EXHIBIT 10.34
DATATEC SYSTEMS, INC.
INVESTOR RIGHTS AGREEMENT
NOVEMBER 2, 2001
DATATEC SYSTEMS, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is made as of this
2nd day of November, 2001, by and between Datatec Systems, Inc., a Delaware
corporation (the "Company") and Cisco Systems, Inc., a California corporation
(the "Investor").
RECITALS
WHEREAS, the Company and Investor have entered into a Stock Purchase
Agreement (the "Purchase Agreement") of even date herewith pursuant to which the
Company desires to sell to Investor and Investor desires to purchase from the
Company shares of the Company's Common Stock;
WHEREAS, a condition to the obligations of the Company and the
Investor under the Purchase Agreement is that the parties enter into this
Agreement in order to provide the Investor, among other things, with certain
rights, including rights with respect to the registration of the shares of the
Company's Common Stock acquired by Investor pursuant to the Purchase Agreement;
WHEREAS, the Company and the Investor desire to induce the other
party to consummate the transactions contemplated by the Purchase Agreement by
agreeing to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. REGISTRATION RIGHTS. The Company and Investor covenant and agree
as follows:
1.1. DEFINITIONS. For purposes of this Section 1:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "Securities Act"), and the declaration or ordering of effectiveness
of such registration statement or document;
(b) The term "Registrable Securities" means (i) the shares
of Common Stock purchased by Investor pursuant to the Purchase Agreement and
(ii) any other shares of Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares referred to in clause (i) above; provided,
however, that the foregoing definition shall exclude in all cases any
Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned. Notwithstanding the foregoing,
Common Stock or other securities of the Company shall only be treated as
Registrable Securities if and so long as (A) they have not been sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, (B) they have not been sold in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
under Section 4(l) thereof so that all transfer restrictions, and restrictive
legends with respect thereto, if any, are removed upon the consummation of such
sale, (C) they are not permitted to be distributed to the public in a single
transaction pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act, or (D) they are not otherwise freely transferable without
restriction under the Securities Act;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 3 of this Agreement;
(e) The term "Form S-3" means such form under the Securities
Act as in effect on the date hereof or any successor form under the Securities
Act; and
(f) The term "SEC" means the Securities and Exchange
Commission.
1.2. REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the date
of this Agreement a written request from the Holders of at least 75% of the
Registrable Securities then outstanding that the Company file a registration
statement under the Securities Act covering the registration of Registrable
Securities then the Company shall, within ten days of the receipt thereof, give
written notice of such request to all Holders and shall, subject to the
limitations of Section 1.2(b), use its best efforts to effect as soon as
practicable, and in any event within 60 days of the receipt of such request, the
registration under the Securities Act of all Registrable Securities which the
Holders request to be registered within 15 days of the mailing of such notice by
the Company in accordance with Section 4.3.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 1.2 and the
Company shall include such information in the written notice referred to in
Section 1.2(a). The underwriter will be selected by the Company and shall be
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include its Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Section 1.5(e)) enter into an
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underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to the Initiating Holders a certificate signed by the President of the
Company stating that, in the good faith judgment of the Board of Directors of
the Company (the "Board"), it would be seriously detrimental to the Company and
its shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than 90 days after
receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) after the Company has effected one registration
pursuant to this Section 1.2 and such registration
has been declared or ordered effective;
(ii) during the period starting with the date 60 days
prior to the Company's good faith estimate of the
date of filing of, and ending on a date 180 days
after the effective date of, a registration
subject to Section 1.3 hereof; provided that the
Company is actively employing in good faith all
reasonable efforts to cause such registration
statement to become effective;
(iii) if the Initiating Holders propose to dispose of
shares of Registrable Securities that may be
immediately registered on Form S-3 pursuant to a
request made pursuant to Section 1.4 below; or
(iv) if the Company shall at the time have effective a
shelf registration statement in accordance with
the terms of Section 1.8 hereof, pursuant to which
the Initiating Holders could effect the sale of
such Holders' Registrable Securities in the manner
requested.
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1.3. COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock under the Securities Act in connection with an underwritten public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan
approved by the Board or a transaction covered by Rule 145 under the Securities
Act approved by the Board, a registration in which the only stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered, or any registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within 20 days after
mailing of such notice by the Company in accordance with Section 4.3, the
Company shall, subject to the provisions of Section 1.9 below, cause to be
registered under the Securities Act all of the Registrable Securities that each
such Holder has requested to be registered. If a Holder decides not to include
any or all of its Registrable Securities in any registration statement filed by
the Company, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
1.4. FORM S-3 REGISTRATION. In case the Company shall receive
from any Holder or Holders a written request or requests that the Company effect
a registration on Form S-3, and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any, related qualification or compliance, to all other
Holders; and
(b) as soon as reasonably practicable, use its reasonable
best efforts to effect such registration, up to two per year, and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 20
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 1.4 if: (i) Form S-3 is
not available for such offering by the Holders; (ii) the Company shall furnish
to the Holders a certificate signed by the President of the Company stating that
in the good faith judgment of the Board, it would be seriously detrimental to
the Company and its shareholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than 90
days after receipt of the request of the Holder or Holders under this Section
1.4; provided, however, that the Company shall not utilize this right more than
once in any 12 month period; (iii) the Company has, within the 12 month period
preceding the date of such request, already effected one registration on Form
S-3 for the Holders pursuant to this Section 1.4; (iv) if the Company shall at
the time have effective a shelf registration statement in accordance with the
terms of Section 1.8 hereof, pursuant to which the Holders could effect the sale
of such Holders' Registrable Securities; (v) in any particular jurisdiction in
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which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance, and in which the Company is not already qualified
to do business or subject to service of process; or (vi) during the period
ending 180 days after the effective date of a registration statement subject to
Section 1.2 or Section 1.3.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for registration or registrations
effected pursuant to Section 1.2.
1.5. OBLIGATIONS OF COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to 120 days. The Company shall not
be required to file, cause to become effective or maintain the effectiveness of
any registration statement that contemplates a distribution of securities on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
except for registrations pursuant to Section 1.4 or Section 1.8; provided,
however, that the Company will only be required to keep such registration
statement effective for up to 120 days;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for up to 120 days;
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, and in which the
Company is not already qualified to do business or subject to service of
process;
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
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(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included 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 the light of the circumstances then
existing, such obligation to continue for 120 days;
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or over-the-counter
market on which similar securities issued by the Company are then listed;
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration; and
(i) Use its reasonable best efforts to furnish, at the
request of any Holder requesting registration of Registrable Securities pursuant
to this Section 1, on the date that such Registrable Securities are delivered to
the underwriters for sale in connection with a registration pursuant to this
Section 1, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters.
1.6. FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement
if, as a result of the application of the preceding sentence, the number of
shares or the anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the number of shares
or the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in Section
1.2(a) or Section 1.4, whichever is applicable.
1.7. EXPENSES OF REGISTRATION.
(a) Demand Registration. All expenses (other than
underwriting discounts and commissions) incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
without limitation all registration, filing and qualification fees, reasonable
printers' and accounting fees, fees and disbursements of counsel for the
Company, and up to a maximum of $10,000 for the fees and disbursements of one
counsel for the selling Holders selected by them per registration right, shall
be borne by the Company; provided, however, that the Company shall not be
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required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered and the Company is in compliance with this Agreement (in which case
all participating Holders shall bear all such reasonable expenses in proportion
to the number of shares for which registration was requested), unless the
Holders of a majority of the Registrable Securities agree to forfeit their right
to one demand registration pursuant to Section 1.2; provided, further, however,
that if at the time of such withdrawal, the Holders have learned of a material
adverse change in the condition, results, business, or prospects of the Company
from that known to the Holders at the time of their request and have withdrawn
the request with reasonable promptness following disclosure by the Company of
such material adverse change, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 1.2.
(b) Company Registration. All expenses (other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities pursuant to
Section 1.3) for each Holder (which right may be assigned as provided in Section
1.12), including without limitation all registration, filing, and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company, and up to a maximum of $10,000 (for each registration right) for the
fees and disbursements of one counsel for the selling Holder or Holders selected
by them, shall be borne by the Company.
(c) Registration on Form S-3. All expenses (other than
underwriting discounts and commissions) incurred in connection with up to three
registrations requested pursuant to Section 1.4 or the shelf registration
effected pursuant to Section 1.8, including without limitation all registration,
filing, qualification, printers' and accounting fees, fees and disbursements of
counsel for the Company, and up to a maximum of $10,000 per registration right
for the fees and disbursements of one counsel for the selling Holder or Holders
selected by them, shall be borne by the Company.
1.8. SHELF REGISTRATION.
(a) On the terms and subject to the conditions set forth in
this Section 1.8, as promptly as practicable (and, in any event, within 30
calendar days) after the closing of the transactions contemplated by Section 1
of the Purchase Agreement, the Company shall file, and shall thereafter use its
reasonable best efforts to cause to become and remain effective, for two years,
a statement registering for purposes of the Securities Act the resale of all of
the Registrable Securities (the "Shelf Registration Statement") held by the
Investor (or its permitted transferees). For so long as the Company is required
to cause the Shelf Registration Statement to remain effective, the Company shall
use its reasonable best efforts to cause the Registrable Securities to be (x)
registered or qualified (to the extent not exempt from such registration or
qualification) for sale under the blue sky laws of such states as any Holder may
reasonably request (provided that the Company shall not be required to qualify
to do business in, or consent to general service of process in, any jurisdiction
by reason thereof) and (y) listed on a national securities exchange or accepted
for quotation on the Nasdaq National Market.
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(b) In connection with the preparation and filing of the
Shelf Registration Statement, the Investor shall promptly provide all
information reasonably requested by the Company for inclusion in the Shelf
Registration Statement.
1.9. UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock under Section
1.3, the Company shall not be required to include any of the Holders' securities
in such underwriting unless they accept the usual and customary terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities to be sold, other
than by the Company, that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders), but in no event shall (i) any shares being sold
by a shareholder exercising a demand registration right similar to that granted
in Section 1.2 be excluded from such offering, (ii) the amount of securities of
the selling Holders included in the offering be reduced below 30% of the total
amount of securities included in such offering, in which case, the selling
shareholders may be excluded if the underwriters make the determination
described above and no other shareholder's securities are included or (iii) any
securities held by an officer or director (or affiliate thereof) of the Company
be included if any securities held by any selling Holder are excluded. For
purposes of the preceding parenthetical concerning apportionment, for any
selling shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro-rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such selling shareholder, as defined in this sentence.
1.10. DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.11. INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any losses,
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claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (each, a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) 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, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 1.11(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Holder, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person indemnified pursuant to this Section 1.11(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
1.11(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that
in no event shall any indemnity under this Section 1.11(b) exceed the net
proceeds from the offering received by such Holder, except in the case of
willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.11 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.11, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
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the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.11, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.11.
(d) If the indemnification provided for in this Section 1.11
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by a Holder
under this Section 1.11(d) exceed the net proceeds from the offering received by
such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.11 shall survive the completion of any offering of Registrable
Securities in a registration statement and the termination of this Agreement.
1.12. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
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(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after 90 days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the Exchange Act, as is necessary to
enable the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of the
fiscal year in which the first registration statement filed by the Company for
the offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.13. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. If at any
time during the two year period following the Closing the Company shall not have
effective a shelf registration statement in accordance with the terms of Section
1.8 hereof, pursuant to which the Holders could effect the sale of such Holders'
Registrable Securities; the Company shall not enter into any agreement with any
holder or prospective holder of any securities of the Company which would allow
such holder or prospective holder to have registration rights that are superior
to the registration rights of the Holders hereunder.
1.14. TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) two years from the date of this Agreement, or (ii) such time as Rule 144
or another similar exemption under the Securities Act is available for the sale
of all of such Holder's shares during a 90-day period without registration.
2. COVENANTS OF THE COMPANY.
2.1. DELIVERY OF FINANCIAL STATEMENTS. If for any reason the
Company is no longer subject to or becomes delinquent with respect to its
Exchange Act reporting requirements, the Company shall deliver to the Investor:
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(a) as soon as practicable, but in any event within 90 days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of shareholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP");
(b) as soon as practicable, but in any event within 30 days
after the end of each of the first three quarters for each fiscal year of the
Company, an unaudited profit or loss statement, a statement of cash flows for
such quarter and an unaudited balance sheet as of the end of such month, in
reasonable detail;
(c) with respect to the financial statements called for in
Section 2.1(a), an instrument executed by the Chief Financial Officer or
President of the Company and certifying that such financials were prepared in
accordance with GAAP consistently applied with prior practice for earlier
periods (with the exception of footnotes that may be required by GAAP) and
fairly present the financial condition of the Company and its results of
operation for the period specified, subject to normal and recurring year-end
audit adjustment, provided that the foregoing shall not restrict the right of
the Company to change its accounting principles consistent with GAAP, if the
Board determines that it is in the best interest of the Company to do so.
2.2. INSPECTION. The Company shall permit each Holder, at such
Holder's expense, to visit and inspect the Company's properties, to examine its
books of account and records and to discuss the Company's affairs, finances and
accounts with its officers, all at such reasonable times as may be requested by
Investor; provided, however, that the Company shall not be obligated pursuant to
this Section 2.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
3. TRANSFERS; ASSIGNMENT OF RIGHTS. Purchaser may transfer any or
all of its Registrable Securities and assign its registration rights under this
Agreement with respect to the Registrable Securities so transferred, provided
that the transferee agrees to be subject to the terms of this Agreement and that
the Company is, within a reasonable time following such transfer, furnished with
written notice of the name and address of such transferee. In the event of a
transfer, the Investor (or any subsequent Holder) shall (i) take all such
actions and execute and deliver all such documents as may be necessary or
reasonably requested by the Company in order to consummate the transfer of such
Stock and (ii) pay to the Company such amounts as may be required for any
applicable stock transfer taxes.
4. MISCELLANEOUS.
4.1. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties (including any transferees). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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4.2. AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
4.3. NOTICES. Unless otherwise provided, any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address or fax number as set forth in the
Purchase Agreement.
4.4. SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
4.5. GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of laws.
4.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.7. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
[SIGNATURE PAGE FOLLOWS]
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The parties have executed this Investor Rights Agreement as of the
date first above written.
COMPANY: INVESTOR:
DATATEC SYSTEMS, INC. CISCO SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Chairman & CEO Title: Sr. VP & Assistant Secretary
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