Exhibit 5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of May 4, 2005, by and among Prescient Applied Intelligence,
Inc., a Delaware corporation (the "Company"), and the purchasers listed on
Schedule I hereto (the "Purchasers").
This Agreement is being entered into pursuant to the Common Stock and
Warrant Purchase Agreement dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" means the date of the closing of the purchase and sale
of the Shares pursuant to the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.001 per
share.
"Effectiveness Date" means with respect to the Registration Statement
the earlier of the sixtieth (60th) day following the Filing Date or the date
which is within three (3) Business Days of the date on which the Commission
informs the Company that the Commission (i) will not review the Registration
Statement or (ii) that the Company may request the acceleration of the
effectiveness of the Registration Statement and the Company makes such request.
"Effectiveness Period" shall have the meaning set forth in Section 2.
"Event" shall have the meaning set forth in Section 7(d).
"Event Date" shall have the meaning set forth in Section 7(d).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the earlier of (A) the one hundred fiftieth
(150th) day following the Closing Date or (B) the thirtieth (30th) day following
the closing date of the Subsequent Common Stock Financing.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock issued
to the Purchasers pursuant to the Purchase Agreement and (ii) the shares of
Common Stock issuable upon exercise of the Warrants issued pursuant to the
Purchase Agreement.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and
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post-effective amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
"Warrants" means the warrants to purchase shares of Common Stock
issued to the Purchasers pursuant to the Purchase Agreement.
2. Resale Registration.
(a) On or prior to the Filing Date the Company shall prepare and file
with the Commission a "resale" Registration Statement providing for the resale
of all Registrable for an offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form SB-2 or any successor form
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form SB-2, in which case such registration shall be on
another appropriate form in accordance with the Securities Act and the rules
promulgated thereunder). The Company shall (i) not permit any securities other
than the Registrable Securities and the securities to be listed on Schedule II
hereto to be included in the Registration Statement and (ii) use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event prior to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until such date as is the
earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144(k) as
determined by the mutual written agreement of the Company and such Holder (it
being understood that the Company and a Holder may reach such a mutual agreement
with respect to less than all of the Registrable Securities held by such Holder,
and in such event the Company's registration obligations with respect thereto
shall cease) (the "Effectiveness Period").
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(b) Except as otherwise provided in this Section 2(b), if at any time
the Company decides to prepare and file with the Commission a Registration
Statement relating to an underwritten public offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then-equivalent forms relating to equity securities to be issued
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Holder of Registrable Securities written
notice of such decision and, if within ten (10) days after receipt of such
notice, any such Holder shall so request in writing (which request shall specify
the Registrable Securities intended to be disposed of by the Holders), the
Company will use reasonable best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by such Holder in connection with such underwritten public
offering; provided, however, that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
Registration Statement filed in connection with such registration, the Company
shall decide for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
decision to such Holder and, thereupon: (i) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof) and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 2(b) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities that such Holder requests to be registered; provided, however, that
the Company shall not be required to register any Registrable Securities
pursuant to this Section 2(b) that are eligible for sale pursuant to Rule 144(k)
of the Securities Act, as determined by the mutual written agreement of the
Company and such Holder (it being understood that the Company and a Holder may
reach such a mutual agreement with respect to less than all of the Registrable
Securities held by such Holder, and in such event the Company's registration
obligations with respect thereto shall cease). Notwithstanding any other
provision of this Section 2(b), in the case of an underwritten public offering,
if the managing underwriter reasonably determines that marketing factors require
a limitation on the number of shares to be offered, the underwriter may (subject
to the allocation priority set forth below) exclude from such Registration
Statement up to all of the securities which would otherwise be offered by
persons other than the Company for the Company's own account. The Company shall
so advise all holders of securities requesting registration of any limitations
on the number of shares to be offered and the number of shares of securities
that are to be excluded from registration. Securities to be excluded from
registration shall be determined in the following order of priority: first to be
excluded, the securities held by any person not having contractual piggyback
registration rights; second to be excluded, securities held by any person having
contractual piggyback registration rights pursuant to an agreement other than
this Agreement; and last to be excluded, Registrable Securities of the Holders,
reduced pro rata among such Holders (based upon the number of Registrable
Securities requested to be included in the registration).
(c) The Company represents and warrants that, as of the date hereof,
it meets the registrant eligibility and transaction requirements for the use of
Form SB-2 (for secondary
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offerings) for the registration of the resale of the Registrable Securities by
the Holders and the Company shall file all reports required to be filed by the
Company with the Commission in a timely manner so as to maintain such
eligibility for the use of Form SB-2.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form SB-2 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form SB-2 such
registration shall be on another appropriate form in accordance with the
Securities Act and the rules promulgated thereunder) in accordance with the
method or methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders), and use its reasonable best efforts to cause
the Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and any Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject to
the review of such Holders and such Special Counsel, and (ii) cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries as shall be necessary, in the reasonable opinion of Special
Counsel, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities or any Special Counsel shall reasonably
object, and will not request acceleration of such Registration Statement without
prior notice to such counsel. The sections of such Registration Statement
covering information with respect to, the Holders, the Holders' beneficial
ownership of securities of the Company or the Holders intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Holders.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements as necessary in
order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; (iii) respond as promptly as possible, but in no event
later than ten (10) Business Days, to any comments, whether written or oral,
received from the Commission with respect to the Registration Statement or any
amendment thereto and as promptly as possible, but in no event later than ten
(10) Business Days, provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the
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disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and any
Special Counsel as promptly as possible (and, in the case of (i)(A) below, not
less than five (5) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those
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previously furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.
(g) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends (provided that the issuance of such unlegended certificates
is in compliance with applicable securities laws), and to enable such
Registrable Securities to be in such denominations and registered in such names
as any Holder may request in writing at least two (2) Business Days prior to any
sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi),
as promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Cause all Registrable Securities relating to the Registration
Statement to be listed on the OTC Bulletin Board or any other securities
exchange, quotation system or market, if any, on which similar securities issued
by the Company are then listed or traded as and when required pursuant to the
Purchase Agreement.
(l) Make available for inspection by the selling Holders, any
representative of such Holders and any attorney or accountant retained by such
selling Holders, at the offices where normally kept and during reasonable
business hours, all financial and other records,
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pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case reasonably
requested by any such Holder, representative, underwriter, attorney or
accountant in connection with the Registration Statement; provided, however,
that if any information is determined in good faith by the Company (in writing)
to be of a confidential nature at the time of delivery of such information, then
prior to delivery of such information, the Company and the Holders shall enter
into a confidentiality agreement reasonably acceptable to the Company and the
Holders providing that such information shall be kept confidential, unless: (i)
disclosure of such information is required by a court or administrative order or
is necessary to respond to inquiries of regulatory authorities (provided,
however, that the Company shall be given notice of any such pending disclosure
so that the Company may seek a protective order), (ii) disclosure of such
information, in the opinion of counsel to such Person, is required by law, (iii)
such information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by such Person or (iv) such
information becomes available to such Person from a source other than the
Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
(m) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any three
(3) month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(n) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company in connection with the
preparation of the Registration Statement unless: (i) disclosure of such
information is necessary to comply with federal or state securities laws, as
determined in the opinion of legal counsel to the Company, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning a Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Holder prior to making such disclosure, and allow the Holder, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such
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reference to such Holder by name or otherwise is not required by the Securities
Act or any similar federal statute then in force) the deletion of the reference
to such Holder in any amendment or supplement to the Registration Statement
filed or prepared subsequent to the time that such reference ceases to be
required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v),
3(c)(vi) or 3(n), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(o) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may (x) postpone or suspend filing
of a registration statement for a period not to exceed thirty (30) consecutive
days or (y) postpone or suspend effectiveness of a registration statement for a
period not to exceed twenty (20) consecutive days; provided that the Company may
not postpone or suspend effectiveness of a registration statement under this
Section 3(n) for more than forty-five (45) days in the aggregate during any
three hundred sixty (360) day period; provided, however, that no such
postponement or suspension shall be permitted for consecutive twenty (20) day
periods arising out of the same set of facts, circumstances or transactions.
4. Registration Expenses.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company, except as and to the extent specified in
this Section 4, shall be borne by the Company whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the OTC
Bulletin Board and each other securities exchange or
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market on which Registrable Securities are required hereunder to be listed, (B)
with respect to filing fees required to be paid to the National Association of
Securities Dealers, Inc. and the NASD Regulation, Inc. and (C) in compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
up to a maximum amount of $7,500, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that (i) such untrue statements or omissions are based solely upon
information regarding such Holder or such other Indemnified Party furnished in
writing to the Company by such Holder expressly for use therein and (ii) that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any untrue statement, allegedly untrue statement, omission or
alleged omission made in any preliminary prospectus but eliminated or remedied
in the final prospectus (filed pursuant to Rule 424 of the Securities Act), such
indemnity agreement shall not inure to the benefit of any Holder,
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underwriter, broker or other Person acting on behalf of holders of the
Registrable Securities, from whom the Person asserting any loss, claim, damage,
liability or expense purchased the Registrable Securities which are the subject
thereof, if a copy of such final prospectus had been made available to such
Person and such Holder, underwriter, broker or other Person acting on behalf of
holders of the Registrable Securities and such final prospectus was not
delivered to such Person with or prior to the written confirmation of the sale
of such Registrable Securities to such Person. The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement or any Transaction Document.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents and employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review), as incurred, arising solely out of or based solely upon
any untrue statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus, or arising solely out of or based
solely upon any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement or
to the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement; provided, however, that the indemnity agreement
contained in this Section 5(b) shall not apply to amounts paid in settlement of
any Losses if such settlement is effected without the prior written consent of
such Holder, which consent shall not be unreasonably withheld; provided,
further, that such Holder agrees its consent to any such settlement will not be
unreasonably withheld if such Holder will not be liable for any payments or
incur any out-of-pocket expenses with respect to such settlement.
Notwithstanding anything to the contrary contained herein, each Holder shall be
liable under this Section 5(b) for only that amount as does not exceed the net
proceeds to such Holder as a result of the sale of Registrable Securities
pursuant to such Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not
-11-
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and the Indemnified Party
shall have reasonably concluded on the advice of counsel that there are legal
defenses available to it that are different from or additional to those
available to the Indemnifying Party or (4) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel (which shall be reasonably acceptable to the Indemnifying Party) that
a conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including, but not
limited to, reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
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material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with (i) any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party in accordance with its terms or (ii)
enforcing any rights under this Section 5. In no event shall any selling Holder
be required to contribute an amount under this Section 5(d) in excess of the net
proceeds received by such Holder upon sale of such Holder's Registrable
Securities pursuant to the Registration Statement giving rise to such
contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. Notwithstanding anything to the contrary contained herein,
the Holders shall be liable under this Section 5(d) for only that amount as does
not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
6. Rule 144.
As long as any Holder owns any Registrable Securities or Warrants, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish the Holders with true and complete copies of all
such filings. As long as any Holder owns any Registrable Securities or Warrants,
if the Company is not required to file reports pursuant to Section 13(a) or
15(d) of the Exchange Act, it will prepare and furnish to the Holders and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any Holder may
reasonably request in writing, all to the extent required from time to time to
enable such Person to sell the Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including providing any legal opinions
relating to such sale pursuant to Rule 144.
-13-
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, entered into any agreement which is
currently in effect, nor shall the Company or any of its subsidiaries, on or
after the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Except as disclosed
in Schedule 2.1(c) of the Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company, under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement or the Transaction Documents.
(c) No Future Piggyback Registrations in the Registration Statement.
Neither the Company nor any of its security holders (other than the Holders in
such capacity pursuant hereto or as disclosed on Schedule 2.1(c) of the Purchase
Agreement or Schedule II hereto) may include securities of the Company in the
Registration Statement, and the Company shall not after the date hereof enter
into any agreement providing such right to any of its securityholders, unless
the right so granted is subject in all respects to the prior rights in full of
the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
(d) Failure to File Registration Statement and Other Events. The
Company and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur, as more fully set forth below. The Company and
the Holders further agree that it would not be feasible to ascertain the extent
of such damages with precision. Accordingly, if (A) the Registration Statement
is not filed on or prior to the Filing Date, or (B) the Registration Statement
is not declared effective by the Commission on or prior to the Effectiveness
Date, or (C) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act
within three (3) Business Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or not subject to further review, or (D) the
Registration Statement is filed with and
-14-
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded promptly by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(E) the Company has breached Section 3(n), or (F) trading in the Common Stock
shall be suspended or if the Common Stock is delisted from the OTC Bulletin
Board (or other principal exchange on which the Common Stock is traded) for any
reason for more than three (3) Business Days in the aggregate (any such failure
or breach being referred to as an "Event," and for purposes of clauses (A) and
(B) the date on which such Event occurs, or for purposes of clause (C) the date
on which such three (3) Business Day period is exceeded, or for purposes of
clause (D) after more than fifteen Business Days, or for purposes of clause (F)
the date on which such three (3) Business Day period is exceeded, being referred
to as "Event Date"), the Company shall pay an amount as liquidated damages to
each Holder equal to two percent (2.0%) of the Holder's initial investment in
the Shares for the first calendar month from the Event Date or portion thereof
and one percent (1.0%) of the Holder's initial investment in the Shares per
calendar month thereafter or portion thereof until the applicable Event is
cured; provided, that, the Company shall not incur liquidated damages under this
Section 7(e) following the date that is two (2) years from the date of this
Agreement. Notwithstanding anything to the contrary in this paragraph (d), if
(I) any of the Events described in clauses (A), (B) or (C) shall have occurred,
(II) on or prior to the applicable Event Date, the Company shall have exercised
its rights under Section 3(n) hereof and (III) the postponement or suspension
permitted pursuant to such Section 3(n) shall remain effective as of such
applicable Event Date, then the applicable Event Date shall be deemed instead to
occur on the second Business Day following the termination of such postponement
or suspension.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of a majority of the Registrable Securities outstanding. Any
amendment or waiver effected in accordance with this Section shall be binding
upon each Holder, each future Holder, and the Company. Upon effectiveness of
each such amendment or waiver, the Company shall promptly give written notice
thereof to the Holders who have not previously consented thereto in writing.
(f) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Holder at its address set forth under its name on Schedule
I attached hereto, or with respect to the Company, addressed to:
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Prescient Applied Intelligence, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Montgomery, McCracken, Xxxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx of the Arts
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxxx X'Xxxxx
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to each Holder shall be sent to such Holder's
counsel set forth on Schedule I hereto.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
assignable by each Holder if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement, and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement. The rights to assignment shall apply to the Holders (and
to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is
-16-
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(n) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(o) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under this Agreement and the Transaction
Documents are several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under the Transaction Documents and the
Company shall not be excused from performance of its obligation to the Purchaser
under this Agreement and the Transaction Documents as a result of nonperformance
or breach by any other Purchaser. The Company acknowledges that the decision of
each Purchaser to purchase securities pursuant to the Purchase Agreement has
been made by such Purchaser independently of any other purchase and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information,
-17-
materials, statements or opinions. The Company acknowledges that nothing
contained herein, or in any Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Purchaser in the Registration Statement and (ii) review by, and
consent to, such Registration Statement by a Purchaser) shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Purchasers and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own individual
counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers. The Company acknowledges
that such procedure with respect to the Transaction Documents in no way creates
a presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
PRESCIENT APPLIED INTELLIGENCE, INC.
By:
-------------------------------------
Name:
Title:
PURCHASER:
By:
-------------------------------------
Name:
Title:
-19-
Schedule I
List of Purchasers
-20-
Schedule II
Securities Allowed to be Included on Registration Statement
1. Shares of Common Stock issuable upon the exercise of warrants issuable to
the placement agent and its designees in connection with the transactions
contemplated by the Purchase Agreement and the Subsequent Common Stock
Financing (as defined in the Purchase Agreement).
2. Shares of Common Stock issued and shares of Common Stock issuable upon the
exercise of Warrants issued pursuant to the Subsequent Common Stock
Financing.
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