EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of July 20,
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2001, by and between Notify Technology Corporation, a California corporation
(the "Company"), and each of the investors identified on Schedule 1 hereto (as
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such schedule may be updated from time to time) and signatory hereto (each, an
"Investor," and collectively, the "Investors") or their permitted assigns (each,
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a "Holder" and collectively, the "Holders").
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WHEREAS, this Agreement is being entered into in connection with the
financing extended by the Investors to the Company (the "Financing") in which,
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pursuant to the terms of subscription agreements entered into between the
Company and each Investor (collectively, the "Subscription Agreement"), each
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Investor will receive (a) shares of the Company's Series A Convertible
Redeemable Preferred Shares, par value $0.001 per share (the "Preferred
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Shares"), that is convertible into shares of common stock, par value $0.001 per
share (the "Common Stock"), of the Company (the "Conversion Shares"), and (b)
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warrants ("Preferred Warrants") to purchase shares of Common Stock (the "Warrant
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Shares"); and
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WHEREAS, the terms of the Preferred Shares and Preferred Warrants
contemplate that the Conversion Shares and the Warrant Shares, as the case may
be, are entitled to registration rights.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties and covenants and agreements contained
herein, the Company and each of the Investors hereto, intending to be legally
bound hereby agree as follows:
I. DEFINITIONS
The following additional definitions shall apply for purposes of this
Agreement:
1.1 The term "Holder" means an Investor and any transferee or
assignee thereof to whom an Investor assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in accordance
with Section 6.2.
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1.2 The term "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a government or any department or agency thereof.
1.3 The term "Prospectus" means the Prospectus included in any
Registration Statement (including without limitation, a Prospectus that
discloses information previously omitted from a Prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the 1933 Act), as amended or supplemented by any amendment or Prospectus
supplement, including post-effective amendments, and all materials incorporated
by reference or explicitly deemed to be incorporated by reference in such
Prospectus.
1.4 The terms "Register," "Registered," and "Registration" refer to
a registration effected by preparing and filing one or more Registration
Statements, (as defined below) or
similar document in compliance with the Securities Act of 1933, as amended (the
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"1933 Act"), and Rule 415 thereunder or any successor rule providing for the
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offering for resale of securities on a continuous or delayed basis ("Rule 415"),
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and the declaration or ordering of effectiveness of such Registration Statement
or document by the United States Securities and Exchange Commission (the "SEC").
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1.5 The term "Registrable Securities" means (a) the Warrant Shares
and any other securities of the Company issuable upon the exercise of the
Warrants, (b) the Conversion Shares, and any other securities of the Company,
issued or issuable upon the conversion of the Preferred Shares, and (c) any
shares of capital stock or other securities issued or issuable with respect to
the Warrant Shares or the Preferred Shares, as a result of any stock split,
stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on the exercises of the Preferred Warrants or
conversion of the Preferred Shares; provided, however, that any securities
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deemed Registrable Securities in accordance herewith shall cease to be
Registrable Securities (i) upon the sale of such securities pursuant to a
Registration Statement, (ii) upon the sale of such securities pursuant to Rule
144 promulgated under the 1933 Act, (iii) on the date on which such securities
become available for sale under Rule 144(k), or (iv) on the date when such
Holder may sell all Registrable Securities held by such Holder in a three (3)
month period in the public markets pursuant to Rule 144.
1.6 The term "Registration Statement" means a registration
statement on Form S-1 or Form S-3 or any similar or successor form then
appropriate for or applicable to the offer and sale of the Registrable
Securities and filed under the 1933 Act.
II. REGISTRATION
2.1 Right to Include Registrable Stock. If the Company proposes to
register any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the offer and sale of non-convertible, non-exchangeable debt
securities or a registration on Form S-4 or Form S-8, or any successor or
similar forms) (a "Piggyback Registration"), whether for the account of the
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Company or otherwise, it will promptly, but not later than thirty (30) days
before the anticipated date of filing such Registration Statement, give written
notice to each Holder. Upon the written request of any of the Holders made
within fifteen (15) days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holders and the intended method of distribution thereof), the Company will use
its best efforts to effect the registration under the 1933 Act of all
Registrable Securities which the Company has been requested to register by any
of the Holders in accordance with the intended methods of distribution specified
in such request; provided, however, that (a) if, at any time after giving
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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 determines for any reason not to proceed with such
registration, the Company may, at its election, give written notice of such
determination to the Holders and, thereupon, will be relieved of its obligation
to register any Registrable Securities in connection with such registration, and
(b) in case of a determination by the Company to delay registration of its
securities, the Company will be permitted to delay the registration of
Registrable Securities for the same period as the delay in
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registering such other securities; provided, however, that the provisions of
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this Article II will not be deemed to limit or otherwise restrict the rights of
the Holders under Article III.
2.2 Mandatory Registration. Notwithstanding the foregoing, the
Company shall prepare and file with the SEC on or before the three (3) month
anniversary of the Initial Closing (as defined in the Agency Agreement), (the
"Filing Deadline"), a Registration Statement or Registration Statements, as
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necessary, on Form S-3 covering the resale of all of the Holders' Registrable
Securities. In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration,
subject to the provisions of Section 2.5. The Company shall use its best efforts
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to cause such Registration Statement to be declared effective by the SEC on or
before the date which is the three (3) month anniversary of the Filing Deadline
(the "Effectiveness Deadline").
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2.3 Priority. If the managing underwriter for a registration (other
than with respect to a Registration Statement filed pursuant to Section 2.2)
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involving an underwritten offering advises the Company in writing that, in its
opinion, the number of securities of the Company (including without limitation,
Registrable Securities) requested to be included in such registration by the
holders thereof exceeds the number of securities of the Company (the "Sale
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Number") which can be sold in an orderly manner in such offering within a price
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range acceptable to the Company, the Company will include (a) first, all
securities of the Company that the Company proposes to register for its own
account, and (b) second, to the extent that the number of securities of the
Company to be included by the Company is less than the Sale Number, a number of
the Registrable Securities equal to the number derived by multiplying (i) the
difference between the Sale Number and the securities proposed to be sold by the
Company, and (ii) a fraction the numerator of which is the number of Registrable
Securities originally requested to be registered by the Holders, and the
denominator of which shall be the aggregate number of all securities requested
to be registered by all holders of the Company's securities (other than
securities being registered by the Company itself); provided, however, that
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notwithstanding anything to the contrary provided herein or elsewhere, in
connection with any underwritten offering, the number of Registrable Securities
included in any such registration and offering shall not be reduced below an
amount equal to twenty-five (25%) percent of the total shares of capital stock
included in such registration. The Company hereby agrees that it will not grant
registration rights to any other holder that are more favorable to such holder
than the registration rights granted hereunder.
2.4 Legal Counsel. Subject to Section 6.1 hereof, the Investors
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holding a majority of the Registrable Securities shall have the right to select
one legal counsel to review and oversee any offering pursuant to this Article II
("Legal Counsel"), which shall be Gusrae, Xxxxxx & Xxxxx, PLLC or such other
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counsel as thereafter designated by the holders of a majority of the Registrable
Securities. The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations under this Agreement.
2.5 Ineligibility of Form S-3. In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (a) register the resale of the Registrable
Securities on another appropriate form, and (b) undertake to register the resale
of the Registrable Securities on Form S-3 as soon as such form is available;
provided, however, that the Company shall maintain the effectiveness of the
Registration Statement then in
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effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.
2.6 Effect of Failure to File and Obtain and Maintain Effectiveness
of Registration Statement. If (a) a Registration Statement covering all the
Registrable Securities and required to be filed by the Company pursuant to this
Agreement is not declared effective by the SEC on or before the applicable
Effectiveness Deadline; (b) on any day after the Registration Statement has been
declared effective by the SEC, sales of all the Registrable Securities required
to be included on such Registration Statement cannot be made pursuant to the
Registration Statement (including without limitation, because of a failure to
keep the Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to the Registration Statement, or to
register sufficient shares of Common Stock), or (c) the Company fails at any
time to fully comply with the rules and regulations of the applicable Nasdaq
market and the Nasdaq staff notifies the Company of such non-compliance,
including the standards for continued listing of the Company's Common Stock on
the applicable Nasdaq market, then the Company shall be in breach of this
Agreement (such a breach being a "Registration Statement Default"). As partial
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relief for any Registration Statement Default and for the damages to any Holder
by reason of any such delay in or reduction of its ability to sell the
Registrable Securities, the remedy shall be as provided for by and in the
Preferred Warrants and the Certificate of Designation (which remedy shall not be
exclusive of any other remedies available at law or in equity). Notwithstanding
the foregoing, the Company shall have thirty (30) days to cure a Registration
Statement Default after the date of its occurrence and to deliver a written
statement to the holders of Registrable Securities certifying that such
Registration Statement Default has been so cured; and if such cure is timely
effected and such statement is timely delivered, the Company shall not be
subject to the remedies for a Registration Statement Default.
2.7 Sufficient Number of Shares Registered. In the event the number
of shares available under a Registration Statement filed pursuant to Section 2.2
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is insufficient to cover all of the Registrable Securities which such
Registration Statement is required to cover, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover at least 100% of the
Registrable Securities (based on the market price of the Common Stock on the
trading day immediately preceding the date of filing of such amendment or new
Registration Statement), in each case, as soon as practicable, but in any event
not later than fifteen (15) business days after the necessity therefor arises.
The Company shall cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if the number of Registrable Securities issued or
issuable upon conversion of the Preferred Shares and exercise of the Preferred
Warrants covered by such Registration Statement is greater than the number of
shares of Common Stock available for resale under the Registration Statement to
cover shares issued or issuable upon conversion of the Preferred Shares and
exercise of the Preferred Warrants. For purposes of the calculation set forth in
the foregoing sentence, any restrictions on the conversion of the Preferred
Shares and the exercise of the Preferred Warrants shall be disregarded and such
calculation shall assume that the Preferred Shares is then convertible into
shares of Common Stock at the then prevailing Conversion Price (as defined in
the Company's Certificate of Designation for the Preferred Shares) and the
Preferred Warrants are then exercisable for shares
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of Common Stock at the then prevailing applicable Exercise Price (as defined in
the applicable Preferred Warrant).
III. OBLIGATIONS OF THE COMPANY
Whenever required under this Agreement to effect the registration of
any Registrable Securities, the Company will, as expeditiously as possible,
fulfill the following obligations:
3.1 Registration Statement. The Company shall promptly prepare and
file with the SEC a Registration Statement with respect to the Registrable
Securities (but in no event later than the Filing Deadline) and use its best
efforts to cause such Registration Statement to become effective (but in no
event later than the applicable Effectiveness Deadline). The Company will keep
such Registration Statement effective for up to three (3) years from its
effective date, but not in any event after such securities cease being
Registrable Securities (the "Registration Period"). The Registration Statement
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(including any amendments or supplements thereto and Prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading. The Company shall submit to the SEC, within three (3) business days,
unless Legal Counsel withholds approval as provided in Section 3.3, after the
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Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than 2
business days after the submission of such request.
3.2 Registration Statement Amendments and Supplements. The Company
shall prepare and file with the SEC such amendments and supplements to such
Registration Statement and the Prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such
Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3.2) by reason of the Company filing a
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report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company shall
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have incorporated such report by reference into the Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement the Registration Statement.
3.3 Legal Counsel. The Company shall (a) permit Legal Counsel to
review and comment upon (i) those sections of a Registration Statement relating
to the Investors at least five (5) business days prior to its filing with the
SEC, and (ii) all other sections of a Registration Statement and all amendments
and supplements to all Registration Statements, which are applicable to the
Investors (except for Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB, Current Reports on Form 8-K and any similar or successor report and
registration statements on Form S-8) at least four (4) business days prior to
their filing with the SEC, and
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(b) not file any document in a form to which Legal Counsel reasonably objects.
The Company shall not submit a request for acceleration of the effectiveness of
a Registration Statement or any amendment or supplement thereto without the
prior approval of Legal Counsel, which consent shall not be unreasonably
withheld. The Company shall furnish to Legal Counsel, without charge, (a) any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (b) promptly after the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules and
all exhibits and (c) upon the effectiveness of any Registration Statement, one
copy of the Prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to this Article
III.
3.4 Notification. As promptly as practicable give notice to the
Holders and Legal Counsel (a) when the Registration Statement or any post-
effective amendment has been declared effective, (b) of the issuance by the SEC
or any other federal or state governmental authority of any stop order or other
suspension of the effectiveness of the Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceedings for that
purpose, (c) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (d) of the occurrence of (but
not the nature of or details concerning) a Material Event (defined in Section
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3.7), and (e) of the determination by the Company that a post-effective
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amendment to the Registration Statement will be filed with the SEC, which notice
may, at the discretion of the Company (or as required pursuant to Section 3.7),
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state that it constitutes a Deferral Notice, in which event the provisions of
Section 3.7 shall apply.
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3.5 Prospectuses. The Company shall deliver to each Holder in
connection with any sale of Registrable Securities pursuant to the Registration
Statement, without charge, as many copies of the Prospectus or Prospectuses
relating to such Registrable Securities (including each preliminary Prospectus)
and any amendment or supplement thereto as such Holder may reasonably request,
and the Company hereby consents (except during such periods that a Deferral
Notice is outstanding and has not been revoked) to the use of such Prospectus or
each amendment or supplement thereto by each Holder in connection with any
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto in the manner set forth therein.
3.6 Blue Sky Laws. The Company shall, prior to any public offering
of the Registrable Securities pursuant to the Registration Statement, register
or qualify or cooperate with the Holders in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or "Blue Sky"
laws of such jurisdictions within the United States as any Holder reasonably
requests in writing, and keep each such registration or qualification (or
exemption therefrom) effective during the Registration Period in connection with
such Holder's offer and sale of Registrable Securities pursuant to such
registration or qualification (or exemption therefrom) and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
Registration Statement
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and the related Prospectus; provided, however, that the Company will not be
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required to (a) qualify as a foreign corporation or as a dealer in securities in
any jurisdiction where it would not otherwise be required to qualify but for
this Agreement, or (b) take any action that would subject it to general service
of process in suits or to taxation in any such jurisdiction where it is not then
so subject. The Company shall promptly notify Legal Counsel and each Holder who
holds Registrable Securities of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification of any of
the Registrable Securities for sale under the securities or "Blue Sky" laws of
any jurisdiction in the United States or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
3.7 Stop Orders; Material Events. The Company shall use
commercially reasonable efforts to prevent the issuance of any stop order or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction. Upon (a) any issuance by the SEC of a stop order or other
suspension of the effectiveness of the Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction despite the Company's commercially reasonable efforts to prevent
such stop order or suspension, or the initiation of proceedings with respect to
the Registration Statement under Section 8(d) or Section 8(e) of the 1933 Act;
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(b) the occurrence of any event or the existence of any fact (a "Material
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Event") as a result of which the Registration Statement shall contain any untrue
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statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any Prospectus shall contain any 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; or (c) the occurrence or existence of any pending
corporate development, public filing with the SEC or other similar event with
respect to the Company that, in the reasonable discretion of the Company, makes
it appropriate to suspend the availability of the Registration Statement and the
related Prospectus, the Company shall (i) in the case of clause (b) above,
subject to the next sentence, as promptly as practicable prepare and file, if
necessary pursuant to applicable law, a post-effective amendment to such
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document that would
be incorporated by reference into such Registration Statement and Prospectus so
that such Registration Statement does not contain any 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 not misleading, and such Prospectus
does not contain any 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, in the case of a post-effective amendment to a Registration
Statement, subject to the next sentence, use its reasonable efforts to cause it
to be declared effective as promptly as is practicable; and (ii) give notice to
the Holders and Legal Counsel that the availability of the Registration
Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral
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Notice, each Holder agrees not to sell any Registrable Securities pursuant to
the Registration Statement until such Holder's receipt of copies of the
supplemented or amended Prospectus provided for in clause (i) above, or until it
is advised in writing by the Company that the Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. The Company will use
commercially reasonable efforts to ensure that the use of the Prospectus may be
resumed (x) in
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the case of clause (a) above, as promptly as is practicable, (y) in the case of
clause (b) above, as soon as, in the sole judgment of the Company, public
disclosure of such Material Event would not be prejudicial to or contrary to the
interests of the Company or, if necessary to avoid unreasonable burden or
expense, as soon as practicable thereafter, and (z) in the case of clause (c)
above, as soon as, in the discretion of the Company, such suspension is no
longer appropriate (such period, during which the availability of the
Registration Statement and any Prospectus is suspended being a "Deferral
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Period"). Notwithstanding the foregoing, no Deferral Period instituted pursuant
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to clause (b) or clause (c) above shall last for a period of time in excess of
thirty (30) days from the date of the Material Event or other occurrence or
state of facts on account of which such Deferral Period is instituted, and the
Company shall institute no more than one (1) Deferral Period in the aggregate
pursuant to clause (b) or clause (c) above in any consecutive twelve (12) month
period. The Company shall use commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
or the lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any jurisdiction
in which they have been qualified for sale, in either case as promptly as
practicable.
3.8 Listing or Quotation. The Company shall either (a) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (b) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or the Nasdaq SmallCap
Market, or, if the Company is unsuccessful in satisfying the preceding clauses
(a) or (b), (c) the Company shall secure the inclusion for quotation on The
American Stock Exchange, Inc. or if it is unable to, the NASD Bulletin Board for
such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two (2) market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
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to such Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3.8.
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3.9 Access to Information. The Company shall make documents, files,
books, records, officers, directors and employees of the Company reasonably
available to any Holder, Legal Counsel and one firm of accountants or other
agents retained by the Holders and provided the underwriters, if any, shall have
agreed to be bound by the provisions of this Section 3.9, to such underwriters
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(collectively, the "Inspectors"), and make such other accommodations as are
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reasonably necessary for the Inspectors, if any, to perform a due diligence
review of the Company; provided, however, that all such information
("Confidential Information") will be kept confidential and not utilized by the
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Inspectors except as contemplated herein and except as required by law or court
order. The term "Confidential Information" does not include information that (a)
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is already in possession of such other party (other than that which is subject
to another confidentiality agreement), (b) becomes generally available to the
public, or (c) becomes available on a non-confidential basis from a source other
than the Company. Each Holder agrees that it shall, upon learning that
disclosure of such Confidential Information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
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appropriate action to prevent disclosure of, or to obtain a protective order
for, the information deemed confidential.
3.10 Non-Disclosure. The Company shall hold in confidence and not
make any disclosure of information concerning any Holder provided to the Company
unless (a) disclosure of such information is necessary to comply with federal or
state securities laws, (b) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (c)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, (d) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement, or (e) such Holder consents to the form and content of any such
disclosure. The Company agrees that it shall, upon learning that disclosure of
such information concerning any Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
3.11 Certificates. The Company shall cooperate with each of the
Holders who hold Registrable Securities being offered, and to the extent
applicable, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legend) representing the Registrable Securities to
be offered pursuant to a Registration Statement and enable such certificates to
be in such denominations or amounts, as the case may be, as the Holders may
reasonably request and registered in such names as the Holders may request.
3.12 Transfer Agent and Registrar. The Company shall provide a
transfer agent and registrar of all such Registrable Securities not later than
the effective date of such Registration Statement.
3.13 Amendments and Supplements Requested by Holders. If requested
by any Holder, the Company shall (a) as soon as practicable incorporate in a
Prospectus supplement or post-effective amendment such information as such
Holder requests to be included therein relating to the sale and distribution of
Registrable Securities, including without limitation, information with respect
to the number of Registrable Securities being offered or sold, the purchase
price being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering, (b) as soon as practicable make all
required filings of such Prospectus supplement or post-effective amendment after
being notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment, and (c) supplement or make amendments to any
Registration Statement if reasonably requested by any Holder of such Registrable
Securities.
3.14 Additional Registrations and Approvals. The Company shall use
its best efforts to cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
3.15 Earnings Statements. The Company shall make generally
available to its security holders as soon as practical, but not later than
ninety (90) days after the close of the
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period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 0000 Xxx) covering a twelve (12) month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement, provided that the
Company shall be deemed to satisfy its obligations under this Section 3.15 if it
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timely makes all required filings under the 1934 Act and does not change its
fiscal year.
3.16 SEC Compliance. The Company shall otherwise comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
3.17 Confirmation of Registration. Within two (2) business days after a
Registration Statement which covers applicable Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement and to Legal Counsel) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.
3.18 Actions for Public Offering. The Company shall provide such opinions,
certifications, indemnifications, and take such other actions, including without
limitation, entering into such agreements (including underwriting agreements),
as are reasonably required and appropriate, to permit the Holders to make a
public offering of the Registrable Securities requested to be registered.
3.19 Rule 144 Requirements. The Company covenants that it shall file the
reports required to be filed by it under the 1933 Act and the 1934 Act, and the
rules and regulations adopted by the SEC thereunder, provided, however, the
Company may delay any such filing but only pursuant to Rule 12b-25 under the
1934 Act, and the Company shall take such further action as any Holder of
Registrable Securities may reasonably request (including without limitation,
promptly obtaining any required legal opinions from Company counsel necessary to
effect the sale of Registrable Securities under Rule 144 and paying the related
fees and expenses of such counsel), all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (a) Rule 144
under the Act, as such Rule may be amended from time to time, or (b) any similar
rule or regulation hereafter adopted by the SEC. 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. If the Company
fails to satisfy its covenants and obligations under this Section 3.19, then it
------------
shall be in breach of this Agreement (such a breach being a "Rule 144 Default").
----------------
As partial relief for any Rule 144 Default and for damages to any Holder by
reason of any delay or inability to sell the underlying shares of Common Stock,
the remedy shall be as provided for by the Preferred Warrants and the
Certificate of Designation (which remedy shall not be exclusive of any other
remedies available at law or in equity).
IV. OBLIGATIONS OF THE HOLDERS
4.1 Furnish Information. The Company's obligation to cause any
Registration Statement to become effective in connection with distribution of
any Registrable Securities
10
pursuant to this Agreement is contingent upon each Holder, with reasonable
promptness, furnishing to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities, as is required pursuant to Regulation S-K promulgated under the
1933 Act, to effect the registration of the Registrable Securities. Each Holder
agrees, by acquisition of the Registrable Securities, that it shall not be
entitled to sell any of such Registrable Securities pursuant to the Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with all information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
misleading in a material respect and any other information regarding such Holder
and the distribution of such Registrable Securities as the Company may from time
to time reasonably request. Any sale of any Registrable Securities by any Holder
shall constitute a representation and warranty by such Holder that the
information relating to such Holder and its plan of distribution is as set forth
in the Prospectus delivered by such Holder in connection with such disposition,
that such Prospectus does not as of the time of such sale contain any untrue
statement of a material fact relating to or provided by such Holder or relating
to its plan of distribution and that such Prospectus does not as of the time of
such sale omit to state any material fact relating to or provided by such Holder
or relating to its plan of distribution necessary to make the statements in such
Prospectus, in the light of the circumstances under which they were made, not
misleading.
V. INDEMNIFICATION
In the event of any registration under this Agreement:
5.1 Indemnification by the Company. The Company will indemnify and hold
harmless each Holder and its officers, directors, partners and affiliates (and
their officers, directors and partners), any underwriter (as defined in the 0000
Xxx) for each Holder and each person (and its officers, directors, partners and
affiliates), if any, who controls any Holder or underwriter within the meaning
of the 1933 Act or the 1934 Act (each a "Company Indemnified Person"), against
--------------------------
any losses, claims, damages, expenses or liabilities, joint or several, or
actions in respect thereof ("Losses") to which they may become subject under the
------
1933 Act, the 1934 Act, or other federal or state law, insofar as such Losses
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (a) any untrue statement or alleged
---------
untrue statement of a material fact contained in such Registration Statement,
including any preliminary Prospectus or final Prospectus contained therein or
any amendments or supplements thereto, (b) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or (c) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law, or any rule or
regulation promulgated under the 1933 Act, the 1934 Act, or any state securities
law, and the Company will pay to each such Company Indemnified Person, as
incurred, any legal or other expenses reasonably incurred by or on behalf of him
in connection with investigating or defending any such Loss; provided, however,
that the indemnity agreement contained in this Section 5.1 shall not apply to
-----------
amounts paid in settlement of any such Loss if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor will the Company be liable in any such case for any such Loss to
the extent that it arises out of or is based upon (a) a Violation which occurs
solely as the result of the
11
written information furnished by any Holder, underwriter or controlling person
seeking indemnification hereunder, as applicable, expressly for inclusion in the
Registration Statement, or (b) with respect to any underwriter and controlling
person of such underwriter (and their respective officers and directors), a
Violation which results from the fact that there was not sent or given to a
person who bought Registrable Securities, at or prior to the written
confirmation of the sale, a copy of the final Prospectus, as then amended or
supplemented, if the Company had previously furnished copies of such Prospectus
hereunder and such Prospectus corrected the misstatement or omission forming the
basis of the Violation.
5.2 Indemnification by Holders. Each Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act, any underwriter and any controlling person of any
such underwriter or other holder (each a "Holder Indemnified Person"), against
-------------------------
any Losses to which any of the foregoing persons may become subject, under the
1933 Act, the 1934 Act, or other federal or state law, insofar as such Losses
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs solely as a result of the written
information furnished by each Holder expressly for inclusion in the applicable
Registration Statement, and such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any Holder Indemnified Person intended to
be indemnified pursuant to this Section 5.2, in connection with investigating or
-----------
defending any such Loss; provided, however, that any Holder's liability pursuant
to this Section 5.2 shall be limited to the amount of the net proceeds received
-----------
by such Holder from the sale of the Registrable Securities sold by it, and
further provided that the indemnity agreement contained in this Section 5.2 does
-----------
not apply to amounts paid in settlement of any such Loss if such settlement is
effected without the consent of such Holder, which consent shall not be
unreasonably withheld.
5.3 Indemnification Procedures. Promptly after receipt by an indemnified
party under this Article V of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Article
V, deliver to the indemnifying party a written notice of the commencement of
such action and the indemnifying party will have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) will have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of the indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between the indemnified party and any other party represented by such
counsel in the same proceeding. If the indemnifying party shall fail to defend
the action, or conducts a defense which is not reasonably adequate in light of
the circumstances, the indemnified party may conduct its own defense and shall
be entitled to reimbursement for the costs of such defense. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Agreement, except to the extent
that the indemnifying party is materially prejudiced by such failure. The
omission so to deliver written notice to the indemnifying party does not relieve
it of any liability
12
that it may have to any indemnified party otherwise than under this Agreement.
No indemnifying party under this Agreement will enter into any settlement or
consent to any entry of judgment without the indemnified party's written consent
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the indemnified party of a release from all liability
in respect of such claim or litigation.
5.4 Contribution. If the indemnification provided for in this Article V
is held by a court of competent jurisdiction to be unavailable to an indemnified
party or is insufficient to indemnify an indemnified party with respect to any
Loss, then the indemnifying party, in lieu of or in addition to, as appropriate,
indemnifying such indemnified party hereunder, will contribute to the amount
paid or payable by such indemnified party as a result of such Loss in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such Loss as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party will be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. The obligation of any Holder to make a contribution
pursuant to this Section 5.4 shall be limited to the net proceeds received by
-----------
such Holder from the sale of the Registrable Securities sold by it, less any
amounts paid pursuant to Section 5.2. To the extent any indemnification by an
-----------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Article V to the fullest extent permitted by
law; provided, however, that: (a) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
-------------
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (b) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to such Registration Statement.
5.5 Survival. The indemnity and contribution provisions contained in this
Article V shall remain operative and in full force and effect regardless of (a)
any termination of this Agreement, (b) any investigation made by or on behalf of
any Holder or any person controlling any Holder, or the Company, or the
Company's officers or directors or any person controlling the Company, and (c)
the sale of any Registrable Securities by any Holder.
VI. MISCELLANEOUS
6.1 Expenses. The Company shall bear all fees and expenses incurred in
connection with the performance by the Company of its obligations under this
Agreement (including without limitation, all registration and filing fees, fees
with respect to filings required to be made with the National Association of
Securities Dealers, Inc., fees and expenses of compliance with securities or
"Blue Sky" laws, printing expenses, messenger, telephone and distribution
expenses associated with the preparation and distribution of any Registration
Statement, all fees and expenses associated with the listing of any Registrable
Securities on any securities exchange or exchanges, the fees and disbursements
of counsel for the Company and its accountants and any
13
underwriting discounts and/or commissions relating to primary issuances by the
Company of its securities. Each seller of Registrable Securities shall pay all
of its underwriting discounts and selling commissions as well as the fees and
expenses of its own special counsel, if any, applicable to any Registrable
Securities registered and sold by such seller.
6.2 Assignment of Registration Rights. The rights under this Agreement
shall be automatically assignable by any Holder to any transferee of all or any
portion of Registrable Securities if: (a) such Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee, and (ii) the securities with respect to which such registration rights
are being transferred or assigned; (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(d) at or before the time the Company receives the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein, and (e) at
least 100,000 shares of Common Stock (or the equivalent number of Preferred
Shares that would convert into that number of shares of Common Stock or the
equivalent number of Preferred Warrants that are exercisable for that number of
shares of Common Stock) are transferred by such Holder to the transferee of the
Registrable Securities contemplated by this Section 6.2.
-----------
6.3 "Market Stand-Off" Agreement.
(a) Agreement to be Bound. To the extent requested by the Company and
---------------------
the managing underwriters, if any, of securities of the Company, each Holder
hereby agrees that it will not, during the period commencing on the effective
date of a Registration Statement of the Company filed under the 1933 Act with
respect to a public offering of the Company's securities and ending on the date
specified by the Company and the managing underwriter (such period not to exceed
180 calendar days), sell, offer, contract to sell, assign, transfer, convey,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, pledge, hypothecate
or otherwise transfer or dispose of, directly or indirectly, any Registrable
Securities; provided, however, that the Company agrees to use its commercially
-------- -------
reasonable efforts to cause such period not to exceed ninety (90) calendar days;
provided, further, however, that in no event shall the period for any Holder
-------- ------- -------
exceed the period for any other person who is either an officer, director and/or
holder of at least five (5%) percent of the then outstanding capital stock of
the Company. The foregoing provisions of this Section 6.3(a) shall only be
--------------
applicable to the Holders if all other persons with registration rights (whether
or not pursuant to this Agreement) and all officers, directors and holders of
more than five (5%) percent of the then outstanding voting capital stock of the
Company enter into identical agreements.
VII. GENERAL
7.1 Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally, (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated
14
and kept on file by the sending party), or (c) one (1) business day after
deposit with an overnight courier service, in each case properly addressed to
the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Notify Technology Corporation
0000 X. XxXxxx Xxxxxxxxx (Xxxxx 000)
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Xx.
If to a Holder, to its most recent address and facsimile number provided to
the Company five (5) days prior to the effectiveness of any change thereof,
together with a copy to Commonwealth Associates, L.P., 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
Written confirmation of receipt (a) given by the recipient of such notice,
consent, waiver or other communication, (b) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission, or (c)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clauses (a), (b) or (c) above, respectively.
7.2 Owner of Registrable Securities. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to be owner of
record of such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
7.3 Consents. All consents and other determinations to be made by the
Holders pursuant to this Agreement shall be made, unless otherwise specified in
this Agreement, by Holders holding a majority of the Registrable Securities,
determined as if all the Preferred Shares then outstanding have been converted
into Registrable Securities and all the Preferred Warrants then outstanding have
been exercised for Registrable Securities without regard for any limitations on
conversion of the Preferred Shares or exercise of the Preferred Warrants.
15
7.4 Additional Parties. The parties hereto agree that additional holders
of Preferred Shares (or warrants to acquire Preferred Shares) of the Company
may, with the consent only of the Company, be added as parties to this Agreement
with respect to any or all securities of the Company held by them, and shall
thereupon be deemed for all purposes "Holders" hereunder; provided, however,
that from and after the date of this Agreement, the Company shall not without
the prior written consent of holders of majority of the outstanding Conversion
Shares enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the grant to such holder of rights
superior to those granted herein. Any such additional party shall execute a
counterpart of this Agreement, and upon execution by such additional party and
by the Company, shall be considered a Holder for purposes of this Agreement.
7.5 Specific Performance. Each of the parties hereto acknowledges and
agrees that the breach of this Agreement would cause irreparable damage to the
other parties hereto and that the other parties hereto will not have an adequate
remedy at law. Therefore, the obligations of each of the parties hereto under
this Agreement shall be enforceable by a decree of specific performance issued
by any court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
7.6 Entire Agreement; Amendment. This Agreement supersedes all other
prior oral or written agreements among the parties, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein. No
provision of this Agreement may be amended or waived other than by an instrument
in writing signed by the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to the Registration Statement and that does
not directly or indirectly affect the rights of other Holders of Registrable
Securities may be given by Holders of at least a majority of the Registrable
Securities being sold by such Holders pursuant to such Registration Statement.
Each Holder of Registrable Securities outstanding at the time of any such
amendment, modification, supplement, waiver or consent or thereafter shall be
bound by any such amendment, modification, supplement, waiver or consent
effected pursuant to this Section 7.6, whether or not any notice, writing or
-----------
marking indicating such amendment, modification, supplement, waiver or consent
appears on the Registrable Securities or is delivered to such Holder.
7.7 Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
7.8 Termination. This Agreement and the obligations of the parties
hereunder shall terminate as of the end of the Registration Period except for
Article V hereof which shall survive and remain in full force and effect in
accordance with its terms.
16
7.9 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement shall be
brought against any of the parties in the courts of the State of New York or, if
it has or can acquire jurisdiction, in the United States District Court for the
Southern District of New York, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
7.10 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
7.11 Successors and Assigns; No Third Party Beneficiaries. Subject to
Section 6.2, this Agreement shall be binding upon and inure to the benefit of
-----------
the parties and their respective successors and permitted assigns. Nothing in
this Agreement shall create or be deemed to create any third-party beneficiary
rights in any person not a party to this Agreement except as provided below and
in Section 6.2. Upon any assignment, the references in this Agreement to any
-----------
Holder shall also apply to any such assignee unless the context otherwise
requires.
7.12 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
7.13 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
7.14 Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
[Remainder of page intentionally left blank]
17
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above.
NOTIFY TECHNOLOGY CORPORATION
By:________________________________________
Name:
Title:
THE FOREGOING AGREEMENT IS
HEREBY ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN:
By:_________________________
Name:
Title:
18
SCHEDULE I
This Schedule I shows the names and addresses of the Investors under the
Registration Rights Agreement.
[NAME OF INVESTOR]
Address for all communications, including written confirmation of such wire
transfers:
[TO BE PROVIDED]
Telecopy Xx.
Xxxxxxxxx Xx.
Xxx XX #
00
EXHIBIT A
Form of Notice of Effectiveness of Registration Statement
[Transfer Agent]
Attention:
Re: Notify Technology Corporation
-----------------------------
Gentlemen:
We are counsel to Notify Technology Corporation, a California corporation
(the "Company"), and have represented the Company in connection with those
-------
certain Subscription Agreements (the "Subscription Agreements") entered into by
-----------------------
and among the Company and the Investors named therein (collectively, the
"Holders") pursuant to which the Company issued to the Holders shares of its
-------
Series A Convertible Preferred Shares (the "Preferred Shares") convertible into
----------------
shares of the Company's common stock, par value $0.001 per share (the "Common
------
Stock") and warrants (the "Warrants") to purchase shares of the Company's Common
----- --------
Stock. Pursuant to the above mentioned agreements, the Company also has entered
into a Registration Rights Agreement with the Holders (the "Registration Rights
-------------------
Agreement") pursuant to which the Company agreed, among other things, to
---------
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Preferred Shares and the shares of Common Stock issuable upon exercise of the
Preferred Warrants, under the Securities Act of 1933, as amended (the "1933
----
Act"). In connection with the Company's obligations under the Registration
---
Rights Agreement, on ____________________, 200__, the Company filed a
Registration Statement on Form S-3 (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
-----------------------
"SEC") relating to the Registrable Securities which names each of the Holders as
---
a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [Enter Time of
Effectiveness] on [Enter Date of Effectiveness] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[Issuer's Counsel]
By:__________________________________
cc: [List Names of Holders]
20
