Exhibit 10.48
Execution Copy
THE SECURITIES DESCRIBED IN THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
CERTAIN STATES, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN MAKING AN
INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY
AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated November 26, 1996, is
entered into by and between VideoLan Technologies, Inc., a Delaware corporation
(the "Company"), and RIC Investment Fund Ltd. (the "Buyer").
The Company has offered for sale pursuant to applicable provisions of Sections
4(2) and 4(6), and Regulation D under the United States Securities Act of 1933,
as amended (the "Act") up to 7,500 shares of Series 1996A Convertible Preferred
Stock (the "Preferred Stock" or "Securities"), convertible into common stock of
the Company ("Common Stock"). The Buyer has been offered 150 shares of the
Preferred Stock, at $1,000 per each share. The terms on which the Preferred
Stock may be converted into shares of Common Stock (such shares of Common Stock
underlying the Preferred Stock being referred to herein as "Shares")and the
other terms of the Preferred Stock are set forth in the Certificate of
Designation in the form attached hereto as Exhibit "A" (the "Certificate of
Designation"), the terms of which are hereby incorporated by reference.
Capitalized terms used herein and not defined herein shall have the meanings
given to them in Regulation D as the same may be amended from time to time.
The parties hereto agree as follows:
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1. Purchase and Sale of Securities Upon the basis of the representations and
warranties, and subject to the terms and conditions, set forth in this
Agreement, the Company covenants and agrees to sell to the Buyer on the Closing
Date (as hereinafter defined) 150 shares of the Preferred Stock at a price of
$1,000 per share, and upon the basis of the representations and warranties, and
subject to the terms and conditions, set forth in this Agreement, the Buyer
covenants and agrees to purchase from the Company, on the Closing Date 150
shares of the Preferred Stock of the Company at $1,000 per share.
2. Closing Instructions to Escrow Agent
(a) The closing of the purchase and sale of the Preferred Stock pursuant to
Section 1 hereof shall take place on or before ____________, 199__ (the "Closing
Date") after the Company has delivered to the offices of First Bermuda
Securities Limited (the "Escrow Agent") located at Xxxxxxx Xxxxx, 0xx Xxxxx,
33/35 Xxxx Street, Xxxxxxxx, XX 12 Bermuda certificates representing 150 shares
of Preferred Stock registered in the names provided by the Buyer (representing
the number of shares of Preferred Stock to be purchased by the Buyer hereunder).
(b) The Company and the Buyer agree that they shall instruct the Escrow
Agent as provided in Exhibit "B" and as follows:
(i) On the Closing Date, for each share of Preferred Stock subscribed
for and delivered to the Escrow Agent pursuant to paragraph 2(a) above, the
Escrow Agent shall, upon confirmation in the form of a Federal funds wire number
that First Bermuda Securities Limited ("First Bermuda") has wired payment of the
Purchase Price for the Preferred Stock (less any fees Company has authorized
Escrow Agent to deduct) in immediately available funds to the Company's account
as provided in the escrow instructions attached as Exhibit "B", release the
certificates of Preferred Stock described in paragraph 2(a) above. The Escrow
Agent shall return to the Company any shares of Preferred Stock that the Buyer
does not purchase on the Closing Date.
(ii) The Escrow Agent will make delivery of the number of shares of
Preferred Stock set forth in clause 2(a) above in accordance with the
instructions of the Buyer subject to customary settlement procedures upon
confirmation of the wiring of funds to the Company as described in clause
2(b)(i) above.
3. Representations and Warranties of the Buyer: The Buyer understands and
represents and warrants to, and agrees with the Company that:
(a) The Buyer understands that no federal or state agency has passed
on, or made any recommendation or endorsement of the Securities.
(b) The Buyer acknowledges that, in making the decision to purchase
the Securities, it has relied solely upon independent investigations made by it
and not upon any representations made by the Company with respect to the Company
or the Securities, except for the representations and warranties in this
Agreement, the Certificate of Designation, the Registration Rights Agreement and
the Officers Certificate, except that the Buyer has received, reviewed and
relied upon the Opinion of Counsel, the Company Memorandum dated October 1, 1996
(the "Company Memorandum") and copies of the report on Form 10-QSB for the
quarter ended June 30, 1996, the report Form 10-KSB for the year ended December
31, 1995, filed by the Company pursuant to the
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Securities Exchange Act of 1934, as amended, and all other filings, which
together with any filings by Company after the date hereof and prior the
Closing, are defined as "Exchange Act Reports".
(c) The Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from or non-application of the
registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Buyer to acquire the Securities.
(d) The Buyer is aware that the Securities and the Shares issuable
upon exercise of conversion rights have not been and will not be registered
under the Act (except as may be required under the Registration Rights
Agreement) and may only be offered or sold pursuant to registration under the
Act or an available exemption therefrom.
The Buyer has the full right, power and authority to enter into this
Agreement and to carry out and consummate the transactions contemplated herein.
This Agreement constitutes the legal, valid and binding obligation of the Buyer.
The Buyer is an "Accredited Investor" as that term is defined in
Section 501(a) of Regulation D promulgated under the Act, because the
undersigned meets one or more of the following requirements: PLEASE CHECK AS
MANY BOXES THAT APPLY:
_ He or she is a natural person whose individual net worth, or joint net
worth with such investor's spouse, exceeds $1,000,000;
_ He or she is a natural person who had individual income in excess of
$200,000 in each of the two most recent years, or (except in California) joint
income with such investor's spouse in excess of $300,000 in each of those years
and reasonably expects to reach the same income level in the current year;
_ It is an organization described in ss. 501(c)(3) of the Internal
Revenue Code of 1986 as amended, (i.e., tax exempt entities), corporation,
Massachusetts or similar business trust, or partnership, not formed for the
specific purpose of acquiring the proposed investment, with total assets in
excess of $5,000,000;
_ It is a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the proposed investment, whose purchases
are directed by a sophisticated person as described;
_ It is a bank as defined in ss. 3(a)(2) of the Act, or a savings and
loan association or other institution as defined in ss. 3(a)(5)(A) of the Act
whether acting in its individual or fiduciary capacity;
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_ It is a broker registered pursuant to ss. 15 of the Securities
Exchange Act of 0000 (xxx Xxxxxxxx Xxx");
_ It is an insurance company as defined in ss. 2(13) of the Act;
_ It is an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in ss. 2(a)(48) of that
Act;
_ It is a Small Business Investment Company licensed by the U.S. Small
Business Administration under ss. 301 (c) or (d) of the Small Business
Investment Act of 1958;
_ It is a private business development company as defined in ss.
202(a)(22) of the Investment Advisers Act of 1940;
_ It is an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in ss. 3(21) of such Act, which is either a
bank, savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are Accredited Investors as described above;
_ He or she is a director or executive officer of the Company;
_ It is an entity in which all the equity owners are Accredited
Investors since they are all described above.
(g) The Buyer has reviewed this Agreement and each Exhibit hereto.
(h) The Buyer has the financial ability to bear the economic risk of
the Buyer's investment, can afford to sustain a complete loss of such
investment, has adequate means of providing for the Buyer's current needs and
personal contingencies and has no need for liquidity in the Buyer's investment
in the Company.
(i) The Buyer will acquire the Securities for its own account (or for
the joint account of the Buyer and the Buyer's spouse either in joint tenancy,
tenancy by the entirety or tenancy in common) for investment and not with a view
to the sale or distribution thereof or the granting of any participation
therein, and the Buyer has no present intention of distributing or selling to
others any of such interest or granting any participation therein, other than
pursuant to an effective registration statement under the Act.
(j) The Buyer has read the Company Memorandum and the Exchange Act
Reports, has been given the opportunity to ask questions of and to receive
answers from persons acting on the
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Company's behalf concerning the terms and conditions of this transaction and
also has been given the opportunity to obtain any additional information which
the Company possesses or can acquire without unreasonable effort or expense. As
a result, the Buyer is cognizant of the financial condition, capitalization, use
of proceeds from this transaction and the operations and financial condition of
the Company, has available full information concerning its affairs and has been
able to evaluate the merits and risks of the investment in the Securities.
(k) The Buyer represents that an investment in the Securities is a
suitable investment for the Buyer, taking into consideration the restrictions on
transferability affecting the Securities.
(l) The Buyer understands and agrees that the Preferred Stock as well
as the Shares issuable upon conversion of Preferred Stock have not been
registered under the Act or any state or foreign securities laws and are
restricted securities within the meaning of Rule 144 of the General Rules and
Regulations under the Act and under applicable state statutes.
(m) The Buyer is not an associated person or affiliate of any member
firm of the National Association of Securities Dealers, Inc.
(n) In making the purchase of the Securities, Buyer understands that
the information set forth in the Company Memorandum and the Exchange Act Reports
and this Agreement was accurate as of its date with respect to the Company.
(o) Without the prior written consent of the Company, the Buyer and
any subsequent transferee shall not sell the Securities or the Shares in a
transaction that is exempt from the registration requirements of the Act
pursuant to Regulation S thereunder.
4. Registration Rights On or prior to the Closing Date, the Company and the
Buyer agree to execute a Registration Rights Agreement in the form substantially
set out in Exhibit "C" attached hereto (the "Registration Rights Agreement"),
the terms of which are herein incorporated by reference.
Conversion of Preferred Stock The Buyer of Preferred Stock shall be
entitled to convert the Preferred Stock into Shares in accordance with the terms
set forth in the Certificate of Designation. In addition to the conversion
rights set forth in the Certificate of Designations, the Buyer of Preferred
Stock purchased pursuant to this Agreement shall be entitled to the following
additional rights:
(a) Buyer's Right to Elect to Receive Notice of Cash Redemption by
Company. A Buyer of Preferred Stock purchased pursuant to this Agreement shall
have the right to require the Company to provide advance notice stating whether
the Company will elect to redeem such Buyer's shares in cash pursuant to the
Company's redemption rights discussed in Section 7 of the Certificate of
Designations.
(b) Mechanics of Buyer's Election Notice. A Buyer shall send notice to
the Company by facsimile ("Election Notice") stating Buyer's intention to
require the Company to disclose if the Buyer were to exercise his, her or its
right of conversion (pursuant to Section 2 of the Certificate of Designations)
whether the Company would elect to redeem the Buyer's Preferred Stock for cash
in lieu of issuing Common Stock. Within three (3) business days of receipt of
the Election Notice, the Company shall disclose to the Buyer what action the
Company would take over the subsequent fifteen (15) day period (the "15 Day
Period"), including the date the Company receives
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such Election Notice. If the Company does not respond to the Buyer within such
three (3) business day period indicating it would elect to redeem the Buyer's
Preferred Stock for cash in lieu of issuing Common Stock, the Company shall be
required to issue to the Buyer Common Stock upon the Buyer's conversion if made
during the 15 Day Period.
5. Conversion of Preferred Stock The holders of Preferred Stock shall be
entitled to convert the Preferred Stock into Shares in accordance with the terms
set forth in the Certificate of Designation.
6. Representations and Warranties of the Company The Company represents and
warrants to, and agrees with, the Buyer that:
(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of Delaware.
(b) This Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity;
and the Company has full corporate power and authority necessary to enter into
this Agreement and to perform its obligations thereunder.
(c) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of its affiliates is required for execution of this Agreement, including,
without limitation, the issuance and sale of the Securities, or the performance
of its obligations hereunder.
(d) Except as disclosed to the Buyer or its representatives in
writing, neither the sale of Securities pursuant to, nor the performance of its
obligations under this Agreement by the Company will (i) violate or conflict
with, result in a breach of, or constitute a default (or an event which with the
giving of notice or the lapse of time or both would be reasonably likely to
constitute a default) under (A) the Certificate of Incorporation (the
"Certificate of Incorporation") or By-laws (the "By-laws") of the Company or any
of its affiliates, (B) any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company or any of its affiliates
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or any of its affiliates or over the properties or assets of
the Company or any of its affiliates, (C) the terms of any bond, debenture, note
or any other evidence of indebtedness, or any material agreement, stock option
or other similar plan, indenture, lease, mortgage, deed of trust or other
material instrument to which the Company or any of its affiliates is a party, by
which the Company or any of its affiliates is bound, or to which any of the
properties of the Company or any of its affiliates is subject, or (D) the terms
of any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company or any of its affiliates is a party to; or (ii) result in
the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its affiliates.
(e) The Company has an authorized capitalization consisting of
80,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000
shares of Preferred Stock, par value $.01 per share ("Preferred Stock"). The
Company has issued and outstanding 14,026,398 shares of Common Stock and no
shares of Preferred Stock on the date hereof. All of the issued shares of
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capital stock of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable; prior to the Closing Date, the authorized
capitalization shall include the Shares to be issued upon conversion of the
Securities. The Shares issuable upon conversion of the Securities, when issued
and delivered in accordance with the terms of the Securities, will be duly and
validly issued, fully paid and nonassessable. The issuance of the Shares will
not be in violation of any preemptive or similar rights of the holders of any
securities of the Company. The Securities (i) are free and clear of any security
interests, liens, claims or other encumbrances, (ii) have been duly and validly
authorized and on the Closing Date will be duly and validly issued, fully paid
and non assessable, (iii) will not have been, individually and collectively,
issued or sold in violation of any preemptive or other similar rights of the
holders of any securities of the Company, (iv) will not subject the holders
thereof to personal liability by reason of being such holders, and (v) the
Shares underlying the Securities are quoted on, and will be, following the
registration of the Shares as set forth in the Registration Rights Agreement be
eligible for trading on, the National Association of Securities Dealers Inc.
SmallCap Market ("Nasdaq").
(f) The Company complies with the eligibility requirements for use of
Form S-3, as set forth in the Act. The Company's stock is listed on Nasdaq and
the Company has received no notice, oral or written, with respect to its
continued eligibility for such listing. The Company hereby agrees, promptly
following the closing of the transactions contemplated by this Agreement, to
take such action as is necessary to cause the Shares issued upon exercise of
conversion rights under the Preferred Stock to be listed on Nasdaq upon such
conversion following the effective date of the registration statement, as
provided in the Registration Rights Agreement (subject, if required, to notice
to Nasdaq of the actual number of shares issued). The Company further agrees, if
the Company applies to have the Common Stock traded on any other principal stock
exchange or market, it will include in such application the Shares and will take
such other action as is necessary or desirable to cause the Shares to be listed
on such other exchange or market upon effective date of the registration
statement.
(g) The Exchange Act Reports are the only filings made by the Company
since December 31, 1995 pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act, and the Company will cause its Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Securities Exchange Act of 1934,
will comply in all respects with its reporting and filing obligations under said
Act, and will not take any action or file any document (whether or not permitted
by said Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act. The Company will take all action necessary to continue the listing
and trading of its Common Stock on Nasdaq and will comply in all respects with
the Company's reporting, filing and other obligations under the by-laws or rules
of the NASD and Nasdaq.
(h) The Company has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company does
not have any subsidiaries. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "Material Adverse Effect" means any
adverse effect on the business, operations, properties, prospects, or financial
condition of the entity with respect to which such term is used and which is
material to such entity.
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(i) The Company has furnished or made available to the Buyer true and
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof, and the Company's By-laws, as in effect on the date hereof.
(j) The Company has delivered or made available to the Buyer true and
complete copies of the Exchange Act Reports (including, without limitation,
proxy information and solicitation materials excluding any preliminary proxy not
distributed). The Company has not provided to the Buyer any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such Exchange Act Reports, and none of the Exchange
Act Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Exchange Act Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(k) Except as set forth in the financial statements and other
documents filed by the Company under the Exchange Act, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1995 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which individually or in the aggregate, are not
material to the financial condition or operating results of the Company. The
Company has not provided to the Buyer any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed.
(l) Since December 31, 1995 there has been no material adverse change
and no material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of the Company, except
as disclosed in accordance with the Exchange Act Reports or the Company
Memorandum and except that the Company continues to incur losses.
(m) There is no material action, suit, proceeding, inquiry or to the
knowledge of the Company or any of its subsidiaries, investigation before or by
any court, public board, government agency, self-regulatory organization or body
pending, or to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries, except
as disclosed in the Exchange Act Reports or the Company Memorandum.
(n) Neither the Company, nor any or its affiliates, nor any person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers
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to buy any security, under circumstances that would require registration of the
Securities under the Act.
(o) The Company has taken no action which would give rise to any claim
by any person for brokerage commissions, finder's fees or similar payments by
the Buyer relating to this Agreement of the transactions contemplated hereby,
except for dealings with First Bermuda Securities Limited, whose commissions and
fees will be paid for by the Company.
(p) As of the date hereof, the Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, shares of Common Stock for the purpose of enabling the Company to
satisfy any obligation to issue shares of its Common Stock upon conversion of
the Securities; provided, however, that the number of shares so reserved shall
at all times be at least 3,000,000. The number of shares so reserved may be
reduced by the number of shares actually delivered pursuant to the conversion of
the Securities (provided that in no event shall the number of shares so reserved
be less than the number required to satisfy the remaining conversion rights on
the unconverted Securities) and the number of shares so reserved shall be
increased to reflect stock splits and stock dividends and distributions.
(q) The Preferred Stock and the Shares have not been registered under
the Securities Act of 1933, as amended (the "Act"). Each of the Securities shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF CERTAIN STATES, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF
COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT (OTHER THAN
PURSUANT TO REGULATION S) AND APPLICABLE STATE LAW IS AVAILABLE.
Certain registration rights with respect to the Securities are set
forth in the Registration Rights Agreement. This offering is not a public
offering and is intended to be made pursuant to Section 4(2) and 4(6) of the Act
and Regulation D as promulgated by the Securities and Exchange Commission
("SEC") under the Act. This offering is also intended to be exempt from the
registration requirements of various state securities laws. A substantial number
of state securities commissions and securities industry associations have
established investor suitability standards for marketing private offerings of
securities within their respective jurisdictions. Some have also established
minimum dollar levels for purchases in their states. The Company shall comply
with these restrictions to the extent applicable.
(r) With a view to making available the benefits of certain rules and
regulations of the SEC that may permit the sale of certain of the Securities, to
the public without registration, the Company shall use its best efforts to:
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(i) make and keep public information regarding the Company available,
as those terms are understood and defined in Rule 144 under the Act, at all
times following the Closing Date (as hereinafter defined);
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act;
(iii) so long as the Buyer owns any Securities, furnish to the Buyer
forthwith upon written request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and of the Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed as the Buyer may
reasonably request in availing itself of any rule or regulation of the SEC
allowing the Buyer to sell any such securities without registration.
(iv) make all necessary filings in connection with this offering as
required by the laws and regulations of all appropriate jurisdictions and
securities exchanges in the United States of America.
(s) Each party shall indemnify the other against any loss, cost or
damages (including reasonable attorney's fees and expenses) incurred as a result
of such parties' breach of any representation, warranty, covenant or agreement
in this Agreement.
7. Offering Materials. All offering materials and documents used in connection
with offers and sales of the Securities prior to the registration of the
Securities as provided in the Registration Rights Agreement shall include
statements to the effect that the Securities and the Shares issuable upon the
exercise of conversion rights have not been registered under the Act and that
the Buyer, may not sell the Securities or Shares unless the Securities or Shares
are registered under the Act, or to the extent applicable under Rule 144, or an
exemption from the registration requirements of the Act is available. Such
statements shall appear (1) on the cover of any prospectus or offering circular
used in connection with the offer or sale of the Securities and (2) in the
underwriting section of any prospectus or offering circular used in connection
with the offer or sale of the Securities. The Company represents that all
offering materials and documents used in connection with the offers and sales of
the Securities prior to the Closing of the transactions contemplated herein have
complied with the foregoing.
8. Covenants of the Company. (a) The Company agrees that during the period
beginning on the date hereof and ending 90 days following the Closing Date, the
Company will not, without the prior written consent of a "majority-in-interest"
of the Buyers, negotiate or contract with any party to obtain additional equity
financing (including debt financing with an equity component) in any form
pursuant to an exemption from the Act under Regulation D or Regulation S of the
Act (the "Future Offerings"). In addition, the Company will not conduct any
Future Offerings during the period beginning on the 90th day following the date
hereof and ending 180 days following the Closing Date unless it shall have first
delivered to the Buyer at least ten (10) business days prior to the closing of
such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing the Buyer an option
during such ten (10) day period to purchase all or any portion of its "pro-rata"
share of the securities being offered in the Future Offerings on the same terms
as contemplated by such Future Offering (the limitations referred to in this and
the immediately preceding sentence are collectively referred to as the "Capital
Raising Limitation"). The Capital Raising Limitation shall not apply to any
transaction involving the
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Company's commercial banking arrangements or issuances of securities in
connection with a merger, consolidation or sale of assets, or in connection with
any strategic partnership or joint venture (the primary purpose of which is not
to raise equity capital), or in connection with the disposition or acquisition
of a business, product or license by the Company (so long as the securities so
issued are "restricted securities" within the meaning of Rule 144 under the 1933
Act and do not carry registration or piggyback rights for at least 360 days from
the date of this Agreement), the issuance of securities to settle securities
litigation, or exercise of options by or the grant of performance shares to
employees, consultants or directors. The terms (i) "majority-in-interest" means
holders of Preferred Stock holding more than 50% of the Common Stock underlying
the Securities (treating the Securities on an as converted basis) and (ii)
"pro-rata share" means the number of the Securities initially purchased divided
by the aggregate number of all Securities sold hereunder.
(b) The parties shall use their best efforts timely to satisfy each of the
conditions described in Section 9 of this Agreement.
(c) So long as the Buyer beneficially owns any of the Securities, the
Company shall timely file all reports required to be filed with the SEC pursuant
to the Exchange Act, and the Company shall satisfy the conditions described in
Section 6(r).
(d) The Company agrees to send the following reports to Buyer until Buyer
transfers, assigns, or sells all of the Securities: (i) within ten (10) days
after the filing with the SEC, a copy of its Annual Report on Form 10-KSB, its
Quarterly Reports on Form 10-QSB and any Current Reports on Form 8-K; and (ii)
within two (2) business days after release, copies of all press releases issued
by the Company or any of its subsidiaries.
(e) The Company shall at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common Stock to provide
for the full conversion of the outstanding Securities and issuance of the Shares
in connection therewith (based on the Conversion Price of the Securities in
effect from time to time). In that regard, on the Closing Date, the Company
shall have at least 3,000,000 shares reserved for issuance upon conversion of
the Securities (subject to adjustment in order to comply with the immediately
preceding sentence); provided that the Company shall not reduce the number of
shares of Common Stock reserved for issuance upon conversion of the Securities
without the consent of a majority-in-interest of the Buyers, which consent will
not be unreasonably withheld.
(f) So long as the Buyer beneficially owns any Securities, the Company
shall maintain its corporate existence, except in the event of a merger,
consolidation or sale of all or substantially all of the Company's assets, as
long as the surviving or successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the agreements and instruments entered
into in connection herewith and (ii) is a publicly traded corporation whose
Common Stock is listed for trading on the AMEX, the NYSE or the Nasdaq.
The Company and the Buyer agree that the Closing Date, when certified by
Escrow Agent as the Closing shall be deemed to be a conclusion of the offering
of the Securities contemplated hereby.
(h) The Shares and the certificates evidencing the same shall at all times
be free of legends (except as provided in Section 10 below), "stock transfer
restrictions," or other restrictions, except for covenants of the Buyer
expressly set forth in this Agreement.
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9. Conditions Precedent to the Buyer's Obligation. The obligations of the Buyer
hereunder are subject to the performance by the Company of its obligations
hereunder and to the satisfaction of the following additional conditions
precedent:
(a) The Buyer shall receive, on the Closing Date, an opinion of
independent counsel to the Company, dated the Closing Date, as to the
representations made by the Company in Sections 6(a) through and including 6(f)
hereof, and in Sections 6(m) and 6(n) hereof, and such other matters as Buyer
reasonably requests. The form of such opinion shall be as set forth in Exhibit 1
hereof.
(b) Delivery of the certificates representing the Preferred Stock with
restrictive legends to the Escrow Agent as set forth herein.
(c) The Company shall have delivered to the Buyer a certificate in
form and substance reasonably satisfactory to the Buyer, executed by an
executive officer of the Company, to the effect that all the conditions to the
Closing shall have been satisfied and the representations and warranties of the
Company herein are true and correct as of the date when made and as of the
Closing Date, and certifying as to the Company's Certificate of Incorporation,
By-laws, resolutions authorizing transaction, and incumbency of Company
officers.
(d) The Company and the Buyer shall have entered into the Registration
Rights Agreement contemplated by Section 4.
10. Legends (a) The certificates representing the Securities and the Shares
issued prior to the effective date of the registration statement or availability
of an exemption from registration, shall bear the legend set forth in Section
6(q) herein (the "Legend").
(b) Following the effective date of the registration statement or
availability of an exemption from registration requirements under Rule 144 of
the Act, the Company will remove or will promptly instruct its transfer agent
(the "Transfer Agent") to remove the Legend from the Securities and, if
applicable, from the Shares issued prior to the effective date of the
registration statement (and will instruct the Transfer Agent to issue without
the Legend, the Shares issuable upon any conversion).
(c) Upon the submission, at any time after the effective date of the
registration statement or applicability of an exemption from the registration
requirements, under Rule 144 of the Act by the Buyer of a written request for
legend removal for the purpose of a bona fide pledge or deposit of the
Securities with a margin account, together with the certificates for which the
legend removal is being requested, the Company will reissue or will promptly
instruct the Transfer Agent to reissue the certificates representing the
Securities to be so pledged or deposited without the Legend.
11. Transfer Agent Instructions The Transfer Agent will be instructed to reserve
for issuance such number of shares of the Company's Common Stock as would be
issuable if the Preferred Stock were converted on the Closing Date and such
additional number of shares as, from time to
time, shall be necessary to provide for the issuance of Shares upon the
conversion of the Preferred Stock. Additionally, the Company shall deliver to
the Transfer Agent at closing irrevocable instructions substantially in the form
set forth in Exhibit "D" attached hereto, pursuant to which the Transfer Agent
shall be instructed to issue upon conversion the number of shares provided for
in the Preferred Stock being converted on the terms provided for therein without
restrictive legend, registered in the
12
names provided by the Holders. The Company warrants and covenants that no
instructions restricting the transferability of the Securities and the Shares
other than the instructions in the immediately preceding sentence and
instructions for a "stop transfer" instruction until the effective date of the
registration statement have been given, or shall be given, to the Transfer
Agent, and that the Securities and the Shares shall otherwise be freely
transferable on the books and records of the Company. Nothing in this section,
however, shall affect in any way the obligations and agreement of the Buyer to
comply with all applicable federal, state and foreign securities laws upon
resale of the Securities.
12. Miscellaneous. (a) This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
(b) This Agreement shall be governed by and constructed in accordance
with the laws of the State of Delaware.
(c) This Agreement shall inure to the benefit of and be binding upon
the parties hereto, their respective successors, and no other person shall have
any right or obligation hereunder. This Agreement shall not be assignable by
either party without the prior written consent of the other, and any assignment
in violation hereof shall be void. Notwithstanding the foregoing, the Buyer may
assign its rights in this Agreement to, and the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Securities or Shares.
(d) This Agreement together with the Certificate of Designation and
the Registration Rights Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior oral
or written proposals or agreements related thereto. This Agreement may not be
amended or any provision hereof waived, in whole or in part, except by a written
amendment signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year above written.
BY: VIDEOLAN TECHNOLOGIES, INC.
__________________________________
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
or
Name: Xxxxxx X. Xxxxxxxxxx
Title: Vice President Finance, Treasurer and Secretary
BY: RIC INVESTMENT FUND LTD.
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__________________________________
Name:
Title:
