Exhibit 10.68
SERIES B PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT
BETWEEN
INTERACTIVE TELESIS INC.
AND
THE INVESTORS SIGNATORY HERETO
THIS CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT is
entered into effective as of May 16, 2001 (the "Agreement"), between the
Investors signatory hereto (each an "Investor" and together the "Investors"),
and Interactive Telesis Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Investors, and the Investors shall purchase in the aggregate (a) 50,000
shares of Series B Preferred Stock of the Company and (b) warrants to
purchase 15,000 shares of the Series B Preferred Stock of the Company, all
for aggregate consideration of $250,000;
WHEREAS, such investments will be made in reliance upon the
provisions of Regulation S and/or Section 4(2) ("Section 4(2)") and/or 4(6)
of the United States Securities Act and/or Regulation D ("Regulation D") and
the other rules and regulations promulgated thereunder (the "Securities
Act"), and/or upon such other exemption from the registration requirements of
the Securities Act as may be available with respect to any or all of the
investments in securities to be made hereunder.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions
The following capitalized terms shall have the meanings ascribed to
them below:
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"CAPITAL SHARES EQUIVALENTS" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for purchase or otherwise acquire Capital Shares or
any such convertible or exchangeable securities.
"CLOSING" shall mean the closing of the purchase and sale of the
Purchased Shares and Warrants pursuant to Section 2.1.
"CLOSING DATE" shall mean 10:00 a.m. on the date hereof, or such other
time as the Company and the Investors may mutually agree, provided all the
conditions thereto have been satisfied or waived on such date.
"COMMON STOCK" shall mean the Company's common stock, $0.001 par value
per share.
"CONVERSION SHARES" shall mean the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock (including the Series B Preferred
Stock issuable upon exercise of the Warrants) purchased hereunder.
"DAMAGES" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs or expenses (including, without limitation,
reasonable attorneys' fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
"DISCLOSURE SCHEDULE" shall mean the written disclosure schedule, if
any, delivered on or prior to the date hereof by the Company to the Investors
that is arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Agreement.
"EFFECTIVE DATE" shall mean the date on which the SEC first declares
effective a Registration Statement registering the resale of the Registrable
Securities as set forth in the Registration Rights Agreement.
"ENVIRONMENTAL LAWS" shall mean foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants.
"ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
"ESCROW AGREEMENT" shall mean the Escrow Agreement in substantially the
form of Exhibit A hereto executed and delivered contemporaneously with this
Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean United States generally accepted accounting
principles as shall be in effect from time to time.
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"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS" shall mean the Irrevocable
Transfer Agent Instructions, in the form of Exhibit B attached hereto, from the
Company to the Company's transfer agent.
"ISSUE DATE" shall mean the date on which Purchased Shares and Warrants
are issued pursuant to Article II.
"LEGEND" shall mean the legend set forth in Section 9.1.
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects, stock price or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under the Transaction Documents in
any material respect.
"PREFERRED STOCK" shall mean the preferred stock, par value $0.001 per
share, of the Company.
"PRINCIPAL MARKET" shall mean the American Stock Exchange, the New York
Stock Exchange, the NASDAQ National Market, or the NASDAQ SmallCap Market,
whichever is at the time the principal trading exchange or market for the Common
Stock, based upon share volume, or if the Common Stock is not traded on an
exchange or market, the OTC Bulletin Board.
"PURCHASE PRICE" with respect to the issuance and sale of the shares of
Series B Preferred Stock purchased at the Closing shall mean $5.00 per share.
"PURCHASED SHARES" shall mean the Series B Preferred Stock purchased
pursuant to this Agreement.
"REGISTRABLE SECURITIES" shall mean the Conversion Shares until (i) all
Registration Statements have been declared effective by the SEC, and all
Conversion Shares have been disposed of pursuant to the Registration Statements,
(ii) all Conversion Shares have been sold under circumstances under which all of
the applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Conversion Shares have
been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares may be sold within a three-month period pursuant
to Rule 144 (or any similar provision then in effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement by and among the Investors, the Company and the other signatories
thereto regarding the filing of Registration Statements for the resale of the
Registrable Securities, substantially in the form attached hereto as Exhibit C.
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"REGISTRATION STATEMENT" shall mean any registration statement on Form
S-3 (if use of such form is then available to the Company pursuant to the rules
of the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate,
and which form shall be available for the resale by the Investors of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investors under the Securities Act of
Registrable Securities.
"REGULATION D" shall have the meaning set forth in the recitals of this
Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean each report, proxy statement and
registration statement filed by the Company with the SEC pursuant to the
Exchange Act or the Securities Act from the initial filing with the SEC through
the date hereof.
"SECTION 4(2)" AND "SECTION 4(6)" shall have the meanings set forth in
the recitals of this Agreement.
"SECURITIES" shall mean the Purchased Shares, the Warrants, the Warrant
Shares and the Conversion Shares.
"SECURITIES ACT" shall have the meaning set forth in the recitals of
this Agreement.
"SERIES B CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations relating to the Series B Preferred Stock, as amended.
"SERIES B PREFERRED STOCK" shall mean the Company's Series B Preferred
Stock, par value $0.001 per share, having the rights, terms, and privileges set
forth in the Company's Series B Certificate of Designations.
"TRADING DAY" shall mean any day during which the Principal Market
shall be open for business.
"TRANSACTION DOCUMENTS" shall mean this Agreement, the Registration
Rights Agreement, the Series B Certificate of Designations, the Escrow
Agreement, the Irrevocable Transfer Agent Instructions and each of the other
agreements, documents and instruments entered into and delivered by the parties
hereto in connection with the transactions contemplated by this Agreement.
"WARRANTS" shall mean the Warrants to purchase Series B Preferred Stock
to be issued to the Investors hereunder, in substantially the form attached
hereto as Exhibit D.
"WARRANT SHARES" shall mean all shares of Series B Preferred Stock or
other securities
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issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES AND WARRANTS
Section 2.1. INVESTMENT.
(a) Upon the terms and subject to the conditions set forth herein, on
the Closing Date, the Company shall sell, and the Investors shall purchase, (x)
an aggregate of 50,000 Purchased Shares at an aggregate Purchase Price of
$250,000 and (y) Warrants in an amount and with an exercise price as provided in
Section 2.1(c), allocated among the Investors as set forth on the signature
pages hereto.
(b) The Closing shall occur on the Closing Date at the Escrow Agent's
offices, at which time the Escrow Agent (x) shall release to the Investors
certificates representing the Purchased Shares and Warrants to be issued on such
Closing Date and (y) shall release to the Company the entire amount of the
aggregate Purchase Price in immediately available funds (after all fees have
been paid as set forth in the Escrow Agreement), in accordance with the terms of
the Escrow Agreement.
(c) The aggregate number of Warrants to be issued at the Closing shall
be 15,000, and the initial exercise price of the Warrants to be issued at the
Closing shall be $5.50. Each Warrant, upon issuance, will be exercisable for one
(1) share of Series B Preferred Stock.
(d) The Closing shall be subject to the parties' satisfaction of the
conditions to Closing set forth below:
(i) The obligation of the Company hereunder to issue and sell
the Purchased Shares and Warrants to each Investor at the
Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole
discretion by providing each Investor with prior written
notice thereof:
(A) The Investors shall have executed each of the
Transaction Documents to be executed by them and
delivered the same to the Company.
(B) The Escrow Agent shall have delivered to the
Company the Purchase Price for the Purchased Shares
and Warrants being purchased by the Investors at the
Closing (less any amounts withheld pursuant to the
Escrow Agreement) by wire transfer of immediately
available funds pursuant to the written wire
instructions provided by the Company.
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(C) The representations and warranties of the
Investors shall be true and correct as of the date
when made and as of the Closing Date as though made
at that time (except for representations and
warranties that speak as of a specific date), and the
Investors shall have performed, satisfied and
complied with the covenants, agreements and
conditions required by the Transaction Documents to
be performed, satisfied or complied with by them at
or prior to the Closing Date.
(ii) The obligation of each Investor hereunder to purchase the
Purchased Shares and Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for
each Investor's sole benefit and may be waived by such
Investor at any time in its sole discretion by providing the
Company with prior written notice thereof:
(A) The Company and each other Investor shall have
executed each of the Transaction Documents to be
executed by it and delivered the same to such
Investor.
(B) The Common Stock shall be authorized for
quotation on the Principal Market, trading in the
Common Stock shall not have been suspended by the
Principal Market or the SEC at any time beginning on
the date hereof and through and including the Closing
Date, and the Company shall not have been notified of
any pending or threatened proceeding or other action
to delist or suspend the Common Stock.
(C) The representations and warranties of the Company
shall be true and correct as of the date when made
and as of the Closing Date as though made at that
time (except for representations and warranties that
speak as of a specific date), and the Company shall
have performed, satisfied and complied with the
covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the
Closing Date. Such Investor shall have received a
certificate, executed by the Company's Chief
Executive Officer, dated as of the Closing Date, to
the foregoing effect and as to such other matters as
may be reasonably requested by such Investor,
including, without limitation, an update as of the
Closing Date regarding the representation contained
in Section 4.3 below.
(D) Such Investor shall have received the opinion of
the Company's counsel dated as of the Closing Date,
in form, scope and substance reasonably satisfactory
to such Investor and in substantially the form of
Exhibit E attached hereto.
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(E) The Company shall have executed and delivered (or
shall have caused the Escrow Agent to deliver to such
Investor the stock certificates (in such
denominations as such Investor shall request)
representing the Purchased Shares being purchased by
such Investor at the Closing.
(F) The Company shall have executed and delivered (or
shall have caused the Escrow Agent to deliver) to
such Investor the Warrants (in such denominations as
such Investor shall request) being purchased by such
Investor at the Closing.
(G) The Board of Directors of the Company shall have
adopted resolutions consistent with Section 4.2 below
and in a form reasonably acceptable to such Investor
(the "RESOLUTIONS").
(H) As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common
Stock, solely for the purpose of effecting the
issuance of the shares of Common Stock issuable in
connection with this Agreement, a number of shares of
Common Stock equal to at least 200% of the number of
Conversion Shares issuable on the Closing Date
(assuming all Warrants were fully exercisable on such
date regardless of any limitation on the timing or
amount of such exercises).
(I) The Company shall have delivered the Irrevocable
Transfer Agent Instructions to its transfer agent,
and such Transfer Agent shall have acknowledged
receipt thereof in writing.
(J) The Company shall have delivered to such Investor
a certificate evidencing the due incorporation and
good standing of the Company and each Subsidiary in
such corporation's state of incorporation (and in any
states where such entities are required to be
qualified to do business) issued by the Secretary of
State of such states as of a date within ten (10)
days of the Closing Date.
(K) The Investors shall have received evidence
satisfactory to the Investors of the concurrent
closing of the Company's financing with Xxxxxxxxx &
Xxxxx Guaranty Finance ("H&QGF"), pursuant to which
the Company shall be receiving $250,000 in gross
proceeds from H&QGF in exchange for Series A
Preferred Stock of the Company.
(L) The Company shall have delivered to such Investor
a certificate, executed by the Company's Secretary
dated the Closing Date, as to (i) the Resolutions
described in Section 4.2, (ii) the Certificate of
Incorporation, and (iii) the Bylaws, each as in
effect on the Closing Date.
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(M) The Company shall have delivered to such Investor
such other documents relating to the transactions
contemplated by this Agreement as such Investor or
its counsel may reasonably request.
(N) Each other Investor shall have purchased its pro
rata share of the Purchased Shares and Warrants to be
purchased by it at such Closing.
(O) Such Investor shall have received a certificate,
executed by the Company's Chief Executive Officer,
dated as of the Closing Date to the effect that since
April 16, 2001 (i) no Material Adverse Effect has
occurred or exists with respect to the Company,
except as disclosed in any SEC Documents filed at
least five (5) days prior to the Closing Date, and
available on XXXXX, and (ii) the Company has not
taken any steps, and does not currently expect to
take any steps, to seek protection pursuant to 11
U.S.C. xx.xx. 101 et seq. (the "BANKRUPTCY CODE") or
any similar state bankruptcy law nor does the Company
have any knowledge or reason to believe that its
creditors intend to an initiate involuntary
proceeding under the Bankruptcy Code or any such
state law.
(P) The Company shall have issued to each of Xxx Xxxx
and Next Millennium Capital Holdings, LLC, as payment
of a finders' fee related to the transactions
contemplated herein, (i) 18,750 shares of Common
Stock, and (ii) warrants to purchase 2,500 shares of
Common Stock at an exercise price of $0.60 per share.
(Q) The original Registration Statement required to
be filed under the Securities Purchase Agreement
dated June 12, 2000, as amended, among the parties
hereto shall be effective and the Company shall not
be in default under any of its obligations under such
purchase agreement or the agreements referenced
therein.
(e) anything to the contrary notwithstanding, in the event the Closing
does not occur by May 30, 2001, the Investors shall have no further obligation
to purchase and the Company shall have no further obligation to sell the
Securities and this Agreement shall be terminated (provided, however, the
Company shall remain responsible for the payment of all expenses of the
Investors, including legal fees).
Section 2.2 LIQUIDATED DAMAGES. The parties hereto acknowledge and agree
that the sums payable pursuant to this Agreement and the Registration Rights
Agreement shall constitute liquidated damages and not penalties. The parties
further acknowledge that (a) the amount of loss or damages likely to be
incurred is incapable or is difficult to precisely estimate, (b) the amounts
specified in such sections bear a reasonable proportion and are not plainly
or grossly disproportionate to the probable loss likely to be incurred by the
Investors in connection with the failure by the Company to timely effect the
registration of the Registrable Securities or otherwise perform hereunder and
(c) the parties are sophisticated business parties and have been
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represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. INTENT. Such Investor is entering into this Agreement for its
own account and not with a view to, or for sale in connection with, any
distribution of the Securities. Such Investor has no present arrangement
(whether or not legally binding) at any time to sell the Securities to or
through any person or entity; provided, however, that by making the
representations herein, such Investor does not agree to hold such Securities
for any minimum or other specific term and reserves the right to dispose of
the Securities at any time in accordance with federal and state securities
laws applicable to such disposition.
Section 3.2. SOPHISTICATED INVESTOR. Such Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an
accredited investor (as defined in Rule 501 of Regulation D), and such
Investor has such experience in business and financial matters that it has
the capacity to protect its own interests in connection with this transaction
and is capable of evaluating the merits and risks of an investment in the
Securities. Such Investor acknowledges that an investment in the Securities
is speculative and involves a high degree of risk. The Investor has had an
opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the sale of the Securities.
Section 3.3. DUE EXECUTION, POWER AND AUTHORITY. This Agreement and each of
the Transaction Documents that is required to be executed by such Investor
has been duly authorized and validly executed and delivered by such Investor
and is a valid and binding agreement of such Investor enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application. The Investor has the requisite power and authority to enter into
the Agreement, to purchase the Securities and perform its obligations under
the terms of the Agreement.
Section 3.4. NOT AN AFFILIATE. Such Investor is not an officer, director or
"AFFILIATE" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
Section 3.5. DISCLOSURE; ACCESS TO INFORMATION. Such Investor has received
all documents, records, books and other publicly available information
pertaining to such Investor's investment in the Company as such Investor has
requested. Such Investor acknowledges that the Company is subject to the
periodic reporting requirements of the Exchange Act, and such Investor has
reviewed copies of all SEC Documents deemed relevant by such Investor.
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Section 3.6. MANNER OF SALE. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that, except as
set forth on the Disclosure Schedule prepared by the Company and attached
hereto:
Section 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own
and operate its properties and assets and to carry on its business as now
being conducted and as presently proposed to be conducted. The Company's
Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of the jurisdictions in which they are incorporated
and have the requisite corporate power and authority to own and operate their
properties and assets and to carry on their business as now being conducted.
The Company does not have any Subsidiaries and does not own more that fifty
percent (50%) of or control any other business entity except as set forth in
the SEC Documents. The Company and each of its Subsidiaries is duly qualified
and is in good standing as a foreign corporation to do business in every
jurisdiction in which the nature of the business conducted or property owned
or leased by it makes such qualification necessary, other than those in which
the failure so to qualify would not have a Material Adverse Effect.
Section 4.2. AUTHORITY. (i) The Company has the requisite corporate power
and corporate authority to enter into and perform its obligations under the
Transaction Documents and to issue the Securities pursuant to their
respective terms; (ii) the execution, issuance and delivery of the
Transaction Documents, the Series B Preferred Stock certificates and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action and no further consent or authorization of the Company or its Board of
Directors or stockholders is required; and (iii) the Transaction Documents,
when executed and delivered by the Company and the parties hereto, shall
constitute valid and legally binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application. The Company has duly and validly authorized and reserved for
issuance shares of Common Stock sufficient in number for the issuance of
Common Stock upon conversion of the Purchased Shares into Common Stock and
exercise and conversion of the Warrants into Common Stock. The Company
understands and acknowledges the potentially dilutive effect to the Common
Stock of the issuance of the Securities. The Company further acknowledges
that its obligation to issue Common Stock under this Agreement is absolute
and unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the Company and
notwithstanding the commencement of any case under the Bankruptcy Code.
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Section 4.3. CAPITALIZATION. The authorized capital stock of the Company
immediately prior to the Closing will consist of (i) 100,000,000 shares of
Common Stock, $0.001 par value per share, of which [32,267,947] shares were
issued and outstanding as of May 1, 2001, and (ii) 25,000,000 shares of
Preferred Stock, $0.001 par value per share, of which 10,000,000 have been
designated "Series A Preferred Stock," none of which are issued and
outstanding as of the Closing Date, and [200,000] of which have been
designated "Series B Preferred Stock," 50,000 of which were issued and
outstanding immediately prior to the Closing. The Company has no authorized
or outstanding shares of preferred stock or other equity securities except as
disclosed herein. Except for (i) outstanding options and warrants as set
forth in the SEC Documents, (ii) 2,546,000 stock options awarded under the
Company's 1996 ITI Stock Option Plan and (iii) as set forth in the Disclosure
Schedule, there are no outstanding Capital Shares Equivalents nor any
agreements or understandings pursuant to which any Capital Shares Equivalents
may become outstanding. The Company is not a party to any agreement granting
preemptive, registration or anti-dilution rights to any person with respect
to any of its equity or debt securities. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable and were issued in compliance with all
applicable federal and state securities laws.
Section 4.4. COMMON STOCK. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full
compliance with all reporting requirements of the Exchange Act, and the
Company is in compliance with all requirements for the continued listing or
quotation of its Common Stock, and such Common Stock is currently listed or
quoted on, the Principal Market. As of the date hereof, the Principal Market
is the OTC Bulletin Board, and except as set forth in the SEC Documents, the
Company has not received any notice regarding, and to its knowledge there is
no threat of, the termination or discontinuance of the eligibility of the
Common Stock for such posting or listing.
Section 4.5. SEC DOCUMENTS. The Company has not provided the Investors any
information that, according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and rules and
regulations of the SEC promulgated thereunder, and the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the rules and regulations of the SEC or other applicable
rules and regulations with respect thereto at the time of such inclusion.
Such financial statements have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they exclude
footnotes or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited interim statements, to normal
year-end audit adjustments). Neither the Company nor any of its
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Subsidiaries has any material indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which were not fully reflected in, reserved
against or otherwise described in the financial statements or the notes
thereto included in the SEC Documents or were not incurred in the ordinary
course of business consistent with the Company's past practices since the
last date of such financial statements. No other information provided by or
on behalf of the Company to the Investors that is not included in the SEC
Documents, including, without limitation, information referred to in Section
3.5 of this Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are or were made,
not misleading.
Section 4.6. EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to the
accuracy of the Investors' representations in Article III, the Company's sale
of the Purchased Shares and its issuance of the Warrants under this Agreement
does not, and the Company's issuance of (i) the Series B Preferred Stock on
the exercise of the Warrants and (ii) Common Stock upon conversion of the
Purchased Shares and the Series B Preferred Stock issuable upon exercise of
the Warrants will not, require registration under the Securities Act and/or
any applicable state securities law. When issued and paid for in accordance
with the Warrants and validly converted in accordance with the Series B
Certificate of Designations, the Conversion Shares will be duly and validly
issued, fully paid, and non-assessable. Neither the sales of the Securities
pursuant to, nor the Company's performance of its obligations under, the
Transaction Documents will (i) result in the creation or imposition by the
Company of any liens, charges, claims or other encumbrances upon any of the
Securities or, except as contemplated herein, any of the assets of the
Company, or (ii) be subject to preemptive or other rights to subscribe for or
acquire the Capital Shares or other securities of the Company. None of the
Securities will subject the Investors to personal liability to the Company or
its creditors by reason of an Investor's possession thereof.
Section 4.7. NO DIRECTED SELLING, GENERAL SOLICITATION OR ADVERTISING IN
REGARD TO THIS TRANSACTION. Neither the Company nor any of its affiliates nor
any person acting on its or their behalf (i) has engaged in or will engage in
any directed selling efforts in violation of the requirements of Regulation
S, (ii) has conducted or will conduct any general solicitation (as that term
is used in Rule 502(c) of Regulation D) or general advertising with respect
to the sale of the Securities, or (iii) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Securities under the Securities Act.
Section 4.8. NO CONFLICTS. The Company's execution, delivery and performance
of the Transaction Documents, and the Company's consummation of the
transactions contemplated hereby and thereby do not and will not (i) result
in a violation of the Company's Certificate of Incorporation or Bylaws or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument, or any "lock-up" or similar
provision of any underwriting or similar agreement to
12
which the Company is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the
Principal Market) applicable to the Company or by which any property or asset
of the Company is bound or affected. The Company is not otherwise in
violation of any term of or in default under its Certificate of
Incorporation, or its Bylaws, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company, except for possible
conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations that would not individually or in the aggregate have a
Material Adverse Effect. The Company's business is not being conducted in
violation of any law, ordinance or regulation of any governmental entity,
except for possible violations that either singly or in the aggregate would
not result in a Material Adverse Effect. Except as specifically contemplated
by this Agreement and as required by the Securities Act, the Company is not
required to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency or any regulatory or
self regulatory organization, in order for it to execute, deliver or perform
any of its obligations under or contemplated by the Transaction Documents in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations that the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to the date hereof. Except as described in Section 4.8 of the Disclosure
Schedule, the Company is not in violation of the listing or posting
requirements of the Principal Market as in effect on the date hereof and is
not aware of any facts which would reasonably lead to delisting of the Common
Stock by the Principal Market in the foreseeable future.
Section 4.9. NO MATERIAL ADVERSE CHANGE. Since April 16, 2001, there has not
been any Material Adverse Effect has occurred or exists with respect to the
Company, except as disclosed in any SEC Documents filed at least five (5)
days prior to the date hereof and available on XXXXX.
Section 4.10. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS, OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred
or exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly announced.
Section 4.11. NO INTEGRATED OFFERING. The Company has not, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of
any of the Securities under the Securities Act or cause this offering of
Securities to be integrated with prior offerings of securities by the Company
for purposes of the Securities Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Principal Market; nor will the Company or any of its Subsidiaries take
any action or steps that would require registration of the Securities under
the Securities Act or cause the offering of the Securities to be integrated
with other offerings.
13
Section 4.12. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the
SEC Documents, there are no lawsuits or proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any Subsidiary
or any of their officers or directors in their capacities as such, nor has
the Company received any written or oral notice of any such action, suit,
proceeding or investigation, which could reasonably be expected to have a
Material Adverse Effect. Except as set forth in the SEC Documents, no
judgment, order, writ, injunction or decree or award has been issued by or,
to the knowledge of the Company, requested of any court, arbitrator or
governmental agency which could result in a Material Adverse Effect. There is
no action, proceeding or investigation by the Company currently pending or
that the Company intends to initiate.
Section 4.13. NO MISLEADING OR UNTRUE COMMUNICATION. Neither Company nor any
person representing the Company, or any other person selling or offering to
sell the Securities in connection with the transaction contemplated by this
Agreement, has made, at any time, any oral communication in connection with
the offer or sale of the same which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to
make the statements, in the light of the circumstances under which they were
made, not misleading.
Section 4.14. MATERIAL NON-PUBLIC INFORMATION. The Company has not disclosed
to the Investors any material non-public information that (i) if disclosed,
would reasonably be expected to have a material effect on the price of the
Common Stock or (ii) according to applicable law, rule or regulation, should
have been disclosed publicly by the Company prior to the date hereof, but
which has not been so disclosed.
Section 4.15. INSURANCE. The Company and each subsidiary maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound
and reputable insurers that is adequate, consistent with industry standards
and the Company's historical claims experience. Neither the Company nor any
Subsidiary has been refused any insurance coverage sought or applied for, and
neither the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.
Section 4.16. TAX MATTERS. The Company has accurately prepared and timely
filed all United States income tax returns and all state and municipal tax
returns that are required to be filed by it, if any, and has paid or made
provision for the payment of all taxes, if any, that have become due pursuant
to such returns. No deficiency assessment or proposed adjustment of the
Company's United States income tax or state or municipal taxes is pending and
there is no liability as of the date hereof for any tax for which there is
not an adequate reserve reflected in the Company's publicly filed financial
statements. All federal, state, local and foreign franchise, sales, use,
occupancy, excise, withholding and other taxes and assessments (including
interest and penalties) payable by, or due from, the Company have been fully
paid or adequately disclosed and fully provided for in the books and
financial statements of the Company, except where the failure to provide for
or pay such taxes and assessments would not have a Material Adverse
14
Effect on the Company. No examination of any tax return of the Company is
currently in progress, except where such examinations would not have a
Material Adverse Effect on the Company. There are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any tax
return of the Company.
Section 4.17. PROPERTY. Neither the Company nor any of its Subsidiaries owns
any real property. Each of the Company and its Subsidiaries has good and
marketable title to all personal property that it owns, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge, any real property, mineral or water rights, and buildings that the
Company holds under lease as a tenant are held by it under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and intended to be made of such property, mineral
or water rights, and buildings by the Company and its Subsidiaries.
Section 4.18. INTELLECTUAL PROPERTY RIGHTS. The Company has sufficient title
and ownership of or is licensed under all patents, patent applications,
trademarks, service marks, trade names, copyrights, and all registrations and
applications for registration of any of the foregoing, and all trade secrets,
information, inventions, computer programs owned or licensed by the Company,
documentation, proprietary rights and processes (collectively, "Intellectual
Property") necessary for its business as now conducted and as currently
proposed to be conducted without any conflict with and without infringement
of the rights of others. The Company has not received any communications
alleging that it has violated or, by conducting its businesses as currently
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. Except as disclosed on the Disclosure Schedule, the Company
does not believe it is or will be necessary to use any inventions of any of
its employees (or people it currently intends to hire) made prior to their
employment by the Company (unless made prior to employment as an independent
contractor to the Company).
Section 4.19 PROPRIETARY INFORMATION; NONCOMPETITION COVENANTS.
(a) The Company has done nothing to compromise the secrecy,
confidentiality or value of any of its trade secrets, know-how, inventions,
prototypes, designs, processes or technical data required to conduct its
business as now conducted or as proposed to be conducted. The Company has taken
in the past and will take in the future reasonable security measures to protect
the secrecy, confidentiality and value of all its trade secrets, know-how,
inventions, prototypes, designs, processes, and technical data important to the
conduct of its business.
(b) Each current employee of the Company has executed a nondisclosure
and assignment of inventions agreement at least as restrictive as the form
previously provided to the Investors as an exhibit to the Securities Purchase
Agreement, dated June 12, 2000, as amended, by and among the Company and the
Investors. Each consultant to the Company has executed a confidentiality and
assignment agreement restricting the disclosure of proprietary information of
the Company and assigning to the Company all inventions made by such consultant
in the course of consulting for the Company. The Company is not aware that any
of the employees, officers or
15
consultants of the Company, past or present, is in violation of such
agreements, and the Company will use its best efforts to prevent any such
violation.
4.20. COMPANY SOFTWARE.
(a) The Disclosure Schedule sets forth a true and complete list of all
software used in connection with the business of the Company other than
off-the-shelf software acquired for less than $10,000 per application (the
"Company Software"). The Company has all technical and descriptive materials
for the Company Software as is necessary to run its business in accordance
with its historical practices, except as would not have a Material Adverse
Effect.
(b) The use of the Company Software does not breach any terms of any
contract or agreement. The Company either owns or has been granted under
license agreements relating to the Company Software (the "Company License
Agreements") valid and subsisting rights with respect to all software
comprising the Company Software and such rights may be exercised anywhere in
the world. The Company is in compliance with each of the terms and conditions
of each of the Company License Agreements except to the extent failure to so
comply, individually or in the aggregate, would not have a Material Adverse
Effect. In the case of any commercially available "shrink-wrap" software
programs (such as Lotus 1-2-3 or Microsoft Word), the Company has not made
and is not using any unauthorized copies of any such software programs and,
to the knowledge of the Company, none of the employees, agents or
representatives of the Company have made or are using any such unauthorized
copies in the conduct of the Company's business, except as would not have a
material adverse effect on the Company.
(c) The Company Software and the related computer hardware used by the
Company in its operations (the "Company Hardware") are adequate in all
material respects, when taken together with the other assets, resources and
personnel of the Company, to run the business of the Company in the same
manner as such business has operated since inception. The Disclosure Schedule
contains a summary description of any unusual problems experienced by the
Company in the past twelve months with respect to the Company Software or
Company Hardware that would result in a Material Adverse Effect.
Section 4.21. INTERNAL CONTROLS AND PROCEDURES. The Company maintains books
and records and internal accounting controls that provide reasonable
assurance that (i) all transactions to which the Company or any Subsidiary is
a party or by which its properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's consolidated
assets is compared with existing assets at regular intervals; (iii) access to
the Company's consolidated assets is permitted only in accordance with
management's authorization; and (iv) all transactions to which the Company or
any Subsidiary is a party or by which its properties are bound are recorded
as necessary to permit preparation of the financial statements of the Company
in accordance with GAAP.
Section 4.22. PAYMENTS AND CONTRIBUTIONS. Neither the Company, nor any
Subsidiary, nor any of their directors, officers or, to the Company's
knowledge, other employees has (i) used any Company funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment
16
of Company funds to any foreign or domestic government official or employee;
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other similar payment to any person with
respect to Company matters.
Section 4.23. ACKNOWLEDGMENT REGARDING INVESTORS' PURCHASE OF THE
SECURITIES. The Company acknowledges and agrees that each of the Investors is
acting solely in the capacity of arm's-length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby. The Company
further acknowledges that no Investor is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any
advice given by any of the Investors or any of their respective
representatives or agents in connection with the Transaction Documents and
the transactions contemplated thereby is merely incidental to such Investor's
purchase of the Securities. The Company further represents to each Investor
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
Section 4.24. EMPLOYEES. To the best of the Company's knowledge, no employee
of the Company is obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would conflict
with such employee's obligation to use his best efforts to promote the
interests of the Company or that would conflict with the Company's business
as conducted or as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by
the employees of the Company, nor the conduct of the Company's business as
currently proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is now obligated. To the best of the Company's knowledge, no
employee or consultant of the Company is in violation of any term of any
employment contract, proprietary information and inventions agreement,
noncompetition agreement or any other contract or agreement relating to the
relationship of any such employee or consultant with the Company or any
previous employer. To the best of the Company's knowledge, no officer of the
Company nor any Key Employee (as hereinafter defined) of the Company, the
termination of whose employment, either individually or in the aggregate,
would have a materially adverse effect on the Company, has any intention of
terminating his or her employment with the Company. The Company has no
collective bargaining agreements with any of its employees and to the best of
the Company's knowledge there is no labor-union-organizing activity pending
or threatened with respect to the Company. For purposes of this Agreement,
"Key Employee" means and includes each officer of the Company and each
employee who contributes to the invention, design or authorship of the
Company's Intellectual Property.
Section 4.25. ENVIRONMENTAL MATTERS.
(a) The Company has duly complied with, and, to the best knowledge of
the Company, all the real estate leased by it either currently or in the past
(hereinafter referred to collectively as the "Premises") are in compliance in
all material respects with, the provisions of
17
all federal, state and local environmental, health and safety laws, codes and
ordinances and all rules and regulations promulgated thereunder.
(b) The Company has been issued, and will maintain, all federal,
state and local permits, licenses, certificates and approvals known to the
Company to be required relating to (i) air emissions, (ii) discharges to
surface water or ground water, (iii) noise emissions, (iv) solid or liquid
waste disposal, (v) the use, generation, storage, transportation or disposal
of toxic or hazardous substances or wastes (intended hereby and hereafter to
include any and all such materials listed in any federal, state or local law,
code or ordinance and all rules and regulations promulgated thereunder, as
hazardous or potentially hazardous), or (vi) other environmental, health and
safety matters.
(c) The Company has not received notice of, nor does the Company know
of any facts that might constitute, any violation of any federal, state or
local environmental, health or safety laws, codes or ordinances, and any
rules or regulations promulgated thereunder, that relate to the use,
ownership or occupancy of any of the Premises, and the Company is not in
violation of any covenants, conditions, easements, rights-of-way or
restrictions affecting any of the Premises or any rights appurtenant thereto.
(d) Except in accordance with a valid governmental permit, license,
certificate or approval, the Company has not caused any emission, spill,
release or discharge into or upon (i) the air, (ii) soils or any improvements
located thereon, (iii) surface water or ground water, or (iv) the sewer,
septic system or waste treatment, storage or disposal system servicing any of
the Premises, of any toxic or hazardous substances or wastes at or from any
of the Premises.
(e) There has been no complaint, order, directive (other than
directives applicable to the general public), claim, citation or notice by
any governmental authority or any other person or entity with respect to (i)
air emissions, (ii) spills, releases or discharges to soils or any
improvements located thereon, surface water, ground water or the sewer,
septic system or waste treatment, storage or disposal systems servicing any
of the Premises, (iii) noise emissions, (iv) solid or liquid waste disposal,
(v) the use, generation, storage, transportation or disposal of toxic or
hazardous substances or wastes or (vi) other environmental, health or safety
matters affecting the Company, any of the Premises or any improvements
located thereon, or the businesses thereon conducted.
Section 4.26. REGULATORY PERMITS. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such items would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
Section 4.27. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to any contract or
18
agreement that in the reasonable judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
Section 4.28. CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents
filed at least ten (10) days prior to the date hereof and except for
arm's-length transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the Disclosure Schedule, none of the officers or directors of
the Company is presently a party to any transaction with the Company or any
of its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer or director or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer or director has a
substantial interest or is an officer, director, trustee or partner.
Section 4.29. APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board
of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the laws of the state of its
incorporation which is or could become applicable to the Investors as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Investor's
ownership of the Securities.
Section 4.30. NO OTHER AGREEMENTS. The Company has not, directly or
indirectly, made any agreements with any Investors relating to the terms or
conditions of the transactions contemplated by the Transaction Documents,
except as set forth in the Transaction Documents.
Section 4.31. NO MISREPRESENTATION. The representations and warranties of
the Company contained in this Agreement, any schedule, annex or exhibit
hereto and any agreement, instrument or certificate furnished by the Company
to the Investors pursuant to this Agreement, do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.32 REGISTRATION RIGHTS. Except as provided in the Registration
Rights Agreement and except for the Company's obligation to register shares
issued or issuable to H&QGF as disclosed in the SEC Documents, the Company is
not under any obligation to register any of its presently outstanding
securities or any of its securities that may hereafter be issued.
Section 4.33 FINDERS' FEES. Except as disclosed in the Disclosure Schedule,
the Company (a) represents and warrants that it has retained no finder or
broker in connection with the transactions contemplated by this Agreement.
The Company hereby agrees to indemnify and to hold the Investors harmless of
and from any liability for any commission or compensation in the nature of a
finder's fee (including any fee listed on the Disclosure Schedule) to any
broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which the Company or any of
its employees or representatives is responsible.
19
Section 4.34 ABSENCE OF RIGHTS AGREEMENT. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change of control of the Company.
ARTICLE V
COVENANTS OF THE INVESTORS
Each Investor, severally and not jointly, covenants as follows.
Section 5.1 BEST EFFORTS. Each Investor shall use its best efforts to timely
satisfy each of the conditions to be established by it as provided in Article
II of this Agreement.
Section 5.2 REGULATION S COMPLIANCE. Each Investor agrees that any hedging
transactions with respect to the Common Stock will only be conducted in
compliance with Regulation S. Each investor certifies that it is not a U.S.
Person (as defined for purposes of Regulation S) and is not acquiring the
Securities for the account or benefit of a U.S. Person. The Investors
understand and acknowledge that the Company may refuse to register the
transfer of any Securities unless made in accordance with the registration or
exemption provisions of the Securities Act.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. BEST EFFORTS. The Company shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Article
II of this Agreement.
Section 6.2. REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect, and the Company shall
comply with the terms thereof.
Section 6.3. RESERVATION OF COMMON STOCK. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at
all times, free of preemptive rights, shares of Common Stock in an amount not
less than 150% of the number of shares of Common Stock needed to provide for
the issuance of the Conversion Shares (as may be adjusted from time to time).
The Company further agrees at if at any time 150% of the number of shares of
Common Stock issuable under the Agreement would cause the Company to be
obligated to issue a number of shares of Common Stock in excess of its
authorized capital (after taking into account all other Capital Shares
Equivalents then existing), it shall promptly commence and effect all
necessary corporate and shareholder action necessary to increase its
authorized capital so as to eliminate the aforesaid condition.
Section 6.4. LISTING OF COMMON STOCK. The Company shall maintain the listing
of the Common Stock on a Principal Market and, as soon as required by the
rules of the Principal Market and any other national securities exchange or
automated quotation system, if any, upon
20
which shares of Common Stock are listed, shall list the Conversion Shares on
the Principal Market and each such other exchange or system. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Principal Market, it will include in such application the Conversion
Shares, and will take such other action as is necessary or desirable in the
opinion of the Investors to cause the Conversion Shares to be listed on such
other Principal Market as promptly as possible. The Company will take all
action necessary to continue the listing and trading of its Common Stock on a
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market and shall provide Investors with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three (3) trading days of the Company's
receipt thereof, until the Investors have disposed of all of their
Registrable Securities. The Company agrees to apply for listing on the Nasdaq
National Market and/or the Nasdaq SmallCap Market as soon as practicable
following the Company's eligibility for listing thereon.
Section 6.5. EXCHANGE ACT REGISTRATION. The Company will cause its Common
Stock to continue to be registered under Section 12(b) or (g) of the Exchange
Act, will use its best efforts to comply in all respects with its reporting
and filing obligations under the Exchange Act, and will not take any action
or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Exchange Act until
the Investors have disposed of all of their Registrable Securities.
Section 6.6. LEGENDS. The certificates evidencing the Registrable
Securities shall be free of legends, except as set forth in Article IX.
Section 6.7. CORPORATE EXISTENCE; CONFLICTING AGREEMENTS. The Company will
take all steps necessary to preserve and continue its corporate existence.
The Company shall not enter into any agreement, the terms of which agreement
would restrict or impair the right or ability of the Company to perform any
of its obligations under this Agreement or any of the other Transaction
Documents.
Section 6.8. CONSOLIDATION; MERGER. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company
to, another entity unless the resulting successor or acquiring entity (if not
the Company) assumes by written instrument or by operation of law the
obligation to deliver to the Investors such shares of stock and/or securities
as the Investors are entitled to receive pursuant to this Agreement.
Section 6.9. ISSUANCE OF PURCHASED SHARES, WARRANTS, WARRANT SHARES AND
CONVERSION SHARES. The sale of the Purchased Shares and the Warrants and the
issuance of the Warrant Shares and Conversion Shares shall be made in
accordance with the provisions and requirements of Regulation S (or if that
exemption shall fail for any reason, then in accordance with Section 4(2),
Section 4(6) or Regulation D). The Company shall take such actions as
necessary to qualify the sales made hereunder to the Investors under
Regulation S. If requested by the Investors, the
21
Company shall file a Form D with respect to the Securities as required under
Regulation D and provide a copy thereof to each Investor promptly after such
filing.
Section 6.10. RELIEF IN BANKRUPTCY. The Company shall not seek judicial
relief from its obligations hereunder except pursuant to the Bankruptcy Code.
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives to the fullest extent permitted any rights to relief it may
have under 11 U.S.C. ss. 362 in respect of the exercise of the Warrants. The
Company agrees, without cost or expense to the Investors, to take or consent
to any and all action necessary to effectuate relief under 11 U.S.C. ss. 362.
Section 6.11. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Securities for working capital and general corporate purposes,
but not for the repayment of any debt.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. SURVIVAL. The representations, warranties and covenants made by
each of the Company and each Investor in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument, agreement and
certificate entered into and delivered by them pursuant to this Agreement,
shall survive the Closing and the consummation of the transactions
contemplated hereby. In the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the
provisions of this Agreement, irrespective of any investigation made by or on
behalf of such party on or prior to the Closing Date.
Section 7.2. INDEMNITY.
(a) The Company shall indemnify and hold harmless the Investors,
their respective Affiliates and their respective officers, directors,
partners and members (each an "Indemnified Party"), from and against any and
all Damages, and shall reimburse the Indemnified Parties for all reasonable
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by such Indemnified Party and to
the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties
contained in any of the Transaction Documents, the
annexes, schedules or exhibits thereto or any
instrument, agreement or certificate entered into or
delivered by the Company pursuant hereto or thereto;
or
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements,
undertakings or obligations set forth in any of the
22
Transaction Documents, the annexes, schedules or
exhibits thereto or any instrument, agreement or
certificate entered into or delivered by the Company
pursuant hereto or thereto; or
(iii) any action instituted against the Investors, or any
of them, by any stockholder of the Company who is not
an affiliate of an Investor, with respect to any of
the transactions contemplated by the Transaction
Documents.
(b) Each Investor, severally but not jointly, shall indemnify and
hold harmless the Company, its Affiliates, directors and officers (each an
"Indemnified Party"), from and against any and all Damages, and shall
reimburse the Indemnified Parties for all reasonable out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by such Indemnified Party and to the extent arising out
of or in connection with:
(i) any misrepresentation, omission of fact or breach of
any of such Investor's representations or warranties
contained in any of the Transaction Documents, the
annexes, schedules or exhibits thereto or any
instrument, agreement or certificate entered into or
delivered by the Investor pursuant hereto or thereto;
or
(ii) any failure by the Investor to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in any of the
Transaction Documents, the annexes, schedules or
exhibits thereto or any instrument, agreement or
certificate entered into or delivered by the Investor
pursuant hereto or thereto.
Section 7.3. NOTICE. Promptly after receipt by an Indemnified Party seeking
indemnification pursuant to Section 7.2 of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the other party hereto (the "Indemnifying Party") of
the commencement thereof; but the omission so to notify the Indemnifying
Party shall not relieve it from any liability that it otherwise may have to
the Indemnified Party, except to the extent that the Indemnifying Party is
actually prejudiced by such omission or delay. In connection with any Claim
as to which both the Indemnified Party and the Indemnifying Party are
parties, the Indemnifying Party shall be entitled to assume the defense
thereof. Notwithstanding the assumption of the defense of any Claim by the
Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, and
the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified
Party, potentially differing interests between such parties in the conduct of
the defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that
23
are in addition to or disparate from those available to the Indemnifying
Party, or (z) the Indemnifying Party shall have failed to employ legal
counsel reasonably satisfactory to the Indemnified Party within a reasonable
period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than
as described in clauses (x), (y) or (z) above, the fees, costs and expenses
of such legal counsel shall be borne exclusively by the Indemnified Party.
Except as provided above, the Indemnifying Party shall not, in connection
with any Claim in the same jurisdiction, be liable for the fees and expenses
of more than one firm of legal counsel for the Indemnified Party (together
with appropriate local counsel). The Indemnifying Party shall not, without
the prior written consent of the Indemnified Party (which consent shall not
unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such Claim or judgment.
Section 7.4. DIRECT CLAIMS. In the event an Indemnified Party should have a
claim for indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall deliver
notice of such claim to the Indemnifying Party. If the Indemnifying Party
disputes the claim, such dispute shall be resolved by mutual agreement of the
Indemnified Party and the Indemnifying Party or by binding arbitration
conducted in accordance with the procedures and rules of the American
Arbitration Association as set forth in Article X. Judgment upon any award
rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. DUE DILIGENCE REVIEW. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of
the Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, Nasdaq or other
filing, all SEC Documents and other filings with the SEC, and all other
publicly available corporate documents and properties of the Company as may
be reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such publicly
available information reasonably requested by the Investors or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and
other inquiries reasonably made or submitted by any of them), prior to and
from time to time after the filing and effectiveness of the Registration
Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to
the Company and the accuracy of the Registration Statement.
Section 8.2. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
24
(a) The Company shall not disclose material non-public information
to the Investors, advisors to or representatives of the Investors unless
prior to disclosure of such information the Company identifies such
information as being non-public information and provides the Investors, such
advisors and representatives with the opportunity to accept or refuse to
accept such non-public information for review. Other than disclosure of any
comment letters received from the SEC staff with respect to the Registration
Statement, the Company may, as a condition to disclosing any non-public
information hereunder, require the Investors' advisors and representatives to
enter into a confidentiality agreement in form and content reasonably
satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investors or their advisors or representatives,
and the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts; provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or
to omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made,
not misleading. Nothing contained in this Section 8.2 shall be construed to
mean that such persons or entities other than the Investors (without the
written consent of the Investors prior to disclosure of such information as
set forth in Section 8.2(a)) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by
such persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated
in the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1. LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legends or
equivalent (the "LEGEND"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION
25
REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT IN
ACCORDANCE WITH REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM
SUCH REGISTRATION.
Section 9.2. TRANSFER AGENT INSTRUCTIONS. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock
(and shall issue to any substitute or replacement transfer agent for its
Common Stock upon the Company's appointment of any such substitute or
replacement transfer agent) Irrevocable Transfer Agent Instructions
substantially in the form of EXHIBIT B hereto. Such Irrevocable Transfer
Agent Instructions shall be irrevocable by the Company from and after the
date hereof or from and after the issuance thereof to any such substitute or
replacement transfer agent, as the case may be.
Section 9.3. NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Registrable Securities and no
instructions or "stop transfer orders," "stock transfer restrictions," or
other restrictions have been or shall be given to the Company's transfer
agent with respect thereto other than as expressly set forth in this Article
IX. After the Effective Date, upon request of the Investor the Company will
substitute certificates without restrictive legend for certificates for any
Conversion Shares issued prior to the Effective Date which bear restrictive
legends and remove any stop-transfer restriction relating thereto promptly,
but in no event later than three trading days after request for removal.
Section 9.4. INVESTORS' COMPLIANCE. Nothing in this Article shall affect in
any way each Investor's obligations to comply with all applicable securities
laws upon resale of the Common Stock.
Section 9.5. TRANSFERS WITHOUT REGISTRATION. If an Investor provides the
Company with an opinion of counsel, in generally acceptable form, that
registration of a resale by such Investor of any Securities is not required
under the Securities Act, the Company shall permit the transfer and, in the
case of the Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates in such name and in such denominations as specified
by such Investor and, if such opinion provides that such legends can be
removed, without any restrictive legends.
Section 9.6. INJUNCTIVE RELIEF. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Investors by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its obligations under this Article IX will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of
this Article IX, that the Investors shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
26
ARTICLE X
CHOICE OF LAW; ARBITRATION
Section 10.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made in Delaware by persons domiciled in Delaware and without
regard to its principles of conflicts of laws. The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders.
Section 10.2. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration by the American Arbitration Association (the "AAA") in accordance
with its Commercial Arbitration Rules. In the event of any conflict between
those Rules and this Agreement, this Agreement will govern.
Arbitration will be conducted by a panel of three (3) arbitrators
(the "Panel"). Within fifteen (15) days after the commencement of
arbitration, each party shall select one person to act as arbitrator and the
two selected shall select a third arbitrator within ten (10) days of their
appointment. The members of the Panel shall decide on one member to act as
Chair. If the arbitrators selected by the parties are unable or fail to agree
on a third arbitrator, the third arbitrator shall be selected by the American
Arbitration Association.
The place of arbitration shall be New York, New York. This Agreement
shall be governed by and interpreted in accordance with the laws of the State
of Delaware unless the matter at issue is the corporation law of the
company's state of incorporation, in which event the corporation law of that
jurisdiction shall govern that particular issue. Either party may, without
waiving any remedy under this Agreement, seek from any Court having
jurisdiction any interim or provisional relief that is necessary to protect
the rights or property of that party, pending the Panel's determination of
the merits of the controversy. If any such provisional relief is sought, the
non-prevailing party shall pay the expenses of the prevailing party,
including reasonable attorney's fees, in connection with that proceeding.
Consistent with the expedited nature of arbitration, each party
will, upon the written request of the other party, promptly provide the other
with copies of documents relevant to the issues raised by any claim or
counterclaim. Any dispute regarding discovery, or the relevance or scope
thereof, shall be determined by the Chair of the Panel, which determination
shall be conclusive. Document exchange shall be completed within forty-five
(45) days following selection of the last member of the Panel. At the request
of a party, the Panel, through its Chair, shall have the discretion to order
examination by deposition of witnesses to the extent the Panel deems such
discovery relevant and appropriate. Depositions shall be limited to a maximum
of three per party and shall be held within thirty (30) days of authorization
by the Panel. Additional depositions may be scheduled only with the
permission of the Chair of the Panel for good cause shown. Each deposition
shall be limited to one day's duration. All objections are reserved for the
arbitration hearing except for objections based on privilege.
27
The award of the arbitrators shall be accompanied by a written
reasoned opinion, which, to the extent practical, shall be rendered no more
than thirty (30) calendar days following the close of the Panel's
adjudicatory hearing on the issues submitted for arbitration. The decision of
the Panel will be final, binding, conclusive and non-appealable. The decision
of the Panel will be entitled to be enforced to the fullest extent permitted
by law and entered in any court of competent jurisdiction. The Panel (or the
sole arbitrator selected, if there is no timely response by the responding
party) is authorized and directed to enter a default judgment against a party
who fails to take action or to participate in any proceeding hereunder within
the time periods prescribed by this Agreement, and by the AAA Rules and/or
the Panel.
The Panel shall award to the prevailing party, as determined by the
Panel, all that party's costs and expenses. "Costs and expenses" means all
reasonable pre-award expenses of arbitration, including discovery and
deposition expenses, witness fees, costs and expenses, and attorneys' fees.
If the Panel is unable to determine which party is the "prevailing party,"
the Panel shall apportion the costs and expenses as it deems appropriate.
ARTICLE XI
ASSIGNMENT
Neither this Agreement nor any rights of the Investors or the Company
hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of any
Securities; provided, however, each Investor's interest in this Agreement may
be assigned at any time, in whole or in part, to any Affiliate of the
Investor, or to not more than a total of three (3) accredited investors, who
agrees to make the representations and warranties contained in Article III
and who agrees to be bound by the terms of this Agreement.
ARTICLE XII
NOTICES
All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) hand delivered, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile,
with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day
during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be
received) or (b) on the first business day following the date of sending by
reputable courier
28
service, fully prepaid, addressed to such address, or (c) upon actual receipt
of such mailing, if mailed. The addresses for such communications shall be:
If to the Company: Interactive Telesis Inc.
000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to
(shall not constitute notice):
Rushall & XxXxxxxx
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
if to the Investors: As set forth on the signature pages hereto
with a copy to: Xxxxx X. Xxxxxx, Esq.
(shall not constitute notice) Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Article XII by giving written notice of such
changed address or facsimile number to the other party hereto as provided in
this Article XII.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. COUNTERPARTS/ FACSIMILE/ AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by fewer
than all of the parties and shall be deemed to be an original instrument that
shall be enforceable against the parties actually executing such counterparts
and all of which together shall constitute one and the same instrument.
Except as otherwise stated herein, in lieu of the original documents, a
facsimile transmission or copy of the original documents shall be as
effective and enforceable as the original. This Agreement may be amended only
by a writing executed by all parties.
29
Section 13.2. ENTIRE AGREEMENT. This Agreement, the other Transaction
Documents, which include, but are not limited to, the Warrants, the Series B
Certificate of Designations, the Registration Rights Agreement, the Escrow
Agreement and the Irrevocable Transfer Agent Instructions set forth the
entire agreement and understanding of the parties relating to the subject
matter hereof and supersede all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written,
relating to the subject matter hereof. The terms and conditions of all
Exhibits to this Agreement are incorporated herein by this reference and
shall constitute part of this Agreement as is fully set forth herein. Nothing
in this Agreement, express or implied, is intended to confer upon any third
party any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
Section 13.3. SEVERABILITY. Any invalidity, illegality or limitation of the
enforceability with respect to any one or more of the provisions of this
Agreement, or any part thereof, shall in no way affect or impair the
validity, legality or enforceability of any other provisions of this
Agreement. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, it shall, to the extent practicable, be modified so as to
make it valid, legal and enforceable and to retain as nearly as practicable
the intent of the parties, and the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 13.4. HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
Section 13.5. NUMBER AND GENDER. There may be one or more Investors parties
to this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if
there is only one Investor, and all references to an Investor as "it" shall
apply equally to a natural person.
Section 13.6. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price or trading volume of
the Common Stock on any given trading day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written agreement of
the Investors and the Company shall be required to employ any other reporting
entity.
Section 13.7. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing any Securities and (ii) in the case
of any such loss, theft or destruction of such certificate, upon delivery of
an indemnity agreement or security reasonably satisfactory in form to the
Company (which shall not include the posting of any bond) or (iii) in the
case of any such mutilation, on surrender and cancellation of such
certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new certificate of like tenor.
Section 13.8. FEES AND EXPENSES. Each of the Company and the Investors
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP, the Investors' counsel,
pursuant to the terms of the Escrow Agreement. The Company shall reimburse
the Investors for any expenses and legal fees incurred enforcing its rights
under the
30
Agreement or in connection with any modification or waiver with respect
thereto. The Company's obligations under this Section 13.8 shall arise and
remain in force whether or not any closing occurs hereunder, unless such
failure to close is solely the result of default by the Investors.
Section 13.9. PUBLICITY. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investors, which shall not be
unreasonably withheld nor delayed by more than two (2) trading days from
their receipt of such proposed release. No release shall name the Investors
without their express consent.
Section 13.10. FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.
Section 13.11. TERMINATION. If the Closing shall not have occurred on or
before May 30, 2001 due to the Company's or an Investor's failure to satisfy
the conditions set forth in Article II above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 13.11, the Company shall remain obligated to
reimburse the non-breaching Investors for the expenses described in Section
13.8 above.
Section 13.12. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against
any party.
Section 13.13. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Investors hereunder or the Investors enforce or
exercise their rights hereunder or thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other person or
entity under any law (including, without limitation, any bankruptcy law,
state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
Section 13.14 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to the Company or the Investors or any
subsequent holder of any Securities upon any breach, default or noncompliance
of the Investors, any subsequent holder of any Securities or the Company
under this Agreement, shall impair any such right, power or remedy, nor shall
it be construed to be a waiver of any such breach, default or noncompliance,
or any
31
acquiescence therein, or of any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent
or approval of any kind or character on the part of the Company or the
Investors of any breach, default or noncompliance under this Agreement or any
waiver on the Company's or the Investors' part of any provisions or
conditions of this Agreement must be in writing and shall be effective only
to the extent specifically set forth in such writing and that all remedies,
either under this Agreement, by law, or otherwise afforded to the Company and
the Investors, shall be cumulative and not alternative.
Section 13.15 AMENDMENTS AND WAIVERS. Except as otherwise expressly provided
herein, any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) with the written consent of the Company and
the Investors or their transferees holding at least sixty percent (60%) of
the outstanding Conversion Shares (assuming the exercise of all Warrants and
the conversion of all Series B Preferred Stock or other securities into
Common Stock), voting together as a single group; provided, however, that no
such amendment or waiver shall reduce the aforesaid percentage of Conversion
Shares required under this Section 13.15. Any amendment or waiver effected in
accordance with this Section 13.15 shall be binding upon the Investors and
each transferee of the Securities. Upon the effectuation of each such
amendment or waiver, the Company shall promptly give written notice thereof
to the Investors (or their transferees) who have not previously consented
thereto in writing.
* * * * * *
32
IN WITNESS WHEREOF, the parties hereto have caused this Series B
Preferred Stock and Warrants Purchase Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
COMPANY:
INTERACTIVE TELESIS INC.
By:
-------------------------
Name:
-----------------------
Title:
-----------------------
INVESTORS:
Address: 000 Xxxxx Xxxxxx Xxxx Xxxxxxxx: BH Capital Investments, L.P.
Xxxxx Xxxxx, 0xx Xxxxx By: HB and Co., Inc., its General Partner
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Fax: 000-000-0000 By:
------------------------
Name: Xxxxx Xxxxxxxxx, President
Purchased Shares and
Warrants Purchased
At Closing:
Purchased Shares: 25,000
Warrants: 7,500
Address: 00 Xxxxxx Xxxxxx Xxxxxx Investor: Excalibur Limited Partnership
Toronto, Ontario, Canada M5R I B2 By: Excalibur Capital Management, Inc.
Fax: 000-000-0000
By:
------------------------
Name: Xxxxxxx Xxxxxxx, President
Purchased Shares and
Warrants Purchased
At Closing:
Purchased Shares: 25,000
Warrants: 7,500
Signature Page to
Series B Preferred Stock and Warrants Purchase Agreements
