Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 14, 2004, by
and among Commerce One, Inc., a Delaware corporation, with headquarters located
at 4440 Rosewood Dr., Pleasanton, CA  94588 (the “Company”), and BayStar Capital
II, L.P. (the “Investor”).

 

WHEREAS:

 

A.            In connection with the Consent and Amendment Agreement by and
between the parties hereto of even date herewith (the “Amendment Agreement”),
the Company has agreed, upon the terms and subject to the conditions of the
Amendment Agreement, to issue to the Investor that number of shares of the
Company’s common stock, par value $0.0001 per share (the “Common Stock”) having
an aggregate fair market value of $947,000 as calculated in the Amendment
Agreement (such shares of Common Stock, the “Common Shares”); and

 

B.            To induce the Investor to execute and deliver the Amendment
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.

 

C.    THE LOCATION OF DEFINED TERMS IN THIS AGREEMENT IS SET FORTH ON THE INDEX
OF TERMS ATTACHED HERETO.

 

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 each of the
Investors hereby agree as follows:

 

1.               DEFINITIONS.

 

As used in this Agreement, the following terms shall have the following
meanings:

 

A.     “BUSINESS DAY” MEANS ANY DAY OTHER THAN SATURDAY, SUNDAY OR ANY OTHER DAY
ON WHICH COMMERCIAL BANKS IN THE CITY OF NEW YORK ARE AUTHORIZED OR REQUIRED BY
LAW TO REMAIN CLOSED.

 

B.     “INVESTOR” MEANS THE INVESTOR, ANY PERMITTED TRANSFEREE OR ASSIGNEE
THEREOF TO WHOM THE INVESTOR ASSIGNS ITS RIGHTS UNDER THIS AGREEMENT IN
CONNECTION WITH A TRANSFER OF REGISTRABLE SECURITIES AND WHO AGREES TO BECOME
BOUND BY THE PROVISIONS OF THIS AGREEMENT IN ACCORDANCE WITH SECTION 9 AND ANY
PERMITTED TRANSFEREE OR ASSIGNEE THEREOF TO WHOM A TRANSFEREE OR ASSIGNEE
ASSIGNS ITS RIGHTS UNDER THIS AGREEMENT IN CONNECTION WITH A TRANSFER OF
REGISTRABLE SECURITIES AND WHO AGREES TO BECOME BOUND BY THE PROVISIONS OF THIS
AGREEMENT IN ACCORDANCE WITH SECTION 9.

 

C.     “PERSON” MEANS AN INDIVIDUAL, A LIMITED LIABILITY COMPANY, A PARTNERSHIP,
A JOINT VENTURE, A CORPORATION, A TRUST, AN UNINCORPORATED ORGANIZATION AND 
GOVERNMENTAL OR ANY DEPARTMENT OR AGENCY THEREOF.

 

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D.     “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 OR
DELAYED 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”).

 

E.     “REGISTRABLE SECURITIES” MEANS THE COMMON SHARES AND ANY SHARES OF
CAPITAL STOCK ISSUED OR ISSUABLE WITH RESPECT TO THE COMMON SHARES AS A RESULT
OF ANY STOCK SPLIT, STOCK DIVIDEND, RECAPITALIZATION, EXCHANGE OR SIMILAR EVENT
OR OTHERWISE.

 

F.      “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 Amendment Agreement.

 

2.               Registration.

 

A.     MANDATORY REGISTRATION.  THE COMPANY SHALL PREPARE, AND, AS SOON AS
PRACTICABLE BUT IN NO EVENT LATER THAN 20 DAYS AFTER THE DATE HEREOF (THE
“FILING DEADLINE”), FILE WITH THE SEC THE REGISTRATION STATEMENT ON FORM S-3
COVERING THE RESALE OF ALL OF THE REGISTRABLE SECURITIES.  IN THE EVENT THAT
FORM S-3 IS UNAVAILABLE FOR SUCH A REGISTRATION, THE COMPANY SHALL USE SUCH
OTHER FORM AS IS AVAILABLE FOR SUCH A REGISTRATION, SUBJECT TO THE PROVISIONS OF
SECTION 2(D); PROVIDED THAT THE COMPANY REPRESENTS AND WARRANTS THAT IT IS
CURRENTLY ELIGIBLE TO REGISTER THE REGISTRABLE SECURITIES ON FORM S-3 AND KNOWS
OF NO REASON WHY IT WILL NOT BE ELIGIBLE TO SO REGISTER THE REGISTRABLE
SECURITIES ON FORM S-3 ON OR BEFORE THE FILING DEADLINE AND ON OR BEFORE THE
EFFECTIVENESS DEADLINE.  THE REGISTRATION STATEMENT PREPARED PURSUANT HERETO
SHALL REGISTER FOR RESALE AT LEAST 500,000 SHARES OF COMMON STOCK.  THE COMPANY
SHALL USE ITS REASONABLE BEST EFFORTS TO HAVE THE REGISTRATION STATEMENT
DECLARED EFFECTIVE BY THE SEC AS SOON AS PRACTICABLE, BUT IN NO EVENT LATER THAN
THE DATE WHICH IS 120 DAYS AFTER THE DATE HEREOF (THE “EFFECTIVENESS DEADLINE”).

 

B.     ALLOCATION OF REGISTRABLE SECURITIES.  THE INITIAL NUMBER OF REGISTRABLE
SECURITIES INCLUDED IN ANY 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 INITIAL 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 TRANSFEROR.  ANY SHARES OF COMMON STOCK INCLUDED
IN A REGISTRATION STATEMENT AND WHICH REMAIN ALLOCATED TO ANY PERSON WHICH
CEASES TO HOLD ANY REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT
SHALL BE ALLOCATED TO THE REMAINING INVESTORS, PRO RATA BASED ON THE NUMBER OF
REGISTRABLE SECURITIES THEN HELD BY SUCH INVESTORS WHICH ARE COVERED BY SUCH
REGISTRATION STATEMENT.  THE COMPANY MAY INCLUDE SECURITIES OTHER THAN
REGISTRABLE SECURITIES ON ANY REGISTRATION STATEMENT TO THE EXTENT

 

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THE COMPANY IS CONTRACTUALLY OBLIGATED TO DO SO PURSUANT TO REGISTRATION RIGHTS
OBLIGATIONS IN EXISTENCE PRIOR TO THE DATE OF THIS AGREEMENT.

 

C.     LEGAL COUNSEL.  SUBJECT TO SECTION 5 HEREOF, THE INVESTORS HOLDING AT
LEAST A MAJORITY OF THE REGISTRABLE SECURITIES SHALL HAVE THE RIGHT TO SELECT
ONE LEGAL COUNSEL TO REVIEW AND OVERSEE ANY OFFERING PURSUANT TO THIS SECTION 2
(“LEGAL COUNSEL”), WHICH SHALL BE SCHULTE ROTH & ZABEL LLP OR SUCH OTHER COUNSEL
AS THEREAFTER DESIGNATED BY THE HOLDERS OF AT LEAST A MAJORITY OF THE
REGISTRABLE SECURITIES.  THE COMPANY AND LEGAL COUNSEL SHALL REASONABLY
COOPERATE WITH EACH OTHER IN PERFORMING THE COMPANY’S OBLIGATIONS UNDER THIS
AGREEMENT.

 

D.     INELIGIBILITY FOR FORM S-3.  IN THE EVENT THAT FORM S-3 IS NOT  AVAILABLE
FOR THE REGISTRATION OF THE RESALE OF REGISTRABLE SECURITIES HEREUNDER, THE
COMPANY SHALL (I) REGISTER THE RESALE OF THE REGISTRABLE SECURITIES ON ANOTHER
APPROPRIATE FORM REASONABLY ACCEPTABLE TO THE HOLDERS OF AT LEAST A MAJORITY OF
THE REGISTRABLE SECURITIES AND (II) 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 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.

 

E.     SUFFICIENT NUMBER OF SHARES REGISTERED.  IN THE EVENT THE NUMBER OF
SHARES AVAILABLE UNDER A REGISTRATION STATEMENT FILED PURSUANT TO SECTION 2(A)
IS INSUFFICIENT TO COVER ALL OF THE REGISTRABLE SECURITIES REQUIRED TO BE
COVERED BY SUCH REGISTRATION STATEMENT OR AN INVESTOR’S ALLOCATED PORTION OF THE
REGISTRABLE SECURITIES PURSUANT TO SECTION 2(B), THE COMPANY SHALL AMEND THE
REGISTRATION STATEMENT, OR FILE A NEW REGISTRATION STATEMENT (ON THE SHORT FORM
AVAILABLE THEREFOR, IF APPLICABLE), OR BOTH, SO AS TO COVER AT LEAST 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 REASONABLE BEST
EFFORTS TO CAUSE SUCH AMENDMENT AND/OR NEW REGISTRATION STATEMENT TO BECOME
EFFECTIVE AS SOON AS PRACTICABLE FOLLOWING THE FILING THEREOF.

 

F.      EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN EFFECTIVENESS OF
REGISTRATION STATEMENT.  IF (I) A REGISTRATION STATEMENT COVERING ALL THE
REGISTRABLE SECURITIES AND REQUIRED TO BE FILED BY THE COMPANY PURSUANT TO THIS
AGREEMENT IS NOT DECLARED EFFECTIVE BY THE SEC ON OR BEFORE THE EFFECTIVENESS
DEADLINE OR (II) ON ANY DAY AFTER THE REGISTRATION STATEMENT HAS BEEN DECLARED
EFFECTIVE BY THE SEC AND PRIOR TO THE TERMINATION OF THE REGISTRATION PERIOD
SALES OF ALL THE REGISTRABLE SECURITIES REQUIRED TO BE INCLUDED ON SUCH
REGISTRATION STATEMENT CANNOT BE MADE (OTHER THAN DURING AN ALLOWABLE GRACE
PERIOD (AS DEFINED IN SECTION 3(R)) PURSUANT TO THE REGISTRATION STATEMENT
(INCLUDING, WITHOUT LIMITATION, BECAUSE OF A FAILURE TO KEEP THE REGISTRATION
STATEMENT EFFECTIVE, TO DISCLOSE SUCH INFORMATION AS IS NECESSARY FOR SALES TO
BE MADE PURSUANT TO THE REGISTRATION STATEMENT OR TO REGISTER SUFFICIENT SHARES
OF COMMON STOCK), THEN, AS PARTIAL RELIEF FOR THE DAMAGES TO ANY HOLDER BY
REASON OF ANY SUCH DELAY IN OR REDUCTION OF ITS ABILITY TO SELL THE UNDERLYING
SHARES OF COMMON STOCK (WHICH REMEDY SHALL NOT BE EXCLUSIVE OF ANY OTHER
REMEDIES AVAILABLE AT LAW OR IN EQUITY), THE COMPANY SHALL PAY TO EACH HOLDER OF
COMMON SHARES RELATING TO SUCH REGISTRATION STATEMENT AN AMOUNT IN CASH PER SUCH
COMMON SHARE HELD EQUAL TO THE PRODUCT OF (I) $1.894 MULTIPLIED BY (II) THE
PRODUCT OF (I) .0005 MULTIPLIED BY (II) THE SUM OF (X) THE NUMBER OF DAYS AFTER
THE EFFECTIVENESS DEADLINE THAT THE REGISTRATION

 

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STATEMENT IS NOT DECLARED EFFECTIVE BY THE SEC, PLUS (Y) THE NUMBER OF DAYS
AFTER THE REGISTRATION STATEMENT HAS BEEN DECLARED EFFECTIVE BY THE SEC THAT
SUCH REGISTRATION STATEMENT IS NOT AVAILABLE (OTHER THAN DURING AN ALLOWABLE
GRACE PERIOD) FOR THE SALE OF AT LEAST ALL THE REGISTRABLE SECURITIES REQUIRED
TO BE INCLUDED ON SUCH REGISTRATION STATEMENT.  THE PAYMENTS TO WHICH A HOLDER
SHALL BE ENTITLED PURSUANT TO THIS SECTION 2(F) ARE REFERRED TO HEREIN AS
“REGISTRATION DELAY PAYMENTS.”  REGISTRATION DELAY PAYMENTS SHALL BE PAID ON THE
EARLIER OF (I) THE LAST DAY OF THE CALENDAR MONTH DURING WHICH SUCH REGISTRATION
DELAY PAYMENTS ARE INCURRED AND (II) THE THIRD BUSINESS DAY AFTER THE EVENT OR
FAILURE GIVING RISE TO THE REGISTRATION DELAY PAYMENTS IS CURED.  IN THE EVENT
THE COMPANY FAILS TO MAKE REGISTRATION DELAY PAYMENTS IN A TIMELY MANNER, SUCH
REGISTRATION DELAY PAYMENTS SHALL BEAR INTEREST AT THE RATE OF 1.5% PER MONTH
(PRORATED FOR PARTIAL MONTHS) UNTIL PAID IN FULL.

 

3.     RELATED OBLIGATIONS.

 

At such time as the Company is obligated to file a Registration Statement with
the SEC pursuant to Section 2(a) or 2(e), the Company will use its reasonable
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 A REGISTRATION
STATEMENT WITH RESPECT TO THE REGISTRABLE SECURITIES (BUT IN NO EVENT LATER THAN
THE APPLICABLE FILING DEADLINE) AND USE ITS REASONABLE BEST EFFORTS TO CAUSE
SUCH REGISTRATION STATEMENT RELATING TO THE REGISTRABLE SECURITIES TO BECOME
EFFECTIVE AS SOON AS PRACTICABLE AFTER SUCH FILING (BUT IN NO EVENT LATER THAN
THE EFFECTIVENESS DEADLINE).  THE COMPANY SHALL KEEP EACH 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 BY
SUCH REGISTRATION STATEMENT WITHOUT RESTRICTION PURSUANT TO RULE 144(K) (OR
SUCCESSOR THERETO) PROMULGATED UNDER THE 1933 ACT OR (II) THE DATE ON WHICH THE
INVESTORS SHALL HAVE SOLD ALL THE REGISTRABLE SECURITIES COVERED BY SUCH
REGISTRATION STATEMENT (THE “REGISTRATION PERIOD”), WHICH 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 THE LIGHT OF THE CIRCUMSTANCES IN WHICH THEY WERE MADE,
NOT MISLEADING.  THE TERM “REASONABLE 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, AND THE APPROVAL OF LEGAL
COUNSEL PURSUANT TO SECTION 3(C), 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

 

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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”), THE
COMPANY SHALL HAVE INCORPORATED SUCH REPORT BY REFERENCE INTO THE REGISTRATION
STATEMENT, IF APPLICABLE, OR SHALL FILE SUCH AMENDMENTS OR SUPPLEMENTS WITH THE
SEC ON THE SAME DAY ON WHICH THE 1934 ACT REPORT IS FILED WHICH CREATED THE
REQUIREMENT FOR THE COMPANY TO AMEND OR SUPPLEMENT THE REGISTRATION STATEMENT.

 

C.     THE COMPANY SHALL (A) PERMIT LEGAL COUNSEL TO REVIEW AND COMMENT UPON (I)
THE REGISTRATION STATEMENT AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO ITS FILING
WITH THE SEC AND (II) ALL OTHER REGISTRATION STATEMENTS AND ALL AMENDMENTS AND
SUPPLEMENTS TO ALL REGISTRATION STATEMENTS (EXCEPT FOR ANNUAL REPORTS ON FORM
10-K, QUARTERLY REPORTS ON FORM 10-Q AND CURRENT REPORTS ON FORM 8-K AND ANY
SIMILAR OR SUCCESSOR REPORTS) WITHIN A REASONABLE NUMBER OF DAYS PRIOR TO THEIR
FILING WITH THE SEC, AND (B) NOT FILE ANY REGISTRATION STATEMENT OR AMENDMENT OR
SUPPLEMENT THERETO IN A FORM TO WHICH LEGAL COUNSEL REASONABLY OBJECTS.  THE
COMPANY SHALL NOT SUBMIT A REQUEST FOR ACCELERATION OF THE EFFECTIVENESS OF A
REGISTRATION STATEMENT OR ANY AMENDMENT OR SUPPLEMENT THERETO WITHOUT THE PRIOR
APPROVAL OF LEGAL COUNSEL, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. 
THE COMPANY SHALL FURNISH TO LEGAL COUNSEL, WITHOUT CHARGE, (I) COPIES OF ANY
CORRESPONDENCE FROM THE SEC OR THE STAFF OF THE SEC TO 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) THERETO 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.  THE COMPANY SHALL
REASONABLY COOPERATE WITH LEGAL COUNSEL IN PERFORMING THE COMPANY’S OBLIGATIONS
PURSUANT TO THIS SECTION 3.

 

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 AND EACH PRELIMINARY
PROSPECTUS, (II) UPON THE EFFECTIVENESS OF ANY REGISTRATION STATEMENT, SUCH
NUMBER OF COPIES OF THE PROSPECTUS INCLUDED IN SUCH REGISTRATION STATEMENT AND
ALL AMENDMENTS AND SUPPLEMENTS THERETO 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 USE ITS REASONABLE BEST EFFORTS TO (I) REGISTER AND
QUALIFY, UNLESS AN EXEMPTION FROM REGISTRATION AND QUALIFICATION APPLIES, THE
RESALE BY INVESTORS OF THE REGISTRABLE SECURITIES COVERED BY A REGISTRATION
STATEMENT UNDER SUCH OTHER SECURITIES OR “BLUE SKY” LAWS OF ALL APPLICABLE
JURISDICTIONS IN THE UNITED STATES, (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

 

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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.      THE COMPANY SHALL NOTIFY LEGAL COUNSEL AND EACH INVESTOR IN WRITING,
INCLUDING VIA FACSIMILE OR E-MAIL, OF THE HAPPENING OF ANY EVENT, AS PROMPTLY AS
PRACTICABLE AFTER BECOMING AWARE OF SUCH 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 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 (PROVIDED
THAT IN NO EVENT SHALL SUCH NOTICE CONTAIN ANY MATERIAL, NONPUBLIC INFORMATION),
AND, SUBJECT TO SECTION 3(R), PROMPTLY PREPARE A SUPPLEMENT OR AMENDMENT TO SUCH
REGISTRATION STATEMENT TO CORRECT SUCH UNTRUE STATEMENT OR OMISSION, AND DELIVER
SUCH 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, INCLUDING VIA FACSIMILE OR E-MAIL, (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 OR E-MAIL ON THE SAME DAY OF SUCH EFFECTIVENESS), (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.

 

G.     THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO PREVENT (EXCEPT BY
THE COMPANY DURING AN ALLOWABLE GRACE PERIOD) 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 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.

 

H.     IF ANY INVESTOR IS REQUIRED UNDER APPLICABLE SECURITIES LAW TO BE
DESCRIBED IN THE REGISTRATION STATEMENT AS AN UNDERWRITER, AT THE REASONABLE
REQUEST OF SUCH 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) 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
INVESTORS, AND (II) AN OPINION, DATED AS OF SUCH DATE, OF COUNSEL REPRESENTING
THE COMPANY FOR PURPOSES OF SUCH

 

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REGISTRATION STATEMENT, IN FORM, SCOPE AND SUBSTANCE AS IS CUSTOMARILY GIVEN IN
AN UNDERWRITTEN PUBLIC OFFERING, ADDRESSED TO THE INVESTORS.

 

I.      UPON THE WRITTEN REQUEST OF ANY INVESTOR IN CONNECTION WITH ANY
INVESTOR’S DUE DILIGENCE REQUIREMENTS, IF ANY, THE COMPANY SHALL MAKE AVAILABLE
FOR INSPECTION BY (I) ANY INVESTOR, (II) LEGAL COUNSEL AND (III) ONE FIRM OF
ACCOUNTANTS OR OTHER AGENTS RETAINED BY THE INVESTORS (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
AGREE TO 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 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 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.  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.

 

J.      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.

 

K.     THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS EITHER TO (I) CAUSE ALL
THE REGISTRABLE SECURITIES COVERED BY A REGISTRATION STATEMENT TO BE LISTED ON
EACH SECURITIES EXCHANGE ON WHICH SECURITIES OF THE SAME CLASS OR SERIES ISSUED
BY THE COMPANY ARE THEN LISTED, IF ANY, IF THE LISTING OF SUCH REGISTRABLE
SECURITIES IS THEN PERMITTED UNDER THE RULES OF SUCH EXCHANGE, OR (II) SECURE
DESIGNATION AND QUOTATION OF ALL THE REGISTRABLE SECURITIES COVERED BY THE
REGISTRATION STATEMENT ON THE NASDAQ NATIONAL MARKET, OR (III) IF, DESPITE THE
COMPANY’S REASONABLE BEST EFFORTS TO SATISFY THE PRECEDING CLAUSE (I) OR (II),
THE COMPANY IS UNSUCCESSFUL IN

 

7

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SATISFYING THE PRECEDING CLAUSE  (I) OR (II), TO SECURE THE INCLUSION FOR
QUOTATION ON THE NASDAQ SMALLCAP MARKET FOR SUCH REGISTRABLE SECURITIES AND,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, TO USE ITS REASONABLE BEST
EFFORTS 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(K).

 

L.      THE COMPANY SHALL COOPERATE WITH THE INVESTORS WHO HOLD REGISTRABLE
SECURITIES BEING OFFERED AND, TO THE EXTENT APPLICABLE AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS, 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
INVESTORS MAY REASONABLY REQUEST AND REGISTERED IN SUCH NAMES AS THE INVESTORS
MAY REQUEST.

 

M.    IF REQUESTED BY AN INVESTOR, THE COMPANY SHALL (I) AS SOON AS PRACTICABLE
INCORPORATE IN A PROSPECTUS SUPPLEMENT OR POST-EFFECTIVE AMENDMENT SUCH
INFORMATION AS AN INVESTOR REASONABLY REQUESTS TO BE INCLUDED THEREIN RELATING
TO THE SALE AND DISTRIBUTION OF REGISTRABLE SECURITIES, INCLUDING, WITHOUT
LIMITATION, INFORMATION WITH RESPECT TO THE NUMBER OF REGISTRABLE SECURITIES
BEING OFFERED OR SOLD, THE PURCHASE PRICE BEING PAID THEREFOR AND ANY OTHER
TERMS OF THE OFFERING OF THE REGISTRABLE SECURITIES TO BE SOLD IN SUCH OFFERING;
(II) AS SOON AS PRACTICABLE MAKE ALL REQUIRED FILINGS OF SUCH PROSPECTUS
SUPPLEMENT OR POST-EFFECTIVE AMENDMENT AFTER BEING NOTIFIED OF THE MATTERS TO BE
INCORPORATED IN SUCH PROSPECTUS SUPPLEMENT OR POST-EFFECTIVE AMENDMENT; AND
(III) AS SOON AS PRACTICABLE, SUPPLEMENT OR MAKE AMENDMENTS TO ANY REGISTRATION
STATEMENT IF REASONABLY REQUESTED BY AN INVESTOR HOLDING ANY REGISTRABLE
SECURITIES.

 

N.     THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO CAUSE THE
REGISTRABLE SECURITIES COVERED BY THE 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.

 

O.     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 1933 ACT) 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.

 

P.     THE COMPANY SHALL OTHERWISE USE ITS REASONABLE BEST EFFORTS TO COMPLY
WITH ALL APPLICABLE RULES AND REGULATIONS OF THE SEC IN CONNECTION WITH ANY
REGISTRATION HEREUNDER.

 

Q.     WITHIN TWO (2) BUSINESS DAYS AFTER A REGISTRATION STATEMENT WHICH COVERS
REGISTRABLE SECURITIES IS ORDERED EFFECTIVE BY THE SEC, THE COMPANY SHALL
DELIVER, AND SHALL CAUSE THE GENERAL 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

 

8

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SUCH REGISTRATION STATEMENT) CONFIRMATION THAT SUCH REGISTRATION STATEMENT HAS
BEEN DECLARED EFFECTIVE BY THE SEC IN THE FORM ATTACHED HERETO AS EXHIBIT A.

 

R.      NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE COMPANY MAY SUSPEND
A REGISTRATION STATEMENT, IF THE COMPANY SHALL FURNISH TO THE INVESTORS A
CERTIFICATE SIGNED BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY STATING THAT IN
THE GOOD FAITH JUDGMENT OF THE BOARD OF DIRECTORS IT WOULD BE SERIOUSLY
DETRIMENTAL TO THE COMPANY OR ITS STOCKHOLDERS FOR SUCH A REGISTRATION STATEMENT
NOT TO BE SUSPENDED (A “GRACE PERIOD”).  IN SUCH EVENT, THE COMPANY’S OBLIGATION
UNDER THIS AGREEMENT TO KEEP A REGISTRATION STATEMENT EFFECTIVE SHALL BE
DEFERRED FOR A GRACE PERIOD NOT TO EXCEED 30 CONSECUTIVE DAYS DURING ANY 90 DAY
PERIOD, PROVIDED, THAT THE COMPANY MAY NOT EXERCISE THIS RIGHT OF DEFERRAL FOR
AN AGGREGATE OF IN EXCESS OF 75 DAYS IN ANY ONE YEAR PERIOD (AN “ALLOWABLE GRACE
PERIOD”).  IF THE COMPANY SUSPENDS THE EFFECTIVENESS OF A REGISTRATION
STATEMENT, THE COMPANY WILL PROMPTLY DELIVER NOTICE TO THE INVESTORS OF SUCH
SUSPENSION AND WILL AGAIN DELIVER NOTICE TO THE INVESTORS WHEN SUCH SUSPENSION
IS NO LONGER NECESSARY.  THE COMPANY SHALL NOT ACCRUE ANY REGISTRATION DELAY
PAYMENTS DURING AN ALLOWABLE GRACE PERIOD.

 

4.     OBLIGATIONS OF THE INVESTORS.

 

A.     AT LEAST FIVE (5) 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 AND MAINTAIN THE EFFECTIVENESS OF 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.     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(G), THE FIRST
SENTENCE OF 3(F) OR DURING AN ALLOWABLE GRACE PERIOD, 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 OF THE SUPPLEMENTED OR AMENDED PROSPECTUS
CONTEMPLATED BY SECTION 3(G), THE FIRST SENTENCE OF 3(F) OR DURING AN ALLOWABLE
GRACE PERIOD OR RECEIPT OF NOTICE THAT NO SUPPLEMENT OR AMENDMENT IS REQUIRED. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE COMPANY SHALL CAUSE ITS TRANSFER
AGENT TO DELIVER UNLEGENDED SHARES OF COMMON STOCK TO A TRANSFEREE OF AN
INVESTOR IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS AND THE TERMS OF THE
AMENDMENT AGREEMENT, IN CONNECTION WITH ANY SALE OF REGISTRABLE

 

9

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SECURITIES WITH RESPECT TO WHICH AN INVESTOR HAS ENTERED INTO A CONTRACT FOR
SALE PRIOR TO THE INVESTOR’S RECEIPT OF A NOTICE FROM THE COMPANY OF THE
HAPPENING OF ANY EVENT OF THE KIND DESCRIBED IN SECTION 3(G), THE FIRST SENTENCE
OF 3(F) OR DURING AN ALLOWABLE GRACE PERIOD AND FOR WHICH THE INVESTOR HAS NOT
YET SETTLED.

 

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 shall be paid by the Company.  The Company shall also
reimburse the BayStar Capital II, L.P. for the fees and disbursements of Legal
Counsel in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3 of this Agreement which amount shall be limited to $10,000 in
the aggregate.

 

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, 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, REASONABLE 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,
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, 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 A REGISTRATION STATEMENT (THE
MATTERS IN THE

 

10

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FOREGOING CLAUSES (I) THROUGH (III) BEING, COLLECTIVELY, “VIOLATIONS”).  SUBJECT
TO SECTION 6(C), THE COMPANY SHALL REIMBURSE THE INDEMNIFIED PERSONS, PROMPTLY
AS SUCH EXPENSES ARE INCURRED AND ARE DUE AND PAYABLE, FOR ANY 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 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 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 OR FAILED TO DELIVER THE CORRECT
PROSPECTUS AS REQUIRED BY THE 1933 ACT AND SUCH CORRECT PROSPECTUS WAS TIMELY
MADE AVAILABLE PURSUANT TO SECTION 3(D); (III) SHALL NOT BE AVAILABLE TO THE
EXTENT SUCH CLAIM IS BASED ON A FAILURE OF THE INVESTOR TO DELIVER OR TO CAUSE
TO BE DELIVERED THE PROSPECTUS MADE AVAILABLE BY THE COMPANY, INCLUDING A
CORRECTED PROSPECTUS, IF SUCH PROSPECTUS OR CORRECTED PROSPECTUS WAS TIMELY MADE
AVAILABLE BY THE COMPANY PURSUANT TO SECTION 3(D); AND (IV) 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 OR DELAYED.  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.

 

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 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(C), SUCH INVESTOR WILL
REIMBURSE ANY LEGAL OR OTHER EXPENSES REASONABLY INCURRED BY AN INDEMNIFIED
PARTY 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 OR DELAYED; 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

 

11

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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.     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 OF NOT MORE THAN ONE COUNSEL FOR SUCH
INDEMNIFIED PERSON OR INDEMNIFIED PARTY 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.  IN THE CASE OF AN
INDEMNIFIED PERSON, LEGAL COUNSEL REFERRED TO IN THE IMMEDIATELY PRECEDING
SENTENCE SHALL BE SELECTED BY THE INVESTORS HOLDING AT LEAST A MAJORITY IN
INTEREST OF THE 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 SETTLEMENT OF ANY ACTION, CLAIM OR PROCEEDING EFFECTED WITHOUT ITS PRIOR
WRITTEN CONSENT, PROVIDED, HOWEVER, THAT THE INDEMNIFYING PARTY SHALL NOT
UNREASONABLY WITHHOLD, DELAY OR CONDITION ITS CONSENT.  NO INDEMNIFYING PARTY
SHALL, WITHOUT THE PRIOR WRITTEN 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

 

12

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SECTION 6, EXCEPT TO THE EXTENT THAT THE INDEMNIFYING PARTY IS PREJUDICED IN ITS
ABILITY TO DEFEND SUCH ACTION.

 

D.     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.

 

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 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
person involved in the sale of Registrable Securities which 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 (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 pursuant to such
Registration Statement.

 

8.     REPORTS UNDER THE 1934 ACT.

 

Until the date on which the Investors shall have sold all the Common Shares,
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 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, IF
TRUE, 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.

 

13

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9.     TRANSFER RESTRICTIONS AND ASSIGNMENT OF REGISTRATION RIGHTS.

 

A.     THE INVESTOR UNDERSTANDS THAT: (I) EXCEPT AS PROVIDED IN THE THIS
AGREEMENT, THE REGISTRABLE SECURITIES HAVE NOT BEEN AND ARE NOT BEING REGISTERED
UNDER THE 1933 ACT OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR
SALE, SOLD, ASSIGNED OR TRANSFERRED UNLESS (A) SUBSEQUENTLY REGISTERED
THEREUNDER, (B) SUCH INVESTOR SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF
COUNSEL, IN A FORM GENERALLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT SUCH
REGISTRABLE SECURITIES TO BE SOLD, ASSIGNED OR TRANSFERRED MAY BE SOLD, ASSIGNED
OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION, OR (C) SUCH
INVESTOR SHALL HAVE SATISFIED THE REQUIREMENTS OF RULE 144(K) PROMULGATED UNDER
THE 1933 ACT, AS AMENDED (OR A SUCCESSOR RULE THERETO); (II) ANY SALE OF THE
REGISTRABLE SECURITIES MADE IN RELIANCE ON RULE 144 OR RULE 144A PROMULGATED
UNDER THE 1933 ACT, AS AMENDED (OR A SUCCESSOR RULE THERETO) (COLLECTIVELY,
“RULE 144”), MAY BE MADE ONLY IN ACCORDANCE WITH THE TERMS OF RULE 144 AND
FURTHER, IF RULE 144 IS NOT APPLICABLE, ANY RESALE OF THE REGISTRABLE SECURITIES
UNDER CIRCUMSTANCES IN WHICH THE SELLER (OR THE PERSON (AS DEFINED IN SECTION
1(C)) THROUGH WHOM THE SALE IS MADE) MAY BE DEEMED TO BE AN UNDERWRITER (AS THAT
TERM IS DEFINED IN THE 1933 ACT) MAY REQUIRE COMPLIANCE WITH SOME OTHER
EXEMPTION UNDER THE 1933 ACT OR THE RULES AND REGULATIONS OF THE SEC THEREUNDER;
AND (III) NEITHER THE COMPANY NOR ANY OTHER PERSON IS UNDER ANY OBLIGATION TO
REGISTER THE SECURITIES UNDER THE 1933 ACT OR ANY STATE SECURITIES LAWS OR TO
COMPLY WITH THE TERMS AND CONDITIONS OF ANY EXEMPTION THEREUNDER.  THE
REGISTRABLE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER BONA FIDE LOAN SECURED BY THE REGISTRABLE SECURITIES AND SUCH
PLEDGE OF REGISTRABLE SECURITIES SHALL NOT BE DEEMED TO BE A TRANSFER, SALE OR
ASSIGNMENT OF THE REGISTRABLE SECURITIES HEREUNDER, AND THE INVESTOR EFFECTING A
PLEDGE OF REGISTRABLE SECURITIES SHALL BE REQUIRED TO PROVIDE THE COMPANY WITH
ANY NOTICE THEREOF OR OTHERWISE MAKE ANY DELIVERY TO THE COMPANY PURSUANT TO
THIS AGREEMENT OR THE AMENDMENT AGREEMENT , INCLUDING, WITHOUT LIMITATION, THIS
SECTION 9A.; PROVIDED, THAT IN ORDER TO MAKE ANY SALE, TRANSFER OR ASSIGNMENT OF
REGISTRABLE SECURITIES, SUCH INVESTOR AND ITS PLEDGEE MAKES SUCH DISPOSITION IN
ACCORDANCE WITH OR PURSUANT TO A REGISTRATION STATEMENT OR AN EXEMPTION UNDER
THE 1933 ACT.  NOTWITHSTANDING THE FOREGOING, NO INVESTOR SHALL TRANSFER ANY
REGISTRABLE SECURITIES OTHER THAN TO AN AFFILIATE OF SUCH INVESTOR.

 

B.     SUCH INVESTOR UNDERSTANDS THAT THE CERTIFICATES OR OTHER INSTRUMENTS
REPRESENTING THE COMMON SHARES AND, UNTIL SUCH TIME AS THE SALE OF THE
REGISTRABLE SECURITIES HAVE BEEN REGISTERED UNDER THE 1933 ACT AS CONTEMPLATED
BY THE REGISTRATION RIGHTS AGREEMENT, THE STOCK CERTIFICATES REPRESENTING THE
REGISTRABLE SECURITIES, EXCEPT AS SET FORTH BELOW, SHALL BEAR ANY LEGEND AS
REQUIRED BY THE “BLUE SKY” LAWS OF ANY STATE AND A RESTRICTIVE LEGEND IN
SUBSTANTIALLY THE FOLLOWING FORM (AND A STOP-TRANSFER ORDER MAY BE PLACED
AGAINST TRANSFER OF SUCH STOCK CERTIFICATES):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. 
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR
(B) AN OPINION OF

 

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COUNSEL, IN A FORM GENERALLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER BONA FIDE LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

C.     THE RIGHTS UNDER THIS AGREEMENT SHALL BE AUTOMATICALLY ASSIGNABLE BY THE
INVESTORS TO ANY TRANSFEREE 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 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 WITH THE COMPANY TO BE BOUND BY ALL OF
THE PROVISIONS CONTAINED HEREIN; AND (V) SUCH TRANSFER SHALL HAVE BEEN MADE IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS AND THE TRANSFER RESTRICTIONS SET
FORTH IN THIS SECTION 9.

 

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 at least 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 SUCH RECORD
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

 

15

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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:

 

If to the Company:

 

Commerce One, Inc.

One Market Street

Steuart Tower, Suite 1300

San Francisco, CA  94105

Telephone:            (415) 644-8700

Facsimile:               (415) 644-8750

Attention:              Chief Financial Officer

 

and a separate notice to:

 

Commerce One, Inc.

One Market Street

Steuart Tower, Suite 1300

San Francisco, CA  94105

Telephone:            (415) 644-8700

Facsimile:               (415) 644-8799

Attention:              General Counsel

 

With a copy to:

 

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA  94304

Telephone:            (650) 849-3223
Facsimile:               (650) 493-6811
Attention: N. Anthony Jeffries, Esq.

 

If to Legal Counsel:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone:  (212) 756-2000

Facsimile:  (212) 593-5955

Attention:  Eleazer Klein, Esq.

 

If to an Investor, to its address and facsimile number set forth on the Schedule
of Investors attached hereto, with copies to such Investor’s representatives as
set forth on the Schedule of Investors, 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 five (5) 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 or

 

16

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electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service 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 DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTIONS)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTIONS OTHER THAN THE
STATE OF DELAWARE.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON- EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING DELAWARE, 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
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 AND THE AMENDMENT AGREEMENT 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 AND THE
AMENDMENT AGREEMENT 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.

 

G.     THE HEADINGS IN THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY AND
SHALL NOT LIMIT OR OTHERWISE AFFECT THE MEANING HEREOF.

 

17

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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.      ALL CONSENTS AND OTHER DETERMINATIONS REQUIRED TO BE MADE BY THE
INVESTORS PURSUANT TO THIS AGREEMENT SHALL BE MADE, UNLESS OTHERWISE SPECIFIED
IN THIS AGREEMENT, BY INVESTORS HOLDING AT LEAST A MAJORITY OF THE REGISTRABLE
SECURITIES.

 

K.     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.

 

L.      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

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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of day and year first above written.

 

 

COMPANY:

INVESTOR:

 

 

COMMERCE ONE, INC.

BAYSTAR CAPITAL II, L.P.

 

 

 

By: BayStar Capital Management, LLC

By:

/s/  Charles Boynton

 

 

 

 

 

 

 

 

By:

 /s/  Steven M. Lamar

Name:

Charles Boynton

 

 

Name:  Steven M. Lamar

 

 

 

Title:    Managing Member

Title:

CFO

 

 

 

 

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SCHEDULE OF INVESTORS

 

 

Investor

 

Investor Address
and Facsimile Number

 

Investor’s Representative’s Address
and Facsimile Number

 

 

 

 

 

BayStar Capital II, L.P.

 

c/o BayStar Capital Management, LLC
80 E Sir Francis Drake Blvd.
Suite 2B
Larkspur, California 94939
Attention:  Steven M. Lamar
Facsimile:  (415) 834-4601
Telephone: (415) 834-4620

 

Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attn:  Eleazer Klein, Esq.
Facsimile:  (212) 593-5955
Telephone:  (212) 756-2000

 

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INDEX OF TERMS

 

1933 Act

 

1934 Act

 

Agreement

 

Allowable Grace Period

 

Amendment Agreement

 

Blue Sky Filing

 

Business Day

 

Investor

 

Claims

 

Common Stock

 

Company

 

Effectiveness Deadline

 

Filing Deadline

 

Grace Period

 

Indemnified Damages

 

Indemnified Party

 

Indemnified Person

 

Inspectors

 

Investor

 

Legal Counsel

 

NASD

 

Person

 

Records

 

Register

 

Registrable Securities

 

Registration Delay Payments

 

Registration Period

 

Registration Statement

 

Rule 144

 

Rule 415

 

SEC

 

Violations

 

 

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EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

 

EquiServe

150 Royall Street

Canton, MA 02021

Attention: Norris Richardson

 

Re:          Commerce One, Inc.

 

Ladies and Gentlemen:

 

I am the General Counsel to Commerce One, Inc., a Delaware corporation (the
“Company”), and have represented the Company in connection with that certain
Consent and Amendment Agreement (the “Amendment Agreement”) entered into by and
among the Company and the Investor named therein (the “Holder”) pursuant to
which the Company issued to the Holder shares of the Company’s Common Stock, par
value $.0001 per share (the “Common Stock”).  Pursuant to the Amendment
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holder (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                          , 2004, the
Company filed a Registration Statement on Form S-3 (File No.
333-                 ) (the “Registration Statement”) with the Securities and
Exchange Commission (the “SEC”) relating to the Registrable Securities which
names the Holder as a selling stockholder thereunder.

 

In connection with the foregoing, I advise you that a member of the SEC’s staff
has advised me 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 I 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]

 

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