-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ROvSdHsW2oZWvlN0JIp1yrS4QYouYwg5Xhc54qcqrq3QD7MS3orWXhculm82dsuV 2KgIpVoxZ5cW02YISqwpsg== 0000932214-06-000005.txt : 20060103 0000932214-06-000005.hdr.sgml : 20060102 20060103165948 ACCESSION NUMBER: 0000932214-06-000005 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20060103 DATE AS OF CHANGE: 20060103 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DATAWAVE SYSTEMS INC CENTRAL INDEX KEY: 0001000157 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 980186455 STATE OF INCORPORATION: B0 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-62097 FILM NUMBER: 06503210 BUSINESS ADDRESS: STREET 1: 13575 COMMERCE PARKWAY STREET 2: SUITE 110 CITY: RICHMOND STATE: A1 ZIP: V6V 2L1 BUSINESS PHONE: 6042951800 MAIL ADDRESS: STREET 1: 13575 COMMERCE PARKWAY STREET 2: SUITE 110 CITY: RICHMOND STATE: A1 ZIP: V6V 2L1 FORMER COMPANY: FORMER CONFORMED NAME: DATAWAVE VENDING INC DATE OF NAME CHANGE: 19950905 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Sigma Opportunity Fund LLC CENTRAL INDEX KEY: 0001291480 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 800 THIRD AVENUE STREET 2: SUITE 1701 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2122016636 MAIL ADDRESS: STREET 1: 800 THIRD AVENUE STREET 2: SUITE 1701 CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 schedule13d.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE IN INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. )(1) DATAWAVE SYSTEMS INC. (Name of Issuer) COMMON SHARES, PAR VALUE $0.001 PER SHARE (Title of Class of Securities) 237921-20-0 (CUSIP Number) copy to: Thom Waye Gary T. Moomjian, Esq. Sigma Capital Advisors, LLC Moomjian & Waite, LLP 800 Third Avenue 100 Jericho Quadrangle Suite 1701 Suite 225 New York, New York 10022 Jericho, New York 11753 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 22, 2005 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) Page 1 of 12 pages - ---------------------- 1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosure provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, SEE notes). CUSIP No. 237921-20-0 13D Page 2 of 12 Pages - -------------------------------------------------------------------------------- Pages ----- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Sigma Opportunity Fund, LLC - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [ ] (b) [x] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS * WC - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER 7,500,000 (See Item 4) SHARES BENEFICIALLY --------------------------------------------------------- OWNED BY 8. SHARED VOTING POWER -0- EACH REPORTING --------------------------------------------------------- PERSON WITH 9. SOLE DISPOSITIVE POWER 7,500,000 (See Item 4) --------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,500,000 (See Item 4) - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.8% (See Item 4) - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON * OO - Limited Liability Company - -------------------------------------------------------------------------------- 2 CUSIP No. 237921-20-0 13D Page 3 of 12 Pages - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Sigma Capital Advisors, LLC - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [ ] (b) [x] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS * 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER 7,500,000 (See Item 4) SHARES BENEFICIALLY --------------------------------------------------------- OWNED BY 8. SHARED VOTING POWER -0- EACH REPORTING --------------------------------------------------------- PERSON WITH 9. SOLE DISPOSITIVE POWER 7,500,000 (See Item 4) --------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,500,000 (See Item 4) - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.8% (See Item 4) - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON * OO - Limited Liability Company - -------------------------------------------------------------------------------- 3 CUSIP No. 237921-20-0 13D Page 4 of 12 Pages - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Sigma Capital Partners, LLC - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [ ] (b) [x] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS * 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER 7,500,000 (See Item 4) SHARES BENEFICIALLY --------------------------------------------------------- OWNED BY 8. SHARED VOTING POWER -0- EACH REPORTING --------------------------------------------------------- PERSON WITH 9. SOLE DISPOSITIVE POWER 7,500,000 (See Item 4) --------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,500,000 (See Item 4) - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.8% (See Item 4) - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON * OO - Limited Liability Company - -------------------------------------------------------------------------------- 4 CUSIP No. 237921-20-0 13D Page 5 of 12 Pages - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Thom Waye - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) [ ] (b) [x] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS * 00 - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION USA - -------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER 7,500,000 (See Item 4) SHARES BENEFICIALLY --------------------------------------------------------- OWNED BY 8. SHARED VOTING POWER -0- EACH REPORTING --------------------------------------------------------- PERSON WITH 9. SOLE DISPOSITIVE POWER 7,500,000 (See Item 4) --------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,500,000 (See Item 4) - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.8% (See Item 4) - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON * IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT 5 ITEM 1. SECURITY AND ISSUER. This statement relates to the common shares, par value $.001 per share (the "Common Stock"), of DataWave Systems Inc., a Delaware corporation (the "Company"). The principal executive office of the Company is located at Wayne Interchange Plaza One, 145 Route 46 West, 3rd Floor, Wayne, New Jersey 07470. ITEM 2. IDENTITY AND BACKGROUND. (a) This statement is being jointly filed by Sigma Opportunity Fund, LLC ("Sigma Fund"), Sigma Capital Advisors, LLC ("Sigma Advisors") and Sigma Capital Partners, LLC ("Sigma Partners"), each a Delaware limited liability company, and Thom Waye. Each of the foregoing is referred to as a "Reporting Person" and collectively as the "Reporting Persons." (i) Sigma Opportunity Fund, LLC, a private investment fund; (ii) Sigma Capital Advisors, LLC, which serves as the managing member of Sigma Opportunity Fund, LLC; (iii) Sigma Capital Partners, LLC, which is the sole member of Sigma Capital Advisors, LLC; (iv) Thom Waye, who is the sole member of Sigma Capital Partners, LLC and who has the power to vote and dispose of the Company's shares owned by the Reporting Persons. (b) The principal business address of each Reporting Person is 800 Third Avenue, Suite 1701, New York, New York 10022. (c) The principal business of Sigma Fund is investing in securities. The principal business of Sigma Advisors is to serve as managing member of Sigma Fund. The principal business of Sigma Partners is to act as a holding entity for the membership interests of Sigma Advisors. The principal occupation of Mr. Waye is to serve as manager of Sigma Advisors. (d) No Reporting Person has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) No Reporting Person has, during the last five years, been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) The State of Incorporation or Citizenship of each Reporting Person is as follows: (i) Sigma Opportunity Fund, LLC--Delaware; (ii) Sigma Capital Advisors, LLC--Delaware; (iii) Sigma Capital Partners, LLC--Delaware; (iv) Thom Waye--United States of America. 6 ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. As more fully described under Item 4, Sigma Fund entered into a Note Purchase Agreement, dated December 21, 2005 (the "Note Purchase Agreement"), pursuant to which Sigma Fund purchased, for an aggregate purchase price of $1,500,000, a convertible promissory note of the Company from Integrated Technologies & Systems, Inc. ("IT&S"), which has a face value of $600,000 and which is convertible into 7,500,000 shares of Common Stock of the Company (the "Note"). In the event that the Common Stock underlying the Note is registered for resale, Sigma Fund shall pay to IT&S an additional $475,000 within twenty days after the effectiveness of the registration statement registering such Common Stock for resale. The funds required for the purchase of the convertible promissory note were obtained from the investment funds of the Sigma Fund. ITEM 4. PURPOSE OF TRANSACTION. The Reporting Persons purchased the convertible promissory note based on the Reporting Persons' belief that such an investment represented an attractive investment opportunity. Note Purchase Agreement On December 22, 2005 (the "Closing Date"), Sigma Fund, IT&S and Integrated Data Corp. ("IDC"), an affiliate of IT&S, entered into a Note Purchase Agreement, pursuant to which, among other things, IT&S sold to Sigma Fund the Note for $1,500,000 in cash. In connection with the Note Purchase Agreement, Sigma Fund and the Company entered into a Registration Rights Agreement, dated as of the Closing Date, pursuant to which the Company shall file, within 60 days, a registration statement pertaining to Common Stock underlying the Note. In the event that the Common Stock underlying the Note is registered for resale, Sigma Fund shall pay to IT&S an additional $475,000. Assuming conversion in full of the Note sold to Sigma Fund into Common Stock on the Closing Date, each Reporting Person would own beneficially 13.8% of the Common Stock issued and outstanding. The following are certain material provisions of the Note Purchase Agreement: Nominee for Company's Board of Directors. It is anticipated that a designee of Sigma Fund will be nominated to the Board of Directors of the Company. IT&S and IDC agreed that, absent a reasonable basis to vote otherwise, each will vote the shares of Common Stock held by them in favor of the nominees to the board of directors recommended by management of the Company. Guarantee by IDC. In the event the Note is for any reason required to be transferred back to IT&S or the Company is unable to register the Common Stock underlying the Note, IDC shall transfer or cause to be transferred to Sigma Fund 7,500,000 shares of Common Stock of the Company. The following are certain material provisions of the Registration Rights Agreement: Registration Rights. The Registration Rights Agreement grants Sigma Fund registration rights with respect to the shares of Common Stock underlying the Note, by which the Company shall file a registration statement to register such shares of Common Stock, or the resale thereof, within 60 days of the Closing Date. Additionally, the Company will use its best commercially reasonable efforts to 7 cause such registration statement to become effective as soon as practicable thereafter. Sigma Fund is also granted piggyback registration rights. Other Transactions Sigma Fund may acquire additional securities of the Company from time to time or may similarly dispose of securities of the Company so as to meet its investment objectives. Plans or Proposals of the Reporting Persons Except as set forth above, none of the Reporting Persons has any plans or proposals that relate to or would result in (a) the acquisition by any person of additional securities of the Company or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's certificate of incorporation, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) The aggregate number and percentage of the Company's Common Stock owned by each Reporting Person is as follows: (i) Aggregate number of shares of Common Stock that may be deemed beneficially owned by Sigma Fund: 7,500,000 Percentage: 13.8% (ii) Aggregate number of shares of Common Stock that may be deemed beneficially owned by Sigma Advisors: 7,500,000 Percentage: 13.8% (iii) Aggregate number of shares of Common Stock that may be deemed beneficially owned by the Sigma Partners: 7,500,000 Percentage: 13.8% (iv) Aggregate number of shares of Common Stock that may be deemed beneficially owned by the Thom Waye: 7,500,000 Percentage: 13.8% (b) The number of shares of Common Stock over which each Reporting Person has the power to vote and the power to dispose is as follows: (i) 1. Sole power to vote or to direct vote: 7,500,000 8 2. Shared power to vote or to direct vote: -0- 3. Sole power to dispose or to direct the disposition: 7,500,000 4. Shared power to dispose or to direct the disposition: -0- (ii) 1. Sole power to vote or to direct vote: 7,500,000 2. Shared power to vote or to direct vote: -0- 3. Sole power to dispose or to direct the disposition: 7,500,000 4. Shared power to dispose or to direct the disposition: -0- (iii) 1. Sole power to vote or to direct vote: 7,500,000 2. Shared power to vote or to direct vote: -0- 3. Sole power to dispose or to direct the disposition: 7,500,000 4. Shared power to dispose or to direct the disposition: -0- (iv) 1. Sole power to vote or to direct vote: 7,500,000 2. Shared power to vote or to direct vote: -0- 3. Sole power to dispose or to direct the disposition: 7,500,000 4. Shared power to dispose or to direct the disposition: -0- (c) Except as described in Item 3 and 4 of this Statement, there have been no transactions effected with respect to the Securities within the past 60 days of the date hereof by the Reporting Persons. (d) No person(s) other than the Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or proceeds from the sale of, the shares of Common Stock beneficially owned by the Reporting Persons. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Other than as described herein, there are no contracts, arrangements, understandings or relationships among the Reporting Persons, or between the Reporting Persons and any other person, with respect to the securities of the Company. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. 9 10.1 Note Purchase Agreement, dated as of December 21, 2005, by and between the IT&S, IDC and Sigma Fund. 10.2 Registration Rights Agreement, dated as of December 21, 2005, by and between the Company and Sigma Fund. 99.1 Joint Filing Agreement, dated December 30, 2005, by and among Sigma Opportunity Fund, LLC, Sigma Capital Advisors, LLC, Sigma Capital Partners, LLC, and Thom Waye. SIGNATURES ---------- After reasonable inquiry and to the best of my knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 30, 2005 SIGMA OPPORTUNITY FUND, LLC BY: SIGMA CAPITAL ADVISORS, LLC BY: /s/Thom Waye ----------------------------------- Thom Waye, Manager SIGMA CAPITAL ADVISORS, LLC BY: /s/Thom Waye ----------------------------------- Thom Waye, Manager SIGMA CAPITAL PARTNERS, LLC BY: /s/Thom Waye ----------------------------------- Thom Waye, Sole Member /s/Thom Waye ----------------------------------- Thom Waye EXHIBIT 99.1 JOINT FILING AGREEMENT JOINT FILING AGREEMENT (this " Agreement"), dated as of December 30, 2005, among Sigma Opportunity Fund, LLC, Sigma Capital Advisors, LLC and Sigma Capital Partners, LLC , each a Delaware limited liability company, and Thom Waye (collectively, the "Joint Filers"). WITNESSETH ---------- WHEREAS, as of the date hereof, each of the Joint Filers is filing a Schedule 13D under the Securities Exchange Act of 1934 (the "Exchange Act") with respect to securities of DataWave Systems Inc. (the "Schedule 13D"); WHEREAS, each of the Joint Filers is individually eligible to file the Schedule 13D; WHEREAS, each of the Joint Filers wishes to file the Schedule 13D and any amendments thereto jointly and on behalf of each of the Joint Filers, pursuant to Rule 13d-1(k)(1) under the Exchange Act; NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the parties hereto agree as follows: 1. The Joint Filers hereby agree that the Schedule 13D is, and any amendments thereto will be, filed on behalf of each of the Joint Filers pursuant to Rule 13d-1(k)(1) under the Exchange Act. 2. Each of the Joint Filers hereby acknowledges that, pursuant to Rule 13d-1(k)(1)(ii) under the Exchange Act, it is responsible for the timely filing of the Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning it contained therein, and is not responsible for the completeness and accuracy of the information concerning any of the other parties contained therein, unless it knows or has reason to know that such information is inaccurate. 3. Each of the Joint Filers hereby agrees that this Agreement shall be filed as an exhibit to the Schedule 13D, pursuant to Rule 13d-1(k)(1)(iii) under the Exchange Act. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed individually or by their respective directors hereunto duly authorized as of the day and year first above written. 11 SIGMA OPPORTUNITY FUND, LLC BY: SIGMA CAPITAL ADVISORS, LLC BY: /s/Thom Waye ----------------------------------- Thom Waye, Manager SIGMA CAPITAL ADVISORS, LLC BY: /s/Thom Waye ----------------------------------- Thom Waye, Manager SIGMA CAPITAL PARTNERS, LLC BY: /s/Thom Waye ----------------------------------- Thom Waye, Sole Member /s/Thom Waye ----------------------------------- Thom Waye 12 EX-10.1 2 notepurchaseagt.txt NOTE PURCHASE AGREEMENT NOTE PURCHASE AGREEMENT NOTE PURCHASE AGREEMENT, dated as of December 21, 2005, by and among Integrated Technologies & Systems, Inc., a British Virgin Islands company ("Seller"), Sigma Opportunity Fund, LLC, a Delaware limited liability company ("Purchaser"), and Integrated Data Corp., a Delaware corporation ("IDC"). WHEREAS, Seller is the beneficial owner of a Promissory Note (the "Note"), dated February 1, 2005, in the aggregate principal amount of $600,000, which Note is convertible into 7,500,000 shares (the "Datawave Shares") of common stock ("Common Stock") of Datawave Systems Inc. (the "Company"); WHEREAS, IDC, an affiliate of the Company, acquired the Note from the Company for investment without a view to distribution in partial consideration of the termination of a license to certain of the intellectual property of the Company; WHEREAS, Seller, an affiliate of IDC, acquired the Note from IDC for investment without a view to distribution in consideration of the repayment of certain loans made from Seller to IDC; WHEREAS, subsequent to the acquisition of the Note by Seller from IDC, the Company requested Seller to transfer the Note to Purchaser; WHEREAS, Seller and IDC believe that it is in the best interest of the Company, IDC and Seller to transfer the Note to Purchaser; WHEREAS, the Seller now desires to sell to Purchaser and Purchaser desires to purchase from the Seller the Note on the terms and subject to the conditions set forth in this Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: Section 1. Sale of Note. ------------ 1.1. Sale and Purchase of Note. At the Closing, upon the terms and subject ------------------------- to the conditions contained in this Agreement, Seller shall sell to Purchaser and Purchaser shall purchase from Seller all right, title and interest in and to the Note for a purchase price of ONE MILLION FIVE HUNDRED THOUSAND ($1,500,000) DOLLARS (the "Purchase Price"). In the event that the Datawave Shares become registered for resale by Purchaser, Purchaser shall pay to Seller an additional $475,000 within twenty days after the effectiveness of the registration statement registering such shares for resale (the "Contingent Purchase Price") 1.2. Closing. The closing of the sale and purchase of the Note shall take ------- place simultaneously with the execution and delivery of this Agreement at the offices of Moomjian & Waite, LLP at 100 Jericho Quadrangle, Jericho, New York 11753, or at such other time and place as Purchaser and Seller shall mutually agree (the "Closing"). 1.3. Deliveries at the Closing. At the Closing: ------------------------- (a) Purchaser shall deliver the Purchase Price to Seller by wire transfer to such account as Seller may designate to Purchaser prior to the Closing. (b) Seller shall deliver to Purchaser (i) the Note, together with an assignment thereof assigning the Note to Purchaser, and (ii) an opinion of Seller's counsel as to the availability of an exemption from the registration requirements under the Securities Act of 1933 (the "Securities Act") in the form mutually agreed. (c) The Company and Purchaser shall execute and deliver a Registration Rights Agreement (the "Registration Rights Agreement") in the form mutually agreed. Section 2. Representations and Warranties of Purchaser. ------------------------------------------- Purchaser hereby represents and warrants to Seller as follows: 2.1. Authorization. Purchaser has all requisite corporate power and ------------- authority to execute, deliver and perform this Agreement and the transactions contemplated hereby, and the execution, delivery and performance by Purchaser of this Agreement has been duly authorized by all requisite action by Purchaser and this Agreement, when executed and delivered by Purchaser, constitutes a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 2.2. Investment Representations. Purchaser hereby represents and warrants --------------------------- to Seller as follows: (a) Available Information. Purchaser acknowledges that it is familiar --------------------- with the business, management, operations, financial condition and affairs of the Company and is therefore able to evaluate the merits and risks of a purchase of the Note. (b) Restricted Securities. Purchaser understands and agrees that, when --------------------- acquired by the Purchaser pursuant to the Agreement, the Note will be restricted within the meaning of the Securities Act, and may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom. (c) Legend. Purchaser understands and acknowledges that the Note and ------ the certificates representing the Datawave Shares upon conversion of the Note shall bear a legend substantially as follows until (i) such securities shall have been registered under the Act; or (ii) in the opinion of counsel for the Company such securities may be sold without registration under the Securities Act as well as any applicable "Blue Sky" or state securities laws: "THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS 2 AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED." (d) Investment. The Note and, until effectiveness of a registration ---------- statement registering the Datawave Shares for resale by Purchaser, any Datawave Shares to be acquired by Purchaser, will be acquired for investment purposes only for Purchaser's own account and not with a view to the distribution thereof. (e) Accredited Investor. Purchaser is an "Accredited Investor" as that ------------------- term is defined in Rule 501 of Regulation D promulgated under the Securities Act. Purchaser is able to bear the economic risk of the purchase of the Note pursuant to the terms of this Agreement, including a complete loss of Purchaser's investment in the Note. (f) Financial Experience. The Purchaser represents that by reason of --------------------- Purchaser's business or financial experience or the business or financial experience of Purchaser's professional advisors who are unaffiliated with and who are not compensated by either Seller or the Company or any affiliate or selling agent of either Seller or the Company, directly or indirectly, Purchaser has the capacity to protect Purchaser's own interests in connection with the transactions contemplated by this Agreement. Purchaser understands that the foregoing representations and warranties are to be relied upon by Seller as a basis for exemption of the sale of the Note under the Securities Act and under the securities laws of all applicable states and for other purposes. Purchaser warrants that the information provided to Seller is true and correct as of the date hereof. Section 3. Representations and Warranties and Covenants of Seller and IDC. ------------------------------------------------------------------- Seller and IDC hereby jointly and severally represent, warrant and covenant to Purchaser as follows: 3.1. Ownership of Note. The Note is solely owned by Seller, beneficially ----------------- and of record, free and clear of any and all liens, encumbrances, claims, charges and assessments, and Seller has the full and sole right, power and authority to sell, transfer and deliver the Note. The Note is not subject to any options or contractual restrictions with respect to transferability. 3.2. Authorization. Seller and IDC each have all requisite corporate power ------------- and authority to execute, deliver and perform this Agreement and the transactions contemplated hereby, and the execution, delivery and performance by Seller and IDC of this Agreement has been duly authorized by all requisite action by Seller and IDC and this Agreement, when executed and delivered by Seller and IDC, constitutes a valid and binding obligation of Seller and IDC, enforceable against Seller and IDC in accordance with its terms, subject to applicable 3 bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 3.3. Approvals and Consents. No action, approval, consent or authorization, ---------------------- including, but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau, or instrumentality is necessary or required as to Seller or IDC in order to constitute this Agreement as a valid, binding and enforceable obligation of Seller and IDC in accordance with its terms. 3.4 Board of Directors. It is contemplated that a designee of Purchaser ------------------- will be nominated to the Board of Directors of the Company. IDC and Seller acknowledge that, absent a reasonable basis to vote otherwise, each will vote the shares of Common Stock held by them in favor of the nominees to the board of directors recommended by management of the Company. 3.5 Guarantee. In the event that the Note is for any reason required to be --------- transferred back to Seller or the Datawave Shares underlying the Note for any reason unable to be registered for resale by Purchaser, IDC, or another party designated by IDC and acceptable to Purchaser, shall transfer or cause to be transferred to Purchaser 7,500,000 shares of Common Stock (subject to adjustment for stock splits, stock dividends, reorganizations and the like) which may be transferred to Purchaser pursuant to an appropriate exemption under the Securities Act and that may be registered for resale by Purchaser. Upon such transfer of shares, Purchaser shall transfer the Note back to Seller. The party transferring such shares, if other than Seller, shall be entitled to receive from Seller a proportionate amount of the Purchase Price paid by Purchaser to Seller and the Contingent Purchase Price to be paid by Purchaser. IDC agrees that, until such time as the Datawave Shares are registered for resale by Purchaser, it shall retain a minimum of 7,500,000 shares of Common Stock (subject to adjustment as provided above) that would be so transferable to Purchaser. 3.6 Registration Expenses. Seller agrees that it shall pay all of the ---------------------- out-of-pocket expenses of the Company incurred in connection with preparation and filing of the registration statement to be filed pursuant to the Registration Rights Agreement and any amendments or supplements thereto. Section 4. Indemnification. --------------- (a) Seller and IDC agree to indemnify and hold harmless Purchaser (and its officers, employees, partners, agents, affiliates and controlling parties) from and against any and all losses, liabilities, damages, claims, suits, actions, judgments or causes of action, assessments, costs and expenses, including without limitation interest, penalties, reasonable attorneys' fees, any and all reasonable expenses incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation, asserted against, resulting to, imposed upon, or incurred or suffered by Purchaser, as a result of third party claims resulting or arising from any inaccuracy in or breach or nonfulfillment of or any alleged inaccuracy in or breach or nonfulfillment of any of 4 the representations, warranties, covenants or agreements made by Seller or IDC in this Agreement; provided, however, that the indemnity agreement contained in -------- ------- this Subsection 4(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 Seller or IDC (which consent shall not be unreasonably withheld, conditioned or delayed). (b) Purchaser agrees to indemnify and hold harmless Seller and IDC (and its officers, employees, partners, agents, affiliates and controlling parties) from and against any and all losses, liabilities, damages, claims, suits, actions, judgments or causes of action, assessments, costs and expenses, including without limitation interest, penalties, reasonable attorneys' fees, any and all reasonable expenses incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation, asserted against, resulting to, imposed upon, or incurred or suffered by Seller or IDC as a result of third party claims resulting or arising from any inaccuracy or any alleged inaccuracy in or breach or nonfulfillment of any of the representations, warranties, covenants or agreements made by the Purchaser in this Agreement, provided, however, that the indemnity agreement contained in this Subsection 4(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 Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed). Section 5. Brokers and Finders. -------------------- No party hereto shall be obligated to pay any commission, brokerage fee or finder's fee based on any alleged agreement or understanding between any such party and a third person in respect of the transactions contemplated hereby. Each party hereto hereby agrees to indemnify the other against any claim by any third person for any commission, brokerage or finder's fee or other payment with respect to this Agreement or the transactions contemplated hereby based on any alleged agreement or understanding between such party and such third person, whether express or implied from the actions of such party. Section 6. Recitals Incorporated. --------------------- The recitals of this Agreement are incorporated herein by this reference and made a material part of this Agreement. IDC and Seller severally covenant, as such recitals relate to them, that the recitals are a true and complete description of the events leading to the sale of the Note hereunder. Section 7. Successors and Assigns. ---------------------- This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 5 Section 8. Entire Agreement. ---------------- This Agreement, including any and all exhibits and schedules hereto, contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings among the parties with respect thereto. Section 9. Notices. ------- All notices, demands and requests of any kind to be delivered to any party in connection with this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered or if sent by internationally-recognized overnight courier or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: (a) if to Purchaser, to: Sigma Opportunity Fund, LLC c/o Sigma Capital Advisors, LLC 800 Third Avenue Suite 1701 New York, New York 10022 Telecopier: (212) 937-3558 Attention: Thom Waye with a copy to: Moomjian & Waite, LLP 100 Jericho Quadrangle Suite 225 Jericho, NY 11753 Telecopier: (516) 937-5050 Attention: Kevin W. Waite, Esq. (b) if to Seller, to: Integrated Technologies & Systems Ltd. The London Representatives Offices Sungold Administration, Suite 4, 1st Floor, 4 Morie Street London. SE18 1SL. United Kingdom Telecopier: 44 20 8875 1856 Attention : John Faraday with a copy to: Anslow & Jaclin, LLP 195 Route 9 South, Suite 204 6 Manapalan, NJ 07726 Telecopier: (732) 577-1188 Attention: Gregg Jaclin, Esq. (c) If to IDC, to: Integrated Data Corp. 220 Commerce Drive, Suite 300 Fort Washington, PA 19034-2411 Telecopier: 484-212-4141 Attention: David C. Bryan or to such other address as the party to whom notice is to be given may have furnished to the other parties to this Agreement in writing in accordance with the provisions of this Section. Any such notice or communication shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of nationally-recognized overnight courier, on the next business day after the date when sent and (iii) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. Section 10. Amendments. ---------- This Agreement may not be modified or amended, or any of the provisions of this Agreement waived, except by written agreement of all parties hereto. Section 11. Governing Law; Waiver of Jury Trial. ------------------------------------ (a) All questions concerning the construction, interpretation and validity of this Agreement shall be governed by and construed and enforced in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether in the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. In furtherance of the foregoing, the internal law of the State of New York will control the interpretation and construction of this Agreement, even if under such jurisdiction's choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily or necessarily apply. (b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. 7 Section 12. Submission to Jurisdiction. -------------------------- Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York and the United States of America located in the City of New York, New York and, by execution and delivery of this Agreement, the parties hereby accept for themselves and in respect of their properties, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereby irrevocably waive, in connection with any such action or proceeding, any objection, including, without limitation, any objection to the venue or based on the grounds of forum non conveniens, which they may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. The parties hereby irrevocably consent to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to them at the address set forth herein. Section 13. Severability. ------------ It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 14. Counterparts. ------------ This Agreement may be executed in any number of counterparts, and each such counterpart of this Agreement shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile counterpart signatures to this Agreement shall be acceptable and binding. Section 15. Headings. -------- The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 16. Expenses. -------- Each party hereto shall pay its own expenses incurred in the preparation, negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby and thereby, including without limitation expenses for legal and accounting services; provided, however, Seller hereby -------- ------- agrees to reimburse Purchaser in the amount of $75,000 for its expenses 8 incurred in connection with the purchase of the Note. Such amount may be withheld from the Contingent Purchase Price. Section 17. Survival. -------- The warranties, representations, and covenants of Seller, IDC and Purchaser contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of Purchaser or Seller. Section 18. Further Assurances. ------------------ From and after the date of this Agreement, the parties agree to execute and deliver any additional documents, instrument and other writings as may be reasonably necessary to effect the transfer of the Note from the Seller to the Purchaser, including any documents required by the Company's counsel. Section 19. Preparation of Agreement. ------------------------ Each party to this Agreement acknowledges that: (i) the party had the advice of, or sufficient opportunity to obtain the advice of, legal counsel separate and independent of legal counsel for any other party hereto; (ii) the terms of the transactions contemplated by this Agreement are fair and reasonable to such party; and (iii) such party has voluntarily entered into the transactions contemplated by this Agreement without duress or coercion. Each party further acknowledges that such party was not represented by the legal counsel of any other party hereto in connection with the transactions contemplated by this Agreement, nor was it under any belief or understanding that such legal counsel was representing its interests. Each party agrees that no conflict, omission or ambiguity in this Agreement, or the interpretation thereof, shall be presumed, implied or otherwise construed against any other party to this Agreement on the basis that such party was responsible for drafting this Agreement. * * * * * 9 IN WITNESS WHEREOF, each of the undersigned has duly executed this Note Purchase Agreement as of the date first written above. INTEGRATED TECHNOLOGIES & SYSTEMS LTD. By: /s/John Faraday ------------------------------------ Name: John Faraday Title: President & CEO SIGMA OPPORTUNITY FUND, LLC By: Sigma Capital Advisors, LLC, managing member By:/s/Thom Waye ------------------------------------- Name: Thom Waye Title: Manager INTEGRATED DATA CORP. By: /s/ David C. Bryan -------------------------------------- Name: David C. Bryan Title: President & CEO 10 > EX-10.2 3 registrationrightsagt.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of December 21, 2005, by and between Datawave Systems Inc., a Delaware corporation (the "Company"), Sigma Opportunity Fund, LLC, a Delaware limited liability company (the "Rightsholder"), and, solely for purposes of Section 3 and the last sentence of Section 4(a)(i) hereof, Integrated Technologies & Systems Ltd., a British Virgin Islands company ("IT&S"). WHEREAS, this Agreement has been entered into in connection with the purchase by the Rightsholder from Integrated Technologies & Systems Ltd. of a Promissory Note (the "Note"), dated February 1, 2005, in the aggregate principal amount of $600,000, which Note is convertible into 7,500,000 shares (the "Shares") of common stock (the "Common Stock") of the Company; WHEREAS, the Company has consented to the transfer of the Note to Rightsholder; and WHEREAS, in consideration of the Rightsholder purchasing the Note and becoming involved with the Company, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Securities Act"), and applicable state securities laws. NOW, THEREFORE, it is agreed as follows: 1. Registerable Securities. The term "Registerable Securities" shall mean ----------------------- (i) the Shares, and (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the Shares. For the purposes of this Agreement, securities will cease to be Registerable Securities when (A) such Registerable Securities are distributed to the public pursuant to the Securities Act, or pursuant to an exemption from the registration requirements of the Securities Act, including, but not limited to, Rules 144 and 144A promulgated under the Securities Act, (B) such Registerable Securities are eligible for immediate resale pursuant to Rule 144(k) promulgated under the Securities Act, or (C) such Registerable Securities have been otherwise transferred and the Company, in accordance with applicable laws and regulations, has delivered new certificates or other evidences of ownership for such securities which are not subject to any stop transfer order or other restriction on transfer and such Registerable Securities may be publicly resold (without volume or method of sale restrictions) without registration under the Securities Act. 2. Registration Rights. ------------------- (a) The Company shall file a registration statement to register the Registerable Securities, or the resale thereof, within 60 days after the date hereof, and will use its best commercially reasonable efforts to cause such registration statement to become effective as soon as practicable thereafter. (b) If, at any time commencing after the date hereof and on or prior to two years from the date hereof, the Company proposes to file a registration statement (a "Registration Statement") under the Securities Act with respect to an offering by the Company or any selling stockholders of any of its equity securities (other than a registration statement on Form S-4 or Form S-8, or any successor form or a registration statement filed solely in connection with an exchange offer, a business combination transaction or an offering of securities solely to the existing stockholders or employees of the Company), then the Company shall in each case give written notice (the "Notice") of such proposed filing to the Rightsholder at least twenty (20) days before the anticipated filing date of such Registration Statement, which Notice shall offer the Rightsholder the opportunity to include in such Registration Statement such amount of Registerable Securities that are not then registered pursuant to an effective registration statement as they may request. The Rightsholder shall advise the Company of such election in writing within ten (10) days after the date of receipt of the Notice, specifying the amount of Registerable Securities for which registration is requested (the "Election"). The Company shall include in any such Registration Statement all Registerable Securities so requested to be included. Notwithstanding the foregoing, if the underwriter(s) of any such offering of the Company shall be of the good faith opinion that the total amount or kind of securities held by the Rightsholder and any other persons or entities entitled to be included in such offering would adversely affect the success of such offering, then the amount of securities to be offered for the accounts of Rightsholder and the other selling securityholders included in the Registration Statement shall be reduced pro rata to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by the underwriter(s) thereof, whereupon the Company shall only be obligated to register such limited portion (which may be none) of the Registerable Securities with respect to which such Rightsholder have provided an Election. In no event shall the Company be required pursuant to this Section 2(b) to reduce the amount of securities proposed to be registered by it for its own account. 3. Registration Expenses. --------------------- IT&S shall pay all of the out-of-pocket expenses of the Company incurred in connection with preparation and filing of the registration statement required to be filed pursuant to Section 2 hereof and any amendments or supplements thereto (including compliance with its obligations under Section 4(a) below), and IT&S is included as a party to this Agreement expressly and solely for the purposes of this Section 3 and the last sentence in Section 4(a)(i) hereof. Rightsholder shall be responsible for and pay its own costs and expenses, including without limitation the costs of its legal counsel in connection with the Registration Statement, and any expenses or commissions in connection with the sale of its Registrable Securities. 4. Registration Obligations ------------------------ (a) Obligations of the Company. The Company will, in connection with -------------------------- any registration pursuant to Section 2 hereof: (i) Prepare and file with the Securities and Exchange Commission (the "Commission") a Registration Statement with respect to the Registerable Securities in accordance with the method or methods of distribution thereof as specified by the Rightsholder 2 (except if otherwise directed by the Rightsholder); provided, however, that not less than three business days prior to the filing of such Registration Statement or any related prospectus or any amendment or supplement thereto (including any document that would be incorporated therein by reference), the Company shall (A) furnish to the Rightsholder and its legal counsel, copies of all such documents proposed to be filed, and (B) at the request of the Rightsholder 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 counsel to the Rightsholder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall prepare and file with the Commission such post-effective amendments and supplements to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registerable Securities until (A) such the securities cease to be Registerable Securities or (B) two (2) years after the effective date of the Registration Statement, whichever is earlier. Rightsholder will reimburse the Company for any reasonable out of pocket expenses that the Company may incur for preparing and filing with the Commission such post-effective amendments and supplements, other than ordinary filing and administrative expenses associated with preparing and filing such post-effective amendments and supplements, if IT&S fails to compensate the Company for such expenses, as provided in Section 3 of this Agreement, within 45 days after a request for compensation is made to IT&S by the Company. Upon Rightsholder providing such compensation, Rightsholder will succeed the Company in the Company's right to collect such expenses from IT&S. (ii) Notify the Rightsholder and its legal counsel as promptly as possible (A) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (B) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registerable Securities or the initiation of any action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened (each, a "Proceeding") for that purpose; (C) 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 Registerable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (D) of the occurrence of any event that makes 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 the light of the circumstances under which they were made, not misleading. (iii) Furnish to the Rightsholder and its legal counsel, without charge, at least one conformed copy of the Registration Statement and each amendment thereto, 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. 3 (iv) Prior to any public offering of the Registerable Securities, use reasonable efforts to register or qualify or cooperate with the Rightsholder and its legal counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registerable Securities for offer and sale under the securities or blue sky laws of such jurisdictions within the United States as the Rightsholder requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the period when the Registration Statement is effective and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registerable Securities covered by the 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 general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (v) Cooperate with the Rightsholder to facilitate the timely preparation and delivery of certificates representing Registerable Securities that Rightsholder confirms to have been sold pursuant to the Registration Statement, which certificates shall be free of all restrictive legends, and to enable such Registerable Securities to be in such denominations and registered in such names as the Rightsholder may request. (vi) Use its reasonable efforts to cause all Registerable Securities relating to the Registration Statement to be listed on any securities exchange, quotation system or market (including Nasdaq), if any, on which similar securities issued by the Company are then listed. (vii) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158. (b) Obligations of Rightsholder. In connection with any registration ---------------------------- of Registerable Securities of the Rightsholder pursuant to Section 2 hereof: (i) It shall be a condition precedent to the obligations of the Company to file the registration statement pursuant to this Agreement that Rightsholder furnish to the Company such information regarding the distribution of such Registerable Securities and Rightsholder and of the intended method of disposition of such securities as shall be reasonably required to effect the registration of the Registerable Securities, all as the Company may from time to time reasonably request; (ii) Rightsholder shall notify the Company in writing two business days in advance of selling any Shares pursuant to the Registration Statement. 4 (iii) Rightsholder, upon receipt of notice from the Company of the occurrence of any event that makes 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 the light of the circumstances under which they were made, not misleading, shall forthwith discontinue disposition of Registerable Securities pursuant to the Registration Statement covering such Registerable Securities until Rightsholder is advised in writing by the Company that the use of the applicable prospectus may be resumed or until the Company delivers copies of supplemented or amended prospectuses. 5. Regulation M; Participation in Underwritten Registration. ------------- ------------------------------------------------ Rightsholder is familiar with the provisions and restrictions of Regulation M under the Securities Exchange Act of 1934, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Exchange Act"), and understands that the anti-manipulation rules of Regulation M may apply to sales of Shares in the market and to the activities of the Rightsholder and its affiliates. Rightsholder shall comply with Regulation M in connection with any sales of its Registerable Securities. Rightsholder further agrees that it may not participate in any underwritten registration hereunder unless such Rightsholder (i) agrees to sell such Rightsholder's securities on the basis provided in any underwriting arrangements and (ii) completes and executes all customary questionnaires, appropriate and limited powers of attorney, escrow agreements, indemnities, underwriting agreements, lock-up agreements with respect to securities not being sold and such other customary documents reasonably required under the terms of such underwriting arrangement. 6. Indemnification. --------------- (a) Indemnification by the Company. The Company agrees to indemnify ------------------------------- and hold harmless, to the full extent permitted by law, Rightsholder and its respective officers, directors, and members and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons from and against any and all losses, claims, damages, liabilities (or actions or proceedings in respect thereof, whether or not such indemnified party is a party thereto) and expenses (including reasonable costs of investigation and legal expenses), joint or several (each, a "Loss" and collectively "Losses"), arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which Registerable Securities were registered under the Securities Act (including any final, preliminary or summary prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein) or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading; provided, however, that the Company shall not be liable to any indemnified party in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement (including any final, preliminary or summary prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein) in reliance upon and in conformity with written information furnished to the Company by Rightsholder expressly for use in connection with such registration; This indemnity shall be in addition to any liability the Company may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Rightsholder or any indemnified party and shall survive the transfer of such securities by Rightsholder. (b) Indemnification by the Rightsholder. Rightsholder agrees to -------------------------------------- indemnify and hold harmless, to the full extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act and the Exchange Act) from and against any Losses arising out of or based upon any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement under which such Registerable Securities were registered under the Securities Act (including any final, preliminary or summary prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein), or necessary to make the statements therein (in the case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission has been contained in any information furnished in writing by Rightsholder to the Company specifically for inclusion in such Registration Statement. This indemnity shall be in addition to any liability such Rightsholder may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any indemnified party. In no event shall the liability of Rightsholder hereunder be greater in amount than the dollar amount of the gross proceeds before expenses and commissions to the Rightsholder under the sale of the Registerable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Any Person entitled to ---------------------------------------- indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided, that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying party has agreed in writing to pay such fees or expenses, (B) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after having received notice of such claim from the Person entitled to indemnification hereunder and to employ counsel reasonably satisfactory to such Person, (C) in the reasonable judgment of any such Person, based upon advice of its counsel, a conflict of interest exists between such Person and the indemnifying party with respect to such claims or (D) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party (in which case, if the Person notifies the indemnifying party, the indemnifying party shall not have the right to assume the defense of such 6 claim on behalf of such Person). If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent, but such consent may not be unreasonably withheld; provided, that an indemnifying party shall not be required to consent to any settlement involving the imposition of any material obligations on such indemnifying party other than financial obligations for which such indemnified party will be indemnified hereunder. If the indemnifying party assumes the defense, the indemnifying party shall have the right to settle such action without the consent of the indemnified party; provided, that the indemnifying party shall be required to obtain such consent (which consent shall not be unreasonably withheld) if the settlement includes any admission of wrongdoing on the part of the indemnified party or any restriction on the indemnified party or its officers or directors. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to each indemnified party of an unconditional release from all liability in respect to such claim or litigation. The indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm at any one time from all such indemnified party or parties. 7. Counterparts. This Agreement may be executed in one or more ------------ counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. 8. Entire Agreement. This Agreement and the documents and instruments ---------------- and other agreements among the parties hereto as contemplated by or referred to herein, constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 9. Severability. In the event that any provision of this Agreement or ------------ the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 10. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Each of the parties hereto irrevocably consents to the exclusive jurisdiction of any state or federal court within the State and City of New York, in connection with any matter based upon or arising out of this Agreement or the matters contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State of New York for such persons and waives and 7 covenants not to assert or plead any objection which they might otherwise have to such jurisdiction and such process. 11. Assignment. The right to include Registerable Securities in a ---------- Registration Statement pursuant to Section 2 may not be assigned. 12. Amendments and Waivers. Except as otherwise provided herein, the ---------------------- provisions of this Agreement may not be amended, modified or supplemented without the written consent of the Company and the Rightsholder. The Rightsholder or the Company may, by written notice to the others, (i) waive any of the conditions to its obligations hereunder or extend the time for the performance of any of the obligations or actions of the other, (ii) waive any inaccuracies in the representations of the other contained in this Agreement or in any documents delivered pursuant to this Agreement, (iii) waive compliance with any of the covenants of the other contained in this Agreement or (iv) waive or modify performance of any of the obligations of the other. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action or compliance with any representation, warranty, condition or agreement contained herein. Waiver of the breach of any one or more provisions of this Agreement shall not be deemed or construed to be a waiver of other breaches or subsequent breaches of the same provisions. 13. Notices. All notices, requests, demands or other communications ------- provided for herein shall be in writing and shall be deemed to have been given when personally delivered or sent by (i) registered or certified mail, return receipt requested, (ii) nationally recognized overnight courier service or (iii) facsimile transmission electronically confirmed addressed if to the Company, to Datawave Systems Inc., Wayne Interchange Plaza One, 145 Route 46 West, 3rd Floor, Wayne, NJ 07470, Attn: Joshua Emanuel, Facsimile: (973) 774-5047; if to Rightsholder, to Sigma Opportunity Fund, LLC, c/o Sigma Capital Advisors, managing member, 800 Third Avenue, Suite 1701, New York, NY 10022, Attn: Thom Waye, Facsimile: (212) 937-3558; with a copy to Moomjian & Waite, LLP, 100 Jericho Quadrangle, Jericho, NY 11753, Attn: Kevin W. Waite, Esq., Facsimile: (516) 937-5050, if to IT&S, to Integrated Technologies & Systems Ltd., Akara Buildings, 24, De Castro Street, Road Town, Tortola, British Virgin Islands, Facsimile: 011-44-208-871-1836; or to such other person or address as either party shall designate to the other from time to time in writing forwarded in like manner. 14. Other Remedies. Except as otherwise provided herein, any and all -------------- remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 15. Further Assurances. Each party hereto covenants and agrees with ------------------- all other parties hereto to promptly execute, deliver, file and/or record such agreements, instruments, certificates and other documents and to do and perform such other and further acts and things as any other party hereto may reasonably request or as may otherwise be necessary or proper to consummate and perfect the transactions contemplated hereby. 8 16. Representations. The parties hereto warrant and agree as follows: --------------- (a) Available Information. Rightsholder acknowledges to the Company ---------------------- that it is familiar with the business, management, operations, financial condition and affairs of the Company and is therefore able to evaluate the merits and risks of a purchase of the Note. The Company represents to the Rightsholder that, to the best of the Company's knowledge, the reports it has filed with the Commission do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. To the best of the Company's knowledge, the Company has filed all reports required to be filed with the Commission since January 1, 2005. (b) Restricted Securities. The Company covenants that, concurrently ---------------------- with the execution of this Agreement, it consents to the transfer of the Note to Rightsholder and that, upon request of Rightsholder, it will reissue a new promissory note in exchange for the Note upon the same terms to Rightsholder in the name of Rightsholder. Rightsholder acknowledges that the Company's consent to the transfer of the Note from IT&S to Rightsholder is based on the exemption referred to as the "Section 4(1-1/2)" exemption and is in reliance on the opinion provided by legal counsel for IT&S, a copy of which was provided to Rightsholder and its legal counsel, and is in reliance on the representations made by Rightsholder in this Section 16. Rightsholder understands and agrees that the Note (including any new note issued in exchange therefor) will be restricted within the meaning of the Securities Act, and may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom. The Company warrants that the Note (and any new note issued in exchange therefor) is valid and enforceable, cannot be prepaid and is convertible into 7,500,000 shares of Common Stock (subject to adjustment for stock splits, stock dividends, reorganizations and the like). (c) Legend. Rightsholder understands and acknowledges that the Note ------ and the certificates representing the Shares upon conversion of the Note shall bear a legend substantially as follows until (i) such securities shall have been registered under the Act; or (ii) in the opinion of counsel for the Company such securities may be sold without registration under the Securities Act as well as any applicable "Blue Sky" or state securities laws: "THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED." (d) Investment. The Note and, until effectiveness of a registration ---------- statement registering the Shares for resale by Rightsholder, any Shares to be acquired by Rightsholder, will be acquired for investment purposes only for Rightsholder's own account and not with a view to 9 the distribution thereof. (e) Accredited Investor. Rightsholder is an "Accredited Investor" as ------------------- that term is defined in Rule 501 of Regulation D promulgated under the Securities Act. Rightsholder is able to bear the economic risk of the purchase of the Note, including a complete loss of Rightsholder's investment in the Note. (f) Financial Experience. The Rightsholder represents and warrants --------------------- thatby reason of Rightsholder's business or financial experience, Rightsholder has the capacity to protect Rightsholder's own interests in connection with the transactions contemplated by this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by themselves or their duly authorized respective officers, all as of the date first written above. DATAWAVE SYSTEMS INC. By: /s/ Joshua Emanuel --------------------------------- Name: Joshua Emanuel Title: CEO SIGMA OPPORTUNITY FUND, LLC By: Sigma Capital Advisors, LLC, managing member By: /s/ Thom Waye --------------------------------- Thom Waye Manager INTEGRATED TECHNOLOGIES & SYSTEMS LTD. By: /s/ John Faraday --------------------------------- John Faraday President 10 -----END PRIVACY-ENHANCED MESSAGE-----