EXHIBIT 4.1
EXHIBIT B
REGISTRATION RIGHTS
This constitutes Exhibit B to the Stock Agreement (as it may be amended
from time to time, the "STOCK AGREEMENT") dated as of July 30, 2002 between
SoftNet Systems, Inc., a Delaware corporation (the "CORPORATION") and Madison
Investors Corporation, a Delaware corporation ("BUYER") This Exhibit B shall
become effective upon the purchase by Buyer of 5,000,000 shares of Common Stock
from Cyber Net Technology Limited pursuant to an agreement between Buyer and
Cyber Net Technology Limited dated July 30, 2002.
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. Terms defined in the Stock Purchase
Agreement are used herein as therein defined. In addition, the following terms,
as used herein, have the following meanings:
"COMMISSION" means the Securities and Exchange Commission.
"DEMAND REGISTRATION STATEMENT" means the Demand Registration Statement
as defined in Section 2.01.
"HOLDER" means a person who owns Registrable Securities and is either
(a) Buyer or (b) a direct or an indirect transferee of Buyer permitted under the
Stock Agreement who has agreed in writing to be bound by the applicable terms of
the Stock Agreement and this Exhibit B.
"INDEMNIFIED PARTY" means an Indemnified Party as defined in Section
4.03.
"PIGGYBACK REGISTRATION" means a Piggyback Registration as defined in
Section 2.02.
"REGISTRABLE COMMON STOCK" means the Shares (as defined under the Stock
Agreement) and any additional shares of Common Stock issued the respect thereof
in connection with a stock split, stock dividend or similar event with respect
to the Common Stock, and any other shares of Common Stock acquired by Buyer as
permitted by the Stock Agreement.
"REGISTRABLE SECURITIES" means the Registrable Common Stock. As to any
particular Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities as soon as they (i) have been sold or otherwise disposed
of pursuant to a registration statement that was filed with the Commission and
declared effective under the Securities Act, (ii) are eligible for sale pursuant
to Rule 144 without being subject to applicable volume limitations thereunder,
(iii) have been otherwise sold, transferred or disposed of by a Holder to any
Person that is not a Holder, or (iv) have ceased to be outstanding.
"REGISTRATION EXPENSES" means Registration Expenses as defined in
Section 3.02.
"RULE 144" means Rule 144 (or any successor rule of similar effect)
promulgated under the Securities Act.
"SELLING HOLDER" means any Holder who is selling Registrable Securities
pursuant to a public offering registered hereunder.
"UNDERWRITER" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
Section 1.02. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Exhibit B, and
references to the parties shall mean the parties to the Stock Purchase
Agreement.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.01. Demand Registration. (a) Buyer, on its own behalf and on
behalf of the other Holders, may make up to three written requests for
registration under the Securities Act of all or any part of the Registrable
Securities held by the Holders (each, a "DEMAND REGISTRATION"); provided that
(i) no Demand Registration may be requested within 180 days after the preceding
request for a Demand Registration, and (ii) each Demand Registration must be (x)
in respect of Registrable Securities with a fair market value of at least
$10,000,000 or (y) in respect of all remaining Registrable Securities and have a
fair market value of at least $5,000,000 and, provided further, at the request
of the Corporation, Buyer and Holders shall accept in lieu of one of the Demand
Registrations, an agreement by the Corporation to permit sales of Registrable
Securities under a "shelf registration" under Rule 415 if such registration
remains continuously effective for a period of not less than 180 days. Such
request will specify the aggregate number of shares of Registrable Securities
proposed to be sold and will also specify the intended method of disposition
thereof. A registration will not count as a Demand Registration until it has
become effective; provided should a Demand Registration not become effective due
to the failure of a Holder to perform its obligations under this Exhibit B or
the inability of the requesting Holders to reach agreement with the underwriters
for the proposed sale (the "UNDERWRITERS") on price or other customary terms for
such transaction, or in the event the requesting Holders withdraw or do not
pursue the request for the Demand Registration (in each of the foregoing cases,
provided that at such time
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the Corporation is in compliance in all material respects with its obligations
under this Exhibit B), then such Demand Registration shall be deemed to have
been effected (provided that if the Demand Registration does not become
effective because of a Material Adverse Effect that occurs subsequent to the
date of the written request made by the requesting Holders, then the Demand
Registration shall not be deemed to have been effected).
(b) In the event that Buyer withdraws or does not pursue a request for a
Demand Registration and, pursuant to Section 2.01(a) hereof, such Demand
Registration is deemed to have been effected, the Holders may reacquire such
Demand Registration (such that the withdrawal or failure to pursue a request
will not count as a Demand Registration hereunder) if the Selling Holders
reimburse the Corporation for any and all Registration Expenses incurred by the
Corporation in connection with such request for a Demand Registration; provided
that the right to reacquire a Demand Registration may be exercised only once.
(c) If the Selling Holders so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. A majority in interest of the Selling Holders shall have
the right to select the managing Underwriters and any additional investment
bankers and managers to be used in connection with any offering under this
Section 2.01, subject to the Corporation's approval, which approval shall not be
unreasonably withheld.
(d) The Selling Holders will inform the Corporation of the time and
manner of any disposition of Registrable Common Stock, and agree to reasonably
cooperate with the Corporation in effecting the disposition of the Registrable
Common Stock in a manner that does not unreasonably disrupt the public trading
market for the Common Stock.
(e) The Corporation will have the right to preempt any Demand
Registration with a primary registration by delivering written notice (within
five business days after the Corporation has received a request for such Demand
Registration) of such intention to Buyer indicating that the Corporation has
identified a specific business need and use for the proceeds of the sale of such
securities and the Corporation shall use commercially reasonable efforts to
effect a primary registration within 60 days of such notice. In the ensuing
primary registration, the Holders will have such piggyback registration rights
as are set forth in Section 2.02 hereof. Upon the Corporation's preemption of a
requested Demand Registration, such requested registration will not count as the
Holders' Demand Registration; provided that a Demand Registration will not be
deemed preempted if the Holders are permitted to sell all requested securities
in connection with the ensuing primary offering by exercising their piggyback
registration rights. The Corporation may exercise the right to preempt only
twice in any 360-day period; provided, that during any 360 day period there
shall be a period of at least 120 consecutive days during which the Selling
Holders may effect a Demand Registration.
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Section 2.02. Piggyback Registration. If the Corporation proposes to
file a registration statement under the Securities Act with respect to an
offering of Common Stock for its own account or for the account of another
Person (other than a registration statement on Form S-4 or S-8 or pursuant to
Rule 415 (or any substitute form or rule, respectively, that may be adopted by
the Commission)), the Corporation shall give written notice of such proposed
filing to the Holders at the address set forth in the share register of the
Corporation as soon as reasonably practicable (but in no event less than 10 days
before the anticipated filing date), undertaking to provide each Holder the
opportunity to register on the same terms and conditions such number of shares
of Registrable Common Stock as such Holder may request (a "PIGGYBACK
REGISTRATION"). Each Holder will have five business days after receipt of any
such notice to notify the Corporation as to whether any it wishes to participate
in a Piggyback Registration; provided that should a Holder fail to provide
timely notice to the Corporation, such Holder will forfeit any rights to
participate in the Piggyback Registration with respect to such proposed
offering. In the event that the registration statement is filed on behalf of a
Person other than the Corporation, the Corporation will use commercially
reasonable efforts to have the shares of Registrable Common Stock that the
Holders wish to sell included in the registration statement. If the Corporation
shall determine in its sole discretion not to register or to delay the proposed
offering, the Corporation may, at its election, provide written notice of such
determination to the Holders and (i) in the case of a determination not to
effect the proposed offering, shall thereupon be relieved of the obligation to
register such Registrable Common Stock in connection therewith, and (ii) in the
case of a determination to delay a proposed offering, shall thereupon be
permitted to delay registering such Registrable Common Stock for the same period
as the delay in respect of the proposed offering. As between the Corporation and
the Selling Holders, the Corporation shall be entitled to select the
Underwriters in connection with any Piggyback Registration.
Section 2.03. Reduction of Offering. Notwithstanding anything contained
herein, if the managing Underwriter of an offering described in Section 2.01 or
2.02 states in writing that the size of the offering that Holders, the
Corporation and any other Persons intend to make is such that the inclusion of
the Registrable Securities would be likely to materially and adversely affect
the price, timing or distribution of the offering, then the amount of
Registrable Securities to be offered for the account of Holders shall be reduced
to the extent necessary to reduce the total amount of securities to be included
in such offering to the amount recommended by such managing Underwriter;
provided that in the case of a Piggyback Registration, if securities are being
offered for the account of Persons other than the Corporation, then the
proportion by which the amount of Registrable Securities intended to be offered
for the account of Holders is reduced shall not exceed the proportion by which
the amount of securities intended to be offered for the account of such other
Persons (other than any Person exercising a demand registration right) is
reduced; provided further that in the case of a Demand Registration, the amount
of Registrable Securities to be offered for the account of the Holders making
the Demand Registration shall be reduced only
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after the amount of securities to be offered for the account of the Corporation
and any other Persons has been reduced to zero.
Section 2.04. Preservation of Rights. The Corporation will not grant any
registration rights to third parties which contravene the rights granted
hereunder.
ARTICLE 3
REGISTRATION PROCEDURES
Section 3.01. Filings, Information. In connection with the registration
of Registrable Securities pursuant to Section 2.01 hereof, the Corporation will
use commercially reasonable efforts to effect the registration of such
Registrable Securities as promptly as is reasonably practicable, and in
connection with any such request:
(a) The Corporation will expeditiously prepare and file with the
Commission a registration statement on any form for which the Corporation then
qualifies and which counsel for the Corporation shall deem appropriate and
available for the sale of the Registrable Securities to be registered thereunder
in accordance with the intended method of distribution thereof, and use
commercially reasonable efforts to cause such filed registration statement to
become and remain effective for such period, not to exceed 60 days, as may be
reasonably necessary to effect the sale of such securities; provided that if the
Corporation shall furnish to Buyer a certificate signed by the Corporation's
Chairman, President or any Vice-President stating that in his or her good faith
judgment it would be detrimental or otherwise disadvantageous to the Corporation
or its shareholders for such a registration statement to be filed as
expeditiously as possible (because the sale of Registrable Securities covered by
such Registration Statement or the disclosure of information in any related
prospectus or prospectus supplement would materially interfere with any
acquisition, financing or other material event or transaction which is then
intended or the public disclosure of which at the time would be materially
prejudicial to the Corporation), the Corporation may postpone the filing or
effectiveness of a registration statement for a period of not more than 120
days; provided, that during any 360 day period there shall be a period of at
least 120 consecutive days during which the Corporation will make a registration
statement available under this Exhibit B; and provided further, that if (i) the
effective date of any registration statement filed pursuant to a Demand
Registration would otherwise be at least 45 calendar days, but fewer than 90
calendar days, after the end of the Corporation's fiscal year, and (ii) the
Securities Act requires the Corporation to include audited financials as of the
end of such fiscal year, the Corporation may delay the effectiveness of such
registration statement for such period as is reasonably necessary to include
therein its audited financial statements for such fiscal year.
(b) The Corporation will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish to the
Selling
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Holders, and each applicable managing Underwriter, if any, copies thereof, and
thereafter furnish to the Selling Holders and each such Underwriter, if any,
such number of copies of such registration statement, amendment and supplement
thereto (in each case including all exhibits thereto and documents incorporated
by reference therein) and the prospectus included in such registration statement
(including each preliminary prospectus) as the Selling Holders or each such
Underwriter may reasonably request in order to facilitate the sale of the
Registrable Securities by the Selling Holders.
(c) After the filing of the registration statement, the Corporation will
promptly notify the Selling Holders of any stop order issued or, to the
Corporation's knowledge, threatened to be issued by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered.
(d) The Corporation will use commercially reasonable efforts to qualify
the Registrable Securities for offer and sale under such other securities or
blue sky laws of such jurisdictions in the United States as the Selling Holders
reasonably request; provided that the Corporation will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph 3.01(d), (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction.
(e) The Corporation will as promptly as is practicable notify the
Selling Holders, at any time when a prospectus relating to the sale of the
Registrable Securities is required by law to be delivered in connection with
sales by an Underwriter or dealer, of the occurrence of any event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and promptly make available to the Selling Holders, and to
the Underwriters any such supplement or amendment. Upon receipt of any notice of
the occurrence of any event of the kind described in the preceding sentence,
Selling Holders will forthwith discontinue the offer and sale of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until receipt by the Selling Holders and the Underwriters of the
copies of such supplemented or amended prospectus and, if so directed by the
Corporation, the Selling Holders will deliver to the Corporation all copies,
other than permanent file copies then in the possession of Selling Holders, of
the most recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event the Corporation shall give such notice, the
Corporation shall extend the period during which such registration statement
shall be maintained effective as provided in Section 3.01(a) hereof by the
number of days during the period from and including the date of the giving of
such notice to the date when the Corporation shall make available to the Selling
Holders such supplemented or amended prospectus.
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(f) The Corporation will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
required in order to expedite or facilitate the sale of such Registrable
Securities.
(g) At the request of any Underwriter in connection with an underwritten
offering the Corporation will use commercially reasonable efforts to cause to be
furnished (i) an opinion of counsel, addressed to the Underwriters, covering
such customary matters as the managing Underwriter may reasonably request and
(ii) a comfort letter or comfort letters from the Corporation's independent
public accountants covering such customary matters as the managing Underwriter
may reasonably request.
(h) The Corporation will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and regulations
of the Commission thereunder.
(i) The Corporation will use its commercially reasonable efforts to
cause all such Registrable Common Stock to be listed on each securities exchange
or quoted on each inter-dealer quotation system on which the Common Stock is
then listed or quoted.
The Corporation may require Selling Holders promptly to furnish in
writing to the Corporation such information regarding such Selling Holders, the
plan of distribution of the Registrable Securities and other information as the
Corporation may from time to time reasonably request or as may be legally
required in connection with such registration.
Section 3.02. Registration Expenses. In connection with any Demand
Registration, the Corporation shall pay 50% of the following expenses incurred
in connection with such registration (the "REGISTRATION EXPENSES"): (i)
registration and filing fees with the Commission and the National Association of
Securities Dealers, Inc., (ii) fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
printing expenses, (iv) fees and expenses incurred in connection with the
listing or quotation of the Registrable Securities, (v) fees and expenses of
counsel to the Corporation and the reasonable fees and expenses of independent
certified public accountants for the Corporation (including fees and expenses
associated with the special audits or the delivery of comfort letters) and (vi)
the reasonable fees and expenses of any additional experts retained by the
Corporation in connection with such registration. In connection with any
Piggyback Registration, the Corporation shall pay the Registration Expenses set
forth in clauses (ii) through (vi) of the preceding sentence. In connection with
any Demand Registration, the Selling Holders shall pay 50% of the expenses set
forth in the first sentence of this
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Section 3.02 and (i) any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities, (ii) fees and expenses of
counsel for the Selling Holders and (iii) any out-of-pocket expenses of the
Selling Holders. In connection with any Piggyback Registration, the Selling
Holders shall pay, in addition to items (i) through (iii) of the preceding
sentence, registration and filing fees with the Commission and National
Association of Securities Dealers Inc., in proportion to the ratio that the
number of shares of Registrable Common Stock being registered for the account of
the Selling Holders bears to the aggregate number of shares of Common Stock
being included in the applicable registration statement.
ARTICLE 4
INDEMNIFICATION AND CONTRIBUTION
Section 4.01. Indemnification By The Corporation. The Corporation
agrees to indemnify and hold harmless each Selling Holder and its Affiliates and
their respective officers, directors, partners, stockholders, members,
employees, agents and representatives and each Person (if any) which controls a
Selling Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities, costs and expenses (including reasonable attorneys' fees)
caused by, arising out of resulting from or related to any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities (as amended or
supplemented if the Corporation shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by or contained in or based upon any
information furnished in writing to the Corporation by or on behalf of such
Selling Holder or any Underwriter expressly for use therein or by the Selling
Holder or Underwriter's failure to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto after the Corporation has
furnished Buyer or Underwriter with copies of the same.
Section 4.02. Indemnification by Buyer. Each Selling Holder agrees to
indemnify and hold harmless the Corporation, its officers and directors, and
each Person, if any, which controls the Corporation within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Corporation to each Selling Holder,
but only with reference to information furnished in writing by or on behalf of
such Selling Holder expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus.
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Section 4.03. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 4.01 or Section 4.02, such Person (the "INDEMNIFIED PARTY") shall
promptly notify the Person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and, in the written
opinion of counsel for the Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties
with the approval of the Indemnifying Party (which approval shall not be
unreasonably withheld). The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent (not to be unreasonably withheld), or if there be a
final judgment for the plaintiff, the Indemnifying Party shall indemnify and
hold harmless such Indemnified Parties from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment.
Section 4.04. Contribution. If the indemnification provided for in this
Article 4 is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities in respect of which indemnity is to be provided
hereunder, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall to the fullest extent permitted by law contribute to
the amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of such party in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Corporation,
a Selling Holder and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party and
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the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Corporation and each Selling Holder agrees that it would not be just
and equitable if contribution pursuant to this Section 4.04 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article 4, no Selling Holder shall be
required to contribute any amount in excess of the amount by which the net
proceeds of the offering (before deducting expenses) received by such Selling
Holder exceeds the amount of any damages which such Selling Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE 5
MISCELLANEOUS
Section 5.01. Participation In Underwritten Registrations. No Person
may participate in any underwritten registered offering contemplated hereunder
unless such Person (a) agrees to sell its securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements, (b) completes and executes all questionnaires, powers
of attorney, custody arrangements, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and this Exhibit B and (c) furnishes in writing to the Corporation
such information regarding such Person, the plan of distribution of the
Registrable Securities and other information as the Corporation may from time to
time request or as may be legally required in connection with such registration.
Section 5.02. Rule 144. The Corporation covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as the Holders may reasonably request
to the extent required from time to time to enable the Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of Buyer, the Corporation
will deliver to
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Buyer a written statement as to whether it has complied with such reporting
requirements.
Section 5.03. Holdback Agreements. Each Holder agrees, in the event of
an underwritten offering for the Corporation (whether for the account of the
Corporation or otherwise) not to offer, sell, contract to sell or otherwise
dispose of any Registrable Securities, or any securities convertible into or
exchangeable or exercisable for such securities, including any sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
offering), during the period commencing on the date of the filing of the
registration statement and ending 180 days after the effective date of the
registration statement for such underwritten offering (or, in the case of an
offering pursuant to an effective shelf registration statement pursuant to Rule
415, the pricing date for such underwritten offering).
Section 5.04. Termination. The registration rights granted under this
Agreement will terminate on December 31, 2006.
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