EXHIBIT 10.62
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between NEW VISUAL
CORPORATION, a Utah corporation with headquarters located at 0000 Xxxxxx Xxxx,
Xxxxx 000, Xxx Xxxxx, XX 00000 (the "Company"), and each individual or entity
named on a signature page hereto (as used herein, each such signatory is
referred to as the "Lender" or a "Lender") (each agreement with a Lender being
deemed a separate and independent agreement between the Company and such Lender,
except that each Lender acknowledges and consents to the rights granted to each
other Lender [each, an "Other Lender"] under such agreement and the Transaction
Agreements, as defined below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Lender are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales to accredited investors
afforded, INTER ALIA, by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Section
4(2) of the 1933 Act; and
WHEREAS, the Lender wishes to lend funds to the Company,
subject to and upon the terms and conditions of this Agreement and acceptance of
this Agreement by the Company, the repayment of which will be represented by 7%
Convertible Debentures Series 03-1 of the Company (the "Convertible
Debentures"), which Convertible Debentures will be convertible into shares of
Common Stock, $.001 par value per share, of the Company (the "Common Stock"),
upon the terms and subject to the conditions of such Convertible Debentures,
together with the Warrants (as defined below) exercisable for the purchase of
shares of Common Stock;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE.
(i) Subject to the terms and conditions of this Agreement and
the other Transaction Agreements, the undersigned hereby agrees to loan to the
Company the principal amount set forth on the Lender's signature page of this
Agreement (the "Purchase Price"), out of the aggregate amount being loaned by
all Lenders of $300,000 (the "Aggregate Purchase Price"). The obligation to
repay the loan from the Lender shall be evidenced by the Company's issuance of
one or more Convertible Debentures to the Lender in such principal amount (the
Convertible Debentures issued to the Lender, the "Debentures"). Each Debenture
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(i) shall provide for a conversion price (the "Conversion Price"), which shall
initially be the Fixed Conversion Price (as defined below), which price may be
adjusted from time to as provided in the Debenture or in the other Transaction
Agreements, and (ii) shall have the terms and conditions of, and be
substantially in the form attached hereto as, ANNEX I. The loan to be made by
the Lender and the issuance of the Debentures and the Warrants to the Lender are
sometimes referred to herein and in the other Transaction Agreements as the
purchase and sale of the Debentures and Warrants.
(ii) The Purchase Price to be paid by the Lender shall be
equal to the face amount of the Debentures being purchased on the Closing Date
(as defined below) and shall be payable in United States Dollars.
b. CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred
to in the relevant provision, another Person who or which controls or is
controlled by or is under common control with such specified Person.
"Certificates" means the Debentures and the Warrants, each
duly executed by the Company and issued on the Closing Date in the name of the
Lender.
"Closing Date" means the date of the closing of the purchase
and sale of the Debentures and Warrants, as provided herein.
"Company Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as defined below).
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of the Debentures (including, if relevant, accrued interest on
the Debentures so converted).
"Escrow Agent" means the escrow agent identified in the Joint
Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions").
"Escrow Funds" means the Purchase Price delivered to the
Escrow Agent as contemplated by Sections 1(c) and (d) hereof.
"Escrow Property" means the Escrow Funds and the Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.
"Finder" means Clearview International Investments.
"Fixed Conversion Price" means $0.26 (as that amount may be
adjusted as provided in the Debenture or herein).
"Holder" means the Person holding the relevant Securities at
the relevant time.
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"Last Audited Date" means October 31, 2002.
"Lender Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Lender pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
"Material Adverse Effect" means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(w) adversely affect the legality, validity or enforceability of the Securities
or any of the Transaction Agreements, (x) have or result in a material adverse
effect on the results of operations, assets, prospects, or condition (financial
or otherwise) of the Company and its subsidiaries, taken as a whole, (y)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Agreements or the transactions
contemplated thereby, or (z) materially and adversely affect the value of the
rights granted to the Lender in the Transaction Agreements.
"Permitted Suspension Period" means up to two such suspension
periods during any consecutive 12-month period, each of which suspension period
shall neither (i) be for more than five (5) days nor (ii) begin less than ten
(10) business days after the last day of the preceding suspension (whether or
not such last day was during or after a Permitted Suspension Period).
"Person" means any living person or any entity, such as, but
not necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin
Board or such other market on which the Common Stock is principally traded at
the relevant time, but shall not included the "pink sheets."
"Registrable Securities" means the Conversion Shares
(including shares issued in payment of interest on the Debentures) and the
Warrant Shares.
"Registration Rights Provisions" means the piggy-back
registration rights contemplated by the terms of this Agreement and the other
Transaction Agreements.
"Registration Statement" means an effective registration
statement covering the Registrable Securities.
"Reporting Service" means Bloomberg LP or if that service is
not then reporting the relevant information regarding the Common Stock, a
comparable reporting service of national reputation selected by the Holders of
the Debentures and reasonably acceptable to the Company.
"Securities" means the Debentures, the Warrants and the
Shares.
"Shares" means the shares of Common Stock representing any or
all of the Conversion Shares and the Warrant Shares.
"State of Incorporation" means Utah.
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"Trading Day" means any day during which the Principal Trading
Market shall be open for business.
"Transaction Agreements" means the Securities Purchase
Agreement, the Debentures, the Joint Escrow Instructions, and the Warrants, and
includes all ancillary documents referred to in those agreements.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Lender shall pay the Purchase Price by delivering
immediately available good funds in United States Dollars to the Escrow Agent no
later than the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Lender to the Escrow Agent of the Purchase Price, the
Company shall deliver the Certificates, each duly executed on behalf of the
Company and issued in the name of the Lender, to the Escrow Agent.
(iii) By signing this Agreement, each of the Lender and the
Company, subject to acceptance by the Escrow Agent, agrees to all of the terms
and conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
d. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Lender by Xxxxxxx
& Prager LLP]
Re: New Visual Oct 03-1 Transaction
2. LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Lender represents and warrants to, and covenants and
agrees with, the Company as follows:
a. Without limiting Lender's right to sell the Securities
pursuant to an effective registration statement or otherwise in compliance with
the 1933 Act, the Lender is purchasing the Securities for its own account for
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investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.
b. The Lender is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Securities by the
Lender shall be made pursuant to registration of the relevant Securities under
the 1933 Act or pursuant to an exemption from registration.
d. The Lender understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Securities.
e. The Lender and its advisors, if any, have been furnished
with or have been given access to all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the Debentures and the Warrants which have been requested by the Lender,
including those set forth on in any annex attached hereto. The Lender and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management and have received complete and satisfactory answers
to any such inquiries. Without limiting the generality of the foregoing, the
Lender has also had the opportunity to obtain and to review the Company's
filings on XXXXX listed on ANNEX VI hereto (the documents listed on such Annex
VI, to the extent available on XXXXX or otherwise provided to the Lender as
indicated on said Annex VI, collectively, the "Company's SEC Documents").
f. The Lender understands that its investment in the
Securities involves a high degree of risk.
g. The Lender hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or the Finder or any of their respective officers, directors and
employees or any of their respective attorneys or agents or the Finder, except
as specifically set forth herein. The Finder is a third party beneficiary of
this provision.
h. The Lender understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
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i. This Agreement and the other Transaction Agreements to
which the Lender is a party, and the transactions contemplated thereby, have
been duly and validly authorized, executed and delivered on behalf of the Lender
and are valid and binding agreements of the Lender enforceable in accordance
with their respective terms, subject as to enforceability to general principles
of equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Lender as of the date hereof and as of the Closing Date that,
except as otherwise provided in ANNEX V hereto or in the Company's SEC
Documents:
a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Debentures, the Warrants or the Shares. No party other than a Lender or an Other
Lender has a currently exercisable right of first refusal which would be
applicable to any or all of the transactions contemplated by the Transaction
Agreements.
b. STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.
c. AUTHORIZED SHARES. The authorized capital stock of the
Company consists of (i) 100,000,000 shares of Common Stock, $.001 par value per
share, of which approximately 70,047,514 are outstanding as of the date hereof,
and (ii) 15,000,000 shares of Preferred Stock, $.01 par value, with following
series designated: (A) 200,000 shares of Series A Preferred Stock, of which none
are outstanding as of the date hereof, (B) 4,000 shares of Series B Preferred
Stock, of which 3,192 are outstanding as of the date hereof, (C) 57,894.201
shares of Series C Preferred Stock, of which 57,894.201 are outstanding as of
the date hereof, (D) 9,090.909 shares of Series D Preferred Stock, of which
9,090.909 are outstanding as of the date hereof, and (E) 25,000 shares of Series
E Preferred Stock, of which 25,000 are outstanding as of the date hereof. All
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the Shares. The Shares have been duly authorized and, when issued on
the conversion of, or as interest on, the Debentures or upon exercise of the
Warrants in accordance with its terms, will be duly and validly issued, fully
paid and non-assessable and will not subject the Holder thereof to personal
liability by reason of being such Holder.
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d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each
of the other Transaction Agreements, and the transactions contemplated thereby,
have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement is, and the
Debentures, the Warrants and each of the other Transaction Agreements, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and each of the other Transaction Agreements by the Company, the
issuance of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Debentures, the Warrants and
the other Transaction Agreements do not and will not conflict with or result in
a breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the certificate of incorporation or by-laws of the Company,
each as currently in effect, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound, including any listing
agreement for the Common Stock except as herein set forth, or (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.
f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the shareholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the
Lender as contemplated by this Agreement, except such authorizations, approvals
and consents that have been obtained.
g. FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since October 1, 2002, the Company has timely filed all
requisite forms, reports and exhibits thereto required to be filed by the
Company with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date,
there has been no material adverse change and no Material Adverse Effect, except
as disclosed in the Company's SEC Documents. Since the Last Audited Date, except
as provided in the Company's SEC Documents, the Company has not (i) incurred or
become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past
practices; (ii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other tangible assets, or
canceled any debts owed to the Company by any third party or claims of the
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Company against any third party, except in the ordinary course of business
consistent with past practices; (v) waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of existing business; (vi) made any increases in employee compensation,
except in the ordinary course of business consistent with past practices; or
(vii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment.
i. FULL DISCLOSURE. To the best of the Company's knowledge,
there is no fact known to the Company (other than general economic conditions
known to the public generally or as disclosed in the Company's SEC Documents)
that has not been disclosed in writing to the Lender that would reasonably be
expected to have or result in a Material Adverse Effect.
j. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company before or by any governmental authority or nongovernmental
department, commission, board, bureau, agency or instrumentality or any other
person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
any of the Transaction Agreements. The Company is not aware of any valid basis
for any such claim that (either individually or in the aggregate with all other
such events and circumstances) could reasonably be expected to have a Material
Adverse Effect. There are no outstanding or unsatisfied judgments, orders,
decrees, writs, injunctions or stipulations to which the Company is a party or
by which it or any of its properties is bound, that involve the transaction
contemplated herein or that, alone or in the aggregate, could reasonably be
expect to have a Material Adverse Effect.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
Section 3(e) hereof, (i) neither the Company nor any of its subsidiaries is in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any material indenture, mortgage, deed of
trust or other material agreement to which it is a party or by which its
property is bound, and (ii) no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company or its subsidiary is a
party, and no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (or its equivalent term) (as so defined
in such agreement), has occurred and is continuing, which would have a Material
Adverse Effect.
l. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR
EVENTS. To the Company's knowledge, none of the following has occurred during
the past five (5) years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property
of such Company Control Person, or any partnership in which he was a
general partner at or within two years before the time of such filing,
or any corporation or business association of which he was an executive
officer at or within two years before the time of such filing;
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(2) Such Company Control Person was convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining
him from, or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, any other Person regulated by the
Commodity Futures Trading Commission ("CFTC") or engaging in or
continuing any conduct or practice in connection with such
activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such Company Control Person to
engage in any activity described in paragraph (3) of this item, or to
be associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the
Company's knowledge, the Company has no liabilities or obligations other than
those disclosed in the Transaction Agreements or the Company's SEC Documents or
those incurred in the ordinary course of the Company's business since the Last
Audited Date, or which individually or in the aggregate, do not or would not
have a Material Adverse Effect. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
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reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
n. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since April 1, 2003, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
o. DILUTION. The number of shares issuable on conversion of
the Debentures and upon exercise of the Warrants may have a dilutive effect on
the ownership interests of the other shareholders (and Persons having the right
to become shareholders) of the Company. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have such a potential dilutive effect. The
board of directors of the Company has concluded, in its good faith business
judgment, that such issuance is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Conversion
Shares upon conversion of the Debentures and the Warrant Shares upon exercise of
the Warrants is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company, and the Company will honor such obligations, including honoring
every Notice of Conversion (as contemplated by the Debentures) and every Notice
of Exercise (as contemplated by the Warrants), unless the Company is subject to
an injunction (which injunction was not sought by the Company) prohibiting the
Company from doing so.
p. FEES TO BROKERS, FINDERS AND OTHERS. Except for payment of
the fees to the Finder's Compensation (as defined below) to the Finder, payment
of which is the sole responsibility of the Company, the Company has taken no
action which would give rise to any claim by any Person for brokerage
commission, finder's fees or similar payments by Lender relating to this
Agreement or the transactions contemplated hereby. Lender shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of Lender, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred. The term "Finder's Compensation" means, in
connection with the consummation of the transactions contemplated by this
Agreement, a cash fee and expense allowance in the amount contemplated by the
Joint Escrow Instructions.
q. CONFIRMATION. The Company confirms that all statements of
the Company contained herein shall survive acceptance of this Agreement by the
Lender. The Company agrees that, if any events occur or circumstances exist
prior to the Closing Date or the release of the Purchase Price to the Company
which would make any of the Company's representations, warranties, agreements or
other information set forth herein materially untrue or materially inaccurate as
of such date, the Company shall immediately notify the Lender (directly or
through its counsel, if any) and the Escrow Agent in writing prior to such date
of such fact, specifying which representation, warranty or covenant is affected
and the reasons therefor.
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4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Lender acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Provisions or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Lender shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Provisions) under the 1933 Act
or to comply with the terms and conditions of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Lender acknowledges and agrees
that, until such time as the relevant Shares have been registered under the 1933
Act, as contemplated by the Registration Rights Provisions and sold in
accordance with an effective Registration Statement or otherwise in accordance
with another effective registration statement, the certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
c. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Securities to the Lender
under any United States laws and regulations applicable to the Company, or by
any domestic securities exchange or trading market, and to provide a copy
thereof to the Lender promptly after such filing.
d. REPORTING STATUS. So long as the Lender beneficially owns
any of the Securities, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take all
reasonable action under its control to ensure that adequate current public
information with respect to the Company, as required in accordance with Rule
144(c)(2) of the 1933 Act, is publicly available, and shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination. The
Company will take all reasonable action under its control to maintain the
continued listing and quotation and trading of its Common Stock (including,
without limitation, all Registrable Securities) on the Principal Trading Market
11
or a listing on the NASDAQ/Small Cap or National Markets and, to the extent
applicable to it, will comply in all material respects with the Company's
reporting, filing and other obligations under the by-laws or rules of the
Principal Trading Market and/or the National Association of Securities Dealers,
Inc., as the case may be, applicable to it at least through the date which is
sixty (60) days after the later of the date on which (x) all of the Debentures
have been converted or been paid in full or (y) all of the Warrants have been
exercised or have expired.
e. USE OF PROCEEDS. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal and escrow fees or
Finder's Compensation in connection with the sale of the Securities) for general
corporate purposes.
f. WARRANTS. The Company agrees to issue to the Lender on the
Closing Date transferable warrants (the "Warrants"), with cashless exercise
rights (subject to certain conditions provided in the Warrants) for the purchase
of two (2) shares of Common Stock for each $1 of Purchase Price. The exercise
price of the Warrants will be equal to $0.15, subject to adjustment as provided
in the Warrant. The Warrants will expire on the last day of the calendar month
in which the third anniversary of the Closing Date occurs. Each of the Warrants
shall be in the form annexed hereto as ANNEX IV, and shall have Registration
Rights Provisions.
g. PIGGY-BACK RIGHTS; RULE 144.
(i) The Holder shall have piggy-back registration rights with
respect to the Registrable Securities (which term, for all purposes of this
Section 4(g), includes shares issuable on the subsequent conversion of the
Debentures or the exercise of the Warrants) subject to the conditions set forth
below. If the Company participates (whether voluntarily or by reason of an
obligation to a third party) in the registration of any shares of the Company's
stock (other than a registration on Form S-8 or on Form S-4), the Company shall
give written notice thereof to the Holder and the Holder shall have the right,
exercisable within ten (10) business days after receipt of such notice, to
demand inclusion of all or a portion of the Holder's Registrable Securities in
such registration statement. If the Holder exercises such election, the
Registrable Securities so designated shall be included in the registration
statement (without any holdbacks) at no cost or expense to the Holder (other
than any commissions, if any, relating to the sale of Holder's shares). Each
Holder's rights under this Section 4(g)(i) shall expire at such time as such
Holder can sell all of such Holder's remaining Registrable Securities under Rule
144 without volume or other restrictions or limit.
(ii) With a view to making available to the Holder the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit Investor to sell
securities of the Company to the public without registration (collectively,
"Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
12
(c) furnish to the Holder so long as such party owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) if not available on the SEC's XXXXX
system, a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Holder to sell such
securities pursuant to Rule 144 without registration; and
(d) at the request of any Holder then holding Registrable
Securities, give its transfer agent (the "Transfer Agent") instructions
(supported by an opinion of Company counsel, if required or requested by the
Transfer Agent) to the effect that, upon the Transfer Agent's receipt from such
Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the provisions of
Rule 144) for the Shares which the Holder proposes to sell (the "Securities
Being Sold") is not less than (1) year and (B) as to such other matters as
may be appropriate in accordance with Rule 144 under the Securities Act,
and
(ii) an opinion of counsel acceptable to the Company (for which purposes it
is agreed that Xxxxxxx & Prager LLP shall be deemed acceptable if not given
by Company counsel) that, based on the Rule 144 Certificate, Securities
Being Sold may be sold pursuant to the provisions of Rule 144, even in the
absence of an effective registration statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the relevant
Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Lender). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.
(iii) Notwithstanding the foregoing, if at any time or from
time to time after the date of effectiveness of the registration statement, the
Company notifies the Holder in writing of the existence of a Potential Material
Event (as defined below), the Holder shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until the Holder receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; PROVIDED, HOWEVER,
that the Company may not so suspend such right other than during a Permitted
Suspension Period. The term "Potential Material Event" means any of the
following: (i) the possession by the Company of material information not ripe
for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (ii) any material
13
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
h. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, a number of
shares (the "Minimum Available Shares") at least equal to (x) one hundred
percent (100%) of the number of shares of Common Stock issuable as may be
required to satisfy the conversion rights of the Holders of principal and
interest on all outstanding Convertible Debentures plus (y) one hundred percent
(100%) of the number of shares issuable upon exercise of all outstanding
Warrants held by all Holders (in each case, whether such Convertible Debentures
or Warrants were originally issued to the Holder, the Lender or to any other
party). For the purposes of such calculations, the Company should assume that
all such Convertible Debentures were then convertible and all Warrants were then
exercisable without regard to any restrictions which might limit any Holder's
right to convert any of the Convertible Debentures or to exercise any of the
Warrants held by any Holder.
i. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties
agrees that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects. In furtherance of the foregoing, the
Company will provide to the Lender drafts of the applicable text of any filing
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least three
(3) business days before such filing will be made) and will not include in such
filing any statement or statements or other material to which the other party
reasonably objects. Notwithstanding the foregoing, each of the parties hereby
consents to the inclusion of the text of the Transaction Agreements in filings
made with the SEC (but any descriptive text accompanying or part of such filing
shall be subject to the other provisions of this paragraph.)
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Lender or its nominee and in such denominations to be specified
by the Holder in connection with each conversion of the Debentures. Except as so
provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Agreements. Nothing in this Section shall affect in any way
the Lender's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Lender provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Lender of any of the Securities in accordance with clause (1)(B)
14
of Section 4(a) of this Agreement is not required under the 1933 Act, the
Company shall (except as provided in clause (2) of Section 4(a) of this
Agreement) permit the transfer of the Securities and, in the case of the
Conversion Shares or of the Warrant Shares, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without legend
in such name and in such denominations as specified by the Lender.
b. Subject to the provisions of this Agreement, the Company
will permit the Lender to exercise its right to convert the Debentures in the
manner contemplated by the Debentures and to exercise the Warrants in the manner
contemplated by the Warrants.
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date (as defined in the Debentures)
could result in economic loss to the Lender. As compensation to the Lender for
such loss, the Company agrees to pay late payments to the Lender for late
issuance of Shares upon conversion in accordance with the following schedule
(where "No. Business Days Late" refers to the number of business days which is
beyond two (2) business days after the Delivery Date):(1)
Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business Day
Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender's exclusive remedy (other than the
following provisions of this Section 5(c) and the provisions of the immediately
following Section 5(d) of this Agreement) for such delay. Furthermore, in
addition to any other remedies which may be available to the Lender, in the
------------
(1) Example: Notice of Conversion is delivered on Monday, December 1, 2003. The
Delivery Date would be Thursday, December 4 (the third business day after such
delivery). If the certificate is delivered by Monday December 8 (2 business days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on December 9, that is 1 "Business Day Late" in the
table below; if delivered on December 16, that 6 "Business Days Late" in the
table.
15
event that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the Delivery Date, the Lender will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company, whereupon the Company and the Lender shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion; provided, however, that an amount equal to any payments
contemplated by this Section 5(c) which have accrued through the date of such
revocation notice shall remain due and owing to the Converting Holder
notwithstanding such revocation.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of a Debenture and
after such Delivery Date, the Holder of the Debentures being converted (a
"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder (the
"Sold Shares"), which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder
shall have the right, to require the Company to pay to the Converting Holder, in
addition to and not in lieu of the amounts due under Section 5(c) hereof (but in
addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu of any such other amounts), the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Holder and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
f. The holder of any Debentures shall be entitled to exercise
its conversion privilege with respect to the Debentures notwithstanding the
commencement of any case under 11 U.S.C. ss.101 ET SEQ. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Debentures.
16
The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11 U.S.C.
ss.362.
g. The Company will authorize its transfer agent to give
information relating to the Company directly to the Lender or the Lender's
representatives upon the request of the Lender or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Lender in connection with a Notice of
Conversion or a Notice of Exercise, or (ii) the number of outstanding shares of
Common Stock of all shareholders as of a current or other specified date. At the
request of the Lender, the Company will provide the Lender with a copy of the
authorization so given to the transfer agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. The closing of the purchase and issuance of Debentures and
Warrants shall occur on the Closing Date at the offices of the Escrow Agent and
shall take place no later than 3:00 P.M., New York time, on such day or such
other time as is mutually agreed upon by the Company and the Finder.
c. Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Funds to the Company
and to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Lender understands that the Company's obligation to sell
the Debentures and Warrants to the Lender pursuant to this Agreement on the
Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the Lender;
b. Delivery by the Lender to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Securities in
accordance with this Agreement;
c. The accuracy on such Closing Date of the representations
and warranties of the Lender contained in this Agreement, each as if made on
such date, and the performance by the Lender on or before such date of all
covenants and agreements of the Lender required to be performed on or before
such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
17
8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.
The Company understands that the Lender's obligation to
purchase the Debentures and Warrants on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;
b. Delivery by the Company to the Escrow Agent of the
Certificates in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
d. On the Closing Date, the Lender shall have received an
opinion of counsel for the Company, dated the Closing Date, in form, scope and
substance reasonably satisfactory to the Lender, substantially to the effect set
forth in ANNEX III attached hereto;
e. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
f. From and after the date hereof to and including the Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii) no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market
that, in the reasonable judgment of the Lender, makes it impracticable or
inadvisable to purchase the Securities.
9. INDEMNIFICATION.
a. (i) The Company agrees to indemnify and hold harmless the
Lender and its officers, directors, employees, and agents, and each Lender
Control Person from and against any losses, claims, damages, liabilities or
expenses incurred (collectively, "Damages"), joint or several, and any action in
respect thereof to which the Lender, its partners, Affiliates, officers,
directors, employees, and duly authorized agents, and any such Lender Control
Person becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Lender's failure to perform any covenant or agreement contained in this
Agreement or the Lender's or its officer's, director's, employee's, agent's or
Lender Control Person's gross negligence, recklessness or bad faith in
performing its obligations under this Agreement.
18
(ii) The Company hereby agrees that, if the Lender,
other than by reason of its gross negligence or willful misconduct or by reason
of its trading of the Common Stock in a manner that is illegal under the federal
securities laws (in each case, as determined by a non-appealable judgment to
such effect), (x) becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of the Company, in connection with or
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or if the Lender is impleaded in
any such action, proceeding or investigation by any Person, or (y) becomes
involved in any capacity in any action, proceeding or investigation brought by
the SEC, any self-regulatory organization or other body having jurisdiction,
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or (z) is impleaded in any such action, proceeding or
investigation by any Person, then in any such case, the Company shall indemnify,
defend and hold harmless the Lender from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Lender, directly or indirectly, and reimburse such Lender for
its reasonable legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith, as such expenses are
incurred. In addition, the Company will reimburse the Lender for reasonable
internal and overhead costs for the time of any officers or employees of the
Lender devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Agreement or the other Transaction Agreements. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Lender who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Lender Control Persons (if any), as
the case may be, of the Lender and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Lender, any such Affiliate and any such
Person. The Company also agrees that neither the Lender nor any such Affiliate,
partner, director, agent, employee or Lender Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except as may be expressly and
specifically provided in or contemplated by this Agreement.
b. All claims for indemnification by any Indemnified Party (as
defined below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of
which any Person claiming indemnification under any provision of this Section
(an "Indemnified Party") might seek indemnity under paragraph (a) of this
Section is asserted against or sought to be collected from such Indemnified
Party by a Person other than a party hereto or an Affiliate thereof (a "Third
Party Claim"), the Indemnified Party shall deliver a written notification,
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of this Section
against any Person (the "Indemnifying Party"), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
19
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by
such failure of the Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under this Section and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have the
right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party
(but only with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which
the Indemnified Party shall not be indemnified in full pursuant to
paragraph (a) of this Section). The Indemnifying Party shall have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at
the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this subparagraph (x), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate protect its interests; and provided
further, that if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in contesting any Third
Party Claim that the Indemnifying Party elects to contest. The Indemnified
Party may participate in, but not control, any defense or settlement of any
Third Party Claim controlled by the Indemnifying Party pursuant to this
subparagraph (x), and except as provided in the preceding sentence, the
Indemnified Party shall bear its own costs and expenses with respect to
such participation. Notwithstanding the foregoing, the Indemnified Party
may take over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to indemnity under
paragraph (a) of this Section with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third
Party Claim pursuant to paragraph (b) of this Section, or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the Indemnified Party
20
in a reasonable manner and in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). The Indemnified
Party will have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that if requested by
the Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this subparagraph (y), if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such
dispute is resolved in favor of the Indemnifying Party in the manner
provided in subparagraph(z) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this subparagraph (y) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified
Party pursuant to this subparagraph (y), and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its liability or the amount of its liability to the Indemnified
Party with respect to the Third Party Claim under paragraph (a) of this
Section or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third Party Claim,
the amount of Damages specified in the Claim Notice shall be conclusively
deemed a liability of the Indemnifying Party under paragraph (a) of this
Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in
good faith to negotiate a resolution of such dispute; provided, however,
that it the dispute is not resolved within thirty (30) days after the Claim
Notice, the Indemnifying Party shall be enlisted to institute such legal
action as it deems appropriate.
(ii) In the event any Indemnified Party should have a
claim under paragraph (a) of this Section against the Indemnifying Party that
does not involve a Third Party Claim, the Indemnified Party shall deliver a
written notification of a claim for indemnity under paragraph (a) of this
Section specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "Indemnity Notice") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
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Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under paragraph (a) of this Section and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that it the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
enlisted to institute such legal action as it deems appropriate.
c. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Lender hereby waive
a trial by jury in any action, proceeding or counterclaim brought by either of
the Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on FORUM
NON CONVENIENS, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Lender for
any reasonable legal fees and disbursements incurred by the Lender in
enforcement of or protection of any of its rights under any of the Transaction
Agreements.
b. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
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g. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
12. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(b) the seventh business day after deposit, postage prepaid, in
the United States Postal Service by registered or certified mail,
or
(c) the third business day after mailing by domestic or
international express courier, with delivery costs and fees
prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxx & XxXxxxxx
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
2300 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
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BUYER: At the address set forth on the signature page of this
Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
and the Lender's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Certificates
and the payment of the Purchase Price, and shall inure to the benefit of the
Lender and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the Lender (if an entity, by one of its officers thereunto duly authorized) as
of the date set forth below.
PURCHASE PRICE: $300,000.00
SIGNATURES FOR LENDERS
IN WITNESS WHEREOF, the undersigned represents that the
foregoing statements are true and correct and that it has caused this Securities
Purchase Agreement to be duly executed on its behalf this 31 day of October,
2003.
00 Xxxxx Xx. Xxxxxx Management
Har Nof, Jerusalem, Israel Printed Name of Lender
By: /s/ Xxxxxx Breitkope
Telecopier No. 0119722 65201063 (Signature of Authorized Person)
Xxxxxx Breitkope, President
______________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
NEW VISUAL CORPORATION
By: /s/ Xxx Xxxxxxxxxx
Title: Senior Vice President
Date: October 31, 2003
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