EXHIBIT 10.18
RECEIVABLE PURCHASE AND STOCK TRANSFER RESTRICTION AGREEMENT
This Receivable Purchase and Stock Transfer Restriction Agreement (the
"AGREEMENT") is made as of April 17, 2002 to be effective as of the Effective
Date, as defined below (the "EFFECTIVE DATE"), by and among New Visual
Corporation, a Utah corporation ("NVC"), TLSI, Inc., a Delaware corporation
("TLSI"), and Adaptive Networks, Inc. ("ANI"), a Massachusetts corporation. NVC,
TLSI and ANI are each referred to as a "PARTY" and collectively referred to as
the "PARTIES."
PRELIMINARY STATEMENT
As of the Effective Date, ANI has accumulated indebtedness to TLSI that
is represented by a receivable of TLSI, payable by ANI. TLSI desires to sell,
and NVC desires to purchase the ANI receivable from TLSI, for a purchase price
consisting of certain shares of common stock, par value $.001 per share, of NVC
(the "COMMON STOCK") in accordance with the terms and subject to the conditions
set forth herein. This Agreement shall not apply to indebtedness of any kind
owed by ANI to TLSI in respect of any period from and after the Effective Date
or the respective rights and obligations of ANI and TLSI in connection with
products and services provided by TSLI to ANI from and after the Effective Date.
TLSI and NVC further desire to agree to certain restrictions on the transfer of
the Common Stock to be issued to TLSI, and to certain provisions regarding the
redemption of such stock.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. DEFINITIONS As used in this Agreement, the terms set forth below have the
following meanings:
1.1 "ADVERSE CLAIM" means a lien, security interest or other charge or
encumbrance, claim or any other type of preferential arrangement.
1.2 "COMMON STOCK" shall refer to the Common Stock of NVC, par value
$.001.
1.3 "EFFECTIVE DATE" shall mean the Effective Date of that certain
Development and License Agreement entered into or to be entered into between NVC
and ANI and of this Agreement and the Related Documents. As of the Effective
Date, the closing of the transaction contemplated by the Development and License
Agreement and the transactions contemplated hereby shall have occurred or shall
be occurring, and each such closing shall be conditioned upon the completion of
the other, and both such closings, shall, when completed, be deemed
simultaneous.
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1.4 "FAIR MARKET VALUE PER SHARE" of a share of Common Stock shall mean
an amount determined as follows:
(i) If the Common Stock is traded on a stock exchange, an
amount equal to the average of the daily closing selling prices of the
Common Stock on the stock exchange reasonably determined by the Board
of Directors to be the primary market for the Common Stock over the ten
(10) trading day period ending on the date prior to the date of the
event giving rise to the need to determine such Fair Market Value, as
such prices are officially quoted in the composite tape of transactions
on such exchange; and
(ii) If the Common Stock is traded over-the-counter, an amount
equal to the average of the daily closing selling prices (or, if such
information is not available, the average of the daily closing bid and
asked prices) of the Common Stock over the ten (10) trading day period
ending on the date prior to the date of the event giving rise to the
need to determine such Fair Market Value, as such prices are reported
by the National Association of Securities Dealers through its NASDAQ
system or any successor system.
1.5 "FINANCING TRANSACTION" shall mean any transaction or series of
related transactions (with transactions consummated within a single period of
ninety (90) days (or fewer presumed to be related)) entered into by NVC, which
transaction or transactions are designed to provide cash financing to NVC,
including, without limitation, any loan or loans taken by NVC or any issuance by
NVC of its debt or equity securities (or options, warrants or rights to acquire
the same) for cash, cash equivalents, marketable securities or similar items
intended to be reduced to cash or readily reducible to cash, or any combination
of the foregoing.
1.6 "NON-OBJECTING HOLDER" shall mean any holder that does not give a
Notice of Objection pursuant to Section 8.6 hereof.
1.7 "QUALIFYING FINANCING TRANSACTION" shall mean a Financing
Transaction as a result of which NVC receives gross cash proceeds, equal to or
greater than $10,000,000.
1.8 "RECEIVABLE" means any indebtedness and other obligations owed to
TLSI by ANI or any right of TLSI to payment from or on behalf of ANI, whether
constituting an account, chattel paper, instrument or general intangible,
arising in connection with the sale of goods or the rendering of services by
TLSI prior to the Effective Date, and includes, without limitation, the
obligation to pay any finance charges, fees and other charges with respect
thereto.
1.9 "REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement entered into as of the Effective Date by and between TLSI and
NVC, substantially in the form of Exhibit A hereto.
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1.10 "RELATED DOCUMENTS means this Agreement, the Registration Rights
Agreement and any other agreement, instrument, certificate or other document
entered into in connection herewith or therewith or relating to the transactions
contemplated hereby and thereby.
1.11 "RELATED SECURITY" means, with respect to the Receivable:
(i) all of TLSI's interest in any goods (including returned
goods), and documentation or title evidencing the shipment or storage
of any goods (including returned goods), relating to any sale giving
rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time purporting to secure payment of such
Receivable, together with all UCC financing statements or similar
filings relating thereto; and
(iii) all guaranties, indemnities, insurance and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable or otherwise relating
to such Receivable, whether pursuant to any contract or agreement
related to such Receivable or otherwise.
2. PURCHASE AND SALE OF RECEIVABLE
2.1 SALE OF RECEIVABLE Subject to the terms and conditions set forth in
this Agreement, including the delivery of the Purchase Price, as set forth
below, TLSI does hereby, sell, convey, assign and deliver to NVC, its successors
and assigns, as of the Effective Date, without set off, all of TLSI's right,
title and interest in and to the Receivable and any Related Security.
2.2. COLLECTIONS TLSI constitutes and appoints NVC the true and lawful
agent and attorney in fact of TLSI, with full power of substitution and
resubstitution, in whole or in part, in the name and stead of TLSI but on behalf
and for the benefit of NVC and its successors and assigns, from time to time:
(a) to demand, receive and collect any and all of the
Receivable or any Related Security and to give receipts and releases for and
with respect to the same, or any part thereof;
(b) to institute and prosecute any and all proceedings at law,
in equity or otherwise, which NVC or its successors and assigns may deem proper
to collect or reduce to possession any of the Receivable or any Related Security
and to collect or enforce any claim or right of any kind hereby assigned or
transferred, or intended so to be; and
(c) to do all things legally permissible, required, or
reasonably deemed by NVC to be required, to recover and collect the Receivable
or any Related Security.
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2.3 DEFENSE. TLSI does hereby bind itself to forever warrant and defend
the title to the Receivable herein sold, conveyed, assigned and delivered unto
NVC, its successors, and assigns against every person claiming all or any part
thereof.
2.4 [RESERVED]
2.5 DELIVERIES As of the Effective Date, TLSI will deliver to NVC all
documents evidencing or relating to the Receivable and all goods or other
property constituting any Related Security and all documents evidencing or
relating to any Related Security that are in the possession of TLSI.
2.6 PARTIES ACKNOWLEDGEMENT OF SUBSTITUTION ANI hereby acknowledges in
whole the transactions contemplated hereby, including the substitution of NVC as
the obligee in respect of the Receivable, and the discharge of its obligation to
TLSI in connection with the Receivable and the substitution therefor of its
obligation to NVC. ANI covenants to make all future payments with respect to the
Receivable to NVC. The Parties agree and acknowledge that from and after the
Effective Date, ANI's obligations to TLSI with respect to the Receivable will
cease, and TLSI will have no rights or recourse to ANI in respect of the
Receivable whatsoever. TLSI acknowledges that ANI has paid in full for, and that
TLSI has no ownership interest in, any products or services provided to ANI by
TLSI related to the Receivable. All of TLSI's rights in the Receivable shall be
fully transferred to NVC which shall fully succeed to the rights and remedies
formerly possessed by TLSI.
2.7 PARTIES ACKNOWLEDGEMENT OF AMOUNT The Parties hereto hereby
acknowledge that as of the Effective Date the aggregate amount of the receivable
is $ 750,000.
2.8. FURTHER ASSURANCES TLSI from time to time hereafter and without
further consideration, upon request of NVC, covenants and agrees to execute and
deliver all such other and additional instruments and other documents, and to
take all other actions, as may be reasonably necessary to more effectively
grant, convey, and assign all of the Receivable hereby granted, conveyed and
assigned, or intended so to be, and which are reasonably necessary or desirable
to facilitate the recognition of the transferred ownership of the Receivable.
Such separate instruments and documents (a) shall evidence the conveyance and
assignment of the applicable Receivable herein made and shall not constitute an
additional conveyance or assignment of the Receivable, (b) are not intended to
modify, and shall not modify, any of the terms, covenants and conditions herein
set forth, and (c) shall be deemed to contain all of the terms and provisions
hereof, as fully and to all intents and purposes as in though the same were set
forth at length therein.
3. PAYMENT OF PURCHASE PRICE
3.1 SHARES OF COMMON STOCK. In full payment of the purchase price for
the Receivable (the "PURCHASE PRICE" ) NVC shall issue and deliver to TLSI that
number of shares of Common Stock (the "SHARES") that results from dividing
$750,000 by the Fair Market Value Per Share on the Effective Date.
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3.2 DELIVERIES. As of the Effective Date of this Agreement NVC shall
deliver to TLSI one or more stock certificates representing the Shares.
4. REPRESENTATIONS AND WARRANTIES OF TLSI
TLSI represents and warrants to NVC the following:
4.1 CORPORATE STATUS AND GOOD STANDING. TLSI is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware.
4.2 AUTHORIZATION OF TRANSACTION. TLSI has full power and authority to
execute and deliver this Agreement and the other Related Documents and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the other Related Documents by TLSI and the consummation by
TLSI of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action. This Agreement and the
other Related Documents constitute the valid and legally binding obligations of
TLSI, enforceable in accordance with their terms and conditions, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally.
4.3 CONSENTS AND APPROVALS. TLSI need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement and the other Related Documents.
4.4 NON-CONTRAVENTION. Neither the execution and the delivery of this
Agreement and the other Related Documents, nor the consummation of the
transactions contemplated hereby and thereby will violate in any material
respect any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which TLSI is subject or any provision of its
certificate of incorporation or bylaws. Except as obtained prior to the
execution of this Agreement and the other Related Documents and delivered to
NVC, no approval, waiver or consent by TLSI under any instrument, contract or
agreement to which TLSI is a party is necessary to consummate the transactions
contemplated hereby and thereby.
4.5 NO DEFENSE. The Receivable represents all accounts receivable,
indebtedness or obligations of any nature to TLSI of ANI for products or
services through the Effective Date.
4.6 TITLE. TLSI is the legal and beneficial owner of the Receivable and
any Related Security, free and clear of any Adverse Claim of any party. Upon
purchase, NVC shall acquire a valid and enforceable, undivided ownership
interest in the Receivable and in any Related Security and collections and other
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proceeds, with respect thereto, free and clear of any Adverse Claim of any
party. TLSI has not sold or otherwise transferred any interest in the Receivable
or any Related Security prior to the date hereof. TLSI has not granted to any
party any security interest in its own assets which could constitute an Adverse
Claim on the Receivable or any Related Security prior to the date hereof. No
effective financing statement or other similar instrument covering the
Receivable or any Related Security or collections and other proceeds with
respect thereto is on file in any recording office.
4.7 NO ACTIONS. There is no pending or to its knowledge threatened
action or proceeding affecting TLSI before any governmental authority or
arbitrator which could reasonably be expected to adversely affect the ability of
TLSI to perform its obligations under the Agreement or the other Related
Documents or the collectibility of the Receivable, or which affects or purports
to affect the legality, validity or enforceability of the Agreement or the other
Related Documents.
4.8 PURCHASE FOR ENTIRELY OWN ACCOUNT. TLSI hereby confirms, that the
Shares to be received by TLSI (the "SECURITIES") will be acquired for investment
for TLSI's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that TLSI has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement and the other Related Documents, TLSI
further represents that TLSI does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
4.9 DISCLOSURE OF INFORMATION. TLSI has had an opportunity to review
NVC's filings under the Securities Act and the Securities Exchange Act of 1934,
as amended, and has received all the information it considers necessary or
appropriate for deciding whether to purchase the Shares. TLSI further represents
that it has had an opportunity to ask questions and receive answers from NVC
regarding such filings, the terms and conditions of the offering of the Shares
and the business, properties, prospects and financial condition of NVC.
4.10 INVESTMENT EXPERIENCE. TLSI can bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares.
4.11 RESIDENCE; ACCREDITED INVESTOR. TLSI's principal residence is the
State of New York. TLSI is a corporation not formed for the specific purpose of
acquiring the Shares, with total assets in excess of $5,000,000.
4.12 RESTRICTED SECURITIES. TLSI understands that the Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from NVC in a transaction
not involving a public offering and that under such laws and applicable
regulations such Securities may be resold without registration under the
Securities Act (as defined in Section 5.6) only in certain limited
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circumstances. In this connection, TLSI represents that it is familiar with Rule
144 promulgated by the SEC (as defined in Section 5.6), as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act, including without limitation the Rule 144 condition that current
information about NVC be available to the public.
4.13 LEGENDS. It is understood that the certificates evidencing the
Securities will bear a legend, the text of which will be substantially
equivalent to the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL
SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT THE
COMPANY WILL NOT RECOGNIZE ANY TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IN THE ABSENCE OF AN OPINION OF LEGAL COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
THE CORPORATION WILL FURNISH TO THE HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE ON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS A FULL STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS
OF STOCK OR SERIES THEREOF WHICH THE COPORATION IS AUTHORIZED TO ISSUE
AND THE QUALIFCATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS. SUCH FULL STATEMENT IS SET FORTH IN THE CORPORATION'S
ARTICLES OF INCORPORATION, AS AMENDED OR RESTATED, ON FILE IN THE STATE
OF UTAH.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE FURTHER SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS THAT ARE SET FORTH IN A "RECEIVABLES
PURCHASE AND STOCK TRANSFER RESTRICTION AGREEMENT," A COPY OF WHICH IS
AVAILABLE FROM THE COMPANY UPON REQUEST. THE COMPANY WILL NOT RECOGNIZE
ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN A
MANNER THAT CONFLICTS WITH THIS AGREEMENT. THE AFOREMENTIONED AGREEMENT
ALSO CONTAINS CERTAIN RIGHTS OF THE COMPANY AND THE HOLDER OF THESE
SECURITIES TO REDEEM THESE SECURITIES OR REQUIRE THEIR REDEMPTION UNDER
CERTAIN CIRCUMSTANCES."
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4.14 ADVISORS. TLSI acknowledges that it has had the opportunity to
review this Agreement and the other Related Documents and the transactions
contemplated by this Agreement and the other Related Documents with TLSI's own
legal counsel. TLSI is relying solely on its legal counsel and tax advisors and
not on any statements or representations of NVC or any of NVC's agents for legal
or tax advice with respect to this investment or the transactions contemplated
by this Agreement and the other Related Documents.
5. REPRESENTATIONS AND WARRANTIES OF NVC
NVC represents and warrants to TLSI the following:
5.1 CORPORATE STATUS AND GOOD STANDING. NVC is a corporation duly
organized, validly existing, and in good standing under the laws of Utah.
5.2 AUTHORIZATION OF TRANSACTION. NVC has full power and authority to
execute and deliver this Agreement and the other Related Documents and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the other Related Documents by NVC and the consummation by
NVC of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action. This Agreement and the
other Related Documents constitute the valid and legally binding obligations of
NVC, enforceable in accordance with the terms and conditions herein, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally. The issuance of the Common Stock is not, and will not be, subject to
any preemptive rights or right of first refusal that have not been properly
waived or complied with.
5.3 CONSENTS AND APPROVALS. NVC does not need to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement and the other Related Documents, other than (a)
such filings as are required pursuant to applicable federal and state securities
laws and blue sky laws, which filings will be effected within the required
statutory period; and (b) such consents, approvals, orders or authorizations the
failure of which to be made or obtained would not have any change or effect that
is or is reasonably likely to be materially adverse to the financial condition,
business or results of operations of NVC or impair the ability of NVC to perform
its obligations in any material respect, or impair the title or value of any
consideration to be delivered to TLSI hereunder or afford to NVC or any third
party the right to rescind or void this agreement.
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5.4 NON-CONTRAVENTION. Neither the execution and the delivery of this
Agreement and the other Related Documents nor the consummation of the
transactions contemplated hereby and thereby will violate in any material
respect any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any kind to which NVC is
subject or any provision of its certificate of incorporation or bylaws. Except
as obtained prior to the execution of this Agreement and the other Related
Documents, no approval, waiver or consent by NVC under any instrument, contract
or agreement to which NVC is a party is necessary to consummate the transactions
contemplated hereby and thereby. NVC is not in violation of, or (with or without
notice or lapse of time or both) in default under, any material term or
provision of its Articles of Incorporation or By-Laws.
5.5 VALIDITY OF ISSUANCE. The Shares that are being purchased by TLSI
hereunder when issued, sold and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued and outstanding, fully paid and nonassessable and free and clear of all
liens and restrictions, other than restrictions imposed under the Securities
Act.
5.6 SEC FILINGS. For the twelve month period prior to the date hereof,
NVC has timely filed all forms, reports, statements and other documents (the
"REPORTS") required to be filed by it with the Securities and Exchange
Commission ("SEC"). The Reports (a) were prepared in all material respects in
accordance with the Securities Act of 1933, as amended (the "SECURITIES ACT")
and the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), as the
case may be, and (b) did not at the time they were filed (or, if amended or
superseded by a filing prior to the Effective Date, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
5.7 CAPITALIZATION. As of the date hereof, the authorized capital stock
of NVC consists of (a) 100,000,000 shares of Common Stock and (b) 15,000,000
shares of preferred stock, par value $0.01 per share, of which 100,000 shares
have been designated Series A Junior Participating Preferred Stock (the "SERIES
A PREFERRED STOCK") and of which, as of the Effective Date, 4000 shares shall
have been designated Series B Preferred Stock. As of April 8, 2002, 45,209,452
shares of Common Stock and no shares of Series A Preferred Stock were
outstanding. As of April 8, 2002, there were outstanding options granted by NVC
exercisable for 5,748,750 shares of Common Stock, outstanding warrants granted
by NVC exercisable for 3,935,818 shares of Common Stock, and securities issued
by NVC convertible into 1,246,875 shares of Common Stock. Except as specifically
set forth above, NVC had no other securities issued or outstanding as of April
8, 2002.
5.8 Subject to the accuracy of the representations and warranties
contained in Section 4, the offer, issue and sale of the Shares are and will be
exempt from registration and prospectus delivery requirements of the Securities
Act and will be issued in compliance with all applicable federal and state
securities laws.
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5.9 Since January 31, 2002, except as disclosed in NVC's Quarterly
Report on Form 10Q for the period ended January 31, 2002, there has been no
event which would have a material adverse effect upon NVC. Since January 31,
2002, except as disclosed in NVC's Quarterly Report on Form 10Q for the period
ended January 31, 2002, NVC has not (a) mortgaged, pledged or subjected to lien
any of its material assets, tangible or intangible, (b) sold, transferred or
leased a material portion of its assets, (c) cancelled or compromised any
material debt or claim, or waived or released any right, of material value, (d)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) having a material effect, (e) declared or paid any dividends on or
made any other distributions with respect to, or purchased or redeemed, any of
its outstanding equity securities, or (f) suffered or experienced any material
adverse change or loss in its business.
5.10 No representation or warranty or other statement made by NVC
herein, or in any document or certificates delivered to TLSI pursuant hereto,
contains any untrue statement or omits to state a material fact necessary to
make any of them, in light of the circumstances in which it was made, not
misleading.
6. RESTRICTIONS ON TRANSFER OF SHARES
6.1 NO TRANSFER IN VIOLATION OF THIS SECTION 6. Except as provided in
this Section 6, TLSI will not sell, assign, transfer, pledge, hypothecate or
otherwise encumber or dispose of (collectively referred to as a "Transfer") all
or any part of or any interest in the Shares now or hereafter owned or held by
it. Any sale, assignment, transfer, pledge, hypothecation or other encumbrance
or disposition of Shares not made in conformance with this Section 6 shall be
null and void, shall not be recorded on the books of NVC and shall not be
recognized by NVC. NVC may require, as a condition to recognizing the validity
of any Transfer to a transferee permitted by this Section 6 (a "Permitted
Transferee"), that such Permitted Transferee execute a written document agreeing
to be bound by the provisions regarding Transfers contained in this Section 6;
provided however, that this requirement shall not apply to Permitted Transferees
purchasing Shares in a transaction meeting the manner of sale requirements of
paragraphs (f) and (g) of Rule 144 under the Securities Act. Any Transfer of
Shares to NVC pursuant to Section 7 of this Agreement, or otherwise, shall be
deemed to be in compliance with this Section 6 and shall not be subject to the
restrictions set forth in Section 6.3.
6.2 TRANSFERS PURSUANT TO REGISTRATION OR EXEMPTION. In addition to the
restrictions set forth in Sections 6.3 and 6.4 below, no Transfer of Shares may
be made unless such Transfer is (a) in a sale pursuant to an effective
registration statement under the Securities Act and applicable state securities
laws or (b) in a sale pursuant to an exemption from such registration
requirements; provided, however, that NVC may require the transferor to provide
NVC with an opinion of counsel, which counsel shall be reasonably satisfactory
to NVC, to the effect that such Transfer is so exempt.
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6.3 RESTRICTIONS ON NUMBER OF SHARES SOLD. TLSI agrees that it will not
at any time sell a number of Shares in any continuous ninety-day period which,
when aggregated with previous sales of Shares made by it during such ninety-day
period, would total a number of Shares in excess of one percent 1% of the
outstanding shares of Common Stock of NVC as of the date of any such sale.
Subject to the foregoing limits, TLSI may sell its Shares pursuant to Rule 144
under the Securities Act at such time as TLSI shall have satisfied the holding
period requirement of such Rule.
6.4 RESTRICTIONS ON PERCENTAGE HOLDINGS SOLD IN REGISTERED SALES. TLSI
agrees that in the event that TLSI's shares are included in an effective
registration statement filed by NVC for the account of NVC or another party,
TLSI will not sell any such registered Shares, except in accordance with the
following amount limitations: (i) For the six month period of time following the
effective date of the registration statement (the "Effective Date"), no shares;
(ii) For the period of time commencing from the six month anniversary of the
Effective Date and ending on the nine month anniversary of the Effective Date a
number of Shares not exceeding 30% of the Shares held by it; (iii) For the
period of time commencing from the nine month anniversary of the Effective Date
and ending on the twelve month anniversary of the Effective Date a number of
Shares not exceeding 60% of the Shares held by it; and (iv) For the period of
time commencing from the twelve month anniversary of the Effective Date and
thereafter a number of Shares up to the full 100% of the Shares held by it. Such
limitations shall not apply to those number of Shares that would have been
saleable by TLSI pursuant to Rule 144 in accordance with Section 6.3 hereof but
for the effective registration statement.
7. REDEMPTION OF SHARES UNDER CERTAIN CONDITIONS
7.1 OPTION OF NVC. Upon fifteen (15) days prior written notice, any or
all of the Shares may be redeemed at the option of NVC, expressed by resolution
of the Board of Directors, at any time, or from time to time, at a per share
redemption price equal to the original Purchase Price, as adjusted as set forth
herein ( the "Redemption Price") multiplied by a factor of 1.333333334. In case
of the redemption of less than all Shares at the time outstanding, the Shares to
be redeemed, may, but need not be, selected by NVC pro rata or by lot from TLSI
or any other holder thereof selected in any manner as may be determined by the
Board of Directors.
7.2 REDEMPTION IN THE EVENT OF A QUALIFYING FINANCING TRANSACTION
Within thirty (30) days following the final closing of a Qualifying Financing
Transaction all of the Shares held by each Non-Objecting Holder shall be
redeemed at the Redemption Price.
7.3 REDEMPTION IN THE EVENT SHARES ARE NOT REGISTERED. In the event
that as of the first anniversary of the Effective Date, TLSI shall not have been
given the opportunity to register all of the Shares in one or more effective
registration statements under the Securities Act pursuant to the exercise of its
rights under the Registration Rights Agreement, all of the Shares held by each
Non-Objecting Holder shall be redeemed at the Redemption Price. In the event
that TLSI shall have been given the opportunity to participate in such
registration or registrations and shall have declined to participate, NVC shall
not be required to effect the redemption provided for herein. In the event that
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NVC shall be required to redeem any of the Shares pursuant to this paragraph,
and NVC shall be, at such time, not permitted to effect such redemption
consistent with the statutory or regulatory requirements governing it in its
state of incorporation or the provisions of its articles of incorporation, or in
the event NVC shall be financially incapable of paying all or any part of the
Redemption Price, NVC shall not redeem the Shares, but such redemption shall be
deferred until such time as such legal or financial impediments are removed.
7.4 ADJUSTMENTS TO REDEMPTION PRICE If NVC at any time or from time to
time after the Effective Date, effects a subdivision of the outstanding Common
Stock, the Redemption Price in effect before that subdivision shall be
proportionately decreased, and conversely, if NVC at any time or from time to
time after the Effective Date combines the outstanding shares of Common Stock
into a smaller number of shares, the Redemption Price in effect before the
combination shall be proportionately increased. Any adjustment under this
Section 7.4 shall become effective at the close of business or the date the
subdivision or combination becomes effective. If NVC at any time or from time to
time after the Effective Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock, then and in each such
event the Redemption Price in effect shall be decreased as of the time of such
issuance or, in the event such record date is fixed, as of the close of business
on such record date, by multiplying the Redemption Price in effect by a fraction
(1) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (2) the denominator of which shall be the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Redemption Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Redemption shall be
adjusted pursuant to this Section 7.4 as of the time of actual payment of such
dividends or distributions.
7.5 NOTICE. Notice of a NVC redemption pursuant to Section 7.1 above,
and of a required redemption pursuant to Sections 7.2 or 7.3 above, shall be
given by NVC by causing a notice of redemption to be mailed to each holder of
record of such shares to be redeemed as of the redemption date addressed to each
such holder at his or her address appearing on the books of NVC or given by him
or her to NVC for the purpose of notice, or if no such address appears or is
given, at the place where the principal office of NVC is located. Notice of a
required redemption pursuant to Sections 7.2 and 7.3 above shall be given as
promptly as possible, and in any event no later than the third Business Day
following the final closing of a Qualifying Financing Transaction in the event
such a transaction is consummated and no later than the third day following the
first anniversary of the Effective Date in the event of a redemption pursuant to
Section 7.3. Each such notice shall be given at least fifteen (15) days prior to
the date fixed for redemption and shall indicate that the relevant event has or
is expected to occur and state that the holder is entitled to redemption
pursuant to Sections 7.2 or 7.3 hereof, as applicable. All notices of redemption
given by NVC pursuant to Sections 7.1, 7.2 and 7.3 hereof shall specify (i) the
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number of Shares of such holder to be redeemed, (ii) the date fixed for
redemption, (iii) the Redemption Price and, in the case of a redemption pursuant
to Section 7.1 above, the price per Share to be paid following the application
of the multiplier set forth therein and (iv) the place and manner of payment for
the Shares to be redeemed (including, if payment will be made available pursuant
to Section 7.8 below, a statement to that effect). Each notice of redemption
mailed pursuant to this Section 7.5 shall be deemed to be delivered when
deposited in the United States mail, addressed as set forth above, with postage
thereon prepaid and shall be deemed to be received upon the earliest of (i) the
date of actual receipt; (ii) five days following mailing; or (iii) on the date
stamped on the return receipt if sent by registered mail or certified mail, with
return receipt requested. In no event shall holder be required to offer Shares
for redemption after one year from the date hereof to the extent it has notified
NVC in writing of its intention to sell such Shares pursuant to Rule 144.
7.6 NOTICE OF OBJECTION. Each holder of Shares that does not desire to
have its Shares redeemed pursuant to Sections 7.2 or 7.3 above shall be entitled
to decline to have its Shares redeemed by mailing or forwarding by facsimile a
written notice (the "Notice of Objection") to NVC at the place where the
principal office of NVC is located. To be effective, such Notice of Objection
must be received by NVC at least five (5) Business Days prior to the date fixed
for redemption (as set forth in NVC's notice) Following receipt of such Notice
of Objection, the Shares of such holder shall no longer be considered scheduled
for redemption and shall not be redeemed. Such holder shall have no further
right to require redemption pursuant to Sections 7.2 or 7.3.
7.7 TERMINATION OF RIGHTS. The Shares scheduled for redemption shall,
as of the date fixed for redemption, no longer be deemed to be outstanding for
any purpose whatsoever, and all rights of the holders of such Shares in or with
respect to NVC shall forthwith cease and terminate, except only the right of the
holders of such Shares to receive payment for such shares upon surrender of the
certificate or certificates representing the shares to be redeemed. On or after
the date fixed for redemption and stated in the notice of redemption, each
holder of Shares scheduled for redemption shall surrender his or her certificate
evidencing such shares to NVC at the place designated by NVC and shall thereupon
be entitled to receive payment of the price therefor. In case less than all the
Shares represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed Shares. If such notice
of redemption shall have been duly given, and if on the date fixed for
redemption funds necessary for the redemption shall be available therefor,
notwithstanding that the certificates evidencing any Shares so scheduled for
redemption shall not have been surrendered, all rights including dividends with
respect to the Shares so scheduled for redemption and the right to transfer such
shares on the books of NVC, shall forthwith after such date cease and terminate,
except for the right of the holders of record on the date fixed for redemption
to receive the price therefor, without interest, upon surrender of their
certificates therefor.
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8 GENERAL PROVISIONS
8.1 SURVIVAL. The warranties, representations and covenants of the
Parties contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement for twenty-four months.
8.2 EXPENSES. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby and thereby.
8.3 FINDER. Each Party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction.
8.4 ENTIRE AGREEMENT. This Agreement and the Related Documents
(including the documents referred to herein) constitute the entire agreement
among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
8.5 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder and thereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder and thereunder or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence.
8.6 NOTICES. All notices, requests, demands, claims, and other
communications hereunder and thereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder and thereunder shall be deemed
duly given and delivered when deposited in the United States mail, addressed as
set forth below, with postage thereon prepaid and shall be deemed to be received
upon the earliest of (i) the date of actual receipt; (ii) five days following
mailing; or (iii) on the date stamped on the return receipt if sent by
registered mail or certified mail, with return receipt requested. Such notices
shall be addressed:
IF TO NVC: COPY TO:
--------- -------
New Visual Corporation Xxxxx & XxXxxxxx
0000 Xxxxxx Xxxx, Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxx 00000
Attn: Xxx Xxxxxxxxxx, Xx. Attn: Xxxxxxxx X. Xxxxxxx
Facsimile: (000)000-0000 Facsimile: (000) 000-0000
14
COPY TO:
IF TO TLSI: Xxxxx X. Xxxxxxxxx, Esq.
----------
Blau, Kramer, Wactlar & Xxxxxxxxx, P.C.
TLSI, Inc. 000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
000 Xxxx Xxxxxx Xxxxxxx, Xxx Xxxx 00000
Xxxxxxxxxx, Xxx Xxxx 00000 Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxx and Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
IF TO ANI: COPY TO:
---------- -------
Adaptive Networks, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx
Attn: Xxxxxxx Xxxxx
Facsimile: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder and thereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder and thereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
8.7 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder and thereunder without the prior
written approval of the other Parties.
8.8 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
8.10 AUTHORSHIP. The Parties agree that the terms and language of this
Agreement were the result of negotiations between the Parties and, as a result,
there shall be no presumption that any ambiguities in this Agreement shall be
resolved against either Party. Any controversy over construction of this
Agreement shall be decided without regard to events of authorship or
negotiation.
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8.11 FURTHER ACTIONS. Upon the request of any Party, the other Party
will (a) furnish to the requesting Party any additional information, (b) execute
and deliver, at their own expense, any other documents and (c) take any other
actions as the requesting Party may reasonably require to more effectively carry
out the intent of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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The Parties have executed and delivered this Agreement to be effective
as of the Effective Date.
NEW VISUAL CORPORATION
By: /S/ C. XXXX XXXXXX III
Name: C. Xxxx Xxxxxx III
Title: VP Bus. Dev., Corp. Sec.
TLSI, INC.
By: /S/ XXXXX XXXXXXXX
Name: Xxxxx Xxxxxxxx
Title: President and CEO
ADAPTIVE NETWORKS, INC.
By: /S/ XXXXXXX XXXXX
Name: Xxxxxxx Xxxxx
Title: President
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