REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") dated November 25,
1998 among DUALSTAR TECHNOLOGIES CORPORATION, a Delaware corporation having its
principal office at 00-00 00xx Xxxxxx, Xxxx Xxxxxx Xxxx, Xxx Xxxx 00000 (the
"Corporation"); the stockholders of the Corporation set forth on SCHEDULE 1
hereto (the "Stockholders"); and TECHNOLOGY INVESTORS GROUP, LLC, a Delaware
limited liability company ("TIG").
WHEREAS, in connection with a Note Purchase Agreement dated the date
hereof (the "Note Purchase Agreement"), the Corporation has agreed to sell its
Subordinated Convertible Note to TIG (the "Note");
WHEREAS, the Corporation has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Act");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements contained herein, the parties agree as follows:
1. REGISTRATION RIGHTS.
1.1. PIGGYBACK REGISTRATION RIGHTS.
1.1.1. RIGHT TO PIGGYBACK. If the Corporation proposes to
register any shares of its common stock (or securities convertible into or
exchangeable or exercisable for common stock) (the "Common Stock") under the Act
(a "Proposed Registration") and the registration form to be used may be used for
the registration of the Registrable Securities as defined in Section 1.5.6 below
(a "Piggyback Registration"), the Corporation will give prompt written notice to
all holders of Registrable Securities of its intention to effect such a
registration and will, subject to Section 1.1.2 below, include in such Piggyback
Registration all Registrable Securities with respect to which the Corporation
has received written requests for inclusion therein within fifteen (15) days
after receipt of the Corporation's notice; provided that, the maximum number of
Registrable Securities that may be registered by TIG pursuant to any such
Piggyback Registration (the "TIG Maximum") shall not exceed the percentage of
TIG's total Registrable Securities equal to the percentage that the total number
of shares offered by the Corporation in the Proposed Registration bears to the
total number of issued and outstanding shares of the Corporation. In the case
of an underwritten offering, Registrable Securities with respect to which such
request for registration has been received will be registered by the Corporation
pursuant to this Section 1 on the same terms and subject to the same conditions
applicable to the stock to be sold by the Corporation or by other persons
selling under such Proposed Registration. Holders of Registrable Securities
will be entitled to include shares pursuant to this Section 1.1.1 in (A) demand
registrations of any shareholder of the Corporation, or (B) registrations of the
Corporation, other than a registration statement on Form S-4 or S-8.
1.1.2. PRIORITY ON PIGGYBACK REGISTRATIONS. If the managing
underwriter or underwriters advise the Corporation in writing that in its or
their opinion (with respect to which opinion, the Company shall act in good
faith), (i) the number of securities proposed to be sold in a Proposed
Registration exceeds the number which can be sold in such offering, the
Corporation will include in such registration the number of securities which, in
the opinion of such underwriter or underwriters, can be sold as follows: (A)
first, the shares of Common Stock the Corporation proposes to sell, (B) second,
the shares of Common Stock requested to be included in such registration
pursuant to a demand registration right, if any, (C) third, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of Registrable Securities to be included therein, and (D) fourth, other
shares of Common Stock requested to be included in such registration, or (ii) it
is inadvisable to include any Registrable Securities in such a Proposed
Registration, then no Registrable Securities shall be included in any such
registration.
1.1.3 REGISTRATION ON REQUEST. If, pursuant to Section 1.1.2
above, the TIG Maximum is reduced by more than twenty-five percent (25%),
thereafter, TIG shall have the right to require the Corporation upon its written
request to effect the registration of any remaining Registrable Securities owned
by TIG ("Demand Registration"); provided that, (i) the Corporation shall not be
obligated to effect more than one Demand Registration; (ii) the Corporation
shall be entitled to postpone for a reasonable period (but not exceeding 135
days) the filing of any registration statement otherwise required to be filed
pursuant to this Section 1.1.3 if the Corporation determines, in its sole
discretion, that such registration or offering pursuant thereto could interfere
with any financing, acquisition, corporate reorganization, or other material
transaction or event involving the Corporation, or would require premature
disclosure thereof; and (iii) the Corporation shall not be required to file any
such registration statement at any time when the Corporation would be required
to undergo an interim audit or to prepare financial statements other than the
regular quarterly or annual statements in order to comply with the requirements
of such registration statement with respect to financial information.
1.1.4. SELECTION OF UNDERWRITERS. If any Proposed Registration is
an underwritten offering, the Corporation will select a managing underwriter or
underwriters to administer the offering.
1.2. REGISTRATION PROCEDURES. With respect to any Piggyback
Registration or Demand Registration, the Corporation will, subject to Sections
1.1.2 and 1.1.3, as expeditiously as practicable:
1.2.1. prepare and file with the Commission a Registration
Statement which includes the Registrable Securities and use its best efforts to
cause such Registration Statement to become effective;
1.2.2. prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration
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Statement effective for a period of not less than three (3) months (or such
shorter period which will terminate when all Registrable Securities covered
by such Registration Statement have been sold or withdrawn, but not prior to
the expiration of the forty-day period referred to in Section 4(3) of the Act
and Rule 174 thereunder, if applicable); cause the Prospectus to be
supplemented by any required Prospectus supplement; and cause such supplement
to be filed pursuant to Rule 424 under the Act;
1.2.3. furnish to any person holding Registrable Securities
included in such Registration Statement and the underwriter or underwriters, if
any, without charge, at least one copy of the Registration Statement and any
post-effective amendment thereto, upon request, and such number of conformed
copies thereof and such number of copies of the Prospectus (including the
preliminary Prospectus) and any amendments or supplements thereto, and any
document incorporated by reference therein, as such person or underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities being sold by such person, (it being understood that the Corporation
consents to the use of the Prospectus and any amendment or supplement thereto by
each person holding Registrable Securities covered by the Registration Statement
and the underwriter or underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto);
1.2.4. notify each person holding Registrable Securities included
in such Registration Statement, at any time when a Prospectus relating thereto
is required to be delivered under the Act, when the Corporation becomes aware of
the happening of any event as a result of which the Prospectus included in such
Registration Statement (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein not misleading and, as promptly as practicable thereafter, prepare and
file with the Commission and furnish a supplement or amendment to such
Prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such Prospectus will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
1.2.5. make generally available to its security holders an
earnings statement satisfying the provisions of Section 11(a) of the Act no
later than ninety (90) days after the end of the twelve-month period beginning
with the first month of the Corporation's first fiscal quarter commencing after
the effective date of the Registration Statement, which statement shall cover
said twelve-month period; and
1.2.6. use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement.
Each holder of Registrable Securities, upon receipt of any notice from
the Corporation of the happening of any event of the kind described in Section
1.2.4, will forthwith discontinue disposition of the Registrable Securities
until such holder's receipt of the copies of the
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supplemented or amended Prospectus contemplated by Section 1.2.4 or until it
is advised in writing (the "Advice") by the Corporation that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus,
and, if so directed by the Corporation, such holder will, or will request the
managing underwriter or underwriters, if any, to deliver to the Corporation
(at the Corporation's expense) all copies, other than permanent file copies
then in such holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Corporation shall give any such notice, the time periods mentioned in Section
1.2.2 shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 1.2.4 or the Advice.
1.3. RESTRICTIONS ON PUBLIC SALE. Each person holding Registrable
Securities included in a Registration Statement, if requested by the managing
underwriter or underwriters of any underwritten Proposed Registration, agrees
not to effect any public sale or distribution of Registrable Securities under
the Act during the five (5) business days prior to and during the sixty-day
period beginning on the effective date of such Proposed Registration (except as
part of such Proposed Registration) (or such earlier time as all the shares of
Common Stock included in such Registration Statement have been disposed of
pursuant thereto).
1.4. REGISTRATION EXPENSES. All of the costs and expenses of each
registration hereunder will be borne by the Corporation, including the fees and
expenses of counsel and accountants for the Corporation, and all other costs and
expenses of the Corporation incident to the preparation, printing and filing
under the Act of the Registration Statement (and all amendments and supplements
thereto) and furnishing copies thereof and of the Prospectus included therein,
and the costs and expenses incurred by the Corporation in connection with the
qualification of the Registrable Securities under the state securities or
"blue-sky" laws of various jurisdictions; provided that, the Corporation shall
not bear costs and expenses of any holders of Registrable Securities, including,
but not limited to, underwriters' commissions, brokerage fees, transfer taxes,
transaction fees, or the fees and expenses of any counsel, accountants or other
representatives retained by any holder.
1.5. INDEMNIFICATION.
1.5.1. INDEMNIFICATION BY THE CORPORATION. The Corporation agrees
to indemnify, to the full extent permitted by law, each holder of Registrable
Securities, its officers and directors and each person who controls such holder
(within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act), against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of a material fact contained in
any Registration Statement, Prospectus or preliminary Prospectus or any omission
or alleged omission to state therein a material fact necessary to make the
statements therein (in the case of the Prospectus or any preliminary Prospectus,
in light of the circumstances under which they were made) not
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misleading, except insofar as the same are caused by or contained in any
information with respect to such holder furnished in writing to the
Corporation by or on behalf of such holder for use therein or by such
holder's failure to deliver a copy of the Registration Statement or
Prospectus or any amendments or supplements thereto after the Corporation has
furnished such holder with a sufficient number of copies of the same.
1.5.2. INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with any Registration Statement in which a holder of Registrable
Securities is participating, each such holder will furnish to the Corporation in
writing such information and affidavits with respect to such holder as the
Corporation reasonably requests for use in connection with any Registration
Statement or Prospectus and agrees to indemnify, to the full extent permitted by
law, the Corporation, its directors and officers and each person who controls
the Corporation (within the meaning of either Section 15 of the Act or Section
20 of the Exchange Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact necessary to
make the statements in the Registration Statement or Prospectus or preliminary
Prospectus (in the case of the Prospectus or any preliminary Prospectus, in
light of the circumstances under which they were made) not misleading, to the
extent that such untrue statement or omission is contained in any information or
affidavit with respect to such holder so furnished in writing by or on behalf of
such holder for inclusion in any Prospectus or Registration Statement. The
Corporation shall be entitled to receive indemnification from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information with respect to such persons so furnished in writing by
such persons specifically for inclusion in any Prospectus or Registration
Statement.
1.5.3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person
entitled to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification,
and (ii) unless in the indemnifying party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying parties with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party.
Whether or not such defense is assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent. No indemnifying party will consent to entry of any
judgment or enter into any settlement which 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 of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of the indemnifying party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay fees and expenses of such
additional counsel or counsels.
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1.5.4. CONTRIBUTION. If for any reason the indemnification
provided for in Sections 1.5.2 and 1.5.3, respectively, is unavailable to an
indemnified party, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable consideration. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue and alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 1.5.3, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 1.5.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
1.5.5. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such holder (i) agrees to sell its Registrable Securities on
the basis provided in any underwriting arrangements, and (ii) completes and
executes all questionnaires, powers of attorney, underwriting agreements and
other documents customarily required under the terms of such underwriting
arrangements.
1.5.6. DEFINITIONS. "Registrable Securities" means the shares of
DualStar Technologies Corporation Common Stock held by the Stockholders or
issued upon conversion of the Note and held by TIG, only so long as any share of
Common Stock continues to be a "Restricted Security." A share shall be deemed
to be a Restricted Security (i) until such share has been effectively registered
under the Act, or (ii) unless such share may be sold pursuant to Rule 144(k) (or
any similar provision then in force) under the Act.
1.5.7. AMENDMENTS AND WAIVERS. Nothing contained herein shall
alter, modify or affect anything contained in the Stockholders Agreement dated
the date hereof. The provisions of this Section 1, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers of or
consents to departures from the provisions hereof may not be given unless the
Corporation has obtained the written consent of entities or individuals holding
more than fifty percent (50%) of the outstanding Registrable Securities.
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1.5.8. TERMINATION. This Section 1 shall continue in full force
and effect until none of the shares are Registrable Securities; PROVIDED,
HOWEVER, that the rights set forth in this Section 1 shall only inure to the
benefit of the Stockholders and TIG.
2. MISCELLANEOUS.
2.1. GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York.
2.2. CAPTIONS. The Section captions used herein are for reference
purposes only, and shall not in any way affect the meaning or interpretation of
this Agreement.
2.3. PUBLICITY. None of the parties hereto shall issue any press
release or make any other public statement, in each case relating to or
connected with or arising out of this Agreement or the matters contained herein,
without obtaining the prior approval of the other parties to the contents and
the manner of presentation and publication thereof, except such reports or other
notices that the party issuing or making same has been advised by counsel are
required pursuant to applicable law or regulation.
2.4. NOTICES. Any notice required hereunder shall be in writing and
shall be sufficiently given if delivered or sent by reputable overnight courier
or facsimile transmission (in each case with evidence of receipt), addressed to
the Corporation at its principal office first set forth above, and to the
Stockholders and TIG, respectively, at the addresses set forth on SCHEDULE 1
hereto. Any party may change such address by like notice. If sent by courier,
such notice shall be deemed to have been given as of the next business day after
it was deposited with the courier service and if sent by facsimile such notice
shall be deemed to have been given when transmitted.
2.5. PARTIES IN INTEREST. Subject to Sections 1.5.7 and 1.5.8 above,
this Agreement shall not be assignable or transferable by any of the parties.
2.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
2.7. ENTIRE AGREEMENT. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
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IN WITNESS WHEREOF, each of the Corporation and TIG has caused this
Agreement to be executed by its officer thereunto duly authorized, and each of
the Stockholders has executed this Agreement, all as of the day and year first
above written.
TECHNOLOGY INVESTORS
GROUP, LLC DUALSTAR TECHNOLOGIES CORPORATION
By: /s/ Xxxx Xxxxxx By: /s/ Elven X. Xxxxxx
------------------------ ----------------------------
Name: Xxxx Xxxxxx Name: Elven X. Xxxxxx
Title: Manager Title: Chairman
/s/ Xxxxxxx Xxxxx
-------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxxx Xxxxxxx
-------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
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SCHEDULE 1
NAMES AND ADDRESSES
1. STOCKHOLDERS
Xxxxxxx Xxxxx
0000 Xxx Xxxxxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxx
00 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
2. Technology Investors Group, LLC
00 Xxxxxxx Xxxxxx
Xxx Xxxxxxxx, Xxx Xxxx 00000
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