EXECUTION VERSION
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated November __,
2005, is entered into by and between IT & E INTERNATIONAL GROUP, a Nevada
corporation (the "Company") and COMVEST INVESTMENT PARTNERS II LLC, a Delaware
limited liability company ("ComVest") and the purchasers set forth on the
signature pages attached hereto (each a "Purchaser" and collectively with
ComVest, the "Purchasers"), as a material inducement for the Purchasers to
purchase (i) senior secured notes (each a "Senior Secured Note") in an aggregate
principal amount up to of $11,500,000 (ii) up to 11,500 of shares of convertible
preferred stock, stated value $1,000 per share (the "Series D Preferred Stock"),
(iii) warrants (the "Warrant") to purchase up to 81,142,788 shares of common
stock, par value $0.001 per share ("Common Stock") and (iv) and the six month
option to invest an additional $5,000,000 on the same terms as (i), (ii) and
(iii) ("the ComVest Option") in accordance with the terms of that certain
Securities Purchase Agreement, dated on or about the date hereof (the "Purchase
Agreement"). All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, the Company and ComVest hereby agree as follows:
1. Definitions. In addition to those terms defined elsewhere in this
Agreement, the following terms shall have the following meanings wherever used
in this Agreement:
"Act" shall mean the Securities Act of 1933, as amended, and any
successor statute from time to time.
"Costs and Expenses" shall mean all of the costs and expenses
relating to any subject Registration Statement, including but not limited to
registration, filing and qualification fees, reasonable blue sky expenses, costs
of listing any shares of Common Stock on any national securities exchange
automated quotation system, printing expenses, fees and disbursements of counsel
and accountants to the Company, and reasonable fees and disbursements of counsel
to ComVest (such fees and disbursements not to exceed $25,000 per Registration);
provided, however, that underwriting discounts and commissions attributable
solely to the securities registered for the benefit of ComVest, fees and
disbursements of any additional counsel to ComVest, and all other expenses
attributable solely to ComVest shall be borne by ComVest.
"Excluded Registration Statement" shall mean a registration
statement relating solely to the registration of the sale of securities (i)
other than for cash, (ii) to participants in a Company stock plan or employee
benefit plan, agreement or arrangement, and (iii) in a transaction covered by
Rule 145 under the Act or the resale of securities issued in such a transaction.
"Existing Registration Rights Agreements" shall mean: (i) the
Registration Rights Agreement dated October 18, 2004 with Laurus Master Fund
Ltd.; (ii) the Company's agreement
with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to
register the resale of their outstanding shares on the Registration Statement,
subject to the Lock-Up Agreement dated as of even date herewith; and (iii) the
piggy-back registration rights that have been granted to the shareholders of
Millennix, Inc., subject to the Lock-Up Agreement dated as of even date
herewith.
"Lock-Up Agreement" shall mean each of the Lock-Up Agreements to be
entered into by the Company and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and
▇▇▇▇ ▇▇▇▇▇▇▇.
"Registrable Securities" shall mean all shares of Common Stock
underlying the Warrants, and the shares of Common Stock underlying the Preferred
Stock held from time to time by the Purchasers, and in each case including the
Optional Registerable Securities, if any; provided, however, that such
Registrable Securities shall cease to be Registrable Securities at such time as
all such Registrable Securities (i) are sold pursuant to any registration
statement filed by the Company with the SEC, pursuant to Rule 144 promulgated
under the Act or pursuant to any other exemption from registration under the Act
or (ii) may be sold, subject to any applicable volume limitations, in open
market transactions pursuant to any applicable exemption from the registration
requirements of the Act, including without limitation Rule 144(k) promulgated
thereunder (or any successor thereto).
"Optional Registrable Securities" shall mean the shares underlying
the Warrants and Preferred Stock issued in connection with the ComVest Option.
"Registration" shall mean any registration or proposed registration
of Registrable Securities pursuant to a Registration Statement in respect to the
sale of any Registrable Securities.
"Registration Period" shall mean the period (i) beginning upon the
earlier of declaration of effectiveness of the Registration Statements provided
for in Section 2 hereof or declaration of effectiveness of any Registration
Statement provided for in Section 3 hereof that includes Registrable Securities
and (ii) ending on the earlier of the date that all Registrable Securities have
ceased to be Registrable Securities and the second anniversary of the date of
this Agreement.
"Registration Statement" shall mean any registration statement filed
or to be filed by the Company with the SEC.
"SEC" shall mean the United States Securities and Exchange
Commission, or any successor agency or agencies performing the functions
thereof.
"Warrant Registrable Securities" shall mean the shares of Common
Stock issuable upon exercise of the Warrants or any shares issued in exchange
for or replacement thereof, from time to time.
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2. Registration.
(a) Mandatory Registration. The Company shall prepare, and, within
fifteen (15) calendar days from the earlier to occur of: (i) the exercise in
full of the ComVest Option, or (ii) the expiration of the ComVest Option (the
"Filing Date"), file with the SEC a Registration Statement on Form S-3 (or, if
Form S-3 is not then available, on such form of Registration Statement as is
then available to effect a registration of the Registrable Securities, subject
to the consent of ComVest, which consent will not be unreasonably withheld)
covering the resale of the Registrable Securities, which Registration Statement,
to the extent allowable under the 1933 Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of or otherwise pursuant to the
Preferred Stock and exercise of the Warrants to prevent dilution resulting from
stock splits, stock dividends or similar transactions. The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than an amount equal to the sum of the number of shares of Common Stock that are
then issuable upon conversion of the Preferred Stock (based on the Conversion
Price), and the number of shares of Common Stock that are then issuable upon
exercise of the Warrants, without regard to any limitation on ComVest's ability
to convert the Preferred Stock or exercise the Warrants but in each case that
relates to Registrable Securities. The Company acknowledges that the number of
shares initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon conversion of the
Preferred Stock and upon exercise of the Warrants but in each case that relates
to Registrable Securities. ComVest acknowledges and agrees that such initial
Registration Statement to be filed on or prior to the Filing Date shall include
shares in accordance with the registration rights set forth in subsection (ii)
and (iii) of the definition of Existing Registration Rights Agreements, subject
to the Lock-Up Agreements being entered into by such parties.
(b) Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed by the Filing Date or declared effective by the SEC within three
months from the Filing Date, or (ii) after the Registration Statement has been
declared effective by the SEC, sales of all of the Registrable Securities cannot
be made pursuant to the Registration Statement, subject to Section 2(d) below,
then the Company will make payments to ComVest in such amounts and at such times
as shall be determined pursuant to this Section 2(c) as partial relief for the
damages to ComVest by reason of any such delay in or reduction of their ability
to sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to ComVest
a cash fee of $100,000 per month, or part thereof, until such time as the
Registration Statement is declared effective by the SEC, or the suspension is
lifted by the SEC. Such amounts shall be paid in cash.
(c) Eligibility for Form ▇-▇, ▇▇-▇ or S-1; Conversion to Form S-3.
The Company represents and warrants that it meets the requirements for the use
of Form ▇-▇, ▇▇-▇ or S-1 for registration of the resale by the Purchasers. The
Company agrees to file all reports required to be filed by the Company with the
SEC in a timely manner so as to remain eligible or become eligible, as the case
may be, and thereafter to maintain its eligibility, for the use of Form S-3. If
the Company is not currently eligible to use Form S-3, not later than five (5)
business
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days after the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration of
the offer and sale by the Purchasers, the Company shall file a Registration
Statement on Form S-3 (or such successor form) with respect to the Registrable
Securities covered by the Registration Statement on Form SB-2 or Form S-1,
whichever is applicable, filed pursuant to Section 2(a) (and include in such
Registration Statement on Form S-3 the information required by Rule 429 under
the ▇▇▇▇ ▇▇▇) or convert the Registration Statement on Form SB-2 or Form S-1,
whichever is applicable, filed pursuant to Section 2(a) to a Form S-3 pursuant
to Rule 429 under the 1933 Act and cause such Registration Statement (or such
amendment) to be declared effective no later than six (6) months after the
Filing Date. In the event of a breach by the Company of the provisions of this
Section 2(c), the Company will be required to make payments pursuant to Section
2(b) hereof.
(d) Allowed Delay. If (i) there is material non-public information
regarding the Company which the Company's Board of Directors (the "Board")
reasonably determines not to be in the Company's best interest to disclose and
which the Company is not otherwise required to disclose, or (ii) there is a
significant business opportunity (including, but not limited to, the acquisition
or disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under a Registration Statement, then the Company may postpone or suspend filing
or effectiveness of such Registration Statement for a period not to exceed
thirty (30) consecutive days, provided that the Company may not postpone or
suspend its obligation under this Section 2(d) for more than sixty (60) days in
the aggregate during any twelve (12) month period (each, an "Allowed Delay").
3. Registration Procedures. In the case of each Registration effected
by the Company in which Registrable Securities or Optional Registrable
Securities are to be sold for the account of ComVest, the Company will use its
good faith reasonable efforts to:
(a) furnish to ▇▇▇▇▇▇▇▇▇ Traurig LLP (counsel to ComVest) copies
of all Registration Statements or prospectuses or any amendments or supplements
thereto proposed to be filed with the SEC, which documents will be subject to
review by such counsel before filing solely with regard to any information
contained therein which pertains to ComVest;
(b) prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective during the
Registration Period (or, with respect to Registration Statement filed in
accordance with Section 3 hereof, for such shorter or longer period covered
thereby) and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during such
period;
(c) furnish to ComVest electronic copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus) and such
other documents as the Purchasers may reasonably require in order to facilitate
the disposition of the Registrable Securities held by the Purchasers;
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(d) register or qualify such Registrable Securities or Optional
Registrable Securities under such other securities or blue sky laws of such
states as may be reasonably required and do any and all other acts and things
which may be reasonably necessary or advisable to enable the Purchasers to
consummate the disposition of the Registrable Securities in such jurisdictions
(provided that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any such
jurisdiction);
(e) notify the Purchasers, at any time when a prospectus relating
to a Registration Statement is required to be delivered under the Act, of the
happening of any event as a result of which the prospectus included in a
Registration Statement contains an untrue statement of a material fact or omits
to state any fact necessary to make the statements therein not materially
misleading, and prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchaser(s) of Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not materially
misleading; and
(f) effective not later than the effectiveness of the subject
Registration Statement, cause all subject Registrable Securities to be listed
for trading on each national securities exchange or automated quotation system
on which the Common Stock is then listed, if any.
4. Indemnification by the Company.
(a) In the event that the Company has failed to use its reasonable
best efforts and has otherwise failed to act in good faith to effect the
registration of the Registrable Securities or Optional Registrable Securities in
accordance with Section 2(a) and (b) hereof and the SEC has failed to declare
effective any such Registration Statement by the Effective Date, then the
Company shall pay ComVest a cash payment in accordance with Section 2(b). In the
event the Company otherwise materially breaches or materially fails to perform,
as applicable, any representation, warranty or covenant contained in this
Agreement, the Company shall indemnify the Purchasers from and against any
expenses, claims, losses, costs, charges or liabilities of any kind, including
amounts paid in settlement and reasonable attorneys' fees (collectively, the
"Losses"), which may be incurred by the Purchasers as a result of any such
failure or breach, with such indemnification to be made within thirty (30) days
of receipt of written request therefor.
(b) The Company shall indemnify and hold harmless each Purchaser
and, each of their respective directors, legal counsel and accountants for
ComVest, and any underwriter (as defined in the Act) for any Losses to which any
Purchaser or any other such indemnified person becomes subject, under the Act or
any rule or regulation thereunder, insofar as such Losses (i) are caused by any
untrue statement or alleged untrue statement of any material fact contained in
any preliminary prospectus (if used prior to the Effective Date of the
Registration Statement), or contained, on the Effective Date thereof, in any
Registration Statement of which Registrable Securities were the subject, the
prospectus contained therein, any amendment or supplement thereto, or (ii) arise
out of or are based upon the omission or alleged
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) arise out of
any violation by the Company of the Act or any rule or regulation thereunder
applicable to the Company and relating to actions or omissions otherwise
required of the Company in connection with such Registration Statement. The
Company shall reimburse the Purchasers and any such other indemnified person for
any legal or other expenses reasonably incurred by the Purchasers or such other
indemnified person in connection with investigating, defending or settling any
such Loss; provided, however, that the Company shall not be liable to any such
Persons in any such case to the extent that any such Loss arises out of or is
based upon (i) any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
furnished to the Company in writing by such person expressly for inclusion in
any of the foregoing documents or (ii) the use by the Purchasers of an outdated
or defective prospectus after the delivery to the Purchasers of written notice
from the Company that the prospectus is outdated or defective. This indemnity
shall not apply to amounts paid in settlement of any such Loss if such
settlement is effected without the consent of the Company.
5. Indemnification by the Purchasers. The Purchasers shall indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed a Registration Statement, legal counsel and accountants for the
Company, each person (if any) who controls the Company within the meaning of the
Act and any underwriter (as defined in the Act) for the Company, against any
Losses to which the Company or any other such indemnified person may become
subject under the Act or any rule or regulation thereunder or otherwise to the
extent that such Losses (or related actions) (i) are caused solely by any untrue
statement or alleged untrue statement of any material fact contained in any
preliminary prospectus (if used prior to the effective date of the Registration
Statement), or contained, on the Effective Date thereof, in any Registration
Statement of which such Purchaser's Registrable Securities were the subject, the
prospectus contained therein, any amendment or supplement thereto, or (ii) arise
out of or are based solely upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with information
furnished to the Company by the respective Purchaser, in writing, expressly for
inclusion in any of the foregoing documents; provided, however, that the
aggregate liability of any Purchaser shall not be greater than the net proceeds
received by such Purchaser upon the sale of the Registrable Securities giving
rise to such indemnification obligation. This indemnity shall not apply to
amounts paid in settlement of any such Loss or related Action if such settlement
is effected without the consent of such Purchaser.
6. Additional Provisions.
(a) Each Purchaser and each other person indemnified pursuant to
Section 5 above shall, in the event that it receives notice of the commencement
of any Action against it which is based upon an alleged act or omission which,
if proven, would result in the Company's having to indemnify it pursuant to
Section 5 above, promptly notify the Company, in writing, of the commencement of
such Action and permit the Company, if the Company so notifies such Purchaser or
other indemnified person within thirty (30) days after receipt by the Company of
notice of the commencement of the Action, to assume the defense of such Action
with counsel
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reasonably satisfactory to such Purchaser; provided, however, that such
Purchaser or other indemnified person shall be entitled to retain its own
counsel at its own expense. The omission to notify the Company promptly of the
commencement of any such Action shall not relieve the Company of any liability
to indemnify such Purchaser or such other indemnified person, as the case may
be, under Section 6 above, from and after the Company's receipt of such notice,
except to the extent that the Company shall suffer any Losses by reason of such
failure to give notice, and shall not relieve the Company of any other
liabilities which it may have under this or any other agreement.
(b) The Company and each other person indemnified pursuant to
Section 6 above shall, in the event that it receives notice of the commencement
of any Action against it which is based upon an alleged act or omission which,
if proven, would result in any Purchaser having to indemnify it pursuant to
Section 6 above, promptly notify each Purchaser or other indemnified person, in
writing, of the commencement of such Action and permit each Purchaser, if such
Purchaser so notifies the Company within thirty (30) days after receipt by such
Purchaser of notice of the commencement of the Action, to assume the defense of
such Action with counsel reasonably satisfactory to the Company; provided,
however, that the Company or other indemnified person shall be entitled to
retain its own counsel at the Company's expense. The omission to notify any
Purchaser promptly of the commencement of any such Action shall not relieve the
Purchasers of liability to indemnify the Company or such other indemnified
person, as the case may be, under Section 6 above, from and after such
Purchaser's receipt of such notice, except to the extent that the subject Holder
shall suffer any Losses by reason of such failure to give notice, and shall not
relieve such Purchaser of any other liabilities which it may have under this or
any other agreement.
(c) No indemnifying party, in the defense of any such Action,
shall, except with the consent of each indemnified party, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such Action.
Each indemnified party shall furnish such information regarding itself or the
Action in question as an indemnifying party may reasonably request in writing
and as shall be reasonably required in connection with defense of such Action
resulting therefrom.
(d) If a court of competent jurisdiction determines that the
foregoing indemnity provided under Sections 5 and 6 above is unavailable, or is
insufficient to hold harmless an indemnified party, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such Losses (A) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (B) if the allocation provided by clause (A)
above is not permitted by applicable law, or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other, but
also the relative fault of the indemnifying party and the indemnified party, as
well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
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7. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be given in accordance with
Section 5.5 of the Purchase Agreement.
8. Waiver and Amendment. No waiver, amendment or modification of this
Agreement or of any provision hereof shall be valid unless evidenced by a
writing duly executed by the Company and each Purchaser. No waiver of any
default hereunder shall be deemed a waiver of any other, prior or subsequent
default hereunder.
9. Governing Law. This Agreement shall be governed by, construed under
and interpreted and enforced in accordance with the laws of the State of New
York, without giving effect to principles of choice of law. Any Action arising
out of or relating to this Agreement shall be commenced in a federal or state
court having competent jurisdiction in the State of New York, and for the
purpose of any such Action, each of the parties and any assignees thereof
submits to the personal jurisdiction of the State of New York. The parties
hereby irrevocably consent to the exclusive personal jurisdiction of any state
or federal court for New York County in the State of New York or the Southern
District of New York. The parties hereby waive any objection to venue and any
objection based on a more convenient form in any Action instituted under this
Agreement.
10. Captions. The captions and Section headings used in this Agreement
are for convenience only, and shall not affect the construction or
interpretation of this Agreement or any of the provisions hereof.
11. Entire Agreement. This Agreement constitutes the sole and entire
agreement and understanding between the parties hereto as to the subject matter
hereof, and supersedes all prior discussions, agreements and understandings of
every kind and nature between them as to such subject matter.
12. No Third Party Beneficiaries. Except as expressly provided herein,
this Agreement is not intended to confer upon any person any rights or remedies
hereunder.
13. Successors and Assigns. The Company may not sell, assign, transfer
or otherwise convey any of its rights or delegate any of its duties under this
Agreement, except to a corporation which has succeeded to substantially all of
the business and assets of the Company and has assumed in writing its
obligations under this Agreement, and this Agreement shall be binding on the
Company and such successor. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the Purchasers and their respective
successors and assigns. Without limiting the generality of the foregoing, any
transferee of Registrable Securities shall have the rights set forth in this
Agreement, and such rights shall be enforceable against the Company by such
transferees as third-party beneficiaries.
14. Execution. This Agreement may be executed in two (2) or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding
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obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
15. Term. This Agreement shall terminate upon the expiration of the
Registration Period; provided, however, that the parties' rights and obligations
under Sections 5 and 6 shall survive any termination of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
____ day of _______ 2005.
COMPANY:
IT & E INTERNATIONAL GROUP
By:
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Name:
Title:
PURCHASER:
COMVEST INVESTMENT PARTNERS II
LLC
By:
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Name:
Title:
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By:
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Name:
Title:
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By:
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Name:
Title: