EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of July
3, 2003, by and among Datatec Systems, Inc., a Delaware corporation (the
"COMPANY"), and the undersigned Investors (each, an "INVESTOR" and collectively,
the "INVESTORS").
WHEREAS:
A. In connection with the Note Purchase Agreement by and among the
parties hereto of even date herewith (the "PURCHASE AGREEMENT"), the Company has
agreed, upon the terms and subject to the conditions of the Purchase Agreement,
to issue and sell to the Investors (i) Subordinated Secured Convertible Notes
(the "NOTES") convertible into shares of the Company's common stock, $0.001 par
value per share (the "COMMON STOCK") (as issued upon conversion of the Notes,
the "CONVERSION SHARES"), and (ii) warrants ("WARRANTS") to purchase shares of
Common Stock (as issued upon exercise of the Warrants, the "WARRANT SHARES");
B. To induce the Investors to execute and deliver the Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors hereby agree as follows.
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means an Investor, any permitted 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 9 of this Agreement and any permitted transferee or assignee
thereof to whom a transferee or assignee assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 of this Agreement.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or ordering
of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means (i) the Common Stock issued or
issuable under the Notes and the Warrants, respectively, including the
Conversion Shares and the Warrant Shares, and (ii) any shares of capital stock
issued or issuable with respect to the foregoing as a result of any stock split,
stock dividend, recapitalization, anti-dilution adjustment, exchange or similar
event or otherwise, without regard to any limitation on conversion of the Notes
or exercise of the Warrants.
e. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as
soon as practicable, but in no event later than thirty (30) days after the
Closing Date (as defined in the Purchase Agreement) (the "SCHEDULED FILING
DATE"), file with the SEC a separate Registration Statement on Form S-3 covering
the resale of all of the Registrable Securities issued and issuable. In the
event that Form S-3 is unavailable for such registration, the Company shall use
such other form as is available for such registration, subject to the provisions
of Section 2.e of this Agreement. The Registration Statement prepared pursuant
hereto shall register for resale that number of shares of Common Stock equal to
150% of the number of Registrable Securities, both issued and issuable, as of
the date (the "ACTUAL FILING DATE") immediately preceding the date the
Registration Statement is initially filed with the SEC, assuming for the purpose
of determining such number of issuable Registrable Securities that all of the
Notes were converted in full at the Mandatory Conversion Price (as defined in
the Notes) in effect on the Actual Filing Date and that all of the Warrants were
exercised in full (without giving effect to any limitations on such conversion
or exercise that otherwise apply) . The Company shall use its best efforts to
have the Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than sixty (60) days after the Closing Date
if the SEC conducts no review of such Registration Statement and one hundred
twenty (120) days after the Closing Date if the SEC conducts a review of such
Registration Statement (as applicable, the "SCHEDULED EFFECTIVE DATE"). The date
on which such Registration Statement is declared effective by the SEC is
referred to herein as the "ACTUAL EFFECTIVE DATE".
b. PIGGY-BACK REGISTRATIONS. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company
proposes to file with the SEC a Registration Statement relating to an
underwritten offering for its own account or the account of others under the
1933 Act of any of its securities (other than a Registration Statement on Form
S-4 or Form S-8 (or their equivalents at such time) relating to securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans), the Company shall promptly send to each Investor written notice
of the Company's intention to file a Registration Statement and of such
Investor's rights under this Section 2.b and, if within twenty (20) days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all of the Registrable Securities
such Investor requests to be registered for resale, subject to the priorities
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set forth in this Section 2.b below. No right to registration of Registrable
Securities under this Section 2.b shall be construed to limit any registration
required under Section 2.a. The obligations of the Company under this Section
2.b may be waived by Investors holding a majority of the Registrable Securities.
To the extent that such Registration Statement has been filed in connection with
an underwritten offering, each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed to by the
Company, offer and sell such Registrable Securities in such underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering. If the managing
underwriter(s) advise the Company, in writing, that in their reasonable good
faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration:
(1) first, all securities the Company proposes to sell for its
own account;
(2) second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights; and
(3) third, the securities requested to be registered by the
Investors and other holders of securities entitled to participate in the
registration, as of the date hereof, drawn from them pro rata based on the
number each has requested to be included in such Registration Statement;
provided, however, that the Investors agree, at all times prior to November 3,
2003, to subordinate their rights to include their shares pursuant to this 2.b
to the right of Cisco to include a minimum of 30% of the shares they are
entitled to include and so request to include in the Registration Statement.
c. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in the Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such number of
Registrable Securities or increase thereof is declared effective by the SEC. In
the event that an Investor sells or otherwise transfers any of such Investor's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such
Registration Statement for such Investor. Any shares of Common Stock included in
a Registration Statement and which remain allocated to any Person which ceases
to hold any Registrable Securities shall be allocated to the remaining
Investors, pro rata based on the number of Registrable Securities then held by
such Investors.
d. LEGAL COUNSEL. Subject to Section 5 hereof, the Investors
holding a majority of the Registrable Securities shall have the right to select
one legal counsel to review and oversee as their counsel any offering pursuant
to this Section 2 ("LEGAL COUNSEL"), which shall be [ ] as
their counsel or such other counsel as is 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.
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e. INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is
unavailable for any registration of Registrable Securities hereunder, the
Company shall (i) register the sale of the Registrable Securities on another
appropriate form and (ii) file a Registration Statement on Form S-3 covering the
resale of the Registrable Securities as soon as reasonably practicable after
such form becomes available (but in no event later than ten (10) Business Days
thereafter, and use its best efforts to have such Registration Statement
declared effective by the SEC as soon as practicable thereafter, provided that
the Company shall maintain the effectiveness of the Registration Statement then
in effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.
f. SUFFICIENT NUMBER OF SHARES REGISTERED. If, on any date, the
number of shares available under the Registration Statement filed pursuant to
Section 2.a is insufficient to cover at least 110% of all of the Registrable
Securities issued or issuable under the Notes and the Warrants, respectively,
assuming for the purpose of determining such number of issuable Registrable
Securities that all of the Notes were converted in full at the Mandatory
Conversion Price (as defined in the Notes) in effect on such date and that all
of the Warrants were exercised in full (without giving effect to any limitations
on such conversion or exercise that otherwise apply), the Company shall amend
the Registration Statement, or file a new Registration Statement (on the short
form available therefor, if applicable), or both, as soon as practicable, but in
any event not later than fifteen (15) days after such date and if the Company is
so requested by the Investors (such date, an "ADDITIONAL SCHEDULED FILING
DATE"), so that the Registration Statement(s) cover in the aggregate at least
150% of all of the Registrable Securities issued or issuable under the Notes and
the Warrants, respectively, such number of issuable Registrable Securities to be
determined based on the foregoing assumptions. The Company shall use it best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof, but in no event
later than sixty (60) days after the Additional Scheduled Filing Date (each such
date, an "ADDITIONAL SCHEDULED EFFECTIVE DATE").
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities
be registered pursuant to Section 2.b or at such time as the Company is
obligated to file a Registration Statement with the SEC pursuant to Section 2.a
or 2.f, the Company will use its best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations
in addition to those under Sections 2.a and 2.f.
a. The Company shall not file any other Registration Statement
with respect to any of its securities between the date hereof and ninety (90)
days after the Actual Effective Date or any Additional Actual Effective Date of
any Registration Statement required to be filed hereunder (provided that the
Company may file (i) a Registration Statement on Form S-8 (or its equivalent at
such time), (ii) a Registration Statement registering for resale securities held
as of the date hereof by the Company's directors or executive officers, or
holders who, as of the date of a proposed registration, beneficially own 5% or
more of the Company's common stock, or (iii) a Registration Statement
registering for resale shares underlying securities issued pursuant to a Private
Placement Memorandum dated June 6, 2003, as amended or supplemented). The
Company shall keep each of the Registration Statements required to be filed
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hereunder effective pursuant to Rule 415 at all times until the earlier of (i)
the date as of which the Investors may sell all of the Registrable Securities
pursuant to paragraph (k) of Rule 144 promulgated under the 1933 Act (or
successor thereto) ("RULE 144") or (ii) the date on which the Investors shall
have sold all of the Registrable Securities pursuant to an effective
Registration Statement or Rule 144 (the "REGISTRATION PERIOD"), each of which
Registration Statements (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 term "best efforts" when used in the Section
3 shall mean, among other things, that the Company shall submit to the SEC,
within two business days after the Company learns that no review of a particular
Registration Statement or amendment thereto 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 48 hours after the submission of
such request.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company 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.b by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), if the information contained in such report
is not incorporated by reference into such Registration Statement), the Company
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.
c. The Company shall (a) permit Legal Counsel to review and
comment upon (i) the Registration Statement at least seven (7) days prior to its
filing with the SEC and (ii) all other Registration Statements and all
amendments and supplements to all Registration Statements within a reasonable
number of days prior to the their filing with the SEC and (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 approval shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) any correspondence between
the SEC or the staff of the SEC and the Company or its representatives relating
to any Registration Statement, (ii) promptly after the same is prepared and
filed with the SEC, one copy of any Registration Statement and any amendment(s)
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thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto.
d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
e. The Company shall (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities or
"blue sky" laws of such jurisdictions in the United States as Legal Counsel or
any Investor reasonably requests, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3.e, (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify Legal Counsel and each Investor
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 threatening of any proceeding for such purpose.
f. In the event Investors who hold a majority of the Registrable
Securities being offered in an underwritten offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering; provided, however, that the Company shall have
the right to consent to the selection of such underwriters, which consent shall
not be unreasonably withheld.
g. As promptly as practicable after becoming aware of such event,
the Company shall notify Legal Counsel and each Investor in writing of the
happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal
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Counsel and each Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). The Company shall also promptly notify
Legal Counsel and each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and each
Investor by facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
h. The Company shall use its best 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 and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify Legal Counsel and each Investor who holds
Registrable Securities being sold (and, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose (such notice to be delivered by facsimile on
the same day such notice of the initiation or threat of such proceeding, such
order or suspension is received by the Company and by overnight mail).
i. At the request of any Investor, the Company shall furnish to
such Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may reasonably
request (i) if required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel, (iii) any underwriter participating in any
disposition pursuant to a Registration Statement, (iv) one firm of accountants
or other agents retained by the Investors and (v) one firm of attorneys retained
by such underwriters (collectively, the "INSPECTORS") all pertinent financial
and other records, and pertinent corporate documents and properties of the
Company (collectively, the "RECORDS"), as shall be reasonably deemed necessary
by each Inspector, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request; provided,
however, that each Inspector shall hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Records or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
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or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Investor agrees that it shall, upon learning
that disclosure of such Records 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 appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) 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, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either, at or prior to
the effective date of a Registration Statement or any amendment thereto, to (i)
cause all the Registrable Securities covered by such Registration Statement or
amendment to be listed on each securities exchange or market 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 market, or (ii) secure the inclusion for quotation on the
over-the-counter market on the electronic bulletin board for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD"), as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3.x.
x. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, 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 managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
n. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of such
Registration Statement.
o. If requested by the managing underwriter(s) in connection with
an underwritten offering or an Investor (whether or not an offering is
underwritten), the Company shall: (i) immediately incorporate in a prospectus
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supplement or post-effective amendment such information as, in the case of an
underwritten offer, the managing underwriters and the Investors agree, and in
the case of any other type of offering, such Investor requests, should 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 sold to such underwriters or by such
Investor, the purchase price being paid therefor by any such underwriter(s) and
any other terms of the underwritten (including any best efforts underwritten)
offering of the Registrable Securities to be sold in such offering; (ii) make
all required filings of such prospectus supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) supplement or make amendments
to any Registration Statement.
p. 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.
q. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 0000 Xxx) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
r. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
s. 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 Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
t. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
u. Notwithstanding anything to the contrary in Section 3.g, at
any time after the Registration Statement has been declared effective, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company, otherwise
required (a "GRACE PERIOD"); provided, that the Company shall promptly (i)
notify the Investors in writing of the existence of material, non-public
information giving rise to a Grace Period (without disclosing such information
to an Investor unless requested in writing by such Investor to do so) and the
date on which the Grace Period will begin, and (ii) notify the Investors in
writing of the date on which the Grace Period ends; and, provided further, that
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during any consecutive 365-day period, there shall be only three Grace Periods,
any such Grace Period not to exceed 15 consecutive days in the aggregate and all
Grace Periods combined not to exceed 30 days in the aggregate (an "ALLOWABLE
GRACE PERIOD"). For purposes of determining the length of a Grace Period above,
the Grace Period shall begin on and include the date the Investors receive the
notice referred to in clause (i) above and shall end on and include the date the
Investors receive the notice referred to in clause (ii) above. Upon expiration
of the Allowable Grace Period, the Company shall again be bound by the first
sentence of Section 3.g with respect to the information giving rise thereto.
Notwithstanding anything to the contrary contained herein, the Investors may
convert some or all of the Note or exercise all or any part of the Warrants
during a Grace Period.
v. Each of the following events shall constitute a "REGISTRATION
DEFAULT" for purposes of this Agreement:
(i) the Company's failure to file a Registration Statement by the
applicable Scheduled Filing Date or Additional Scheduled Filing Date thereof, as
appropriate, or in accordance with subsection 2(e) above, if applicable;
(ii) the SEC's failure to declare a Registration Statement
effective on or before the applicable Scheduled Effective Date or Additional
Scheduled Effective Date thereof, as appropriate, except where the failure to
meet such deadline is the result solely of actions by the holders of Registrable
Securities;
(iii) the Company's failure to request acceleration of the
effectiveness of a Registration Statement within two (2) business days after the
SEC has notified the Company that it may file such an acceleration request as
required by Section 3.a hereof, except where the failure to meet such deadline
is a result solely of actions by the holders of Registrable Securities;
(iv) the Investors' inability to sell all Registrable Securities
pursuant to an effective Registration Statement (whether 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, to
register sufficient shares of Common Stock or otherwise), except during any
Allowable Grace Period; or
(v) the aggregate number of days included in a Grace Period
exceed the Allowable Grace Period.
Upon the occurrence of a Registration Default, the Company shall pay to each
Investor an amount determined in accordance with the following formula for each
30-day period during which such Registration Default continues:
2% x P x N for all Registration Defaults
where
P = the average closing sale price of the Common Stock for the
applicable 30 days; and
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N = the number of Registrable Securities issued or issuable under
such Investor's Note and Warrant, respectively, on the last
day of the applicable 30-day period assuming, for the purpose
of determining the number of issuable Registrable Securities,
that such Note was converted in full at the Mandatory
Conversion Price (as defined in the Notes) in effect on such
day and that the Warrant was exercised in full (without giving
effect to any limitations on such conversion or exercise that
otherwise apply).
If a Registration Default is cured before the end of a 30-day period, the
applicable formula shall be pro-rated. The Company shall pay such amount in cash
on demand by an Investor made at any time during the continuance or after
termination of such Registration Default. If the Company does not remit payment
of the amount due to such Investor, the Company will pay the Investor's
reasonable costs of collection, including attorneys' fees. An Investor's right
to demand such payment shall be in addition to any other rights it may have
under this Agreement, the Purchase Agreement or otherwise.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) business days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2.b, each such Investor agrees
to enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.h or
the first sentence of Section 3.g, such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
11
of the supplemented or amended prospectus contemplated by Section 3.h or the
first sentence of Section 3.g.
e. Each Investor agrees not to take any action that causes such
Investor to become a broker-dealer that is required to be registered under the
1934 Act or to effect any change to such Investor's status that would preclude
the Company from using Form S-3 for the Registration Statement.
5. EXPENSES OF REGISTRATION.
All reasonable expenses (other than expenses incurred pursuant to
Section 3.j(iv) and (v) and underwriting discounts and commissions) incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company and reasonable fees and disbursements of Legal Counsel,
shall be paid by the Company; provided, however that any such expenses of Legal
Counsel shall be included in and subject to the cap on expenses set forth in
Section 13.8 of the Purchase Agreement.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint
or several, (collectively, "CLAIMS") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency or body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("BLUE SKY FILING"), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
12
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "VIOLATIONS").
The Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or reasonable other expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.a: (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person or underwriter for such Indemnified
Person expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3.d;
(ii) with respect to any preliminary prospectus, shall not inure to the benefit
of any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3.d, and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a violation and such Indemnified Person, notwithstanding such advice,
used it; and (iii) shall not be available to the extent such Claim is based on a
failure of the Indemnified Person to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3.d and such Indemnified Person had
an obligation under applicable law to deliver such prospectus, as determined by
a court of competent jurisdiction. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of any Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9 of this Agreement.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the fullest extent permitted by
law, the Company, each of its directors, each of its officers who signs the
Registration Statement, each Person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PARTY"), against
any Claim or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the
extent, and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6.d, such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
13
Section 6.b and the agreement with respect to contribution contained in Section
7 shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6.b for only that amount of a Claim
or Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.b with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus and
such prospectus was provided to Investors as required, as then amended or
supplemented.
c. The Company and each Investor shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so furnished
in writing expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority of the
issued or issuable Registrable Securities included in the Registration Statement
to which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
14
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
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 Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
e. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to applicable law.
7. CONTRIBUTION.
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 Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) 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.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 , during the Registration Period, the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
15
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable
by the Investors to any transferee of all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) 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; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing to be bound
by all of the provisions contained herein; and (v) such transfer shall have been
made in accordance with the applicable requirements of the Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold or have the right to acquire a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record 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.
b. 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: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
16
If to the Company:
Datatec Systems, Inc.
00 Xxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to an Investor, to its address and facsimile number on the signature pages
attached hereto, with copies to such Investor's representatives as set forth on
the signature pages or to such other address and/or facsimile number and/or to
the attention of such other person as the recipient party has specified by
written notice given to each other party at least five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, overnight or courier delivery or transmission by facsimile
in accordance with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
17
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. 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.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the Notes, the Purchase Agreement and the
other Transaction Documents (and the exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. 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.
k. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
18
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed
as of day and year first above written.
COMPANY:
DATATEC SYSTEMS, INC.
By: ______________________________________________
Name:_____________________________________________
Title: ___________________________________________
INVESTORS:
By: ______________________________________________
Name:_____________________________________________
Address:
By: ______________________________________________
Name:_____________________________________________
Address:
By: ______________________________________________
Name:_____________________________________________
Address:
19
By: ______________________________________________
Name:_____________________________________________
Address:
By: ______________________________________________
Name:_____________________________________________
Address:
By: ______________________________________________
Name:_____________________________________________
Address:
With a copy to:
20
Exhibit A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Attn:
Re: DATATEC SYSTEMS, INC.
--------------------
Ladies and Gentlemen:
We are counsel to Datatec Systems, Inc., a Delaware corporation (the
"COMPANY"), which has entered into that certain subordinated Secured Convertible
Notes and Warrants Purchase Agreement (the "PURCHASE AGREEMENT") by and among
the Company and the Investors named therein (collectively, the "HOLDERS")
pursuant to which the Company issued to the Holders Notes, convertible into
shares of its common stock, $0.001 par value per share (the "COMMON STOCK"), and
Warrants to purchase Common Stock. Pursuant to the Purchase Agreement, 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) under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 2003, the Company filed a Registration
Statement on Form S-1 (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]
21
