EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
January 3, 2005, is made by and among SLS International, Inc., a corporation
organized under the laws of the State of Delaware (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 Series C Convertible Preferred Stock, par
value $0.001 per share (the "PREFERRED STOCK"), that are convertible into shares
of the Company's common stock, par value $0.001 per share (the "COMMON STOCK"),
upon the terms and subject to the limitations and conditions set forth in the
Certificate of Designation, Rights and Preferences with respect to such
Preferred Stock as originally filed on December 29, 2004 and including any and
all amendments and certificates of correction thereto through and including the
Issuance Date, as such term is defined therein (the "CERTIFICATE OF
DESIGNATION"), and (ii) warrants (the "WARRANTS") to acquire shares of Common
Stock. The shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Preferred Stock and/or the Certificate of Designation
(including, without limitation, the shares of Common Stock issuable upon
conversion of shares of Preferred Stock issued as payment of the Premium
pursuant to Article IV of the Certificate of Designation) are referred to herein
as the "CONVERSION SHARES" and the shares of Common Stock issuable upon exercise
of or otherwise pursuant to the Warrants are referred to herein as the "WARRANT
SHARES." This Agreement, the Certificate of Designation, the Warrants and the
Securities Purchase Agreement are collectively referred to herein as the
"TRANSACTION DOCUMENTS."
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) "INVESTORS" means the Initial Investors and any affiliated
transferees or affiliated assignees who agree to become bound by the provisions
of this Agreement in accordance with Section 9 hereof.
(ii) "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").
(iii) "REGISTRABLE SECURITIES" means (a) the Conversion
Shares, (b) the 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 (including the Preferred Stock
and the Warrants), whether as Premium (as defined in the Certificate of
Designation), default payments, on account of anti-dilution or other adjustments
or otherwise.
(iv) "REGISTRATION STATEMENT" means a registration statement
of the Company that covers the Registrable Securities pursuant to this
Agreement, including the prospectus, any and all pre- and post-effective
amendments and any and all supplements and exhibits thereto and any and all
documents incorporated by reference therein.
(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) Mandatory Registration. The Company shall prepare promptly and file
with the SEC as soon as practicable, but in no event later than the thirtieth
(30th) day following the date hereof (the "FILING DATE"), a Registration
Statement on Form SB-2 (or, if Form SB-2 is not then available, on such form of
Registration Statement as is then available to effect a registration of all of
the Registrable Securities, subject to the consent of the Initial Investors)
covering the resale of at least sixteen million (16,000,000) Registrable
Securities. The Registration Statement filed hereunder, to the extent allowable
under the Securities Act and the Rules promulgated thereunder (including Rule
416), shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Stock and exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or other transactions
pursuant to the terms of the Preferred Stock and the Warrants. The Registrable
Securities included on the Registration Statement shall be allocated among the
Investors as set forth in Section 11(k) hereof. Drafts of the Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and subject to the
reasonable approval of) the Initial Investors and their counsel (to such
counsel, if any, in accordance with Section 11(b) hereof and at such counsel's
address set forth on each Initial Investor's signature page hereto or as
otherwise may be provided after the date hereof) prior to its filing or other
submission.
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(b) Payments by the Company. The Company shall use its reasonable best
efforts to cause the Registration Statement required to be filed pursuant to
Section 2(a) hereof to become effective as soon as practicable, but in no event
later than the ninetieth (90th) day following the date hereof. At the time of
effectiveness, the Company shall ensure that such Registration Statement covers
all of the Registrable Securities, including, if necessary, by filing an
amendment prior to the effective date of the Registration Statement to increase
the number of Registrable Securities covered thereby. If (i) (A) the
Registration Statement required to be filed pursuant to Section 2(a) hereof is
not filed with the SEC prior to the Filing Date or declared effective by the SEC
on or before the ninetieth (90th) day following the date hereof (the
"REGISTRATION DEADLINE") or (B) any Registration Statement required to be filed
pursuant to Section 3(b) hereof is not declared effective by the SEC on or
before the sixtieth (60th) 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 Common Stock is not traded, listed or included for quotation, as applicable,
on the Nasdaq Over-the-Counter Bulletin Board (the "OTC"), the Nasdaq SmallCap
Market (the "SMALLCAP MARKET"), the Nasdaq National Market (the "NATIONAL
MARKET"), the New York Stock Exchange (the "NYSE"), the American Stock Exchange
(the "AMEX") or some other national securities exchange or automated or
electronic quotation system at any time after the 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(b) as
partial relief for the damages to the Investors by reason of any such delay in
or reduction of their ability to sell the 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 (x) the
number of shares of Preferred Stock then outstanding (including, for this
purpose, any shares of Preferred Stock that have been converted into Conversion
Shares then held by such Investor as if such shares of Preferred Stock had not
been so converted) multiplied by the per share purchase price, multiplied by (y)
one hundredth (.01), for each thirty (30) day period (or portion thereof)
beginning the ninetieth (90th) day after the date hereof and ending on the one
hundred and eightieth (180th) day after the date hereof, and two hundredths
(.02) for each thirty (30) day period beginning the one hundred and eightieth
(180th) day after the date hereof (or portion thereof) (A) after the Filing Date
and prior to the date the Registration Statement is filed with the SEC pursuant
to Section 2(a), (B) after the Registration Deadline and prior to the date the
Registration Statement filed pursuant to Section 2(a) is declared effective by
the SEC, provided, however, that in the event the SEC commences a review of the
Registration Statement, the amount payable to each Investor pursuant to this
Section 2(b)(x)(B) shall begin accruing on the one hundred and twentieth
(120th), and not the ninetieth (90th), day after the date hereof, (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 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
traded, listed or included for quotation, as applicable, on the OTC, the
SmallCap Market, the National Market, NYSE, AMEX, or some other national
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securities exchange or automated or electronic quotation system; provided,
however, that, 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.
(c) 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 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(c) shall be construed to limit any
registration required under Section 2(a) hereof. If an offering in connection
with which an Investor is entitled to registration under this Section 2(c) 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.
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(d) Eligibility for Form SB-2 or S-2. The Company represents and
warrants that it meets the requirements for the use of Form SB-2 or Form S-2 for
registration of the sale by the Initial Investor 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 such form.
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
second 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 (unless the Company has determined, upon advice of
counsel, that an amendment to such Registration Statement is required to be
filed prior to effectiveness, in which case the Company shall use its reasonable
best efforts to amend the Registration Statement and cause the SEC to declare
the Registration Statement, as so amended, effective 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 U.S. 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
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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 all of the Registrable
Securities then issued or issuable upon conversion of the Preferred Stock
(without giving effect to any limitations on conversion contained in the
Certificate of Designation) and exercise of the Warrants (without giving effect
to any limitations on exercise contained in the Warrants), the Company shall
provide each 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 all of the Registrable Securities issued or
issuable upon conversion of the Preferred Stock (without giving effect to any
limitations on conversion contained in the Certificate of Designation) or
exercise of the Warrants (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 20 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 60 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 Preferred Stock at a price per share of
Preferred Stock equal to the Redemption Amount (as defined in the Certificate of
Designation) 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 all of the Registrable Securities issued or
issuable upon conversion of such Investor's Preferred Stock (without giving
effect to any limitations on conversion contained in the Certificate of
Designation) and exercise of such Investor's Warrants (without giving effect to
any limitation on exercise contained in the Warrants). If the Company fails to
redeem any of such Preferred Stock within five business days after its receipt
of a Mandatory Redemption Notice, then such Investor shall be entitled to the
remedies provided in Article VIII.C of the Certificate of Designation.
(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 Statement required to be filed pursuant to Section 2(a), each
letter written by or on behalf of the Company to the SEC or the staff of the SEC
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(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.
(d) The Company shall use its reasonable 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 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 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 of such Investor, 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 reasonable 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 in a form to which
such counsel reasonably objects.
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(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
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 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 in writing 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
written 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 reasonable best efforts to promptly cause
all of the Registrable Securities covered by any Registration Statement to be
traded, listed or designated for quotation, as applicable, on the OTC, the
SmallCap Market, the National Market, the NYSE, the AMEX or any other national
securities exchange or automated or electronic quotation system and on each
additional national securities exchange or automated or electronic 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 or
electronic 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 sold or
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
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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.
(m) At the reasonable 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) or 3(b)
hereof without the consent of the holders of a majority in interest of the
Registrable Securities, except that the Company may include in the Registration
Statement the securities identified as "Securities Subject to Registration
Rights" in Section 3(c) of the Disclosure Schedule attached to the Securities
Purchase Agreement.
(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
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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.
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 the 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 Preferred 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
10
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) or 3(b) hereof.
5. EXPENSES OF REGISTRATION.
All reasonable out-of-pocket expenses incurred by the Company and/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, and any underwriting discounts and
commissions) shall be borne by the Company. In addition, the Company shall pay
(on an as-incurred basis) each Investor's costs and expenses (including, without
limitation, 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
(including, without limitation, legal counsel) 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
11
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 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 and its agents (including, without
limitation, its legal counsel) (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
12
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 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.
13
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:
(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 (together with
its affiliates) holds at least 25% of the Series C Preferred Stock, 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,
and (ii) 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 Preferred 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 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, the Certificate of
Designation and the Warrants, as applicable. In addition, and notwithstanding
anything to the contrary contained in this Agreement, the Securities Purchase
Agreement, the Certificate of Designation 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 each such Initial Investor or its
affiliates still owns Preferred Stock, Warrants or Registrable Securities) and
the Investor(s) who hold a majority in interest of the Registrable Securities
14
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 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:
SLS International, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President and Controller
with a copy simultaneously transmitted by like means
(which transmittal shall not constitute notice
hereunder) to:
Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
15
(ii) If to any Initial Investor, to such address as set forth
on such Initial Investor's execution page to the Securities Purchase
Agreement, and, if to any other 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. Each of the Company and the Investors
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. Each of the Company and the Investors irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
Each of the Company and the Investors further agrees that service of process
upon it, mailed by first class mail shall be deemed in every respect effective
service of process upon it in any such suit or proceeding in such forum. Nothing
herein shall affect the right of the Company or any Investor to serve process in
any other manner permitted by law. Each of the Company and the Investors 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.
16
(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 Preferred Stock and Warrants then outstanding
had been converted into or exercised for Registrable Securities) held by all
Investors. No consideration shall be offered or paid to any Investor to amend or
consent to a waiver or modification of any provision of this Agreement unless
the same consideration is offered to all of the Investors.
(k) The initial number of Registrable Securities included on any
Registration Statement filed pursuant to Section 2(a) 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 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 Preferred Stock and 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 or electronic quotation system
or other trading market where the Common Stock is then listed, quoted or traded,
is open for trading.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
17
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.
SLS INTERNATIONAL, INC.
By:
-------------------------------------------------
Name:
Title:
INITIAL INVESTORS:
-----------------------------------------------------
BAYSTAR CAPITAL II, L.P.
By:
---------------------------------------------------
Name:
Title:
Counsel:
Drinker Xxxxxx & Xxxxx LLP
One Xxxxx Square
00xx xxx Xxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
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.
--------------------------------------------
PSO TRADING IV, LLC
By:
-----------------------------------------
Name:
Title:
2
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.
--------------------------------------------
ROYAL BANK OF CANADA
By: RBC Capital Markets Corporation
Its: Agent
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
3
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.
---------------------------------------------
HFTP INVESTMENT L.L.C.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
-----------------------------------------
Name:
Title:
4
EXHIBIT A
[Date]
[Transfer Agent]
RE: SLS INTERNATIONAL, INC.
Ladies and Gentlemen:
We are counsel to SLS International, Inc., a corporation organized under the
laws of the State of Delaware (the "COMPANY"), and we understand that [Names of
Investors] (the "HOLDERS") have purchased from the Company (i) shares of Series
C Convertible Preferred Stock that are convertible into shares of the Company's
common stock, par value [$___] per share (the "COMMON STOCK"), and (ii) warrants
to acquire shares of Common Stock. Pursuant to a Registration Rights Agreement,
dated as of January 3, 2005, by and among the Company and the signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with the
Holders, 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 S-___ (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 currently available for resale under the Securities Act pursuant to the
Registration Statement.
Very truly yours,
[NAME OF COUNSEL]
cc: [Name of Investor]
5
