Exhibit 99.5
MINIMUM BORROWING NOTE REGISTRATION RIGHTS AGREEMENT
This Minimum Borrowing Note Registration Rights Agreement (this
"Agreement") is made and entered into as of March 31, 2005, by and between
Farmstead Telephone Group, Inc., a Delaware corporation (the "Company"),
and Laurus Master Fund, Ltd. (the "Purchaser").
This Agreement is made pursuant to the Security Agreement, dated as
of the date hereof, by and among the Purchaser, the Company and various
subsidiaries of the Company (as amended, modified or supplemented from time
to time, the "Security Agreement"), and pursuant to the Notes and the
Warrants referred to therein.
The Company and the Purchaser hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined
herein that are defined in the Security Agreement shall have the meanings
given such terms in the Security Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares of the Company's common stock, par
value $0.01 per share.
"Effectiveness Date" means, (i) with respect to the
Registration Statement required to be filed in connection with the Minimum
Borrowing Note issued on the initial funding date under the Security
Agreement and the Warrants issued on such initial funding date, a date no
later than ninety (90) days following such initial funding date and (ii)
with respect to each additional Registration Statement required to be filed
hereunder, a date no later than thirty (30) days following the applicable
Filing Date.
"Effectiveness Period" has the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
"Filing Date" means, with respect to (1) the Registration
Statement which is required to be filed in connection with the shares of
Common Stock issuable upon conversion of the Minimum Borrowing Note made on
the initial funding date, the date which is thirty (30) days after the date
hereof, (2) the Registration Statement required to be filed in connection
with each additional Minimum Borrowing Note funded after the initial
funding date, the date which is thirty (30) days after such funding of such
additional Minimum Borrowing Note, (3) the Registration Statement required
to be filed in connection with the shares of Common Stock issuable to the
Holder upon exercise of a Warrant, the date which is thirty (30) days after
the issuance of such Warrant, and (4) the Registration Statement required
to be filed in connection with the shares of Common Stock issuable to the
Holder as a result of adjustments to the Fixed Conversion Price or the
Exercise Price, as the case may be, made pursuant to Section 2.5 of the
Revolving Note, Section 3.5 of the Minimum Borrowing Notes, Section 4 of
the Warrant or
otherwise, thirty (30) days after the occurrence of such event or the date
of the adjustment of the Fixed Conversion Price or Exercise Price, as the
case may be.
"Holder" or "Holders" means the Purchaser or any of its
affiliates or transferees to the extent any of them hold Registrable
Securities, other then those purchasing Registrable Securities in a market
transaction.
"Indemnified Party" has the meaning set forth in Section 5(c).
"Indemnifying Party" has the meaning set forth in Section 5(c).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-
effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock
issued upon the conversion of the each Minimum Borrowing Note and issuable
upon exercise of the Warrants.
"Registration Statement" means each registration statement
required to be filed hereunder, including the Prospectus therein,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
Securities Act" means the Securities Act of 1933, as amended,
and any successor statute.
"Security Agreement" has the meaning given to such term in the
Preamble hereto.
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"Trading Market" means any of the NASD Over The Counter
Bulletin Board, NASDAQ SmallCap Market, the NASDAQ National Market, the
American Stock Exchange or the New York Stock Exchange
"Warrants" means the Common Stock purchase warrants issued in
connection with the Security Agreement, whether on the date thereof or
thereafter.
2. Registration.
(a) On or prior to each Filing Date, the Company shall
prepare and file with the Commission a Registration Statement covering the
Registrable Securities for a selling stockholder resale offering to be made
on a continuous basis pursuant to Rule 415. Each Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case
such registration shall be on another appropriate form in accordance
herewith). The Company shall cause each Registration Statement to become
effective and remain effective as provided herein. The Company shall use
its reasonable commercial efforts to cause each Registration Statement to
be declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event no later than the Effectiveness
Date. The Company shall use its reasonable commercial efforts to keep each
Registration Statement continuously effective under the Securities Act
until the date which is the earlier date of when (i) all Registrable
Securities covered by such Registration Statement have been sold or (ii)
all Registrable Securities covered by such Registration Statement may be
sold immediately without registration under the Securities Act and without
volume restrictions pursuant to Rule 144(k), as determined by the counsel
to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent and the affected
Holders (each, an "Effectiveness Period").
(b) If: (i) any Registration Statement is not filed on or
prior to the applicable Filing Date for such Registration Statement; (ii) a
Registration Statement filed hereunder is not declared effective by the
Commission by the applicable Effectiveness Date; (iii) after a Registration
Statement is filed with and declared effective by the Commission, a
Discontinuation Event (as hereafter defined) shall occur and be continuing,
or such Registration Statement ceases to be effective (by suspension or
otherwise) as to all Registrable Securities to which it is required to
relate at any time prior to the expiration of the Effectiveness Period
applicable to such Registration Statement (without being succeeded
immediately by an additional Registration Statement filed and declared
effective), for a period of time which shall exceed 30 days in the
aggregate per year or more than 20 consecutive calendar days (defined as a
period of 365 days commencing on the date such Registration Statement is
declared effective); or (iv) the Common Stock is not listed or quoted, or
is suspended from trading on any Trading Market for a period of three (3)
consecutive Trading Days (provided the Company shall not have been able to
cure such trading suspension within 30 days of the notice thereof or list
the Common Stock on another Trading Market); (any such failure or breach
being referred to as an "Event," and for purposes of clause (i) or (ii) the
date on which such Event occurs, or for purposes of clause (iii) the date
which such 30 day or 20 consecutive day period (as the case may be) is
exceeded, or for purposes of clause (iv) the date on which such three (3)
Trading Day period is exceeded, being referred to as "Event Date"), then as
partial relief for the damages to the Purchaser by reason of
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the occurrence of any such Event (which remedy shall not be exclusive of
any other remedies available at law or in equity), the Company shall pay to
the Purchaser for each day that an Event has occurred and is continuing, an
amount in cash equal to one-thirtieth (1/30th) of the product of: (A) the
then outstanding principal amount of the Note multiplied by (B) 0.02 (or,
with respect to an Event of the type referred to in clause (ii) of this
Section 2(b) that occurs in connection with the initial Registration
Statement required to be filed hereunder, 0.015 for the first 30 day period
following the applicable Effectiveness Date, and 0.02 thereafter).In the
event the Company fails to make any payments pursuant to this Section 2(b)
in a timely manner, such payments shall bear interest at the rate of 1.5%
per month (prorated for partial months) until paid in full.
(c) Within three business days of the Effectiveness Date, the
Company shall cause its counsel to issue a blanket opinion in the form
attached hereto as Exhibit A, to the transfer agent stating that the shares
are subject to an effective registration statement and can be reissued free
of restrictive legend upon notice of a sale by the Purchaser and
confirmation by the Purchaser that it has complied with the prospectus
delivery requirements, provided that the Company has not advised the
transfer agent orally or in writing that the opinion has been withdrawn.
Copies of the blanket opinion required by this Section 2(c) shall be
delivered to the Purchaser within the time frame set forth above.
3. Registration Procedures. If and whenever the Company is
required by the provisions hereof to effect the registration of any
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities, respond as promptly
as possible to any comments received from the Commission, and use its best
efforts to cause such Registration Statement to become and remain effective
for the Effectiveness Period with respect thereto, and promptly provide to
the Purchaser copies of all filings and Commission letters of comment
relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement and to keep such
Registration Statement effective until the expiration of the Effectiveness
Period applicable to such Registration Statement;
(c) furnish to the Purchaser such number of copies of the
Registration Statement and the Prospectus included therein (including each
preliminary Prospectus) as the Purchaser reasonably may request to
facilitate the public sale or disposition of the Registrable Securities
covered by such Registration Statement;
(d) use its commercially reasonable efforts to register or
qualify the Purchaser's Registrable Securities covered by such Registration
Statement under the securities or "blue sky" laws of such jurisdictions
within the United States as the Purchaser may reasonably request, provided,
however, that the Company shall not for any such purpose be required to
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qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(e) list the Registrable Securities covered by such
Registration Statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately notify the Purchaser at any time when a
Prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event of which the Company has
knowledge as a result of which the Prospectus contained in such
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing; and
(g) make available for inspection by the Purchaser and any
attorney, accountant or other agent retained by the Purchaser, all publicly
available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available, non-
confidential information reasonably requested by the attorney, accountant
or agent of the Purchaser.
4. Registration Expenses. All expenses relating to the Company's
compliance with Sections 2 and 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and
expenses (including reasonable counsel fees) incurred in connection with
complying with state securities or "blue sky" laws, fees of the NASD,
transfer taxes, fees of transfer agents and registrars, fees of, and
disbursements incurred by, one counsel for the Holders are called
"Registration Expenses". All selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any special
counsel to the Holders beyond those included in Registration Expenses, are
called "Selling Expenses." The Company shall only be responsible for all
Registration Expenses.
5. Indemnification.
(a) In the event of a registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, the Company
will indemnify and hold harmless each Holder, and its officers, directors
and each other person, if any, who controls such Holder within the meaning
of the Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which such Holder, or such persons may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable
Securities were registered under the Securities Act pursuant to this
Agreement, any preliminary Prospectus or final Prospectus contained
therein, or any amendment or supplement thereof, 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 such Holder, and each such
person for any reasonable legal or other expenses incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action;
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provided, however, that the Company will not be liable in any such case if
and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information
furnished by or on behalf of the Purchaser or any such person in writing
specifically for use in any such document.
(b) In the event of a registration of the Registrable
Securities under the Securities Act pursuant to this Agreement, the
Purchaser will indemnify and hold harmless the Company, and its officers,
directors and each other person, if any, who controls the Company within
the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such persons may
become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact which was furnished in writing by the
Purchaser to the Company expressly for use in (and such information is
contained in) the Registration Statement under which such Registrable
Securities were registered under the Securities Act pursuant to this
Agreement, any preliminary Prospectus or final Prospectus contained
therein, or any amendment or supplement thereof, 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 the Company and each such person
for any reasonable legal or other expenses incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Purchaser will be liable in any such
case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished in writing to the Company by or on behalf of the
Purchaser specifically for use in any such document. Notwithstanding the
provisions of this paragraph, the Purchaser shall not be required to
indemnify any person or entity in excess of the amount of the aggregate net
proceeds received by the Purchaser in respect of Registrable Securities in
connection with any such registration under the Securities Act.
(c) Promptly after receipt by a party entitled to claim
indemnification hereunder (an "Indemnified Party") of notice of the
commencement of any action, such Indemnified Party shall, if a claim for
indemnification in respect thereof is to be made against a party hereto
obligated to indemnify such Indemnified Party (an "Indemnifying Party"),
notify the Indemnifying Party in writing thereof, but the omission so to
notify the Indemnifying Party shall not relieve it from any liability which
it may have to such Indemnified Party other than under this Section 5(c)
and shall only relieve it from any liability which it may have to such
Indemnified Party under this Section 5(c) if and to the extent the
Indemnifying Party is prejudiced by such omission. In case any such action
shall be brought against any Indemnified Party and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party
shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
Indemnified Party, and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume and undertake the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified
Party under this Section 5(c) for any legal expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof; if the
Indemnified Party retains its own counsel, then the Indemnified Party shall
pay all fees, costs and expenses of such counsel, provided, however, that,
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if the defendants in any such action include both the Indemnified Party and
the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the Indemnifying Party
or if the interests of the Indemnified Party reasonably may be deemed to
conflict with the interests of the Indemnifying Party, the Indemnified
Party shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
Indemnifying Party as incurred.
(d) In order to provide for just and equitable contribution
in the event of joint liability under the Securities Act in any case in
which either (i) the Purchaser, or any officer, director or controlling
person of the Purchaser, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time
to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact
that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the
Purchaser or such officer, director or controlling person of the Purchaser
in circumstances for which indemnification is provided under this Section
5; then, and in each such case, the Company and the Purchaser will
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so
that the Purchaser is responsible only for the portion represented by the
percentage that the public offering price of its securities offered by the
Registration Statement bears to the public offering price of all securities
offered by such Registration Statement, provided, however, that, in any
such case, (A) the Purchaser will not be required to contribute any amount
in excess of the public offering price of all such securities offered by it
pursuant to such Registration Statement; and (B) no person or entity guilty
of fraudulent misrepresentation (within the meaning of Section 10(f) of the
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
6. Representations and Warranties.
(a) The Common Stock is registered pursuant to Section 12(b)
or 12(g) of the Exchange Act and, except with respect to certain matters
which the Company has disclosed to the Purchaser on Schedule 12(u) to the
Security Agreement, the Company has timely filed all proxy statements,
reports, schedules, forms, statements and other documents required to be
filed by it under the Exchange Act. The Company has filed (i) its Annual
Report on Form 10-K for the fiscal year ended December 31, 2003 and (ii)
its Quarterly Report on Form 10-Q for the fiscal quarters ended March 31,
2004, June 30, 2004, and September 30, 2004 (collectively, the "SEC
Reports"). Each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in
the SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally
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accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes
or may be condensed) and fairly present in all material respects the
financial condition, the results of operations and the cash flows of the
Company and its subsidiaries, on a consolidated basis, as of, and for, the
periods presented in each such SEC Report.
(b) The Common Stock is listed for trading on the American
Stock Exchange and satisfies all requirements for the continuation of such
listing, and the Company shall do all things necessary for the continuation
of such listing. The Company has not received any notice that its Common
Stock will be delisted from the American Stock Exchange (except for prior
notices which have been fully remedied and/or previously responded to (to
the extent a copy of each such notice and response thereto shall have been
provided to the Purchaser)) or that the Common Stock does not meet all
requirements for the continuation of such listing
(c) Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offering of the Securities
pursuant to the Security Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the
Company from selling the Common Stock pursuant to Rule 506 under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries
take any action or steps that would cause the offering of the Common Stock
to be integrated with other offerings (other than such concurrent offering
to the Purchaser).
(d) The Warrants, the Notes and the shares of Common Stock
which the Purchaser may acquire pursuant to the Warrants and the Notes are
all restricted securities under the Securities Act as of the date of this
Agreement. The Company will not issue any stop transfer order or other
order impeding the sale and delivery of any of the Registrable Securities
at such time as such Registrable Securities are registered for public sale
or an exemption from registration is available, except as required by
federal or state securities laws.
(e) The Company understands the nature of the Registrable
Securities issuable upon the conversion of each Note and the exercise of
each Warrant and recognizes that the issuance of such Registrable
Securities may have a potential dilutive effect. The Company specifically
acknowledges that its obligation to issue the Registrable Securities is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
(f) Except for agreements made in the ordinary course of
business, there is no agreement that has not been filed with the Commission
as an exhibit to a registration statement or to a form required to be filed
by the Company under the Exchange Act, the breach of which could reasonably
be expected to have a material and adverse effect on the Company and its
subsidiaries, or would prohibit or otherwise interfere with the ability of
the Company to enter into and perform any of its obligations under this
Agreement in any material respect.
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(g) The Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock for the full
conversion of each Note and exercise of the Warrants.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by
a Holder, of any of their respective obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement.
(b) No Piggyback on Registrations. Except as and to the
extent set forth on Schedule 7(b) hereto, neither the Company nor any of
its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in any Registration Statement
other than the Registrable Securities, and the Company shall not after the
date hereof enter into any agreement providing any such right for inclusion
of shares in the Registration Statement to any of its security holders.
Except as and to the extent specified in Schedule 7(b) hereto, the Company
has not previously entered into any agreement granting any registration
rights with respect to any of its securities to any Person that have not
been fully satisfied.
(c) Compliance. Each Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities Act
as applicable to it in connection with sales of Registrable Securities
pursuant to any Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice
from the Company of the occurrence of a Discontinuation Event (as defined
below), such Holder will forthwith discontinue disposition of such
Registrable Securities under the applicable Registration Statement until
such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may
provide appropriate stop orders to enforce the provisions of this
paragraph. For purposes of this Section 7(d), a "Discontinuation Event"
shall mean (i) when the Commission notifies the Company whether there will
be a "review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto
to each of the Holders); (ii) any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to
such Registration Statement or Prospectus or for additional information;
(iii) the issuance by the Commission of any stop order suspending the
effectiveness of such Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) the receipt by the Company of any notification with respect
to the suspension of the qualification or exemption from qualification of
any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and/or (v)
the occurrence of any event or passage of time that makes the financial
statements included in such
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Registration Statement ineligible for inclusion therein or any statement
made in such Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires any revisions to such Registration
Statement, Prospectus or other documents so that, in the case of such
Registration Statement or Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Piggy-Back Registrations. If at any time during any
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities required to be covered during
such Effectiveness Period and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of
any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with
stock option or other employee benefit plans, then the Company shall send
to each Holder written notice of such determination and, if within fifteen
(15) days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or
any part of such Registrable Securities such Holder requests to be
registered, to the extent the Company may do so without violating
registration rights of others which exist as of the date of this Agreement,
subject to customary underwriter cutbacks applicable to all holders of
registration rights and subject to obtaining any required consent of any
selling stockholder(s) to such inclusion under such registration statement.
(f) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates
exclusively to the rights of certain Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or
consent relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(g) Notices. Any notice or request hereunder may be given to
the Company or the Purchaser at the respective addresses set forth below or
as may hereafter be specified in a notice designated as a change of address
under this Section 7(g). Any notice or request hereunder shall be given by
registered or certified mail, return receipt requested, hand delivery,
overnight mail, Federal Express or other national overnight next day
carrier (collectively, "Courier") or telecopy (confirmed by mail). Notices
and requests shall be, in the case of those by hand delivery, deemed to
have been given when delivered to any party to whom it is addressed, in the
case of those by mail or overnight mail, deemed to have been given three
(3) business days after the date when deposited in the mail or with the
overnight mail carrier, in the case of a Courier, the next business day
following timely delivery of the package with the
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Courier, and, in the case of a telecopy, when confirmed. The address for
such notices and communications shall be as follows:
If to the Company: Farmstead Telephone Group, Inc.
00 Xxxxxxxx Xxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: ___________________
with a copy to:
Pepe & Hazard LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 02110Attention:
Xxxxx X. Xxxxxxxx, III, Esq.
Facsimile: 617-748-5555
If to a Purchaser: To the address set forth under such
Purchaser name on the signature
pages hereto.
If to any other Person who is
then the registered Holder: To the address of such Holder as it
appears in the stock transfer books
of the Company
or such other address as may be designated in writing hereafter in
accordance with this Section 7(g) by such Person.
(h) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the
prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted
under the Notes and the Securities Purchase Agreement.
(i) Execution and Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed
shall be deemed to be an original and, all of which taken together shall
constitute one and the same agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
(j) Governing Law, Jurisdiction and Waiver of Jury Trial.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW. The Company hereby consents and agrees that the state or federal
courts located in the County of New York, State of New York shall have
exclusion jurisdiction to hear and determine any Proceeding between the
Company, on the one
11
hand, and the Purchaser, on the other hand, pertaining to this Agreement or
to any matter arising out of or related to this Agreement; provided, that
the Purchaser and the Company acknowledge that any appeals from those
courts may have to be heard by a court located outside of the County of New
York, State of New York, and further provided, that nothing in this
Agreement shall be deemed or operate to preclude the Purchaser from
bringing a Proceeding in any other jurisdiction to collect the obligations,
to realize on the Collateral or any other security for the obligations, or
to enforce a judgment or other court order in favor of the Purchaser. The
Company expressly submits and consents in advance to such jurisdiction in
any Proceeding commenced in any such court, and the Company hereby waives
any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens. The Company hereby waives personal
service of the summons, complaint and other process issued in any such
Proceeding and agrees that service of such summons, complaint and other
process may be made by registered or certified mail addressed to the
Company at the address set forth in Section 7(g) and that service so made
shall be deemed completed upon the earlier of the Company's actual receipt
thereof or three (3) days after deposit in the U.S. mails, proper postage
prepaid. The parties hereto desire that their disputes be resolved by a
judge applying such applicable laws. Therefore, to achieve the best
combination of the benefits of the judicial system and of arbitration, the
parties hereto waive all rights to trial by jury in any Proceeding brought
to resolve any dispute, whether arising in contract, tort, or otherwise
between the Purchaser and/or the Company arising out of, connected with,
related or incidental to the relationship established between then in
connection with this Agreement. If either party hereto shall commence a
Proceeding to enforce any provisions of this Agreement, the Security
Agreement or any other Ancillary Agreement, then the prevailing party in
such Proceeding shall be reimbursed by the other party for its reasonable
attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
[Balance of page intentionally left blank; signature page follows]
12
IN WITNESS WHEREOF, the parties have executed this Minimum Borrowing
Note Registration Rights Agreement as of the date first written above.
FARMSTEAD TELEPHONE GROUP, INC.
By: /s/ Xxxxxx X XxXxxxx
Name: Xxxxxx X XxXxxxx
Title: Chief Financial Officer
LAURUS MASTER FUND, LTD.
By:_/s/ Xxxxx Grin
Name:_David Grin
Title:_____________________________
Address for Notices:
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Grin
Facsimile: 000-000-0000
13
EXHIBIT A
____________, 200___
[Continental Stock Transfer
& Trust Company
Two Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxxx]
Re: Farmstead Telephone Group, Inc. Registration Statement on Form [S-3]
Ladies and Gentlemen:
As counsel to Farmstead Telephone Group, Inc., a Delaware corporation
(the "Company"), we have been requested to render our opinion to you in
connection with the resale by the individuals or entitles listed on
Schedule A attached hereto (the "Selling Stockholders"), of an aggregate of
__________ shares (the "Shares") of the Company's Common Stock.
A Registration Statement on Form [S-3] under the Securities Act of
1933, as amended (the "Act"), with respect to the resale of the Shares was
declared effective by the Securities and Exchange Commission on [date].
Enclosed is the Prospectus dated [date]. We understand that the Shares are
to be offered and sold in the manner described in the Prospectus.
Based upon the foregoing, upon request by the Selling Stockholders at
any time while the registration statement remains effective, it is our
opinion that the Shares have been registered for resale under the Act and
new certificates evidencing the Shares upon their transfer or re-
registration by the Selling Stockholders may be issued without restrictive
legend. We will advise you if the registration statement is not available
or effective at any point in the future.
Very truly yours,
[Company counsel]
Schedule A to Exhibit A
Shares
Selling Stockholder R/N/O Being Offered
------------------- ----- -------------
SCHEDULE 7(b)
