EXHIBIT 10.17
RECEIVABLE PURCHASE AND STOCK TRANSFER RESTRICTION AGREEMENT
This Receivable Purchase and Stock Transfer Restriction Agreement
("AGREEMENT") is made as of April 17, 2002 to be effective as of the Effective
Date, as defined below, by and among New Visual Corporation, a Utah corporation
("NVC"), Zaiq Technologies, Inc., a Delaware corporation ("ZAIQ"), and Adaptive
Networks, Inc., a Massachusetts corporation ("ANI"). NVC, ZAIQ 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 ZAIQ that
is represented by a receivable of ZAIQ, payable by ANI. ZAIQ desires to sell,
and NVC desires to purchase the ANI receivable from ZAIQ, for a purchase price
consisting of $250,000 in cash and 3,192 shares of Series B Preferred Stock, par
value $.01 per share, of NVC (the "PREFERRED 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 ZAIQ in respect of any period
from and after the Effective Date, or the respective rights and obligations of
ANI and ZAIQ in connection with products and services provided by ZAIQ to ANI
from and after the Effective Date. ZAIQ and NVC further desire to agree to
certain restrictions on the transfer of the Securities (as defined below) to be
issued to ZAIQ.
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 "CONVERSION STOCK" shall refer to the Common Stock into which the
Preferred Stock is convertible pursuant to the Designation.
1.4 "DESIGNATION" shall refer to the designation of the rights,
preferences and privileges of the Series B Preferred Stock of NVC as filed with
the Utah Department of Commerce, Division of Corporations and Commercial Code,
and substantially in the form attached as Exhibit A hereto.
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1.5 "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 transactions 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.
1.6 "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;
(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; and
(iii) If no determination can be made on the basis set forth
in either (i) or (ii) above, the Fair Market Value Per Share shall be
an amount determined in good faith by the Board of Directors of NVC as
of the date of the event giving rise to the need for such
determination.
The Fair Market Value Per Share of any share of Preferred Stock shall
mean the aggregate Fair Market Value of the shares of Conversion Stock issuable
upon conversion of such share of Preferred Stock.
1.7 "PREFERRED STOCK" shall refer to the Series B Preferred Stock, par
value $.01 of NVC.
1.8 "RECEIVABLE" means any indebtedness and other obligations owed to
ZAIQ by ANI or any right of ZAIQ 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
ZAIQ prior to the Effective Date and includes, without limitation, the
obligation to pay any finance charges, fees and other charges with respect
thereto.
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1.9 "REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement entered into as of the Effective Date by and between ZAIQ and
NVC, substantially in the form of Exhibit B hereto.
1.10 "RELATED DOCUMENTS means this Agreement, the Designation, 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 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
(ii) 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.
The parties agree that under no circumstances will ANI warrants that
have been or may in the future be issued to ZAIQ ever be considered to
be "Related Security" hereunder.
1.12 "SECURITIES" shall refer to the Preferred Stock and the Conversion
Stock.
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, as of the Effective Date, ZAIQ does hereby sell, convey, assign and
deliver to NVC, its successors and assigns, without set off, all of ZAIQ's
right, title and interest in and to the Receivable and any Related Security, on
an as is, where is basis, without recourse, and without representation or
warranty of any kind, other than as may be expressly set forth herein. NVC will
not have any claim, cause of action or right of offset against ZAIQ arising out
of a past, present or future dispute between ANI and ZAIQ relating to any
products or services provided to ANI by ZAIQ related to the Receivable,
including without limitation disputes as to the quality, value or effectiveness
of such products or services; provided, however, that nothing herein shall
affect ZAIQ's obligations to ANI respecting such products and services, as set
forth in the Services Agreement between ZAIQ and ANI, dated as of November 1,
2000 (the "Services Agreement"), or ANI's obligations to ZAIQ thereunder (except
with respect to the discharge of the Receivable in accordance with this
Agreement)
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2.2. COLLECTIONS. ZAIQ constitutes and appoints NVC the true and lawful
agent and attorney in fact of ZAIQ, with full power of substitution and
resubstitution, in whole or in part, in the name and stead of ZAIQ 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, in its own name, 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.
2.3 [RESERVED]
2.4 DELIVERIES. As of the Effective Date ZAIQ 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 ZAIQ, other than
proprietary documents of ZAIQ. ZAIQ will also deliver to NVC an opinion of
counsel to ZAIQ, dated as of the Effective Date, in form and substance
reasonably satisfactory to NVC and counsel to NVC.
2.5 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
ZAIQ 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 ZAIQ with respect to the Receivable will
cease, and ZAIQ will have no rights or recourse to ANI in respect of the
Receivable whatsoever. ZAIQ acknowledges that ANI has paid in full for, and that
ZAIQ has no ownership interest in, any products or services provided to ANI by
ZAIQ related to the Receivable. All ZAIQ's rights in the Receivable shall be
fully transferred to NVC. Except for claims, demands and liabilities arising out
of ZAIQ's obligations, if any, to ANI pursuant to the Services Agreement,
including, without limitation, any such arising out of products or services
provided by ZAIQ pursuant thereto, ANI hereby releases and discharges ZAIQ from
any claims, demands or liabilities which ANI had, may have had or now has
against ZAIQ, if any, from the beginning of the world to the date hereof.
2.6 PARTIES ACKNOWLEDGEMENT OF AMOUNT. The Parties hereto hereby
acknowledge that as of the Effective Date the aggregate amount of the Receivable
is $3,442,000.
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2.7. FURTHER ASSURANCES. ZAIQ 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 though the same were set
forth at length therein.
3. PAYMENT OF PURCHASE PRICE
3.1 PURCHASE PRICE - CASH AND PREFERRED STOCK. In full payment of the
purchase price for the Receivable (the "PURCHASE PRICE"), NVC shall pay to ZAIQ
the sum in cash of $250,000 (the "CASH COMPONENT") and issue and deliver to ZAIQ
3,192 shares of Preferred Stock (the "SHARES").
3.2 DELIVERIES. The Cash Component shall be payable in two installments
of which $100,000 shall be payable on the Effective Date and $150,000 shall be
payable within forty-five days of the Effective Date. As of the Effective Date,
NVC shall deliver to ZAIQ one or more stock certificates representing the
Shares. NVC will also deliver to ZAIQ an opinion of counsel to NVC, dated as of
the Effective Date, in form and substance reasonably satisfactory to ZAIQ and
counsel to ZAIQ.
4. REPRESENTATIONS AND WARRANTIES OF ZAIQ
ZAIQ represents and warrants to NVC the following:
4.1 CORPORATE STATUS AND GOOD STANDING. ZAIQ is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware.
4.2 AUTHORIZATION OF TRANSACTION. ZAIQ 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 ZAIQ and the consummation by
ZAIQ 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
ZAIQ, 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.
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4.3 CONSENTS AND APPROVALS. ZAIQ 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 ZAIQ 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 ZAIQ under any instrument, contract or
agreement to which ZAIQ is a party is necessary to consummate the transactions
contemplated hereby and thereby.
4.5 NO DEFENSE. Except as set forth on Exhibit C, the Receivable
represents all indebtedness to ZAIQ of ANI for products or services through the
Effective Date.
4.6 TITLE. ZAIQ 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, free and clear of any Adverse Claim of any party. ZAIQ has
not sold or otherwise transferred any interest in the Receivable or any Related
Security prior to the date hereof. Except with respect to the existing liens of
Silicon Valley Bank, ZAIQ 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. Except with respect to the existing
liens of Silicon Valley Bank, no effective financing statement or 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 threatened action or proceeding
affecting ZAIQ before any governmental authority or arbitrator which could
reasonably be expected to adversely affect the ability of ZAIQ 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. ZAIQ hereby confirms that the
Securities to be received by ZAIQ will be acquired for investment for ZAIQ'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 ZAIQ has no present intention of
selling, granting any participation in or otherwise distributing the same. By
executing this Agreement and the other Related Documents, ZAIQ further
represents that ZAIQ 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.
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4.9 DISCLOSURE OF INFORMATION. ZAIQ 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 Securities. ZAIQ 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
Securities and the business, properties, prospects and financial condition of
NVC.
4.10 INVESTMENT EXPERIENCE. ZAIQ acknowledges that it 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 Securities.
4.11 RESIDENCE; ACCREDITED INVESTOR. ZAIQ's principal residence is the
State of Massachusetts. ZAIQ is a corporation not formed for the specific
purpose of acquiring the Securities, with total assets in excess of $5,000,000.
4.12 RESTRICTED SECURITIES. ZAIQ 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
circumstances. In this connection, ZAIQ 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.
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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."
4.14 ADVISORS. ZAIQ 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 ZAIQ's own
legal counsel. ZAIQ 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 ZAIQ 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
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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.
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)
the filing of the Designation with the appropriate office in the State of Utah;
(b) 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 (c) 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 Zaiq hereunder or afford
to NVC or any third party the right to rescind or void this agreement.
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 government,
governmental agency, or court to which NVC is subject or any provision of its
articles of incorporation or bylaws. Except as obtained prior to the Effective
Date 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.
5.5 VALIDITY OF ISSUANCE. As of the Effective Date, the Preferred Stock
is duly authorized and when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and will have the rights,
preferences and privileges specified in the Designation. As of the Effective
Date, the Conversion Stock is duly authorized and has been reserved for issuance
upon conversion of the Preferred Stock, and, when issued upon conversion in
accordance with the terms of the Designation will be duly and validly issued,
fully paid and nonassessable.
5.6 SEC FILINGS. NVC has 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
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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.
6. OBSERVER RIGHTS
6.1 RIGHT TO OBSERVER ON BOARD. For so long as ZAIQ shall continue to
hold at least one half of the 3192 shares of Series B Preferred Stock originally
issued to it pursuant to this Agreement (as such number may be adjusted in the
event of any stock split or other subdivision, reverse stock split or other
combination, stock dividend or other recapitalization of the Series B Preferred
Stock), ZAIQ shall be entitled to designate one individual reasonably acceptable
to NVC to attend all meetings of NVC's Board of Directors (including without
limitation all regular and/or special meetings, including all telephonic and/or
videophonic meetings) in a nonvoting observer capacity, and to receive all
proposed written consents to action at the same time such materials are provided
to NVC's Board of Directors. Such observer shall be given copies of all notices,
minutes, consents, proposed consents and other materials that NVC provides to
its directors at the same time such materials are provided to such directors;
provided, however, that such representative shall agree to hold in confidence
(unless and until such information is disclosed by the company or otherwise
becomes known to persons outside of NVC through no fault of such representative
or of ZAIQ, and further provided that such representative will be entitled to
share such information with ZAIQ's board of directors and management) and trust
and to act in a fiduciary manner with respect to all information so provided;
and provided further that NVC reserves the right to withhold any information and
to exclude such representative from any meeting or portion thereof if access to
such information or attendance at such meeting: (I) in the good faith judgment
of the Board could adversely affect the attorney-client privilege between NVC
and its outside counsel or cause the Board to breach its fiduciary duties, or
(II) in the good faith judgment of the Board would result in disclosure of trade
secrets to such nonvoting representative, unless such representative executes a
non-disclosure agreement reasonably satisfactory to NVC, or (III) in the good
faith judgment of the Board involves a conflict of interest due to ZAIQ's or the
nonvoting representative's relationships with NVC or its affiliates. ZAIQ and
such representative agrees to abide by NVC's xxxxxxx xxxxxxx policies applicable
to directors generally, and acknowledges that conversion of the Series B
Preferred Stock may not be permissible while ZAIQ or such representative is in
possession of material, non-public information of NVC.
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6.2 MEMBER OF ADVISORY BOARD. For so long as ZAIQ shall continue to
hold at least one half of the 3192 shares of Series B Preferred Stock originally
issued to it pursuant to this Agreement (as such number may be adjusted in the
event of any stock split or other subdivision, reverse stock split or other
combination, stock dividend or other recapitalization of the Series B Preferred
Stock), ZAIQ shall be entitled to designate one individual reasonably acceptable
to NVC to be appointed by NVC to serve as an Advisory Director of NVC, which
Advisory Director shall have responsibilities determined as set forth in Section
3.5 of NVC's Bylaws.
7. RESTRICTIONS ON TRANSFER OF SECURITIES
7.1 NO TRANSFER IN VIOLATION OF THIS SECTION 7. Except as provided in
this Section 7, ZAIQ 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 Securities now or hereafter owned or held
by it. Any sale, assignment, transfer, pledge, hypothecation or other
encumbrance or disposition of Securities not made in conformance with this
Section 7 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 7 (a
"PERMITTED TRANSFEREE"), that such Permitted Transferee execute a written
document agreeing to be bound by the provisions regarding Transfers contained in
this Section 7, 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 Securities to NVC pursuant to the Designation, or
otherwise, shall be deemed to be in compliance with this Section 7 and shall not
be subject to the restrictions set forth in Section 7.4.
7.2 TRANSFERS PURSUANT TO REGISTRATION OR EXEMPTION. In addition to the
restrictions set forth in Sections 7.3 and 7.4 below, no Transfer of Securities
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.
7.3 RIGHT OF FIRST REFUSAL.
(a) TRANSFER NOTICE. If at any time ZAIQ proposes (x) to
transfer Securities to one or more third parties pursuant to an
understanding with such third parties or (y) to transfer Securities in
a public sale, then ZAIQ shall give NVC written notice of ZAIQ's
intention to make the Transfer (the "TRANSFER NOTICE"), which Transfer
Notice shall include (i) a description of the Securities to be
transferred ("OFFERED SHARES"), (ii) if such Transfer is described in
clause (x) above, the identity of the prospective transferee(s) and
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(iii) the consideration and the material terms and conditions upon
which the proposed Transfer is to be made. In connection with any
Transfer described in clause (x) above, the Transfer Notice shall
certify that ZAIQ has received a firm offer from the prospective
transferee(s) and in good faith believes a binding agreement for the
Transfer is obtainable on the terms set forth in the Transfer Notice,
and shall also include a copy of any written proposal, term sheet or
letter of intent or other agreement relating to the proposed Transfer.
The Transfer Notice shall be delivered to NVC at least fourteen (14)
days prior to the date ZAIQ proposes to consummate the proposed
Transfer.
(b) NVC'S OPTION. NVC shall have an option for a period of
fourteen (14) days from receipt of the Transfer Notice to elect to
purchase the Offered Shares (I) in the case of a proposed Transfer
described in clause (x) of paragraph (a) above, at the same price and
subject to the same material terms and conditions as described in the
Transfer Notice and (II) in the case of a proposed Transfer described
in clause (y) of paragraph (a) above, at the Fair Market Value Per
Share. NVC may exercise such purchase option and, thereby, purchase all
or a portion of the Offered Shares by notifying ZAIQ in writing before
expiration of such fourteen (14) day period as to the number of such
Offered Shares which it wishes to purchase. If NVC gives ZAIQ notice
that it desires to purchase such Offered Shares, then payment for the
Offered Shares shall be made in cash (subject to subsection 7.3(c)
below) against delivery of the Offered Shares to be purchased, at a
place agreed upon between the parties and at the time of the scheduled
closing therefor, unless the value of the purchase price has not been
determined pursuant to paragraph (c) below.
(c) VALUATION OF PROPERTY. Should any portion of the purchase
price specified in the Transfer Notice be payable in cash, evidences of
indebtedness or securities of any entity, NVC shall have the right to
pay such portion of the purchase price in cash, at the agreed to or
appraised value as set forth below. Should any portion of the purchase
price specified in the Transfer Notice be payable in property other
than cash, evidences of indebtedness or securities of any entity, NVC
shall have the right to pay such portion of the purchase price in the
form of cash or in the form of equivalent property of NVC (which shall
not include securities of NVC, unless NVC and ZAIQ otherwise agree)
equal in amount to the value of such property (with the concept of
equivalency to include, without limitation, equivalency of liquidity).
If ZAIQ and NVC cannot agree on the values of any evidences of
indebtedness, securities of any entity, or property offered as
consideration in the Transfer Notice or on the values of any NVC
property offered in lieu thereof, within ten (10) days after NVC's
receipt of the Transfer Notice, the valuations shall be made by an
appraiser of recognized standing selected by ZAIQ and NVC or, if they
cannot agree on an appraiser within ten (10) days after NVC's receipt
of the Transfer Notice, each shall select an appraiser of recognized
standing and the two appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such
values. The cost of such appraisal shall be shared equally by ZAIQ and
NVC. If the time for the closing of NVC's purchase has expired but for
the determination of the value of the purchase price offered by the
prospective transferee(s) and any property offered by NVC, then such
closing shall be held on or prior to the fifth business day after such
valuations shall have been made pursuant to this subsection.
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(d) ZAIQ RIGHT TO SELL To the extent that NVC has not
exercised its rights to purchase the Offered Shares within the time
periods specified in this Section, ZAIQ shall have a period of
forty-five (45) days from the expiration of such rights in which to
sell the Offered Shares upon terms and conditions (including the
purchase price) no more favorable than those specified in the Transfer
Notice, and, if applicable, to the proposed transferee(s) identified in
the Transfer Notice which transferee(s) prior to the completion of the
sale, transfer, or assignment shall have executed documents assuming
the obligations of ZAIQ under this Agreement with respect to the
transferred securities.
7.4 RESTRICTIONS ON NUMBER OF SECURITIES SOLD. ZAIQ agrees that it will
not at any time sell a number of shares of NVC Common Stock in any continuous
ninety-day period which would total a number of Securities in excess of one
percent 1% of the outstanding shares of Common Stock of NVC as of the date of
any such sale. For purposes of the foregoing calculation, a Transfer of shares
of Preferred Stock shall be deemed to constitute a Transfer of the number of
shares of Conversion Stock then issuable upon conversion of such shares of
Preferred Stock.
7.5 LIMITATIONS ON RESTRICTIONS. Notwithstanding the provisions of
Section 7.3 and 7.4 of this Agreement, ZAIQ may sell or otherwise assign, with
or without consideration, Securities to any company controlling, controlled by
or under common control with ZAIQ (an "Affiliate"), provided that such
Affiliate, prior to the completion of the sale, transfer, or assignment shall
have executed documents assuming the obligations of ZAIQ under this Agreement
with respect to the transferred Securities.
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 12 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.
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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 if (and then two business days after) it is sent by (a) confirmed
facsimile; (b) overnight delivery; or (c) registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
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
COPY TO:
-------
IF TO ZAIQ:
----------
Xxxxx Xxxxxxxx, Esq.
Zaiq Technologies, Inc. 000 Xxxxxx Xxxx
78 Dragon Court Sudbury, MA 01776
Xxxxxx, XX 00000 Facsimile: ________________
Attn: Xxxxxxx XxXxxxxx
Facsimile: (000) 000-0000
IF TO ANI: COPY TO:
---------- -------
Adaptive Networks, Inc. Xxxxx, Xxxxxx-Xxxxx & Xxxxxxxxx, P.C.
00 Xxxxx Xxxxxx Xxxxxxxxx Place, 0000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx Attn: Xxxxx X. Xxxxxx-Xxxxx
Facsimile: (000) 000-0000 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
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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 CHOICE OF LAW; SECTION HEADINGS. Whenever applicable, provisions of
this Agreement conferring rights or obligations upon ZAIQ as a holder of shares
of NVC and describing limitations on those rights or obligations shall be
governed by and construed or interpreted in accordance with the Utah Revised
Business Corporation Act, the regulations thereunder and interpretations
thereof. The remaining provisions of this Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California. The section headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
8.9 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.
8.10 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.
8.11 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.
8.12 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.
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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/ XXX XXXXXXXXXX, XX.
Xxx Xxxxxxxxxx, Xx.
President and Chief Executive Officer
ZAIQ TECHNOLOGIES, INC.
By: /S/ XXXXXXX. X. XX XXXXXX
Name: Xxxxxxx X. Xx Xxxxxx
Title: Chairman
ADAPTIVE NETWORKS, INC.
By: /S/ XXXXXXX XXXXX
Name: Xxxxxxx Xxxxx
Title: President
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