INVESTOR REGISTRATION RIGHTS AGREEMENT
Exhibit
99.2
THIS
REGISTRATION RIGHTS AGREEMENT (this
“Agreement”), dated as of November 3, 2005, by and among BSI2000,
INC., a Delaware corporation (the “Company”), and the
undersigned investors listed on Schedule I attached hereto (each,
an
“Investor” and collectively, the “Investors”).
RECITALS:
WHEREAS,
in
connection with the Securities
Purchase Agreement by and among the parties hereto of even date herewith
(the
“Securities Purchase Agreement”), the Company has
agreed, upon the terms and subject to the conditions of the Securities Purchase
Agreement, to issue and sell to the Investors secured convertible debentures
(the “Convertible Debentures”) which shall be convertible into that
number of shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”), pursuant to the terms of the Securities Purchase
Agreement for an aggregate purchase price of up to One Million
Dollars ($1,000,000). Capitalized terms not defined herein shall have
the
meaning ascribed to them in the Securities Purchase Agreement.
WHEREAS,
to
induce the Investors to execute and
deliver the Securities Purchase Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as amended,
and
the rules and regulations there under, or any similar successor
statute (collectively, the “Securities Act”), and applicable state
securities laws.
WHEREAS,
on
or about June 17, 2005, the parties
hereto entered into a Securities Purchase Agreement (the “June 2005 SPA”)
and other related agreements, documents and instruments, including without
limitation the Investor Registration Rights Agreement dated June 17, 2005.
In
addition, on or about September 30, 2004, the parties hereto entered into
a
Securities Purchase Agreement (the “2004 SPA”) and other related
agreements, documents and instruments, including without limitation the Investor
Registration Rights Agreement dated September 30, 2004. This Agreement shall
supersede the Investor Registration Rights Agreement dated June 17, 2005
and the
Investor Registration Rights Agreement dated September 30, 2004.
NOW,
THEREFORE, for and in consideration of the
premises and the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
Company and the Investors hereby agree as follows:
1. DEFINITIONS.
As
used in this Agreement, the following terms shall have the
following meanings:
(a) “Person”
means a corporation, a limited liability company, an association, a partnership,
an organization, a business, an individual, a governmental or political
subdivision thereof or a governmental agency.
(b) “Register,”“registered,”
and “registration” refer to a registration effected by preparing and
filing one or more Registration Statements (as defined below) in compliance
with
the Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a continuous or delayed
basis (“Rule 415”), and the declaration or ordering of effectiveness of
such Registration Statement(s) by the United States Securities and Exchange
Commission (the “SEC”).
(c) “Registrable
Securities” means the shares of Common Stock issuable to the Investors upon
conversion of the Convertible Debentures pursuant to the Securities Purchase
Agreement, the Warrant Shares and Commitment Shares (as these terms are defined
in the Securities Purchase Agreement dated the date hereof), the shares of
Common Stock issuable to the Investors upon conversion of the convertible
debentures pursuant to the June 2005 SPA, the shares of Common Stock underlying
the Warrant issued pursuant to the June 2005 SPA and the shares of Common
Stock
issuable to the Investors upon conversion of the convertible debentures pursuant
to the 2004 SPA.
(d) “Registration
Statement” means a registration statement under the Securities Act which
covers the Registrable Securities.
2. REGISTRATION.
(a) Subject
to the terms and conditions of this Agreement, the Company shall prepare
and
file, no later than ninety (90) days from the date hereof (the “Scheduled
Filing Deadline”), with the SEC a registration statement on Form S-1 or SB-2
(or, if the Company is then eligible, on Form S-3) under the Securities Act
(the
“Initial Registration Statement”) for the resale by the Investors of the
Registrable Securities, which includes at least 151,000,000 shares of Common
Stock to be issued upon conversion of the Convertible Debentures and upon
exercise of the Warrant of even date herewith, the shares of Common Stock
to be
issued upon conversion of the convertible debentures issued pursuant to the
June
2005 SPA, the shares of Common Stock to be issued upon exercise of the Warrant
dated June 17, 2004 and the shares of Common Stock to be issued upon conversion
of the convertible debentures issued pursuant to 2004 SPA. The Company shall
cause the Registration Statement to remain effective until all of the
Registrable Securities have been sold. Prior to the filing of the Registration
Statement with the SEC, the Company shall furnish a copy of the Initial
Registration Statement to the Investors for their review and comment. The
Investors shall furnish comments on the Initial Registration Statement to
the
Company within twenty-four (24) hours of the receipt thereof from the
Company.
(b) Effectiveness
of the Initial Registration Statement. The Company shall use its best
efforts (i) to have the Initial Registration Statement declared effective
by the
SEC no later than one hundred twenty (120) days after the date hereof (the
“Scheduled Effective Deadline”) and (ii) to insure that the Initial
Registration Statement and any subsequent Registration Statement remains
in
effect until all of the Registrable Securities have been sold, subject to
the
terms and conditions of this Agreement. It shall be an event of default
hereunder if the Initial Registration Statement is not filed by the Scheduled
Filing Deadline or declared effective by the SEC by the Scheduled Effective
Deadline.
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(c) Failure
to File or Obtain Effectiveness of the Registration Statement. In the event
the Registration Statement is not filed by the Scheduled Filing Deadline
or is
not declared effective by the SEC on or before the Scheduled Effective Date,
or
if after the Registration Statement has been declared effective by the SEC,
sales cannot be made pursuant to the Registration Statement (whether because
of
a failure to keep the Registration Statement effective, failure to disclose
such
information as is necessary for sales to be made pursuant to the Registration
Statement, failure to register sufficient shares of Common Stock or otherwise
then as partial relief for the damages to any holder of Registrable Securities
by reason of any such delay in or reduction of its ability to sell the
underlying shares of Common Stock (which remedy shall not be exclusive of
any
other remedies at law or in equity), the Company will pay as liquidated damages
(the “Liquidated Damages”) to the holder, at the holder’s option, either
a cash amount or shares of the Company’s Common Stock within three (3) business
days, after demand therefore, equal to two percent (2%) of the liquidated
value
of the Convertible Debentures outstanding as Liquidated Damages for each
thirty
(30) day period after the Scheduled Filing Deadline or the Scheduled Effective
Date as the case may be.
(d) Liquidated
Damages. The Company and the Investor hereto acknowledge and agree that the
sums payable under subsection 2(c) above shall constitute liquidated damages
and
not penalties and are in addition to all other rights of the Investor, including
the right to call a default. The parties further acknowledge that (i) the
amount
of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, (ii) the amounts specified in such subsections bear a
reasonable relationship to, and are not plainly or grossly disproportionate
to,
the probable loss likely to be incurred in connection with any failure by
the
Company to obtain or maintain the effectiveness of a Registration Statement,
(iii) one of the reasons for the Company and the Investor reaching an agreement
as to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Investor are
sophisticated business parties and have been represented by sophisticated
and
able legal counsel and negotiated this Agreement at arm’s length.
3. RELATED
OBLIGATIONS.
(a) The
Company shall keep the Registration Statement effective pursuant to
Rule 415 at all times until the date on which the Investor shall have
sold
all the Registrable Securities covered by such Registration Statement (the
“Registration Period”), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein, or necessary to make the statements therein,
in
light of the circumstances in which they were made, not misleading.
(b) The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the Securities Act,
as may
be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions
of
the Securities Act with respect to the disposition of all Registrable Securities
of the Company covered by such Registration Statement until such time as
all of
such Registrable Securities shall have been disposed of in accordance with
the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement. In the case of amendments and supplements to
a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company’s filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under
the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), the
Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the Exchange Act report is filed which created
the
requirement for the Company to amend or supplement the Registration Statement.
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(c) The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) at least one (1) copy
of such
Registration Statement as declared effective by the SEC and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus,
(ii) ten (10) copies of the final prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number
of
copies as such Investor may reasonably request) and (iii) such other documents
as such Investor may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
(d) The
Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities
or
“blue sky” laws of such jurisdictions in the United States as any Investor
reasonably requests, (ii) prepare and file in those jurisdictions,
such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall
not be
required in connection therewith or as a condition thereto to (w) make any
change to its articles of incorporation or by-laws, (x) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but
for
this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any
such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification
with
respect to the suspension of the registration or qualification of any of
the
Registrable Securities for sale under the securities or “blue sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
(e) As
promptly as practicable after becoming aware of such event or development,
the
Company shall notify each Investor in writing of the happening of any event
as a
result of which the prospectus included in a Registration Statement, as then
in
effect, includes an untrue statement of a material fact or omission 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 (provided that in no event shall such notice contain any material,
nonpublic information), and promptly prepare a supplement or amendment to
such
Registration Statement to correct such untrue statement or omission, and
deliver
ten (10) copies of such supplement or amendment to each Investor. The Company
shall also promptly notify each Investor in writing (i) when a prospectus
or any
prospectus supplement or post-effective amendment has been filed, and when
a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness), (ii) of any request by
the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
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(f) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction within the United States of America and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension
at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) At
the reasonable request of any Investor, the Company shall furnish to such
Investor, on the date of the effectiveness of the Registration Statement
and
thereafter from time to time on such dates as an Investor may reasonably
request
(i) a letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance
as is
customarily given in an underwritten public offering, addressed to the
Investors.
(h) The
Company shall make available for inspection by (i) any Investor and
(ii) one (1) firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”) all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), as shall be reasonably deemed necessary by
each Inspector, and cause the Company’s officers, directors and employees to
supply all information which any Inspector may reasonably request; provided,
however, that each Inspector shall agree, and each Investor hereby agrees,
to
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use any Record or other information which the Company determines
in
good faith to be confidential, and of which determination the Inspectors
are so
notified, unless (a) the disclosure of such Records is necessary to avoid
or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the Securities Act, (b) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or government
body of competent jurisdiction, or (c) the information in such Records has
been
made generally available to the public other than by disclosure in violation
of
this or any other agreement of which the Inspector and the Investor has
knowledge. Each Investor agrees that it shall, upon learning that disclosure
of
such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
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(i) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws,
(ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available
to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure
of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt
written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to
obtain
a protective order for, such information.
(j) The
Company shall use its best efforts either to cause all the Registrable
Securities covered by a Registration Statement (i) to be listed on each
securities exchange on which securities of the same class or series issued
by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) the
inclusion for quotation on the National Association of Securities Dealers,
Inc.
OTC Bulletin Board for such Registrable Securities. The Company shall pay
all
fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, to facilitate the timely preparation
and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement
and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names
as the
Investors may request.
(l) The
Company shall use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved
by
such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
(m) The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the Securities Act) covering a twelve (12) month period beginning
not later than the first day of the Company’s fiscal quarter next following the
effective date of the Registration Statement.
(n) The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration hereunder.
(o) Within
two (2) business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that
such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.
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(p) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
4. OBLIGATIONS
OF THE INVESTORS.
Each
Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f)
or
the first sentence of 3(e), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor’s receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(e) or
receipt of notice that no supplement or amendment is required. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended certificates for shares of Common Stock to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement
in
connection with any sale of Registrable Securities with respect to which
an
Investor has entered into a contract for sale prior to the Investor’s receipt of
a notice from the Company of the happening of any event of the kind described
in
Section 3(f) or the first sentence of 3(e) and for which the Investor has
not
yet settled.
5. EXPENSES
OF REGISTRATION.
All
expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation,
all
registration, listing and qualifications fees, printers, legal and accounting
fees shall be paid by the Company.
6. INDEMNIFICATION.
With
respect to Registrable Securities which are included in a
Registration Statement under this Agreement:
(a) To
the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor, the directors, officers,
partners, employees, agents, representatives of, and each Person, if any,
who
controls any Investor within the meaning of the Securities Act or the Exchange
Act (each, an “Indemnified Person”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses, joint or several (collectively,
“Claims”) incurred in investigating, preparing or defending any action,
claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether
or
not an indemnified party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification
of
the offering under the securities or other “blue sky” laws of any jurisdiction
in which Registrable Securities are offered (“Blue Sky Filing”), or
the omission or alleged omission to state a material fact required to be
stated
therein or necessary to make the statements therein not misleading; (ii)
any
untrue statement or alleged untrue statement of a material fact contained
in any
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein
were
made, not misleading; or (iii) any violation or alleged violation by the
Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation there under
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through
(iii)
being, collectively, “Violations”). The Company shall reimburse the
Investors and each such controlling person promptly as such expenses are
incurred and are due and payable, for any legal fees or disbursements or
other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (x)
shall
not apply to a Claim by an Indemnified Person arising out of or based upon
a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly
for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (y) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or to
cause
to be delivered the prospectus made available by the Company, if such prospectus
was timely made available by the Company pursuant to Section 3(c); and
(z) shall not apply to amounts paid in settlement of any Claim if
such
settlement is effected without the prior written consent of the Company,
which
consent shall not be unreasonably withheld. Such indemnity shall remain in
full
force and effect regardless of any investigation made by or on behalf of
the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9 hereof.
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(b) In
connection with a Registration Statement, each Investor agrees to severally
and
not jointly indemnify, hold harmless and defend, to the same extent and in
the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, employees, representatives, or agents and each Person,
if
any, who controls the Company within the meaning of the Securities Act or
the
Exchange Act (each an “Indemnified Party”), against any Claim or
Indemnified Damages to which any of them may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or is based upon any Violation, in each
case to
the extent, and only to the extent, that such Violation occurs in reliance
upon
and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement;
and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of
such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only
that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds
to
such Investor as a result of the sale of Registrable Securities pursuant
to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified
Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected and such new prospectus was delivered to each Investor
prior to such Investor’s use of the prospectus to which the Claim relates.
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(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to
assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified
Party
shall have the right to retain its own counsel with the fees and expenses
of not
more than one (1) counsel for such Indemnified Person or Indemnified Party
to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of
the
Indemnified Person or Indemnified Party and the indemnifying party would
be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by
such
counsel in such proceeding. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to
the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable
for any
settlement of any action, claim or proceeding effected without its prior
written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person
of a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter
for
which indemnification has been made. The failure to deliver written notice
to
the indemnifying party within a reasonable time of the commencement of any
such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend
such
action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as
and
when bills are received or Indemnified Damages are incurred.
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(e) The
indemnity agreements contained herein shall be in addition to (i) any
cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To
the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be
liable
under Section 6 to the fullest extent permitted by law; provided, however,
that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to
contribution from any seller of Registrable Securities who was not guilty
of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by
such seller from the sale of such Registrable Securities.
8. REPORTS
UNDER THE EXHANGE ACT.
With
a view to making available to the Investors the benefits of
Rule 144 promulgated under the Securities Act or any similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of
the
Company to the public without registration (“Rule 144”) the Company
agrees to:
(a) make
and keep public information available, as those terms are understood and
defined
in Rule 144;
(b) file
with the SEC in a timely manner all reports and other documents required
of the
Company under the Securities Act and the Exchange Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company’s obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents as
are
required by the applicable provisions of Rule 144; and
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied
with
the reporting requirements of Rule 144, the Securities Act and the Exchange
Act,
(ii) a copy of the most recent annual or quarterly report of the Company
and
such other reports and documents so filed by the Company, and (iii) such
other
information as may be reasonably requested to permit the Investors to sell
such
securities pursuant to Rule 144 without registration.
9. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company. No
such
amendment shall be effective to the extent that it applies to fewer than
all of
the holders of the Registrable Securities. No consideration shall be offered
or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is
offered
to all of the parties to this Agreement.
10
10. MISCELLANEOUS.
(a) A
Person is deemed to be a holder of Registrable Securities whenever such Person
owns or is deemed to own of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two (2) or more
Persons with respect to the same Registrable Securities, the Company shall
act
upon the basis of instructions, notice or election received from the registered
owner of such Registrable Securities.
(b) Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party);
or (iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party
to
receive the same. The addresses and facsimile numbers for such communications
shall be:
|
If
to the Company, to:
|
BSI2000,
INC.
|
|
00000
Xxxx Xxxxxx Xxxxxx, X000
|
|
|
Xxxxxxxx,
XX 00000
|
|
|
Attention: Xxxx
Xxxxxx, CEO
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
Copy to:
|
Xxxxxxxxxxx
&
Xxxxxxxx Xxxxxxxxx Xxxxxx, LLP
|
|
000
Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
|
|
|
Xxxxx,
Xxxxxxx 00000
|
|
|
Attention: Xxxxxxx
X. Xxxxxx, Esq.
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
If
to an Investor, to its address and facsimile number on the
Schedule of Investors attached hereto, with copies to such Investor’s
representatives as set forth on the Schedule of Investors or to such other
address and/or facsimile number and/or to the attention of such other person
as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written confirmation
of
receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and
an
image of the first page of such transmission or (C) provided by a courier
or
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
11
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate
as a
waiver thereof.
(d) The
laws of the State of New Jersey shall govern all issues concerning the relative
rights of the Company and the Investors as its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of
this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdiction) that would
cause
the application of the laws of any jurisdiction other than the State of New
Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
of the Superior Courts of the State of New Jersey, sitting in Xxxxxx County,
New
Jersey and federal courts for the District of New Jersey sitting Newark,
New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient
forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address for such notices to it under this Agreement and
agrees
that such service shall constitute good and sufficient service of process
and
notice thereof. Nothing contained herein shall be deemed to limit in any
way any
right to serve process in any manner permitted by law. If any provision of
this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(e) This
Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase
Agreement and related documents including the Convertible Debenture and the
Escrow Agreement dated the date hereof by and among the Company, the Investors
set forth on the Schedule of Investors attached hereto, and Xxxxx Xxxxxxxx,
Esq.
(the “Escrow Agreement”) and the Security Agreement dated the date hereof
(the “Security Agreement”) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There
are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the Irrevocable
Transfer Agent Instructions, the Securities Purchase Agreement and related
documents including the Convertible Debenture, the Escrow Agreement and the
Security Agreement supersede all prior agreements and understandings among
the
parties hereto with respect to the subject matter hereof and thereof.
(f) This
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
12
(g) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(h) This
Agreement may be executed in identical counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
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.
(j) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may
any
provision hereof be enforced by, any other Person.
[SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE
INTENTIONALLY BLANK]
13
IN
WITNESS WHEREOF, the parties have caused this
Investor Registration Rights Agreement to be duly executed as of day and
year
first above written.
|
COMPANY:
BSI2000,
INC.
|
||
| |
|
|
| By: | /s/ Xxxx Xxxxxx | |
|
Name: Xxxx Xxxxxx |
||
|
Title: President
&
CEO
|
||
14
SCHEDULE
I
SCHEDULE
OF INVESTORS
|
Name
|
Signature
|
Address/Facsimile
Number
of Investors
|
|
Cornell
Capital Partners, LP
|
By: Yorkville
Advisors, LLC
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
Xxx: General
Partner
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Facsimile: (000)
000-0000
|
||
|
By: __________________
|
||
|
Name: Xxxx
Xxxxxx
|
||
|
Its: Portfolio
Manager
|
||
|
With
a copy to:
|
Xxxxx
Xxxxxxxx, Esq.
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
Xxxxxx
Xxxx, XX 00000
|
||
|
Facsimile:
(000) 000-0000
|
||
15
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Attention:
|
Re:
|
BSI2000,
INC.
|
Ladies
and Gentlemen:
We
are counsel to BSI2000, INC., a Delaware corporation (the
“Company”), and have represented the Company in connection with that
certain Securities Purchase Agreement (the “Securities Purchase
Agreement”) entered into by and among the Company and the investors named
therein (collectively, the “Investors”) pursuant to which the Company
issued to the Investors shares of its Common Stock, par value $0.0001 per
share
(the “Common Stock”). Pursuant to the Purchase Agreement, the Company
also has entered into a Registration Rights Agreement with the Investors
(the
“Investor Registration Rights Agreement”) pursuant to which the Company
agreed, among other things, to register the Registrable Securities (as defined
in the Registration Rights Agreement) under the Securities Act of 1933, as
amended (the “Securities Act”). In connection with the Company’s
obligations under the Registration Rights Agreement, on ____________ ____,
the
Company filed a Registration Statement on Form SB-2 (File
No. 333-_____________) (the “Registration Statement”) with the
Securities and Exchange SEC (the “SEC”) relating to the Registrable
Securities which names each of the Investors as a selling stockholder there
under.
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 Securities Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a
member of the SEC’s staff, that any stop order suspending its effectiveness has
been issued or that any proceedings for that purpose are pending before,
or
threatened by, the SEC and the Registrable Securities are available for resale
under the Securities Act pursuant to the Registration Statement.
Very
truly yours,
XXXXXXXXXXX
&
XXXXXXXX XXXXXXXXX XXXXXX,
LLP
By: ________________________________________
cc: [LIST
NAMES OF
INVESTORS]
16
