Document:

exv10w1

 

EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

This Agreement is entered into on June 27, 2003 by and between
TASER International, Inc., a Delaware corporation (the “Buyer”), a Electronic
Medical Research Laboratory, Inc., dba
Tasertron, a California corporation a wholly-owned subsidiary of Taser
Technologies, Inc., a California corporation, Taser Technologies, Inc., a
California corporation and Barnet Resnick,
an individual (jointly and severally, the “Sellers”). The Buyer and the
Sellers are referred to collectively herein as the “Parties” and individually
as a “Party.”

This Agreement contemplates a transaction in which the Buyer will purchase all
of the assets (and assume no liabilities) of Sellers used in the business of
designing, manufacturing, marketing, selling and supporting their brand stun
guns and related products, in return for cash payments secured by an
irrevocable letter of credit from Buyer.

Now, therefore, in consideration of the mutual promises herein made, the
Parties agree as follows.

1. Definitions.

	 	1.1	 	 “Acquired Assets” means all right, title, and interest in and
to all of the assets relating to the Business, except for Excluded
Assets (as defined below), including all of its (a) removable tenant
improvements, fixtures, and fittings thereon, (b) tangible personal
property (such as computers, and software loaded thereon, machinery,
equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
trade show displays, all production equipment, tools, jigs, and
dies, whether finished or not and whether on or off site), (c)
intangible personal property including Intellectual Property,
goodwill associated therewith, licenses and sublicenses to or from
a Seller, granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions,
(d) certain agreements, contracts, indentures, mortgages,
instruments, Security Interests (as defined below), guaranties,
other similar arrangements, and rights thereunder, which have been
designated by Buyer, (e) deposits, prepayments, refunds, and rights
of recovery, (f) approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights obtained
from governments and governmental agencies, (g) books, records,
ledgers, files, documents, correspondence, lists, plats, product
plans, drawings, and specifications, creative materials, advertising
and promotional materials, studies, reports, and other printed,
electronic or written materials, as it relates to customers,
patents, trademarks, and tooling, (h) rights with respect to the
intellectual property assignments in employee and consultant
agreements, (i) customer and supplier lists, (j) all lawsuits,
claims, complaints, demands, judgments, injunctions, orders and the
like against Buyer or any other person, (k) any warranty claims in
favor of Sellers related to the items above, and (l) the good will
of the Business.

 

 

	 	1.2	 	 “Adverse Consequences” means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses.
	 
	 	1.3	 	“Affiliate” means, with respect to a specified person
other than an individual: any person that directly or indirectly controls, is directly or
indirectly controlled by or is directly or indirectly under common control with such specified
persons. For purposes of this definition, (a) “control” (including “controlling,”
“controlled by,” and “under common control with”) means the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract or
otherwise, and shall be construed as such term is used in the rules promulgated under
the Securities Act of 1933, as amended (the “Securities Act”).
	 
	 	1.4	 	“Business” means the design, manufacture, marketing, selling, and
supporting Seller’s brand stun guns and products.
	 
	 	1.5	 	 “Closing” has the meaning set forth in § 2.6 below.
	 
	 	1.6	 	 “Closing Date” has the meaning set forth in §2.6 below.
	 
	 	1.7	 	 “Confidential Information” means any information concerning the
businesses and affairs of the Business that is not generally available to the public.
	 
	 	1.8	 	 “Corporate Seller” means Electronic Medical Research Laboratories, Inc.,
dba Tasertron, a wholly owned subsidiary of laser Technologies, Inc.
	 
	 	1.9	 	“Employee Benefit Plan” means any “employee benefit plan” (as such term
is defined in ERISA §3(3)) and any other employee benefit plan, program or
arrangement of any kind.
	 
	 	1.10	 	 “Employee Pension Benefit Plan” has the meaning set forth in ERISA §3(2).
	 
	 	1.11	 	 “Employee Welfare Benefit Plan” has the meaning set forth in ERISA §3(1).
	 
	 	1.12	 	 “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.
	 
	 	1.13	 	 “Intellectual Property” means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all improvements
thereto, and all U.S. and foreign patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all common law, U.S.
registered and foreign trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all applications,

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	 	 	 	registrations, and renewals in connection therewith, including the name
“TASER,” “Tasertron” “95 HP” and “121 HP” “TE 86”, “TE 93”, “TE 95”,
“Modular Taser”, “Patrol laser,” and all derivations thereof, (c) all
common law, U.S. registered and foreign copyrightable works, all
copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all trade secrets and confidential business
information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer
and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (e) all domain names, websites,
telephone numbers, (f) all other proprietary rights, (g) all hard
copies, electronic copies and tangible embodiments thereof (in whatever
form or medium), and (h) all claims and rights to assert claims against
third parties with respect to any of the preceding.
	 
	 	1.14	 	 “Knowledge” means actual knowledge after reasonable investigation.
	 
	 	1.15	 	 “Liability” means any liability or obligation of whatever kind or nature
(whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due), including any liability for Taxes.
	 
	 	1.16	 	 “Multiemployer Plan” has the meaning set forth in ERISA §3(37).
	 
	 	1.17	 	 “Purchase Price” has the meaning set forth in §2.4 below.
	 
	 	1.18	 	 “Security Interests” has the meaning set forth in Section 3.6 below.
	 
	 	1.19	 	 “Tax” or “Taxes” means any income, gross receipts, license, payroll,
employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital
stock, franchise, employees’ income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and other
tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any
interest, penalty, addition or additional amount thereon imposed, assessed or
collected by or under the authority of any governmental body or payable under
any tax-sharing agreement or any other contract.
	 
	 	1.20	 	 “Tax Return” means any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document
or information filed with or submitted to, or required to be filed with
or submitted
to, any governmental body in connection with the determination,
assessment,
collection or payment of any Tax or in connection with the
administration,
implementation or enforcement of or compliance with any legal requirement
relating to any Tax.

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2. Basic Transaction.

	 	2.1	 	 Purchase and Sale of Assets. Subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the Sellers, and the Sellers agree to
sell, transfer, convey, and deliver to the Buyer, all of the Acquired Assets, free
and clear of all Security Interests, at the Closing for the Purchase Price.
Notwithstanding the foregoing, the transfer of the Acquired Assets pursuant to
this Agreement shall not include the assumption by Buyer of any Liability related
to the Acquired Assets.
	 
	 	2.2	 	 Excluded Assets. Notwithstanding anything to the contrary contained in
Section 2.1 or elsewhere in this Agreement, the following assets of Sellers
(collectively, the “Excluded Assets”) are not part of the sale and purchase
contemplated hereunder, are excluded from the Acquired Assets and shall remain
the property of Sellers after the Closing:

		
	 	     (i) all cash, cash equivalents and short-term
investments, and accounts receivables;
	 
	 	     (ii) all minute books, stock records and
corporate seals;
	 
	 	     (iii) the shares of capital
stock of each Corporate Seller;
	 
	 	     (iv) all insurance policies and rights thereunder (except
to the extent specified in the definition of Acquired Assets above);
	 
	 	     (v) all personnel records and other records that each
Seller is required by law to retain in its possession;
	 
	 	     (vi) all claims for refund of Taxes and other governmental
charges of whatever nature;
	 
	 	     (vii) the security deposit on deposit with the landlord for
the property occupied by Sellers at 1785 Pomona Road, Suite C, Corona,
California 92880;
	 
	 	     (viii) attorney/client privileged communications
and personal correspondence; and,
	 
	 	     (ix) all rights of Sellers under this Agreement and the
Bill of Sale.

	 	2.3	 	 No Assumption of Liabilities. Buyer shall not assume nor have any
responsibility for any Liabilities, claims, demands, or causes of
action of the Business or of any Seller (except for those related to
the Buyer and Intellectual Property, as specified above) or related in
any way to the Acquired Assets (collectively, the “Retained
Liabilities”), it being acknowledged and agreed by the Parties that it
is the

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	 	 	 	intention of the Parties that all of the foregoing shall be and remain
solely the obligations, liabilities and indebtedness of Sellers.
	 
	 	2.4	 	 Purchase Price. Except as otherwise provided herein, the Buyer agrees to
pay to the Sellers an aggregate of One Million Dollars ($1,000,000) (the
“Purchase Price”) in payments designated as follows: On June 27, 2003 a cash
payment in the amount of $100,000 payable to Electronic Medical Research Laboratory,
Inc., dba Tasertron and, a cash payment in the amount of $400,000 payable to
Barnet Resnick; on October 1, 2003 a cash payment in the amount of $250,000
payable to Barnet Resnick; and on January 2, 2004 a cash payment in the amount of
$250,000 payable to Barnet Resnick.
	 
	 	2.5	 	Cash Distribution to Sellers. Buyer’s payment of the Purchase Price on
the dates and in the amounts stated in Section 2.4 above shall be secured by an
irrevocable letter of credit issued by Buyer’s banks, the form of which is attached
hereto as Exhibit A (the “Letter of Credit”).
	 
	 	2.6	 	 The Closing. The closing of the transaction contemplated by this
Agreement (the “Closing”) shall take place on June 27, 2003 at a mutually agreeable
location following the satisfaction or waiver of all conditions to the obligations
of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take at
the Closing itself) or such other date as the Parties may mutually determine (the
“Closing Date”).
	 
	 	2.7	 	 Deliveries at the Closing. At the Closing, (i) the Sellers will deliver
to the Buyer the various certificates, instruments, and documents referred to in §5.1
below; (ii) the Buyer will deliver to the Sellers the Letter of Credit; (iii)
the Sellers will execute, acknowledge (if appropriate), and deliver to the Buyer (A)
assignments (including Intellectual Property transfer documents) in the forms
attached hereto as Exhibit B; (B) such other instruments of sale, transfer, conveyance,
and assignment as the Buyer and its counsel may request; (C) Stipulation of
Dismissal with Prejudice and Sealing the Case Record and Order of
Dismissal with Prejudice and Sealing the Case Record; (D) the Covenant not to
Compete; (E) the Board of Directors and Shareholders’ resolution
authorizing this Agreement; (F) the opinions of counsel, (G) the Bill of Sale; (H) the
sub-license; and (I) Amendments of the Articles of Incorporation.
	 
	 	2.8	 	 Allocation. The Parties agree to allocate the Purchase Price among the
Sellers and the Acquired Assets for all purposes (including financial accounting and
tax purposes) in accordance with the allocation schedule attached hereto as
Exhibit C. Each Seller shall timely and properly prepare, execute, file and deliver
all such documents, forms and other information as Buyer may reasonably request to
prepare such allocation. Neither Buyer nor any Seller shall take any
position (whether in audits, tax returns or otherwise) which is inconsistent with
such allocation unless required to do so by applicable law and shall not file
any tax return or report (including Form 8594), or otherwise take a position with
federal

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	 	 	 	or state authorities, which is inconsistent with such allocation.
The allocation is intended to comply with Section 1060 of the
Internal Revenue Code of 1986, as amended, and related regulations
(the “Code”).

     3. Representations and Warranties of the Sellers. The Sellers represent
and warrant to their Knowledge, jointly and severally, to the Buyer that the
statements contained in this §3 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date and
each payment date, except as set forth in the disclosure schedule accompanying
this Agreement and initialed by the Parties (the “Disclosure Schedule”
attached hereto as Exhibit D). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this §3.

	 	3.1	 	 Organization of the Sellers. Corporate Seller is a
corporation duly organized, validly existing, and in good standing under the laws of the State
of California.
	 
	 	3.2	 	 Capitalization. The authorized equity securities of each
Corporate Seller consists of: 100,000 shares of Series A common stock, of which 862 shares
are issued and outstanding, and owned by Taser Technologies, Inc., and 10,000
Series B common stock of which no shares are issued. Taser Technologies,
Inc. is and will be on the Closing Date the record and beneficial owner and holder
all of the shares. There are no contracts or agreements relating to the
issuance, sale or transfer of any equity securities or other securities of any
Corporate Seller. None of the outstanding equity securities of any Corporate Seller was
issued in violation of the Securities Act, or any other legal requirement.
	 
	 	3.3	 	 Authorization of Transaction. Each Seller has full power and
authority (including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of each Corporate Seller and
stockholders of each Corporate Seller has duly authorized the execution, delivery, and
performance of this Agreement by each Corporate Seller. This Agreement constitutes the valid and
legally binding obligation of each Seller, enforceable in accordance with its terms and conditions.
	 
	 	3.4	 	 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Seller is subject or any provision of its charter or
bylaws or (ii) conflict with, result in a breach of or constitute a default under any
agreement, contract, lease, license, instrument, or other arrangement to which the
Seller is a party, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice, or Security
Interest would not have a material adverse effect on the ability of the Parties to
consummate the transactions contemplated by this Agreement. The Seller does not
need to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the Parties to

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	 	 	 	consummate the transactions contemplated by this, except where the
failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a material adverse effect on the
ability of the Parties to consummate the transactions contemplated by
this Agreement.
	 
	 	3.5	 	 Each Seller is the owner of all claims and has not assigned any such
claims against the Buyer.
	 
	 	3.6	 	 Title to Assets. The Sellers have good and marketable title to the
Acquired Assets free and clear of all security interests, liens, claims or encumbrances
of any kind (“Security Interests”). Schedule 3.6 of the Disclosure Schedule lists
in detail all of the Acquired Assets and their location. The Acquired Asset excluding
the Excluded Assets and the trade booth used by, but not owned by Sellers (a)
constitute all of the assets, tangible, of any nature whatsoever,
necessary to operate the Business in the manner presently operated by Sellers and (b)
include all of the operating assets of Sellers.
	 
	 	3.7	 	 Since the fiscal year ended 2002, there has not been any material adverse
change in the Business. Without limiting the generality of the foregoing, since that date:

		(i)	 	except in the ordinary course of business, none of the Sellers have sold, leased, assigned or otherwise
transferred any assets related in any way to the Business, tangible or intangible, or any interest in any such asset,
in the previous 180 days;
	 
		(ii)	 	except as referred to in the Disclosure
Schedule, no Seller has accelerated, terminated, made
material modifications to, or cancelled any agreement,
contract, lease, or license to which Sellers are a party or
by which any of them is bound; and
	 
		(iii)	 	none of the Sellers have granted any
lease, license or sublicense of any rights under or with
respect to any Intellectual Property or other Acquired
Assets.

	 	3.8	 	 Undisclosed Liabilities. No corporate Seller has any Liability (and
there is no basis for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability), including any Liability for attorneys fees or expenses in connection
with any lawsuits, claims, injunctions, and orders or otherwise, and Seller, Barnet
Resnick has no liability which would effect the title, or constitute an
encumbrance, or a prohibition against use of the Patents.
	 
	 	3.9	 	Legal Compliance. Each of the Sellers and Affiliates has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments,
orders, decrees, rulings, and charges thereunder and including the
Foreign Corrupt
Practices Act, 15 U.S.C. 78dd-l et seq.) of federal, state, local, and
foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing,

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	 	 	 	investigation, charge, complaint, claim, demand, or notice has been filed
or commenced against any of them alleging any failure so to comply.
	 
	 	3.10	 	 Intellectual Property. For
purposes of this Section 3.10, the term
“Acquired IP” means all Intellectual Property that is included in the
Acquired Assets.

	 	 	 	 	 
	 	 	a.
	 	Except as disclosed in the Disclosure Schedule, Seller owns
or have the rights to use, without payments to any other person, all
Intellectual Property. Each item of Intellectual Property owned or used by any
Seller will be transferred to Buyer on the Closing Date.
	 	 	 	 	 
	 	 	b.
	 	Except as disclosed in the Disclosure Schedule and to
Seller’s actual knowledge, Seller, and no product manufactured, designed,
marketed, sold, leased or licensed by any Seller, has interfered with,
infringed upon or misappropriated any Intellectual Property right of any third
party, and no Seller (or any agent, advisor or management level employee of
any Seller with direct responsibility for Intellectual Property
matters) has ever received any charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation, or violation
(including any claim that any Seller must license or refrain from using
any Intellectual Property rights of any third party) except for
charges, complaints, claims, demands and notices that have been fully and
finally resolved. To Sellers’ actual knowledge, no third party has
interfered in any material way with, infringed upon or misappropriated any
Intellectual Property related to the Business.
	 	 	 	 	 
	 	 	c.
	 	Schedule 3.10(c)-A identifies each item of Intellectual
Property that any Seller owns or controls that he or it has filed, recorded or
registered, or applied to file, record or register, with any governmental entity
or domain name registrar, and Schedule 3.10(c)-B identifies each
license or agreement that any Seller has granted to any third party with
respect to any Intellectual Property owned or controlled by that Seller. With
respect to each item of Intellectual Property required to be identified in
Schedule 3.10(c)-A and the Intellectual Property subject to the licenses
and agreements required to be identified in Schedule 3.10(c)-B: (A)
Sellers are the sole owners and possess all right, title, and interest in and
to the item, free and clear of any Security Interest, license, or other
restriction; (B) Except for as set forth in the Disclosure Schedule, the item is
not subject to any outstanding injunction, judgment, order, decree, ruling, or
charge that names any Seller nor Affiliate; (C) Except as set forth in
the Disclosure Schedule hereby, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand naming Seller
nor Affiliate is pending or has been threatened in writing that
challenges the legality, validity, enforceability, registrations, use or
ownership of the item; (D) no Seller nor Affiliate is currently bound by any
agreement to indemnify any person for or against any interference,
infringement, misappropriation or other conflict with respect to the item; Each item of

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	 	 	 	 	Intellectual Property described in Schedule 3.10(c)-A and in Schedule
3.10(c)-B is included in the term “Acquired IP.”
	 	 	 	 	 
	 	 	d.
	 	Schedule 3.10(d) identifies each item of Intellectual Property that any
third party owns or licenses and that Sellers use in connection with the
Business pursuant to license, sublicense, agreement, or permission. With
respect to each item of Intellectual Property required by this
subsection (d) to be identified in Schedule 3.10(d): no party to the license,
sublicense, agreement or permission is in breach or default, and no event has
occurred that with notice or lapse of time would constitute a breach or default,
that would in either case permit termination, modification or acceleration
thereunder; no party to the license, sublicense, agreement or
permission, has repudiated in writing any material provision thereof. The
license, sublicense, agreement or permission for each item of Intellectual
Property described in Schedule 3.10(d) is included in the term “Acquired IP.”
	 	 	 	 	 
	 	 	e.
	 	No former or current employees of any Seller or any Seller Affiliate have
filed, asserted in writing or, to Sellers’ Knowledge (including agents,
advisors or management employees of any Seller with direct
responsibility for Intellectual Property matters), threatened in writing any claim
against any Seller or any Seller Affiliate in connection with such employee’s
involvement in the conception and development of any of the Acquired IP.
All former or current employee, agents and consultants who have
contributed in any material to or participated in the conception and
development of the Acquired IP, have delivered, and executed an
assignment to Sellers, copies of which have been delivered to Buyer.
	 	 	 	 	 
	 	 	f.
	 	Except as set forth in the Disclosure Schedule and except as to the
Acquired IP As of the Closing Date, no former or current shareholder,
employee, director or officer of any Seller will have any rights to
future royalty payments, or license fees from any Seller from
licenses, technology agreements or other agreements, whether written or oral,
between any such person and any Seller.
	 	 	 	 	 
	 	 	g.
	 	Sellers have in their possession or control: (i) correct and complete,
fully-executed copies of all of the licenses and agreements (as amended to date)
that are identified on Schedule 3.10(c)-B and (iv); and (ii) correct and
complete copies of all patents, registration certificates, renewal
certificates, applications, prosecution histories, and all
documents submitted to or received from the relevant patent, copyright, trademark,
domain name or other authorities in the United States and foreign
jurisdictions, as the case may be) relating to each item of the
Intellectual Property identified on Schedule 3.10(c)-A.
	 	 	 	 	 
	 	 	h.
	 	Sellers have delivered to Buyer: (i) correct and complete,
fully-executed copies of all of the documents described in the preceding
subsection.

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	 	3.11	 	 Contracts. Schedule 3.11 of the Disclosure Schedule lists the contracts,
licenses and other agreements related to the Business to which any of the Sellers
is a party: The Sellers have delivered to the Buyer a correct and complete copy of
each written agreement listed in Schedule 3.11 of the Disclosure Schedule (as
amended to date) (A) no party is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (B) no party has repudiated any material provision of the agreement.
	 
	 	3.12	 	 Litigation. Schedule 3.12 of the Disclosure Schedule sets forth each
instance in which any of the Sellers (i) are subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or, to the knowledge of any of the
Sellers, is threatened to be made a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any arbitrator.
	 
	 	3.13	 	 Employee Benefit Plans.

	 	 	 	 	 
	 	 	a.
	 	The Corporate Seller does not and has never maintained any
(Employee Benefit Plans as defined in ERISA.)
	 	 	 	 	 
	 	 	b.
	 	No Seller contributes to, has any obligation to contribute
for Employees of Sellers, nor has any liability (including withdrawal liability as
defined in ERISA §4201) under or with respect to (i) any Employee Pension
Benefit Plan that is a “defined benefit plan” (as defined in ERISA §(35)).
	 	 	 	 	 
	 	 	c.
	 	No asset of any Seller is subject to any Lien under ERISA or
the Code, or (ii) any Multiemployer Plan.

	 	3.14	 	 Tax Matters.

	 	 	 	 	 
	 	 	a.
	 	Each Seller has timely filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by each Seller (whether or not shown or required to be shown
on any Tax Return) have been paid. Except for the 2002 Income Tax
Returns, no Seller currently is the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever been made
by an authority in a jurisdiction where any Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no liens on any of the assets of any Seller that arose in connection with
any failure (or alleged failure) to pay any Tax.
	 	 	 	 	 
	 	 	b.
	 	Each Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with any amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other
third party, and all Forms W-2 and 1099 required with respect thereto
have been properly completed and timely filed.

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	 	 	c.
	 	No Seller stockholder and no director or officer (or
employee responsible for Tax matters) of any Seller expects any
authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim
concerning any Tax Liability of any Seller either (A) claimed or
raised by any authority in writing or (B) as to which any of
Seller’s stockholders and the directors and officers (and
employees responsible for Tax matters) of any Seller has
knowledge based upon personal contact with any agent of such
authority which may materially effect the title constitute an
encumbrance of or prohibit the use of the Acquired Assets.

	 	3.15	 	 Schedule 3.15 of the Disclosure Schedule lists all customers
together with their
address and contact information. Seller shall provide
all other sales
documentation.
	 
	 	3.16 	 	Certain Business Relationships. None of the Sellers or Affiliates
own any asset,
tangible or intangible, which is used in the Business, which is not
being
transferred hereby except for the Excluded Assets and the trade booth
used but
not owned by Seller.
	 
	 	3.17	 	 Brokers’ Fees. No Seller or any Affiliate has any Liability or
obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the
transactions contemplated by this Agreement for which Buyer could
become
liable or obligated.
	 
	 	3.18	 	 Disclosure. The representations and warranties contained in this §3
do not contain
any untrue statement of a material fact or omit to state any material
fact necessary
in order, to make the statements and information contained in this §3
not
misleading. There does not now exist any event, condition or other
matter, or any
series of events, conditions or other matters, individually or in the
aggregate,
adversely affecting the Acquired Assets that has not been set forth in
this
Agreement or the Disclosure Schedule or specifically disclosed to
Buyer in
writing by Sellers.

4.     Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in this §4
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
§4), except as set forth in Schedule 4 the Disclosure Schedule. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this §4.

	 	 	 	 	 
	 	 	a.
	 	Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the
laws of the State of Delaware.

11

 

	 	 	 	 	 
	 	 	b.
	 	Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms and conditions.
	 	 	 	 	 
	 	 	c.
	 	Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws or (ii) conflict with,
result in a breach of or constitute a default under any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is
a party, except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Security
Interest would not have a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement.
The Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this, except where the failure to give notice,
to file, or to obtain any authorization, consent, or approval would not have
a material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
	 	 	 	 	 
	 	 	d.
	 	Dissemination of Financial Statements. As part of
Buyer’s due diligence it has been provided copies of Corporate Seller’s financial statements.
Buyer represents and warrants that it shall permit only the executive
officers, directors and auditors access to such statement and shall not
otherwise disseminate the statements through January 2, 2004.

5. Conditions to Obligation to Close.

	 	5.1	 	 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following
conditions:

12

 

	 	 	 	 	 
	 	 	a.	 	
the representations and warranties set forth in §3 above shall be true
and correct in all material respects at and as of the Closing Date;
	 
	 	 	b.	 	
the Sellers shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
	 
	 	 	c.	 	
Buyer shall have received evidence of the releases of all Security
Interests on the Acquired Assets satisfactory to Buyer and its counsel;
	 
	 	 	d.	 	
Delivery of a Bill of Sale in the form attached as Exhibit E and such
other instruments of assignment, transfer and conveyance as Buyer shall
request to convey to Buyer good title to the Acquired Assets;
	 
	 	 	e.	 	Delivery of all instruments of assignment relating to the Intellectual
Property;
	 
	 	 	f.	 	the Sellers shall have arranged for Buyer to acquire possession of and
effect the transfer and/or assignments to Buyer of all of the Acquired
Assets, excepting: the assignments of Intellectual Property which will
be delivered at closing pursuant to section (e); the correspondence files
identified in 1.1(g) which will be delivered post-closing and the china
tool which will be delivered post-closing;
	 
	 	 	g.	 	
no notice has been received by Seller of any action, suit, or proceeding
shall be pending before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyer to own the
Acquired Assets;
	 
	 	 	h.	 	
each Seller shall have delivered to the Buyer a certificate to the effect
that each of the conditions specified above is satisfied in all respects
in form and substance as set forth in Exhibit F;
	 
	 	 	i.	 	
the Buyer shall have received from counsel to the Sellers an opinion in
form and substance as set forth in Exhibit G attached hereto, addressed
to the Buyer, and dated as of the Closing Date;
	 
	 	 	j.	 	
Seller, Barnet Resnick, shall have signed a covenant not to compete in
the Business for a period of seven (7) years in form and substance as set
forth in Exhibit H;
	 
	 	 	k.	 	
Seller, Barnet Resnick, shall have executed and delivered sub-license
agreement in a form and substance as set forth in Exhibit I.

13

 

	 	 	 	 	 
	 	 	l.	 	
all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to
effect the transactions contemplated hereby shall be
satisfactory in form and substance to Buyer.
	 
	 	 	m.	 	all board and shareholder resolutions approving the
transaction.
	 
	 	 	n.	 	
executed Amendment to the Articles of Incorporation of Corporate Sellers changing the corporate
names.
	 
	 	 	o.	 	
abandonment of the fictitious business name “Tasertron.”

The Buyer may waive any condition specified in this §5.1 if it executes a
writing so stating at or prior to the Closing.

	 	5.2	 	 Conditions to Obligation of the Sellers. The obligation of
the Sellers to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:

	 	 	 	 	 
	 	 	a.	 	the representations and warranties set forth in
§4 above shall be true and correct in all material respects at and as of the Closing
Date;
	 
	 	 	b.	 	the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
	 	 	 	 	 
	 	 	c.
	 	no action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
	 	 	 	 	 
	 	 	d.
	 	the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above is satisfied in all
respects in form and substance as set forth in Exhibit J;
	 	 	 	 	 
	 	 	e.
	 	the Sellers shall have received from counsel to
the Buyer an opinion in form and substance as set forth in Exhibit K attached hereto,
addressed to the Sellers, and dated as of the Closing Date,
	 	 	 	 	 
	 	 	f.
	 	post the Letter of Credit referenced in Section 2.5 herein
above.
	 	 	 	 	 
	 	 	g.
	 	board of directors resolution approving this
Agreement and its related
transaction.

14

 

The Sellers may waive any condition specified in this §5.2 if they execute a
writing so stating at or prior to the Closing.

     6. Post closing obligations. In addition to all other covenants,
conditions and representations of Sellers and Buyers which continue after the
Closing Date, the parties agree to the following post-closing obligations:

		
	 	       (i)       From
the Closing Date through January 2, 2004, no Sellers shall make a general assignment for the benefit of
creditors, file a voluntary petition in bankruptcy or for
reorganization or arrangement under the bankruptcy laws.
	 
	 	       (ii)      In the
event that an involuntary petition in bankruptcy is filed against any Seller. Sellers shall take whatever action
is necessary to effect a dismissal of such petition prior to
January 2, 2004.
	 
	 	       (iii)     Sellers shall accomplish the following:

	 	 	 
	 	 	a.       
shall file the Amended Articles of Incorporation
with the California Secretary of State.
	 	 	 
	 	 	b.       
shall file and record any required abandonment of
the Tasertron fictitious business name.
	 	 	 
	 	 	c.       
shall deliver the correspondence files to Buyer on or before July 3, 2003.
	 	 	 
	 	 	d.       
shall deliver the china mold to Buyer by no later than September 30, 2003.

		
	 	       (iv)     the
obligations of Buyers regarding the dissemination of Seller’s financial statements shall survive the
Closing Date and continue through and until January 3, 2004.

     7. Remedies for Breaches of this Agreement.

	 	7.1	 	Survival of Representations and Warranties. All of the
representations, warranties and covenants of the Sellers shall survive the Closing (even if the
Buyer knew or had reason to know of any misrepresentation or breach of warranty
which effect the ability to provide clear title to the Acquired Assets or which
would encumber or restrict the ability to use the Acquired Assets at the time of
Closing) and continue in full force and effect up and until January 2, 2004.
Provided, however, should any claims be made prior to January 3, 2004, the
representation and warranties shall continue in full force and effect as to that claim
until resolved.
	 
	 	7.2	 	Indemnification Provisions for Benefit of the Buyer. Each
Seller, jointly and severally, agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may pay resulting from, arising out
of, relating to, in the nature of, or caused by the following only as it relates
to affording the

15

 

	 	 	 	Buyer clear title, release of any encumbrances on restriction on use of
the Acquired Assets:

	 	 	 	 	 
	 	 	a.
	 	any Breach of any representation or warranty made by that
Seller in (i) this Agreement (without giving effect to any
supplement to the Disclosure Schedule), (ii) the Disclosure
Schedule, (iii) the supplements to the Disclosure Schedule, (iv)
the certificates delivered pursuant to Section 5.1, (v) any
transfer instrument or (vi) any other certificate, document,
writing or instrument delivered by any Seller pursuant to this
Agreement;
	 	 	 	 	 
	 	 	b.
	 	any Breach of any covenant or obligation of any Seller in
this Agreement or in any other certificate, document, writing or
instrument delivered by any Seller pursuant to this Agreement;
	 	 	 	 	 
	 	 	c.
	 	any Liability arising out of the ownership or operation of
the Acquired Assets prior to the Closing Date;
	 	 	 	 	 
	 	 	d.
	 	any brokerage of finder’s fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been made, by any Person with any Seller (or any Person acting on their behalf) in connection with any of the transactions contemplated by this
Agreement;
	 	 	 	 	 
	 	 	e.
	 	any product or component thereof manufactured by or shipped, or any services provided by, any Seller, in whole or in part, prior to the
Closing Date;
	 	 	 	 	 
	 	 	f.
	 	any noncompliance with any bulk sales laws or fraudulent transfer law in respect of the transactions contemplated by this Agreement;
	 	 	 	 	 
	 	 	g.
	 	any liability under the WARN Act or any similar state or local legal requirement that may result from an “Employment Loss”, as defined
by 29 U.S.C. sect. 2101(a)(6), caused by any action of any Seller prior to the Closing or by Buyer’s decision not to hire previous employees of
any Seller; or
	 	 	 	 	 
	 	 	h.
	 	any liability, claim or expense of the Sellers (including
any liability of the Sellers that becomes a liability of the Buyer
under any bulk transfer law of any jurisdiction under any common law
doctrine of de facto merger or successor liability, or otherwise by
operation of law).
	 	 	 	 	 
	 	 	g.
	 	any of the Excluded Assets or Retained Liabilities;
	 	 	 	 	 
	 	 	h.
	 	the ownership or use of the Acquired Assets or the operation
of the Business on or before the Closing Date.

	 	7.3	 	 Indemnification Provisions for Benefit of the Sellers. The Buyer agrees
to indemnify the Sellers from and against the entirety of any Adverse
Consequences the Sellers may suffer resulting from, arising out of,
relating to, in the nature of,

16

 

	 	 	 	or caused by any breach of Buyer’s representations, warranties, and
covenants contained in this Agreement.
	 
	 	7.4	 	 Set off. Buyer shall provide notice of receipt of any claim for which
Sellers are
required to indemnification pursuant to Section 7. After receipt of written notice,
Sellers shall have sixty (60) days from the date of such notice (the “cure period”)
to pay, cure, investigate and compromise such claim. Should Sellers believe such
claim to be an invalid claim, not entitling Buyer to indemnification, hereunder,
Sellers may initiate proceedings seeking an adjudication of the validity of such
claims within the cure period. Should Sellers initiate such proceedings within the
cure period, Buyer shall not pay such claim but shall set off the amount of the
claim against any payment due under the letter of credit and shall hold this
amount in abeyance in a mutually agreeable escrow account until either Seller and
Buyer jointly agree to such payment or invalidity or joint direction from such time
as the claim is adjudicated and Buyer shall then pay such amount to the prevailing
party. Buyer may set off any amounts to which it may be entitled under this
Section 7 against amounts otherwise payable under this Agreement and the letter
of credit to any Seller. The exercise of such right of setoff by Buyer in good faith,
whether or not ultimately determined to be justified, will not constitute an event
of default under this Agreement or the Letter of Credit. Neither the exercise of
nor the failure to exercise such right of setoff will constitute an election of
remedies or limit Buyer in any manner in the enforcement of any other remedies
that any be available to it.
	 
	 	7.5	 	 Matters Involving Third Parties.

	 	 	 	 	 
	 	 	a.
	 	If any third party shall notify any Party (the “Indemnified
Party”) with
respect to any matter which may give rise to a claim for
indemnification (a “Third Party Claim”) against the other Party
(the “Indemnifying Party”) under this Agreement, then the
Indemnified Party shall promptly but in no event any later than 5
business days thereafter, notify the Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
	 	 	 	 	 
	 	 	
b.
	 	The Indemnifying Party will have the right to assume the
defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party at
any time within 15 days after the Indemnified Party
has given notice of the Third Party Claim; and provided, further, that the
Indemnifying Party must conduct the defense of the Third Party Claim
actively and diligently thereafter in order to preserve all rights in this
regard; and provided further that the Indemnified Party may retain
separate co-counsel to participate in the defense of the Third Party Claim.
	 	 	 	 	 
	 	 	
c.
	 	So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance the above provisions,

17

 

	 	 	 	 	 
	 	 	 	 	(A) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of
money damages by the Indemnifying Party does not impose an
injunction or other equitable relief upon the Indemnified
Party, and contains a complete release of the Indemnified Party
and (B) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
	 	 	 	 	 
	 	 	
d.
	 	In the event the Indemnifying Party does not assume
and conduct the defense of the Third Party Claim in accordance
with the above provisions, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim
in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent
from, the Indemnifying Party in connection therewith) and (B)
the Indemnifying Party will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent and (C) if the
Indemnified Party is the Buyer, it may set off the amount of
such Third Party Claim against payments owed under this
Agreement.

8. Termination.

	 	8.1	 	 Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:

	 	 	 	 	 
	 	 	
a.
	 	by Buyer if any condition in Section 5.1 has not been satisfied as of the
date specified for Closing in the first sentence of Section 2.6 or if
satisfaction of such a condition by such date is or becomes impossible
(other than through the failure of Buyer to comply with its obligations
under this Agreement), and Buyer has not waived such condition on or
before such date;
	 	 	 	 	 
	 	 	
b.
	 	by all, but not less than all, of the Sellers if any condition in Section 5.2
has not been satisfied as of the date specified for Closing in the first
sentence of Section 2.6 or if satisfaction of such a condition by such date is or becomes impossible (other than through the failure of any Seller to
comply with its obligations under this Agreement), and the Sellers have
not waived such condition on or before such date;
	 	 	 	 	 
	 	 	
c.
	 	the Buyer and the Sellers may terminate this Agreement by mutual written
consent at any time prior to the Closing;

18

 

	 	 	 	 	 
	 	 	d.
	 	the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing (A) in the event any
Seller has breached any material representation, warranty, or covenant
contained in this Agreement or (B) if the Closing shall not have occurred on
or before June 27, 2003, and,
	 	 	 	 	 
	 	 	e.
	 	all, but not less than all, of the Sellers may
terminate this Agreement by giving written notice to the Buyer at any time prior to the
Closing (A) in the event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, or (B) if the
Closing shall not have occurred on or before June 27, 2003.

	 	8.3	 	 Effect of Termination. If any Party terminates this Agreement
pursuant to §7.1 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to the
other Party (except for any liability of any Party then in breach).

9. Miscellaneous.

	 	9.1	 	Attorney-in-fact. Effective as of the Closing Date, each Seller
hereby constitutes and appoints the Buyer and its successors and assigns, as the true and
lawful attorney-in-fact of each Seller to take all action which the Buyer
deems proper in order to permit for Buyer to confirm and transfer title of any
Acquired Assets. Each Seller acknowledges that the foregoing powers are coupled with an
interest and are irrevocable.
	 
	 	9.2	 	 Press Releases and Public Announcements. The Sellers shall not
issue any press release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the Buyer; provided, however, that the Buyer
may make any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded securities.
	 
	 	9.3	 	 No Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
	 
	 	9.4	 	 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject matter
hereof.
	 
	 	9.5	 	 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written approval
of the other Party.

19

 

	 	9.6	 	 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which together will constitute one
and the same instrument.
	 
	 	9.7	 	 Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of
this Agreement.
	 
	 	9.8	 	Notices. All notices, requests, demands, claims, and other
communications permitted or required hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be deemed duly given
if (and then two business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the intended recipient
as set forth below:

	 	 	 
	If to the Sellers:	 	
Barnet Resnick

Vogt & Resnick

Law Corporations

4400 MacArthur Blvd., Ninth Floor

Newport Beach, CA 92660
	 	 	 
	If to the Buyers:	 	
Rick Smith

Chief Executive Officer

TASER International, Inc.

7860 East McClain Drive, Suite 2

Scottsdale, AZ 85260-1627
	 	 	 
	Copy to:	 	
Douglas Klint

Vice President and General
Counsel 
TASER International,
Inc.
 7860 East McClain Drive,
Suite 2 
Scottsdale, AZ
85260-1627

Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Party notice in the manner herein set forth.

20

 

	 	9.9	 	 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California without
giving effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of California.
	 
	 	9.10	 	 Amendments and Waivers. No
amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the
Sellers. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
	 
	 	9.11	 	 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof
or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
	 
	 	9.12	 	 Expenses. Each of the Buyer and the Sellers will bear his, its or their
own costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
	 
	 	9.13	 	 Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly by the
Parties and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word “including” shall mean including without limitation.
	 
	 	9.14	 	 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a part
hereof.
	 
	 	9.15	 	 Tax Matters. The Sellers will be responsible for the preparation and
filing of all Tax Returns for the Sellers for all periods as to which Tax Returns are
due after the Closing Date (including the consolidated, unitary, and combined Tax
Returns for the Sellers which include the operations of the Business for any
period ending on or before the Closing Date). The Sellers will make all payments
required with respect to any such Tax Return. The Sellers shall pay in a timely
manner all Taxes resulting from or payable in connection with the sale of the
Acquired Assets pursuant to this Agreement, regardless of the person on whom such
Taxes are imposed by legal requirements.

21

 

	 	9.16	 	 Retained Liabilities. In addition to payment of Taxes pursuant to
Section 8.15, the Sellers shall pay, or make adequate provision for the payment, in
full all of the Retained Liabilities and other Liabilities of Seller under this Agreement.
	 
	 	9.17	 	 Further Assurances. The Parties shall cooperate reasonably with each
other and with their respective representatives in connection with any steps
required to be taken as part of their respective obligations under this Agreement, and
shall (a) furnish upon request to each other such further information; (b)
execute and deliver to each other such other documents; and (c) do such other acts
and things, all as the other party may reasonably request for the purpose of carrying
out the intent of this Agreement and the transactions contemplated hereby.
	 
	 	9.18	 	 Bulk Transfer Laws. Sellers shall comply with the provisions of any bulk
transfer laws of any jurisdiction in connection with the transactions contemplated
by this Agreement.
	 
	 	9.19 	 	Waiver; Remedies Cumulative. The rights and remedies of the Parties to
this Agreement are cumulative and not alternative. Neither any failure nor any
delay by any Party in exercising any right, power or privilege under this
Agreement or any of the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of any
such” right, power or privilege will preclude any other or further exercise of such
right, power or privilege or the exercise of any other right, power or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or any of the documents referred to in this Agreement can
be discharged by one Party, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other Party(ies), (b) no
waiver that may be given by a Party will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on one Party will be
deemed to be a waiver of any obligation of that Party or of the right of the Party
giving such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
	 
	 	9.20	 	 Specific Performance. Each Party acknowledges and agrees that the other
Party would be damaged irreparably in the event any provision of this Agreement
not performed in accordance with its specific terms or otherwise is breached,
so that a Party shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the terms
and provisions hereof in addition to any other remedy to which such Party may
be entitled, at law or in equity. In particular, the Parties acknowledge
that the business of the Sellers is unique and recognize and affirm that in the
event any Seller breaches this Agreement, money damages would be inadequate and
Buyer would have no adequate remedy at law, so that Buyer shall have the right,
in addition to any other rights and remedies existing in its favor, to
enforce its rights and the other Parties’ obligations hereunder not only by action for
damages but also by action for specific performance, injunctive, and/or other
equitable relief.

22

 

	 	9.21	 	 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Orange County, California, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and determined
in any such court. Each Party also agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security that might be
required of any other Party with respect thereto. Any Party may make service on
any other Party by sending or delivering a copy of the process to the Party to
be served at the address and in the manner provided for the giving of notices in
§8.8 above. Nothing in this §8.21, however, shall affect the right of any Party
to serve legal process in any other manner permitted by law or in equity. Each
Party agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
	 
	 	9.22	 	 Attorney’s Fees and Costs. In the event of a dispute arising
out of or an action related to this Agreement, the prevailing party shall be entitled to
recover an award of attorney’s fees and costs. Prevailing Party shall mean
with respect to monetary relief a party that recovers fifty percent (50%) or more of
what it seeks in arbitration or in court. With respect to equitable relief it
shall mean a judgment or award that provides the party with the majority of the equitable
relief it seeks to be determined by the arbitrator or judge as the case may be.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.

TASER International, Inc.

	 	 	 
	By:	 	
/s/ Patrick W. Smith
	 	 	

	Name:	 	
Patrick W. Smith
	Title:	 	
CEO

	 	 	 
	By:	 	
/s/ Barnet Resnick
	 	 	

	Name:	 	
Barnet Resnick

Taser Technologies, Inc.

	 	 	 
	By:	 	
/s/ Barnet Resnick
	 	 	

	Name:	 	
Barnet Resnick
	Title:	 	
President

23

 

Electronic Medical Research Laboratory, Inc., dba Tasertron

	 	 	 
	By:	 	
/s/ Barnet Resnick
	 	 	

	Name:	 	
Barnet Resnick
	Title:	 	
President

24<PAGE>
                                                                  Exhibit 4.1

                           THIRD AMENDED AND RESTATED
                          REGISTRATION RIGHTS AGREEMENT

         The Third Amended and Restated Registration Rights Agreement (this
"Restatement") is made and entered into as of April 30,1995 by and among
Crystallume, a California corporation (the "Company"), and the persons
identified on Exhibit A attached hereto (the "Registration Rights Holders").

         Whereas, the Company has granted to certain of the Registration Rights
Holders rights to register securities held or to be held by such holders under
Agreements that are defined on Exhibit B hereto, such rights having been
granted, as to certain of the Registration Rights Holders, under a Series C
Preferred Stock Purchase Agreement dated September 4, 1987 and a certain
Registration Rights Agreement dated May 24, 1990, as amended by the First
Amendment to Registration Rights Agreement dated November 13, 1990 and Section 5
of the Series F Agreement (defined on Exhibit B hereto) (collectively, the
"Agreement").

         Whereas, additional Registration Rights Holders, whose name are also
set forth on Exhibit B, were added to the Agreement under an amended and
restated version of the Agreement referred to as the Amended and Restated
Registration Rights Agreement dated May 7, 1993, as amended by the Fun Amendment
to Amended and Restated Registration Rights Agreement dated as of December 28,
1993, the Second Amendment to Amended and Restated Registration Rights Agreement
dated as of February 25, 1994 and the Third Amendment to Amended and Restated
Registration Rights Agreement dated as of March 3, 1994 (collectively, the
"First Amendment"), which First Amendment replaced the Agreement.

         Whereas, additional Registration Rights Holders, whose names are set
forth on Exhibit B (entries 17 and 18 thereon) were added to the First Amendment
under the terms of that certain Second Amended and Restated Registration Rights
Agreement (the "Second Amendment"), which Second Amendment replaced the First
Amendment.

         Whereas, pursuant to the terms of certain Subscription Agreements, the
Company desires to issue certain units (the "Units"), each Unit consisting of
one share of a new series of the Company's Preferred Stock, the 12% Series A
Convertible Preferred Stock (referred to herein as the "12% Series A"), plus a
warrant for the purchase of up to 100 shares of Common Stock exercisable at
$3.25 per share over a three-year period (the "Unit Warrants"), and to further
amend and restate the Second Amendment (1) to include the Common Stock
underlying the 12% Series A and the Unit Warrants in the definition of
"Registrable Securities" hereunder and (2) to reflect the fact that New York
Life Insurance Company ("NYL") has been added as a holder of "Registrable
Securities" as a consequence of its loan of $1,035,000 to the Company pursuant
to a Note Agreement and a 15% Convertible Secured Note (the "15% Note"), both
dated September 29, 1994, with respect to the shares of Common Stock into which
such 15% Note is convertible or, at the election of NYL, the Common Stock
receivable upon conversion of the Company's Preferred Stock into which such 15%
Note is convertible (in either case, the "15% Note Stock").

<PAGE>

         Now, Therefore, in consideration of the promises, releases and
covenants contained herein, and to fulfill the desires of the parties set forth
in the foregoing recitals, the Agreement, as amended and restated by the First
Amendment and the Second Amendment, is further amended and restated as follows:

         1.       AMENDMENT OF REGISTRATION RIGHTS. The Agreement, the First
Amendment and the Second Amendment shall hereafter be null and void, except that
the recitals to each of such Agreements shall continue to remain in effect to
express the intent of the parties thereto. The registration rights of all
Registration Rights Holders shall be set forth solely in this Restatement.

         2.       DEFINITIONS. All terms not defined below, or in the body of
this Restatement, are defined in Exhibit B hereto. For the purposes of this
Restatement:

                  2.1      The term "Act" means the Securities Act of 1933, as
amended;

                  2.2      The term "Common Stock" means the Common Stock of the
Company.

                  2.3      The term "Registrable Securities" means:

                           (a)      for purposes of this Restatement other than
Section 3 hereof (Special Registration), Common Stock issued upon conversion of
the Series A Stock, the Series B Stock, the Series C Stock, the Series D Stock,
the Series E Preferred Stock of the Company (the "Series E Stock"), the Series F
Stock, the Series G Stock and the Series H Stock (including the Common Stock
issued or issuable upon exercise of the NYL Warrant Venture Lease Warrants and
the Series D Warrants, and upon conversion of the 15% Note Stock, NYL Note, the
Convertible Note, the 1994 Convertible Notes and the Fund Notes, respectively);

                           (b)      for purposes of this Restatement other than
the rights specified in Section 3 (Special Registration), Section 4 (Request for
Registration) and Section 7 (S-3 Registration) hereof, the Lessor Stock, the New
Consultant Warrant Stock, the MMC Stock and the Unit Warrant Stock;

                           (c)      for purposes of this Restatement other than
the rights specified in Section 3.3 (Special Registration for 12% Series A),
Section 4 (Request for Registration), Section 5 (Company Registration) and
Section 7 (S-3 Registration), the Convertible Note Stock and the Short-Term
Stock;

                           (d)      for purposes of this Restatement other than
the rights specified in Section 3.1 and 3.2 (Special Registration for
Convertible Note Stock and Short-Term Stock and Registration of the Underwriters
Warrant), Section 4 (Request for Registration), Section 5 (Company Registration)
and Section 7 (S-3 Registration), the Common Stock of the Company issued or
issuable upon conversion of the 12% Series A Stock; and

                                       2

<PAGE>

                           (e)      any Common Stock of the Company issued as a
dividend or other distribution with respect to, or in exchange or in replacement
of, the aforementioned stock, to the extent limited above;

Shares of such stock shall cease to be Registrable Securities pursuant to
Sections 2.3(a) through (e) above as soon as they have been sold so that they
are no longer "restricted securities" pursuant to Rule 144 or on the later of
(i) the date such Common Stock becomes freely tradable pursuant to Rule 144(k),
or (ii) March 22,1996.

                  2.4      The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Act and the declaration or
ordering of effectiveness of such registration statement.

                  2.5      The term "Holder" means a holder of Registrable
Securities; provided, however, that for purposes of this Restatement, a record
holder of securities convertible into or exercisable for Registrable Securities
shall be treated as the Holder of such Registrable Securities and, provided,
further, that the Company shall in no event be obligated to register any series
of the Company's Preferred Stock (the "Preferred Stock") and that Holders of
Registrable Securities will not be required to convert any shares of Preferred
Stock into Common Stock, nor to exercise or convert any warrant or other
security convertible into such Preferred Stock or Common Stock, in order to
exercise registration rights granted hereunder, until immediately before the
closing of the offering to which the registration relates.

                  2.6      The term "SEC" means the Securities and Exchange
Commission or any body or agency which is a successor thereto.

                  2.7      The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.

                  2.8      The term "Public Offering" shall mean the Company's
initial public offering of Common Stock under a registration statement on Form
SB-2 filed with and declared effective by the SEC on March 22, 1994, File Number
33-76186LA.

                  2.9      The team "Underwriter" shall mean Dickinson & Co.,
the underwriter in the Public Offering.

                  2.10     The term "Underwriter's Stock" shall mean the Common
Stock issuable upon exercise of that certain Representative's Warrant dated
March 22, 1994 that was issued by the Company to the Underwriter or upon
exercise of that certain Redeemable Warrant purchasable upon exercise of such
Representative's Warrant.

                                       3

<PAGE>

         3.       SPECIAL REGISTRATION RIGHTS FOR THE NEW CREDITORS AND THE
                  UNDERWRITER.

                  3.1      The Company agrees that it will, no later than
September 22, 1994, a date six months after the effective date of the
registration statement filed with the SEC in the Public Offering, use reasonable
commercial efforts to register the Convertible Note Stock and the Short-Term
Stock and will keep such registration statement current until March 22, 1996, a
date 24 months after the effective date. For purposes of the rights granted in
this Section 3.1, the Convertible Note Stock and the Short-Term Stock will be
deemed the only Registrable Securities, and the incidental rights described in
Section 5 below shall be inapplicable to the offering to be registered under the
provisions of this Section 3.1, but Section 7.4 shall apply to the registration
described in this Section 3.1.

                  3.2      Each of the parties hereto agree that the
Underwriters Warrant, and the shares of Common Stock purchasable upon exercise
thereof, may be registered in the Public Offering and each of the parties hereto
consents to such registration, notwithstanding the fact that Registrable
Securities will not be included in the Public Offering. The parties hereto agree
that they will amend this Restatement as necessary to enable the Underwriter to
include the Underwriters Warrant and underlying Common Stock in such
registration, without conflict with this Restatement or to grant such additional
registration rights to the Underwriter as the Company and the Underwriter may
agree.

                  3.3      The Company agrees that it will, no later than
January 15, 1996, use reasonable commercial efforts to register the Common Stock
issued or issuable upon conversion of the 12% Series A and will keep such
registration statement current until a date 24 months after the effective date
of such registration statement. For purposes of the rights granted in this
Section 3.3, the Common Stock issued or issuable upon conversion of the 12%
Series A will be deemed the only Registrable Securities, and the incidental
rights described in Section 5 below shall be inapplicable to the offering to be
registered under the provisions of this Section 3.3, but Section 7.4 shall apply
to the registration described in this Section 3.3.

         4.       REQUEST FOR REGISTRATION.

                  4.1      If the Company shall receive, at any time after March
22, 1994 and on or before March 22, 2004, a written request from the Holders of
thirty percent (30%) of the Registrable Securities then outstanding, and which
have been accorded rights under this Section 4, that the Company file a
registration statement under the Act, or a similar document pursuant to any
other statute then in effect corresponding to the Act, covering the registration
of at least twenty-seven percent (27%) of the Registrable Securities accorded
rights under this Section 4 that are held by such Holders, then the Company
shall use reasonable commercial efforts to cause all such Registrable Securities
to be registered under the Act. The Company is, however, obligated to effect
only two (2) such registrations pursuant to this Section 4.1. A registration
statement filed pursuant to the request of the Holders under this Section 4.1
may, subject to the provisions of Section 4.2 herein, include other securities
of the Company which are held by officers or directors of the Company or the
Underwriter or are to be issued by the Company.

                                       4

<PAGE>

                  4.2      If the Holders intend to distribute the Registrable
Securities covered by their request pursuant to Section 4.1 by means of an
underwriting and a representative of the underwriter advises the Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the securities of the Company held by officers or directors
(other than Registrable Securities) of the Company or securities to be issued by
the Company shall be excluded from such registration to the extent so required
by such limitation, and if a limitation of the number of shares is still
required, the Company shall so advise all Holders of Registrable Securities
whose securities would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all such Holders and the Underwriter in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and/or Underwriter's Stock which they hold at the time of filing the
registration statement. No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration.

         5.       COMPANY REGISTRATION. If (but without any obligation to do so)
at any time from time to time on or before March 22, 1999, the Company proposes
to register any of its stock or other securities under the Act in connection
with the public offering of such securities solely for cash (other than an
offering for an employee plan, reclassification of securities, merger,
consolidation, exchange of stock, tender offer or acquisition of assets), the
Company, each such time, shall promptly give each Holder written notice of such
determination. Upon the written request of each Holder given within twenty (20)
days after receipt of any such notice from the Company, the Company shall use
reasonable commercial efforts to cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered. The
rights of a particular Holder under this Section 5 shall terminate after the
Company has four (4) times effected the registration of some or all of the
Registrable Securities held by such Holder or such Holder's affiliates and
transferees as part of a Company registration (including for this purpose a
registration effected by the Company at the request of shareholders other than
such Holder).

         6.       OBLIGATIONS OF THE COMPANY. Whenever required under either
Section 3.4 or 5 to use reasonable commercial efforts to effect the registration
of any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

                  6.1      Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use reasonable
commercial efforts to cause such registration statement to become and remain
effective; provided, however, that in connection with any proposed registration
intended to permit an offering of any securities from time to time (i.e. a
so-called "shelf registration"), except as expressly set forth herein, the
Company shall in no event be obligated to cause any such registration to remain
effective for more than ninety (90) days;

                  6.2      Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement;

                                       5

<PAGE>

                  6.3      Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such Other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
and

                  6.4      Use reasonable commercial efforts to register and
qualify the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by the registration
statement; provided, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdiction; and
provided further, that (anything in this Restatement to the contrary
notwithstanding with respect to the bearing of expenses) if any jurisdiction in
which the securities shall be qualified shall require that expenses incurred in
connection with the qualification of the securities in that jurisdiction be
borne by selling shareholders, then such expenses shall be payable by selling
shareholders pro rata, to the extent required by such jurisdiction.

         7.       FORM S-3 REGISTRATION.

                  7.1      In case the Company shall receive from any Holder or
Holders that have been accorded rights under this Section 7 a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders accorded such rights, and at such
time the Company is eligible to use such Form, the Company shall:

                           (a)      promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
that have been accorded rights under this Section 7; and

                           (b)      as soon as practicable, file and effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request, as are specified in a
written request given within 15 days after receipt of such written notice from
the Company; provided, however, that in connection with any proposed shelf
registration, the Company shall in no event be obligated to cause any such
registration to remain effective for more than ninety (90) days; and provided
further, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 7: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $250,000; (3) if the
Company shall furnish to the Holder a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
(e.g., interfere with any financing, acquisition, corporate reorganization or
other material corporate transaction

                                       6

<PAGE>

or development involving the Company) for such Form S-3 Registration to be
effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than
60 days after receipt of the request of the Holder or Holders under this Section
7; provided, however, that the Company shall not utilize this right more than
once in any twelve month period for any one Holder; (4) if the Company has,
within the twelve (12) month period preceding the date of such request, already
effected two registrations on Form S-3 for the Holders pursuant to this Section
7; or (5) in any particular jurisdiction in which the Company would be required
to qualify to do business or to execute a general consent to service of process
in effecting such registration, qualification or compliance.

                  7.2      A registration statement filed pursuant to the
request of the Holders under this Section 7 may include other securities of the
Company which are held by officers or directors of the Company or are to be
issued by the Company. In such event, participation by such officers and
directors and the Company shall be on the basis set forth in Section 4.2 herein.

                  7.3      Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 7, including (without limitation) all
registration, filing, qualification, printer's and accounting fees, the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders and of counsel for the Company, and any underwriters' discounts or
commissions associated with Registrable Securities and other securities to be
registered, shall be borne pro rata by the Holder or Holders participating in
the Form S-3 Registration, the officers and directors of the Company
participating in the Form S-3 Registration, and, if the Company participates in
the Form S-3 Registration, the Company (on the basis of the number of shares of
each of them included in such registration). Registrations effected pursuant to
this Section 7 shall not be counted as demands for registrations effected
pursuant to Sections 4 or 5, respectively.

                  7.4      In the event that the Company believes that it may be
necessary or appropriate to file a supplement or a post-effective amendment to
any registration statement filed pursuant to the request of the Holders under
this Section 7 or under Sections 3.1 or 3.3, the prospectus contained in such
registration statement, or any document incorporated therein by reference, or to
file any other required document so that, as thereafter delivered to the
purchasers of shares registered under such registration statement ("Registered
Shares"), the prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein not
misleading (a "Prospectus Update"), the Company shall notify the Holders of all
Registered Shares accorded rights under this Section 7 or under Sections 3.1 or
3.3, as applicable, of its determination that it is necessary or appropriate to
prepare, file and cause to be declared effective a Prospectus Update. After
receipt of such notice no Holder of Registered Shares shall sell such Registered
Shares unless and until a Prospectus Update has been effectuated. The Company
shall use all reasonable efforts to prepare, file and effectuate such Prospects
Update as soon as practicable, but in any event such Prospectus Update shall be
filed with the SEC within six (6) months after the date the Company's notice of
determination described above in this Section 7.4. As soon as the Prospectus
Update has been effectuated, the Company shall notify the Holders of Registered
Shares that the Prospectus is available for use.

                                       7

<PAGE>

                  7.5      In the event that a registration proceeding is begun
pursuant to this Section 7 and the registration request is subsequently
withdrawn or if any Holder fails to sell shares registered under a registration
statement effectuated pursuant to this Section 7, such Holder shall forfeit, as
to the shares so registered or to be registered, its right to request that the
Company effect a subsequent registration on Form S-3, unless such registration
request was withdrawn (a) at the request of the Company due to the fact that it
would be seriously detrimental to the Company and its shareholders for such
registration to be effected at such time or (b) after such Holder has learned of
a material adverse change in the condition, business or prospects of the Company
not known to such Holder at the time of such Holder's request for registration.

         8.       FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 3, 4, 5 and 7
that the Holders shall furnish to the Company such information regarding them,
the Registrable Securities held by them, and the intended method of disposition
of such securities as the Company shall reasonably request and as shall be
requited in connection with the action to be taken by the Company.

         9.       EXPENSES OF DEMAND REGISTRATION. All expenses incurred in
connection with a registration pursuant to Section 3 and the first two
registrations pursuant to Section 4, including without limitation all
registration and qualification fees, printer's and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders and the Underwriter (such
counsel's fees and disbursements not to exceed twenty-five thousand dollars
($25,000)) shall be borne by the Company; provided, however, that the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Sections 3 or 4 if the registration request is subsequently
withdrawn, unless the Holders agree to forfeit their right to one (1) demand
registration pursuant to Section 4 or forfeit their registration rights entirely
under Section 3, as the case may be; provided further, however, than if at the
time of the withdrawal, the Holders have learned of a material adverse change in
the condition, business, or prospects of the Company from that known to the
Holders at the time of their request, then the Holders shall not be required to
pay any of the expenses and shall retain the right to require the Company to
register the Registrable Securities pursuant to Sections 3 or 4 as the case may
be.

                  9.1      The Company shall not be required to pay stock
transfer taxes or underwriters' fees, discounts or commissions relating to the
Registrable Securities; and

                  9.2      If any cost or expense payable by the Company under
this Section 9 is attributable solely to one selling shareholder and does not
constitute a normal cost or expense of such a registration, such cost or expense
shall be allocated to, and borne by, that selling shareholder.

         10.      EXPENSES OF COMPANY REGISTRATION. All expenses incurred in
connection with any registration effected pursuant to Section 5 herein,
including without limitation, all registration, filing and qualification fees,
printing and accounting expenses, fees and disbursements of

                                       8

<PAGE>

counsel for the Company, and the fees and disbursements of one special counsel
retained by the Underwriter and Holders of Registrable Securities covered by
such registration (such special counsel's fees and disbursements not to exceed
twenty five thousand dollars ($25,000)) shall be borne by the Company; provided,
however:

                  10.1     the Company shall not be required to pay stock
transfer taxes or underwriters' fees, discounts or commissions relating to
Registrable Securities; and

                  10.2     if any such cost or expense is attributable solely to
one selling shareholder and does not constitute a normal cost or expense of such
a registration, such cost or expense shall be allocated to, and borne by, that
selling shareholder.

         11.      UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 5 to include any of the Holders' securities
in such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then only in
such quantity as will not, in the opinion of the underwriters, jeopardize the
success of the offering by the Company. If the total amount of securities that
all such selling shareholders of the Company (including the Holders) request to
be included in such offering exceeds the amount of such securities that the
underwriters reasonably believe compatible with the success of the offering, the
Company shall only be required to include in the offering so many of the
securities of the selling shareholders (including the Holders) as the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling shareholders
(including the Holders) according to the total amount of securities owned by
said selling shareholders (including the Holders), or in such other proportions
as shall mutually be agreed to by such selling shareholders (including the
Holders); provided, however that: (a) no such reduction shall be made with
respect to any securities offered by the Company for its own account, except to
the extent necessary to comply with the following clauses of this Section 1l, or
to Holders exercising demand registration rights; (b) the Holders' securities
and Registrable Securities way be excluded in their entirety from the
registration covering the Company's initial registered public offering of
securities; and (c) in any registration in which Holders are entitled to include
Registrable Securities pursuant to Section 5 hereof (other than the registration
covering the Company's initial public offering of securities) the Holders and
the Underwriter together shall be entitled to register Registrable Securities
and/or Underwriter's Stock constituting up to an aggregate of twenty-five
percent (25%) of the total number of securities to be included in any such
subsequent registration.

         12.      DELAY OF REGISTRATION. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Restatement.

         13.      INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Restatement:

                                       9

<PAGE>

                  13.1     To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for it, and each person, if any, who controls such Holder or underwriter within
the meaning of the Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of any untrue or alleged untrue statement of any material
fact contained in such registration statement, including any preliminary
prospectus (unless such untrue statement or omission is cured in the final
prospectus) or final prospects contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; and will reimburse each
such Holder, such underwriter, or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 13.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in connection with such registration
statement, preliminary prospectus, final prospectus or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.

                  13.2     To the extent permitted by law, each Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act and each agent and attorney
for the Company and any underwriter for the Company (within the meaning of the
Act), and any person who controls such underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which the Company or
any such director, officer, controlling person, agent, attorney or underwriter
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus (unless such
untrue statement or omission is cured in the final prospectus) or final
prospectus contained therein or any amendments or supplements thereto, or arise
out or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary or final
prospectus or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent, attorney or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the obligations of each such Holder

                                       10

<PAGE>

hereunder will be limited to an amount equal to the proceeds received by each
such Holder from securities sold as contemplated herein.

                  13.3     Promptly after receipt by an indemnified party under
this paragraph of notice of the commencement of any action, such indemnified
patty will, if claim in respect thereof is to be made against any indemnifying
party under this paragraph, notify the indemnifying party in writing 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 the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that if in the reasonable opinion of such counsel there is a conflict of
interest between the indemnifying and indemnified party or parties, then the
indemnified party or parties may retain one counsel to represent it or them and
the indemnifying party or parties shall bear the expenses of such counsel. The
failure to notify an indemnifying party promptly of the commencement of any such
action, if prejudicial to the indemnifying party's ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this paragraph, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may have to any
indemnified party otherwise than under this Section 13.

         14.      REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. The Company
agrees to use reasonable commercial efforts to:

                  14.1     make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration filed by the Company;

                  14.2     file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act"); and

                  14.3     to furnish to any Holder so long as Holder on any
Registrable Securities, upon request a written statement by the Company that it
has complied with the reporting requirements of SEC Rule 144 (at any time after
ninety (90) days after the effective date of said first registration statement
filed by the Company), and of the Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC permitting the selling of any such securities
without registration under the Act.

         15.      STANDBACK. Each Holder hereby agrees that it shall not sell or
otherwise transfer or dispose of any Registrable Securities or any other
securities of the Company for the period of time specified by an underwriter of
securities of the Company (other than to donees who agree to be similarly bound)
not to exceed one hundred eighty (180) days after the effective date of any
future registration statement filed by the Company in connection with any
underwritten public offering of the Company's Common Stock. In order to enforce
the foregoing covenant, the Company may impose legends and stock transfer
instructions with respect to the Registrable

                                       11

<PAGE>

Securities held by each Holder, and so the shares or securities of every other
person subject to the foregoing restriction, until the end of such period.

         16.      AMENDMENT AND ASSIGNMENT OF REGISTRATION RIGHTS.

                  16.1     Any provision of this Restatement 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 the Holders of two-thirds (2/3) of the Registrable
Securities then outstanding. For this purpose, Registrable Securities shall mean
any of the securities described in Section 2.3 above. Notwithstanding the
foregoing, the Company will not, without the prior written consent of the
Holders of a majority of the Lessor Stock, or a majority of the MMC Stock, as
the case may be, and the securities in each case issued with respect to such
stock that constitute Registrable Securities, amend, modify or restate the
provisions of this Restatement applicable to the incidental rights described in
Section 5 above or the S-3 rights described in Section 7 above with respect to
the Lessor Stock, or the incidental rights described in Section 5 above with
respect to the MMC Stock, if the Holders of such shares would be adversely
affected by the amendment in a manner different than the other Holders having
such incidental rights or S-3 rights, respectively. Any amendment or waiver
effected in accordance with this Section shall be binding upon each Holder and
the Company. By acceptance of any benefits under this Restatement, Holders of
Registrable Securities hereby agree to be bound by all the provisions hereunder.

                  16.2     The rights to cause the Company to register
Registrable Securities pursuant to this Restatement may be assigned by a Holder
to a transferee or assignee of such securities provided the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. The parties hereto acknowledge that transfers of the
Company's Series A through D, F and G Preferred Stock on March 31, 1993 included
the transfer of registration rights hereunder relating to such stock.

         17.      GOVERNING LAW. This Restatement and the legal relations
between the parties arising hereunder shall be governed by and interpreted in
accordance with the laws of the State of California excluding that body of law
relating to conflicts of laws. The parties hereto agree to submit to the
jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Restatement or the enforcement
of any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Restatement.

         18.      ENTIRE AGREEMENT. This Restatement constitutes the full and
entire understanding and agreement between the parties regarding rights to
registration and the other subject matter hereof. My other obligation of the
Company to provide registration rights any shareholder hereunder is hereby
terminated. Except as otherwise expressly provided herein, the provisions

                                       12

<PAGE>

hereof shall inure to the benefit of, and be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.

         19.      NOTICES, ETC. Any notice required or permitted to be given to
a party pursuant to the provisions of this Restatement will be in writing and
will be effective and deemed given under this Restatement on the earliest of (a)
the date of personal delivery, (b) the date of delivery by facsimile (if
receiving party has provided the Company with its facsimile number), (c) the
business day after deposit with a nationally-recognized courier or overnight
service, including Express Mail, for United States deliveries or three (3)
business days after such deposit for deliveries outside of the United States, or
(d) three (3) business days after deposit in the United States mail by
registered or certified mail for United States deliveries. All notices not
delivered personally or by facsimile will be sent with postage and other charges
prepaid and properly addressed (a) if to a Registration Rights Holder, at such
Registration Rights Holder's address as set forth on Exhibit A, or at such other
address as such Registration Rights Holder shall have furnished to the Company
in writing in accordance with this Section 19, or (b) if to the Company, at its
principal office. All notices for delivery outside the United States will he
sent by facsimile, or by nationally recognized courier or overnight service,
including Express Mail. Notices to the Company will be marked to the attention
of the President.

         20.      COUNTERPARTS. This Restatement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one agreement.

         21.      ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Restatement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which such party may be
entitled.

         22.      SURVIVAL. The rights and obligations of the parties hereto
will survive the exercise, conversion or expiration of any of the warrants or
convertible promissory notes specified on Exhibit B hereto.

         23.      EFFECTIVE DATE AND EFFECT OF RESTATEMENT. The parties hereto
intend this Restatement to constitute a written amendment of the Second
Amendment, in compliance with Section 16 thereof, effective on the date first
set forth above; provided, however, that this Restatement shall be effective as
to each of the 1995 Subscribers, respectively, on the date that such person or
entity executes this Restatement. Provided that the parties to this Restatement
include the Company and the requisite number of Holders, this amendment and
restatement will be binding on each Holder, whether or not such Holder has
signed this Restatement.

                [Remainder of this page intentionally left blank]

                                       13

<PAGE>

In Witness Whereof, the undersigned have executed this Restatement as of the
date set forth above.

                                    CRYSTALLUME
                                    a California corporation

                                    By: ________________________________________

                                    Its: _______________________________________

                                    REGISTRATION RIGHTS HOLDER
                                    ____________________________________________
                                    Print Name of Registration Rights Holder

                                    ____________________________________________
                                    Signature of Registration Rights Holder or
                                    Authorized Signatory

                                    ____________________________________________
                                    (Name and Title of Authorized Signatory)

                  [SIGNATURE PAGE TO THIRD AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT]

                                       14

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