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EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
October 25, 2000, by and among Applied Digital Solutions, Inc., a Missouri
corporation, with headquarters located at 400 Royal Palm Way, Suite 410 Palm
Beach, Florida 33480 (the "COMPANY"), and the undersigned buyers (each, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers shares of the
Company's Series C Convertible Preferred Stock (the "PREFERRED STOCK"), which
series shall be further divided into two subseries, designated as the "Series
C-1 convertible preferred stock" (the "SERIES C-1 PREFERRED STOCK") and the
"Series C-2 convertible preferred stock" (the "SERIES C-2 PREFERRED STOCK") and
which issuances may take place from time to time at the Initial Closing or
Additional Closing (as those terms are defined in the Securities Purchase
Agreement), which Preferred Stock will be convertible into shares of the
Company's common stock, $0.001 par value per share (the "COMMON STOCK") (as
converted, the "CONVERSION SHARES") in accordance with the Certificate of
Designation setting forth the rights and preferences of the Company's Series C
Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"); and
B. In consideration for the Buyers agreeing to purchase the
Preferred Stock, the Company shall issue and deliver to the Buyers common stock
purchase warrants (the "WARRANTS") to purchase additional shares of Common Stock
pursuant to the terms of the Securities Purchase Agreement (the shares of Common
Stock issued or issuable upon exercise of the Warrants are hereinafter referred
to as the "WARRANT SHARES");
C. To induce the Buyers to execute and deliver the Securities
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
Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "INVESTOR" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
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(b) "PERSON" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, an
entity, 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 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 Conversion Shares
issued or issuable upon conversion of the Preferred Stock, (ii) the Warrant
Shares issued or issuable upon exercise of the Warrants and (iii) any shares of
capital stock issued or issuable with respect to the Conversion Shares, the
Preferred Stock, the Warrant Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event whether such
shares are issued at the Initial Closing or at an Additional Closing and without
regard to any limitations on conversion of the Preferred Stock or exercises of
Warrants.
(e) "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
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
Initial Closing Date or sixty (60) days after the Initial Closing Date in the
event the Investors elect to sell their Registrable Securities in an
underwritten offering (the "FILING Deadline"), file with the SEC a Registration
Statement or Registration Statements (as is necessary) (the "INITIAL
REGISTRATION STATEMENT") on Form S-3 (or, if such form is unavailable for such a
registration, on such other form as is available for such a registration,
subject to the consent of each Buyer and the provisions of Section 2(c))
covering the resale of all of the Registrable Securities issuable upon
conversion of the Preferred Stock and exercise of the Warrants issued (or to be
issued) at the Initial Closing and all of the Additional Closings, in each case
assuming that shares of Preferred Stock are not to be issued in excess of the
"Initial Conversion Cap", as such term is defined in the Certificate of
Designation (the "INITIAL REGISTRABLE SECURITIES"), which Registration Statement
shall state that, in accordance with Rules 416 promulgated under the 1933 Act,
such Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
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Stock to prevent dilution resulting from stock splits, stock dividends or
similar transactions. Such Registration Statement shall initially register for
resale at least 200% of the number of Initial Registrable Securities issuable as
of the date immediately preceding the date the Initial Registration Statement is
initially filed with the SEC, subject to adjustment as provided in Section 3(c).
Such registered shares of Common Stock shall be allocated among the Investors
pro rata based on the total number of Initial Registrable Securities issued or
issuable as of each date that the Initial Registration Statement, as amended,
relating to the resale of the Initial Registrable Securities is declared
effective by the SEC. The Company shall use its best efforts to have the Initial
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than one hundred and twenty (120) days after the Initial
Closing Date (or one hundred and eighty (180) days after the Initial Closing
Date in the case of an underwritten offering) (the "EFFECTIVENESS DEADLINE");
provided, however, that if the SEC does not permit the Company to register all
of the Initial Registrable Securities, including the Registrable Securities
issuable upon conversion of the Additional Preferred Stock, by the Effectiveness
Deadline (after the Company has used its best efforts to effect the registration
of such securities), (i) the Company shall use its best efforts to register for
resale 200% of the Registrable Securities issuable upon conversion of the
Initial Preferred Stock as of the date immediately preceding the filing date or
upon exercise of the initial outstanding Warrants by the Effectiveness Deadline
and (ii) the Company shall prepare, and, as soon as practicable, but in no event
later than thirty (30) days after the date that any Buyer delivers an Additional
Preferred Stock Notice or sixty (60) days after the date that any Buyer delivers
an Additional Preferred Stock Notice in the event that such Buyer elects to sell
such Registrable Securities in an underwritten offering (the "ADDITIONAL FILING
DEADLINE"), file with the SEC a Registration Statement (the "ADDITIONAL
REGISTRATION STATEMENT") or an amendment to the Initial Registration Statement
covering the resale of 200% of the Registrable Securities issuable upon
conversion of all of the Additional Preferred Stock issuable pursuant to the
Securities Purchase Agreement and exercise of Warrants to be issued at the
Additional Closing as of the date immediately preceding the filing date and the
Company shall use its best efforts to have such Additional Registration
Statement (or amendment or supplement) declared effective by the SEC as soon as
practicable, but in no event later than one hundred and twenty (120) days after
the delivery of such Additional Preferred Stock Notice (or one hundred and
eighty (180) days after the delivery of such Additional Preferred Stock Notice
in the case of an underwritten offering) (the "ADDITIONAL EFFECTIVENESS
DEADLINE"). In the event that, in respect of the Registrable Securities to be
registered pursuant to clause (ii) above, the SEC does not permit the
registration of the Registrable Securities issuable upon conversion of
Additional Preferred Stock and exercise of Warrants which preferred stock and
warrants are to be issued pursuant to subsequent Additional Preferred Stock
Notices, then (x) the Company shall use its best efforts to register for resale
200% of the Registrable Securities issuable upon conversion of such Additional
Preferred Stock and Warrants that are subject of the Additional Preferred Stock
Notice referred to in clause (ii) above as of the date immediately preceding the
filing date and the Company shall use its best efforts to have such registration
declared effective by the Additional Effectiveness Deadline and (y) the Company
shall similarly prepare, file and use its best efforts to have declared
effective such number of additional Registration Statements (or amendments to
any Additional Registration Statements) as are necessary in connection with the
delivery by any Buyer, to the Company, of any subsequent Additional Preferred
Stock Notices in accordance with the requirements set forth in clause (ii) above
(with each such additional Registration Statement deemed to be an "ADDITIONAL
REGISTRATION STATEMENT" hereunder, each such Additional Filing Deadline deemed
an "ADDITIONAL FILING DEADLINE" and each such Additional Effectiveness Deadline
deemed an "ADDITIONAL EFFECTIVENESS DEADLINE").
(b) COUNSEL AND INVESTMENT BANKERS. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Buyers
holding at least two-thirds of the Registrable Securities shall have the right
to select legal counsel and an investment banker or bankers and manager or
managers to administer their interest in the offering, which investment banker
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or bankers or manager or managers shall be reasonably satisfactory to the
Company. The Company shall reasonably cooperate with any such counsel and
investment bankers.
(c) ELIGIBILITY FOR FORM S-3. The Company represents, warrants
and covenants that it will meet the requirements for the use of Form S-3 for
registration of the sale by the Buyers and any other Investor of the Registrable
Securities on and after the thirtieth (30th) day following the date of issuance
of the Preferred Stock and the Company has filed and shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
obtain and maintain such eligibility for the use of Form S-3. In the event that
Form S-3 is not available for sale by the Investors of the Registrable
Securities, then the Company: (i), shall register the sale of the Registrable
Securities on another appropriate form and (ii) the Company shall undertake to
register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the
Initial Registration Statement, the Additional Registration Statement or any
other 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.
(d) SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, filed pursuant to Section 2(a) is insufficient to cover all of the
Registrable Securities issuable upon conversion of the Initial Preferred Stock
in the case of the Initial Registration Statement and the outstanding Additional
Preferred Stock in the case of the Additional Registration Statement or any
other required Registration Statement, required to be covered by such
Registration Statement or an Investor's allocated portion of the Registrable
Securities pursuant to Section 2(a), the Company shall use its best efforts to
amend such Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
150% of the number of such Registrable Securities as of the trading day
immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event
not later than fifteen (15) days after the necessity therefor arises. The
Company shall use its best efforts to 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 at any time the number of Registrable
Securities issued or then issuable upon conversion of the outstanding Preferred
Shares and exercise of the Warrants covered by such Registration Statement is
greater than the quotient determined by dividing (i) the number of shares of
Common Stock available for resale under such Registration Statement by (ii)
1.50. The calculation set forth in the foregoing sentence shall be made without
regard to any limitations on the conversion of the Preferred Stock or exercise
of the Warrants and such calculation shall assume that the Preferred Stock and
the Warrants are then convertible and exercisable, respectively, into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the
Certificate of Designation) and Warrant Exercise Price (as defined in the
Warrants), respectively, if applicable.
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3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement with the SEC pursuant to Section 2(a), 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:
(a) The Company shall promptly prepare and file with the SEC
an Initial Registration Statement with respect to the Registrable Securities
required to be registered pursuant to Section 2(a) (but in no event later than
the Filing Deadline) and use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing (but in no event later than the Effectiveness
Deadline), and keep such Registration Statement 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 covered thereby without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto)
(assuming cashless exercise of Warrants) or (ii) the date on which (A) the
Investors shall have sold all the Registrable Securities covered thereby and (B)
none of the Preferred Stock covered thereby is outstanding (the "REGISTRATION
PERIOD"), which Initial Registration Statement (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"
shall mean among other things, that the Company shall submit to the SEC, within
two (2) Business Days after the 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 to a time and
date not later than 48 hours after the submission of such request. In the event
that the Initial Registration Statement is not filed by the Filing Deadline (the
"REQUIRED FILING DATE") or declared effective by the SEC by the Effectiveness
Deadline (the "REQUIRED FILING PERIOD"), the Company will pay each Investor a
penalty until such time that the Initial Registration Statement is filed with
the SEC or declared effective by the SEC (all such payments shall be made, at
the option of the Company, in cash or in additional shares of Preferred Stock
(valued by dividing $1,000 by the penalty amount), and shall be nonrefundable)
on the first day of each thirty (30) day period after the Required Filing Date
or the Required Filing Period, an amount equal to the product of (A) one and
one-half (1.5%) percent multiplied by (B) the amount paid for the Preferred
Stock plus accrued but unpaid dividends, multiplied by, (C) the number of Shares
held by such Investor. In the event that such Registration Statement is not
declared effective by the SEC within 180 days (or 240 days in the case of an
underwritten offering) after the issuance of the Preferred Stock, the Buyers
shall have the right at any time prior to the effectiveness of the Initial
Registration Statement to demand redemption of any or all of the Preferred Stock
at a price equal to 125% of the Liquidation Value (as defined in the Certificate
of Designation) of such shares being redeemed all in accordance with the
redemption provisions set forth in Section 3 of the Certificate of Designation.
(b) If an Additional Registration Statement is required to be
filed pursuant to Section 2(a), the Company shall promptly prepare and file with
the SEC such Registration Statement with respect to the Registrable Securities
issuable upon conversion of the Additional Preferred Stock as required by
Section 2(a) (but in no event later than the Additional Filing Deadline) and use
its best efforts to cause such Registration Statement relating to such
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Registrable Securities to become effective as soon as possible after such filing
(but in no event later than the Additional Effectiveness Deadline), and keep
such Registration Statement 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 covered thereby issuable upon conversion of the
Additional Preferred Stock without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) (assuming cashless
exercise of Warrants) or (ii) the date on which (A) the Investors shall have
sold all such Registrable Securities and (B) none of the Preferred Stock is
outstanding (the "ADDITIONAL REGISTRATION PERIOD"), which Additional
Registration Statement (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. In the event that such Registration Statement is
not filed by the Additional Filing Deadline (the "ADDITIONAL REQUIRED FILING
DATE") or declared effective by the SEC by the Additional Effectiveness Deadline
(the "ADDITIONAL REQUIRED FILING PERIOD"), the Company will pay each Investor a
penalty until such time that the Additional Registration Statement is filed with
the SEC or declared effective by the SEC (all such payments shall be made, at
the option of the Company, in cash or in additional shares of Preferred Stock
(valued by dividing $1,000 by the penalty amount), and shall be nonrefundable)
on the first day of each thirty (30) day period after the Additional Required
Filing Date or the Additional Required Filing Period, an amount equal to the
product of (A) one and one-half (1.5%) percent multiplied by (B) the amount paid
for the Preferred Stock plus accrued but unpaid dividends, multiplied by, (C)
the number of Shares held by such Investor. In the event that such Registration
Statement is not declared effective by the SEC within 180 days (or 240 days in
the case of an underwritten offering) after the issuance of the Preferred Stock,
the Buyers shall have the right at any time prior to the effectiveness of the
Additional Registration Statement to demand redemption of any or all of the
Preferred Stock at a price equal to 125% of the Liquidation Value (as defined in
the Certificate of Designation) of such shares being redeemed all in accordance
with the redemption provisions set forth in Section 3 of the Certificate of
Designation.
(c) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement, as the case may be, and the prospectus(es) used in
connection with any such Registration Statement(s), which prospectus(es) are to
be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep any Registration Statement(s) effective at all times during
any Registration Period or Additional 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 any
Registration Statement(s) 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 any Registration
Statement. In the case of amendments and supplements to the Initial Registration
Statement, the Additional Registration Statement or any other Registration
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Statement, as the case may be, which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(c)) 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"), the
Company shall have incorporated such report by reference into such 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 such Registration Statement.
(d) The Company shall furnish to each Investor whose
Registrable Securities are included in the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, and its legal counsel without charge (i) promptly after the same is
prepared and filed with the SEC at least one copy of any Registration Statement
and any amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, the prospectus(es)
included in any Registration Statement(s) (including each preliminary
prospectus) and, with regards to such Registration Statement, any correspondence
by or on behalf of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives, (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 any
preliminary prospectus, as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
The Company will promptly respond to any and all comments received from the SEC,
with a view towards causing any Registration Statement or any amendment thereto
to be declared effective by the SEC as soon as practicable and shall, subject to
Section 3(i), promptly file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that such Registration Statement or any
amendment thereto will not be subject to review.
(e) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Initial Registration
Statement, the Additional Registration Statement and any other Registration
Statement, as the case may be, under such other securities or "blue sky" laws of
such jurisdictions in the United States as 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 or the Additional 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 or the
Additional 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 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 two-thirds of the
Registrable Securities being offered in the offering select underwriters for the
offering, which selection shall be made within two (2) business days following
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the Initial Closing Date (or an Additional Closing, if applicable) the Company
shall, subject to Section 2(b) hereof, 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, that, if the Investors who hold
two-thirds of the Registrable Securities being offered in the offering do not
select underwriters for such offering within two (2) business days following the
Initial Closing Date (or an Additional Closing, if applicable) then the
Investors shall have no right to an underwritten offering with respect to such
Registrable Securities.
(g) As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor in writing of the happening of any
event as a result of which the prospectus included in the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission 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 each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to 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 such Registration Statement or related prospectus or related
information, and (iii) of the Company's reasonable determination that a
post-effective amendment to such 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 the Initial
Registration Statement, the Additional Registration Statement or any other
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 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; provided, however, that if in the good faith judgment of the
majority of the Board of Directors of the Company, after consultation with and
the agreement of the outside counsel for the Company, an undisclosed material
event has occurred and the disclosure of such event is reasonably likely to have
a material adverse effect on the Company or the pending transaction, the Company
shall be permitted to instruct such Investors of Registrable Securities to
suspend sale of Registrable Securities for a period of up to five (5)
consecutive trading days or 30 non-consecutive trading days in any period of 365
consecutive days (a "PERMITTED BLACKOUT PERIOD").
(i) The Company shall permit each Investor and a single firm
of counsel, initially Schulte Roth & Zabel LLP or such other counsel as
thereafter designated as selling stockholders' counsel by the Investors who hold
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a majority of the Registrable Securities being sold, to review and comment upon
the Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, and all amendments and
supplements thereto at least three (3) business days prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement(s) or any amendment or supplement
thereto without the prior approval of such counsel, which consent shall not be
unreasonably withheld or delayed; and the failure of such counsel to respond to
a request for approval within two (2) business days shall be deemed to be an
approval by such counsel.
(j) At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Initial Registration Statement, the Additional Registration
Statement or any other Registration Statement, as the case may be, (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.
(k) The Company shall make available for inspection by (i) any
Investor holding 25% of the Registrable Securities, (ii) any underwriter
participating in any disposition pursuant to the Initial Registration Statement,
the Additional Registration Statement or any other Registration Statement, as
the case may be (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
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 to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to an Investor) or use of
any Record 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 release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or
(b) 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.
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. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
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(l) 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 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.
(m) The Company shall use its best efforts either to (i) cause
the Registrable Securities covered by the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, 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 (ii) secure designation and quotation of the Registrable Securities
covered by such Registration Statement on the Nasdaq National Market or the
Nasdaq SmallCap Market 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. 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(m).
(n) 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 the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement, as the case may be, 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. Not
later than the date on which any Registration Statement registering the resale
of Registrable Securities is declared effective, the Company shall deliver to
its transfer agent instructions, accompanied by any reasonably required opinion
of counsel, that permit sales of unlegended securities in a timely fashion that
complies with then mandated securities settlement procedures for regular way
market transactions.
(o) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Initial Registration Statement, the Additional
Registration Statement or any other Registration Statement, as the case may be.
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<PAGE> 11
(p) The Company shall provide a CUSIP number, a transfer agent
and registrar of all such Registrable Securities not later than the effective
date of such Registration Statement.
(q) If requested by the managing underwriters or an Investor,
the Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree 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,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; 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 supplement or make amendments to the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement, as the case may be, if requested by a shareholder or any
underwriter of such Registrable Securities relating to information disclosed in
such Registration Statement about any such shareholder or underwriter.
(r) The Company shall use its best efforts to cause the
Registrable Securities covered by the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, 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.
(s) 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.
4. OBLIGATIONS OF THE INVESTORS.
(a) At least four (4) days prior to the first anticipated
filing date of the Initial Registration Statement, the Additional Registration
Statement or any other Registration Statement, as the case may be, the Company
shall notify each Investor or its counsel 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 as may be requested in writing by the Company 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 and such information shall be furnished to the Company within
three (3) days of the Company's request therefor.
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate promptly with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Initial Registration Statement, the Additional Registration
Statement or any other Registration Statement, as the case may be, hereunder,
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<PAGE> 12
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) 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 3(g), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement, as the case may be, covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(h) or the first sentence of 3(g) and, if so directed
by the Company, such Investor shall deliver to the Company (at the expense of
the Company) or destroy all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(d) No Investor may participate in any underwritten
registration hereunder unless such Investor promptly (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than 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 fees and disbursements of
one counsel for the Investors (which counsel's fees shall not exceed $10,000 or
in the case of an underwritten offering, $20,000), shall be paid by the Company.
In addition, the Company shall pay all of the Investors' reasonable costs
(including legal fees) incurred in connection with the successful enforcement of
the Investors' rights hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in the
Initial Registration Statement, the Additional Registration Statement or any
other 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 and each Person, if any, who controls any Investor within the meaning of
the 1933 Act or the 1934 Act, and any underwriter (as defined in the 1933 Act)
for the Investors, and the directors and officers of, and each Person, if any,
who controls, any such underwriter 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,
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<PAGE> 13
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
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 the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, 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, 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, or (iii) any violation or alleged 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 such Registration Statement
(the matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, 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 reasonable legal fees or
other reasonable 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 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 any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section (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 apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
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<PAGE> 14
(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 same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs such Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, 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 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,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution with respect to information such
persons so furnished in writing expressly for inclusion in the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement, as the case may be.
(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 (at its expense) 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 such indemnifying party shall diligently pursue such defense and
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<PAGE> 15
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 Indemnified Person or
Indemnified Party, as the case may be, 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 in interest of the Registrable
Securities included in the Initial Registration Statement, the Additional
Registration Statement or any other 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 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 indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
(f) 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 the 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 contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no person involved in the sale of Registrable Securities which
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<PAGE> 16
person is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act in connection with such sale shall be entitled to
contribution from any person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) 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 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), 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 (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) 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
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 to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any Person (a "TRANSFEREE") acquiring all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with the Transferee 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 three (3)
business days after such transfer or assignment, furnished with written notice
of (a) the name and address of such Transferee, 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 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 agrees in writing with the Company to be bound by all of the
provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; (vi) such Transferee shall be an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; (vii) in
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the event the assignment occurs subsequent to the date of effectiveness of the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, required to be filed pursuant
to Section 2(a), the Transferee agrees to pay all reasonable expenses of
amending or supplementing such Registration Statement to reflect such
assignment, (viii) no Investor may assign its purchase or other rights with
respect to the Additional Preferred Stock except for an assignment to (x) an
affiliate of such Investor; (y) to another Investor or (z) to an affiliate of
another Investor; and (ix) no Investor may assign its purchase or other rights
hereunder to an entity that in the good faith judgment of the Board of Directors
of the Company is competitive with a core business of the Company; provided,
further, that the restrictions on assignments included in clauses (viii) and
(ix) herein shall not apply if the Company is in default of any of its materials
obligations under this Agreement or any of the other agreements referred to
herein or if a Triggering Event (as defined in the Certificate of Designation)
has occurred.
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 hold at least two-thirds 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 consideration shall be offered or paid to
any person or entity 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 or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record the Preferred Stock,
the Warrants or such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities 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 a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested; or (iv) one
(1) 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:
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<PAGE> 18
if to the Company:
Applied Digital Solutions, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480
Telephone: (561) 366-4800
Facsimile: (561) 366-0002
Attention: David I. Beckett
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
Facsimile: (212) 728-8111
Attention: Peter J. Hanlon, Esq.
if to a Buyer, to its address and facsimile number on the
Schedule of Buyers attached hereto, with copies to such
Buyer's counsel as set forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the other party
of any change in address, phone number or facsimile number.
(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) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. 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.
(e) This Agreement, the Certificate of Designation, the
Warrants and the Securities Purchase Agreement (including all schedules and
exhibits thereto and documents referenced therein) 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. The aforementioned
documents supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
(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.
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<PAGE> 19
(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 two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
(i) Any legal action, suit or proceeding brought against the
Company with respect to this Agreement may be brought in any federal court of
the Southern District of New York or any state court located in New York County,
State of New York, and by execution and delivery of this Agreement, the Company
hereby irrevocably and unconditionally waives any claim (by way of motion, as a
defense or otherwise) of improper venue, that it is not subject personally to
the jurisdiction of such court, that such courts are an inconvenient forum or
that this Agreement or the subject matter may not be enforced in or by such
court. The Company hereby irrevocably and unconditionally consents to the
service of process of any of the aforementioned courts in any such action, suit
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, at its address set forth or provided for herein, such service
to become effective 10 days after such mailing. Nothing herein contained shall
be deemed to affect the right of any party to serve process in any manner
permitted by law or commence legal proceedings or otherwise proceed against any
other party in any other jurisdiction to enforce judgments obtained in any
action, suit or proceeding brought pursuant to this Section. The Company
irrevocably submits to the executive jurisdiction of the aforementioned courts
in such action, suit or proceeding. THE COMPANY HEREBY IRREVOCABLY WAIVES TRIAL
BY JURY IN ANY ACTION, SUIT, OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY
IT OR THE HOLDER IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(j) 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.
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<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
APPLIED DIGITAL SOLUTIONS, INC. LEONARDO, L.P.
By: /s/ DAVID I. BECKETT By: /s/ FRED BERGER
------------------------------------ -----------------------------
Name: David I. Beckett Name: Fred Berger
Its: Vice President and General Its: Chief Financial Officer
Counsel
PECONIC FUND, LTD. WESTGATE INTERNATIONAL, L.P.
By: Elliott International Capital
Advisors Inc., as
attorney-in-fact
By: /s/ MARRAN OLGILVIE By: /s/ ELLIOT GREENBERG
------------------------------------ -----------------------------
Name: Marran Olgilvie Name: Elliott Greenberg
Its: General Counsel of Ramius Capital Its: Vice President
Group, LLC, its Investment Advisor
ELLIOTT ASSOCIATES, L.P.
By: Elliott International Capital Advisors, L.P.,
as general partner
By: Braxton Associates, Inc.,
as general partner
By: /s/ ELLIOT GREENBERG
------------------------------------
Name: Elliott Greenberg
Its: Vice President
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<PAGE> 21
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
INVESTOR ADDRESS AND NUMBER OF INVESTOR'S ADVISORS AND LEGAL
INVESTOR NAME FACSIMILE NUMBER PREFERRED STOCK COUNSEL ADDRESS
-------------- -------------------- ---------------- --------------------------------
<S> <C> <C> <C>
Peconic Fund, Ltd. 757 Third Avenue, 27th Floor 8,666.67 Eleazer Klein, Esq.
New York, NY 10017 Schulte Roth & Zabel LLP
Fax: (212) 845-7999 900 Third Avenue
New York, NY 10022
Fax: (212) 593-5955
Leonardo, L.P. 245 Park Avenue, 26th Floor 8,666.67 Eleazer Klein, Esq.
New York, NY 10167 Schultze Roth & Zabel LLP
Fax: (212) 867-6449 900 Third Avenue
New York, NY 10022
Fax: (212) 593-5955
Elliott Associates, L.P. 712 Fifth Avenue, 36th Floor 4,333.33 Eleazer Klein, Esq.
New York, NY 10019 Schulte Roth & Zabel LLP
Fax: (212) 974-2092 900 Third Avenue
New York, NY 10022
Fax: (212) 593-5955
Westgate International, L.P. 712 Fifth Avenue, 36th Floor 4,333.33 Eleazer Klein, Esq.
New York, NY 10019 Schulte Roth & Zabel LLP
Fax: (212) 974-2092 900 Third Avenue
New York, NY 10022
Fax: (212) 593-5955
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