Exhibit 10.64
SERIES B PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT
BETWEEN
INTERACTIVE TELESIS INC.
AND
THE INVESTORS SIGNATORY HERETO
THIS CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT is
entered into effective as of April ____, 2001 (the "Agreement"), between the
Investors signatory hereto (each an "Investor" and together the "Investors"),
and Interactive Telesis Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase in the aggregate (a) 100,000 shares of Series B
Preferred Stock of the Company and (b) warrants to purchase 30,000 shares of the
Series B Preferred Stock of the Company, all for aggregate consideration of
$500,000;
WHEREAS, such investments will be made in reliance upon the provisions
of Regulation S and/or Section 4(2) ("Section 4(2)") and/or 4(6) of the United
States Securities Act and/or Regulation D ("Regulation D") and the other rules
and regulations promulgated thereunder (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in securities to be
made hereunder.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions
The following capitalized terms shall have the meanings ascribed to
them below:
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"CAPITAL SHARES EQUIVALENTS" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for purchase or otherwise acquire Capital Shares or
any such convertible or exchangeable securities.
"CLOSING" shall mean the closing of the purchase and sale of the
Purchased Shares and Warrants pursuant to Section 2.1.
"CLOSING DATE" shall mean 10:00 a.m. on the date hereof, or such other
time as the Company and the Investors may mutually agree, provided all the
conditions thereto have been satisfied or waived on such date.
"COMMON STOCK" shall mean the Company's common stock, $0.001 par value
per share.
"CONVERSION SHARES" shall mean the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock (including the Series B Preferred
Stock issuable upon exercise of the Warrants) purchased hereunder.
"DAMAGES" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs or expenses (including, without limitation,
reasonable attorneys' fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
"DISCLOSURE SCHEDULE" shall mean the written disclosure schedule, if
any, delivered on or prior to the date hereof by the Company to the Investors
that is arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Agreement.
"EFFECTIVE DATE" shall mean the date on which the SEC first declares
effective a Registration Statement registering the resale of the Registrable
Securities as set forth in the Registration Rights Agreement.
"ENVIRONMENTAL LAWS" shall mean foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants.
"ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
"ESCROW AGREEMENT" shall mean the Escrow Agreement in substantially the
form of Exhibit A hereto executed and delivered contemporaneously with this
Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean United States generally accepted accounting
principles as shall be in effect from time to time.
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS" shall mean the Irrevocable
Transfer Agent Instructions, in the form of Exhibit B attached hereto, from the
Company to the Company's transfer agent.
"ISSUE DATE" shall mean the date on which Purchased Shares and Warrants
are issued pursuant to Article II.
"LEGEND" shall mean the legend set forth in Section 9. 1.
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects, stock price or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under the Transaction Documents in
any material respect.
"PREFERRED STOCK" shall mean the preferred stock, par value $0.001 per
share, of the Company.
"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.
"PURCHASE PRICE" with respect to the issuance and sale of the shares of
Series B Preferred Stock purchased at the Closing shall mean $5.00 per share.
"PURCHASED SHARES" shall mean the Series B Preferred Stock purchased
pursuant to this Agreement.
"REGISTRABLE SECURITIES" shall mean the Conversion Shares until (i) all
Registration Statements have been declared effective by the SEC, and all
Conversion Shares have been disposed of pursuant to the Registration Statements,
(ii) all Conversion Shares have been sold under circumstances under which all of
the applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Conversion Shares have
been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares may be sold within a three-month period pursuant
to Rule 144 (or any similar provision then in effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement by and among the Investors, the Company and the other signatories
thereto regarding the filing of Registration Statements for the resale of the
Registrable Securities, substantially in the form attached hereto as Exhibit C.
"REGISTRATION STATEMENT" shall mean any registration statement on Form
S-3 (if use of such form is then available to the Company pursuant to the rules
of the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate,
and which form shall be available for the resale by the Investors of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investors under the Securities Act of
Registrable Securities.
"REGULATION D" shall have the meaning set forth in the recitals of this
Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean each report, proxy statement and
registration statement filed by the Company with the SEC pursuant to the
Exchange Act or the Securities Act from the initial filing with the SEC through
the date hereof.
"SECTION 4(2)" AND "SECTION 4(6)" shall have the meanings set forth in
the recitals of this Agreement.
"SECURITIES" shall mean the Purchased Shares, the Warrants, the Warrant
Shares and the Conversion Shares.
"SECURITIES ACT" shall have the meaning set forth in the recitals of
this Agreement.
"SERIES B CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations relating to the Series B Preferred Stock attached hereto as Exhibit
D.
"SERIES B PREFERRED STOCK" shall mean the Company's Series B Preferred
Stock, par value $0.001 per share, having the rights, terms, and privileges set
forth in the Company's Series B Certificate of Designations.
"TRADING DAY" shall mean any day during which the Principal Market
shall be open for business.
"TRANSACTION DOCUMENTS" shall mean this Agreement, the Registration
Rights Agreement, the Series B Certificate of Designations, the Escrow
Agreement, the Irrevocable Transfer Agent Instructions and each of the other
agreements, documents and instruments entered into and delivered by the parties
hereto in connection with the transactions contemplated by this Agreement.
"WARRANTS" shall mean the Warrants to purchase Series B Preferred Stock
to be issued to the Investors hereunder, in substantially the form attached
hereto as Exhibit E.
"WARRANT SHARES" shall mean all shares of Series B Preferred Stock or
other securities issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES AND WARRANTS
Section 2.1. INVESTMENT.
(a) Upon the terms and subject to the conditions set forth herein, on
the Closing Date, the Company shall sell, and the Investors shall purchase, (x)
an aggregate of 100,000 Purchased Shares at an aggregate Purchase Price of
$500,000 and (y) Warrants in an amount and with an exercise price as provided in
Section 2.1(c), allocated among the Investors as set forth on the signature
pages hereto.
(b) The Closing shall occur on the Closing Date at the Escrow Agent's
offices, at which time the Escrow Agent (x) shall release to the Investors
certificates representing the Purchased Shares and Warrants to be issued on such
Closing Date and (y) shall release to the Company the entire amount of the
aggregate Purchase Price in immediately available funds (after all fees have
been paid as set forth in the Escrow Agreement), in accordance with the terms of
the Escrow Agreement.
(c) The aggregate number of Warrants to be issued at the Closing shall
be 30,000, and the initial exercise price of the Warrants to be issued at the
Closing shall be $5.50. Each Warrant, upon issuance, will be exercisable for one
(1) share of Series B Preferred Stock.
(d) The Closing shall be subject to the parties' satisfaction of the
conditions to Closing set forth below:
(i) The obligation of the Company hereunder to issue and sell
the Purchased Shares and Warrants to each Investor at the
Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole
discretion by providing each Investor with prior written
notice thereof:
(A) The Investors shall have executed each of the
Transaction Documents to be executed by them and
delivered the same to the Company.
(B) The Escrow Agent shall have delivered to the
Company the Purchase Price for the Purchased Shares
and Warrants being purchased by the Investors at the
Closing (less any amounts withheld pursuant to the
Escrow Agreement) by wire transfer of immediately
available funds pursuant to the written wire
instructions provided by the Company.
(C) The representations and warranties of the
Investors shall be true and correct as of the date
when made and as of the Closing Date as though made
at that time (except for representations and
warranties that speak as of a specific date), and the
Investors shall have performed, satisfied and
complied with the covenants, agreements and
conditions required by the Transaction Documents to
be performed, satisfied or complied with by them at
or prior to the Closing Date.
(D) The Series B Certificate of Designations shall
have been filed in Delaware and shall have become
effective under the Delaware General Corporation Law.
(ii) The obligation of each Investor hereunder to purchase the
Purchased Shares and Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for
each Investor's sole benefit and may be waived by such
Investor at any time in its sole discretion by providing the
Company with prior written notice thereof:
(A) The Company and each other Investor shall have
executed each of the Transaction Documents to be
executed by it and delivered the same to such
Investor.
(B) The Common Stock shall be authorized for
quotation on the Principal Market, trading in the
Common Stock shall not have been suspended by the
Principal Market or the SEC at any time beginning on
the date hereof and through and including the Closing
Date, and the Company shall not have been notified of
any pending or threatened proceeding or other action
to delist or suspend the Common Stock.
(C) The representations and warranties of the Company
shall be true and correct as of the date when made
and as of the Closing Date as though made at that
time (except for representations and warranties that
speak as of a specific date), and the Company shall
have performed, satisfied and complied with the
covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the
Closing Date. Such Investor shall have received a
certificate, executed by the Company's Chief
Executive Officer, dated as of the Closing Date, to
the foregoing effect and as to such other matters as
may be reasonably requested by such Investor,
including, without limitation, an update as of the
Closing Date regarding the representation contained
in Section 4.3 below.
(D) Such Investor shall have received the opinion of
the Company's counsel dated as of the Closing Date,
in form, scope and substance reasonably satisfactory
to such Investor and in substantially the form of
Exhibit F attached hereto.
(E) The Company shall have executed and delivered (or
shall have caused the Escrow Agent to deliver to such
Investor the stock certificates (in such
denominations as such Investor shall request)
representing the Purchased Shares being purchased by
such Investor at the Closing.
(F) The Company shall have executed and delivered (or
shall have caused the Escrow Agent to deliver) to
such Investor the Warrants (in such denominations as
such Investor shall request) being purchased by such
Investor at the Closing.
(G) The Board of Directors of the Company shall have
adopted resolutions consistent with Section 4.2 below
and in a form reasonably acceptable to such Investor
(the "RESOLUTIONS").
(H) As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common
Stock, solely for the purpose of effecting the
issuance of the shares of Common Stock issuable in
connection with this
Agreement, a number of shares of Common Stock equal
to at least 200% of the number of Conversion Shares
issuable on the Closing Date (assuming all Warrants
were fully exercisable on such date regardless of any
limitation on the timing or amount of such
exercises).
(I) The Company shall have delivered the Irrevocable
Transfer Agent Instructions to its transfer agent,
and such Transfer Agent shall have acknowledged
receipt thereof in writing.
(J) The Company shall have delivered to such Investor
a certificate evidencing the due incorporation and
good standing of the Company and each Subsidiary in
such corporation's state of incorporation (and in any
states where such entities are required to be
qualified to do business) issued by the Secretary of
State of such states as of a date within ten (10)
days of the Closing Date.
(K) The Company shall have amended its Series A
Preferred Stock Certificate of Designations in
substantially the form attached hereto as Exhibit G
and shall have delivered to such Investor a certified
copy of its Certificate of Incorporation (including
all Certificates of Designations and amendments
thereto) as certified by the Secretary of State of
the State of Delaware within ten (10) days of the
Closing Date.
(L) The Investors shall have received evidence
satisfactory to the Investors of the concurrent
closing of the Company's financing with Xxxxxxxxx &
Xxxxx Guaranty Finance ("H&QGF"), pursuant to which
the Company can immediately thereafter make an
initial draw down on the equity line agreement
between the Company and H&QGF.
(M) The Company shall have delivered to such Investor
a certificate, executed by the Company's Secretary
dated the Closing Date, as to (i) the Resolutions
described in Section 4.2, (ii) the Certificate of
Incorporation, and (iii) the Bylaws, each as in
effect on the Closing Date.
(N) The Company shall have delivered to such Investor
such other documents relating to the transactions
contemplated by this Agreement as such Investor or
its counsel may reasonably request.
(O) Each other Investor shall have purchased its pro
rata share of the Purchased Shares and Warrants to be
purchased by it at such Closing.
(P) Such Investor shall have received a certificate,
executed by the Company's Chief Executive Officer,
dated as of the Closing Date to the effect that since
June 12, 2000 (i) no Material Adverse Effect has
occurred or exists with respect to the Company,
except as disclosed in any SEC Documents filed at
least five (5) days prior to the Closing Date, and
available on XXXXX, and (ii) the Company has not
taken any steps, and does not currently expect to
take any steps, to seek protection pursuant to 11
U.S.C. Section 101 et seq. (the "BANKRUPTCY CODE") or
any similar state bankruptcy law nor does the Company
have any knowledge or reason to believe that its
creditors intend to an initiate involuntary
proceeding under the Bankruptcy Code or any such
state law.
(Q) The Company shall have issued to each of Xxx Xxxx
and Next Millennium Capital Holdings, LLC, as payment
of a finders' fee related to the transactions
contemplated herein, (i) 37,500 shares of Common
Stock, and (ii)
warrants to purchase 5,000 shares of Common Stock at
an exercise price of $0.60 per share.
(R) The original Registration Statement required to
be filed under the Securities Purchase Agreement
dated June 12, 2000, as amended, among the parties
hereto shall be effective and the Company shall not
be in default under any of its obligations under the
such purchase agreement or the agreements referenced
therein.
(S) The Series B Certificate of Designations shall
have been filed in Delaware and shall have become
effective under the Delaware General Corporation Law.
(e) anything to the contrary notwithstanding, in the event the Closing
does not occur by April 30, 2001, the Investors shall have no further obligation
to purchase and the Company shall have no further obligation to sell the
Securities and this Agreement shall be terminated (provided, however, the
Company shall remain responsible for the payment of all expenses of the
Investors, including legal fees).
Section 2.2 LIQUIDATED DAMAGES. The parties hereto acknowledge and agree that
the sums payable pursuant to this Agreement and the Registration Rights
Agreement shall constitute liquidated damages and not penalties. The parties
further acknowledge that (a) the amount of loss or damages likely to be incurred
is incapable or is difficult to precisely estimate, (b) the amounts specified in
such sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by the Investors in
connection with the failure by the Company to timely effect the registration of
the Registrable Securities or otherwise perform hereunder and (c) the parties
are sophisticated business parties and have been represented by sophisticated
and able legal and financial counsel and negotiated this Agreement at arm's
length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. INTENT. Such Investor is entering into this Agreement for its own
account and not with a view to, or for sale in connection with, any distribution
of the Securities. Such Investor has no present arrangement (whether or not
legally binding) at any time to sell the Securities to or through any person or
entity; provided, however, that by making the representations herein, such
Investor does not agree to hold such Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to such
disposition.
Section 3.2. SOPHISTICATED INVESTOR. Such Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and such Investor has such experience
in business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in the Securities. Such Investor acknowledges
that an investment in the Securities is speculative and involves a high degree
of risk. The Investor has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the sale of the
Securities.
Section 3.3. DUE EXECUTION, POWER AND AUTHORITY. This Agreement and each of the
Transaction Documents that is required to be executed by such Investor has been
duly authorized and validly executed and delivered by such Investor and is a
valid and binding agreement of such Investor enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of
general application. The Investor has the requisite power and authority to enter
into the Agreement, to purchase the Securities and perform its obligations under
the terms of the Agreement.
Section 3.4. NOT AN AFFILIATE. Such Investor is not an officer, director or
"AFFILIATE" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. DISCLOSURE; ACCESS TO INFORMATION. Such Investor has received all
documents, records, books and other publicly available information pertaining to
such Investor's investment in the Company as such Investor has requested. Such
Investor acknowledges that the Company is subject to the periodic reporting
requirements of the Exchange Act, and such Investor has reviewed copies of all
SEC Documents deemed relevant by such Investor.
Section 3.6. MANNER OF SALE. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that, except as
set forth on the Disclosure Schedule prepared by the Company and attached
hereto:
Section 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as now being
conducted and as presently proposed to be conducted. The Company's Subsidiaries
are corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions in which they are incorporated and have the requisite
corporate power and authority to own and operate their properties and assets and
to carry on their business as now being conducted. The Company does not have any
Subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company and
each of its Subsidiaries is duly qualified and is in good standing as a foreign
corporation to do business in every jurisdiction in which the nature of the
business conducted or property owned or leased by it makes such qualification
necessary, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
Section 4.2. AUTHORITY. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under the
Transaction Documents and to issue the Securities pursuant to their respective
terms; (ii) the execution, issuance and delivery of the Transaction Documents,
the Series B Preferred Stock certificates and the Warrants by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required; and (iii) the Transaction Documents, when executed and delivered by
the Company and the parties hereto, shall constitute valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the issuance of
Common Stock upon conversion of the Purchased Shares into Common Stock and
exercise and conversion of the Warrants into Common Stock. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of the Securities. The Company further acknowledges that its
obligation to issue Common Stock under this Agreement is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company and notwithstanding
the commencement of any case under the Bankruptcy Code.
Section 4.3. CAPITALIZATION. The authorized capital stock of the Company
immediately prior to the Closing will consist of (i) [50,000,000] shares of
Common Stock, $0.001 par value per share, of which [30,811,938] shares were
issued and outstanding as of March 1, 2001, and (ii) 25,000,000 shares of
Preferred Stock, $0.001 par value per share, of which 10,000,000 have been
designated "Series A Preferred Stock," [none] of which are issued and
outstanding as of the Closing Date, and [200,000] of which have been designated
"Series B Preferred Stock," none of which were issued and outstanding
immediately prior to the Closing. The Company has no authorized or outstanding
shares of preferred stock or other equity securities except as disclosed herein.
Except for (i) outstanding options and warrants as set forth in the SEC
Documents, (ii) [xxx] stock options awarded under the Company's 1996 ITI Stock
Option Plan and (iii) as set forth in the Disclosure Schedule, there are no
outstanding Capital Shares Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting preemptive, registration or
anti-dilution rights to any person with respect to any of its equity or debt
securities. All of the outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully paid and
non-assessable and were issued in compliance with all applicable federal and
state securities laws.
Section 4.4. COMMON STOCK. The Company has registered its Common Stock pursuant
to Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on, the Principal
Market. As of the date hereof, the Principal Market is the OTC Bulletin Board,
and except as set forth in the SEC Documents, the Company has not received any
notice regarding, and to its knowledge there is no threat of, the termination or
discontinuance of the eligibility of the Common Stock for such posting or
listing.
Section 4.5. SEC DOCUMENTS. The Company has not provided the Investors any
information that, according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company, but which has
not been so disclosed. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and rules and regulations of the SEC
promulgated thereunder, and the SEC Documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents complied in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC or other applicable rules and regulations with respect thereto at the
time of such inclusion. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited interim statements, to normal year-end
audit adjustments). Neither the Company nor any of its Subsidiaries has any
material indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that would
have been required to be reflected in, reserved against or otherwise described
in the financial statements or in the notes thereto in accordance with GAAP,
which were not fully reflected in, reserved against or otherwise described in
the financial statements or the notes thereto included in the SEC Documents or
were not incurred in the ordinary course of business consistent with the
Company's past practices since the last date of such financial statements. No
other information provided by or on behalf of the Company to the Investors that
is not included in the SEC Documents, including, without limitation, information
referred to in Section 3.5 of this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are or
were made, not misleading.
Section 4.6. EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to the
accuracy of the Investors' representations in Article III, the Company's sale of
the Purchased Shares and its issuance of the Warrants under this Agreement does
not, and the Company's issuance of (i) the Series B Preferred Stock on the
exercise of the Warrants and (ii) Common Stock upon conversion of the Purchased
Shares and the Series B Preferred Stock issuable upon exercise of the Warrants
will not, require registration under the Securities Act and/or any applicable
state securities law. When issued and paid for in accordance with the Warrants
and validly converted in accordance with the Series B Certificate of
Designations, the Conversion Shares will be duly and validly issued, fully paid,
and non-assessable. Neither the sales of the Securities pursuant to, nor the
Company's performance of its obligations under, the Transaction Documents will
(i) result in the creation or imposition by the Company of any liens, charges,
claims or other encumbrances upon any of the Securities or, except as
contemplated herein, any of the assets of the Company, or (ii) be subject to
preemptive or other rights to subscribe for or acquire the Capital Shares or
other securities of the Company. None of the Securities will subject the
Investors to personal liability to the Company or its creditors by reason of an
Investor's possession thereof.
Section 4.7. NO DIRECTED SELLING, GENERAL SOLICITATION OR ADVERTISING IN REGARD
TO THIS TRANSACTION. Neither the Company nor any of its affiliates nor any
person acting on its or their behalf (i) has engaged in or will engage in any
directed selling efforts in violation of the requirements of Regulation S, (ii)
has conducted or will conduct any general solicitation (as that term is used in
Rule 502(c) of Regulation D) or general advertising with respect to the sale of
the Securities, or (iii) made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would require
registration of the Securities under the Securities Act.
Section 4.8. NO CONFLICTS. The Company's execution, delivery and performance of
the Transaction Documents, and the Company's consummation of the transactions
contemplated hereby and thereby do not and will not (i) result in a violation of
the Company's Certificate of Incorporation or Bylaws or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the Principal
Market) applicable to the Company or by which any property or asset of the
Company is bound or affected. The Company is not otherwise in violation of any
term of or in default under its Certificate of Incorporation, or its Bylaws, or
any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company, except for possible conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not individually or in
the aggregate have a Material Adverse Effect. The Company's business is not
being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in the
aggregate would not result in a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required by the Securities Act, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory organization, in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations that the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. Except as described in Section 4.8 of the
Disclosure Schedule, the Company is not in violation of the listing or posting
requirements of the Principal Market as in effect on the date hereof and is not
aware of any facts which would reasonably lead to delisting of the Common Stock
by the Principal Market in the foreseeable future.
Section 4.9. NO MATERIAL ADVERSE CHANGE. Since October 31, 2000, there has not
been any Material Adverse Effect has occurred or exists with respect to the
Company, except as disclosed in any SEC Documents filed at least five (5) days
prior to the date hereof and available on XXXXX.
Section 4.10. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS, OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, operations or financial condition, that would be
required to be disclosed
by the Company under applicable securities laws on a registration statement
filed with the SEC relating to an issuance and sale by the Company of its Common
Stock and which has not been publicly announced.
Section 4.11. NO INTEGRATED OFFERING. The Company has not, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the Securities Act or cause this offering of Securities to
be integrated with prior offerings of securities by the Company for purposes of
the Securities Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the Principal Market; nor
will the Company or any of its Subsidiaries take any action or steps that would
require registration of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.
Section 4.12. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company or any Subsidiary or any of their
officers or directors in their capacities as such, nor has the Company received
any written or oral notice of any such action, suit, proceeding or
investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect. There is no action, proceeding or
investigation by the Company currently pending or that the Company intends to
initiate.
Section 4.13. NO MISLEADING OR UNTRUE COMMUNICATION. Neither Company nor any
person representing the Company, or any other person selling or offering to sell
the Securities in connection with the transaction contemplated by this
Agreement, has made, at any time, any oral communication in connection with the
offer or sale of the same which contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not
misleading.
Section 4.14. MATERIAL NON-PUBLIC INFORMATION. The Company has not disclosed to
the Investors any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof, but which has not
been so disclosed.
Section 4.15. INSURANCE. The Company and each subsidiary maintains property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputa-ble insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. Neither the Company nor any Subsidiary
has been refused any insurance coverage sought or applied for, and neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its Subsidiaries, taken as a whole.
Section 4.16. TAX MATTERS. The Company has accurately prepared and timely filed
all United States income tax returns and all state and municipal tax returns
that are required to be filed by it, if any, and has paid or made provision for
the payment of all taxes, if any, that have become due pursuant to such returns.
No deficiency assessment or proposed adjustment of the Company's United States
income tax or state or municipal taxes is pending and there is no liability as
of the date hereof for any tax for which there is not an adequate reserve
reflected in the Company's publicly filed financial statements. All federal,
state, local and foreign franchise, sales, use, occupancy, excise, withholding
and other taxes and assessments (including interest and penalties) payable by,
or due from, the Company have been fully paid or adequately disclosed and fully
provided for in the books and financial statements of the Company, except where
the failure to provide for or pay such taxes and assessments would not have a
Material Adverse Effect on the Company. No examination of any tax return of the
Company is currently in progress, except where such examinations
would not have a Material Adverse Effect on the Company. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return of the Company.
Section 4.17. PROPERTY. Neither the Company nor any of its Subsidiaries owns any
real property. Each of the Company and its Subsidiaries has good and marketable
title to all personal property that it owns, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company; and to the Company's knowledge, any
real property, mineral or water rights, and buildings that the Company holds
under lease as a tenant are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and intended to be made of such property, mineral or water rights, and
buildings by the Company and its Subsidiaries.
Section 4.18. INTELLECTUAL PROPERTY RIGHTS. The Company has suffi-cient title
and ownership of or is licensed under all patents, patent applications,
trademarks, service marks, trade names, copyrights, and all registrations and
applications for registration of any of the foregoing, and all trade secrets,
information, inventions, computer programs owned or licensed by the Company,
documenta-tion, proprietary rights and processes (collectively, "Intel-lectual
Property") necessary for its business as now conducted and as currently proposed
to be conducted without any conflict with and without infringement of the rights
of others. The Company has not received any communications alleging that it has
violated or, by conducting its businesses as currently proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity. Except as
disclosed on the Disclosure Schedule, the Company does not believe it is or will
be necessary to use any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company (unless
made prior to employment as an independent contractor to the Company).
Section 4.19 PROPRIETARY INFORMATION; NONCOMPETITION COVENANTS.
(a) The Company has done nothing to compromise the secrecy,
confidentiality or value of any of its trade secrets, know-how, inventions,
prototypes, designs, processes or technical data required to conduct its
business as now conducted or as proposed to be conducted. The Company has taken
in the past and will take in the future reasonable security measures to protect
the secrecy, confidentiality and value of all its trade secrets, know-how,
inventions, prototypes, designs, processes, and technical data important to the
conduct of its business.
(b) Each current employee of the Company has executed a nondisclosure
and assignment of inventions agreement at least as restrictive as the form
previously provided to the Investors as an exhibit to the Securities Purchase
Agreement, dated June 12, 2000, as amended, by and among the Company and the
Investors. Each consultant to the Company has executed a confidentiality and
assignment agreement restricting the disclosure of proprietary information of
the Company and assigning to the Company all inventions made by such consultant
in the course of consulting for the Company. The Company is not aware that any
of the employees, officers or consultants of the Company, past or present, is in
violation of such agreements, and the Company will use its best efforts to
prevent any such violation.
4.20. COMPANY SOFTWARE.
(a) The Disclosure Schedule sets forth a true and complete list of all
software used in connection with the business of the Company other than
off-the-shelf software acquired for less than $10,000 per application (the
"Company Software"). The Company has all technical and descriptive materials for
the Company Software as is necessary to run its business in accordance with its
historical practices, except as would not have a Material Adverse Effect.
(b) The use of the Company Software does not breach any terms of any
contract or agreement. The Company either owns or has been granted under license
agreements relating to the Company Software (the "Company License Agreements")
valid and subsisting rights with respect to all software comprising the Company
Software and such rights may be exercised anywhere in the world. The
Company is in compliance with each of the terms and conditions of each of the
Company License Agreements except to the extent failure to so comply,
individually or in the aggregate, would not have a Material Adverse Effect. In
the case of any commercially available "shrink-wrap" software programs (such as
Lotus 1-2-3 or Microsoft Word), the Company has not made and is not using any
unauthorized copies of any such software programs and, to the knowledge of the
Company, none of the employees, agents or representatives of the Company have
made or are using any such unauthorized copies in the conduct of the Company's
business, except as would not have a material adverse effect on the Company.
(c) The Company Software and the related computer hardware used by the
Company in its operations (the "Company Hardware") are adequate in all material
respects, when taken together with the other assets, resources and personnel of
the Company, to run the business of the Company in the same manner as such
business has operated since inception. The Disclosure Schedule contains a
summary description of any unusual problems experienced by the Company in the
past twelve months with respect to the Company Software or Company Hardware that
would result in a Material Adverse Effect.
Section 4.21. INTERNAL CONTROLS AND PROCEDURES. The Company maintains books and
records and internal accounting controls that provide reasonable assurance that
(i) all transactions to which the Company or any Subsidiary is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any Subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
GAAP.
Section 4.22. PAYMENTS AND CONTRIBUTIONS. Neither the Company, nor any
Subsidiary, nor any of their directors, officers or, to the Company's knowledge,
other employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.23. ACKNOWLEDGMENT REGARDING INVESTORS' PURCHASE OF THE SECURITIES.
The Company acknowledges and agrees that each of the Investors is acting solely
in the capacity of arm's-length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Investor is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
of the Investors or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to such Investor's purchase of the Securities. The
Company further represents to each Investor that the Company's decision to enter
into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
Section 4.24. EMPLOYEES. To the best of the Company's knowledge, no employee of
the Company is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would conflict with
such employee's obligation to use his best efforts to promote the interests of
the Company or that would conflict with the Company's business as conducted or
as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as currently proposed, will,
to the Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. To
the best of the Company's knowledge, no employee or consultant of the Company is
in violation of any term of any employment contract, proprietary information and
inventions agreement, noncompetition agreement or any other contract or
agreement relating to the relationship of any such employee or
consultant with the Company or any previous employer. To the best of the
Company's knowledge, no officer of the Company nor any Key Employee (as
hereinafter defined) of the Company, the termination of whose employment, either
individually or in the aggregate, would have a materially adverse effect on the
Company, has any intention of terminating his or her employment with the
Company. The Company has no collective bargaining agreements with any of its
employees and to the best of the Company's knowledge there is no
labor-union-organizing activity pending or threatened with respect to the
Company. For purposes of this Agreement, "Key Employee" means and includes each
officer of the Company and each employee who contributes to the invention,
design or authorship of the Company's Intellectual Property.
Section 4.25. ENVIRONMENTAL MATTERS.
(a) The Company has duly complied with, and, to the best knowledge of
the Company, all the real estate leased by it either currently or in the past
(hereinafter referred to collectively as the "Premises") are in compliance in
all material respects with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder.
(b) The Company has been issued, and will maintain, all federal, state
and local permits, licenses, certificates and approvals known to the Company to
be required relating to (i) air emissions, (ii) discharges to surface water or
ground water, (iii) noise emissions, (iv) solid or liquid waste disposal, (v)
the use, generation, storage, transportation or disposal of toxic or hazardous
substances or wastes (intended hereby and hereafter to include any and all such
materials listed in any federal, state or local law, code or ordinance and all
rules and regulations promulgated thereunder, as hazardous or potentially
hazardous), or (vi) other environmental, health and safety matters.
(c) The Company has not received notice of, nor does the Company know
of any facts that might constitute, any violation of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder, that relate to the use, ownership or
occupancy of any of the Premises, and the Company is not in violation of any
covenants, conditions, easements, rights-of-way or restrictions affecting any of
the Premises or any rights appurtenant thereto.
(d) Except in accordance with a valid governmental permit, license,
certificate or approval, the Company has not caused any emission, spill, release
or discharge into or upon (i) the air, (ii) soils or any improvements located
thereon, (iii) surface water or ground water, or (iv) the sewer, septic system
or waste treatment, storage or disposal system servicing any of the Premises, of
any toxic or hazardous substances or wastes at or from any of the Premises.
(e) There has been no complaint, order, directive (other than
directives applicable to the general public), claim, citation or notice by any
governmental authority or any other person or entity with respect to (i) air
emissions, (ii) spills, releases or discharges to soils or any improvements
located thereon, surface water, ground water or the sewer, septic system or
waste treatment, storage or disposal systems servicing any of the Premises,
(iii) noise emissions, (iv) solid or liquid waste disposal, (v) the use,
generation, storage, transportation or disposal of toxic or hazardous substances
or wastes or (vi) other environmental, health or safety matters affecting the
Company, any of the Premises or any improvements located thereon, or the
businesses thereon conducted.
Section 4.26. REGULATORY PERMITS. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such items would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
Section 4.27. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any contract or
agreement that in the reasonable judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
Section 4.28. CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents
filed at least ten (10) days prior to the date hereof and except for
arm's-length transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the Company could
obtain from third parties and other than the grant of stock options disclosed in
the Disclosure Schedule, none of the officers or directors of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer or director or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer or director has a substantial interest or is an officer,
director, trustee or partner.
Section 4.29. APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the laws of the state of its incorporation
which is or could become applicable to the Investors as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company's issuance of the Securities and the Investor's ownership of the
Securities.
Section 4.30. NO OTHER AGREEMENTS. The Company has not, directly or indirectly,
made any agreements with any Investors relating to the terms or conditions of
the transactions contemplated by the Transaction Documents, except as set forth
in the Transaction Documents.
Section 4.31. NO MISREPRESENTATION. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement, do 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 under
which they were made, not misleading.
Section 4.32 REGISTRATION RIGHTS. Except as provided in the Registration Rights
Agreement and except for the Company's obligation to register shares issued or
issuable to H&QGF as disclosed in the SEC Documents, the Company is not under
any obligation to register any of its presently outstanding securities or any of
its securities that may hereafter be issued.
Section 4.33 FINDERS' FEES. Except as disclosed in the Disclosure Schedule, the
Company (a) represents and warrants that it has retained no finder or broker in
connection with the transactions contemplated by this Agreement. The Company
hereby agrees to indemnify and to hold the Investors harmless of and from any
liability for any commission or compensation in the nature of a finder's fee
(including any fee listed on the Disclosure Schedule) to any broker or other
person or firm (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its employees or
representatives is responsible.
Section 4.34 ABSENCE OF RIGHTS AGREEMENT. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change of control of the Company.
ARTICLE V
COVENANTS OF THE INVESTORS
Each Investor, severally and not jointly, covenants as follows.
Section 5.1 BEST EFFORTS. Each Investor shall use its best efforts to timely
satisfy each of the conditions to be established by it as provided in Article II
of this Agreement.
Section 5.2 REGULATION S COMPLIANCE. Each Investor agrees that any hedging
transactions with respect to the Common Stock will only be conducted in
compliance with Regulation S. Each investor certifies that it is not a U.S.
Person (as defined for purposes of Regulation S) and is not acquiring the
Securities for the account or benefit of a U.S. Person. The Investors understand
and acknowledge that the Company may refuse to register the transfer of any
Securities unless made in accordance with the registration or exemption
provisions of the Securities Act.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. BEST EFFORTS. The Company shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Article II
of this Agreement.
Section 6.2. REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect, and the Company shall
comply with the terms thereof.
Section 6.3. RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock in an amount not less
than 150% of the number of shares of Common Stock needed to provide for the
issuance of the Conversion Shares (as may be adjusted from time to time). The
Company further agrees at if at any time 150% of the number of shares of Common
Stock issuable under the Agreement would cause the Company to be obligated to
issue a number of shares of Common Stock in excess of its authorized capital
(after taking into account all other Capital Shares Equivalents then existing),
it shall promptly commence and effect all necessary corporate and shareholder
action necessary to increase its authorized capital so as to eliminate the
aforesaid condition.
Section 6.4. LISTING OF COMMON STOCK. The Company shall maintain the listing of
the Common Stock on a Principal Market and, as soon as required by the rules of
the Principal Market and any other national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are listed, shall
list the Conversion Shares on the Principal Market and each such other exchange
or system. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, it will include in such application
the Conversion Shares, and will take such other action as is necessary or
desirable in the opinion of the Investors to cause the Conversion Shares to be
listed on such other Principal Market as promptly as possible. The Company will
take all action necessary to continue the listing and trading of its Common
Stock on a Principal Market (including, without limitation, maintaining
sufficient net tangible assets) and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Principal Market and shall provide Investors with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three (3) trading days of the Company's
receipt thereof, until the Investors have disposed of all of their Registrable
Securities. The Company agrees to apply for listing on the Nasdaq National
Market and/or the Nasdaq SmallCap Market as soon as practicable following the
Company's eligibility for listing thereon.
Section 6.5. EXCHANGE ACT REGISTRATION. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act until the Investors
have disposed of all of their Registrable Securities.
Section 6.6. LEGENDS. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article IX.
Section 6.7. CORPORATE EXISTENCE; CONFLICTING AGREEMENTS. The Company will take
all steps necessary to preserve and continue its corporate existence. The
Company shall not enter into any agreement, the terms of which agreement would
restrict or impair the right or ability of the Company to perform any of its
obligations under this Agreement or any of the other Transaction Documents.
Section 6.8. CONSOLIDATION; MERGER. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument or by operation of law the obligation to deliver
to the Investors such shares of stock and/or securities as the Investors are
entitled to receive pursuant to this Agreement.
Section 6.9. ISSUANCE OF PURCHASED SHARES, WARRANTS, WARRANT SHARES AND
CONVERSION SHARES. The sale of the Purchased Shares and the Warrants and the
issuance of the Warrant Shares and Conversion Shares shall be made in accordance
with the provisions and requirements of Regulation S (or if that exemption shall
fail for any reason, then in accordance with Section 4(2), Section 4(6) or
Regulation D). The Company shall take such actions as necessary to qualify the
sales made hereunder to the Investors under Regulation S. If requested by the
Investors, the Company shall file a Form D with respect to the Securities as
required under Regulation D and provide a copy thereof to each Investor promptly
after such filing.
Section 6.10. RELIEF IN BANKRUPTCY. The Company shall not seek judicial relief
from its obligations hereunder except pursuant to the Bankruptcy Code. In the
event the Company is a debtor under the Bankruptcy Code, the Company hereby
waives to the fullest extent permitted any rights to relief it may have under 11
U.S.C. Section 362 in respect of the exercise of the Warrants. The Company
agrees, without cost or expense to the Investors, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. Section 362.
Section 6.11. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Securities for working capital and general corporate purposes, but not
for the repayment of any debt.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. SURVIVAL. The representations, warranties and covenants made by
each of the Company and each Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date.
Section 7.2. INDEMNITY.
(a) The Company shall indemnify and hold harmless the Investors, their
respective Affiliates and their respective officers, directors, partners and
members (each an "Indemnified Party"), from and against any and all Damages, and
shall reimburse the Indemnified Parties for all reasonable out-of-pocket
expenses (including the reasonable fees and expenses of legal counsel), in each
case promptly as incurred by such Indemnified Party and to the extent arising
out of or in connection with:
(i) any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties
contained in any of the Transaction Documents, the
annexes, schedules or exhibits thereto or any
instrument, agreement or certificate entered into or
delivered by the Company pursuant hereto or thereto;
or
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements,
undertakings or obligations set forth in any of the
Transaction Documents, the annexes, schedules or
exhibits thereto or any instru-ment, agreement or
certificate entered into or delivered by the Company
pursuant hereto or thereto; or
(iii) any action instituted against the Investors, or any
of them, by any stockholder of the Company who is not
an affiliate of an Investor, with respect to any of
the transactions contemplated by the Transaction
Documents.
(b) Each Investor, severally but not jointly, shall indemnify and hold
harmless the Company, its Affiliates, directors and officers (each an
"Indemnified Party"), from and against any and all Damages, and shall reimburse
the Indemnified Parties for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by such Indemnified Party and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact or breach of
any of such Investor's representations or warranties
contained in any of the Transaction Documents, the
annexes, schedules or exhibits thereto or any
instrument, agreement or certificate entered into or
delivered by the Investor pursuant hereto or thereto;
or
(ii) any failure by the Investor to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in any of the
Transaction Documents, the annexes, schedules or
exhibits thereto or any instru-ment, agreement or
certificate entered into or delivered by the Investor
pursuant hereto or thereto.
Section 7.3. NOTICE. Promptly after receipt by an Indemnified Party seeking
indemnification pursuant to Section 7.2 of written notice of any investigation,
claim, proceeding or other action in respect of which indemnification is being
sought (each, a "Claim"), the Indemnified Party promptly shall notify the other
party hereto (the "Indemnifying Party") of the commencement thereof; but the
omission so to notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnified Party and
the Indemnifying Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any
Claim in the same jurisdiction, be liable for the fees and expenses of more than
one firm of legal counsel for the Indemnified Party (together with appropriate
local counsel). The Indemnifying Party shall not, without the prior written
consent of the Indemnified Party (which consent shall not unreasonably be
withheld), settle or compromise any Claim or consent to the entry of any
judgment that does not include an unconditional release of the Indemnified Party
from all liabilities with respect to such Claim or judgment.
Section 7.4. DIRECT CLAIMS. In the event an Indemnified Party should have a
claim for indemnification that does not involve a claim or demand being asserted
by a third party, the Indemnified Party promptly shall deliver notice of such
claim to the Indemnifying Party. If the Indemnifying Party disputes the claim,
such dispute shall be resolved by mutual agreement of the Indemnified Party and
the Indemnifying Party or by binding arbitration conducted in accordance with
the procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. DUE DILIGENCE REVIEW. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, Nasdaq or other
filing, all SEC Documents and other filings with the SEC, and all other publicly
available corporate documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's officers,
directors and employees to supply all such publicly available information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose material non-public information to
the Investors, advisors to or representatives of the Investors unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investors' advisors and representatives to enter into a
confidentiality agreement in form and content reasonably satisfactory to the
Company and the Investors.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investors or their advisors or representatives,
and the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements therein, in light of the circumstances in which they were
made, not misleading. Nothing contained in this Section 8.2 shall be construed
to mean that such persons or entities other than the Investors (without the
written consent of the Investors prior to disclosure of such information as set
forth in Section 8.2(a)) may not obtain non-public information in the course of
conducting due diligence in accordance with the terms of this Agreement and
nothing herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such persons or
entities, that the Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1. LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legends or
equivalent (the "LEGEND"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED
OF, EXCEPT IN ACCORDANCE WITH REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM SUCH REGISTRATION.
Section 9.2. TRANSFER AGENT INSTRUCTIONS. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
shall issue to any substitute or replacement transfer agent for its Common Stock
upon the Company's appointment of any such substitute or replacement transfer
agent) Irrevocable Transfer Agent Instructions substantially in the form of
EXHIBIT B hereto. Such Irrevocable Transfer Agent Instructions shall be
irrevocable by the Company from and after the date hereof or from and after the
issuance thereof to any such substitute or replacement transfer agent, as the
case may be.
Section 9.3. NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article IX. After the Effective Date,
upon request of the Investor the Company will substitute certificates without
restrictive legend for certificates for any Conversion Shares issued prior to
the Effective Date which bear restrictive legends and remove any stop-transfer
restriction relating thereto promptly, but in no event later than three trading
days after request for removal.
Section 9.4. INVESTORS' COMPLIANCE. Nothing in this Article shall affect in any
way each Investor's obligations to comply with all applicable securities laws
upon resale of the Common Stock.
Section 9.5. TRANSFERS WITHOUT REGISTRATION. If an Investor provides the Company
with an opinion of counsel, in generally acceptable form, that registration of a
resale by such Investor of any Securities is not required under the Securities
Act, the Company shall permit the transfer and, in the case of the Conversion
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such
denominations as specified by such Investor and, if such opinion provides that
such legends can be removed, without any restrictive legends.
Section 9.6. INJUNCTIVE RELIEF. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Investors by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Article IX will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Article
IX, that the Investors shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
ARTICLE X
CHOICE OF LAW; ARBITRATION
Section 10.1. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made in Delaware by persons domiciled in Delaware and without regard to its
principles of conflicts of laws. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders.
Section 10.2. ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration by the
American Arbitration Association (the "AAA") in accordance with its Commercial
Arbitration Rules. In the event of any conflict between those Rules and this
Agreement, this Agreement will govern.
Arbitration will be conducted by a panel of three (3) arbitrators (the
"Panel"). Within fifteen (15) days after the commencement of arbitration, each
party shall select one person to act as arbitrator and the two selected shall
select a third arbitrator within ten (10) days of their appointment. The members
of the Panel shall decide on one member to act as Chair. If the arbitrators
selected by the parties are unable or fail to agree on a third arbitrator, the
third arbitrator shall be selected by the American Arbitration Association.
The place of arbitration shall be New York, New York. This Agreement
shall be governed by and interpreted in accordance with the laws of the State of
Delaware unless the matter at issue is the corporation law of the company's
state of incorporation, in which event the corporation law of that jurisdiction
shall govern that particular issue. Either party may, without waiving any remedy
under this Agreement, seek from any Court having jurisdiction any interim or
provisional relief that is necessary to protect the rights or property of that
party, pending the Panel's determination of the merits of the controversy. If
any such provisional relief is sought, the non-prevailing party shall pay the
expenses of the prevailing party, including reasonable attorney's fees, in
connection with that proceeding.
Consistent with the expedited nature of arbitration, each party will,
upon the written request of the other party, promptly provide the other with
copies of documents relevant to the issues raised by any claim or counterclaim.
Any dispute regarding discovery, or the relevance or scope thereof, shall be
determined by the Chair of the Panel, which determination shall be conclusive.
Document exchange shall be completed within forty-five (45) days following
selection of the last member of the Panel. At the request of a party, the Panel,
through its Chair, shall have the discretion to order examination by deposition
of witnesses to the extent the Panel deems such discovery relevant and
appropriate. Depositions shall be limited to a maximum of three per party and
shall be held within thirty (30) days of authorization by the Panel. Additional
depositions may be scheduled only with the permission of the Chair of the Panel
for good cause shown. Each deposition shall be limited to one day's duration.
All objections are reserved for the arbitration hearing except for objections
based on privilege.
The award of the arbitrators shall be accompanied by a written reasoned
opinion, which, to the extent practical, shall be rendered no more than thirty
(30) calendar days following the close of the Panel's adjudicatory hearing on
the issues submitted for arbitration. The decision of the Panel will be final,
binding, conclusive and non-appealable. The decision of the Panel will be
entitled to be enforced to the fullest extent permitted by law and entered in
any court of competent jurisdiction. The Panel (or the sole arbitrator selected,
if there is no timely response by the responding party) is authorized and
directed to enter a default judgment against a party who fails to take action or
to participate in any proceeding hereunder within the time periods prescribed by
this Agreement, and by the AAA Rules and/or the Panel.
The Panel shall award to the prevailing party, as determined by the
Panel, all that party's costs and expenses. "Costs and expenses" means all
reasonable pre-award expenses of arbitration, including discovery and deposition
expenses, witness fees, costs and expenses, and attorneys' fees. If the Panel is
unable to determine which party is the "prevailing party," the Panel shall
apportion the costs and expenses as it deems appropriate.
ARTICLE XI
ASSIGNMENT
Neither this Agreement nor any rights of the Investors or the Company hereunder
may be assigned by either party to any other person. Notwithstanding the
foregoing, the provisions of this Agreement shall inure to the benefit of, and
be enforceable by, any permitted transferee of any Securities; provided,
however, each Investor's interest in this Agreement may be assigned at any time,
in whole or in part, to any Affiliate of the Investor, or to not more than a
total of three (3) accredited investors, who agrees to make the representations
and warranties contained in Article III and who agrees to be bound by the terms
of this Agreement.
ARTICLE XII
NOTICES
All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) hand delivered, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
If to the Company: Interactive Telesis Inc.
000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
(shall not constitute notice):
Rushall & XxXxxxxx
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
if to the Investors: As set forth on the signature pages hereto
with a copy to: Xxxxx X. Xxxxxx, Esq.
(shall not constitute notice) Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Article XII by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Article XII.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. COUNTERPARTS/ FACSIMILE/ AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by fewer than
all of the parties and shall be deemed to be an original instrument that shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. ENTIRE AGREEMENT. This Agreement, the other Transaction Documents,
which include, but are not limited to, the Warrants, the Series B Certificate of
Designations, the Registration Rights Agreement, the Escrow Agreement and the
Irrevocable Transfer Agent Instructions set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and supersede
all prior and contemporaneous agreements, negotiations and understandings
between the parties, both oral and written, relating to the subject matter
hereof. The terms and conditions of all Exhibits to this Agreement are
incorporated herein by this reference and shall constitute part of this
Agreement as is fully set forth herein. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 13.3. SEVERABILITY. Any invalidity, illegality or limitation of the
enforceability with respect to any one or more of the provisions of this
Agreement, or any part thereof, shall in no way affect or impair the validity,
legality or enforceability of any other provisions of this Agreement. In case
any provision of this Agreement shall be invalid, illegal or unenforceable, it
shall, to the extent practicable, be modified so as to make it valid, legal and
enforceable and to retain as nearly as practicable the intent of the parties,
and the validity, legality, and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
Section 13.4. HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 13.5. NUMBER AND GENDER. There may be one or more Investors parties to
this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if there
is only one Investor, and all references to an Investor as "it" shall apply
equally to a natural person.
Section 13.6. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given trading day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written agreement of the Investors
and the Company shall be required to employ any other reporting entity.
Section 13.7. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing any Securities and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form to the Company
(which shall not include the posting of any bond) or (iii) in the case of any
such mutilation, on surrender and cancellation of such certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new certificate of
like tenor.
Section 13.8. FEES AND EXPENSES. Each of the Company and the Investors agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of Xxxxxx
Xxxxxxx Xxxxx & Xxxxxx LLP, the Investors' counsel, pursuant to the terms of the
Escrow Agreement. [The Company shall also reimburse the Investors for up to
$5,000 of their due diligence related expenses with respect to the Company.] The
Company shall reimburse the Investors for any expenses and legal fees incurred
enforcing its rights under the Agreement or in connection with any modification
or waiver with respect thereto. The Company's obligations under this Section
13.8 shall arise and remain in force whether or not any closing occurs
hereunder, unless such failure to close is solely the result of default by the
Investors.
Section 13.9. PUBLICITY. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investors, which shall not be
unreasonably withheld nor delayed by more than two (2) trading days from their
receipt of such proposed release. No release shall name the Investors without
their express consent.
Section 13.10. FURTHER ASSURANCES. 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.
Section 13.11. TERMINATION. If the Closing shall not have occurred on or before
April 30, 2001 due to the Company's or an Investor's failure to satisfy the
conditions set forth in Article II above (and the nonbreaching party's failure
to waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 13.11, the Company shall remain obligated to reimburse the non-breaching
Investors for the expenses described in Section 13.8 above.
Section 13.12. NO STRICT CONSTRUCTION. 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.
Section 13.13. PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to the Investors hereunder or the Investors enforce or exercise
their rights hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person or entity under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
Section 13.14 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to the Company or the Investors or any subsequent
holder of any Securities upon any breach, default or noncompliance of the
Investors, any subsequent holder of any Securities or the Company under this
Agreement, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character on the part of the Company or the Investors of
any breach, default or noncompliance under this Agreement or any waiver on the
Company's or the Investors' part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing and that all remedies, either under this
Agreement, by law, or otherwise afforded to the Company and the Investors, shall
be cumulative and not alternative.
Section 13.15 AMENDMENTS AND WAIVERS. Except as otherwise expressly provided
herein, any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively and either for a specified period of time
or indefinitely) with the written consent of the Company and the Investors or
their transferees holding at least sixty percent (60%) of the outstanding
Conversion Shares (assuming the exercise of all Warrants and the conversion of
all Series B Preferred Stock or other securities into Common Stock), voting
together as a single group; provided, however, that no such amendment or waiver
shall reduce the aforesaid percentage of Conversion Shares required under this
Section 13.15. Any amendment or waiver effected in accordance with this Section
13.15 shall be binding upon the Investors and each transferee of the Securities.
Upon the effectuation of each such amendment or waiver, the Company shall
promptly give written notice thereof to the Investors (or their transferees) who
have not previously consented thereto in writing.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Series B Preferred Stock
and Warrants Purchase Agreement to be executed by the undersigned, thereunto
duly authorized, as of the date first set forth above.
COMPANY:
INTERACTIVE TELESIS INC.
By:______________________________
Name:____________________________
Title:___________________________
INVESTORS:
Address: 000 Xxxxx Xxxxxx Xxxx Xxxxxxxx: BH Capital Investments, L.P.
Xxxxx Xxxxx, 0xx Xxxxx By: HB and Co., Inc., its General Partner
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Fax: 000-000-0000 By:______________________________
Name: Xxxxx Xxxxxxxxx, President
Purchased Shares and
Warrants Purchased
At Closing:
Purchased Shares: 50,000
Warrants: 15,000
Address: 00 Xxxxxx Xxxxxx Xxxxxx Investor: Excalibur Limited Partnership
Toronto, Ontario, Canada M5R I B2 By: Excalibur Capital Management, Inc.
Fax: 000-000-0000
By:______________________________
Name: Xxxxxxx Xxxxxxx, President
Purchased Shares and
Warrants Purchased
At Closing:
Purchased Shares: 50,000
Warrants: 15,000
