Exhibit 10.1

PIGGYBACK REGISTRATION RIGHTS AGREEMENT

This Piggyback Registration Rights Agreement (Agreement) is made and entered into as of August 31, 2018 by and between One Stop Systems, Inc., a Delaware corporation (the Company) and James M. Reardon (the “Sole Shareholder”).

RECITALS

WHEREAS, this Agreement is being executed and delivered pursuant to the Agreement and Plan of Merger and Reorganization dated August 22, 2018 (Merger Agreement) by and among the Company (and certain subsidiaries) as buyer, Concept Development, Inc. as target and the Sole Shareholder as target shareholder.

WHEREAS, subject to the terms and conditions of the Merger Agreement, the Company has agreed to grant the Sole Shareholder the piggyback registration rights set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows:

AGREEMENT

1. REGISTRATION RIGHTS.

1.1 Definitions. For purposes of Agreement:

Registrable Securities means: (a) all shares of the Company’s common stock, par value $0.0001 (the “Common Stock”) issued to Sole Shareholder pursuant to the Merger Agreement and (b) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to, in exchange for or in replacement of the foregoing shares of Common Stock described in clause (a); provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) when (i) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act of 1933, as amended (the “Securities Act”), and such Registrable Securities have been disposed of by the Sole Shareholder in accordance with such effective Registration Statement, or (ii) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such Registrable Securities become eligible for resale under Rule 144 without volume or other limitations.

Registrable Securities then Outstanding will mean the number of shares of Common Stock which are Registrable Securities and are then issued and outstanding.

Registration Statement” means any registration statement, including the prospectus, amendments and supplements to any 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 any such registration statement, filed by the Company under the Securities Act for purposes of registering any of the Company’s securities (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or any of its other employee benefit plans).

SEC means the United States Securities and Exchange Commission.

1.2 Piggyback Registrations.

(a) Piggyback Registrations. The Company will notify the Sole Shareholder in writing at least thirty (30) days prior to filing any Registration Statement and will afford Sole Shareholder an opportunity to include in such Registration Statement all or any part of the Registrable Securities then held by Sole Shareholder. Sole


Shareholder, if he desires to include in any such Registration Statement all or any part of the Registrable Securities held by him, will, within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice will inform the Company of the number of Registrable Securities he wishes to include in such Registration Statement. If Sole Shareholder decides not to include all of his Registrable Securities in any Registration Statement hereafter filed by the Company, he will nevertheless continue to have the right to include any Registrable Securities in any subsequent Registration Statement(s) as may be filed by the Company with respect to offerings of its securities, in each case upon the terms and conditions set forth herein.

(b) Underwriting. If a Registration Statement under which the Company gives notice under this Section 1.2 is for an underwritten offering, then the Company will so advise the Sole Shareholder. In such event, the right of the Sole Shareholder’s Registrable Securities to be included in a registration pursuant to this Section 1.2 will be conditioned upon his participation in such underwriting and the inclusion of his Registrable Securities in the underwriting to the extent provided herein. If the Sole Shareholder proposes to include any Registrable Securities in said underwritten Registration Statement, the Sole Shareholder will enter into an underwriting agreement in customary form with the managing underwriter or underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including Registrable Securities) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting will be allocated, first, to the Company, and second, to each of the holders requesting inclusion of their Registrable Securities in such Registration Statement on a pro rata basis based on the total number of Registrable Securities then held by each such holder. If the Sole Shareholder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn from such underwriting will be excluded and withdrawn from the registration. For any estates and family members of the Sole Shareholder and any trusts for the benefit of any of the foregoing persons will be deemed to be a single holder and any pro rata reduction with respect to such holder will be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such holder, as defined in this sentence.

(c) Expenses. All expenses incurred in connection with a registration pursuant to this Section 1.2 (excluding underwriters’ and brokers’ discounts and commissions), including, without limitation all federal and “blue sky” registration and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one (1) counsel for the Sole Shareholder will be borne by the Company.

1.3 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company will, 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 Sole Shareholder, keep such Registration Statement effective for up to ninety (90) 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;

(c) Furnish to the Sole Shareholder such number 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 the Registrable Securities that are included in such registration;

(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 will be reasonably requested by the Sole Shareholder, provided the Company will 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;

(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(s) of such offering (it being

 

2


understood and agreed, as a condition to the Company’s obligations under this clause (e), Sole Shareholder will also enter into and perform its obligations under such an agreement);

(f) Notify Sole Shareholder if he has 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; and

(g) Furnish, at the request of Sole Shareholder, on the date any Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date the Registration Statement with respect to such securities becomes effective, (i) an opinion, dated as of 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 and reasonably satisfactory to Sole Shareholder, addressed to the underwriters, if any, and to Sole Shareholder and (ii) a “comfort” letter dated as of 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 and reasonably satisfactory to Sole Shareholder, addressed to the underwriters, if any, and to Sole Shareholder.

1.4 Furnish Information. It will be a condition precedent to the obligations of the Company to take any action pursuant to Section 1.2 hereof that the Sole Shareholder will furnish to the Company such information regarding himself, the Registrable Securities held by him and the intended method of disposition of such securities as will be required to timely effect the registration of their Registrable Securities.

1.5 Delay of Registration. The Sole Shareholder will have no 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.

1.6 Indemnification. In the event any Registrable Securities are included in a Registration Statement under Section 1.2 hereof:

(a) By the Company. To the extent permitted by law, the Company will indemnify and hold harmless the Sole Shareholder, any underwriter (as defined in the Securities Act) for the Sole Shareholder and each person, if any, who controls such underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended, (Exchange Act), against any losses, 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 (collectively 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 federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such Registration Statement.

The Company will reimburse each of the Sole Shareholder, underwriter or controlling person for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, the indemnity agreement contained in this Subsection 1.6(a) will 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 will not be unreasonably withheld), nor will the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent 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 Sole Shareholder, underwriter or controlling person of such underwriter.

 

3


(b) By Sole Shareholder. To the extent permitted by law, the Sole Shareholder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other holder selling securities under such Registration Statement or any of such other holder’s partners, directors or officers or any person who controls such holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such holder, partner or director, officer or controlling person of such other holder 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) such Violation occurs in reliance upon and in conformity with written information furnished by the Sole Shareholder expressly for use in connection with such registration; and the Sole Shareholder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other holder, partner, officer, director or controlling person of such other holder in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, the indemnity agreement contained in this Subsection 1.6(b) will 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 Sole Shareholder, which consent will not be unreasonably withheld; provided further, the total amounts payable in indemnity by the Sole Shareholder under this Subsection 1.6(b) in respect of any Violation will not exceed the net proceeds received by the Sole Shareholder in the registered offering to which such Violation relates.

(c) Notice. Promptly after receipt by an indemnified party under this Section 1.6 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 1.6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party will have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, an indemnified party will have the right to retain its own counsel, with the 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 conflict of 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, will relieve such indemnifying party of any liability to the indemnified party under this Section 1.6, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability it may have to any indemnified party otherwise than under this Section 1.6.

(d) Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of the Company and holders are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the Registration Statement in question becomes effective or the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (Final Prospectus), such indemnity agreement will not inure to the benefit of any person if a copy of the Final Prospectus (i) was furnished to the indemnified party and (ii) was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act.

(e) Contribution. In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 1.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact this Section 1.6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 1.6; then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so such holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Securities offered by and sold under the Registration Statement bears to the public offering price of all securities offered by and sold under such Registration Statement, and the Company and other selling holders are responsible for the remaining portion; provided, however, in any such case, (A) no such holder will be required to contribute any amount in excess of the

 

4


public offering price of all such Registrable Securities offered and sold by such holder pursuant to such Registration Statement and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

(f) Survival. The obligations of the Company and holders under this Section 1.6 will survive the completion of any offering of Registrable Securities in a Registration Statement, and otherwise.

1.7 Rule 144. With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of this Agreement;

(b) Use its best efforts to 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;

(c) As long as the Sole Shareholder owns any Registrable Securities, to furnish to him forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, if accurate, a copy of the most recent annual or quarterly report of the Company and such other reports and documents of the Company as the Sole Shareholder may reasonably request in availing itself of any rule or regulation of the SEC allowing the Sole Shareholder to sell any such securities without registration; and

(d) take such additional action as is requested by the Sole Shareholder to enable him to resell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s transfer agent as may be requested from time to time by the Sole Shareholder (including covering all reasonable costs and expenses, transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of securities to the Sole Shareholder) and otherwise fully cooperate with the Sole Shareholder and his broker to effect such sale of securities pursuant to Rule 144.

1.8 Termination of the Company’s Obligations. The Company will have no obligations pursuant to Section 1.2 with respect to any Registrable Securities proposed to be sold by the Sole Shareholder in a registration pursuant to Section 1.2 if, in the opinion of counsel to the Company, all such Registrable Securities proposed to be sold by the Sole Shareholder may be sold within a three-month period following such opinion without registration or volume or other limitations under the Securities Act or any of the rules or regulations promulgated thereunder, including without limitation Rule 144.

2. ASSIGNMENT AND AMENDMENT.

2.1 Assignment. Notwithstanding anything herein to the contrary, the registration rights of the Sole Shareholder under Section 1 may be assigned only to (a) a spouse, child, parent or beneficiary of the estate of the Sole Shareholder or (b) a trust for the benefit of the persons set forth in (a); provided, however, no party may be assigned any of the foregoing rights unless the Company is given written notice by the assigning party at the time of such assignment stating the name, address and tax identification number of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; and provided further any such assignee will receive such assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Section 2.

2.2 Amendment of Rights. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Sole Shareholder (and/or any of his permitted successors or assigns holding shares of Registrable Securities representing a majority of all Registrable Securities). Any amendment or waiver effected in accordance with this Section 2.2 will be binding upon the Sole Shareholder, each permitted successor or assignee of the Sole Shareholder and the Company.

3. GENERAL PROVISIONS.

 

5


3.1 Notices. Any notice, request or other communication required or permitted hereunder will be in writing and will be deemed to have been duly given if personally delivered, deposited in the U.S. mail by registered or certified mail, return receipt requested, postage prepaid or electronic-mail when receipt is electronically confirmed (a) if to the Sole Shareholder, as set forth below the Sole Shareholder’s name on the signature page of this Agreement, and (ii) if to the Company, to the address set forth below:

One Stop Systems, Inc.

2235 Enterprise Street, Suite 110

Escondido, California 92029

Attention: Stephen D. Cooper

President and Chief Executive Officer

Email: scooper@onestopsystems.com

Any party hereto (and such party’s permitted assigns) may by notice so given change its address for future notices hereunder. Notice will be deemed conclusively given when personally delivered or when deposited in the mail in the manner set forth above.

3.2 Entire Agreement. This Agreement, together with all the exhibits hereto, constitutes and contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the subject matter hereof.

3.3 Governing Law. This Agreement will be governed by and construed exclusively in accordance with the internal laws of the State of Delaware, excluding that body of law relating to conflict of laws and choice of law.

3.4 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, then such provision(s) will be excluded from this Agreement and the balance of this Agreement will be interpreted as if such provision(s) were so excluded and will be enforceable in accordance with its terms.

3.5 Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.

3.6 Successors and Assigns. Subject to the provisions of Section 2.1, the provisions of this Agreement will inure to the benefit of, and will be binding upon, the successors and permitted assigns of the parties hereto.

3.7 Captions. The captions to sections and subsections of this Agreement have been inserted for identification and reference purposes only and will not be used to construe or interpret this Agreement.

3.8 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Executed counterparts of this Agreement may be delivered by delivery of a scanned counterpart in portable document format (PDF) by e-mail. The signatures in the facsimile or PDF data file will be deemed to have the same force and effect as if the manually signed counterpart had been delivered to the other party in person.

3.9 Costs and Attorneys’ Fees. In the event any action, suit or other proceeding is instituted concerning or arising out of this Agreement or any transaction contemplated hereunder, the prevailing party will recover all of such party’s costs and attorneys’ fees incurred in each such action, suit or other proceeding, including any and all appeals or petitions therefrom.

3.10 Adjustments for Stock Splits and Certain Other Changes. Wherever in this Agreement there is a reference to a specific number of shares of Common Stock of the Company, then, upon the occurrence of any subdivision, combination or stock dividend of such Common Stock, the specific number of shares so referenced in this Agreement will automatically be proportionally adjusted to reflect the effect on the outstanding shares of such Common Stock by such subdivision, combination or stock dividend.

[Signatures on following page]

 

6


IN WITNESS WHEREOF, the parties hereto have executed this Piggyback Registration Rights Agreement as of the date and year first above written.

 

COMPANY

One Stop Systems, Inc.,

a Delaware corporation

By:   /s/ Stephen D. Cooper
  Stephen D. Cooper, President and Chief Executive Officer

 

SOLE SHAREHOLDER

Signed:   /s/ James M. Reardon
Printed Name:   James M. Reardon
Address: