EXHIBIT 10.1
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT, dated as of January 24, 2006, is
entered into by and between RIM SEMICONDUCTOR COMPANY (formerly known as New
Visual Corporation), a Utah corporation with headquarters located at 000 XX
000xx Xxx., Xxxxx 000, Xxxxxxxx, XX 00000 (the "Company"), and each individual
or entity named on an executed counterpart of the signature page hereto (each
such signatory is referred to as a "Lender") (each agreement with a Lender being
deemed a separate and independent agreement between the Company and such Lender,
except that each Lender acknowledges and consents to the rights granted to each
other Lender [each, an "Other Lender"] under such agreement and the Transaction
Agreements, as defined below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Lender are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales to accredited investors
afforded, INTER ALIA, by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Section
4(2) of the 1933 Act; and
WHEREAS, each Lender wishes to lend funds in the amount of the
Purchase Price (as defined below) to the Company, subject to and upon the terms
and conditions of this Agreement and acceptance of this Agreement by the
Company, the repayment of which will be represented by a Secured Promissory Note
of the Company (the "Note"), on the terms and conditions referred to herein; and
WHEREAS, in connection with the loan to be made by the Lender,
the Company has agreed to issue the Note and the Warrant (as defined below) to
the Lender;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE.
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(i) Subject to the terms and conditions of this Agreement and
the other Transaction Agreements (as defined below), the Lender hereby agrees to
loan to the Company the principal amount specified on the Lender's signature
page of this Agreement (the "Purchase Price"), out of the aggregate amount being
loaned by all Lenders of US $750,000 (the "Aggregate Purchase Price").(1)
(ii) The obligation to repay the loan of the relevant Purchase
Price from the Lender shall be evidenced by the Company's issuance of one or
more Notes to the Lender in the principal amount of one hundred eight percent
(108%) of the Purchase Price paid by the Lender on or in connection with the
Closing Date. Each Note shall be payable on the earlier of (A) the date (the
"Stated Maturity Date") which is the later of May 25, 2006 or the date which is
one hundred twenty (120) days after the Closing Date or (B) the date on which
the New Transaction Threshold (as defined in the Note) occurs. Each Note shall
be in the form of ANNEX I annexed hereto. Repayment of the Note shall be secured
under the terms of a Security Interest Agreement between the Company, as debtor,
and the Lender, as secured party (the "Security Interest Agreement"),
substantially in the form annexed hereto as ANNEX V.
(iii) In consideration of the loan to be made by the Lender,
the Company will issue to such Lender the Warrant to purchase the number of
shares of the Company's Common Stock as provided in Section 4 hereof.
(iv) The loan to be made by the Lender and the issuance of the
Note and the Warrant to the Lender and the other transactions contemplated
hereby are sometimes referred to herein and in the other Transaction Agreements
as the purchase and sale of the Securities (as defined below), and are referred
to collectively as the "Transactions."
b. CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred
to in the relevant provision, another Person who or which controls or is
controlled by or is under common control with such specified Person.
"Certificates" means the ink-signed Note and the Warrant, each
duly executed by the Company and issued on the Closing Date in the name of the
Lender.
"Closing Date" means the date of the closing of the
Transactions, as provided herein.
"Company Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as defined below).
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(1)The Company acknowledges that of this amount, $130,000 has been previously
advanced on December 19, 2005 (the "Advance Date") by one Lender and received by
the Company. See footnote to Section 4(f) below.
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"Disclosure Annex" means ANNEX VIII to this Agreement;
provided, however, that the Disclosure Annex shall be arranged in sections
corresponding to the identified Sections of this Agreement, but the disclosure
in any such section of the Disclosure Annex shall qualify other provisions in
this Agreement to the extent that it would be readily apparent to an informed
reader from a reading of such section of the Disclosure Annex that it is also
relevant to other provisions of this Agreement.
"Escrow Agent" means Xxxxxxx & Xxxxxx LLP, the escrow agent
identified in the Joint Escrow Instructions attached hereto as ANNEX II (the
"Joint Escrow Instructions").
"Escrow Funds" means the Purchase Price delivered to the
Escrow Agent as contemplated by Sections 1(c) and (d) hereof.
"Escrow Property" means the Escrow Funds and the Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.
"Holder" means the Person holding the relevant Securities at
the relevant time.
"Last Audited Date" means October 31, 2004.
"Lender Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Lender pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
"Lender's Allocable Share" means the fraction, of which the
numerator is the Lender's Purchase Price and the denominator is the Aggregate
Purchase Price.
"Material Adverse Effect" means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(x) adversely affect the legality, validity or enforceability of the Purchased
Securities or any of the Transaction Agreements, (y) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company and its subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
material obligations under any of the Transaction Agreements or the transactions
contemplated thereby.
"New Common Stock" means shares of Common Stock and/or
securities convertible into, and/or other rights exercisable for, Common Stock,
which are offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or
lender (howsoever denominated) in a New Transaction.
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"New Transaction" means
(i) the offer or sale of New Common Stock by or on behalf of the
Company to a New Investor and/or
(ii) the grant of a security interest in or pledge of (x) any or all of
the Company's assets by the Company and/or (y) shares of the Company's
Common Stock or securities convertible into or exercisable for the
Company's Common Stock by any other party in connection with a
transaction in which the Company borrows or is otherwise obligated to
pay funds to a third party,
in a transaction offered or consummated after the date hereof; provided,
however, that it is specifically understood that the term "New Transaction" (1)
includes, but is not limited to, a sale of Common Stock or of a security
convertible into Common Stock or an equity or credit line transaction, but (2)
does not include (a) the issuance of Common Stock upon the exercise or
conversion of options, warrants or convertible securities outstanding on the
date hereof, or in respect of any other financing agreements as in effect on the
date hereof and identified in the Disclosure Annex or the Company SEC Documents
(provided the relevant instrument or document is not amended after the date
hereof), (b) the issuance of Common Stock pursuant to an employee stock option
plan of the Company, such stock option plan having been properly approved by the
shareholders of the Company, (c) the issuance of Common Stock pursuant to a
non-employee director or consultants' stock option plan of the Company, (d) the
issuance of Common Stock upon the exercise of any options or warrants referred
to in the preceding clauses of this paragraph (provided the relevant instrument
is not amended after the date hereof), or (e) the issuance of shares to a
Strategic Partner.
"Person" means any living person or any entity, such as, but
not necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin
Board or such other market on which the Common Stock is principally traded at
the relevant time, but shall not included the "pink sheets."
"Purchased Securities" means the Note and the Warrant.
"Securities" means the Note, the Warrant and the Shares
(provided, however, that the parties acknowledge that the use of such term is
for convenience only, and is not intended to suggest that the Note is a
"security," as such term is used in the 1933 Act).
"Shares" means the shares of Common Stock representing any of
the Warrant Shares.
"State of Incorporation" means Utah.
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"Strategic Partner" means a third party, whether or not
currently affiliated with the Company, which party (i) is engaged in a business
which is the business in which the Company is engaged or a similar or related
business, and (ii) either (a) subsequently purchases equity securities of the
Company (or securities convertible into equity securities of the Company), or
(b) enters into an agreement for one or more of the following: the licensing by
the Company of all or any portion of its technology to such third party, the
licensing by such third party of all or any portion of its technology to the
Company, or any other coordination of all or a portion of their respective
business activities or operations by the Company and such third party.
"Trading Day" means any day during which the Principal Trading
Market shall be open for business.
"Transfer Agent" means, at any time, the transfer agent for
the Company's Common Stock.
"Transaction Agreements" means this Bridge Loan Agreement, the
Note, the Security Interest Agreement, the Joint Escrow Instructions, and the
Warrant, and includes all ancillary documents referred to in those agreements.
"Warrant" means the warrant issued to the Lender as
contemplated by Section 4 of this Agreement.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrant.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Lender shall pay the Purchase Price by delivering
immediately available good funds in United States Dollars to the Escrow Agent no
later than the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Lender to the Escrow Agent of the Purchase Price, the
Company shall deliver the Certificates, each duly executed on behalf of the
Company and issued in the name of the Lender, to the Escrow Agent.
(iii) By signing this Agreement, each of the Lender and the
Company, subject to acceptance by the Escrow Agent, agrees to all of the terms
and conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
d. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made by wire transfer of funds to:
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Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Lender by
Xxxxxxx & Prager LLP]
Re: Rim Semiconductor 1/06 Bridge Transaction
For: [Name of Lender]
2. LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Lender represents and warrants to, and covenants and
agrees with, the Company as follows:
a. Without limiting Lender's right to sell the Securities
pursuant to an effective registration statement, if any, or otherwise in
compliance with the 1933 Act, the Lender is purchasing the Securities for its
own account for investment only and not with a view towards the public sale or
distribution thereof and not with a view to or for sale in connection with any
distribution thereof.
b. The Lender is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Securities by the
Lender shall be made either pursuant to registration of the relevant Securities
under the 1933 Act or pursuant to an exemption from registration.
d. The Lender understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Securities.
e. The Lender and its advisors, if any, have been furnished
with or have been given access to all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
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sale of the Securities which have been requested by the Lender, including those
set forth on any annex attached hereto. The Lender and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and its
management and have received complete and satisfactory answers to any such
inquiries. Without limiting the generality of the foregoing, the Lender has also
had the opportunity to obtain and to review the Company's filings on XXXXX
listed on ANNEX VI hereto (the documents listed on such Annex VI, to the extent
available on XXXXX or otherwise provided to the Lender as indicated on said
Annex VI, collectively, the "Company's SEC Documents").
f. The Lender understands that its investment in the
Securities involves a high degree of risk.
g. The Lender hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or any of its officers, directors and employees or any of its
attorneys or agents, except as specifically set forth herein.
h. The Lender understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
i. This Agreement and the other Transaction Agreements to
which the Lender is a party, and the transactions contemplated thereby, have
been duly and validly authorized, executed and delivered on behalf of the Lender
and are valid and binding agreements of the Lender enforceable in accordance
with their respective terms, subject as to enforceability to general principles
of equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Lender as of the date hereof and as of the Closing Date that,
except as otherwise provided in the Disclosure Annex or in the Company's SEC
Documents:
a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Note, the Warrant or the Shares. No party has a currently exercisable right of
first refusal which would be applicable to any or all of the transactions
contemplated by the Transaction Agreements.
b. STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
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or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.
c. AUTHORIZED SHARES.
(i) The authorized capital stock of the Company consists of (x)
500,000,000 shares of Common Stock, $0.001 par value per share, of which
approximately 258,995,599 are outstanding as of January 10, 2006, and (y)
15,000,000 shares of preferred stock, $0.01 par value per share, none of which
are issued or outstanding.
(ii) There are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future. If any such securities are listed on the Disclosure Annex, the number or
amount of each such outstanding convertible security and the conversion terms
are set forth in said Disclosure Annex.
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as would be
necessary to effect the issuance of the Shares on the Closing Date, were the
Warrant fully exercised on that date.
(iv) As of the Closing Date, the Shares shall have been duly authorized
by all necessary corporate action on the part of the Company, and, when issued
upon exercise of the Warrant, in accordance with its terms, will have been duly
and validly issued, fully paid and non-assessable and will not subject the
Holder thereof to personal liability by reason of being such Holder.
d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each
of the other Transaction Agreements, and the transactions contemplated thereby,
have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement is, and the Note,
the Warrant and each of the other Transaction Agreements, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and each of the other Transaction Agreements by the Company, the
issuance of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Note, the Warrant and the other
Transaction Agreements do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under (i) the certificate of incorporation or by-laws of the Company, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
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or any of its properties or assets are bound, including any listing agreement
for the Common Stock except as herein set forth, or (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have or result in a Material Adverse Effect.
f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the shareholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the
Lender as contemplated by this Agreement, except such authorizations, approvals
and consents that have been obtained.
g. FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since December 1, 2004, the Company has filed all annual
and quarterly reports required to be filed by the Company with the SEC under
Section 13(a) or 15(d) of the 1934 Act.
h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date,
there has been no Material Adverse Effect, except as disclosed in the Company's
SEC Documents. Since the Last Audited Date, except as provided in the Company's
SEC Documents, the Company has not (i) incurred or become subject to any
material liabilities (absolute or contingent) except liabilities incurred in the
ordinary course of business consistent with past practices; (ii) discharged or
satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business consistent with past practices; (iii) declared or
made any payment or distribution of cash or other property to shareholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts owed to the Company
by any third party or claims of the Company against any third party, except in
the ordinary course of business consistent with past practices; (v) waived any
rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of existing business; (vi) made any
increases in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
i. FULL DISCLOSURE. To the best of the Company's knowledge,
there is no fact known to the Company (other than general economic conditions
known to the public generally or as disclosed in the Company's SEC Documents)
that has not been disclosed in writing to the Lender that would reasonably be
expected to have or result in a Material Adverse Effect.
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j. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company before or by any governmental authority or nongovernmental
department, commission, board, bureau, agency or instrumentality or any other
person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
any of the Transaction Agreements. The Company is not aware of any valid basis
for any such claim that (either individually or in the aggregate with all other
such events and circumstances) could reasonably be expected to have a Material
Adverse Effect. There are no outstanding or unsatisfied judgments, orders,
decrees, writs, injunctions or stipulations to which the Company is a party or
by which it or any of its properties is bound, that involve the transaction
contemplated herein or that, alone or in the aggregate, could reasonably be
expect to have a Material Adverse Effect.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
Section 3(e) hereof, (i) neither the Company nor any of its subsidiaries is in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any material indenture, mortgage, deed of
trust or other material agreement to which it is a party or by which its
property is bound, and (ii) no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company or its subsidiary is a
party, and no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (or its equivalent term) (as so defined
in such agreement), has occurred and is continuing, which would have a Material
Adverse Effect.
l. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR
EVENTS. To the Company's knowledge, none of the following has occurred during
the past five (5) years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state insolvency law was
filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such Company Control
Person, or any partnership in which he was a general partner at or within two
years before the time of such filing, or any corporation or business association
of which he was an executive officer at or within two years before the time of
such filing;
(2) Such Company Control Person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
(i) acting as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, as a futures commission merchant, introducing broker,
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commodity trading advisor, commodity pool operator, floor broker, any
other Person regulated by the Commodity Futures Trading Commission
("CFTC") or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
(4) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than 60 days the
right of such Company Control Person to engage in any activity described in
paragraph (3) of this item, or to be associated with Persons engaged in any such
activity; or
(5) Such Company Control Person was found by a court of competent jurisdiction
in a civil action or by the CFTC or SEC to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
SEC has not been subsequently reversed, suspended, or vacated.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the
Company's knowledge, the Company has no liabilities or obligations other than
those disclosed in the Transaction Agreements or the Company's SEC Documents or
those incurred in the ordinary course of the Company's business since the Last
Audited Date, or which individually or in the aggregate, do not or would not
have a Material Adverse Effect. No event or circumstance has occurred or exists
with respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
n. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since July 1, 2005, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
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o. DILUTION. The number of shares issuable upon exercise of
the Warrant may have a dilutive effect on the ownership interests of the other
shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Warrant Shares upon exercise of the Warrant is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company, and the Company will honor such obligation, including honoring every
Notice of Exercise (as contemplated by the Warrant), unless the Company is
subject to an injunction (which injunction was not sought by the Company)
prohibiting the Company from doing so.
p. FEES TO BROKERS, FINDERS AND OTHERS. The Company has taken
no action which would give rise to any claim by any Person for brokerage
commission, finder's fees or similar payments by Lender relating to this
Agreement or the transactions contemplated hereby. Notwithstanding the
foregoing, the Company acknowledges that it has agreed to pay the Due Diligence
Fees to the Due Diligence Reviewers (as those terms are defined in ANNEX VII
hereto) for providing due diligence services to the Lenders in connection with
the transactions contemplated hereby. Except for such fees arising as a result
of any agreement or arrangement entered into by the Lender without the knowledge
of the Company (a "Lender's Fee"), Lender shall have no obligation with respect
to such fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this paragraph that may be due in connection
with the transactions contemplated hereby. The Company shall indemnify and hold
harmless each of the Lender, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees (other than a
Lender's Fee).
q. CONFIRMATION. The Company confirms that all statements of
the Company contained herein shall survive acceptance of this Agreement by the
Lender for a period of three (3) years from the Closing Date. The Company agrees
that, if any events occur or circumstances exist prior to the the release of the
Purchase Price to the Company which would make any of the Company's
representations, warranties, agreements or other information set forth herein
materially untrue or materially inaccurate as of such date, the Company shall
immediately notify the Lender (directly or through its counsel, if any) and the
Escrow Agent in writing prior to such date of such fact, specifying which
representation, warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
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a. TRANSFER RESTRICTIONS. The Lender acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and the Shares have not been and are not being registered under the
1933 Act, and may not be transferred unless (A) subsequently registered
thereunder or (B) the Lender shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (2) any sale of the
Securities made in reliance on Rule 144 promulgated under the 1933 Act may be
made only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of such Securities under circumstances in which the
seller, or the Person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or, except as
specifically contemplated by the Transaction Agreements, to comply with the
terms and conditions of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Lender acknowledges and agrees
that, until such time as the relevant Shares have been registered under the 1933
Act and sold in accordance with an effective registration statement, the
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
c. FILINGS. The Company undertakes and agrees to make all
filings required to be made by it in connection with the sale of the Securities
to the Lender under the 1933 Act, the 1934 Act or any United States state
securities laws and regulations thereof applicable to the Company, or by any
domestic securities exchange or trading market, and, unless such filing is
publicly available on the SEC's XXXXX system (via the SEC's web site at no
additional charge), to provide a copy thereof to the Lender promptly after such
filing.
d. REPORTING STATUS. So long as the Lender beneficially owns
any of the Securities and for at least twenty (20) Trading Days thereafter, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its
control to ensure that adequate current public information with respect to the
Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. So long as the Lender
beneficially owns the Warrant or any of the Warrant Shares, the Company will
take all reasonable action under its control to maintain the continued listing
13
and quotation and trading of its Common Stock (including, without limitation,
all Shares) on the Principal Trading Market or a listing on the NASDAQ/Small Cap
or National Markets and, to the extent applicable to it, will comply in all
material respects with the Company's reporting, filing and other obligations
under the by-laws or rules of the Principal Trading Market and/or the National
Association of Securities Dealers, Inc., as the case may be, applicable to it.
e. USE OF PROCEEDS. The Company will use the proceeds received
hereunder (i) first, as provided in ANNEX VII attached hereto, and (ii) then,
for general corporate purposes.
f. WARRANT. The Company agrees to issue to each Lender on the
Closing Date a transferable warrant (the "Warrant") for the purchase of the
Lender's Allocable Share of 7,500,000 shares of Common Stock.(2) The exercise
price of the Warrant will be equal to $0.10, subject to adjustment as provided
in the Warrant and herein. The Warrant shall be exercisable initially on the
Commencement Date specified in the Warrant and shall expire on the later of
January 31, 2011 or the last day of the calendar month in which the fifth
anniversary of the Closing Date occurs. Except as specified above, each Warrant
shall generally be in the form annexed hereto as ANNEX IV.
g. CERTAIN AGREEMENTS. Any other provision of this Agreement
or any of the other Transaction Agreements to the contrary notwithstanding, the
Company shall not engage in any offers, sales or other transactions of its
securities which would adversely affect the exemption from registration
available for the transactions contemplated by the Transaction Agreements.
h. RULE 144. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit Holder to sell securities of
the Company to the public without registration (collectively, "Rule 144"), the
Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(iii) furnish to the Holder so long as such party owns Warrants or
Warrant Shares, promptly upon request, (A) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the 1933 Act
and the 1934 Act, (B) 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 (C) such other information as may be
reasonably requested to permit the Holder to sell such securities pursuant to
Rule 144 without registration; and
------------------------
(2)Of this total, the Warrant for 1,300,000 shares was issued as of the Advance
Date.
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(iv) at the request of any Holder then holding Warrants or Warrant
Shares, give the Transfer Agent instructions (supported by an opinion of Company
counsel, if required or requested by the Transfer Agent) to the effect that,
upon the Transfer Agent's receipt from such Holder of
(A) a certificate (a "Rule 144 Certificate") certifying (1) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the Shares which the Holder proposes to
sell (the "Securities Being Sold") is not less than one (1) year and
(2) as to such other matters as may be appropriate in accordance with
Rule 144 under the Securities Act, and
(B) an opinion of counsel acceptable to the Company (for which purposes
it is agreed that Xxxxxxx & Xxxxxx LLP shall be deemed acceptable if
not given by Company counsel) that, based on the Rule 144 Certificate,
Securities Being Sold may be sold pursuant to the provisions of Rule
144, even in the absence of an effective registration statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the relevant
Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Lender). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.
i. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, a number of
shares (the "Minimum Available Shares") at least equal to one hundred percent
(100%) of the number of shares which would be issuable upon exercise of the
outstanding Warrants held by all Holders (in each case, whether such Warrant
were originally issued to the Holder, the Lender or to any other party). For the
purposes of such calculations, the Company should assume that the Warrant were
then exercisable without regard to any restrictions which might limit any
Holder's right to exercise the Warrant held by any Holder.
j. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties
agrees that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects, unless in the reasonable opinion of
15
counsel to the party proposing such statement, such statement is legally
required to be included. In furtherance of the foregoing, the Company will
provide to the Lender drafts of the applicable text of the first filing of a
Current Report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K
(or equivalent SB forms) intended to be made with the SEC which refers to the
Transaction Agreements or the transactions contemplated thereby as soon as
practicable (but at least two (2) Trading Days before such filing will be made)
and will not include in such filing any statement or statements or other
material to which the other party reasonably objects, unless in the reasonable
opinion of counsel to the party proposing such statement, such statement is
legally required to be included. Notwithstanding the foregoing, each of the
parties hereby consents to the inclusion of the text of the Transaction
Agreements in filings made with the SEC as well as any descriptive text
accompanying or part of such filing which is accurate and reasonably determined
by the Company's counsel to be legally required. Notwithstanding, but subject
to, the foregoing provisions of this Section 4(j), the Company will, after the
Closing Date, promptly issue a press release and file a Current Report on Form
8-K or, if appropriate, a quarterly or annual report on the appropriate form,
referring to the transactions contemplated by the Transaction Agreements.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give the Transfer Agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon exercise of the Warrant in such
amounts as specified from time to time by the Company to the Transfer Agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement,
registered in the name of the Lender or its nominee and in such denominations to
be specified by the Holder in connection with each exercise of the Warrant.
Except as so provided, the Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Agreements. Nothing in this Section shall affect in
any way the Lender's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Lender provides the
Company with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Lender of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of
this Agreement) permit the transfer of the Securities and, in the case of the
Warrant Shares, promptly instruct the Company's Transfer Agent to issue one or
more certificates for Common Stock without legend in such name and in such
denominations as specified by the Lender.
b. Subject to the provisions of this Agreement, the Company
will permit the Lender to exercise the Warrant in the manner contemplated by the
Warrant.
c. (i) The Company understands that a delay in the issuance of
the Shares of Common Stock beyond the Delivery Date (as defined in the Warrant)
could result in economic loss to the Lender. As compensation to the Lender for
such loss, the Company agrees to pay late payments to the Lender for late
16
issuance of Shares upon exercise in accordance with the following schedule
(where "No. Business Days Late" refers to the number of Trading Days which is
beyond two (2) Trading Days after the Delivery Date):(3)
Late Payment For Each $10,000
of Exercise Price of Warrant
NO. BUSINESS DAYS LATE BEING EXERCISED
---------------------- ---------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender's exclusive remedy (other than the
following provisions of this Section 5(c)) for such delay. Furthermore, in
addition to any other remedies which may be available to the Lender, in the
event that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the tenth Trading Day after the Delivery
Date, the Lender will be entitled to revoke the relevant Notice of Exercise by
delivering a notice to such effect to the Company, whereupon the Company and the
Lender shall each be restored to their respective positions immediately prior to
delivery of such Notice of Exercise; provided, however, that an amount equal to
any payments contemplated by this Section 5(c) which have accrued through the
date of such revocation notice shall remain due and owing to the Exercising
Holder notwithstanding such revocation.
(ii) If, by the close of business on the fifth
Trading Day after the Delivery Date, the Company fails for any reason to deliver
the Shares to be issued upon exercise of the Warrant and after such fifth
Trading Day, the Holder of the Warrant being exercised (an "Exercising Holder")
purchases, in an arm's-length open market transaction or otherwise, shares of
Common Stock (the "Covering Shares") in order to make delivery in satisfaction
of a sale of Common Stock by
--------------------------
(3) Example: Notice of Exercise is delivered on Monday, May 1, 2006. The
Delivery Date would be Thursday, May 4 (the third Trading Day after such
delivery). If the certificate is delivered by Monday, May 8 (2 Trading Days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on May 9, that is 1 "Business Day Late" in the table
below; if delivered on May 16, that is 6 "Business Days Late" in the table.
17
the Exercising Holder (the "Sold Shares"), which delivery such Exercising Holder
anticipated to make using the Shares to be issued upon such exercise (a
"Buy-In"), the Exercising Holder shall have the right, in addition to and not in
lieu of all other amounts contemplated in other provisions of the Transaction
Agreements, including, but not limited to, the provisions of the immediately
preceding Section 5(c)(i), the Buy-In Adjustment Amount (as defined below). The
"Buy-In Adjustment Amount" is the amount equal to the number of Sold Shares
multiplied by the excess, if any, of (x) the Exercising Holder's total purchase
price per share (including brokerage commissions, if any) for the Covering
Shares over (y) the net proceeds per share (after brokerage commissions, if any)
received by the Exercising Holder from the sale of the Sold Shares. The Company
shall pay the Buy-In Adjustment Amount to the Exercising Holder in immediately
available funds immediately upon demand by the Exercising Holder. By way of
illustration and not in limitation of the foregoing, if the Exercising Holder
purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which Company will be required to pay to the Exercising Holder will be $1,000.
d. The Holder of the Warrant shall be entitled to exercise its
exercise privilege with respect to the Warrant notwithstanding the commencement
of any case under 11 U.S.C. ss.101 ET SEQ. (the "Bankruptcy Code"). In the event
the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to
the fullest extent permitted, any rights to relief it may have under 11 U.S.C.
ss.362 in respect of such holder's exercise privilege. The Company hereby
waives, to the fullest extent permitted, any rights to relief it may have under
11 U.S.C. ss.362 in respect of the exercise of the Warrant. The Company agrees,
without cost or expense to such Holder, to take or to consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss.362.
e. The Company will authorize the Transfer Agent to give
information relating to the Company directly to the Holder or the Holder's
representatives upon the request of the Holder or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Holder in connection with a Notice of
Exercise, or (ii) the aggregate number of outstanding shares of Common Stock of
all shareholders (as a group, and not individually) as of a current or other
specified date. At the request of the Holder, the Company will provide the
Holder with a copy of the authorization so given to the Transfer Agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. The closing of the Transactions shall occur on the Closing
Date at the offices of the Escrow Agent and shall take place no later than 3:00
P.M., New York time, on such day or such other time as is mutually agreed upon
by the Company and the Lender.
18
c. Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Funds to the Company
and to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Lender understands that the Company's obligation to sell
the Note and the Warrant to the Lender pursuant to this Agreement on the Closing
Date is conditioned upon:
a. The execution and delivery of this Agreement by the Lender;
b. Delivery by the Lender to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price in accordance with this
Agreement;
c. The accuracy on such Closing Date of the representations
and warranties of the Lender contained in this Agreement, each as if made on
such date, and the performance by the Lender on or before such date of all
covenants and agreements of the Lender required to be performed on or before
such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.
The Company understands that the Lender's obligation to
purchase the Note and the Warrant on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;
b. Delivery by the Company to the Escrow Agent of the
Certificates in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
d. On the Closing Date, the Lender shall have received an
opinion of counsel for the Company, dated the Closing Date, in form, scope and
substance reasonably satisfactory to the Lender, substantially to the effect set
forth in ANNEX III attached hereto;
19
e. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
f. From and after the date hereof to and including the Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii) no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market.
9. INDEMNIFICATION AND REIMBURSEMENT.
a. (i) The Company agrees to indemnify and hold harmless the
Lender and its officers, directors, employees, and agents, and each Lender
Control Person from and against any losses, claims, damages, liabilities or
expenses incurred (collectively, "Damages"), joint or several, and any action in
respect thereof to which the Lender, its partners, Affiliates, officers,
directors, employees, and duly authorized agents, and any such Lender Control
Person becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Lender's failure to perform any covenant or agreement contained in this
Agreement or the Lender's or its officer's, director's, employee's, agent's or
Lender Control Person's illegal or willful misconduct, gross negligence,
recklessness or bad faith (in each case, as determined by a non-appealable
judgment to such effect) in performing its obligations under this Agreement.
(ii) The Company hereby agrees that, if the Lender,
other than by reason of its gross negligence, illegal or willful misconduct,,
(x) becomes involved in any capacity in any action, proceeding or investigation
brought by any shareholder of the Company, in connection with or as a result of
the consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or if the Lender is impleaded in any such action,
proceeding or investigation by any Person, or (y) becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisdiction, against or
involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by this Agreement or the other Transaction
Agreements, or (z) is impleaded in any such action, proceeding or investigation
by any Person, then in any such case, the Company shall indemnify, defend and
hold harmless the Lender from and against and in respect of all losses, claims,
liabilities, damages or expenses resulting from, imposed upon or incurred by the
Lender, directly or indirectly, and reimburse such Lender for its reasonable
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred.
The indemnification and reimbursement obligations of the Company under this
20
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Lender who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Lender Control Persons (if any), as
the case may be, of the Lender and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Lender, any such Affiliate and any such
Person. The Company also agrees that neither the Lender nor any such Affiliate,
partner, director, agent, employee or Lender Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except as may be expressly and
specifically provided in or contemplated by this Agreement.
b. All claims for indemnification by any Indemnified Party (as
defined below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of
which any Person claiming indemnification under any provision of this Section
(an "Indemnified Party") might seek indemnity under paragraph (a) of this
Section is asserted against or sought to be collected from such Indemnified
Party by a Person other than a party hereto or an Affiliate thereof (a "Third
Party Claim"), the Indemnified Party shall deliver a written notification,
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of this Section
against any Person (the "Indemnifying Party"), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by
such failure of the Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under this Section and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to
this paragraph (b) of this Section, then the Indemnifying Party shall
have the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
21
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party shall
not be indemnified in full pursuant to paragraph (a) of this Section).
The Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this
subparagraph (x), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be
necessary or appropriate protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in contesting any
Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this subparagraph (x), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under paragraph (a) of this
Section with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to paragraph (b) of this Section, or if
the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within the
Dispute Period, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings
shall be prosecuted by the Indemnified Party in a reasonable manner and
in good faith or will be settled at the discretion of the Indemnified
Party (with the consent of the Indemnifying Party, which consent will
not be unreasonably withheld). The Indemnified Party will have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party
Claim which the Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this subparagraph (y), if the Indemnifying
Party has notified the Indemnified Party within the Dispute Period that
the Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such Third
Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in subparagraph(z) below, the
22
Indemnifying Party will not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this subparagraph (y) or
of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense
or settlement controlled by the Indemnified Party pursuant to this
subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under paragraph
(a) of this Section or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party with respect to
such Third Party Claim, the amount of Damages specified in the Claim
Notice shall be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good
faith to negotiate a resolution of such dispute; provided, however,
that if the dispute is not resolved within thirty (30) days after the
Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(ii) In the event any Indemnified Party should have a
claim under paragraph (a) of this Section against the Indemnifying Party that
does not involve a Third Party Claim, the Indemnified Party shall deliver a
written notification of a claim for indemnity under paragraph (a) of this
Section specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "Indemnity Notice") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under paragraph (a) of this Section and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that it the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
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c. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Lender hereby waive
a trial by jury in any action, proceeding or counterclaim brought by either of
the Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
a. (i) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware 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
City of Wilmington or the state courts of the State of Delaware sitting in the
City of Wilmington in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on FORUM
NON CONVENIENS, to the bringing of any such proceeding in such jurisdictions or
to any claim that such venue of the suit, action or proceeding is improper. To
the extent determined by such court, the Company shall reimburse the Lender for
any reasonable legal fees and disbursements incurred by the Lender in
enforcement of or protection of any of its rights under any of the Transaction
Agreements. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
(ii) The Company and the Lender acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement or the other Transaction Agreements were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
the other Transaction Agreements and to enforce specifically the terms and
provisions hereof and thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
b. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
24
e. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
g. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
k. All dollar amounts referred to or contemplated by this
Agreement or any other Transaction Agreement shall be deemed to refer to US
Dollars, unless otherwise explicitly stated to the contrary.
12. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal
delivery as against written receipt therefor or by confirmed
facsimile transmission,
(b) the fifth Trading Day after deposit, postage
prepaid, in the United States Postal Service by registered or
certified mail, or
(c) the third Trading Day after mailing by domestic
or international express courier, with delivery costs and fees
prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
25
with a copy to:
Xxxxx Xxxxx, P.C.
Attn: Xxxxxxxx Xxxxxxx, Esq.
900 Three Galleria Tower
000000 Xxxx Xxxx
Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
LENDER: At the address set forth on the signature page of this Agreement.
with a copy to:
Xxxxxxx & Prager LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Prager LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
and the Lender's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Certificates
and the payment of the Purchase Price, and shall inure to the benefit of the
Lender and the Company and their respective successors and assigns.
[Balance of page intentionally left blank]
26
IN WITNESS WHEREOF, with respect to the Purchase Price specified below,
this Agreement has been duly executed by the Lender and the Company as of the
date set first above written.
PURCHASE PRICE: $ 750,000
LENDER:
-------
Harbour House, Waterfront Drive
P. O. Box 972
Road Town, Tortola, BVI Double U Master Fund, LP
--------------------------------- ------------------------------------
Address Printed Name of Lender
By: /s/ [ illegible ]
Telecopier No. 0-000-000-0000 ------------------------------------
(Signature of Authorized Person)
Navigator Management, Ltd.
British Virgin Islands Authorized Signatory
----------------------------------- ------------------------------------
Jurisdiction of Incorporation Printed Name and Title
or Organization
COMPANY
-------
RIM SEMICONDUCTOR COMPANY
By: /s/ Xxxx Xxxxx
-------------------------------------------------
(Signature of Authorized Person)
Xxxx Xxxxx, President and Chief Executive Officer
-------------------------------------------------
Printed Name and Title
27
ANNEX I FORM OF NOTE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL OF COMPANY
ANNEX IV FORM OF WARRANT
ANNEX V SECURITY INTEREST AGREEMENT
ANNEX VI COMPANY'S SEC DOCUMENTS AVAILABLE ON XXXXX
ANNEX VII USE OF PROCEEDS
ANNEX VIII COMPANY DISCLOSURE
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