EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of May 26, 2005 (this
"Agreement"), is entered into by and between NEW VISUAL CORPORATION, a Utah
corporation with headquarters located at 000 XX 000xx Xxx., Xxxxx 000, Xxxxxxxx,
XX 00000 (the "Company"), and each individual or entity named on an executed
counterpart of the signature page hereto (each such signatory is referred to as
a "Buyer") (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer [each, an
"Other Buyer"] 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 Buyer are executing and delivering this
Agreement 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 Buyer wishes to lend to the Company, subject to and upon
the terms and conditions of this Agreement and acceptance of this Agreement by
the Company, the Purchase Price (as defined below), the repayment of which will
be represented by 7% Senior Secured Convertible Debentures Series 05-01 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:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE.
(i) Subject to the terms and conditions of this Agreement and the other
Transaction Agreements, the undersigned Buyer hereby agrees to loan to the
Company the principal amount set forth on the Buyer's signature page of this
Agreement (the "Purchase Price"), out of the aggregate amount being loaned by
all Buyers of US $3,500,000 (the "Aggregate Purchase Price"). The obligation to
repay the loan from the Buyer shall be evidenced by the Company's issuance of
one or more Convertible Debentures to the Buyer in such principal amount (the
Convertible Debentures issued to the Buyer, the "Debentures"). Each Debenture
(i) shall provide for a Conversion Price (as defined below), which price may be
adjusted from time to as provided in the Debenture, (ii) shall have the terms
and conditions of, and be substantially in the form attached hereto as, ANNEX I,
and (iii) shall be secured pursuant to the terms of the Security Interest
Agreement substantially in the form annexed hereto as ANNEX VIII (the "Security
Interest Agreement").(1)
__________________
(1) By signing this Agreement, the Buyer subject to acceptance by the Agent
named in the Security Interest Agreement, agrees to all of the terms and
conditions of, and becomes a party to, the Security Interest Agreement, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
(ii) The loan to be made by the Buyer and the issuance of the
Debentures and the Warrants (collectively, the "Purchased Securities") to the
Buyer are sometimes referred to herein and in the other Transaction Agreements
as the purchase and sale of the Debentures and the Warrants.
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.
"Buyer Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Buyer
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as
defined below).
"Certificates" means the (x) the original ink-signed Debentures and (y)
the original ink-signed Warrants, each duly executed by the Company and issued
in the name of the Buyer on the Closing Date.
"Closing Date" means the date of the closing of the purchase and sale
of the Purchased Securities.
"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.
"Company Principal's Agreement" has the meaning ascribed to in Section
4(h).
"Company's SEC Documents" means the Company's filings on the SEC's
XXXXX system which are listed on ANNEX VI annexed hereto, to the extent
available on XXXXX or otherwise provided to the Buyer as indicated on said Annex
VI.
"Conversion Certificates" means certificates representing the
Conversion Shares.
"Conversion Date" means the date a Holder submits a Notice of
Conversion, as provided in the Debentures.
"Conversion Price" means the lower of (i) the Variable Conversion Price
or (ii) the Lowest Fixed Conversion Price.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Debentures and/or in payment of accrued interest, as
contemplated in the Debentures.
"Converting Holder" means the Holder of Debentures who or which has
submitted a Notice of Conversion (as contemplated by the Debentures).
"Disclosure Letter" means a letter and any modifications thereof, the
latest of which is dated at least two Trading Days prior to the Closing Date,
from the Company to the Buyers; provided, however, that the Disclosure Letter
shall be arranged in sections corresponding to the identified Sections of this
Agreement, but the disclosure in any such section of the Disclosure Letter shall
qualify other provisions in this Agreement to the extent that it would be
readily apparent to an informed reader from a reading of such section of the
Disclosure Letter that it is also relevant to other provisions of this
Agreement.
"Effective Percentage" means, initially, thirty percent (30%), which
percentage is subject to increase as provided herein.
"Effective Date" means the date the Registration Statement covering the
Registrable Securities is declared effective by the SEC.
"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.
"Exercise Price" means the per share exercise price of the relevant
Warrant.
"Finder" means Advisor Associates, Inc.
"Holder" means the Person holding the relevant Securities at the
relevant time.
"Issue Date Conversion Share" means the number of shares of Common
Stock equal to (x) the Purchase Price paid by the Buyer, divided by (y) the VWAP
for the three (3) Trading Days ending on the Trading Day immediately preceding
the Closing Date.
"Last Audited Date" means October 31, 2004.
"Lowest Fixed Conversion Price" means the lowest New Transaction Price
(as defined below; as that amount may subsequently be adjusted as provided in
the Debentures or herein).
"Majority in Interest of the Holders" means one or more Holders whose
respective outstanding principal amounts of the Debentures held by each of them,
as of the relevant date, aggregate more than fifty percent (50%) of the
aggregate outstanding principal amounts of the outstanding Debentures held by
the Buyer and all Other Buyers on that date.
"Material Adverse Effect" means an event or combination of events,
which individually or in the aggregate, would reasonably be expected to (x)
adversely affect the legality, validity or enforceability of the Purchased
Securities or any of the Transaction Agreements, (y) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company and its subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
material obligations under any of the Transaction Agreements or the transactions
contemplated thereby.
"Maturity Date" shall have the meaning ascribed to it in the
Convertible Debentures.
"New Common Stock" means shares of Common Stock and/or securities
convertible into, and/or other rights exercisable for, Common Stock, which are
offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or lender
(howsoever denominated) in a New Transaction.
"New Transaction" means, unless consented to by a Majority in Interest
of the Buyers (which consent is in the sole discretion of the Holders and may be
withheld for any reason or for no reason whatsoever), the sale of New Common
Stock by or on behalf of the Company to a New Investor in a transaction offered
or consummated after the date hereof; provided, however, that it is specifically
understood that the term "New Transaction" (1) unless consented to otherwise by
a Majority in Interest of the Buyers (which consent is in the sole discretion of
the Holders and may be withheld for any reason or for no reason whatsoever),
includes, but is not limited to, a sale of Common Stock or of a security
convertible into Common Stock or an equity or credit line transaction, but (2)
does not include (a) the sale of the Purchased Securities to the Buyer and the
Other Buyers, (b) the issuance of Common Stock upon the exercise or conversion
of options, warrants or convertible securities outstanding on the date hereof,
or in respect of any other financing agreements as in effect on the date hereof
and identified in the Disclosure Letter (provided the same is not amended after
the date of the Disclosure Letter) or in the Company's SEC Documents (provided
the same is not amended after the date hereof), (c) the issuance of Common Stock
pursuant to an Employee Stock Option Plan (an "ESOP") of the Company, such ESOP
having been properly approved by the shareholders of the Company, (d) the
issuance of Common Stock pursuant to a non-employee director stock option plan
of the Company, (e) the issuance of Common Stock pursuant to a consultants'
stock option plan of the Company, as in effect on the Closing Date, (f) the
issuance of Common Stock upon the exercise of any options or warrants referred
to in the preceding clauses of this paragraph (provided the same is not amended
after the date hereof), (g) the issuance of stock options or warrants to
employees, officers or directors of the Company, provided that all such shares
are or are made subject to a Company Principal's Agreement simultaneously with
such issuance, or (h) to a Strategic Partner.
"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 include the "pink sheets."
"Registrable Securities" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form annexed hereto as ANNEX IV as executed by the Buyer and the Company
simultaneously with the execution of this Agreement.
"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 a Majority in Interest of
the Holders and reasonably acceptable to the Company.
"Securities" means the Purchased Securities and the Shares.
"Shares" means the shares of Common Stock representing any or all of
the Conversion Shares, the Warrant Shares and the Payment Shares (as defined in
the Registration Rights Agreement).
"State of Incorporation" means Utah.
"Strategic Partner" means a third party, whether or not affiliated with
the Company as of the date hereof, which party (i) is engaged in a business
which is the business in which the Company is engaged or a similar, related or
complementary business, and (ii) subsequently purchases equity securities of the
Company (or securities convertible into equity securities of the Company), where
such purchase is accompanied or followed by one or more of the following: the
licensing by the Company of all or any portion of its technology to such third
party, the licensing by such third party of all or any portion of its technology
to the Company, or any other coordination of all or a portion of their
respective business activities or operations by the Company and such third
party.
"Trading Day" means any day during which the Principal Trading Market
shall be open for business.
"Transaction Agreements" means this Agreement, the Debentures, the
Joint Escrow Instructions, the Registration Rights Agreement, the Disclosure
Letter, the Security Interest Agreement, and the Warrants, and includes all
ancillary documents referred to in those agreements.
"Transfer Agent" means, at any time, the transfer agent for the
Company's Common Stock.
"Variable Conversion Price" means (i) the VWAP for the five (5) Trading
Days ending on the Trading Day immediately before the Conversion Date,
multiplied by (ii) a percentage equal to (x) one hundred percent (100%), less
(y) the Effective Percentage.
"VWAP" means the volume weighted average price of the Common Stock on
the Principal Trading Market for the relevant Trading Day(s), as reported by the
Reporting Service.
"Warrants" means (i) the warrants referred to in Section 4 hereof and
(ii) the Additional Warrants (as defined below), if any.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer 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) Within three (3) Trading Days after the Escrow Agent notifies the
Company that the Escrow Agent has on deposit cleared funds from or on behalf of
one or more Buyers an aggregate amount equal to the Aggregate Purchase Price and
the Company shall have accepted the Buyer's subscription hereunder, but in no
event later than the Closing Date, the Company will deliver the Certificates to
the Escrow Agent. Such Certificates shall be held in escrow as provided in the
Joint Escrow Instructions.
(iii) By signing this Agreement, each of the Buyer 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 Buyer by Xxxxxxx & Prager LLP]
Re: New Visual 05 Transaction/[NAME OF BUYER]
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Buyer is purchasing the Securities for its own account for 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 Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act, (ii)
experienced in making investments of the kind described in this Agreement and
the other Transaction Agreements, (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 other Transaction
Agreements, 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 Buyer shall
be made pursuant to registration of the relevant Securities under the 1933 Act
or pursuant to an exemption from such registration.
d. The Buyer 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 Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
e. The Buyer 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
Purchased Securities which have been requested by the Buyer, including those set
forth on in any annex attached hereto. The Buyer 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 Buyer has also had the
opportunity to obtain and to review the Company's SEC Documents.
f. The Buyer understands that its investment in the Securities involves
a high degree of risk.
g. In connection with its purchase of the Securities, the Buyer 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 Buyer 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.
i. This Agreement and the other Transaction Agreements to which the
Buyer is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Buyer and are valid
and binding agreements of the Buyer 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 Buyer as of the date hereof and as of the Closing Date that, except as
otherwise provided in the Disclosure Letter 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 Purchased
Securities or the Shares. No other party 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.
(i) The authorized capital stock of the Company consists of (i) 500,000,000
shares of Common Stock, $.001 par value per share, of which approximately
95,735,615 are outstanding as of April 18, 2005, and (ii) 14,704,014 shares of
Preferred Stock, $.01 par value, none of which is outstanding as of the date
hereof.
(ii) There are no outstanding securities which are convertible into shares
of Common Stock, whether such conversion is currently exercisable or exercisable
only upon some future date or the occurrence of some event in the future. If any
such securities are listed on the Disclosure Letter but not in the Company's SEC
Documents, the number or amount of each such outstanding convertible security
and the conversion terms are set forth in said Disclosure Letter.
(iii) 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 on the Closing Date.
(iv) The Shares shall have been duly authorized by all necessary corporate
action on the part of the Company, and, when issued on conversion of, or in
payment of interest on, the Debentures or upon exercise of the Warrants, in each
case in accordance with their respective terms, will have been 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.
d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated hereby and
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 obligations 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 Buyer 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 April 1, 2004, the Company has 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 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 material tangible assets, or canceled any material debts
owed to the Company by any third party or material claims of the 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 Company's knowledge, there is no fact known
to the Company (other than facts known to the public generally or as disclosed
in the Company's SEC Documents) that has not been disclosed in writing to the
Buyer 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 non-governmental 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, 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;
(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. 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 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 October 1, 2004, 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, upon exercise of the Warrants or pursuant to the other terms of the
Transaction Agreements 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, the Warrant Shares upon exercise of the Warrants or the Payment
Shares as provided in the Registration Rights Agreement 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), every Notice of Exercise (as contemplated by
the Warrants), and every demand for Payment Shares (as contemplated by the
Registration Rights Agreement), 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 Buyer relating to this Agreement or the transactions
contemplated hereby. Buyer 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 Buyer, 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, the consideration contemplated by
the Joint Escrow Instructions.
q. DISCLOSURE. All information relating to or concerning the Company
set forth in the Transaction Agreements or in the Company's public filings with
the SEC is true and correct in all material respects and have not omitted to
state any material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial conditions, which under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company.
r. CONFIRMATION. The Company confirms that all statements of the
Company contained herein shall survive acceptance of this Agreement by the Buyer
for a period of two (2) years from the Closing Date. The Company agrees that,
if, to the knowledge of the Company, any events occur or circumstances exist
prior to the Closing Date 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 Buyer (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.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS.
(i) The Buyer 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 Agreement 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 Buyer 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 Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
(ii) In addition to the foregoing, and not in lieu thereof, the Buyer
agrees that, without the express written consent of the Company in each
instance, it will not transfer any of the Purchased Securities to any Person (x)
which is known to the Buyer to be in substantially the same business as the
Company or which the Company reasonably identifies as a competitor, or (y) which
is known to be a subsidiary or affiliate of such a Person.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that, until
such time as the relevant Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Agreement, and may be sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective registration statement, or until such Shares can otherwise be sold
without restriction, whichever is earlier, 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 filings it
deems necessary (based on the advice of Company counsel) in connection with the
sale of the Securities to the Buyer 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 Buyer promptly after such filing.
Reference is made to the Section titled "Publicity, Filings, Releases, Etc."
below.
d. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Purchased Securities and for at least twenty (20) Trading Days thereafter, 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 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 have
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 net proceeds received
hereunder (excluding amounts paid as contemplated by the Joint Escrow
Instructions) (i) first, for repayment of the promissory notes listed on ANNEX
IX attached hereto, and (ii) then, for general corporate purposes.
f. WARRANTS.
(i) The Company agrees to issue to the Buyer on the Closing Date two
(2) separate transferable warrants (each, a "Warrant" and, collectively, the
"Warrants"), designated as Class 2005-A ("Class A") and Class 2005-B ("Class B")
Warrants, respectively.
(ii) Each Class A Warrant shall be for the purchase the a number of
shares of Common Stock equal to one hundred percent (100%) of the Issue Date
Conversion Shares and each Class B Warrant shall be for the purchase the a
number of shares of Common Stock equal to fifty percent (50%) of the Issue Date
Conversion Shares, or a total of 150% of the Issue Date Conversion Shares for
all Warrants combined.
(iii) Each Warrant shall have an exercise price (each, an "Exercise
Price") as follows: (i) Class A - two hundred percent (200%) of the VWAP for the
three (3) Trading Days ending on the Trading Day immediately preceding the
Closing Date; and (ii) Class B - one hundred percent (100%) of the VWAP for the
three (3) Trading Days ending on the Trading Day immediately preceding the
Closing Date; each such Exercise Price will be subject to adjustment as provided
in the Warrant.
(iv) Each of the Warrants shall be exercisable commencing on the
Commencement Date specified in the Warrants. Each of the Warrants shall expire
at the close of business on its expiration date, which dates are as follows: (i)
Class A - the date which is the last day of the calendar month in which the
third annual anniversary of the Effective Date occurs; and (ii) Class B - the
date which is the last day of the calendar month in which the first annual
anniversary of the Effective Date occurs. Each Warrant shall have cashless
exercise rights as provided in the Warrant. Except as specified above, each
Warrant shall generally be in the form annexed hereto as ANNEX V.
(v) The Warrant Shares shall be subject to the provisions of the
Registration Rights Agreement.
g. CERTAIN AGREEMENTS.
(i) For purposes of this Agreement, the following terms shall have
meanings indicated:
(A) "New Transaction Period" means the period commencing on the Closing
Date and continuing through and including the Final Lock-up Date.
(B) "Final Lock-up Date" means the date on which the aggregate
principal amount of all outstanding Debentures is one-third or less
than the Aggregate Purchase Price.
(C) "New Transaction Price" means the Basic New Transaction Price (as
defined below) except that if the New Transaction Exercise Price is
lower than the Basic New Transaction Price, it means the New
Transaction Exercise Price.
(D) "Basic New Transaction Price" means, as may be applicable, on a per
share basis, the lower of (1) the lowest fixed purchase price of any
shares of the New Common Stock contemplated in the New Transaction, or
(2) the lowest conversion price or put or call price which would be
applicable under the terms of the New Transaction; in each such case,
whether such purchase or conversion price or put or call price is
stated or otherwise specified or is determined on the closing date of
the New Transaction by the application of a formula set in the
documents reflecting the New Transaction or could result from
adjustments or revisions contemplated in the relevant agreements for
the New Transaction and whenever such adjustment or revision would be
applicable (and if no minimum purchase price, conversion price or put
or call price, as the case may be, is set, it shall be assumed that
such minimum purchase price or conversion price is $.01); and provided,
further, that, if the securities issued in the New Transaction are
issued at a Face Value Discount (as defined below), the New Transaction
Price shall be adjusted to reflect such discount.(2)
(E) "Exercise Threshold Price" means the then applicable Exercise
Price.
(F) "New Transaction Exercise Price" means the lowest exercise price
per share applicable to the warrants, option or similar instrument
(howsoever denominated; collectively, "New Transaction Warrants")
included in such New Transaction, whether such exercise price is stated
or could result from adjustments or revisions contemplated in the
relevant agreements for the New Transaction and whenever such exercise
price would be applicable (and, if no minimum exercise price is set, it
shall be assumed that such minimum exercise price is $.01).
(G) The term "New Transaction Effective Percentage" means the
percentage equal to the excess, if any, of (x) one hundred percent
(100%) over (y) the percentage equal to (1) the New Transaction Price,
divided by (2) the VWAP for the five (5) Trading Days ending on the
Trading Day immediately before the closing date of the New Transaction.
(H) "Alternative Warrant Percentage" means (x) the number of shares
which are eligible to be purchased under the New Transaction Warrants,
divided by (y) the aggregate of the shares of New Common Stock issued
or issuable in such transaction (excluding the shares issuable on
exercise of the New Transaction Warrants).
(I) "Outstanding Warrant Shares" means, for each class of Warrants or
for any previously issued Additional Warrants (as defined below), the
then outstanding number of Warrant Shares which would then be issuable
upon the exercise in full of such class of Warrants (without regard to
any limitations which may then restrict the Holder's full exercise of
such Warrant at any time) or such Additional Warrants, if any, as in
effect immediately prior to the relevant New Transaction.
(J) "Original Warrant Shares" means, for each class of Warrants or for
any previously issued Additional Warrants, the original number of
Warrant Shares issuable on exercise of such class of Warrants on the
Closing Date or as Additional Warrants, as the case may be (in each
case without regard to any limitations which may then restrict the
Holder's full exercise of such Warrant at any time), but excluding any
Warrant canceled pursuant to the provisions of Section 4(o)(iii)
hereof.
(K) "Face Value Discount" means consideration less than, as the case
may be, (x) the number of shares being issued multiplied by the stated
purchase price, (y) the stated principal amount of a debenture, note or
similar instrument or (z) the stated value of the shares of convertible
stock.
(ii) The Company covenants and agrees that, if, during the New
Transaction Period, without the prior written consent of a Majority in Interest
of the Holders in each instance (which consent is in the sole discretion of the
Holders and may be withheld for any reason or for no reason whatsoever), the
Company enters into a New Transaction, then
______________
(2) By way of illustration, if convertible preferred shares having a stated
value of $1 million and a fixed conversion price of $0.05 were sold for a
purchase price of $800,000, the effective New Transaction Price would be $0.04.
(A) the New Transaction Price shall be the Lowest Fixed Conversion
Price for all Unconverted Debentures; provided, however, if there was a
previous New Transaction Price, the Lowest Fixed Conversion Price shall
be the lowest New Transaction Price(3); and
(B) if the New Transaction Effective Percentage is higher than the then
applicable Effective Percentage, the Effective Percentage shall be
adjusted for all Unconverted Debentures to such New Transaction
Effective Percentage; and
(C) if the New Transaction Exercise Price of any of the New Transaction
Warrants representing the first one hundred percent (100%) of the
Alternative Warrant Percentage(4) (the "First New Transaction
Warrants") is lower than the Exercise Threshold Price of the Class A
Warrants, then the Exercise Price of the then outstanding Class A
Warrants shall be adjusted to be equal to the New Transaction Exercise
Price of such First New Transaction Warrants; and
(D) if the New Transaction Exercise Price of any of the New Transaction
Warrants representing above the first one hundred percent (100%) of the
Alternative Warrant Percentage (the "Additional New Transaction
Warrants") is lower than the Exercise Threshold Price of the Class B
Warrants, then the Exercise Price of the then outstanding Class B
Warrants shall be adjusted to be equal to the New Transaction Exercise
Price of such Additional New Transaction Warrants; and.
(E) if the provisions applicable to the convertible preferred stock,
convertible debenture or similar instrument (howsoever denominated), if
any, of the New Transaction are more beneficial to the holder of such
instrument than the corresponding terms applicable to the Debentures or
in or to the Warrants, as the case may be, or if the terms which are
beneficial to the Company in the relevant Transaction Agreements are
not included in the corresponding instrument in the New Transaction,
then, unless waived by the Holder, the terms of the Transaction
Agreements applying to the then outstanding Debentures or the Warrants
or to the other Transaction Agreements, as the case may be, shall be
modified to reflect similar terms (based, if relevant, on the Closing
Date); provided, however, that nothing in this provision shall be read
to mean that the Purchased Securities shall be changed to any other
form of security;
(F) if the Alternative Warrant Percentage is greater than one hundred
fifty percent (150%), the Company shall issue to the Holder additional
warrants ("Additional Warrants") for the purchase of the number of
shares equal to the excess, if any, of
(1) (x) the Alternative Warrant Percentage,
multiplied by (y) (I) the Purchase Price, divided by (II) the
Conversion Price in effect on the Closing Date or on the
closing date of the New Transaction, whichever is lower,
multiplied by (y) a fraction, of which the numerator is the
Outstanding Warrant Shares for all classes of Warrants
(including previously issued Additional Warrants) and the
denominator is Original Warrant Shares for all relevant
classes of Warrants (including previously issued Additional
Warrants); over
(2) the aggregate Outstanding Warrant Shares for all
classes of Warrants Classes (including previously issued
Additional Warrants);
____________
(3) Any New Transaction Price shall be adjusted for subsequent events as
contemplated by the Debentures.
(4) If New Transaction Warrants have more than one exercise price, they shall be
ranked in priority order from lowest exercise price to highest exercise price.
two-thirds or such Additional Warrants shall be Class A Warrants and
the balance shall be Class B Warrants; and the terms of such Additional
Warrants (including, but not limited, to term of exercisability,
exercise price, manner and limitations, if any, on exercise,
registration rights) shall be the same as the shall be the same as the
applicable New Transaction Warrants issued in such New Transaction.
(iii) The Company covenants and agrees that, any of the foregoing
provisions of this Section 4(g) or any other provision of this Agreement or any
of the other Transaction Agreements to the contrary notwithstanding, without the
prior written consent of a Majority in Interest in each instance (which consent
is in the sole discretion of the Holders and may be withheld for any reason or
for no reason whatsoever),
(A) during the New Transaction Period, the Company will not enter into
any New Transaction where such transaction provides for a variable
conversion price or a variable exercise price;
(B) during the period commencing on the Closing Date and continuing
through the Effective Date, the Company will not enter into any New
Transaction whatsoever, and (C) during the period commencing on the
Effective Date and continuing through the date which is the sixth
monthly anniversary of the Effective Date, the Company will not enter
into any New Transaction where such New Transaction provides for any
registration rights (including, but not limited to demand or piggy-back
registration rights) to any one or more of the New Investors in such
New Transaction.
The Company acknowledges that each of the foregoing provisions is independent of
the others and that a breach of any of the foregoing provisions might result in
adjustments referred to in other provisions of this Section 4(g) and, in
addition (and not in lieu of such adjustments, if any) shall constitute an event
of default under the Debenture and the other Transaction Agreements. The Company
is aware that if such event of default occurs, a Holder of a Debenture will have
certain redemption rights contemplated by the Debenture.
(iv) Nothing in the foregoing provisions reflects either an obligation
on the part of any Buyer to participate in any New Transaction or a limitation
on any Buyer from participating in any New Transaction.
(v) Any of the foregoing provisions of this Section 4(g) or any other
provision of this Agreement or any of the other Transaction Agreements to the
contrary notwithstanding, the Company shall not engage in any offers, sales or
other transactions of its securities which would adversely affect the exemption
from registration available for the transactions contemplated by the Transaction
Agreements.
(vi) The Company agrees that, prior to the Effective Date, the Company
will not file any registration statement for the sale of shares by the Company
or any other shareholder other than the Registration Statement contemplated by
the Registration Rights Agreement.
h. COMPANY PRINCIPAL'S AGREEMENTS.
(i) The Company hereby agrees that, no later than the Closing Date, the
Company will cause each of its principal officers and all of its directors
(each, a "Company Principal"), and certain Persons who are related to or
controlled by such Company Principal, to execute and deliver an agreement (each,
a "Company Principal's Agreement") regarding limitations on the sale or other
disposition of the shares of the Company's Common Stock (or instruments
convertible into or exercisable for such shares) held by such Company Principal
or other Principal (as defined in the Company Principal's Agreement), except
that, notwithstanding its terms, the Company Principal's Agreement will be
deemed not apply to the sale of shares of Common Stock bought by a Principal in
open market transactions. Subject to the foregoing, each Company Principal's
Agreement shall be substantially in the form set forth in ANNEX VII attached
hereto.
(ii) In addition, under certain circumstances as contemplated by the
definition of "New Transaction" in this Agreement, certain future issuances by
the Company to persons identified in clause (g) of such definition are
conditioned on such shares being subject to a Company Principal's Agreement
being executed by the relevant party (who, whether or not included in the
definition of Company Principal in the preceding subparagraph (i), shall, for
purposes of this Section 4(h), be deemed to be a "Company Principal" identified
in such definition). The Company covenants that it will obtain such executed
Company Principal's Agreement from the relevant party no later than the issuance
of the relevant security to such party and that it will promptly provide a copy
thereof to the Escrow Agent on behalf of the Buyer and the Other Buyers.
h. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, a number of shares (the
"Reserved Amount") at least equal to one hundred twenty-five percent (125%) of
the sum of (x) the number of shares of Common Stock issuable as may be required,
at any time, to satisfy the conversion rights of the Holders of principal on all
outstanding Convertible Debentures plus interest thereon through the Maturity
Date, plus (y) the number of shares issuable upon exercise of all outstanding
Warrants held by all Holders (in each case, whether any of such outstanding
Convertible Debentures or Warrants were originally issued to the Holder, the
Buyer or to any other party and without regard to any restrictions which might
limit any Holder's right to convert any of the Debentures or to exercise any of
the Warrants held by any Holder). The Reserved Amount shall be determined on the
first Trading Day after the end of each calendar quarter and the number of
shares to be reserved shall be based on (q) all outstanding Convertible
Debentures and the Conversion Price as of such date and (r) unexercised Warrants
as of such date. The Reserved Amount determined on such date shall remain the
Reserved Amount until the next quarterly determination.
j. 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 Buyer 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). Notwithstanding,
but subject to, the foregoing provisions of this Section 4(j), the Company will,
after the Closing Date, promptly issue a press release and file a Current Report
on Form 8-K or, if appropriate, a quarterly or annual report on the appropriate
form, referring to the transactions contemplated by the Transaction Agreements.
k. INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under the Transaction Agreements are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any Other Buyer under any
one or more of the Transaction Agreements. The decision of each Buyer or Other
Buyer to purchase Purchased Securities pursuant to the Transaction Agreements
has been made by such Buyer independently of any Other Buyer. Nothing contained
herein or in any Transaction Agreement, and no action taken by any Buyer
pursuant thereto, shall be deemed to constitute any two or more Buyers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Agreements. Each Buyer acknowledges that no Other Buyer has acted as
agent for such Buyer in connection with making its investment hereunder and that
no Buyer will be acting as agent of such Other Buyer in connection with
monitoring its investment in the Purchased Securities or enforcing its rights
under the Transaction Agreements. Each Buyer shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Agreements, and it shall
not be necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Buyers
has been provided with the same Transaction Agreements for the purpose of
closing a transaction with multiple Buyers and not because it was required or
requested to do so by any Buyer.
l. EQUAL TREATMENT OF BUYERS. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of any of the Transaction Agreements unless the same consideration is also
offered to all of the parties to the Transaction Agreements.
m. INDEPENDENT INVESTMENT DECISION. No Buyer has agreed to act with any
Other Buyer for the purpose of acquiring, holding, voting or disposing of the
Securities purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Buyer is acting independently with respect to its investment in
the Securities. The decision of each Buyer to purchase Purchased Securities
pursuant to this Agreement has been made by such Buyer independently of any
other purchase and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or its subsidiaries which may have made or given by any
Other Buyer or by any agent or employee of any Other Buyer, and no Buyer or any
of its agents or employees shall have any liability to any Other Buyer (or any
other person) relating to or arising from any such information, materials,
statements or opinions.
n. NASD RULE 2710. The Company is aware that the Corporate Financing
Rule 2710 ("NASD Rule 2710") of the National Association of Securities Dealers
("NASD") is or may become applicable to the transactions contemplated by the
Transaction Agreements or to the sale by a Holder of any of the Securities. If
NASD Rule 2710 is so applicable, the Company shall, to the extent required by
such rule, cooperate with any broker or selling shareholder in respect of any
consents, authorizations or approvals that may be necessary for the NASD to
timely and expeditiously permit the shareholder to sell the securities.
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 the Transfer Agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Debentures or
exercise of the Warrants or in connection with the issuance of Payment Shares,
as may be applicable from time to time, 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 Buyer or its nominee and in
such denominations to be specified by the Holder in connection therewith. 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 Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act or upon request from a Holder while the Registration Statement is
effective, 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, the Warrant Shares or the Payment Shares, as may be
applicable, promptly instruct the Transfer Agent to issue one or more
certificates for Common Stock without legend in such name and in such
denominations as specified by the Buyer.
b. (i) The Company understands that a delay in the delivery of
Conversion Certificates, whether on conversion of the Debenture and/or in
payment of accrued interest, beyond the relevant Delivery Date (as defined in
the Debenture) could result in economic loss to the Holder. As compensation to
the Holder for such loss, the Company agrees to pay late payments to the Holder
for late issuance of the Conversion Certificates in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
Trading Days beyond two (2) Trading Days after the Delivery Date):(5)
____________
(5) Example: Notice of Conversion is delivered on Monday, May 1, 2006. The
Delivery Date would be Thursday, May 4 (the third Trading Day after such
delivery). If the certificate is delivered by Monday, May 8 (2 Trading Days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on May 9, that is 1 "Trading Day Late" in the table
below; if delivered on May 16, that is 6 "Trading Days Late" in the table.
[Balance of page intentionally left blank]
Late Payment For Each $10,000
of Principal or Interest
No. Business Days Late 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. Nothing herein shall limit the Holder's right to
pursue actual damages for the Company's failure to issue and deliver the
Conversion Certificates to the Holder within a reasonable time. Furthermore, in
addition to any other remedies which may be available to a Holder, in the event
that the Company fails for any reason to effect delivery of such Conversion
Certificates within two (2) Trading Days after the Delivery Date, the Converting
Holder will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company prior to the Converting
Holder's receipt of the relevant Conversion Certificates, whereupon the Company
and the Converting Holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion; PROVIDED, HOWEVER,
that any payments contemplated by this Section 5(b) of this Agreement which have
accrued through the date of such revocation notice shall remain due and owing to
the Converting Holder notwithstanding such revocation.
(ii) If, by the tenth Trading Day after the relevant Delivery Date, the
Company fails for any reason to deliver the Conversion Certificates, but at any
time after the Delivery Date, the 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 contemplated in other provisions of the Transaction Agreements,
including, but not limited to, the provisions of the immediately preceding
Section 5(b)(i)), the Buy-In Adjustment Amount (as defined below). The "Buy-In
Adjustment Amount" is the amount equal to the number of Sold Shares multiplied
by the excess, if any, of (x) the Holder's total purchase price per share
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds per share (after brokerage commissions, if any) received by the
Holder from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to the Holder in immediately available funds immediately upon
demand by the Converting Holder. By way of illustration and not in limitation of
the foregoing, if the 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 Holder
will be $1,000.
c. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion of the Debenture or exercise of a Warrant or at
the request of the Holder with respect to any Shares previously issued, provided
the Transfer Agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and the
Holder's 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 the Transfer Agent to electronically
transmit to the Holder the Common Stock issuable upon conversion of the
Debenture or exercise of the Warrant or in replacement of any Shares previously
issued by crediting the account of Holder's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission system.
d. The Company shall assume any fees or charges of the Transfer Agent
or Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement. Notwithstanding the foregoing, it shall be the Holder's
responsibility to obtain all needed formal requirements (specifically: medallion
guarantee and prospectus delivery compliance) in connection with any electronic
issuance of shares of Common Stock.
e. The Company will authorize the Transfer Agent to give information
relating to the Company directly to the Holder or the Holder's representatives
upon the request of the Buyer 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 Holder in connection with a Notice of Conversion or
a Notice of Exercise, or (ii) the aggregate number of outstanding shares of
Common Stock of all shareholders (as a group and not individually) as of a
current or other specified date. At the request of the Holder, the Company will
provide the Holder with a copy of the authorization so given to the Transfer
Agent.
6. CLOSING DATES.
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 the Purchased Securities
shall occur on the Closing Date at the offices of the Escrow Agent.
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 Buyer understands that the Company's obligation to sell the
Purchased Securities to the Buyer pursuant to this Agreement on the Closing Date
is conditioned upon:
a. The execution and delivery of this Agreement by the Buyer on or
before the Closing Date;
b. Delivery by the Buyer to the Escrow Agent by the Closing Date of
good funds as payment in full of an amount equal to the Purchase Price in
accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer 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.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Purchased Securities on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company on or before the Closing Date;
b. The delivery by the Company to the Escrow Agent of originals of each
of the Certificates in accordance with this Agreement;
c. Delivery by the Company to the Escrow Agent of written confirmation
that there are no changes to the Disclosure Letter, a copy of which shall be
attached to such confirmation;
d. Delivery by the Company to the Escrow Agent of the executed Company
Principal's Agreements from each Company Principal and the related Principals
(as defined in each Company Principal's Agreement) of such Company Principal;
e. On such Closing Date, each of the Transaction Agreements executed by
the Company on or before such date shall be in full force and effect and the
Company shall not be in default thereunder;
f. The accuracy in all material respects on such 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;
g. The Buyer shall have received an opinion of counsel for the Company,
dated such Closing Date, in form, scope and substance reasonably satisfactory to
the Buyer, substantially to the effect set forth in ANNEX III attached hereto;
h. 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
i. From and after the date hereof to and including such 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.
9. INDEMNIFICATION.
a. (i) The Company agrees to indemnify and hold harmless the Buyer and
its officers, directors, employees, and agents, and each Buyer 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 Buyer, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Buyer 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 Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer, 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 Buyer 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 Buyer from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Buyer, directly or indirectly, and reimburse such Buyer for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred.
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
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer 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 Buyer, any such Affiliate and any such
Person. The Company also agrees that neither the Buyer nor any such Affiliate,
partner, director, agent, employee or Buyer 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 to the extent such
liability is based on a material misrepresentation made by the Buyer in Section
2 hereof or Buyer's material failure to perform any material covenant or
agreement of Buyer contained in the Transaction Agreements or the gross
negligence, recklessness or bad faith of the Buyer or its officers, directors,
employees, and agents, or Buyer Control Person, as the case may be, in
performing its material obligations under the relevant Transaction 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 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, each in a
reasonable manner, 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 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 entitled 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 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 if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled 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 Buyer 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. SPECIFIC PERFORMANCE. The Company and the Buyer acknowledge and
agree that irreparable damage would occur in the event that any provision of
this Agreement or any of the other Transaction Agreements were not performed in
accordance with its specific terms or were otherwise breached. It is accordingly
agreed that the parties (including any Holder) shall be entitled to an
injunction or injunctions, without (except as specified below) the necessity to
post a bond, to prevent or cure breaches of the provisions of this Agreement or
such other Transaction Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity; provided, however that the
Company, upon receipt of a Notice of Conversion or a Notice of Exercise, may not
fail or refuse to deliver the stock certificates and the related legal opinions,
if any, based on any claim that the Holder has violated any provision hereof or
for any other reason, unless the Company has first posted a bond for one hundred
fifty percent (150%) of the principal amount and then obtained a court order
specifically directing it not to deliver said stock certificates to the Holder.
This provision is deemed incorporated by reference into each of the Transaction
Agreements as if set forth therein in full.
12. 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 Buyer for any
reasonable legal fees and disbursements incurred by the Buyer 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.
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.
13. 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: Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Aboudi & Xxxxxxxxxx
Attn: Xxxxx Xxxxxx, Esq.
Rechov Gavish 3, POB 2432
Kfar Xxxx Xxxxxxxxxx Xxxx 00000 Xxxxxx
Telephone No.: (000-000-0) 000-0000
Telecopier No.: (000-000-0) 000-0000
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
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer'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, for a period of two (2) years after the Closing Date and
shall inure to the benefit of the Buyer and the Company and their respective
successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, with respect to the Purchase Price
specified below, each the undersigned represents that the foregoing statements
made by it above are true and correct and that it has caused this Agreement to
be duly executed on its behalf (if an entity, by one of its officers thereunto
duly authorized) as of the date first above written.
PURCHASE PRICE: $________________________
BUYER:
________________________________ ___________________________________
Address Printed Name of Buyer
________________________________
By: _______________________________
Telecopier No. _________________ (Signature of Authorized Person)
___________________________________
________________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
COMPANY:
NEW VISUAL CORPORATION
By: __________________________
Title: __________________________
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V FORM OF WARRANT
ANNEX VI COMPANY'S SEC DOCUMENTS AVAILABLE ON XXXXX
ANNEX VII COMPANY PRINCIPAL'S AGREEMENT
ANNEX VIII SECURITY INTEREST AGREEMENT
ANNEX IX USE OF PROCEEDS
