REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 31, 2000, among General DataComm Industries, Inc., a
Delaware corporation (the "Company"), and the investors signatory hereto (each
such investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof, among the Company and the Purchasers
(the "Purchase Agreement").
In consideration of the mutual covenants contained in the
Purchase Agreement and in this Agreement, the Company and the Purchasers hereby
agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the state of New York and the State of Connecticut generally are
authorized or required by law or other governmental action to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.10 per share and any other securities into which such stock shall hereafter be
redistributed or recapitalized.
"Effectiveness Date" means the 90th day following the Closing
Date, provided, that if (i) the Commission fails to respond with either comments
(whether or not such comments request the filing of additional material), a
request for additional information, a notice of no-review, or a notice of no
further review (whether, in any case, orally or in writing) to the filing by the
Company with the Commission of a Registration Statement within 20 days of the
date that such Registration Statement was filed (the "Response Period"), and
(ii) the Company shall have during such entire period used its best efforts to
obtain such comments, requests or notifications, then, for each day after the
Response Period during which such failure by the Commission continues and during
which the Company shall have continued to have used its best efforts to obtain
such comments, requests or notifications, one day will be added to the
definition of "Effectiveness Date" for all purposes of this Agreement, provided,
however, that in the case of an amendment to a Registration Statement, the
Response Period shall be 15 days of the date that such amendment to a
Registration Statement was filed.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 45th day following the Closing Date.
"Holder" or "Holders" or "Selling Stockholders" means the
holder or holders, as the case may be, from time to time of Registrable
Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
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"Preferred Stock" means the Company's 5% Cumulative
Convertible Preferred Stock, par value $1.00 per share, issued to the Purchasers
in accordance with the Purchase Agreement.
"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
issuable upon conversion of and dividends on the Preferred Stock and upon
exercise in full of the Warrants.
"Registration Statement" means the registration statement and
any additional registration statement contemplated by Section 3(c), including
(in each case) the Prospectus, 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 to having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 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.
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"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Special Counsel" means one special counsel to the Holders for
which the Holders will be reimbursed by the Company pursuant to Section 4.
"Warrants" means the Warrants as defined in the Purchase
Agreement.
2. Shelf Registration
(a) On or prior to the 45th day following the Closing Date,
the Company shall prepare and file with the Commission a "Shelf" Registration
Statement covering the resale of all Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. The 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 as the Holders may
consent). The Company shall respond fully to all comments received from the
Commission within fifteen (15) days of receipt thereof provided Holders timely
provide the Company with all information concerning themselves required by the
Commission. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is two (2)
years after the date that such Registration Statement is declared effective by
the Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold 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 (the "Effectiveness
Period"), provided, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed one or more post-effective amendments to
the Registration Statement and the Commission has not declared it effective.
(b) The initial Registration Statement to be filed hereunder
shall include a number of shares of Common Stock equal to the Maximum Issuable
Shares (as defined in Section 3.5 of the Purchase Agreement) which is the sum of
(i) the number of shares of
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Common Stock issuable upon conversion of the Preferred Stock (ii) the number of
shares issuable upon exercise in full of the Closing Warrant, and the number of
shares issuable as dividends on the Preferred Stock in lieu of cash, not to
exceed 19.999% of the outstanding Common Stock on July 20, 2000.
(c) If (i) the Company fails to file with the Commission a
request to accelerate in accordance with Rule 461 promulgated under the
Securities Act within five (5) business days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed" or is not subject to further
review, or (ii) the initial Registration Statement filed hereunder is not
declared effective by the Commission on or before the 120th day following the
Closing Date) by reason of acts or failure to act by the Company (any such
breach or failure being referred to as an "Event"), and for purposes of clause
(i), the date on which such five (5) business day period is exceeded, and as a
result of any one or more Events the Registration Statement is not declared
effective on or before the 120th day following the Closing Date unless due to
comments by the Commission, in writing, specifically addressing violations of
the Federal securities laws by the Holder or Holders (including the identity
thereof but not of the structure of this transaction generally), then, in any
such case, as liquidated damages for the damages suffered therefrom by the
Holder including damages for failure of the Registration Statement to be
effective on the Effectiveness Date (which remedy shall be exclusive of any
other remedies available at law or in equity except the right to rescind as
provided in the Purchase Agreement if said Registration Statement is not
declared effective by the 180th date following the Closing Date unless the
Company has been notified by the Commission, in writing, that such failure to
declare the Registration Statement effective is due to comments specifically
addressing violations of the Federal securities laws by the Holder or Holders
(including the identity thereof but not the structure of this transaction
generally) the Company shall, on the monthly anniversary of the date of the
Event, and on each monthly anniversary thereof until the Event is cured, pay to
the Holders liquidated damages in the amount of $5,000 per calendar day from the
day after the date of the Event and each day thereafter until cured. In
addition, in the event the Company does not file such Registration Statement by
the 45th day following the Closing Date the Company shall, on the second monthly
anniversary of the Closing Date and on each monthly anniversary thereafter until
the Registration Statement is filed, pay to the Holders liquidated damages in
the aggregate amount of $5,000 per calendar day from such 46th day up to but
excluding the day on which the Registration Statement is filed with the
Commission. In the event of such rescission provided in the Purchase Agreement,
he Company shall promptly withdraw the Registration Statement.
(d) The Company shall not permit a registration statement
filed with the Commission covering any securities of the Company issued after
the Closing Date which are
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convertible or exercisable into shares of Common Stock, which securities contain
reset provisions with respect to lowering the exercise or conversion price for
the acquisition of such shares of Common Stock or involves Common Stock sold at
a discount greater than 20% (but excluding an issuance of securities to a
strategic investor), to become effective until the 46th day following the date
the Registration Statement filed pursuant to this Agreement is declared
effective. Each such registration statement should contain the delaying
amendment language provided in Rule 473 under the Securities Act, as 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 473. The
foregoing shall not apply to registration statements on Form S-8 covering stock
option and/or stock purchase plans covering shares issuable to employees of the
Company, or any registration statement with respect to warrants disclosed in
Schedule 6(b) of this Agreement.
(e) The Company shall not permit the Registration Statement to
cease to be effective for more than ten (10) days (which need not be consecutive
days) during any 60 day period, nor more than thirty (30) days (which need not
be consecutive days), during any twelve (12) month period, other than by reason
of acts or omissions of, or matters relating to, the Holders where the Company
has been notified by the Commission that such event is due to the acts or
omissions of, or related to, the Holders.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
30th day following the Closing Date, a Registration Statement as required by
Section 2(a) which shall contain the "Plan of Distribution" attached hereto as
Annex A (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein, provided, that not less than three (3) Business Days prior to the filing
of a Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), the Company shall, (i) furnish to the
Holders and their Special Counsel copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders and
their Special Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders,
to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration
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Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities or their Special
Counsel shall reasonably object, but all time periods relating to the filing and
effectiveness of such Registration Statement shall be adjusted for the period of
such objections.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within fifteen (15)
days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto, and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c)(i) File such supplements or attach "stickers" to the
Registration Statement or Prospectus as and when required by the Commission to
evidence a material amount of resales by a Holder pursuant to a Prospectus. In
connection therewith, if such supplements or "stickers" are periodically
required by the Commission, the Company shall, within six (6) Business Days,
file such supplements or attach such "stickers" whenever a Holder has advised
Company that Holder has sold 50% of the Registrable Securities covered by the
then outstanding Prospectus (as last supplemented or "stickered") in order to
cover 100% of the number of the outstanding Registrable Securities.
(ii) File additional Registration Statements covering
shares in addition to the Maximum Issuable Shares as and to the extent so
permitted and effectuated by the Company pursuant to Section (D)(10)(c) of the
Certificate of Designations. The Company shall have thirty (30) days to file
such additional Registration Statements after the Company has effectuated such
increase and such additional Registration Statements shall be declared effective
by the 90th day thereafter.
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(d) Notify the Holders of Registrable Securities to be sold
and their Special Counsel as promptly as reasonably possible (and, in the case
of (i)(A) below, not less than three (3) Business Days (or, in the case of a
supplement or "sticker" required to be filed or attached pursuant to Section
3(c), within one (1) Business Days) prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1) Business
Days following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) 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); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (v)
of 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 (vi) of the occurrence of any event or passage
of time that makes the financial statements included in the Registration
Statement ineligible for inclusion therein or any statement made in the
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 the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the 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) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) Furnish to each Holder and their Special Counsel without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto,
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including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder and their Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to any tax in any such jurisdiction where it is
not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee
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pursuant to a Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such Holders may request.
(j) Upon the occurrence of any event contemplated by Section
3(d)(vi), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the New York Stock
Exchange ("NYSE") or if not so listed, on any other stock market or trading
facility on which shares of Common Stock are traded, listed or quoted (each a
"Subsequent Market") as and when required pursuant to the Purchase Agreement.
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(l) Comply with all applicable rules and regulations of the Commission.
(m) The Company may require each selling Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities
and the beneficial ownership of Common Stock held by such Holder as is
required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request. If the Registration Statement
refers to any Holder by name or otherwise as the holder of any securities
of the Company, then such Holder shall have the right to require by written
advice (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to
the time that such reference ceases to be required.
4. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company except as limited herein and Annex
A shall be borne by the Company whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
with respect to filings required to be made with the NYSE or if applicable the
replacement Subsequent Market, exclusive, however, of such fees and expenses in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities may designate), (ii)
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printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing or reproducing a
reasonable quantity of prospectuses if such supply of prospectuses is requested
by the holders of a majority of the Registrable Securities included in the
Registration Statement) (iii) messenger, telephone and delivery expenses of the
Company, (iv) fees and disbursements of counsel for the Company and Special
Counsel for the Holders (limited in the case of Special Counsel for the Holders,
up to a maximum of $5,000), (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, its officers, directors, agents and employees, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person and brokers acting on behalf of such
Holder in the sale of the Registrable Securities, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and reasonable attorneys' fees) and expenses (collectively, "Losses"), as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's pro-posed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such
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Holder in writing that the Prospectus is outdated or defective and prior to
the receipt by such Holder of the Advice contemplated in Section 6(e). The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with
such indemnification.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents and employees of such controlling Persons,
to the fullest extent permitted by applicable law, from and against all Losses
as determined by a court of competent jurisdiction in a final judgment not
subject to appeal or review arising solely out of or based solely upon any
untrue statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus, or in any amendment or supplement thereto and, in the case of an
occurrence of an event of the type specified in Section 3(d)(ii)-(vi), the use
by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(e).
In no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the
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Indemnified Party and the payment of all reasonable fees and expenses
incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only)
to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have approximately and materially adversely prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to cooperate in, but not control, the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised in writing by counsel
that a conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement (i) provides for
the payment of money only and (ii) includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such proceeding.
The Indemnified Party shall reasonably cooperate with the
Indemnifying Party in the defense thereof.
(d) Contribution. If a claim for indemnification
under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by
reason of public policy or otherwise), then each
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Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their 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. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
15
(b) No Inconsistent Agreements; Other Registration Rights.
The Company has not entered, as of the date hereof, nor shall the Company on or
after the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Except as and to
the extent specified in Schedule 6(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, which rights remain unexercised.
(c) No Piggyback on Registration Statement. Except as and to
the extent specified in Schedule 6(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 the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders. The
Holders shall not have any rights hereunder to piggyback on or be included in
any other Registration Statement with respect to the Registrable Securities
other then the Registration Statement to be filed hereunder.
(d) Compliance. Each Holder covenants and agrees that (i) it
will not sell any Registrable Securities under the Registration Statement until
it has received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(j) and (ii) it and its officers, directors and
Affiliates, if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to any of them in connection with sales of
Registrable Securities pursuant to the Registration Statement. Each Holder will
not take any action prohibited by Regulation M under the Exchange Act in
connection with the distribution of the Registrable Securities contemplated
hereby.
(e) 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 any event of the kind described in Sections
3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will forthwith
discontinue disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j),
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.
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers
16
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
at least a majority of the then outstanding Registrable Securities.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 5:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day of receipt of delivery, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: General DataComm Industries, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.:(▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With copies to: ▇▇▇▇▇▇▇ Celler Spett & ▇▇▇▇▇▇ P.C
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the
signature pages hereto.
If to any other Person who is then the registered Holder:
To the address and facsimile number 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 the same manner, 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
17
without the prior written consent of the Holders of a majority of the
Registrable Securities then outstanding, except the Company may assign its
rights or obligations hereunder without the consent of the Holders in the event
of a merger in which the Company does not survive, consolidation or sale of all
or substantially all of the Company's assets. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
this Agreement and the Purchase Agreement.
(i) 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. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(k) Cumulative Remedies. Except as otherwise limited
herein, 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
18
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.
(n) Independent Nature of Holders' Obligations and Rights.
The obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Except as set forth herein whereby
the election of the Holders of a specified percentage of Registrable Securities
shall bind all Holders, each Holder shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Holder to be joined as an additional
party in any proceeding for such purpose.
19
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
GENERAL DATACOMM INDUSTRIES, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President, Finance
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOWS]
STRONG RIVER INVESTMENTS, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Attorney-in-Fact
Address for Notice:
Strong River Investments, Inc.
c/o ▇▇▇▇▇▇▇▇-▇▇▇▇ & ▇▇▇▇▇▇ (BVI) Limited
Wickhams Cay I, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ & (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. and
▇▇▇▇ ▇. ▇▇▇▇▇. Esq.
21
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock issuable upon conversion of or as dividends on the Preferred
Stock or upon exercise of the Closing Warrants on any stock exchange, market or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The Selling Stockholders may
use any one or more of the following methods when selling shares of Common Stock
except as limited by the Purchase Agreement:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales, except as limited by the Purchase Agreement;
- broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Except as limited by the Purchase Agreement, the Selling Stockholders
may also engage in short sales against the box, puts and calls and other
transactions in securities of the Company or derivatives of Company securities
and may sell or deliver shares in connection with these trades. The Selling
Stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a Selling Stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares.
22
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
Because the Selling Stockholders may be deemed to be "underwriters,"
the Selling Stockholders will be subject to prospectus delivery requirements
under the Securities Act. In addition, in the event of a "distribution" of
securities, the Selling Stockholders, any selling broker-dealer and any
"affiliated purchasers" may be subject to Regulation M under the Securities
Exchange Act of 1934, which prohibits certain activities for the purpose of
pegging, fixing or stabilizing the price of securities in connection with an
offering.
Except as otherwise provided by the Registration Rights Agreement
pursuant to which the Registration Statement is being filed, the Company is
required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the Selling Stockholders
(not to exceed $5,000 in the aggregate) and excluding all discounts, commissions
and other similar expenses paid to brokers, dealers, agent and others. The
Company has agreed to indemnify the Selling Stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act.
23
SCHEDULE 6(b)
Other Registrations Rights and Registration Statements*
1. Registration Rights for Foothill Capital Corporation Lenders -
600,000 and 444,444 shares;
2. Registration Rights for Middlebury Office Park Limited
Partnership - 52,379 shares;
3. Existing registration statements for securities issuable
on conversion of the Company's 7 3/4% Senior Convertible
Subordinated Debentures due 2002 and 9% Cumulative
Convertible Preferred Stock.
--------
* None of these will be included in this Registration Statement
24
