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EXHIBIT 10.11
EXHIBIT 10.11. Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made and entered into as of June
14, 2000 (this "AGREEMENT"), by and between Virtual Technology Corporation, a
Minnesota corporation (the "COMPANY") and Corona Viking Group LLC, a Nevada
limited liability company ("CORONA") (the term Corona shall include Corona or
its nominee).
This Agreement is being entered into pursuant to the Promissory Note
dated June 14, 2000 (the "Note") issued by the Company to Corona under which
Corona is entitled to convert the Note into shares of the Company's Common Stock
(the "NOTE"), the Warrant issued by the Company on June 14, 2000 to Corona for
500,000 shares of the Company's Common Stock (the "WARRANT"), and a side letter
agreement entered into between the Company and GrayBox, LLC relating to the
registration of shares of Common Stock owned by GrayBox, LLC, Corona and/or
entities affiliated with GrayBox, LLC, or Corona (the "SIDE LETTER AGREEMENT").
The Company and Corona hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Note. As used in this Agreement, the following
terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section 3(n).
"Board" shall have the meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.001 per
share.
"Effectiveness Date" means with respect to the Registration Statement
the earlier of the date which is (i) the 90th day following the Filing Date and
(ii) the date which is within five (5) days of the date on which the Commission
informs the Company that the Commission (i) will not review the Registration
Statement or (ii) that the Company may request the acceleration of the
effectiveness of the Registration Statement.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 7(e).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means no later than December 31, 2000.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities, including, without limitation,
Corona and its assigns.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Liquidated Damages" shall have the meaning set forth in Section 7(e).
"Losses" shall have the meaning set forth in Section 5(a).
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc. automated quotation system.
"Note Shares" means at any time the aggregate number of shares of
Common Stock which may at such time be purchased upon conversion of the Note,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms thereunder.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
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"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Promissory Note" shall mean that certain Promissory Note dated June
14, 2000 by and between the Company and Corona.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means: (i) the shares of Common Stock
issuable upon conversion of the Note (the "Note Shares"), (ii) the shares of
Common Stock issuable upon exercise of Warrant (the "Warrant Shares") issued
pursuant to the Warrant, (iii) the shares of Common Stock covered by the Side
Letter Agreement between GrayBox, LLC and the Company dated June 14, 2000 (the
"Side Letter Shares"), and (iv) any other dividend or other distribution with
respect to, conversion or exchange of, or in replacement of, Registrable
Securities; provided, however, that Registrable Securities shall include (but
not be limited to) a number of shares of Common Stock equal to no less than 150%
of the maximum number of shares of Common Stock which would be issuable upon
conversion of the Note, the issuance of the Warrant and pursuant to the Side
Letter Agreement, assuming such conversion and exercise occurred on the Closing
Date or the Filing Date, whichever date would result in the greater number of
Registrable Securities. Notwithstanding anything herein contained to the
contrary, such registered shares of Common Stock shall be allocated among the
Holders pro rata based on the total number of Registrable Securities issued or
issuable as of each date that a Registration Statement, as amended, relating to
the resale of the Registrable Securities is declared effective by the
Commission. Notwithstanding anything contained herein to the contrary, if the
actual number of shares of Common Stock issuable upon conversion of the Note,
upon exercise of the Warrant and pursuant to the Side Letter Agreement exceeds
150% of the number of shares of Common Stock issuable upon conversion of the
Note, exercise of the Warrant and pursuant to the Side Letter Agreement, based
upon a computation as at the Closing Date or the Filing Date, the term
"Registrable Securities" shall be deemed to include such additional shares of
Common Stock.
"Registration Statement" means the registration statement and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus,
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amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Side Letter Agreement" means that certain side letter agreement dated
June 14, 2000 between the Company and GrayBox, LLC, a Nevada limited liability
Company relating to the Side Letter Shares.
"Side Letter Shares" mean those shares of Common Stock owned by
certain investors whose shares, under the direction of Corona, GrayBox, LLC or
entities affiliated with Corona or GrayBox, LLC, shall be subject to the terms
and conditions of this Agreement.
"Special Counsel" means any special counsel to the Holders, for which
the Company will pay fees pursuant to Section 4.
"Warrant" shall mean the Warrant issued by the Company on June 14,
2000 to Corona for the purchase of 500,000 shares of Common Stock.
2. Registration.
On or prior to the Filing Date the Company shall prepare and file with
the Commission a "shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415, if applicable. The Registration Statement shall be on Form S-3 (or on
another appropriate form for such registration in accordance herewith). The
Company shall (i) not permit any securities other than the Registrable
Securities to be included in the Registration Statement and (ii) use its best
efforts to cause the Registration Statement to be declared effective as soon as
possible after the filing thereof, but in any event
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prior to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until such date as is the
earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period"). If an additional Registration Statement is required to be filed
because the actual number of shares of Common Stock into which the Note is
convertible, the Warrant is exercisable, and pursuant to the Side Letter
Agreement exceeds the number of shares of Common Stock initially registered
based upon the initial computation of the number of Registrable Shares required
to be registered, the Company shall have 15 Business Days to file such
additional Registration Statement, and the Company shall use its best efforts to
cause such additional Registration Statement to be declared effective by the
Commission as soon as possible, but in no event later than 30 days after filing.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, Registration Statement on Form S-3 (or on another form appropriate for
such registration in accordance herewith) in accordance with the method or
methods of distribution thereof as specified by the Holders (except if otherwise
directed by the Holders), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by reference), the
Company shall (i) furnish to the Holders and any Special Counsel, copies of all
such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Holders and
such Special Counsel, and (ii) at the request of any Holder cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries as shall be necessary, in the reasonable opinion of counsel to
such Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities or any Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
(b) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration
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Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
possible to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and any
Special Counsel as promptly as possible (and, in the case of (i)(A) below, not
less than five (5) Business Days prior to such filing) and (if requested by any
such Person) confirm such notice in writing no later than one (1) Business Day
following the day: (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement; and (C) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
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The Company shall promptly furnish to Special Counsel, without charge,
(i) any correspondence from the Commission or the Commission's staff to the
Company or its representatives relating to any Registration Statement and (ii)
promptly after the same is prepared and filed with the Commission, a copy of any
written response to the correspondence received from the Commission.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without charge, at
least one (1) conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Registration Statement, Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
any Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to
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do business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi),
as promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an 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 the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on NASDAQ and any other securities
exchange, quotation system or market, if any, on which similar securities issued
by the Company are then listed as and when required pursuant to the Note,
Warrant and Side Letter Agreement.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) Require each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement, and the Company
may exclude from such registration the Registrable Securities of any such Holder
who fails to furnish such information within a reasonable time prior to the
filing of each Registration Statement, supplemented Prospectus and/or amended
Registration Statement.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or
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any similar federal statute then in force) the deletion of the reference to such
Holder in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder has copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration
Statement.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may suspend effectiveness of
a registration statement for a period not to exceed 20 consecutive days,
provided that the Company may not suspend its obligation under this Section 3(n)
for more than 45 days in the aggregate during any 12 month period (each, a
"Blackout Period"); provided, however, that no such suspension shall be
permitted for consecutive 20 day periods, arising out of the same set of facts,
circumstances or transactions.
(o) Within two (2) business days after the Registration Statement
which includes the Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Holders whose Registrable Securities are included in
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such Registration Statement) confirmation that the Registration Statement has
been declared effective by the Commission in the form attached hereto as Exhibit
A.
4. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, the following: (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with NASDAQ and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the Commission and (C) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate, such fees of the Holder's counsel to be part of the maximum amount
referred to below)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and Special Counsel for the Holders, in the case of the
Special Counsel, to a maximum amount of $15,000, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement, including, without
limitation, the Company's independent public accountants (including the expenses
of any comfort letters or costs associated with the delivery by independent
public accountants of a comfort letter or comfort letters). In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common
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Stock), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, and the respective successors,
assigns, estate and personal representatives of each of the foregoing, to the
fullest extent permitted by applicable law, from and against any and all claims,
losses, damages, liabilities, penalties, judgments, costs (including, without
limitation, costs of investigation) and expenses (including, without limitation,
attorneys' fees and expenses) (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by or for the benefit of such Holder
expressly for use therein, which information was reasonably relied on by the
Company for use therein or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by or for the
benefit of such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) herein) and shall survive the
transfer of the Registrable Securities by the Holders.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, and the
respective successors, assigns, estate and personal representatives of each of
the foregoing, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, arising solely out of or based solely upon any
untrue statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in the light of the circumstances under which
they were made) not misleading, to the extent, but only to the extent, that such
untrue statement or omission is contained in or omitted from any information so
furnished in writing by or on behalf of such Holder to the Company specifically
for
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inclusion in the Registration Statement or such Prospectus and that such
information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus or such form of prospectus or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by or on behalf of such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus Supplement.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable under this Section 5(b) for only that amount as does not exceed the net
proceeds to such Holder as a result of the sale of Registrable Securities
pursuant to such Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
13
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying, Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 5(c) for only that amount as
does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
14
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties
6. Rule 144.
As long as any Holder owns the Note or the Note Shares, the Warrant or
the Warrant Shares or the Side Letter Shares, or other unregistered securities
of the Company, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and, if any Holder so requests or if such
reports have not been filed by the Company with the Commission pursuant to the
Commission's "electronic data gathering and retrieval" (XXXXX) service, to
promptly furnish the Holders with true and complete copies of all such filings.
As long as any Holder owns the Note or the Note Shares, the Warrant or the
Warrant Shares or the Side Letter Shares or other unregistered securities of the
Company, if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders
and make publicly available on a timely basis all information required by Rule
144(c) promulgated under the Securities Act. The Company further covenants that
it will take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Person to sell the Note
Shares, Warrant Shares or Side Letter Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including providing any legal opinions of
counsel to the Company referred to in the Note, Warrant or the Side Letter
Agreement. Upon the request of any Holder, the Company shall deliver to such
Holder a written certification of a duly authorized officer as to whether it has
complied with such requirements.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into and currently in effect,
nor shall the Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the
15
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, without the written consent of
the Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of the
Holders set forth herein, and are not otherwise in conflict with the provisions
of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement, and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its security holders, unless the right so granted is subject in all
respects to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict with the provisions of this Agreement.
(d) Piggy-Back Registrations. If at any time when there is not an
effective Registration Statement covering the Note Shares, the Warrant Shares or
the Side Letter Shares, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or its then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each holder of Registrable Securities
written notice of such determination and, if within 30 days after receipt of
such notice, any such holder shall so request in writing (which request shall
specify the Registrable Securities intended to be disposed of by the Holders),
the Company will cause the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holder, to the extent requisite to permit the disposition of the Registrable
Securities so to be registered, provided that if at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 4 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an
16
underwritten public offering, if the managing underwriter(s) should reasonably
object to the inclusion of the Registrable Securities in such registration
statement, then if the Company after consultation with the managing underwriter
should reasonably determine that the inclusion of such Registrable Securities
would materially adversely affect the offering contemplated in such registration
statement, and, based on such determination, recommends inclusion in such
registration statement of fewer or none of the Registrable Securities of the
Holders, then, as applicable (x) the number of Registrable Securities of the
Holders included in such registration statement shall be reduced pro-rata among
such Holders (based upon the number of Registrable Securities requested to be
included in the registration), or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement; provided, however,
that if securities are being offered for the account of other persons or
entities as well as the Company, such reduction of the number of Registrable
Securities intended to be offered by the Holders shall not represent a greater
fraction than the fraction of similar reductions imposed on such other persons
or entities (other than the Company).
(e) Failure to File Registration Statement and Other Events. The
Company and Corona agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
Filing Date, or is not declared effective by the Commission on or prior to the
Effectiveness Date (or in the event an additional Registration Statement is
filed because the actual number of shares of Common Stock into which the
Promissory Note is convertible or upon the exercise of the Warrant or pursuant
to the Side Letter Agreement exceeds the number of shares of Common Stock
initially registered is not filed and declared effective within the time periods
set forth in Section 2 herein), or (ii) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act within five (5) Business Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(iv) trading in the Common Stock shall be suspended or if the Common Stock is
delisted from NASDAQ or the Over-the-Counter Bulletin Board for any reason for
more than five (5) consecutive Business Days after such time as the registration
Statement has been declared effective, or (v) the Company breaches in a material
respect any covenant or other material term or condition to this Agreement, and
such breach continues for a period of thirty days after written notice thereof
to the Company, or (vi) the Company has breached Section 3(n) of this Agreement
(any such
17
failure or breach being referred to as an "EVENT"), the Company shall pay as
liquidated damages for such failure and not as a penalty (the "LIQUIDATED
DAMAGES") an amount equal to 100,000 shares of Common Stock (the "PENALTY
SHARES") for the initial thirty (30) day period and for each of the next three
(3) successive thirty (30) day periods following the Event until the applicable
Event has been cured, which amount shall be pro rated for any period less than
thirty (30) days and for the proportion of Registrable Securities that are
timely registered, and thereafter, the penalty for each additional thirty (30)
day period shall be equal to 400,000 additional shares per month for each of the
next nine (9) successive months that the Company remains under default under the
terms of this Agreement (the "ADDITIONAL PENALTY SHARES"), pro rated for any
period less than thirty (30) days and for the proportion of Registrable
Securities that are timely registered. The Penalty Shares and Additional Penalty
Shares shall be registered under the Securities Act pursuant to either the
Registration Statement (if payment of the Periodic Amount is made prior to the
effectiveness of the Registration Statement) or any other registration statement
to be filed by the Company relating to an offering for its own account or the
account of others. The parties agree that the Penalty and Additional Penalty
Shares represents a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of damages that may be incurred by the
Holders if the Registration Statement is not filed on or prior to the Filing
Date or has not been declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Period or if any other Event as described herein has occurred.
(f) Specific Enforcement, Consent to Jurisdiction.
(i) The Company and the Holders acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Registration
Rights Agreement or the Note, Warrant or Side Letter Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Registration
Rights Agreement or the Note, Warrant or Side Letter agreement and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
(ii) Each of the Company and Corona (i) hereby irrevocably submits to
the jurisdiction of a United States District Court for the State of Nevada and
the courts of the State of Nevada located in Xxxxx county for the purposes of
any suit, action or proceeding arising out of or relating to this Agreement or
the Note, Warrant or Side Letter agreement and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and Corona consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good
18
and sufficient service of process and notice thereof. Nothing in this Section
7(f) shall affect or limit any right to serve process in any other manner
permitted by law.
(g) Anti-Short Provision. For a period commencing as of the date of
this Agreement and continuing thereafter for a period of one (1) year, Corona,
its nominee and its assigns agrees that it will not use any shares obtained
pursuant to the Note for the purpose of effectuating a short-sale of the
Company's stock, nor will it pledge its shares to cover any short-position or
otherwise make the shares under the Note available to cover a short-sale.
(h) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(i) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., pacific time, on a
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., pacific time, on any date and
earlier than 11:59 p.m., pacific time, on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to the Company and Corona, addressed respectively to:
The Company:
Virtual Technology Corporation
Attention Xxxxxxx Xxxxxxxx, President and Chief Executive Officer
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
Telephone: 000.000.0000
Facsimile: 952.259.4710
19
Corona:
Corona Viking Group LLC
Attention: Xxxxx Xxxxxxxxx
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
Facsimile: 310.478.9082
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Xxxxxxxx &
Xxxxxx P.A., 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, XX 00000,
Attention: Xxxxxxx Xxxxxxx, Esq., facsimile no. (000)000-0000. Copies of notice
to Corona shall be sent to Xxxxx Xxxxxxx Xxxxxx & Xxxxxx LLP, 10390 Santa Xxxxxx
Boulevard, 4th Floor, Attention: Xxxxx Xxxxxxxx, Esq., Xxx Xxxxxxx, Xxxxxxxxxx
00000, Esq., Facsimile no.: (000) 000-0000. Copies of notices sent to counsel
for a party shall not constitute notice to such party.
(j) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Holder may
assign its rights hereunder in the manner and to the Persons as permitted under
the Note, Warrant or Side Letter agreement.
(k) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Note, Warrant or Side Letter Agreement or the Registrable
Securities if: (i) the Holder agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment the further disposition
of such securities by the transferee or assignees is restricted under the
Securities Act and applicable state securities laws, (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, (v) such transfer shall have
been made in accordance with the applicable requirements of the Note, Warrant or
Side Letter Agreement; and (vi) counsel for such Holder provides the Company
with a written opinion that such transfer will not violate federal or any
applicable state
20
securities laws. In addition, each Holder shall have the right to assign its
rights hereunder to any other Person with the prior written consent of the
Company, which consent shall not be unreasonably withheld. The rights to
assignment shall apply to the Holders (and to subsequent) successors and
assigns. In the event of any assignment hereunder, action to declare any default
or take any other action hereunder on the part of the Holders may be taken only
by the Holders holding a majority of the Registrable Securities acting together.
(l) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(m) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, without regard to principles
of conflicts of law thereof. This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.
(n) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(o) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(p) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(q) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
21
whether such consent or approval was given by the Holders of such required
percentage and shall not be counted as outstanding.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
VIRTUAL TECHNOLOGY CORPORATION
A MINNESOTA CORPORATION
By: /s/ Xxxx Xxxxxxxx
----------------------------------------------
Name: Xxxx Xxxxxxxx
Title: President and Chief Executive Officer
CORONA VIKING GROUP LLC
A NEVADA LIMITED LIABILITY COMPANY
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Manager
22
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
[ADDRESS]
Attn: _____________
Re: VIRTUAL TECHNOLOGY CORPORATION
Ladies and Gentlemen:
We are counsel to Virtual Technology Corporation, a Minnesota
corporation (the "COMPANY"), and have represented the Company in connection with
that certain Promissory Note (the "NOTE"), dated as of June 14, 2000, by and
between the Company and Corona Viking Group LLC, a Nevada limited liability
company ("CORONA") pursuant to which the Company issued to Corona a Convertible
Promissory Note, convertible into shares of the Company's Common Stock, $0.001
par value, that certain Warrant of that same date for the purchase of 500,000
shares of the Company's Common Stock (the "WARRANT"), and a side letter
agreement dated that same date relating to shares of the Company's Common Stock
owned by certain investors in the Company (the "SIDE LETTER AGREEMENT").
Pursuant to the Note, the Warrant and the Side Letter Agreement, the Company has
also entered into a Registration Rights Agreement with the Holders (the
"REGISTRATION RIGHTS AGREEMENT"), dated as of June 14, 2000, pursuant to which
the Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement), including the shares of
Common Stock issuable upon conversion of the Promissory Note, the exercise of
the Warrant and pursuant to the Side Letter Agreement under the Securities Act
of 1933, as amended (the "1933 ACT"). In connection with the Company's
obligations under the Registration Rights Agreement, on ________________, 200_,
the Company filed a Registration Statement on Form ___ (File No. 333-________)
(the "REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the resale of the Registrable Securities which names each of
the present Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and, accordingly, the
Registrable Securities are available for resale under the 1933 Act in the manner
specified in, and pursuant to the terms of the Registration Statement.
Very truly yours,
By:
cc: [LIST NAMES OF HOLDERS]
