
giving effect to any limitations on exercise contained in the Series C
Warrants), including, if necessary, by filing an amendment prior to the
effective date of the Secondary Registration Statement to increase the number of
Secondary Registrable Securities covered thereby.
(iii) If (i) (A) the First Registration Statement is not filed with the
SEC prior to the First Filing Date or declared effective by the SEC on or before
the First Registration Deadline, or (B) the Second Registration Statement is not
filed with the SEC prior to the Second Filing Date or declared effective by the
SEC on or before the Second Registration Deadline, or (C) any Registration
Statement required to be filed pursuant to Section 3(b) hereof is not declared
effective by the SEC on or before the seventy-fifth (75th) day following the
applicable Registration Trigger Date (as defined in Section 3(b) below), or (ii)
if, after any such Registration Statement has been declared effective by the
SEC, sales of any of the Registrable Securities required to be covered by such
Registration Statement (including any Registrable Securities required to be
registered pursuant to Section 3(b) hereof) cannot be made pursuant to such
Registration Statement (by reason of a stop order or the Company's failure to
update the Registration Statement or for any other reason outside the control of
the Investors) or (iii) the
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Company's common stock is not listed or included for quotation on the Nasdaq
SmallCap Market (the "SMALLCAP MARKET"), the Nasdaq National Market (the
"NATIONAL MARKET"), the New York Stock Exchange (the "NYSE"), or the American
Stock Exchange (the "AMEX") at any time after the First Registration Deadline
hereunder, then the Company will make payments to each Investor in such amounts
and at such times as shall be determined pursuant to this Section 2(c) as
partial relief for the damages to the Investors by reason of any such delay in
or reduction of their ability to sell such Registrable Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity).
The Company shall pay to each Investor an amount equal to the
product of (i) the number of shares of Common Stock acquired pursuant to the
Securities Purchase Agreement and then held by such Investor, multiplied by the
per Unit purchase price under the Securities Purchase Agreement, multiplied by
(ii) one hundredth (.01) for the first thirty day period (or portion thereof)
and two hundredths (.02) for each additional 30 day period (or portion thereof)
(A) after the First Filing Date and prior to the date the First Registration
Statement is filed with the SEC, (B) after the First Registration Deadline and
prior to the date the first Registration Statement is declared effective by the
SEC, (C) after the sixtieth (60th) day following a Registration Trigger Date and
prior to the date the Registration Statement filed pursuant to Section 3(b)
hereof is declared effective by the SEC, and (D) during which sales of any
Initial Registrable Securities cannot be made pursuant to any such Registration
Statement after the Registration Statement has been declared effective or the
Common Stock is not listed or included for quotation on the SmallCap Market, the
National Market, NYSE, or AMEX.
In addition, the Company shall pay to each Investor an amount equal
to the aggregate exercise price paid by such Investor upon exercise of Series B
Warrants, multiplied by one hundredth (.01) for the first thirty day period (or
portion thereof) and two hundredths (.02) for each additional 30 day period (or
portion thereof) (A) after the Second Filing Date and before the Second
Registration Statement is filed with the SEC, (B) after the Second Registration
Deadline and prior to the date the Second Registration Statement is declared
effective by the SEC, and (C) during which sales of any Secondary Registrable
Securities cannot be made pursuant to any Registration Statement after the
Registration Statement has been declared effective or the Common Stock is not
listed or included for quotation on the SmallCap Market, the National Market,
NYSE, or AMEX.
Notwithstanding the foregoing payment provisions, for purpose of
calculating the payment amount owed to any given Investor, there shall be
excluded from each such period any delays which are solely attributable to
changes required by such Investor in the Registration Statement with respect to
information relating to such Investor, including, without limitation, changes to
the plan of distribution (other than any corrections of Company mistakes with
respect to information previously provided by such Investor). All such amounts
required to be paid hereunder shall be paid in cash within five days after the
end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, interim payments shall be
made for each such 30 day period.
(d) Piggy-Back Registrations. If, at any time prior to the expiration of
the Registration Period (as defined in Section 3(a) below) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under
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the Securities Act of any of its equity securities (other than on Form S-4 or
Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans), the Company shall send to each Investor written notice of such filing,
and if, within 15 days after the date of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered. Notwithstanding the foregoing, in the event that, in connection with
any underwritten public offering, the managing underwriter(s) thereof shall
impose a limitation on the number of shares of common stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
as the underwriter shall permit; provided, however, that (i) the Company shall
not exclude any Registrable Securities unless the Company has first excluded all
outstanding securities, the holders of which are not contractually entitled to
inclusion of such securities in such Registration Statement or are not
contractually entitled to pro rata inclusion with the Registrable Securities,
(ii) after giving effect to the immediately preceding proviso, any such
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities and the holders of other securities
having the contractual right to inclusion of their securities in such
Registration Statement by reason of demand registration rights, in proportion to
the number of Registrable Securities or other securities, as applicable, sought
to be included by each such Investor or other holder, and (iii) no such
reduction shall reduce the amount of Registrable Securities included in the
registration below twenty-five (25%) of the total amount of securities included
in such registration. No right to registration of Registrable Securities under
this Section 2(d) shall be construed to limit any registration required under
Section 2(a) or Section 2(b) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(d) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
(e) Eligibility for Form F-3. The Company represents and warrants that
it meets the requirements for the use of Form F-3 for registration of the sale
by the Initial Investors and any other Investor of the Registrable Securities
and the Company shall file all reports and statements required to be filed by
the Company with the SEC in a timely manner so as to thereafter maintain such
eligibility for the use of Form F-3.
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3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
(a) The Company shall respond promptly to any and all comments made by
the staff of the SEC to any Registration Statement required to be filed
hereunder, and shall submit to the SEC, before the close of business on the
business day immediately following the business day on which the Company learns
(either by telephone or in writing) that no review of such Registration
Statement will be made by the SEC or that the staff of the SEC has no further
comments on such Registration Statement, as the case may be, a request for
acceleration of the effectiveness of such Registration Statement to a time and
date as soon as practicable. The Company shall keep such Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which all of the Registrable Securities may be immediately sold to
the public without registration or restriction pursuant to Rule 144(k) under the
Securities Act or any successor provision (the "REGISTRATION PERIOD"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) (A) shall comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder
and (B) shall not contain any 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 not misleading. The financial statements of the Company
included in any such Registration Statement or incorporated by reference therein
(x) shall comply as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto, (y) shall be prepared in accordance with
Canadian generally accepted accounting principles, consistently applied during
the periods involved (except as may be otherwise indicated in such financial
statements or the notes thereto or, in the case of unaudited interim statements,
to the extent they may not include footnotes or may be condensed on summary
statements) and (z) fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end adjustments).
(b) The Company shall (i) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to any Registration
Statement required to be filed hereunder and the prospectus used in connection
with any such Registration Statement as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and (ii) during the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by any such Registration Statement until such time as all of
such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is, for any three (3)
consecutive trading days (the last of such three (3) trading days being the
"REGISTRATION TRIGGER DATE"), insufficient to cover 125% of the Registrable
Securities (assuming full excise of all Warrants and without giving effect to
any limitations on exercise contained in the Warrants), the Company shall
provide each
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Investor written notice of such Registration Trigger Date within three business
days thereafter and shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover 125% of the Registrable Securities (assuming full excise of
all Warrants and without giving effect to any limitations on exercise contained
in the Warrants) as of the Registration Trigger Date, in each case, as soon as
practicable, but in any event within 15 days after the Registration Trigger
Date. The Company shall cause such amendment(s) and/or new Registration
Statement(s) to become effective as soon as practicable following the filing
thereof. In the event the Company fails to obtain the effectiveness of any such
Registration Statement within 75 days after a Registration Trigger Date, each
Investor shall thereafter have the option, exercisable in whole or in part at
any time and from time to time by delivery of a written notice to the Company (a
"MANDATORY REDEMPTION NOTICE"), to require the Company to redeem for cash such
number of the Investor's shares of the Common Stock at a price per share of
Common Stock equal to 6.90 (the "REDEMPTION AMOUNT") such that, following such
redemption, the total number of Registrable Securities included on the
Registration Statement for resale by such Investor is at least equal to 125% of
the Registrable Securities (assuming full exercise of all Warrants and without
giving effect to any limitation on exercise contained in the Warrants). If the
Company fails to pay any holder the Redemption Amount within five business days
after its receipt of a Redemption Notice, then the Investor entitled to
redemption shall be entitled to interest on the Redemption Amount at a per annum
rate equal to the lower of twenty-four percent (24%) and the highest interest
rate permitted by applicable law from the date on which the Company receives the
Redemption Notice until the date of payment of the Redemption Amount hereunder.
In the event the Company is not able to redeem all of the shares of Common Stock
subject to Redemption Notices delivered prior to the date upon which such
redemption is to be effected, the Company shall redeem shares of Common Stock
from each Investor pro rata, based on the total number of shares of Common Stock
outstanding at the time of redemption included by such Investor in all
Redemption Notices delivered prior to the date upon which such redemption is to
be effected relative to the total number of shares of Common Stock outstanding
at the time of redemption included in all of the Redemption Notices delivered
prior to the date upon which such redemption is to be effected.
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in a Registration Statement and such Investor's legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC or received by the Company, as applicable, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and, in the case of the
Registration Statements required to be filed pursuant to Section 2(a) and
Section 2(b), each letter written by or on behalf of the Company to the SEC or
the staff of the SEC (including, without limitation, any request to accelerate
the effectiveness of the Registration Statement or amendment thereto), and each
item of correspondence from the SEC or the staff of the SEC, in each case
relating to the Registration Statement (other than any portion thereof that
contains information for which the Company has sought confidential treatment),
(ii) on the date of effectiveness of the Registration Statement or any amendment
thereto, a notice stating that the Registration Statement or amendment has been
declared effective, and (iii) such number of copies of a prospectus, including a
preliminary prospectus, all amendments and supplements thereto and all such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
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(d) The Company shall use its best efforts to (i) register and qualify
the Registrable Securities covered by any Registration Statement under such
other securities or "blue sky" laws of such jurisdictions in the United States
and Canada as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (A) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (B) subject itself to general taxation in any such
jurisdiction, (C) file a general consent to service of process in any such
jurisdiction, (D) provide any undertakings that cause the Company undue expense
or burden, or (E) make any change in its Certificate of Incorporation or Bylaws,
which in each case the Board of Directors of the Company reasonably determines
to be contrary to the best interests of the Company and its stockholders.
(e) As promptly as practicable after becoming aware of such event, the
Company shall (i) notify each Investor by telephone and facsimile of the
happening of any event, as a result of which the prospectus included in any
Registration Statement that includes Registrable Securities, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
(f) The Company shall use its best efforts (i) to prevent the issuance
of any stop order or other suspension of effectiveness of any Registration
Statement that includes Registrable Securities, and, if such an order is issued,
to obtain the withdrawal of such order at the earliest practicable moment
(including in each case by amending or supplementing such Registration
Statement), and (ii) to notify each Investor who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof (and if
such Registration Statement is supplemented or amended, deliver such number of
copies of such supplement or amendment to each Investor as such Investor may
reasonably request).
(g) The Company shall permit a single firm of counsel designated by the
Initial Investors to review any Registration Statement required to be filed
hereunder and all amendments and supplements thereto a reasonable period of time
prior to its filing with the SEC, and not file any document to which such
counsel reasonably objects.
(h) The Company shall make generally available to its security holders
as soon as practicable, but in no event later than 90 days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement. The Company will be
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deemed to have complied with its obligations under this Section 3(h) upon the
Company's filing, on an appropriate form, the appropriate report of the Company
as required by the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"EXCHANGE ACT").
(i) The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with United States federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement that
includes such Investor's Registrable Securities, (iii) the release of such
information is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction, (iv) such information has been made
generally available to the public other than by disclosure in violation of this
or any other agreement, or (v) such Investor consents to the form and content of
any such disclosure. The Company shall, upon learning that disclosure of any
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
such Investor prior to making such disclosure, and cooperate with the Investor,
at the Investor's expense, in taking appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
(j) The Company shall use its best efforts to cause all of the
Registrable Securities covered by any Registration Statement to be promptly
listed or designated for quotation on the SmallCap Market, the National Market,
the NYSE, or the AMEX, and on each additional national securities exchange or
automated quotation system on which securities of the same class or series
issued by the Company are then listed or quoted, if any, if the listing or
quotation of such Registrable Securities is then permitted under the rules of
such exchange or automated quotation system, and in any event, without limiting
the generality of the foregoing, to arrange for or maintain at least two market
makers to register with the National Association of Securities Dealers, Inc.
(the "NASD") as such with respect to the Registrable Securities.
(k) The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement required to be filed pursuant to Section 2(a)
hereof.
(l) The Company shall cooperate with any Investor who holds Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to any Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, and registered in such names,
as such Investor or the managing underwriter or underwriters, if any, may
reasonably request. Without limiting the generality of the foregoing, within
three business days after any Registration Statement that includes Registrable
Securities is declared effective by the SEC, the Company shall cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to any Investor whose Registrable Securities
are included in such Registration Statement), an opinion of such counsel in the
form attached hereto as Exhibit A.
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(m) At the request of any Investor, the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to any Registration Statement required to be filed hereunder and the
prospectus used in connection with such Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
(n) The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Exchange Act and the
rules and regulations thereunder promulgated by the SEC.)
(o) From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company to
include any of their securities which are not Registrable Securities in the
Registration Statement required to be filed pursuant to Section 2(a), 2(b) or
3(b) hereof without the consent of the holders of a majority in interest of the
Registrable Securities.
(p) The Company shall make available for inspection by (i) each
Investor, (ii) any underwriter participating in any disposition pursuant to any
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable such Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(A) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (B) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (C) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. Nothing herein shall be deemed to
limit any Investor's ability to sell Registrable Securities in a manner that is
otherwise consistent with applicable laws and regulations.
(q) In the case of an underwritten public offering, at the request of
any Investor, the Company shall furnish, on the date of effectiveness of the
Registration Statement (i) an opinion, dated as of such date, from counsel
representing the Company addressed to any such Investor and in form, scope and
substance as is customarily given in an underwritten public offering and (ii) a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and any such Investor.
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4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, each
Investor shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company
to effect the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five trading days
prior to the first anticipated filing date of a Registration Statement, the
Company shall notify each Investor of the information the Company requires from
each such Investor.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement required to be filed hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
(c) Upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e) or 3(f) with respect to any
Registration Statement including Registrable Securities, each Investor shall
immediately discontinue disposition of Registrable Securities pursuant to such
Registration Statement until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Sections 3(e) and 3(f), as
applicable, and, if so directed by the Company, such Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's possession
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice. Notwithstanding the foregoing or anything to the
contrary in this Agreement, but subject to compliance with applicable laws, the
Company shall cause the transfer agent for the Registrable Securities to deliver
unlegended shares of common stock to a transferee of an Investor in accordance
with the terms of the Common Stock and Warrants in connection with any sale of
Registrable Securities with respect to which any such Investor has entered into
a contract for sale prior to receipt of such notice and for which any such
Investor has not yet settled.
(d) No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below, and (iv) complies with all applicable laws
in connection therewith. Notwithstanding anything in this Section 4(d) to the
contrary, this Section 4(d) is not intended to limit any Investor's rights under
Sections 2(a), 2(b) or 3(b) hereof.
11
5. EXPENSES OF REGISTRATIONS.
All expenses incurred by the Company or the Investors in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3 above
(including, without limitation, all registration, listing and qualification
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and the fees and disbursements of one counsel selected by the
Investors (but in the case of the counsel selected by the Investors, only to the
extent that the fees and distributions of such counsel are covered under the
Expense Cap as set out in Section 4(o) of the Securities Purchase Agreement),
and any underwriting discounts and commissions) shall be borne by the Company.
In addition, the Company shall pay each Investor's costs and expenses (including
reasonable legal fees) incurred in connection with the enforcement of the rights
of such Investor hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the extent permitted by law, the Company shall indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, members, employees and agents of each
such Investor and each person, if any, who controls each such Investor within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, an "INVESTOR INDEMNIFIED PERSON"), against any joint or several
losses, claims, damages, liabilities or expenses (collectively, together with
actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "CLAIMS") to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (A) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading, (B) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (C) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act or any other law (including, without
limitation, any state securities law), rule or regulation relating to the offer
or sale of the Registrable Securities (the matters in the foregoing clauses (A)
through (C), collectively, "VIOLATIONS"). Subject to the restrictions set forth
in Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse each Investor and each other Investor Indemnified Person, promptly as
such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (x) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Investor Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (y) shall not apply
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to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (z) with respect to any preliminary prospectus, shall
not inure to the benefit of any Investor Indemnified Person if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented, if such corrected prospectus was timely made available by the
Company pursuant to Section 3(c) hereof, and the Investor Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the use
giving rise to a Violation and such Investor Indemnified Person, notwithstanding
such advice, used it. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Investor Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9 hereof.
(b) In connection with any Registration Statement in which an Investor
is participating, (i) each such Investor shall, severally and not jointly,
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, its employees and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder within the meaning of the
Securities Act or the Exchange Act (each, a "COMPANY INDEMNIFIED PERSON"),
against any Claims to which any of them may become subject insofar as such
Claims arise out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and (ii)
subject to the restrictions set forth in Section 6(c), such Investor shall
reimburse the Company Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim; provided, however, that the indemnification obligations contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; and provided, further, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Company Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investor pursuant to Section 9 hereof. Notwithstanding
anything to the contrary contained herein, the indemnification obligations
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Company Indemnified Person if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Promptly after receipt by any party entitled to indemnification
under this Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a Claim in respect
thereof is to made against any indemnifying party under this Section 6, deliver
to the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the
13
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the indemnified party;
provided, however, that such indemnifying party shall not be entitled to assume
such defense and an indemnified party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the indemnified party and the indemnifying
party would be inappropriate due to actual or potential conflicts of interest
between such indemnified party and any other party represented by such counsel
in such proceeding or the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying party and
any such indemnified party reasonably determines that there may be legal
defenses available to such indemnified party that are in conflict with those
available to such indemnifying party. The indemnifying party shall pay for only
one separate legal counsel for the indemnified parties, and such legal counsel
shall be selected by Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim relates (if
the parties entitled to indemnification hereunder are Investor Indemnified
Persons) or by the Company (if the parties entitled to indemnification hereunder
are Company Indemnified Persons). The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
indemnified party under this Section 6, except to the extent that the
indemnifying party is actually prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party shall make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and the indemnified
party, on the other hand, with respect to the Violation giving rise to the
applicable Claim; provided, however, that (a) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation,
and (c) contribution (together with any indemnification or other obligations
under this Agreement) by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
14
(a) file with the SEC in a timely manner and make and keep available all
reports and other documents required of the Company under the Securities Act and
the Exchange Act so long as the Company remains subject to such requirements and
the filing and availability of such reports and other documents is required for
the applicable provisions of Rule 144; and
(b) furnish to each Investor so long as such Investor holds Common
Stock, Warrants or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit such Investor to sell such securities under Rule
144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Common Stock, the Warrants or the Registrable Securities if: (a)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company after such
assignment, (b) the Company is furnished with written notice of (i) the name and
address of such transferee or assignee, and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c) following
such transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state and provincial securities laws, (d) the transferee or assignee agrees in
writing for the benefit of the Company to be bound by all of the provisions
contained herein, and (e) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement and the
Warrants, as applicable. In addition, and notwithstanding anything to the
contrary contained in this Agreement, the Securities Purchase Agreement or the
Warrants, the Securities (as defined in the Securities Purchase Agreement) may
be pledged, and all rights of the Investor under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with an Investor's margin or brokerage account.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor or its affiliates still owns
Common Stock, Warrants or Registrable Securities) and the Investor(s) who hold a
majority in interest of the Registrable Securities or, in the case of a waiver,
with the written consent of the party charged with the enforcement of any such
provision; provided, however, that (a) no amendment hereto which restricts the
ability of an Investor to elect not to participate in an underwritten offering
shall be effective against any Investor which does not consent in writing to
such amendment; (b) no consideration shall be paid to an Investor by the Company
in connection with an amendment hereto unless each Investor similarly affected
by such amendment receives a pro rata amount of consideration from the
15
Company; and (c) unless an Investor otherwise agrees, each amendment hereto must
similarly affect each Investor. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notices required or permitted to be given under the terms of
this Agreement shall be in writing and sent by certified or registered mail
(return receipt requested) or delivered personally, by nationally recognized
overnight carrier or by confirmed facsimile transmission, and shall be effective
five days after being placed in the mail, if mailed, or upon receipt or refusal
of receipt, if delivered personally or by nationally recognized overnight
carrier or confirmed facsimile transmission, in each case addressed to a party
as provided herein. The initial addresses for such communications shall be as
follows, and each party shall provide notice to the other parties of any change
in such party's address:
(i) If to the Company:
QSound Labs, Inc.
000 - 0000 00xx Xxxxxx XX
Xxxxxxx, XX X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx
with a copy to Xxxxxx Varvos, Esq.
as above
(ii) If to any Investor, to such address as such Investor shall
have provided in writing to the Company.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed in the State of Delaware. The Company irrevocably consents to the
jurisdiction of the United States federal courts and the state courts located in
the County of New Castle, State of Delaware in any suit or proceeding based on
or arising under this Agreement and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The
16
Company further agrees that service of process upon the Company, mailed by first
class mail shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding in such forum. Nothing herein shall
affect any Investor's right to serve process in any other manner permitted by
law. The Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
(e) This Agreement and the other Transaction Documents (including any
schedules and exhibits hereto and thereto) constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the other
Transaction Documents supersede all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(i) Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(j) Unless otherwise expressly provided herein, all consents, approvals
and other determinations to be made by the Investors pursuant to this Agreement
shall be made by the Investors holding a majority in interest of the Registrable
Securities (determined as if all Warrants then outstanding had been converted
into or exercised for Registrable Securities) held by all Investors.
(k) The initial number of Registrable Securities included on any
Registration Statement filed pursuant to Section 2(a), 2(b) or 3(b), and each
increase to the number of Registrable Securities included thereon, shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time of such establishment or increase,
as the case may be. In the event an Investor shall sell or otherwise transfer
any of such holder's Registrable Securities, each transferee shall be allocated
a pro rata portion of the number of Registrable Securities included on a
Registration Statement for such transferor. Any shares of Common Stock included
on a Registration Statement and which remain allocated to any person or entity
which does not hold any Registrable Securities shall be allocated to the
17
remaining Investors, pro rata based on the number of shares of Registrable
Securities then held by such Investors. For the avoidance of doubt, the number
of Registrable Securities held by any Investor shall be determined as if all
Warrants then outstanding were converted into or exercised for Registrable
Securities.
(l) Each party to this Agreement has participated in the negotiation and
drafting of this Agreement. As such, the language used herein shall be deemed to
be the language chosen by the parties hereto to express their mutual intent, and
no rule of strict construction will be applied against any party to this
Agreement.
(m) For purposes of this Agreement, the term "business day" means any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law, regulation or
executive order to close, and the term "trading day" means any day on which the
principal national securities exchange, automated quotation system or other
trading market where the Company's common stock is then listed, quoted or
traded, is open for trading.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
18
IN WITNESS WHEREOF, the undersigned Initial Investor and the Company have
caused this Agreement to be duly executed as of the date first above written.
QSOUND LABS, INC.
By: __________________________________
Name:
Title:
INITIAL INVESTOR:
__________________________________________________
(Print or Type Name of Purchaser)
By: _____________________________________________
Name:
Title:
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
EXHIBIT A
[Date]
[Transfer Agent]
RE: QSOUND LABS, INC.
Ladies and Gentlemen:
We are counsel to QSound Labs, Inc., a corporation organized under the laws of
the State Alberta, Canada (the "COMPANY"), and we understand that [Name of
Investor] (the "HOLDER") has purchased from the Company (i) shares of the
Company's common stock, no par value (the "COMMON STOCK"), and (ii) warrants to
acquire shares of Common Stock. Pursuant to a Registration Rights Agreement,
dated as of December 16, 2004, by and among the Company and the signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with the
Holder, among other things, to register the Registrable Securities (as that term
is defined in the Registration Rights Agreement) under the Securities Act of
1933, as amended (the "SECURITIES ACT"), upon the terms provided in the
Registration Rights Agreement. In connection with the Company's obligations
under the Registration Rights Agreement, on [_____________ ___, ____], the
Company filed a Registration Statement on Form F-___ (File No. 333-
_____________) (the "REGISTRATION STATEMENT") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities, which names the
Holder as a selling stockholder thereunder. The Registration Statement was
declared effective by the SEC on _____________, ____.
In connection with the foregoing, we advise you that a member of the SEC's staff
has advised us by telephone that the SEC has entered into an order declaring the
Registration Statement effective under the Securities Act at [time of
effectiveness] on [date of effectiveness], and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC.
Based on the foregoing, we are of the opinion that the Registrable Securities
are available for resale under the Securities Act pursuant to the Registration
Statement.
Very truly yours,
[NAME OF COUNSEL]
cc: [Name of Investor]
