REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of April
___, 2001, by and among Interactive Telesis Inc., a Delaware corporation, with
headquarters located at 000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxxx 00000 (the "COMPANY"), the undersigned buyers (each, a "BUYER" and
collectively, the "BUYERS") and the Finders (as defined below).
WHEREAS:
A. In connection with the Series B Preferred Stock and Warrants
Purchase Agreement by and among the parties hereto of even date herewith (the
"SERIES B PURCHASE AGREEMENT"), the Company has agreed, upon the terms and
subject to the conditions of the Series B Purchase Agreement, to issue and sell
to the Buyers (i) shares of the Company's Series B Convertible Preferred Stock,
$0.001 par value per share (the "SERIES B PREFERRED STOCK"), convertible into
shares of the Company's Common Stock, $0.001 par value per share ("COMMON
STOCK") and (ii) warrants (the "WARRANTS") to purchase shares of Series B
Preferred Stock (the "WARRANT SHARES"), convertible into shares of Common Stock;
B. In connection with the transactions contemplated under the
Securities Purchase Agreement, the Company has agreed to issue to each of Xxx
Xxxx and Next Millennium Capital Holdings, LLC (each, a "FINDER" and
collectively, the "FINDERS"), as payment of a finders' fee, (i) shares of Common
Stock (the "FINDERS SHARES"), and (ii) warrants to purchase shares of Common
Stock (the "FINDERS WARRANTS"), as set forth on the Schedule of Investors
attached hereto.
C. To induce the Buyers to execute and deliver the Series B Purchase
Agreement, 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 "1933 ACT"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, the
Finders and the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer or Finder, any transferee or
assignee thereof to whom a Buyer or Finder assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and any transferee or
assignee thereof to whom a transferee or assignee assigns its rights under
this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9.
b. "PERSON" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or ordering
of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means (i) the Finders Shares, the
Common Stock issued or issuable upon exercise of the Finders Warrants, the
Common Stock issued or issuable pursuant to the Series B Purchase Agreement,
including the Common Stock issued or issuable upon conversion of the Series B
Preferred Stock (including the Warrant Shares issued or issuable on exercise of
the Warrants) and (ii) any shares of capital stock issued or issuable with
respect to Registrable Securities, Series B Preferred Stock (including the
Warrant Shares issued or issuable on exercise of the Warrants), Finders Warrants
or Warrants as a result of any stock split, stock dividend, recapitalization,
anti-dilution adjustment, exchange or similar event or otherwise, without regard
to any limitation on exercise or conversion of the Series B Preferred Stock
(including the Warrant Shares issued or issuable on exercise of the Warrants),
Finders Warrants or Warrants.
e. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act.
2. REGISTRATION.
a. DEMAND REGISTRATIONS. Subject to the terms of this Section
2.a and Section 5, at any time after the date hereof, after receipt of a written
request (the "INVESTOR REQUEST") from the holders of Registrable Securities
requesting that the Company effect a registration under the Securities Act
covering at least 40% of the Registrable Securities then outstanding, and
specifying the intended method of disposition thereof, the Company shall
promptly notify all Investors in writing of the receipt of such request and each
such Investor may elect (by written notice sent to the Company within ten (10)
business days from the date of such Investor's receipt of the aforementioned
notice from the Company) to have Registrable Securities included in such
registration thereof pursuant to this Section 2.a. Thereupon, the Company shall,
as expeditiously as possible (and in accordance with Section 3), use its best
efforts to effect the registration under the 1933 Act of all shares of
Registrable Securities which the Company has been so requested to register by
such Investors for sale, all to the extent required to permit the disposition of
all of the Registrable Securities so registered; provided, however, that the
Company shall not be required to effect more than two (2) registrations of
Registrable Securities pursuant to this Section 2.a.
b. PIGGY-BACK REGISTRATIONS. If at any time the Company
proposes to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
securities (other than a Registration Statement on Form S-4 or Form S-8 (or
their equivalents at such time) relating to securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans), the
Company shall promptly send to each Investor written notice of the Company's
intention to file a Registration Statement and of such Investor's rights under
this Section 2.b and, if within twenty (20) days after receipt of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, subject to the priorities set forth in this
Section 2.b below. No right to registration of Registrable Securities under this
Section 2.b shall be construed to limit any registration required under Section
2.a. The obligations of the Company under this Section 2.b may be waived by
Investors holding a majority of the Registrable Securities. If an offering in
connection with which an Investor is entitled to registration under this Section
2.b is an underwritten offering, then each Investor whose Registrable Securities
are included in such Registration Statement shall, unless otherwise agreed to by
the Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering. If a registration
pursuant to this Section 2.b is to be an underwritten public offering and the
managing underwriter(s) advise the Company in writing, that in their reasonable
good faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration:
(1) first, all securities the Company proposes to sell for its
own account;
(2) second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled to inclusion of
their securities in the Registration Statement by reason of demand registration
rights; and
(3) third, the securities requested to be registered by the
Investors and other holders of securities entitled to participate in the
registration, as of the date hereof, drawn from them pro rata based on the
number each has requested to be included in such registration.
c. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable
Securities, each transferee shall be allocated a pro rata portion of the then
remaining number of Registrable Securities included in such Registration
Statement for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases
to hold any Registrable Securities shall be allocated to the remaining
Investors, pro rata based on the number of Registrable Securities then held
by such Investors.
d. LEGAL COUNSEL. Subject to Section 5 hereof, the Investors
holding a majority of the Registrable Securities shall have the right to select
one legal counsel to review and oversee as their counsel any offering pursuant
to this Section 2 ("LEGAL COUNSEL"), which shall be Xxxxxx Xxxxxxx Xxxxx &
Xxxxxx LLP as their counsel or such other counsel as thereafter designated by
the holders of a majority of Registrable Securities. The Company shall
reasonably cooperate with Legal Counsel in performing the Company's obligations
under this Agreement.
e. INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is
unavailable for any registration of Registrable Securities hereunder, the
Company shall (i) register the sale of the Registrable Securities on another
appropriate form and (ii) undertake to register the Registrable Securities on
Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2.b or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2.a, the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the thirtieth (30th) day after the Company's receipt of the Investor Request
(the "DEMAND FILING DATE")) for the registration of Registrable Securities
pursuant to Section 2.a and use its best efforts to cause such Registration
Statements relating to the Registrable Securities to become effective as soon as
possible after such filing (but, in no event later than ninety (90) days after
the Company's receipt of the Investor Request in the event the SEC does not
review the Registration Statement and no later than one hundred twenty (120)
days after the Company's receipt of the Investor Request in the event the SEC
conducts a full review of the Registration Statement (as applicable, the "DEMAND
EFFECTIVE DATE")). The Company shall not file any other Registration Statement
with respect to its securities between the date of the Investor Request and
ninety (90) days after the Demand Effective Date (other than a Registration
Statement on Form S-8 (or its equivalent at such time) or any Registration
Statements required to be filed for securities issued or issuable to H&QGF
pursuant to the existing terms of the Company's equity line agreement with
H&QGF. The Company shall keep any Registration Statement required to be filed
hereunder effective pursuant to Rule 415 at all times until the earlier of (i)
the date as of which the Investors may sell
all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act
(or successor thereto) or (ii) the date on which (A) the Investors shall have
sold all the Registrable Securities covered by such Registration Statement
and (B) none of the Series B Preferred Stock (including the Warrant Shares
issued or issuable on exercise of the Warrants), Finders Warrants or Warrants
is outstanding (the "REGISTRATION PERIOD"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading. The term "best efforts" shall mean, among other things, that
the Company shall submit to the SEC, within two business days after the
Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later
than 48 hours after the submission of such request.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3.b by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), the Company shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement the
Registration Statement.
c. The Company shall (a) permit Legal Counsel to review and
comment upon (i) the Registration Statement at least seven (7) days prior to its
filing with the SEC and (ii) all other Registration Statements and all
amendments and supplements to all Registration Statements within a reasonable
number of days prior to the their filing with the SEC and (b) not file any
document in a form to which Legal Counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
Legal Counsel, which approval shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) any correspondence from the
SEC or the staff of the SEC to the Company or its representatives relating to
any Registration Statement, (ii) promptly after the same is prepared and filed
with the SEC, one copy of any Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference
and all exhibits and (iii) upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such Registration Statement
and all amendments and supplements thereto.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably request)
and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.
e. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as Legal Counsel or any Investor reasonably requests, (ii) prepare and
file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.e, (y) subject itself to
general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
f. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering; provided, however, that the Company shall have
the right to consent to the selection of such underwriter, which consent shall
not be unreasonably withheld.
g. As promptly as practicable after becoming aware of such
event, the Company shall notify Legal Counsel and each Investor in writing of
the happening of any event as a result of which the prospectus included in a
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, in light of the circumstances under
which they were made, not misleading, and promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to
Legal Counsel and each Investor (or such other number of copies as Legal
Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to
Legal Counsel and each Investor by facsimile on the same day of such
effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
h. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold (and, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
i. At the request of any Investor, the Company shall furnish
to such Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may reasonably
request (i) if required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel, (iii) any underwriter participating in any
disposition pursuant to a Registration Statement, (iv) one firm of accountants
or other agents retained by the Investors, and (v) one firm of attorneys
retained by such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to an Investor) or use of any Records or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of
this or any other agreement of which the Inspector has knowledge. Each
Investor agrees that it shall, upon learning that disclosure of such Records
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange or market on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
market, or (ii) secure the inclusion for quotation on the over-the-counter
market on the electronic bulletin board for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3.x.
x. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
n. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of such
Registration Statement.
o. If requested by the managing underwriters or an Investor,
the Company shall: (i) immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by an Investor or any underwriter of such Registrable Securities.
p. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
q. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 0000 Xxx) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
r. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
s. Within two (2) business days after a Registration Statement
which covers applicable Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as EXHIBIT A.
t. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
u. Notwithstanding anything to the contrary in Section 3.g, at
any time after the Registration Statement has been declared effective, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company, otherwise
required (a "GRACE PERIOD"); provided, that the Company shall promptly (i)
notify the Investors in writing of the existence of material, non-public
information giving rise to a Grace Period and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on
which the Grace Period ends; and, provided further, that during any
consecutive 365-day period, there shall be only one Grace Period, such Grace
Period not to exceed 20 days in the aggregate (an "ALLOWABLE GRACE PERIOD").
For purposes of determining the length of a Grace Period above, the Grace
Period shall begin on and include the date the Investors receive the notice
referred to in clause (i) above and shall end on and include the date the
Investors receive the notice referred to in clause (ii) above. Upon
expiration of the Allowable Grace Period, the Company shall again be bound by
the first sentence of Section 3.g with respect to the information giving rise
thereto. Notwithstanding anything to the contrary contained herein, the
Investors may exercise or convert Finders Warrants, Warrants and Series B
Preferred Stock (including the Warrant Shares issued or issuable on exercise
of the Warrants) during a Grace Period.
v. Each of the following events shall constitute a
"REGISTRATION DEFAULT" for purposes of this Agreement:
(i) the Company's failure to file a Registration
Statement pursuant to Section 2.a by the Demand Filing Date;
(ii) the SEC's failure to declare a Registration
Statement filed pursuant to Section 2.a effective on or before the Demand
Effective Date, except where the failure to meet such deadline is the result
solely of actions by the holders of Registrable Securities or Legal Counsel;
(iii) the Company's failure to request acceleration of
the effectiveness of a Registration Statement within two (2) business days
after the SEC has notified the Company that it may file such an acceleration
request as required by Section 3.a hereof, except where the failure to meet
such deadline is a result solely of actions by the holders of Registrable
Securities or Legal Counsel;
(iv) the Investors' inability to sell all Registrable
Securities pursuant to an effective Registration Statement (whether because
of a failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, to register sufficient shares of Common Stock or otherwise); or
(v) the aggregate days of Grace Period exceed the
Allowable Grace Period.
Upon the occurrence of a Registration Default, the Company shall pay each
Investor an amount determined in accordance with the following formula for each
30-day period of such Registration Default:
2% x P x N for the first 30 days of the first Registration Default, and
3% x P x N for all continuing subsequent Registration Defaults
where
P = the average closing sale price of the Company's Common Stock
on the Principal Market for the applicable 30 days (for
purposes of this Agreement, "PRINCIPAL MARKET" shall mean the
American Stock Exchange, the New York Stock Exchange, the
NASDAQ National Market, or the NASDAQ SmallCap Market,
whichever is at the time the principal trading exchange or
market for the Common Stock, based upon share volume, or if
the Common Stock is not traded on an exchange or market, the
OTC Bulletin Board); and
N = the number of Registrable Securities that such Investor
holds or may acquire pursuant to exercise or conversion of
Series B Preferred Stock (including the Warrant Shares issued
or issuable on exercise of the Warrants), Finders Warrants or
Warrants on the last day of the applicable 30-day period
(without giving effect to any limitations on conversion or
exercise of such Series B Preferred Stock (including the
Warrant Shares issued or issuable on exercise of the
Warrants), Finders Warrants or Warrants).
If a Registration Default is cured before the end of a 30-day period, the
applicable formula shall be pro-rated. The Company shall pay such amount in cash
on demand by an Investor made at any time during the continuance or after
termination of such Registration Default. If the Company does not remit payment
of the amount due to such Investor, the Company will pay the Investor's
reasonable costs of collection, including attorneys' fees. An Investor's right
to demand such payment shall be in addition to any other rights it may have
under this Agreement, the Series B Purchase Agreement or otherwise.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) business days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor's election to exclude all of
such Investor's Registrable Securities from such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2.b, each such Investor agrees
to enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities.
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3.h
or the first sentence of Section 3.g, such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3.h or the
first sentence of Section 3.g.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions.
f. Each Investor agrees not to take any action to cause such
Investor to become a registered broker-dealer as defined under the 1934 Act or
to effect any change to such Investor's status that would preclude the Company
from using Form S-3 for the Registration Statement.
5. EXPENSES OF REGISTRATION.
All reasonable expenses (other than expenses incurred pursuant
to Section 3.j(iv) and (v) and underwriting discounts and commissions) incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company and reasonable fees and disbursements of Legal Counsel,
shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company
will, and hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who controls
any Investor within the meaning of the 1933 Act or the 1934 Act, and any
underwriter (as defined in the 0000 Xxx) for the Investors, and the directors
and officers of, and each Person, if any, who controls, any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED
PERSON"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "CLAIMS") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency or body or
the SEC, whether pending or threatened, whether or not an indemnified party
is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which Registrable
Securities are offered ("BLUE SKY FILING"), or the omission or alleged
omission to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
any other law, including, without limitation, any state securities law, or
any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement or (iv) any
material violation of this Agreement (the matters in the foregoing clauses
(i) through (iv) being, collectively, "VIOLATIONS").
The Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or reasonable other expenses incurred
by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6.a: (i) shall not
apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person or underwriter
for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3.d; (ii) with respect to any preliminary
prospectus, shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of
any person controlling such person) if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected in the
prospectus, as then amended or supplemented, if such prospectus was timely
made available by the Company pursuant to Section 3.d, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior to the use giving rise to a violation and such Indemnified Person,
notwithstanding such advice, used it; (iii) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or to
cause to be delivered the prospectus made available by the Company, if such
prospectus was timely made available by the Company pursuant to Section 3.d;
and (iv) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees to severally
and not jointly indemnify, hold harmless and defend, to the same extent and
in the same manner as is set forth in Section 6.a, the Company, each of its
directors, each of its officers who signs the Registration Statement, each
Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any
of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon
any Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection
with such Registration Statement; and, subject to Section 6.d, such Investor
will reimburse any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6.b and the agreement
with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not
be unreasonably withheld; provided, further, however, that the Investor shall
be liable under this Section 6.b for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.b with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus and
such prospectus was provided to Investors as required, as then amended or
supplemented.
c. The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any
distribution, to the same extent as provided above, with respect to
information such persons so furnished in writing expressly for inclusion in
the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified
Person or Indemnified Party and any other party represented by such counsel
in such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Investors, and such legal counsel shall be
selected by the Investors holding a majority of the issued or issuable
Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate
fully with the indemnifying party in connection with any negotiation or
defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party or Indemnified Person
of a release from all liability in respect to such claim or litigation.
Following indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or Indemnified
Person with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be entitled to contribution from any seller of Registrable Securities who was
not guilty of fraudulent misrepresentation; and (ii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount
of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"),
during the Registration Period, the Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements and the filing of
such reports and other documents is required for the applicable provisions of
Rule 144; and
c. furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule
144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule
144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or assignee, and (b) the securities with respect to which such registration
rights are being transferred or assigned; (iii) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein; and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions 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 Investors who then hold or have the right to
acquire two-thirds (2/3) of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend
or consent to a waiver or modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties
to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same.
The addresses and facsimile numbers for such communications shall be:
If to the Company:
Interactive Telesis Inc
000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
With a copy to:
Rushall & XxXxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx, Esq.
If to an Investor, to its address and facsimile number on the signature pages
or Schedule of Investors attached hereto, with copies to such Investor's
representatives as set forth on the signature pages or Schedule of Investors
or to such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice
given to each other party five days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of such transmission or (C) provided by a courier or
overnight courier service shall be rebuttable evidence of personal service,
overnight or courier delivery or transmission by facsimile in accordance with
clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Delaware, without giving effect to any choice
of law or conflict of law provision or rule that would cause the application
of the laws of any jurisdictions other than the State of Delaware. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting
the City of Wilmington, Delaware, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.
k. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
INTERACTIVE TELESIS INC. BH CAPITAL INVESTMENTS, L.P.
By: HB and Co., Inc. its General Partner
By: By:
----------------------------- ----------------------------
Name: Name: Xxxxx Xxxxxxxxx
---------------------------
Its: Its: Authorized Signatory
----------------------------
EXCALIBUR LIMITED PARTNERSHIP
By: Excalibur Capital Management, Inc.
Its General Partner
By:_____________________________
Name: Xxxxxxx Xxxxxxx, President
FINDERS:
--------------------------
Xxx Xxxx
Next Millennium Capital Holdings, LLC.
By:
-----------------------------
Name:
---------------------------
Its:
----------------------------
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
-----------------------
-----------------------
ATTN:
------------------
Re: INTERACTIVE TELESIS INC.
Ladies and Gentlemen:
We are counsel to Interactive Telesis Inc., a Delaware corporation
(the "COMPANY"), which has entered into that certain Series B Preferred Stock
and Warrants Purchase Agreement (the " PURCHASE AGREEMENT") by and among the
Company, and the buyers named therein (collectively with the Finders, the
"HOLDERS") pursuant to which the Company issued to the Holders shares of its
Series B Convertible Preferred Stock, $0.001 par value per share (the "SERIES
B PREFERRED STOCK"), convertible into shares of the Company's Common Stock,
$0.001 par value per share (the "COMMON STOCK") and Warrants to purchase
Series B Preferred Stock. Pursuant to the Purchase Agreement, the Company
also has entered into a Registration Rights Agreement with the Holders and
the Finders (as defined therein) (the "REGISTRATION RIGHTS AGREEMENT")
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement)
under the Securities Act of 1933, as amended (the "1933 ACT"). In connection
with the Company's obligations under the Registration Rights Agreement, on
____________ ___, 2001, the Company filed a Registration Statement on Form
S-___ (File No. 333-_____________) (the "REGISTRATION STATEMENT") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder
thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and the Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
---------------------
cc: [LIST NAMES OF HOLDERS AND FINDERS]
SCHEDULE OF INVESTORS
------------------------------------------ --------------------------------------- -----------------------------------
NAME OF BUYER INITIAL NUMBER OF SHARES OF SERIES B INITIAL NUMBER OF SHARES OF
PREFERRED STOCK SERIES B PREFERRED STOCK
UNDERLYING WARRANTS
------------------------------------------ --------------------------------------- -----------------------------------
BH CAPITAL INVESTMENTS, L.P. 25,000 7,500
000 Xxxxx Xxxxxx Xxxx
Xxxxx Tower, 7th Floor
Toronto, Ontario, Canada X0X 0X0
Fax: 000-000-0000
------------------------------------------ --------------------------------------- -----------------------------------
EXCALIBUR LIMITED PARTNERSHIP 25,000 7,500
00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx, Xxxxxx X0X I B2
Fax: 000-000-0000
------------------------------------------ --------------------------------------- -----------------------------------
------------------------------------------ --------------------------------------- -----------------------------------
NAME OF FINDER INITIAL NUMBER OF FINDERS SHARES OF INITIAL NUMBER OF SHARES OF
COMMON STOCK COMMON STOCK UNDERLYING FINDERS
WARRANTS
------------------------------------------ --------------------------------------- -----------------------------------
XXX XXXX 18,750 2,500
0000 Xxxxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
Xxxxxx X0X 0X0
------------------------------------------ --------------------------------------- -----------------------------------
NEXT MILLENNIUM CAPITAL HOLDINGS, LLC. 18,750 2,500
0000 Xxxxxxx Xxxx
Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
------------------------------------------ --------------------------------------- -----------------------------------
