EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 26, 2005 (this
"Agreement"), is made 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 entity named on a signature page hereto (each, an
"Initial Investor") (each agreement with an Initial Investor being deemed a
separate and independent agreement between the Company and such Initial
Investor, except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of May 26, 2005, between the Initial Investor and
the Company (the "Securities Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investors the Debentures and the Warrants; and
WHEREAS, the Debentures are convertible into shares of Common Stock
(the "Conversion Shares"; which term, for purposes of this Agreement, shall
include shares of Common Stock of the Company issuable in lieu of accrued
interest through the Maturity Date of the Debentures, as that term is defined in
and as contemplated by the Debentures) upon the terms and subject to the
conditions contained in the Debentures; and
WHEREAS, the Warrant Shares may be issued upon the exercise of the
Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Registrable Securities (as defined
below);
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 Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
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"Company Counsel" means Aboudi & Xxxxxxxxxx.
"Effective Date" means the date the SEC declares a Registration
Statement covering Registrable Securities and otherwise meeting the conditions
contemplated hereby to be effective.
"Held Shares Value" means, for shares of Common Stock acquired by the
Investor upon a conversion of a Debenture within the thirty (30) days preceding
the Restricted Sale Date, but not yet sold by the Investor, the principal amount
of the Debentures converted into such Conversion Shares; provided, however, that
if the Investor effected more than one such conversion during such thirty (30)
day period and sold less than all of such shares, the sold shares shall be
deemed to be derived first from the conversions in the sequence of such
conversions (that is, for example, until the number of shares from the first of
such conversions have been sold, all shares shall be deemed to be from the first
conversion; thereafter, from the second conversion until all such shares are
sold).
"Increased Conversion Shares" means the good faith estimate of number
of shares which the Company anticipates will be issuable to the Holder as a
result of an adjustment to the Conversion Price resulting from the application
of Section 4(g) of the Securities Purchase Agreement.
"Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Debentures or Registrable
Securities.
"Other Issuable Shares" means (i) the Payment Shares, if any, issued or
issuable to the Holder as of the date of the filing of the Registration
Statement and any amendment thereto or any subsequent date, and (ii) the good
faith estimate of the Company of the number of the other Payment Shares or
Increased Convertible Shares, as the case may be, which the Company anticipates,
as of the date of the filing of the Registration Statement and any amendment
thereto, will be issuable to the Holder pursuant to the provisions of the
Transaction Agreements.
"Payment Shares" means shares of Common Stock issued by the Company as
provided in Section 2(b) below.
"Permitted Selling Shareholders" has the meaning ascribed to it in
Schedule 1 annexed hereto.
"Permitted Suspension Period" means one or more periods aggregating not
more than fifty (50) days during any consecutive 12-month period during which
the Holder's right to sell Registrable Securities under the Registration
Statement is suspended, provided, however, that each of such periods shall
neither (i) be for more than twenty (20) days nor (ii) begin less than ten (10)
Trading Days after the last day of the preceding suspension period (whether or
not such last day was during or after a Permitted Suspension Period).
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"Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
"Registrable Securities" means, collectively, the Conversion Shares,
the Warrant Shares, and the Other Issuable Shares.
"Registration Statement" means a registration statement of the Company
under the Securities Act covering Registrable Securities on Form SB-2, if the
Company is then eligible to file using such form, and if not eligible, on Form
S-1 or other appropriate form.
"Required Effective Date" means, initially, the Initial Required
Effective Date or the Increased Required Effective Date (as those terms are
defined below), as the case may be.
"Required Filing Date" means the date as soon as practicable after the
Closing Date but no later than forty-five (45) days after the Closing Date.
"Restricted Sale Date" means the first date, other than a date during a
Permitted Suspension Period (as defined below), on which the Investor is
restricted from making sales of Registrable Securities covered by any previously
effective Registration Statement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon as
practicable after the Closing Date but no later than the Required Filing Date, a
Registration Statement registering for resale by the Investor a sufficient
number of shares of Common Stock for the Initial Investors to sell the
Registrable Securities. Notwithstanding the requirement to register all
Registrable Securities, the Company's obligation to register the Registrable
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Securities shall initially be satisfied by the registration of the Initial
Number of Shares to Be Registered (as defined below). The "Initial Number of
Shares to Be Registered" is a number of shares of Common Stock which is at least
equal to the sum of (x) one hundred fifty percent (150%) of the number of shares
into which the Debentures and all interest thereon through their respective
Maturity Dates would be convertible at the time of filing of such Registration
Statement (assuming for such purposes that all Debentures had been eligible to
be converted, and had been converted, into Conversion Shares in accordance with
their terms, whether or not such eligibility, accrual of interest or conversion
had in fact occurred as of such date) based on the Conversion Price in effect
on, or within three (3) Trading Days prior to, the date the Registration
Statement is filed (or subsequently amended), (y) the number of Warrant Shares
covered by the Warrants (assuming for such purposes that all the Warrants had
been eligible to be exercised and had been exercised for the issuance of Warrant
Shares in accordance with their terms, whether or not such eligibility or
exercise had in fact occurred as of such date), and (z) the number of Other
Issuable Shares as of the date of the filing of the Registration Statement or
any amendment thereto (provided, however, that for purposes of this provision,
the number of Other Issuable Shares shall not be greater than the number of such
shares which the SEC permits to be included in the Registration Statement).
Unless otherwise specifically agreed to in writing in advance by the Holder, the
Registration Statement (W) shall include only (1) the Registrable Securities,
(2) the shares issuable on exercise of warrants issued to the Placement Agent in
connection with the transactions contemplated by the Transaction Agreements, (3)
the shares of the Permitted Selling Shareholder listed on Schedule 1 annexed
hereto, and (X) shall also state that, in accordance with Rule 416 and 457 under
the Securities Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Purchased
Shares, exercise of the Warrants or issuances of Other Issuable Securities
covered by such Registration Statement to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
(ii) The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z)
ninety (90) days after the Closing Date.
(iii) If at any time (an "Increased Registered Shares Date"), the
number of shares of Common Stock represented by the Registrable Securities,
issued or to be issued as contemplated by the Transaction Agreements, exceeds
eighty percent (80%) of the aggregate number of shares of Common Stock then
registered or sought to be registered in a Registration Statement which has not
yet been declared effective, the Company shall either
(X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at
that time, to register the Increased Number of Shares to Be Registered
(as defined below). The "Increased Number of Shares to Be Registered"
is a number of shares of Common Stock which is at least equal to (A)
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the number of shares theretofore issued on conversion of the Debentures
(including any interest paid on conversion by the issuance of
Conversion Shares) and on exercise of the Warrants, plus (B) the sum of
(x) one hundred fifty percent (150%) of the number of shares into which
the unconverted Debentures and all interest thereon through their
respective Maturity Dates would be convertible at the time of filing of
such Registration Statement or amendment (assuming for such purposes
that all Debentures, reduced by any previously converted Debentures,
had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or not such
issuance, eligibility, accrual of interest or conversion had in fact
occurred as of such date) based on the Conversion Price in effect on,
or within three (3) Trading Days prior to, the date the amendment to
the Registration Statement is filed, (y) the number of Warrant Shares
covered by the unexercised Warrants (assuming for such purposes that
all the Warrants, reduced by any exercised Warrants, had been eligible
to be exercised and had been exercised for the issuance of Warrant
Shares in accordance with their terms, whether or not such issuance,
eligibility or exercise had in fact occurred as of such date), (z) the
number of Other Issuable Shares as of the date of the filing of the
Registration Statement or any amendment thereto (provided, however,
that for purposes of this provision, the number of Other Issuable
Shares shall not be greater than the number of such shares which the
SEC permits to be included in the Registration Statement), or
(Y) if such Registration Statement has been declared effective by the
SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Number of Shares
to Be Registered (where the number of shares determined by clause (x)
is based on the Conversion Price in effect on, or within three (3)
Trading Days prior to, the date the additional Registration Statement
(or any amendment thereto) is filed, over the aggregate number of
shares of Common Stock already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) thirty (30) days after the Increased Registered Shares Date.
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(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable Securities
is not filed as contemplated by this Agreement with the SEC by the Required
Filing Date, the Company will make payment to the Initial Investor in such
amounts and at such times as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities
is not effective by the relevant Required Effective Date or if there is a
Restricted Sale Date, then the Company will make payments to the Initial
Investor in such amounts and at such times as shall be determined pursuant to
this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company to
the Initial Investor shall be determined as of each Computation Date (as defined
below) and such amount shall be equal to the Periodic Amount Percentage (as
defined below) of the Stated Value of the Holder's Purchased Shares for the
period from the date following the relevant Required Filing Date or the Required
Effective Date or a Restricted Sale Date, as the case may be, to the first
relevant Computation Date, and thereafter to each subsequent Computation Date
(each such period, a "Computation Period"). The "Periodic Amount Percentage"
means two percent (2) of the Purchase Price of all Debentures for each
Computation Period (and pro rata for any Computation Period which is less than
thirty [30] days). Anything in the preceding provisions of this paragraph (iii)
to the contrary notwithstanding, after the relevant Effective Date the Purchase
Price shall be deemed to refer to the sum of (X) the principal amount of all
Debentures not yet converted and (Y) the Held Shares Value. By way of
illustration and not in limitation of the foregoing, if the Registration
Statement is filed on or before the Required Filing Date, but is not declared
effective until seventy-five (75) days after the Initial Required Effective
Date, the Periodic Amount will aggregate five percent (5%) of the Purchase Price
of the Debentures (2% for days 1-30, plus 2% for days 31-60, plus 1% for days
61-75).
(iv) Each Periodic Amount, if any, will be payable by the Company,
except as provided in the other provisions of the immediately succeeding
subparagraph (v), in cash or other immediately available funds to the Investor
on the third Trading Day after
(A) with respect to Periodic Amounts for Computation Periods ending on
or before the Effective Date, (i) the earlier of the Effective Date or
the date which is one hundred eighty (180) days after the Initial
Required Effective Date (the "First Specified Periodic Payment Date")
and (ii) if relevant, the last day of each Computation Period after the
First Specified Periodic Payment Date, and
(B) with respect to all Periodic Amounts accruing after the Effective
Date, the last day of the relevant Computation Period,
in each case, without requiring demand therefor by the Investor.
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(v) Notwithstanding the provisions of the immediately preceding
subparagraph (iv),
(A) at the option of the Company, exercisable in its discretion on the
date the Periodic Amount is due; provided, however, that the Company
may exercise this discretion if, but only if the Effective Date is on
or before the First Specified Periodic Payment Date and the
Registration Statement covering the Payment Shares is then effective;
or
(B) at the option of the Investor, exercisable in its sole and absolute
discretion by written notice to the Company at any time before the
Periodic Amount is paid,
all or a portion of the Periodic Amount shall be paid by the issuance of
additional shares of Common Stock to the Investor ("Payment Shares") in an
amount equal to the Periodic Amount being paid thereby divided by the then
applicable Conversion Price; provided, further that the Delivery Date for the
Payment Shares shall be three (3) Trading Days after the date the Periodic
Amount is due (if the election is made by the Company) or after the Investor
gives the notice contemplated by clause (ii) of this subparagraph. The
provisions of Section 5(b)(i) of the Securities Purchase Agreement shall apply
to the delivery of the certificates of the Payment Shares based on the relevant
Periodic Amount.
(vi) The parties acknowledge that the damages which may be incurred by
the Investor if the Registration Statement is not filed by the Required Filing
Date or the Registration Statement has not been declared effective by a Required
Effective Date, including if the right to sell Registrable Securities under a
previously effective Registration Statement is suspended or the shares of the
Company's stock are not listed on the Principal Trading Market, may be difficult
to ascertain. The parties agree that the amounts payable pursuant to the
foregoing provisions of this Section 2(b) represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages.
(vii) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the
filing or effectiveness of the Registration Statement occurs because of an act
of, or a failure to act or to act timely by the Initial Investor or its counsel.
(viii) "Computation Date" means (A) the date which is the earlier of
(1) thirty (30) days after the Required Filing Date, the Required Effective Date
or a Restricted Sale Date, as the case may be, or (2) the date after the
Required Filing Date, the Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed or the shares of the Company's stock are listed on the
Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the
earlier of (1) thirty (30) days after the previous Computation Date or (2) the
date after the previous Computation Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b)(i) hereof)
or is declared effective or has its restrictions removed or the shares of the
Company's stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.
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(ix) Anything in the preceding provisions of this Section 2(b) to the
contrary notwithstanding, if, but only if, the Registration Statement is
declared effective within thirty (30) days following the Initial Required
Effective Date,
(A) the provisions of Section 2(b)(i) shall not apply; and
(B) the provisions of Section 2(b)(ii) shall not apply to the fact that
the Registration Statement was initially declared effective after the
Initial Required Effective Date;
and the Company will not have any obligation to pay any Periodic Amount to the
Investor with respect thereto; provided, however, that the provisions of Section
2(b)(ii) shall continue to apply to all other events described therein.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing Date
a Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earlier of (i) the date when the
Investors may sell all Registrable Securities under Rule 144 without volume or
other restrictions or limits or (ii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
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(c) Permit a single firm of counsel designated by the Initial Investors
(which, until further notice, shall be deemed to be Xxxxxxx & Prager LLP, Attn:
Xxxxxx Xxxxxxx, Esq., which firm has requested to receive such notification;
each, an "Investor's Counsel") to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (but not less
than three (3) Trading Days) prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects;
(d) Notify each Investor and the Investor's Counsel and any managing
underwriters immediately (and, in the case of (i)(A) below, not less than three
(3) Trading Days prior to such filing) and (if requested by any such person)
confirm such notice in writing no later than one (1) Trading Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall communicate with the
Investor's Counsel with regard to its proposed written responses to the comments
contemplated in clause (C) of this Section 3(d), so that, to the extent
practicable, the Investors shall have the opportunity to comment thereon;
(e) Furnish to each Investor and to Investor's Counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration Statement, each
preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
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(f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Comply with Regulation FD or any similar rule or regulation
regarding the dissemination of information regarding the Company, and in
furtherance of the foregoing, and not in limitation thereof, not disclose to the
Investor any non-public material information regarding the Company;
(i) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing that the effectiveness of the Registration
Statement is suspended for any reason, whether due to a Potential Material Event
or otherwise, the Investors shall not offer or sell any Registrable Securities,
or engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of such notice until such Investor
receives written notice from the Company that such the effectiveness of the
Registration Statement has been restored, whether because the Potential Material
Event has been disclosed to the public or it no longer constitutes a Potential
Material Event or otherwise; PROVIDED, HOWEVER, that the Company may not so
suspend the right to such holders of Registrable Securities during the periods
the Registration Statement is required to be in effect other than during a
Permitted Suspension Period (and the applicable provisions of Section 2(b) shall
apply with respect to any such suspension other than during a Permitted
Suspension Period);
(j) Use its reasonable efforts to secure and maintain the designation
of all the Registrable Securities covered by the Registration Statement on the
Principal Trading Market and the quotation of the Registrable Securities on the
Principal Trading Market;
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(k) Provide a transfer agent ("Transfer Agent") and registrar, which
may be a single entity, for the Registrable Securities not later than the
initial Effective Date;
(l) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request, and, within five (5) Trading Days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the Transfer Agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel, which shall
include, without limitation, directions to the Transfer Agent to issue
certificates of Registrable Securities(including certificates for Registrable
Securities to be issued after the Effective Date and replacement certificates
for Registrable Securities previously issued) without legends or other
restrictions, subject to compliance with applicable law and other rules and
regulations, including, without limitation, prospectus delivery requirements;
(m) Take all other reasonable administrative steps and actions
(including the participation of Company counsel) necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement; provided, however, that the foregoing does not
require that the Company take any steps whatsoever regarding the identification
or selection of a broker to sell the Registrable Securities, the identification
of buyers of the Registrable Securities, or the negotiation of the sale terms of
the Registrable Securities; and
(n) Not file any other registration statement (other than the
Registration Statement and amendments thereto) during the period commencing on
the Closing Date and ending on the Effective Date.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(b) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f), (g)
or (i) above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f), (g) or (i),
and, if so directed by the Company, such Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
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5. EXPENSES OF REGISTRATION. All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $4,500 for
the review of each Registration Statement and $2,000 for the review of each
post-effective amendment to a Registration Statement shall be borne by the
Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, and each Buyer
Control Person (each, an "Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act,
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively referred to as "Violations"). Subject to clause (b) of this Section
6, the Company shall reimburse the Investors, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (I) apply to
any Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Indemnified Party expressly for use in connection with the
preparation of the Registration Statement, any such amendment thereof or
12
supplement thereto or prospectus, if such prospectus (or supplement or amendment
thereto) was timely made available by the Company pursuant to Section 3(b)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company or the amendment or supplement thereto made available by the
Company; (III) be available to the extent such Claim is based on the delivery of
a prospectus by the Investor after receiving notice from the Company under
Section 3(f), (g) or (i) hereof (other than a notice regarding the effectiveness
of the Registration Statement or any amendment or supplement thereto), or (IV)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. The Investor will indemnify the Company and
its officers, directors and agents (each, an "Indemnified Party") against any
claims arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company, by or on
behalf of such Investor, expressly for use in connection with the preparation of
the Registration Statement or the amendment or supplement thereto, subject to
such limitations and conditions as are applicable to the indemnification
provided by the Company pursuant to this Section 6. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Party under this Section 6
of notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel satisfactory to the
indemnifying party (provided such counsel shall not have a conflict of interest
with the Indemnified Party and provided that all defenses available to the
Indemnified Party can be maintained without prejudicing the rights of the
indemnifying party). In case any such action is brought against any Indemnified
Party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Party under this Section 6 for any legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel as provided above. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Party under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable; provided, however, that the Investor shall not obligated to make any
indemnification payment to the Company under this Section 6 unless and until
there has been a final adjudication of liability on the part of the Investor.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; PROVIDED,
HOWEVER, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
except where the seller has committed fraud (other than a fraud by reason of the
information included or omitted from the Registration Statement as to which the
Company has not given notice as contemplated under Section 3 hereof) or
intentional misconduct, contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to making
available to Investor the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) if not available on the SEC's XXXXX system, a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information as may be
reasonably requested to permit the Investor to sell such securities pursuant to
Rule 144 without Registration; and
14
(d) at the request of any Investor holding Registrable Securities (a
"Holder"), give its Transfer Agent instructions (supported by an opinion of
Company counsel, if required or requested by the Transfer Agent) to the effect
that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the shares of Registrable Securities which
the Holder proposes to sell (the "Securities Being Sold") is not less
than (1) year and (B) as to such other matters as may be appropriate in
accordance with Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that the initial Investor's Counsel shall be
deemed acceptable if not given by Company Counsel) that, based on the
Rule 144 Certificate, Securities Being Sold may be sold pursuant to the
provisions of Rule 144, even in the absence of an effective
Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities (or all or any portion of any unconverted Purchased Shares) only if
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, (b) the securities with respect to which such registration rights are
being transferred or assigned, and (c) written evidence of the transferee's
assumption of the Investor's obligations under this Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who represent a Majority in
Interest of the Holders as of the relevant date. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
15
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be given
in the manner contemplated by the Securities Purchase Agreement, (i) if to the
Company or to the Initial Investor, to their respective address contemplated by
the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) 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.
(d) 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 and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions.
(e) The Company and the Investor 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 of or in connection with
this Agreement or any of the other Transaction Agreements.
(f) 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.
16
(g) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(k) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3(a) hereof, or any delay in such performance
could result in loss to the Investors, and the Company agrees that, in addition
to any other liability the Company may have by reason of such failure or delay,
the Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
(l) This Agreement (including to the extent relevant the provisions of
other Transaction Agreements) constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
INITIAL INVESTOR:
------------------------------------
[PRINT NAME OF INITIAL INVESTOR]
By: ________________________________
Name: ______________________________
Title: _____________________________
COMPANY:
NEW VISUAL CORPORATION
By: ________________________________
Name: ______________________________
Title: _____________________________
18
SCHEDULE 1
SHARES WHICH MAY BE INCLUDED IN
"PERMITTED SELLING SHAREHOLDER" REGISTRATION STATEMENT
------------------------------------------- --------------------------------------------
The Selling Shareholders named in the Any shares included in such Registration
Company's Registration Statement on Form Statement which are have not been resold by
SB-2 which was declared effective in August the PermittedSelling Shareholder
2004 (as the same may be amended, but not
to add any additional shares thereto)
------------------------------------------- --------------------------------------------
SHARES ISSUABLE ON CONVERSION OF SERIES 03-2
7% CONVERTIBLE DEBENTURES (INCLUDING ACCRUED
INTEREST PAID IN SHARES OF COMMON STOCK IN
ACCORDANCE WITH THE DEBENTURES) AND RELATED
WARRANTS (NOT PREVIOUSLY REGISTERED):
Xxxxx Xxxxx 736,666
Yokim Asset Management Corp. 736,666
Alpha Capital AG 1,473,334
Xxxxx Xxxxxxxx Associates, Inc. Plan 736,666
Inglewood Holdings Ltd. 736,666
Gross Foundation, Inc. 736,666
PLUS, for each of them any "Payment Shares"
(as defined in the Registration Rights
Agreement, dated as of December 31, 2003,
between the Company and such Selling
Shareholder), if any, issued or issuable as of
the filing of the Registration Statement (or
any amendment) and not included in the
preceding item on this schedule
------------------------------------------- --------------------------------------------
Clearview International Investments Limited 233,334 shares issuable on exercise of
warrants (not previously registered)
------------------------------------------- --------------------------------------------
Holders as of the Closing Date of outstanding The shares of Common Stock issuable on
shares of the Company's Series B Preferred conversion of such Series B Preferred Stock
Stock (including dividends thereon paid in shares of
Common Stock in accordance with the
Certificate of Designations for such Series)
------------------------------------------- --------------------------------------------
Advisor Associates, Inc. 2,000,000 shares issued to the Selling
Shareholder for services as a consultant to the
Company
------------------------------------------- --------------------------------------------
