REGISTRATION RIGHTS AGREEMENT
between
DIGITAL TRANSMISSION SYSTEMS, INC.
and
WI-LAN INC.
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Dated: January 7, 2000
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TABLE OF CONTENTS
Page
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1. Background ............................................................. 1
2. Registration Under Securities Act, etc. ................................ 1
2.1 Registration on Request ........................................... 1
2.2 Piggyback Registration ............................................ 4
2.3 Shelf Registration ................................................ 5
2.4 Registration Procedures ........................................... 6
2.5 Underwritten Offerings ............................................ 9
2.6 Preparation; Reasonable Investigation ............................. 10
2.7 Limitations, Conditions and Qualifications to Obligations under
Registration Covenants ............................................ 11
2.8 Indemnification ................................................... 11
3. Definitions ............................................................ 14
4. Rule 144 and Rule 144A ................................................. 17
5. Amendments and Waivers ................................................. 17
6. Nominees for Beneficial Owners ......................................... 18
7. Notices ................................................................ 18
8. Assignment ............................................................. 18
9. Calculation of Percentage Interests in Registrable Securities .......... 19
10. No Inconsistent Agreements ............................................. 19
11. Remedies ............................................................... 19
12. Certain Distributions .................................................. 19
13. Severability ........................................................... 19
14. Entire Agreement ....................................................... 20
15. Headings ............................................................... 20
16. GOVERNING LAW .......................................................... 20
17. Counterparts ........................................................... 20
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REGISTRATION RIGHTS AGREEMENT, dated as of January 7, 2000, between
DIGITAL TRANSMISSION SYSTEMS, INC., a Delaware corporation (the "Company"), and
WI-LAN, INC., a corporation incorporated pursuant to the laws of the Province of
Alberta, Canada (the "Purchaser").
1. Background. Pursuant to (i) the Convertible Debenture Purchase
Agreement, dated December 29, 1999 (the "Convertible Debenture Purchase
Agreement"), between the Company and the Purchaser, the Purchaser has agreed to
purchase from the Company, and the Company has agreed to issue to the Purchaser,
(x) convertible debentures in an aggregate principal amount of U.S.$1,500,000
(the "First Convertible Debenture") and (y) an option to purchase convertible
debentures issued by the Company in an aggregate principal amount of up to U.S.
$1,500,000 (the "Convertible Debenture Option"); (ii) the Purchase Agreement,
dated December 29, 1999 (the "Purchase Agreement"), between Finova Mezzanine
Capital Inc., a Delaware corporation ("Finova"), and the Purchaser, the
Purchaser has agreed to purchase from Finova, and Finova has agreed to sell to
the Purchaser, (w) a convertible debenture issued by the Company and held by
Finova in an aggregate principal amount of U.S.$2,000,000 (the "Second
Convertible Debenture"), (x) an option to acquire any or all of the 1,314,333
shares of preferred stock, par value $0.01 per share (the "Preferred Stock"), of
the Company that are held by Finova (the "Preferred Stock Option") and (y)
warrants exercisable into 702,615 shares of Common Stock of the Company (the
"DTS Warrants"); and (iii) the Share Purchase Agreement, dated December 29, 1999
(the "Share Purchase Agreement"), between the Purchaser and MicroTel
International, Inc., a Delaware corporation ("MicroTel"), the Purchaser has
agreed to purchase from MicroTel, and MicroTel has agreed to sell to the
Purchaser, 1,738,159 shares of Common Stock of the Company.
2. Registration Under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time, or from time to time
following July 7, 2000, one or more holders (the "Initiating Holders") of 33% or
more of the Purchased Shares, may, upon written request, require the Company to
effect the registration under the Securities Act of any Registrable Securities
held by such Initiating Holders. The Company promptly will give written notice
of such requested registration to all other holders of Registrable Securities
who may join in such registration. The Company will use its best efforts to
effect, at the earliest possible date, the registration under the Securities
Act, including by means of an "evergreen" shelf registration on Form S-3 (or any
successor form) pursuant to Rule 415 under the Securities Act if so requested in
such request (but only if the Company is then eligible to use such a shelf
registration and if Form S-3 (or such successor form) is then available to the
Company), of
(i) the Registrable Securities that the
Company has been so requested to register by such Initiating Holders,
and
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(ii) all other Registrable Securities that
the Company has been requested to register by the holders thereof (such
holders together with the Initiating Holders hereinafter are referred
to as the "Selling Holders") by written request given to the Company
within 30 days after the giving of such written notice by the Company
of such registration, all to the extent requisite to permit the
disposition of the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 2.1, except to the
extent required by agreements with the Company in effect as of the date hereof,
no securities other than Registrable Securities shall be included among the
securities covered by such registration unless the Selling Holders of not less
than 51% of all Registrable Securities to be covered by such registration shall
have consented in writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under
this Section 2.1 shall be on such appropriate registration form of the
Commission as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been
effected:
(i) unless a registration statement with
respect thereto has become effective and remained effective in
compliance with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such
registration statement until the earlier of (x) 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
set forth in such registration statement and (y) 180 days after the
effective date of such registration statement, except with respect to
any registration statement filed pursuant to Rule 415 under the
Securities Act, in which case the Company shall use its best efforts to
keep such registration statement effective until such time as all of
the Registrable Securities cease to be Registrable Securities,
(ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or
court for any reason not attributable to the Selling Holders and has
not thereafter become effective, or
(iii) if the conditions to closing specified
in the underwriting agreement, if any, entered into in connection with
such registration are not satisfied or waived, other than by reason of
a failure on the part of the Selling Holders.
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(e) Selection of Underwriters. The underwriter or
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Selling Holders of more than 50% of each
class of Registrable Securities to be included in such registration and shall be
reasonably acceptable to the Company.
(f) Priority in Requested Registration. If the
managing underwriter of any underwritten offering shall advise the Company in
writing (and the Company shall so advise each Selling Holder of Registrable
Securities requesting registration of such advice) that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering within a price range acceptable to the
Selling Holders of 66-2/3% of the Registrable Securities requested to be
included in such registration, the Company, except as provided in the following
sentence, will include in such registration, to the extent of the number and
type that the Company is so advised can be sold in such offering, Registrable
Securities requested to be included in such registration, pro rata among the
Selling Holders requesting such registration on the basis of the estimated gross
proceeds from the sale thereof. If the total number of Registrable Securities
requested to be included in such registration cannot be included as provided in
the preceding sentence, holders of Registrable Securities requesting
registration thereof pursuant to Section 2.1, representing not less than 33-1/3%
of the Registrable Securities with respect to which registration has been
requested and constituting not less than 66- 2/3% of the Initiating Holders,
shall have the right to withdraw the request for registration by giving written
notice to the Company within 20 days after receipt of such notice by the Company
and, in the event of such withdrawal, such request shall not be counted for
purposes of the requests for registration to which holders of Registrable
Securities are entitled pursuant to Section 2.1 hereof. In connection with any
such registration to which this Section 2.1(f) is applicable, no securities
other than Registrable Securities shall be covered by such registration.
(g) Limitations on Registration on Request.
Notwithstanding anything in this Section 2.1 to the contrary, in no event will
the Company be required to (i) effect, in the aggregate, more than four
registrations pursuant to this Section 2.1, (ii) effect a registration pursuant
to this Section 2.1 within the six-month period occurring immediately subsequent
to the effectiveness (within the meaning of Section 2.1(d)) of a registration
statement filed pursuant to this Section 2.1 or within the 45 day period
preceding the expected filing date of a registration statement pursuant to this
Section 2.1, (iii) effect a registration pursuant to this Section 2.1 if less
than 15% of the Registrable Securities are requested to be included in such
registration or (iv) effect a registration pursuant to this Section 2.1 during
such time as a Shelf Registration (as defined herein) has been declared, and
remains, effective.
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(h) Listing. The Company shall have the Registrable
Securities subject to Section 2.1(a) included or listed, as the case may be, on
the OTC Bulletin Board, the NASDAQ Small Cap Market or another of the national
securities exchanges or automated quotation system.
(i) Expenses. The Company will pay all Registration
Expenses (except for any underwriting commissions or discounts) in connection
with any registration requested pursuant to this Section 2.1, except if the
request for registration is withdrawn other than pursuant to Section 2.1(f).
2.2 Piggyback Registration.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to register any shares of Common Stock or any
securities convertible into Common Stock under the Securities Act by
registration on any form other than Forms S-4 or S-8, whether or not for sale
for its own account, it will each such time give prompt written notice to all
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.2. Upon the written request of any such holder (a
"Requesting Holder") made as promptly as practicable and in any event within 30
days after the receipt of any such notice, the Company will use its reasonable
best efforts to effect the registration under the Securities Act of all
Registrable Securities that the Company has been so requested to register by the
Requesting Holders thereof; provided, however, that prior to the effective date
of the registration statement filed in connection with such registration,
immediately upon notification to the Company from the managing underwriter of
the price at which such securities are to be sold, if such price is below the
price that any Requesting Holder shall have indicated to be acceptable to such
Requesting Holder, the Company shall so advise such Requesting Holder of such
price, and such Requesting Holder shall then have the right to withdraw its
request to have its Registrable Securities included in such registration
statement; provided further, that if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to cause such
registration to be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1.
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(b) Priority in Piggyback Registrations. If the
managing underwriter of any underwritten offering shall inform the Company by
letter of its opinion that the number or type of Registrable Securities
requested to be included in such registration would materially adversely affect
such offering, and the Company has so advised the Requesting Holders in writing,
then the Company will include in such registration, to the extent of the number
and type that the Company is so advised can be sold in (or during the time of)
such offering, first, all securities proposed by the Company to be sold for its
own account, second such Registrable Securities requested to be included in such
registration pursuant to this Agreement, among such Requesting Holders and such
other Persons who have the right pursuant to agreements with the Company to
require that their securities be included in such registration, pro rata on the
basis of the estimated proceeds from the sale thereof and third, all other
securities proposed to be registered.
(c) Expenses. The Company will pay all Registration
Expenses in connection with any registration effected pursuant to this Section
2.2.
2.3 Shelf Registration.
(a) Filing and Effectiveness of Shelf Registration.
At the request of holders of 51% of the Registrable Securities, if the Company
is eligible to use Form S-3 (or such successor form) the Company shall file an
"evergreen" shelf registration statement solely with respect to the Registrable
Securities and pursuant to Rule 415 under the Securities Act (the "Shelf
Registration") on Form S-3 (or any successor form). The Company shall use its
best efforts to have the Shelf Registration declared effective as soon as
practicable after such filing, and shall, except at the request of holders of
51% of the Registrable Securities, use its best efforts to keep the Shelf
Registration effective and updated, from the date such Shelf Registration is
declared effective until such time as all of the Registrable Securities shall
cease to be Registrable Securities. The Company shall not be required to effect
a Shelf Registration if less than 15% of the Registrable Securities are
requested to be included in such registration or if the Company would be
required to have an additional audit completed in connection therewith.
(b) Supplements and Amendments; Expenses. The Company
shall supplement or amend, if necessary, the Shelf Registration, as required by
the instructions applicable to such registration form or by the Securities Act
and the Company shall furnish to the holders of the Registrable Securities to
which the Shelf Registration relates copies of any such supplement or amendment
prior to its being used and/or filed with the Commission. The Company shall pay
all Registration Expenses in connection with the Shelf Registration, whether or
not it becomes effective, and whether all, none or some of the Registrable
Securities are sold pursuant to the Shelf Registration. In no event shall the
Shelf Registration include securities other than Registrable Securities, unless
the holders of more than 66-2/3% of the Registrable Securities consent to such
inclusion.
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(c) Effective Shelf Registration Statement. A Shelf
Registration pursuant to this Section 2.3 shall not be deemed to have been
effected (i) unless a Shelf Registration has become effective and remained
effective in compliance with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities and until such time as all of
such Registrable Securities have been disposed of under the Shelf Registration
or (ii) if after it has become effective, the Shelf Registration is interfered
with by any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court and has not thereafter become
effective.
2.4 Registration Procedures. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1, 2.2, and 2.3, the Company will, as
expeditiously as possible:
(i) prepare and (within 90 days after the end
of the period within which requests for registration may be given to
the Company or in any event as soon thereafter as practicable) file
with the Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective; provided, however, that the
Company may discontinue any registration of its securities that are not
Registrable Securities (and, under the circumstances specified in
Section 2.2(a), its securities that are Registrable Securities) at any
time prior to the effective date of the registration statement relating
thereto;
(ii) prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement until the
earlier of (a) 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 set forth in such registration
statement and (b) 120 days after the effective date of such
registration statement, except with respect to any registration
statement filed pursuant to Rule 415 under the Securities Act if the
Company is eligible to file a registration statement on Form S-3, in
which case the Company shall use its best efforts to keep the
registration statement effective and updated, from the date such
registration statement is declared effective until such time as all of
the Registrable Securities cease to be Registrable Securities;
(iii) furnish to each seller of Registrable
Securities covered by such registration statement, such number of
conformed copies of such registration statement and of each such
amendment and supplement
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thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller may reasonably request;
(iv) use its best efforts (x) to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such States of the United States of America where an exemption is not
available and as the sellers of Registrable Securities covered by such
registration statement shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect and (z) to take any other
action that may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the
securities to be sold by such sellers, except that the Company shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (iv) be obligated to
be so qualified or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental
agencies or authorities as may be necessary in the opinion of counsel
to the Company and counsel to the seller or sellers of Registrable
Securities to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) in the case of an underwritten or "best
efforts" offering, furnish at the effective date of such registration
statement to each seller of Registrable Securities, and each such
seller's underwriters, if any, a signed counterpart of:
(x) an opinion of counsel for the
Company, dated the effective date of such registration
statement and, if applicable, the date of the closing under
the underwriting agreement, and
(y) a "comfort" letter signed by the
independent public accountants who have certified the
Company's financial statements included or incorporated by
reference in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the
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accountants' comfort letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' comfort letters
delivered to the underwriters in underwritten public offerings of
securities and, in the case of the accountants' comfort letter, such
other financial matters, and, in the case of the legal opinion, such
other legal matters, as the underwriters may reasonably request;
(vii) cause representatives of the Company to
participate in any "road show" or "road shows" reasonably requested by
any underwriter of an underwritten or "best efforts" offering of any
Registrable Securities;
(viii) notify each seller of Registrable
Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which they were made, and at the
request of any such seller promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an
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 in the light of the circumstances under which
they were made;
(ix) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and, if
required, make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to each such seller of Registrable
Securities a copy of any amendment or supplement to such registration
statement or prospectus;
(x) provide and cause to be maintained a
transfer agent and registrar (which, in each case, may be the Company)
for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such
registration; and
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(xi) use its best efforts to have all
Registrable Securities covered by such registration statement included
or listed, as the case may be, on the OTC Bulletin Board, the NASDAQ
Small Cap Market or any national securities exchange on which
Registrable Securities of the same class covered by such registration
statement are then included or listed, as the case may be, and, if no
such Registrable Securities are so included or listed, on the OTC
Bulletin Board, the NASDAQ Small Cap Market or any national securities
exchange on which the Common Stock is then included or listed.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to promptly furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing; provided, that any such
information or questionnaires shall be given or made by a seller of Registrable
Securities without representation or warranty of any kind whatsoever except
representations with respect to the identity of such seller, such seller's
Registrable Securities and such seller's intended method of distribution or any
other representations required by applicable law.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (viii) of this
Section 2.4, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of this
Section 2.4 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.5 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by
the underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under Section 2.1, the Company
will use its best efforts to enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to each such holder and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.8. The holders
of the Registrable Securities proposed to be sold by such underwriters will
reasonably cooperate with the Company in the negotiation of the underwriting
agreement. Such holders of Registrable Securities to be sold by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by,
10 and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. No
holder of Registrable Securities shall be required to make any representations
or warranties to, or agreements with, the Company other than representations,
warranties or agreements regarding the identity of such holder, such holder's
Registrable Securities and such holder's intended method of distribution or any
other representations required by applicable law.
(b) Piggyback Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters, subject to the provisions of Section 2.2(b).
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. No holder of Registrable Securities shall be
required to make any representations or warranties to, or agreements with, the
Company or the underwriters other than representations, warranties or agreements
regarding the identity of such holder, such holder's Registrable Securities and
such holder's intended method of distribution or any other representations
required by applicable law.
(c) Underwriting Discounts and Commission. The
holders of Registrable Securities sold in any offering pursuant to Section
2.5(a) or Section 2.5(b) shall pay all underwriting discounts and commissions of
the underwriter or underwriters with respect to the Registrable Securities sold
thereby.
(d) Holdback Arrangements. In connection with a
requested underwritten offering, the Holders shall agree to customary holdback
arrangements as may be reasonably requested by the underwriters of such
offering.
2.6 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of Registrable
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Securities registered under such registration statement, their underwriters, if
any, and their respective counsel the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such reasonable access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
2.7 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants. The Company shall be entitled to postpone, for a
reasonable period of time (but not exceeding 100 days), the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 if the Company determines, in its good faith judgment,
that such registration and offering would interfere with any material financing,
acquisition, corporate reorganization or other material transaction involving
the Company or any of its affiliates and promptly gives the holders of
Registrable Securities requesting registration thereof pursuant to Section 2.1
written notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the anticipated delay. If
the Company shall so postpone the filing of a registration statement, holders of
Registrable Securities requesting registration thereof pursuant to Section 2.1,
representing not less than 33-1/3% of the Registrable Securities with respect to
which registration has been requested and constituting not less than 66-2/3% of
the Initiating Holders, shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 2.1
hereof.
2.8 Indemnification.
(a) Indemnification by the Company. The Company will,
and hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 2.1, 2.2 or 2.3, each seller of any
Registrable Securities covered by such registration statement and each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, and their respective
directors, officers, partners, members, agents and affiliates against any
losses, claims, damages or liabilities, joint or several, to which such seller
or underwriter or any such director, officer, partner, member, agent, affiliate
or controlling person may become subject under the Securities Act or otherwise,
including, without limitation, the fees and expenses of legal counsel (including
those incurred in connection with any claim for indemnity hereunder), insofar as
such losses, claims, damages or liabilities (or actions or proceedings,
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whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse such seller or underwriter and each such
director, officer, partner, member, agent, affiliate and controlling Person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller or underwriter, as the case may be, specifically stating that it is
for use in the preparation thereof; and provided further, that the Company shall
not be liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securi ties or any other Person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such Person's failure to send or
give a copy of the final prospectus, as the same may have been supplemented or
amended, to the Person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, partner, member, agent or controlling person and
shall survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 2.8(a)) the Company,
and each director of the Company, each officer of the Company and each other
Person, if any, who participates as an underwriter in the offering or sale of
such securities and each other Person who controls the Company or any such
underwriter within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged
13
omission was made in reliance upon and in conformity with written information
furnished to the Company by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
the liability of such indemnifying party under this Section 2.8(b) shall be
limited to the amount of the net proceeds received by such indemnifying party in
the offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 2.8(a) or (b), such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 2.8, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that any indemnified party may, at
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an indemnified party is, or is reasonably likely to become, a party,
such indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such indemnified party, (a) there
are or may be legal defenses available to such indemnified party or to other
indemnified parties that are different from or additional to those available to
the Company or (b) any conflict or potential conflict exists between the Company
and such indemnified party that would make such separate representation
advisable; provided, however, that in no event shall the Company be required to
pay fees and expenses under this Section 2.8 for more than one firm of attorneys
in any jurisdiction in any one legal action or group of related legal actions.
No indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation or which requires action other than the
payment of money by the indemnifying party.
14
(d) Contribution. If the indemnification provided for
in this Section 2.8 shall for any reason be held by a court to be unavailable to
an indemnified party under Section 2.8(a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 2.8(a) or (b), the indemnified party
and the indemnifying party under Section 2.8(a) or (b) shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same,
including those incurred in connection with any claim for indemnity hereunder),
(i) in such proportion as is appropriate to reflect the relative fault of the
Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such prospective
sellers from the offering of the securities covered by such registration
statement; provided, however, that for purposes of this clause (ii), the
relative benefits received by the prospective sellers shall be deemed not to
exceed the amount of proceeds received by such prospective sellers. 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. Such prospective sellers'
obligations to contribute as provided in this Section 2.8(d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
Section 2.8 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.8 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
3. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
15
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, par value $.01 per share,
of the Company and each other class of capital stock of the Company into which
such stock is reclassified or reconstituted.
"Convertible Debenture Option" has the meaning set forth in the
recitals to this Agreement.
"Convertible Debenture Purchase Agreement" has the meaning set forth in
the recitals to this Agreement.
"DTS Warrants" has the meaning set forth in the recitals to this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any other similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include a reference to the comparable section, if any, of any such similar
Federal statute.
"Finova" has the meaning set forth in the recitals to this Agreement.
"First Convertible Debenture" has the meaning set forth in the recitals
to this Agreement.
"MicroTel" has the meaning set forth in the recitals to this Agreement.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and shall include any successor (by merger
or otherwise) of any such entity.
"Preferred Stock" has the meaning set forth in the recitals to this
Agreement.
"Preferred Stock Option" has the meaning set forth in the recitals to
this Agreement.
"Purchase Agreement" has the meaning set forth in the recitals to this
Agreement.
16
"Purchased Shares" means the total number of shares of Common Stock
(assuming the conversion or exercise of all convertible or exercisable
securities) (i) purchased by the Purchaser pursuant to the Share Purchase
Agreement and (ii) issued or issuable upon conversion or exercise of the First
Convertible Debenture, the Second Convertible Debenture, the convertible
debentures, if any, issued upon exercise of the Convertible Debenture Option,
the shares of Preferred Stock, if any, issued upon exercise of the Preferred
Stock Option and the DTS Warrants.
"Registrable Securities" means (i) any shares of Common Stock purchased
by the Purchaser pursuant to the Share Purchase Agreement, (ii) any shares of
Common Stock issued or issuable upon conversion or exercise of the First
Convertible Debenture, the Second Convertible Debenture, the convertible
debentures, if any, issued upon exercise of the Convertible Debenture Option,
the shares of Preferred Stock, if any, issued upon exercise of the Preferred
Stock Option and the DTS Warrants, (iii) any Related Registrable Securities, and
(iv) any shares of Common Stock owned by the Purchaser. As to any particular
Registrable Securities, once issued, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by Rule 144 (or any
successor provision) under the Securities Act and the purchaser thereof does not
receive "restricted securities" as defined in Rule 144, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not, in the opinion of counsel for
the holders, require registration of them under the Securities Act or (d) they
shall have ceased to be outstanding. All references to percentages of
Registrable Securities shall be calculated pursuant to Section 9.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration and filing fees, all fees of the OTC Bulletin Board, NASDAQ, other
national securities exchanges or the National Association of Securities Dealers,
Inc., all fees and expenses of complying with securities or blue sky laws, all
word processing, duplicating and printing expenses, messenger and delivery
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance, any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (excluding any underwriting discounts or commissions with respect to
the Registrable Securities) and the reasonable fees and expenses of one counsel
to the Selling Holders (selected by Selling Holders representing at least 50% of
the Registrable Securities covered by such registration). Notwithstanding the
foregoing, in the event the Company shall determine, in accordance with Section
2.2(a) or Section 2.7, not to register any securities with respect to which it
had given written notice of its intention to so
17
register to holders of Registrable Securities, all of the costs of the type (and
subject to any limitation to the extent) set forth in this definition and
incurred by Requesting Holders in connection with such registration on or prior
to the date the Company notifies the Requesting Holders of such determination
shall be deemed Registration Expenses.
"Related Registrable Securities" means, with respect to shares of
Common Stock issuable upon conversion or exercise of the First Convertible
Debenture, the Second Convertible Debenture, the convertible debentures issued
or issuable upon exercise of the Convertible Debenture Option, the shares of
Preferred Stock issued or issuable upon exercise of the Preferred Stock Option
and the DTS Warrants, any securities of the Company issued or issuable with
respect to such shares of Common Stock by way of a dividend or stock split or in
connection with a combina tion of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Second Convertible Debenture" has the meaning set forth in the
recitals to this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
"Share Purchase Agreement" has the meaning set forth in the recitals to
this Agreement.
4. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the provisions of (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, (b) Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or (c) any similar rules or regulations
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended with the
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of at least 50% of the Registrable
Securities affected by such amendment, action or omission to act. Each holder of
any Registrable Securities at the time or thereafter outstanding shall be bound
by any
18
consent authorized by this Section 5, whether or not such Registrable Securities
shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
7. Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(i) if to the Purchaser, addressed to it in the manner set
forth in the Convertible Debenture Purchase Agreement, or at such other address
as it shall have furnished to the Company in writing in the manner set forth
herein;
(ii) if to any other holder of Registrable Securities, at the
address that such holder shall have furnished to the Company in writing in the
manner set forth herein, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company; or
(iii) if to the Company, addressed to it in the manner set
forth in the Convertible Debenture Purchase Agreement, or at such other address
as the Company shall have furnished to each holder of Registrable Securities at
the time outstanding in the manner set forth herein.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered to a
courier, if delivered by overnight courier service; five Business Days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and permitted assigns and, with respect to
the Purchaser, any holder of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities
19
required in order to be entitled to certain rights, or take certain actions,
contained herein. Except by operation of law, this Agreement may not be assigned
by the Company without the prior written consent of the holders of a majority in
interest of the Registrable Securities outstanding at the time such consent is
requested.
9. Calculation of Percentage Interests in Registrable Securities. For
purposes of this Agreement, all references to a percentage of the Registrable
Securities shall be calculated based upon the number of shares of Registrable
Securities outstanding at the time such calculation is made, assuming the
conversion or exercise of all convertible securities, options or warrants into
shares of Common Stock.
10. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
Without limiting the generality of the foregoing, the Company will not hereafter
enter into any agreement with respect to its securities that grants, or modify
any existing agreement with respect to its securities to grant, to the holder of
its securities in connection with an incidental registration of such securities
higher priority to the rights granted to the Purchasers under Section 2.2(b).
11. Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
12. Certain Distributions. The Company shall not at any time make a
distribution on or with respect to the Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and such Registrable
Securities are not changed or exchanged) of securities of another issuer if
holders of Registrable Securities are entitled to receive such securities in
such distribution as holders of Registrable Securities and any of the securities
so distributed are registered under the Securities Act, unless the securities to
be distributed to the holders of Registrable Securities are also registered
under the Securities Act.
13. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being
20
intended that all of the rights and privileges of the Purchaser shall be
enforceable to the fullest extent permitted by law.
14. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
15. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed an original and all
of which taken together shall constitute one and the same instrument.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
DIGITAL TRANSMISSION SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
WI-LAN INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman and Chief Executive
