EXHIBIT 10.3
REGULATION S STOCK PURCHASE AGREEMENT
Dated April 15, 2003
for
NEW VISUAL CORP.
Regulation S Stock Purchase Agreement, dated as of April 15, 2002
between New Visual Corporation, a Utah corporation having offices at 0000 Xxxxxx
Xxxx, Xxx Xxxxx, Xxxxxxxxxx, X.X.X. 00000 (the "Company") and Californian
Securities S.A., located at Xxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxxx,
Xxxxxx Xxxx, Xxxxxxxx of Panama. 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 corporation
organized under the laws of the State of Utah.
b. "Purchaser" means Californian Securities S.A. a Panamanian
business company.
c. "Purchase Notice" means a written or 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 $.145 per Share.
e. "Reg S" shall mean Regulation S and the related Rules
promulgated by the SEC pursuant to the Securities Act of 1933
("Securities Act") as an exemption from registration.
f. "SEC" shall mean the United States Securities and Exchange
Commission.
g. "Shares" means shares of common stock of the Company and
"Share" means a single share of common stock of the Company.
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 One Million Six
Hundred (1,600,000) Shares of the Company.
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1.2. CLOSING. The Purchaser will pay the Total Amount Due on a
closing date by wire transfer of immediately available funds
within 3 business days after receipt of the Share
certificates. The Closing shall take place in Panama.
1.3. FLOOR PRICE. There is no floor price.
1.4. DELIVERY OF PURCHASE NOTICE; TERM. Purchaser shall have to and
until May 15, 2003 to deliver one or more Purchase Notices to
the Company at which time this Agreement shall terminate,
unless extended in writing by the parties. 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. Anything herein
to the contrary notwithstanding, any Purchase Notice accepted
after the end of the term of this Agreement shall be governed
by the terms of this Agreement as if it was timely delivered.
1.5. COVENANT OF BEST EFFORTS. The Purchaser agrees to use its best
efforts to purchase up to 1,600,000 Shares between the date
hereof and May 15, 2003 ("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:
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 (as hereinafter defined).
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.
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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
SEC pursuant to the Securities Act with respect to
the Shares purchased hereby.
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
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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.
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 on its books
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
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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;
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.
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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
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, equity swap or
other derivative transaction.
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
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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:
(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. Except as otherwise set forth on Schedule 2.1,
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.
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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 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.
2.4. COMMUNICATIONS. The Company will only communicate with the
Purchaser or its authorized representative, A-Street Capital
Corp., with regard to any aspect of this Agreement or the sale
of Shares pursuant to this Agreement.
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
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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 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, 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) Forms 10-Q
dated Xxxxx 00, 0000 (xx) Forms 10-KA dated February 28, 2003
and Form 10K January 29, 2003 (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 October 31,
2002 the Company has authorized and outstanding capital stock
as set forth on Schedule 3.4 and in the Form 10KA dated
February 28, 2003. 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 Schedule 3.4: (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
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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 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, or qualification 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 material action, suit, proceeding or
investigation pending or, to the Company's knowledge,
currently threatened, against the Company, except as described
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in the SEC Filings or Schedule 3.9 hereto. 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.
3.10. FINANCIAL STATEMENTS. The unaudited financial statements dated
as of January 31, 2003 attached hereto as Schedule 3.10 (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 or in the Company's 10KA dated March 28, 2003, the
Company has no material liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of
business subsequent to January 31, 2003, 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. Except as set forth in Schedule 3.12 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. Except as set forth in Schedule
3.12 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
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Financial Statements. Except as set forth in Schedule 3.12,
none of such properties or assets is subject to any mortgage,
pledge, lien, security interest, lease, charge or encumbrance
other than those the material terms of which are described in
the Financial Statements. 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
xxxx 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. Except as set forth in Schedule 3.15, 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
12
bargaining, workers' compensation insurance and the payment of
social security and other taxes. None of 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 options 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 registration statement all or any part of the Registrable
Shares such holder requests to be registered, except that if
13
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 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 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
14
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.
(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
15
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, 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
16
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.
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
17
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.
5.2. AMENDMENTS, WAIVERS AND CONSENTS. Notwithstanding any
provision in this Agreement to the contrary, 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 parties shall agree in writing.
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 are to bear their own
expenses.
18
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
terms and 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.
A. This Agreement shall be enforced, governed and
construed in accordance with the commercial 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 having jurisdiction. 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
having jurisdiction and 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
19
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.
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
20
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 a delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall not
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 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
21
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]
22
IN WITNESS WHEREOF, the parties hereto have caused this Regulation S
Stock Purchase Agreement to be executed as of the date first above written.
NEW VISUAL CORP. CALIFORNIAN SECURITIES S.A.
By: /s/ B Ketch By:
23
