AMENDMENT NO. 2
TO
SECURITIES PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO SECURITIES PURCHASE AGREEMENT is entered
into as of the [16TH] day of April 2001 (the "Amendment") by and among the
undersigned investors (each an "Investor" and together the "Investors") and
Interactive Telesis Inc., a Delaware corporation (the "Company").
WHEREAS, the parties entered into that certain Securities Purchase
Agreement dated June 12, 2000 (as amended on August 29, 2000 by that certain
Amendment No. 1 to Securities Purchase Agreement, the "Common Stock Purchase
Agreement"), pursuant to which the Company agreed to issue and sell to the
Investors, and the Investors agreed to purchase from the Company up to
$4,500,000 of the Company's Common Stock and to receive in connection therewith
certain Repricing Rights and Warrants to purchase shares of the Company's Common
Stock; and
WHEREAS, simultaneous with the execution of this Amendment, the parties
hereto are entering into a Series B Preferred Stock Purchase Agreement (the
"Series B Purchase Agreement"), pursuant to which the Company agrees to issue
and sell to the Investors, and the Investors agree to purchase from the Company,
$250,000 of the Company's Series B Preferred Stock, $0.001 par value per share
(the "Series B Preferred Stock"), and to receive warrants to purchase shares of
the Company's Series B Preferred Stock (the "Series B Warrants").
WHEREAS, in connection with and as consideration for entering into the
Series B Purchase Agreement, the parties desire herein to amend the Common Stock
Purchase Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Amendment and the Series B Purchase Agreement, the parties hereto agree as
follows:
1. DEFINED TERMS. Terms that are used herein with initial capital
letters and are not otherwise defined herein will have the meanings given to
them in the Common Stock Purchase Agreement.
2. AMENDMENT TO ARTICLE I. Effective upon the Closing (as defined
in the Series B Purchase Agreement) [AND RETROACTIVE WITH RESPECT TO ANY
CONVERSIONS EFFECTED BY THE INVESTORS ON FEBRUARY 1, 2001 AND FEBRUARY 13,
2001], the definition of the following term contained in Article I of the
Common Stock Purchase Agreement shall be amended and restated in its entirety
as follows:
"AVERAGE MARKET PRICE" for any Exercise Date means ninety percent (90%)
of the average of the Market Price on each of the two (2) trading days
having the lowest Market Prices, whether or not consecutive, during the
period of thirty (30) consecutive trading
days ending on the trading day prior to such date. Average Market
Price shall be reduced by 5% if the Company receives notice of
delisting from its Principal Market."
[THE COMPANY AGREES TO ISSUE ADDITIONAL SHARES OF ITS COMMON STOCK TO
THE INVESTORS WITHIN 5 DAYS FROM THE DATE HEREOF TO GIVE EFFECT TO THIS
AMENDMENT WITH RESPECT TO THE CONVERSIONS EFFECTED ON FEBRUARY 1, 2001 AND
FEBRUARY 13, 2001.]
3. AMENDMENT TO SECTION 2.2(h)(C)(C). Effective upon the Closing (as
defined in the Series B Purchase Agreement), Section 2.2(h)(C)(C) of the Common
Stock Purchase Agreement shall be amended and restated in its entirety to read
as follows:
"(C) any remaining Repricing Rights then unexercised shall
expire twenty four (24) months after the applicable
Effective Date; provided, however, this expiration
date shall be extended for a period of time equal to
any delay in the Registration Statement going
effective after the Scheduled Effective Date (except
for delays caused primarily by the Investors) and for
the length of any suspensions after the Effective
Date."
4. COVENANTS OF THE COMPANY. For purposes of this Section 4, terms used
with initial capital letters shall have the meanings ascribed to such terms in
the Series B Purchase Agreement.
(a) LIMITATION ON FUTURE FINANCING. The Company agrees that it
will not sell or enter into any agreement to sell any of its securities or incur
any indebtedness outside the ordinary course of business until six (6) months
after the Closing Date, except for any sales (i) pursuant to any presently
existing employee benefit plan which plan has been approved by the Company's
stockholders, (ii) pursuant to any compensatory plan for a full-time employee or
key consultant, (iii) with the prior approval of holders of a majority of the
Conversion Shares then outstanding, which will not be unreasonably withheld, in
connection with a strategic partnership or other business transaction, the
principal purpose of which is not financing the Company's business operations,
(iv) of Common Stock resulting in gross proceeds to the Company of not less than
$5 million at a fixed price per share not less than the per share Purchase Price
at the Closing (as adjusted for any stock splits, dividends or similar events),
or (v) made to Xxxxxxxxx & Xxxxx Guaranty Finance, LLC ("H&QGF") pursuant to the
existing terms of the Loan and Security Agreement between H&QGF and the Company
dated November 21, 2000 (as amended on March 30, 2001), or any warrants issued
in connection therewith.
(b) PROXY STATEMENT. If required either now or later by the
rules and regulations of the Principal Market or otherwise, upon the request of
the Investors, the Company shall provide each stockholder entitled to vote at
the next meeting of stockholders of the Company, which shall be not later than
90 days from the date of such request (the "STOCKHOLDER MEETING DEADLINE"), a
proxy statement, which has been previously reviewed by the Investors and a
counsel of their choice, soliciting each such stockholder's affirmative vote at
such stockholder meeting for approval of the Company's issuance of all of the
Purchased Shares, Warrant Shares and Conversion Shares in excess of any
limitation or cap imposed by the Principal Market or otherwise, and the Company
shall use its best efforts to solicit its stockholders' approval of such
issuance of the Securities and cause the Board of Directors of the Company to
recommend to the
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stockholders that they approve such proposal. If the Company fails to hold a
meeting of its stockholders by the Stockholder Meeting Deadline (unless such
failure is the result solely of the actions of the Investors), then, as
partial relief (which remedy shall not be exclusive of any other remedies
available at law or in equity), the Company shall pay to each holder of
Conversion Shares (assuming the exercise of all Warrants and the conversion
of all Series B Preferred Stock or other securities) an amount in cash per
share equal to 2.5% of the Purchase Price applicable to such share per month
until the stockholder meeting is held (pro rated for partial months). The
Company shall make the payments referred to in the immediately preceding
sentence within five days of the earlier of (I) the holding of the meeting of
the Company's stockholders and (II) the last day of each 30-day period
beginning on the day after the Stockholder Meeting Deadline. In the event the
Company fails to make such payments in a timely manner, such payments shall
bear interest at the rate of 2.5% per month (pro rated for partial months)
until paid in full.
(c) TRANSACTIONS WITH AFFILIATES. So long as (i) there are
Warrants outstanding or (ii) any Investor owns Purchased Shares and/or Warrant
Shares and/or Conversion Shares with an aggregate market value equal to or
greater than $125,000, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each, a "RELATED PARTY"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arm's-length basis on terms no less favorable than terms which would have
been obtainable from a person other than such Related Party, or (c) any
agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment or arrangement. "AFFILIATE" for purposes of this Section
means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "CONTROL" or "CONTROLS" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
(d) RIGHT OF FIRST REFUSAL. Subject to Section 4(a), the
Company shall not sell any of its securities to Persons other than the Investors
during the period commencing on the date hereof and ending one year after the
Closing Date unless the Company shall first have satisfied its obligations under
this Section 4(d).
(i) If the Company receives a written offer from any
Person or group of Persons other than the Investors to purchase any of the
Company's securities, the Company shall give the Investors a written notice of
such offer stating the type, terms, and purchase price of such securities and
the other material terms and conditions of the sale of such securities and
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attaching a copy of any offer signed by the Person or Persons making such offer.
(ii) The Investors shall have the right to purchase
all or any part of such securities on the same terms and conditions as are set
forth in the Company's written notice. Each Investor may exercise its right to
purchase such securities by giving a written notice of exercise to the Company
within seven (7) days after such Investor's receipt of the Company's notice.
Each Investor shall have the right to purchase such securities pro rata in
accordance with the number of shares of Common Stock (assuming the exercise of
all warrants and the conversion of all Preferred Stock or other securities) that
it has purchased under this Agreement and the Purchase Agreement. Each Investor
may also notify the Company that it will purchase its pro rata share of any such
securities not purchased by the other Investors.
(iii) If the Investors shall not have exercised their
rights to purchase all of such securities, then the Company shall have the
right to sell all securities not subscribed by the Investors on the same terms
and conditions as those set forth in the Company's notice. If the Company shall
not have sold all such securities within 30 days after the expiration of the
7-day period in subsection 4(d)(ii) above, then the Company shall not sell any
such securities unless it first offers to sell such securities to the Investors
in accordance with the procedures set forth in this Section 4(d).
(e) SUSPENSION OF TRADING. In addition any other remedies
which the Investors have under the Series B Purchase Agreement and under
applicable law, for each business day on which trading in the shares of Common
Stock is suspended or prohibited on the Principal Market, the Company shall pay
the Investors an amount equal to 0.2% of the product of (1) the number of shares
of Common Stock (assuming the exercise of all warrants and the conversion of all
Preferred Stock or other securities) then held by the Investors and (2) the
closing sale price of the Common Stock on the trading day prior to such
suspension or prohibition. The cumulative amount of such amounts which have
accrued shall be paid by the Company to the Investors every seven (7) business
days after the date of such suspension or prohibition.
5. EFFECT OF AMENDMENT. The provisions of the Common Stock Purchase
Agreement are amended and modified by the provisions of this Amendment. If any
provisions of the Common Stock Purchase Agreement are materially different from
or inconsistent with any of the provisions of this Amendment, the provisions of
this Amendment shall control, and the provisions of the Common Stock Purchase
Agreement shall, to the extent of such difference or inconsistency, be deemed to
be amended and modified.
6. SINGLE AGREEMENT. This Amendment and the Common Stock Purchase
Agreement, as amended and modified by the provisions of this Amendment, shall
constitute and be construed as a single agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to Securities 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:___________________________________
INVESTORS:
Address: BH Capital Investments, L.P.
000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx, Xxxxx Tower By: HB and Co., Inc. its General Partner
Xxxxxxx, Xxxxxxx Xxxxxx X0X 0X0
Fax: 000-000-0000
By:_____________________________________
Name: Xxxxx Xxxxxxxxx
Authorized Signatory
Address: Excalibur Limited Partnership
00 Xxxxxx Xxxxxx Xxxxxx By: Excalibur Capital Management, Inc.
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 its General Partner
Fax: 000-000-0000
By:_____________________________________
Name: Xxxxxxx Xxxxxxx, President
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