EXHIBIT 10.56
REGULATION S STOCK PURCHASE AGREEMENT
Dated September 23, 2002
for
NEW VISUAL CORPORATION
Regulation S Stock Purchase Agreement, dated as of September 23, 2002 between
New Visual Corporation, a Utah corporation having offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇.▇. ▇▇▇▇▇ (the "Company"), and Starz Investments
Limited, a Belize International business company, the registered address of
which is ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ (the "Purchaser").
The Company and the Purchaser, intending to be bound and for good and valuable
consideration, the receipt and sufficiency of which is acknowledged, covenant
and agree as follows:
Certain definitions:
a. The "Company" means New Visual Corporation, a Utah
corporation.
b. "Purchaser" means Starz Investments Limited, a Belize
International business company.
c. "Purchase Notice" means an electronic notice from the
Purchaser to the Company of its binding, irrevocable
commitment to purchase a specific number of Shares in an
exempt transaction subject to Regulation S. The Purchase
Notice shall set forth the closing date desired by Purchaser,
the number of Shares to be purchased with respect to each date
(a "Purchase Date") covered by the Purchase Notice (which
shall be the same date or dates on which Shares were sold by
or on behalf of Purchaser to third parties), the Share Price
as of the trading day immediately preceding each Purchase
Date, the proposed Purchase Price per Share on each Purchase
Date, the proposed aggregate Purchase Price for all Shares
covered by the Purchase Notice, the number of Share
certificates to be issued, and the number of Shares
represented by each Share certificate.
d. "Purchase Price" means an amount calculated by multiplying .35
times the Share Price, calculated as of the trading day
immediately preceding each Purchase Date.
e. "Shares" means shares of common stock of the Company and
"Share" means a single share of common stock of the Company.
f. "Share Price" means the closing bid price (if traded on the
OTCBB or the closing price (if traded on the American Stock
Exchange, or on such other United States stock exchange or
public trading market on which the Shares trade).
1
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.1. PURCHASE AND SALE. In consideration of and in express reliance
upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to sell to
the Purchaser in an offshore transaction negotiated outside
the U.S. and to be consummated and closed outside the U.S.,
and the Purchaser agrees to purchase, subject to the
conditions hereinafter set forth, up to 7,000,000 Shares of
the Company.
1.2. CLOSING. The Closing of each purchase of Shares hereunder will
occur as described in this Section 1.2. On or before the
proposed closing date specified in the Purchase Notice (which
shall not be less than two business days after receipt of a
Purchase Notice for Shares), the Company will deliver stock
certificates representing such Shares in the name of Purchaser
to Pacific Continental Nominee Limited ("PCNL") in London, to
be held in escrow pending delivery to the Company of the
Purchase Price for such Shares. Purchaser will pay the
Purchase Price for the Shares to be purchased pursuant to such
Purchase Notice by wire transfer to the Company of immediately
available funds within 5 business days after receipt of the
Share certificates by PCNL, at which time PCNL shall release
the Share certificates to Purchaser.
1.3. FLOOR PRICE. The Purchaser shall have no obligation to present
a Purchase Notice and the Company shall have no obligation to
accept and honor a Purchase Notice received from Purchaser if
the Purchase Price for the Shares to be purchased thereunder
is less than $0.15 per share.
1.4. DELIVERY OF PURCHASE NOTICE. Purchaser shall have 90 days from
the date of this Agreement to deliver one or more Purchase
Notices to the Company. A Purchase Notice may be for all or a
part of the Shares described in Article 1.1 above. Purchaser
may deliver more than one Purchase Notice, provided, however,
that the number of shares purchased pursuant to all Purchase
Notices shall not exceed the number of available Shares
described in Article 1.1.
1.5. COVENANT OF BEST EFFORTS. The Purchaser agrees to use its best
efforts to purchase up to 7,000,000 Shares between the date
hereof and December 15, 2002 ("Best Efforts Period").
Purchaser shall only be liable to purchase the number of
Shares set forth in each Purchase Notice.
1.6. REPRESENTATIONS BY THE PURCHASER. The Purchaser represents and
warrants to the Company as follows, which representations and
warranties shall be true and correct in all material respects
on the date of each closing of the purchase of the Shares:
2
A. ACCESS TO INFORMATION. The Purchaser, in making the decision
to purchase the Shares, has relied upon the representations
and warranties contained in this Agreement as well as
independent investigations made by it and/or its
representatives, if any. The Purchaser and/or its
representatives during the course of this transaction, and
prior to the purchase of any Shares, has had the opportunity
to ask questions of and receive answers from the management of
the Company concerning the business of the Company and to
receive any additional information, documents, records and
books relative to the business, assets, financial condition,
results of operations and liabilities (contingent or
otherwise) of the Company. Purchaser acknowledges that it has
reviewed the SEC Filings.
B. SOPHISTICATION AND KNOWLEDGE. The Purchaser and/or its
representatives has such knowledge and experience in financial
and business matters that it can represent itself and is
capable of evaluating the merits and risks of the purchase of
the Shares. The Purchaser is not relying on the Company with
respect to the tax and other economic considerations of an
investment in the Shares, and the Purchaser has relied on the
advice of, or has consulted with, only the Purchaser's own
advisor(s). The Purchaser represents that it has not been
organized for the purpose of acquiring the Shares.
C. LACK OF LIQUIDITY. The Purchaser acknowledges that the
purchase of the Shares involves a high degree of risk and
further acknowledges that it can bear the economic risk of the
purchase of the Shares, including the total loss of its
investment. The Purchaser acknowledges and understands that
the Shares may not be sold to a U.S. Person (as hereinafter
defined) or into the United States for a period of one (1)
year from the date of purchase and that Purchaser has no
present need for liquidity in connection with its purchase of
the Shares.
D. NO PUBLIC SOLICITATION. The Purchaser is not subscribing for
the Shares as a result of or subsequent to any advertisement,
article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or meeting,
or any solicitation of a subscription by a person not
previously known to the Purchaser in connection with
investments in securities generally. Neither the Company nor
the Purchaser nor any person acting on behalf of either of
them has engaged or will engage in any "Directed Selling
Efforts in the U.S." as defined in Regulation S promulgated by
the Securities and Exchange Commission ("SEC") pursuant to the
Securities Act of 1933, as amended (the "Securities Act") with
respect to the Shares purchased hereby.
3
E. ORGANIZATION AND STANDING. The Purchaser has been duly
incorporated and is validly existing and in good standing
under the laws of the Republic of Belize and has the requisite
corporate power and authority necessary to own its properties
and to conduct its business as presently conducted, to deliver
this Agreement and all other agreements required to be
executed by the Purchaser in connection with performance under
this Agreement (collectively, the "Ancillary Agreements", and
collectively with this Agreement, the "Transaction
Documents"), to purchase the Shares and to carry out the
provisions of the Transaction Documents.
F. AUTHORITY FOR AGREEMENT. The execution and delivery by the
Purchaser of the Transaction Documents, and the performance by
the Purchaser of its obligations thereunder, have been duly
and validly authorized by all requisite corporate action on
the part of the Purchaser. The Transaction Documents, when
executed and delivered, will be legally valid and binding
obligations of the Purchaser, enforceable against the
Purchaser in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of
creditors' rights, and general principles of equity that
restrict the availability of equitable remedies. To the
Purchaser's knowledge, the execution and delivery of the
Transaction Documents by the Purchaser and the performance by
the Purchaser of its obligations there under do not, as of the
date hereof, (I) conflict with or violate the provisions of
the Purchaser's Charter or Bylaws, (ii) require on the part of
the Purchaser any filing with, or any permit, authorization,
consent or approval of, any governmental entity or regulatory
body (a "Governmental Entity"), (iii) conflict with, result in
a breach of, constitute (with or without due notice or lapse
of time or both) a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver
under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, lien, encumbrance
or other arrangement to which the Purchaser is a party or by
which the Purchaser is bound or to which its assets are
subject, (iv) result in the imposition of any Security
Interest upon any assets of the Purchaser or (v) violate or
contravene any United States federal, Belize corporate or
applicable state statute, rule or regulation applicable to the
Purchaser or any order, writ, judgment, injunction, decree,
determination or award.
G. GOVERNMENTAL APPROVAL. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any Governmental Entity is
required on the part of the Purchaser in connection with the
execution and delivery of the Transaction Documents, the
purchase and receipt of the Shares or the other transactions
to be consummated as contemplated by this Agreement.
4
H. BROKERS OR FINDERS. No person has or will have, as a result of
the transactions contemplated by this Agreement, any right,
interest or valid claim against or upon the Company for any
commission, fee or other compensation as a finder or broker
because of any act or omission by Purchaser or its respective
agents.
I. REQUIREMENTS FOR TRANSFER. Purchaser agrees that it will not
transfer the Shares, and the Company shall not be required to
transfer the shares unless the transferee executes a
representation letter in a form reasonably acceptable to the
Company.
J. COMPLIANCE WITH LOCAL LAWS. The Purchaser will only make
offers and sales of the Shares during the "distribution
compliance period" as defined in Rule 902(f) of Regulation S
to persons permitted to purchase such Shares in offshore
transactions in reliance upon Regulation S. Further, any such
sale of the Shares in any jurisdiction outside of the United
States will be made in compliance with the securities laws of
such jurisdiction. Purchaser will not offer to sell or sell
the Shares in any jurisdiction unless the Purchaser obtains
all required consents, if any.
K. REGULATION S EXEMPTION. The Purchaser understands that the
Shares are being offered and sold to it in reliance on an
exemption from the registration requirements of United States
federal and state securities laws under Regulation S
promulgated under the Securities Act and that the Company is
relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of the
Purchaser to acquire the Shares. In this regard, the Purchaser
represents, warrants and agrees that:
a. The Purchaser is not a U.S. Person (as defined below)
and is not an affiliate (as defined in Rule 501(b)
under the Securities Act) of the Company. A U.S.
Person means any one of the following:
i any natural person resident in the United
States of America;
ii any partnership or corporation organized or
incorporated under the laws of the United
States of America;
iii any estate of which any executor or
administrator is a U.S. person;
5
iv any trust of which any trustee is a U.S.
person;
v any agency or branch of a foreign entity
located in the United States of America;
vi any non-discretionary account or similar
account (other than an estate or trust) held
by a dealer or other fiduciary for the
benefit or account of a U.S. person;
vii any discretionary account or similar account
(other than an estate or trust) held by a
dealer or other fiduciary organized,
incorporated or (if an individual) resident
in the United States of America; and
viii any partnership or corporation if:
(1) organized or incorporated under the
laws of any foreign jurisdiction;
and
(2) formed by a U.S. person principally
for the purpose of investing in
securities not registered under the
Securities Act, unless it is
organized or incorporated, and
owned, by accredited investors (as
defined in Rule 501(a) under the
Securities Act) who are not natural
persons, estates or trusts.
b. At the time of the origination of contact concerning
this Agreement and the date of the execution and
delivery of this Agreement, the Purchaser was outside
of the United States.
c. The Purchaser will not, during the period commencing
on the date of issuance of the Shares and ending on
the first anniversary of such date, or such shorter
period as may be permitted by Regulation S or other
applicable securities law (the "Restricted Period"),
offer, sell, pledge or otherwise transfer the Shares
in the United States, or to a U.S. Person for the
account or for the benefit of a U.S. Person, or
otherwise in a manner that is not in compliance with
Regulation S.
d. The Purchaser will, after expiration of the
Restricted Period, offer, sell, pledge or otherwise
transfer the Shares only pursuant to registration
under the Securities Act or an available exemption
therefrom, and in accordance with all applicable
state and foreign securities laws. Without limiting
the foregoing, the Purchaser will not, in connection
with its resale of the Shares, make any untrue
6
statement of a material fact or omit to state any
material fact necessary to make the statements made,
in light of the circumstances under which they were
made, not misleading. Purchaser agrees that, in
connection with its resale of Shares, it will provide
to the persons who purchase Shares no information
regarding the Company that is not contained in the
SEC Filings, the Company's website, or written
materials approved in advance in writing by the
Company.
e. The Purchaser has not in the United States engaged
in, and prior to the expiration of the Restricted
Period will not engage in, any short selling of or
any hedging transaction with respect to the Shares,
including without limitation, any put, call or other
option transaction, option writing or equity swap.
f. Neither the Purchaser nor any person acting on its
behalf has engaged, nor will engage, in any directed
selling efforts to a U.S. Person with respect to the
Shares and the Purchaser and any person acting on its
behalf have complied and will comply with the
"offering restrictions" requirements of Regulation S
under the Securities Act.
g. The transactions contemplated by this Agreement have
not been pre-arranged with a buyer located in the
United States or with a U.S. Person, and are not part
of a plan or scheme to evade the registration
requirements of the Securities Act.
h. Neither the Purchaser nor any person acting on its
behalf has undertaken or carried out any activity for
the purpose of, or that could reasonably be expected
to have the effect of, conditioning the market in the
United States, its territories or possessions, for
any of the Shares. The Purchaser agrees not to cause
any advertisement of the Shares to be published in
any newspaper or periodical or posted in any public
place and not to issue any circular relating to the
Shares, except such advertisements that include the
statements required by Regulation S under the
Securities Act, and only offshore and not in the U.S.
or its territories, and only in compliance with any
local applicable securities laws.
i. Each certificate representing the Shares shall be
endorsed with the following legends, or substantially
similar legends, in addition to any other legend
required to be placed thereon by applicable federal
or state corporate or securities laws:
7
(A) "THE SHARES ARE BEING OFFERED TO
INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE SECURITIES ACT")) AND WITHOUT
REGISTRATION WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN
RELIANCE UPON REGULATION S PROMULGATED UNDER THE
SECURITIES ACT."
(B) "TRANSFER OF THESE SHARES IS PROHIBITED,
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S, PURSUANT TO REGISTRATION UNDER THE
SUCURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION
FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT."
j. The Purchaser consents to the Company making a
notation on its records or giving instructions to any
transfer agent of the Company in order to implement
the restrictions on transfer of the Shares set forth
in this Article 1.5.
ARTICLE II
COVENANTS OF THE COMPANY
2.1. OPERATIONS. From and after the date hereof through the final purchase
of the Shares, the Company will operate only in the ordinary course of
business.
2.2. INSPECTION. The Company shall permit authorized representatives of the
Purchaser to visit and inspect any of the properties of the Company,
including its books of account (and to make copies thereof and take
extracts there from), and to discuss its affairs, finances and accounts
with its officers, employees, independent accountants, consultants and
attorneys, all at such reasonable times and as often as may be
reasonably requested.
2.3. SHARE REGISTRY; REMOVAL OF LEGEND. The Company consents to Purchaser
reselling Shares and to recording the ownership of such shares in book
entry form, provided, however, that all such sales are conducted in
full compliance with Regulation S and all applicable foreign law or
regulation, and the Company and its transfer agent are advised of the
identity of each subsequent purchaser. Purchaser or bona fide
transferees of Purchaser may request certification of Shares at any
time and the Company will instruct its transfer agent to cooperate in
this regard. Shares for which the Regulation S distribution compliance
8
period has expired shall be delivered free of any Regulation S legend,
provided that the Purchaser or holder of such Shares provides the
Company and its counsel with such customary representations as may be
reasonably requested in connection with the preparation and delivery to
the Company's transfer agent of any required legal opinion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows, which
representations and warranties shall be true and correct in all material
respects on the date of each closing of the purchase of the Shares:
3.1. ORGANIZATION AND STANDING. The Company has been duly incorporated and
is validly existing and in good standing under the laws of the State of
Utah and has the requisite corporate power and authority necessary to
own its properties and to conduct its business as presently conducted,
to deliver this Agreement and all other agreements required to be
executed by the Company in connection with performance under this
Agreement and the Transaction Documents, to issue and sell the Shares
and to carry out the provisions of the Transaction Documents. The
Company is duly qualified to transact business as a foreign corporation
and is in good standing in every jurisdiction in which the failure to
so qualify would have a material adverse effect on the operations or
financial condition of the Company.
3.2. AUTHORITY FOR AGREEMENT. The execution and delivery by the Company of
the Transaction Documents, and the performance by the Company of its
obligations thereunder, have been duly and validly authorized by all
requisite corporate action on the part of the Company. The Transaction
Documents, when executed and delivered, will be legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and
general principles of equity that restrict the availability of
equitable remedies. To the Company's knowledge, the execution and
delivery of the Transaction Documents by the Company and the
performance by the Company of its obligations thereunder do not, as of
the date hereof, (I) conflict with or violate the provisions of the
Company's Articles of Incorporation or Bylaws, each as amended, (ii)
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any Governmental Entity, (iii)
conflict with, result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice, consent or waiver
under, any material contract, lease, sublease, license, sublicense,
9
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, lien, encumbrance or other arrangement to
which the Company is a party or by which the Company is bound or to
which its assets are subject, (iv) result in the imposition of any
Security Interest upon any assets of the Company or (v) violate or
contravene any United States federal, Utah corporate or applicable
state statute, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award applicable to the Company,
except, in the case of subsections (ii), (iii), (iv) or (v), for any
such items that would not have a material adverse effect on the
operations or financial condition of the Company.
3.3. SECURITIES LAW FILINGS, ETC. The Company has previously furnished to
the Purchaser the Company's filings with the Securities and Exchange
Commission as follows: (I) Form 10-Q filed 9/16/02 (the "Most Recent
10-Q"); (ii) Form 10-Q filed 6/14/02; (iii) definitive proxy statement
filed 6/10/02; (iv) Form 10-Q filed 3/18/02; and (v) Form 10-K filed
1/29/02 (collectively the "SEC Filings"). The SEC Filings, as of the
date of the filing thereof with the SEC, complied in all material
respects with the provisions of the Securities Exchange Act of 1934
(the "Exchange Act"), and in each case the rules and regulations
promulgated thereunder, and none of such filings contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.4. CAPITALIZATION AND ISSUANCES OF STOCK. (a) As of September 12, 2002,
the Company has authorized and outstanding capital stock as set forth
in the Most Recent 10-Q. All outstanding shares of capital stock of the
Company are duly authorized, validly issued and outstanding, fully paid
and nonassessable. Except as set forth in the SEC Filings, as of
September 16, 2002: (I) there are no outstanding options, stock
subscription agreements, warrants or other rights permitting or
requiring the Company or others to purchase or acquire any shares of
capital stock or other equity securities of the Company; (ii) there are
no securities issued or outstanding which are convertible into or
exchangeable for any of the foregoing and there are no contracts,
commitments or understandings, whether or not in writing, to issue or
grant any such option, warrant, right or convertible or exchangeable
security; (iii) there are no shares of stock or other securities of the
Company reserved for issuance for any purpose; and (iv) there are no
voting trusts or other contracts, commitments, understandings,
arrangements or restrictions of any kind with respect to the ownership,
voting or transfer of shares of stock or other securities of the
Company to which the Company or, to the best of the Company's
knowledge, any stockholder of the Company is a party, including without
limitation, any preemptive rights, rights of first refusal, proxies or
similar rights. The issued and outstanding shares of capital stock of
the Company conform to all statements in relation thereto contained in
the SEC Filings, and the SEC Filings describe all material terms and
conditions thereof. To the Company's knowledge, all issuances by the
10
Company of its securities were exempt from registration under the
Securities Act and any applicable state securities laws or were issued
pursuant to a registration statement declared effective by the SEC
under the Securities Act and which registration statement was available
for the sale of the type of securities sold thereunder.
3.5. SUBSIDIARIES. The Company has the operating subsidiaries described in
the SEC Filings and additional subsidiaries that are dormant and not
material to the Company's operations or financial condition.
3.6. ISSUANCE OF SECURITIES. The issuance, sale and delivery of the Shares
in accordance with this Agreement, have been, or will be on or prior to
the Closing, duly authorized, and the Shares reserved for issuance by
all necessary corporate action on the part of the Company. The Shares,
when issued, sold, delivered and paid for in accordance with the
provisions of this Agreement will be duly and validly issued, fully
paid and non-assessable, and will be free of all liens, charges,
claims, encumbrances and restrictions on transfer other than the
restrictions on transfer under the Transaction Documents and under
applicable state and federal and foreign securities laws.
3.7. GOVERNMENTAL CONSENTS. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing
with, any Governmental Entity is required on the part of the Company in
connection with the execution and delivery of the Transaction
Documents, the offer, issue, sale and delivery of the Shares or the
other transactions to be consummated as contemplated by this Agreement,
except qualifications or filings under the Securities Act and other
applicable state securities laws which qualifications or filings, if
required, will be obtained or made and will be effective within the
time periods required by law.
3.8. OFFERING EXEMPTION. Assuming the accuracy of the representations and
warranties made by the Purchaser, the offer, sale and issuance of the
Shares to the Purchaser will be exempt from the registration
requirements of the Securities Act and will have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf
has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of the Shares to any person or
persons so as to bring the sale of such Shares by the Company within
the registration provisions of the Securities Act or any state
securities laws.
3.9. LITIGATION. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened, against
the Company, except as described in the SEC Filings. The Company is not
aware of any basis for any of the foregoing or any intent on its part
to initiate any of the foregoing.
11
3.10. FINANCIAL STATEMENTS. The financial statements set forth in the
Company's SEC Filings (the "Financial Statements") fairly present the
financial condition and results of operations of the Company and are in
accordance with the books and records of the Company, in each case as
at the dates and for the periods indicated, and have been prepared in
accordance with generally accepted accounting principles consistently
applied to companies domiciled in the United States, except to the
extent that the unaudited financial statements may not contain all
required footnotes and are subject to normal year-end audit adjustments
that in the aggregate will not be material.
3.11. ABSENCE OF LIABILITIES. Except as set forth in the Financial
Statements, the Company has no material liabilities, contingent or
otherwise, other than (I) liabilities incurred in the ordinary course
of business subsequent to July 31, 2002, that individually or in the
aggregate are not material to the financial condition or operating
results of the Company, and (ii) obligations not required under
generally accepted accounting principles to be reflected in the
Financial Statements.
3.12. TAXES. The Company has paid all taxes due as of the date hereof. The
Company has filed or has obtained presently effective extensions with
respect to all Federal, state, county, local and foreign tax returns
(collectively, "Tax Returns") that the Company is required to file. The
Tax Returns were true and correct in all material respects when filed,
and all taxes shown thereon to be due have been paid, with any
exceptions permitted by any taxing authority not having a materially
adverse effect on the Company. No material penalties or other charges
are or will become due with respect to any such Tax Returns as the
result of the late filing thereof. The Company has either paid or
established in the Financial Statements adequate reserves for the
payment of all such taxes due or claimed to be due by any taxing
authority in connection with any such Tax Returns. None of the
Company's federal income tax returns have been audited by the Internal
Revenue Service, and no controversy with respect to taxes of any type
is pending or, to the knowledge of the Company, threatened. The Company
has withheld or collected from each payment made to its employees the
amount of all taxes required to be withheld or collected therefrom and
has paid all such amounts to the appropriate taxing authorities when
due. Neither the Company nor, to the Company's knowledge, any of its
stockholders on behalf of the Company has ever filed (I) an election
pursuant to Section 1362 of the Internal Revenue Code of 1986, as
amended (the "Code"), that the Company be taxed as an S Corporation, or
(ii) a consent pursuant to Section 341(f) of the Code relating to
collapsible corporations.
3.13. PROPERTY AND ASSETS. The Company has good title to, or a valid
leasehold interest in, all of its material properties and assets,
including all properties and assets reflected in the July 31, 2002
Balance Sheet (the "Balance Sheet") contained in the Most Recent 10-Q.
None of such properties or assets is subject to any mortgage, pledge,
lien, security interest, lease, charge or encumbrance other than those
12
the material terms of which are described in the Most Recent 10-Q. The
Company does not own any real estate. All personal property of the
Company is in good operating condition and repair (ordinary wear and
tear and routinely scheduled maintenance excepted) and is suitable and
adequate for the uses for which it is intended or is being used.
3.14. INTELLECTUAL PROPERTY. To the Company's knowledge, the Company owns, or
has the right to use, free and clear of all liens, charges, claims and
restrictions, all patents, patent applications, trademarks, service
marks, trademark and service ▇▇▇▇ applications, trade names, copyrights
and licenses presently owned or held by the Company or employed or
proposed to be employed by it in its business as now conducted or
proposed to be conducted, as well as any agreement under which the
Company has access to any confidential information used by the Company
in its business (the "Intellectual Property Rights"). The Company has
not received any communications alleging that the Company has violated
any of the patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets or other proprietary rights of any other person
or entity ("Third-Party Intellectual Property Rights"), and to the
Company's knowledge the business proposed by the Company will not cause
the Company to infringe or violate any Third Party Intellectual
Property Rights. The Company is not aware of any violation by any third
party of any Intellectual Property Rights of the Company or of any
defects in the title thereto. The Company is not aware that any
employee is obligated under any contract (including any license,
covenant or commitment of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative agency,
that would conflict or interfere with: (I) the performance of such
employee's duties as an officer, employee or director of the Company;
(ii) the use of such employee's best efforts to promote the interests
of the Company; or (iii) the Company's business as conducted.
3.15. COMPLIANCE. The Company has, in all material respects, complied with
all laws, regulations and orders applicable to its business and has all
material permits and licenses required thereby. To the Company's
knowledge, no employee of the Company is in violation in any material
respect of any contract or covenant (either with the Company or with
another entity) relating to employment, patent, other proprietary
information disclosure, non-competition, or non-solicitation.
3.16. EMPLOYEES. All employees of the Company who have access to confidential
or proprietary information of the Company have executed and delivered
nondisclosure agreements, and all of such agreements are in full force
and effect. Except as set forth on Schedule 3.16, the Company is not
aware that any employee of the Company has plans to terminate his or
her employment relationship with the Company. The Company has complied
in all material respects with all applicable laws relating to wages,
hours, equal opportunity, collective bargaining, workers' compensation
insurance and the payment of social security and other taxes. None of
13
the employees of the Company is represented by any labor union, and
there is no labor strike or other labor trouble (including, without
limitation, any organizational drive) pending or, to the knowledge of
the Company, threatened with respect to the Company.
3.17. ENVIRONMENTAL AND SAFETY MATTERS. To the Company's knowledge, the
Company is not in material violation of any applicable environmental
law, and to its knowledge, no material expenditures are or will be
required in order to comply with any such environmental law.
3.18. BOOKS AND RECORDS. The books of account, ledgers, order books, records
and documents of the Company accurately and completely reflect all
material information relating to the business of the Company, the
location and collection of its assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of
the Company.
3.19. BROKERS OR FINDERS. The Company has not agreed to incur, directly or
indirectly, any liability for brokerage or finders' fees, agents'
commissions or other similar charges in connection with the Transaction
Documents or any of the transactions contemplated hereby or thereby,
except as set forth on Schedule 3.19.
3.20. DISCLOSURES. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision
to purchase the Shares. None of the information provided to the
Purchaser or its agents by the Company pursuant to this Agreement, any
Exhibit hereto, the Transaction Documents, or any report, certificate
or instrument furnished to the Purchaser or its agents in connection
with the transactions contemplated by this Agreement, when read
together, contains or will contain any material misstatement of fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE IV
REGISTRATION RIGHTS
4.1. PIGGY-BACK REGISTRATIONS. If at any time after the first anniversary of
the purchase of the Shares, the Company shall determine to register for
its own account or the account of others under the Securities Act
(including pursuant to a demand for registration of any stockholder of
the Company) any of its equity securities, other than on Form S-4 or
Form S-8 or their then equivalents relating to shares of Common Stock
to be issued solely in connection with any acquisition of any entity or
business or shares of Common Stock issuable in connection with stock
option or other employee benefit plans, it shall send to each holder of
Registrable Shares who is entitled to registration rights under this
Article 4.1 written notice of such determination and, if within fifteen
(15) days after receipt of such notice, such holder shall so request in
writing, the Company shall use its best efforts to include in such
14
registration statement all or any part of the Registrable Shares such
holder requests to be registered, except that if in connection with a
public offering of the Company, the managing underwriter shall impose a
limitation on the number of shares of such Common Stock which may be
included in the registration statement because, in its judgment, such
limitation is necessary to effect an orderly public distribution, then
the Company shall be obligated to include in such registration
statement only such limited portion of the Registrable Shares with
respect to which such holder has requested inclusion hereunder on a pro
rata basis.
"Registrable Shares" shall mean and include the Shares; provided,
however, that shares of Common Stock which are Registrable Shares shall
cease to be Registrable Shares upon the first to occur of (I) the
consummation of any sale pursuant to a registration statement or Rule
144 under the Securities Act, (ii) 90 days after the effectiveness of a
registration statement that includes such Registrable Shares, or (iii)
the date when such Registrable Shares may be sold without registration
under the Securities Act pursuant to Rule 144(k) thereunder.
4.2. EFFECTIVENESS. The Company will use its best efforts to maintain the
effectiveness for up to 90 days (or such shorter period of time as the
underwriters need to complete the distribution of the registered
offering) of any registration statement pursuant to which any of the
Registrable Shares are being offered, and from time to time will amend
or supplement such registration statement and the prospectus contained
therein to the extent necessary to comply with the Securities Act and
any applicable state securities statute or regulation. The Company will
also provide each holder of Registrable Shares with as many copies of
the prospectus contained in any such registration statement as it may
reasonably request.
4.3. INDEMNIFICATION BY THE COMPANY. (a) In the event that the Company
registers any of the Registrable Shares under the Securities Act, the
Company will indemnify and hold harmless each holder and each
underwriter of the Registrable Shares (including their officers,
directors, affiliates and partners) so registered (including any broker
or dealer through whom such shares may be sold) and each person, if
any, who controls such holder or any such underwriter within the
meaning of Section 15 of the Securities Act from and against any and
all losses, claims, damages, expenses or liabilities, joint or several,
to which they or any of them become subject under the Securities Act,
applicable state securities laws or under any other statute or at
common law or otherwise, as incurred, and, except as hereinafter
provided, will reimburse each such holder, each such underwriter and
each such controlling person, if any, for any legal or other expenses
reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, as incurred, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact
15
contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the final prospectus (or the registration
statement or prospectus as from time to time amended or supplemented by
the Company) or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, or
any violation by the Company of any rule or regulation promulgated
under the Securities Act or any state securities laws applicable to the
Company and relating to action or inaction required of the Company in
connection with such registration, unless (I) such untrue statement or
alleged untrue statement or omission or alleged omission was made in
such registration statement, preliminary or amended preliminary
prospectus or final prospectus in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith
by any such holder of Registrable Shares (in the case of
indemnification of such holder), any such underwriter (in the case of
indemnification of such underwriter) or any such controlling person (in
the case of indemnification of such controlling person) expressly for
use therein, or unless (ii) in the case of a sale directly by such
holder of Registrable Shares (including a sale of such Registrable
Shares through any underwriter retained by such holder of Registrable
Shares to engage in a distribution solely on behalf of such holder of
Registrable Shares), such untrue statement or alleged untrue statement
or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus copies of
which were delivered to such holder of Registrable Shares or such
underwriter on a timely basis, and such holder of Registrable Shares
failed to deliver a copy of the final or amended prospectus at or prior
to the confirmation for the sale of the Registrable Shares to the
person asserting any such loss, claim, damage or liability in any case
where such delivery is required by the Securities Act.
(b) Promptly after receipt by any holder of Registrable Shares, any
underwriter or any controlling person of notice of the commencement of
any action in respect of which indemnity may be sought against the
Company, such holder of Registrable Shares, or such underwriter or such
controlling person, as the case may be, will notify the Company in
writing of the commencement thereof (provided, that failure by any such
person to so notify the Company shall not relieve the Company from any
liability it may have hereunder to any other person entitled to claim
indemnity or contribution hereunder) and, subject to the provisions
hereinafter stated, the Company shall be entitled to assume the defense
of such action (including the employment of counsel, who shall be
counsel reasonably satisfactory to such holder of Registrable Shares,
such underwriter or such controlling person, as the case may be), and
the payment of expenses insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against
the Company.
16
(C) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which any holder of
Registrable Shares exercising rights under this Article IV or any
controlling person of any such holder, makes a claim for
indemnification pursuant to this Article 4.3 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Article 4.3
provides for indemnification in such case, then, the Company and such
holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from
others) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and of the holder of Registrable
Shares on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of
the Company on the one hand and of the holder of Registrable Shares on
the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the holder of
Registrable Shares on the other, and each party's relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, however, that, in any such case,
(A) no such holder will be required to contribute any amount in excess
of the public offering price of all such Registrable Shares offered by
it pursuant to such registration statement, net of any underwriting
discounts or commissions paid by such holder; and (B) no person or
entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
4.4. INDEMNIFICATION BY HOLDERS OF REGISTRABLE SHARES. (a) In the event that
the Company registers any of the Registrable Shares under the
Securities Act, each holder of the Registrable Shares so registered
will, as a condition to registration of the Registrable Shares, agree
to indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed or otherwise participated in the
preparation of the registration statement, each underwriter of the
Registrable Shares so registered (including any broker or dealer
through whom such of the shares may be sold) and each person, if any,
who controls the Company within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, applicable state
securities laws or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the
Company and each such director, officer, underwriter or controlling
person for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions
whether or not resulting in any liability, insofar as such losses,
17
claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the final
prospectus (or in the registration statement or prospectus as from time
to time amended or supplemented) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company in connection therewith by such
holder of Registrable Shares expressly for use therein; provided,
however, that such holder's obligations hereunder shall be limited to
an amount equal to the aggregate public offering price of the
Registrable Shares sold by such holder in such registration, net of any
underwriting discounts or commissions paid by such holder.
(b) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which the Company or
another person entitled to indemnification pursuant to this Article 4.4
makes a claim for indemnification pursuant to this Article 4.4, but it
is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding that this Article 4.4
provides for indemnification in such case, then, the Company and such
holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from
others) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and of the holder of Registrable
Shares on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of
the Company on the one hand and of the holder of Registrable Shares on
the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the holder of
Registrable Shares on the other, and each party's relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, however, that, in any such case,
(A) no such holder will be required to contribute any amount in excess
of the public offering price of all such Registrable Shares offered by
it pursuant to such registration statement, net of any underwriting
discounts or commissions paid by such holder; and (B) no person or
entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
18
4.5. EXCHANGE ACT REPORTS. The Company will use its best efforts to timely
file with the Commission such information as the Commission may require
under the Exchange Act and shall use its best efforts to take all
action as may be required as a condition to the availability of Rule
144 or Rule 144A under the Securities Act (or any successor exemptive
rule hereafter in effect) with respect to its Common Stock. The Company
shall furnish to any holder of Registrable Shares forthwith upon
request (I) a written statement by the Company as to its compliance
with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company as filed with the
Commission, and (iii) such other reports and documents as a holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a holder to sell any such Registrable Shares
without registration. The Company agrees to use its best efforts to
facilitate and expedite transfers of the Shares pursuant to Rule 144
under the Securities Act, which efforts shall include timely notice to
its transfer agent to expedite such transfers of Shares.
4.6. EXPENSES. In the case of each registration effected under Article 4.1,
the Company shall bear all reasonable costs and expenses of each such
registration on behalf of the selling holders of Registrable Shares,
including, but not limited to, the Company's printing, legal and
accounting fees and expenses, Commission and NASD filing fees and "Blue
Sky" fees; provided, however, that the Company shall have no obligation
to pay or otherwise bear any portion of the underwriters' commissions
or discounts attributable to the Registrable Shares being offered and
sold by the holders of the Registrable Shares, or the fees and expenses
of counsel for the selling holders of Registrable Shares in connection
with the registration of the Registrable Shares.
4.7. TRANSFERABILITY. For all purposes of Article IV of this Agreement,
Purchaser or an assignee thereof who agrees to be bound by the
provisions of this Article IV shall be deemed at any particular time to
be the holder of all Registrable Shares of which such person shall at
such time be the "beneficial owner," determined in accordance with Rule
13d-3 under the Exchange Act.
ARTICLE V
MISCELLANEOUS
5.1. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of any
party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power
or remedy hereunder. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
19
5.2. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement to
the contrary notwithstanding, and except as hereinafter provided,
changes in, termination or amendments of or additions to this Agreement
may be made, and compliance with any covenant or provision set forth
herein may be omitted or waived, if the Company shall obtain consent
thereto in writing from the Purchaser. Any waiver or consent may be
given subject to satisfaction of conditions stated therein and any
waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
5.3. ADDRESSES FOR NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including
telegraphic communication) and mailed, telegraphed or delivered to each
applicable party at the address set forth on Schedule 5.3 hereto or at
such other address as to which such party may inform the other parties
in writing in compliance with the terms of this Article. All such
notices, requests, demands and other communications shall be considered
to be effective when delivered.
5.4. COSTS, EXPENSES AND TAXES. All parties to bear their own expenses.
5.5. EFFECTIVENESS; BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Company, the Purchaser and
their respective successors and assigns; provided, that, the Company
may not assign any of its rights or obligations under this Agreement
without the prior written consent of the Purchaser. The Purchaser may
assign all or any part of its rights and obligations hereunder to any
person who acquires any Shares owned by the Purchaser subject to the
conditions of this Agreement.
5.6. PRIOR AGREEMENTS. The Transaction Documents executed and delivered in
connection herewith constitute the entire agreement between the parties
and supersede any prior understandings or agreements concerning the
subject matter hereof.
5.7. SEVERABILITY. The provisions of the Transaction Documents are severable
and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of a provision
contained therein shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of such Transaction Document and the terms of such
Transaction Documents shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of a provision,
had never been contained therein, and such provisions or part reformed
so that it would be valid, legal and enforceable to the maximum extent
possible.
5.8. GOVERNING LAW; VENUE.
20
A. This Agreement shall be enforced, governed and construed in
accordance with the laws of the State of New York, the
corporate law of Utah or federal securities law, as
applicable, without giving effect to choice of laws principles
or conflict of laws provisions. Any dispute arising out of
this agreement shall first be submitted to arbitration before
a single arbitrator sitting in Chicago, Illinois, said
arbitration to be conducted in accordance with the commercial
rules of the American Arbitration Association. Any discovery
permitted by the arbitrator shall be conducted in accordance
with the Federal Rules of Civil Procedure relating to the
conduct of written and oral discovery. Judgment may be entered
upon the award of the arbitrator in any state or federal court
located within San Diego County, California or ▇▇▇▇ County,
Illinois. The arbitrator shall render his or her findings and
award within 30 days of the completion of the hearing. The
award shall be in writing and shall state the reasons for the
award. The arbitrator may award costs and expenses at his or
her discretion. Notwithstanding the foregoing, any party shall
be entitled to seek injunctive relief from a state or federal
court located in San Diego County, California or ▇▇▇▇ County,
Illinois in any case where such relief may be available.
B. Purchaser hereby waives, and agrees not to assert against the
Company, or any successor assignee thereof, by way of motion,
as a defense, or otherwise, in any suit, action or proceeding,
(I) any claim that the Purchaser is not personally subject to
the jurisdiction of the above-named courts, and (ii) to the
extent permitted by applicable law, any claim that such suit,
action or proceeding is brought in an inconvenient forum or
that the venue of any such suit, action or proceeding is
improper or that this Agreement may not be enforced in or by
such courts.
5.9. HEADINGS. Article, section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
5.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart.
5.11. FURTHER ASSURANCES. From and after the date of this Agreement, upon the
request of the Purchaser or the Company, the Company and the Purchaser
shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of the
Transaction Documents and the Shares.
21
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company and Purchaser contained herein
shall survive the Closing and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations).
6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PURCHASER. In the
event the Company breaches any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 6.1, provided that the Purchaser makes a written claim for
indemnification against the Company within the applicable survival period stated
in Section 6.1, then the Company agrees to indemnify, defend and hold harmless
the Purchaser and its directors, officers, and each person, if any, who controls
the Purchaser within the meaning of Section 15 of the Securities Act, from and
against the entirety of any Adverse Consequences (as defined in Section 6.5) the
Purchaser or any such persons may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Purchaser or any
such persons may suffer after the end of the applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
6.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY. In the event
the Purchaser breaches any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 6.1, provided that the Company makes a written claim for indemnification
against the Purchaser within the applicable survival period stated in Section
6.1, then the Purchaser agrees to indemnify, defend and hold harmless the
Company and its directors, officers, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act, from and against
the entirety of any Adverse Consequences the Company or any such persons may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Company or any such persons may suffer after the
end of the applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach).
6.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Article VI, then each Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (I) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
22
and fulfill its indemnification obligations hereunder, (iii) the Third Party
Claim involves only money damages and does not seek an injunction or other
equitable relief, (iv) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 6.4(b), (I) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 6.4(b) is or
becomes unsatisfied, however, (I) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Parties need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article VI.
6.5 ADVERSE CONSEQUENCES. As used in this Article VI, "Adverse
Consequences" means all proceedings, charges, complaints, claims, causes of
action, demands, injunctions, judgments, orders, decrees, rulings, damages,
investigation and/or remediation costs, dues, penalties, fines, costs of defense
and other costs, amounts paid in settlement, liabilities, obligations,
responsibilities, taxes, liens, losses, expenses, and fees, including court
costs and reasonable attorneys' fees and expenses.
[signatures on following page]
23
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed as of the date first above written.
NEW VISUAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
STARZ INVESTMENTS LTD
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
By: /s/ Illegible
Name:______________________________
Title:_____________________________
24
