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NEW VISUAL ENTERTAINMENT, INC.
a Utah corporation
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SECURITIES PURCHASE AGREEMENT
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$5 MILLION OF COMMON STOCK
AND
WARRANTS FOR 4,000,000 SHARES OF COMMON STOCK
Dated as of November 17, 2000
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LIST OF ANNEXES
Annex A Schedule of Investors
Annex B Series A Warrant
Annex C Series B Warrant
Annex D Form of Draw Down Notice
Annex E Registration Rights Agreement
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), is dated this
17th day of November, 2000 (the "EFFECTIVE DATE"), by and between NEW VISUAL
ENTERTAINMENT, INC. (the "COMPANY") and those persons set forth on ANNEX A
(collectively, the "INVESTORS"). Terms not otherwise defined shall have the
meanings ascribed to them in Section 10 hereof.
RECITALS
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WHEREAS, the Investors desire to purchase from the Company, and the
Company desires to sell to the Investors shares (the "COMMON SHARES") of the
Company's Common Stock, $.001 par value (the "COMMON STOCK") in exchange for the
Investors' $5 million investment in the Company (the "INVESTMENT"); and
WHEREAS, as part of their Investment the Investors shall receive
warrants (the "WARRANTS") to purchase up to 4,000,000 shares of Common Stock
(the "WARRANT SHARES") to be issued in two series (the "SERIES A WARRANTS" and
the "SERIES B WARRANTS"); and
WHEREAS, the Common Shares, the Warrants and the Warrant Shares are
sometimes referred to herein individually and collectively as the "SECURITIES."
NOW, THEREFORE, in consideration of the premises and mutual agreements,
covenants, representations, warranties and indemnities contained in this
Agreement, the Company and the Investors agree as follows:
1. SALE AND PURCHASE OF THE SECURITIES. Upon the terms and subject to the
conditions herein contained, the Company agrees to sell to the Investors and the
Investors agree to purchase: (i) an aggregate of $5,000,000 of the Company's
Common Stock and (ii) Warrants to purchase the Warrant Shares. The sale and
purchase of the Securities shall occur in a series of draw down transactions
(each, a "DRAW DOWN") as more fully described in Section 3 hereof.
2. DETERMINATION OF PRICE AND NUMBER OF SHARES TO BE PURCHASED.
2.1 The price to be paid for each Common Share (the "PURCHASE
PRICE") shall be equal to 87% of the average of the closing
sales price of the Company's Common Stock as reported on the
principal exchange on which the Common Stock is traded (as
reported by the Wall Street Journal or, if not reported
thereby, by another authoritative source) over the applicable
Pricing Period (as defined below) (the "AVERAGE SALES PRICE").
By way of illustration, if the Average Sales Price over a
Pricing Period is $10 per share, the Purchase Price with
respect to such Draw Down shall be $8.70 per share. The five
consecutive trading day period over which the Average Sales
Price shall be calculated shall be referred to herein as the
"PRICING PERIOD."
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2.2 The number of shares of Common Stock to be issued in
connection with each Draw Down shall be equal to the Average
Sales Price divided by the Draw Down Amount, rounded to the
nearest whole share and adjusted as set forth in Section 3.4
below (the "CLOSING SHARES"). By way of illustration, if the
Average Sales Price is $7.50 per share and the Draw Down
Amount is $375,000, the number of Closing Shares to issued to
the Investors shall be $375,000 divided by $7.50, or 50,000
Closing Shares.
2.3 Each Investor severally agrees to purchase from the Company,
at each Closing on each Closing Date (as hereinafter defined),
such Investor's pro rata portion of the Draw Down Amount (the
"REQUIRED PAYMENT") in exchange for its pro rata portion of
the Closing Shares.
3. DRAW DOWN TERMS. Subject to the satisfaction of the conditions set forth in
this Agreement, the parties agree as follows:
3.1 During the Term, the Company, may, in its sole discretion,
issue a number of Draw Down Notices, each with respect to a
draw down (a "DRAW DOWN"), which Draw Down the Purchaser shall
be obligated to accept, of a Draw Down amount of up to
$500,000 (each, a "DRAW DOWN AMOUNT"); PROVIDED, HOWEVER, that
the Investors may refuse, in their sole discretion, on or
before the Closing Date, to close on any Draw Down in which
the Average Sales Price is below $5 per share.
3.2 There shall be a minimum of five (5) trading days (or such
other number of trading days mutually agreed upon by the
Purchaser and the Company) between Draw Downs.
3.3 The Company must inform the Purchaser via facsimile
transmission as to the Draw Down Amount the Company wishes to
exercise before commencement of trading on the first trading
day of the Pricing Period (the "DRAW DOWN NOTICE"),
substantially in the form attached hereto as ANNEX D.
3.4 On each Closing Date, the Investors shall cause the Required
Payment to be made to the Company's designated account by wire
transfer of immediately available funds. Within three days of
receipt of the Required Payment, the Company shall cause the
Common Shares to be delivered to the Investors in accordance
with each Investor's pro rata percentage, as set forth on
ANNEX A attached hereto, making all required adjustments to
ensure that the number of Common Shares distributed to each
Investor for any given Draw Down is rounded up to the nearest
whole share.
3.5 The Draw Down Amounts advanced hereunder shall not, in the
aggregate, exceed $1,000,000 until such time as the Company's
New Wheel Technology, Inc. subsidiary has demonstrated to an
engineer and/or engineering consulting organization trained in
the art of transmission and/or data communications that its
metallic high-speed transmission technology is capable of
transmitting and receiving signals in sufficient detail that
signals are being transferred at 51 Mbps on two 26-gauge
copper wires for a distance of 8,500 feet.
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4. CLOSING.
4.1 SERIES OF CLOSINGS. The sale to and purchase by the Investors
of the Securities shall occur in a series of Draw Downs (each
purchase to occur at a "CLOSING," and collectively, the
"CLOSINGS") pursuant to the Draw Down Terms set forth in
Section 3 above.
4.2 MECHANICS OF CLOSINGS. Upon receipt of a Draw Down Notice, the
Pricing Period shall begin. The Average Sales Price shall be
determined over the course of the Pricing Period. Subject to
Section 3.1 hereof, the Closing shall occur three business
days from the end of the Pricing Period, unless another date
is mutually agreed upon, in writing, by the parties (each, a
"CLOSING DATE").
4.3 DELIVERIES AT CLOSINGS. At the first closing, the Company will
deliver to each Investor a Series A Warrant Certificate
substantially in the form attached as ANNEX B hereto and/or a
Series B Warrant Certificate substantially in the form
attached as ANNEX C hereto for the purchase of the number of
Warrant Shares in each series as set forth opposite such
Investor's name on ANNEX A hereto, upon receipt by the Company
of payment by check or wire transfer in an aggregate amount
equal to the Required Payment owed by such Investor at such
Closing.
4.4 INITIAL DRAW DOWN. The Company acknowledges receipt of
$315,000 advanced from the Investors prior to the execution of
this Agreement. Therefore, the Company and the Investors agree
that the initial Draw Down will be deemed to have occurred
upon the execution of this Agreement and the initial Draw Down
Amount shall be deemed to have been made in the amount of
$315,000.
5. RESTRICTIONS ON TRANSFER OF SECURITIES; REMOVAL OF RESTRICTIONS ON TRANSFER
OF SECURITIES.
5.1 RESTRICTIONS ON TRANSFER.
(a) Each Investor understands and agrees that the
Securities it will be acquiring have not been
registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and that accordingly
they will not be fully transferable except as
permitted under various exemptions contained in the
Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of
the Securities Act. Each Investor acknowledges that
it must bear the economic risk of its investment in
the Securities for an indefinite period of time since
they have not been registered under the Securities
Act and therefore cannot be sold unless they are
subsequently registered or an exemption from
registration is available.
(b) Each Investor hereby represents and warrants to the
Company that it is acquiring the Securities it has
agreed to purchase for investment purposes only, for
its own account, and not as nominee or agent for any
other Person, and not with a view to the sale or
distribution of any part thereof, and that it has no
present intention of selling or granting any
participation in or otherwise distributing the same.
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(c) Each Investor hereby agrees with the Company as
follows:
(i) Subject to Section 5.2 hereof, the
certificates evidencing the Common Shares
and, as applicable, the Series A and Series
B Warrant Certificates, and each certificate
issued in transfer thereof, will bear a
restrictive legend such as the following:
"THE SECURITIES EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND HAVE BEEN
TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF,
AND, SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES OR THE ISSUER
CORPORATION RECEIVES AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL FOR THE ISSUER
CORPORATION) STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
(ii) The certificates representing such
Securities, and each certificate issued in
transfer thereof, will also bear any legend
required under any applicable state
securities law and any other legends
required under the law of the State of Utah
to reflect the terms set forth herein.
(iii) Absent an effective registration statement
under the Securities Act, covering the
disposition of the Securities which such
Investor acquires, such Investor will not
sell, transfer, assign, pledge, hypothecate
or otherwise dispose of any or all of the
Securities without first providing the
Company with an opinion of counsel (which
may be counsel for the Company) to the
effect that such sale, transfer, assignment,
pledge, hypothecation or other disposition
will be exempt from the registration and the
prospectus delivery requirements of the
Securities Act and the registration or
qualification requirements of any applicable
state securities laws, except that no such
registration or opinion shall be required
with respect to (A) a transfer not involving
a change in beneficial ownership, or (B) the
distribution of Securities by such Investor
to any of its partners, or retired partners,
or to the estate of any of its partners or
retired partners, or (C) a sale to be
effected in accordance with Rule 144 of the
Commission under the Securities Act ("RULE
144") (or any comparable exemption).
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(iv) Such Investor consents to the Company's
making a notation on its records or giving
instructions to any transfer agent of the
Common Shares in order to implement the
restrictions on transfer of the Securities
mentioned in this subsection (c).
5.2 REMOVAL OF TRANSFER RESTRICTIONS. Any legend concerning the
transfer restrictions set forth above, endorsed on a
certificate evidencing a Security pursuant to Section
5.1(c)(i), hereof and the stop transfer instructions and
record notations with respect to such Security shall be
removed and the Company shall issue a certificate without such
legend to the holder of such Security (a) if such Security is
registered under the Securities Act, or (b) if such Security
may be sold under Rule 144(k) of the Commission under the
Securities Act or (c) if such holder provides the Company with
an opinion of counsel (which may be counsel for the Company)
reasonably acceptable to the Company to the effect that a
public sale or transfer of such Security may be made without
registration under the Securities Act.
5.3 RULE 144 LIMITATIONS. Each Investor hereby further agrees,
that in addition to the restrictions on transfer set forth in
Section 5.1 hereof, it will comply with the volume limitations
imposed by Rule 144(e) in connection with any resales of the
Securities, even if Rule 144 would not otherwise be applicable
to such Investor's resales. Investor acknowledges that a
restriction may be placed on any stock certificate
representing the Securities to reflect this Section 5.3.
5.4 COMPLIANCE WITH SECTION 16(C). Each Investor hereby further
agrees that it will not engage in any transactions prohibited
by Section 16(c) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), even if Section 16(c) of the
Exchange Act would not otherwise be applicable to such
Investor. Investor acknowledges that a legend may be placed on
any stock certificate representing the Securities to reflect
this Section 5.4.
6. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. In order to induce each
Investor to enter into this Agreement and to purchase the Securities, the
Company hereby covenants with, and represents and Warrants to, each Investor as
follows:
6.1 ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Utah, and has all requisite power and
authority to carry on its business, to own and hold its
properties and assets, to enter into this Agreement and any
other agreements to be entered into by it in connection
herewith, including without limitation the Registration Rights
Agreement, (as hereinafter defined) and each other such
agreement, document or instrument (which are collectively
referred to herein as the "TRANSACTION DOCUMENTS"), and to
carry out the provisions hereof and thereof.
6.2 CAPITAL STOCK. As of the Effective Date, the authorized
capital stock of the Company will consist of 100,000,000
shares of Common Stock, and 15,000,000 shares of Preferred
Stock. No shares of Preferred Stock have been issued. As of
October 1, 2000, 23,951,789 shares of Common Stock were issued
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and outstanding, and such shares are duly authorized, validly
issued, fully paid and nonassesessable. As of the Effective
Date, the Company will have reserved a total of 4,000,000
shares of Common Stock for issuance pursuant to exercise of
the Warrants, 2,500,000 shares for issuance pursuant to the
Company's 2000 Omnibus Securities Plan, 1,563,750 shares for
issuance pursuant to the exercise of outstanding stock
options, and 200,000 shares for issuance pursuant to the
exercise of outstanding warrants.
6.3 COMMON SHARES. The Common Shares are duly authorized and, when
issued and paid for pursuant to the terms of this Agreement,
will be duly authorized, validly issued, fully paid and
nonassessable, and will be free and clear of all Liens (as
hereinafter defined) and restrictions, other than Liens that
might have been created by Investors and restrictions on
transfer imposed by (i) Section 5.4 hereof, (ii) applicable
state securities laws and (iii) the Securities Act.
6.4 WARRANTS. The issuance of the Warrants has been duly
authorized and, when issued and paid for pursuant to the terms
of this Agreement, the Warrants will be duly authorized,
validly issued, fully paid and nonassessable, each of the
Series A Warrants and the Series B Warrants will have the
rights, preferences and privileges specified in ANNEX B and
ANNEX C, respectively, and will be free and clear of all Liens
(as hereinafter defined) and restrictions, other than Liens
that might have been created by Investors and restrictions on
transfer imposed by (i) Sections 5.1 and 5.2 hereof, (ii)
applicable state securities laws and (iii) the Securities Act.
The Warrant Shares are duly authorized and have been reserved
for issuance upon exercise of the Warrants and, when issued
upon the exercise and payment in accordance with the terms of
the Warrants, will be duly authorized, validly issued, fully
paid and nonassessable Common Stock and free and clear of all
Liens and restrictions, other than Liens that might have been
created by Investors and restrictions imposed by (i) Section
5.4 hereof, (ii) applicable state securities laws and (iii)
the Securities Act.
6.5 CORPORATE ACTS AND PROCEEDINGS. All corporate acts and
proceedings required for the authorization, execution and
delivery of this Agreement, and the Transaction Documents, the
offer, issuance and delivery of the Securities and the
performance of this Agreement and the Transaction Documents,
and the terms of the Warrants have been lawfully and validly
taken or will have been so taken prior to the Effective Date.
6.6 NO CONFLICTS. The execution, delivery and performance by the
Company of this Agreement, and the Transaction Documents, and
the observance of the terms of the Warrants (a) will not, as
of the Effective Date, require from the Board or stockholders
of the Company any consent or approval that has not then been
validly and lawfully obtained, (b) will not, as of the
Effective Date, require any authorization, consent, approval,
license, exemption of or filing or registration with any court
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or governmental department, commission, board, bureau, agency
or instrumentality of government, except such as shall have
been lawfully and validly obtained prior to the Closing, (c)
will not cause the Company to violate or contravene (i) any
provision of law, (ii) any rule or regulation of any agency or
government, domestic or foreign, (iii) any order, writ,
judgment, injunction, decree, determination or award, or (iv)
any provision of the Articles of Incorporation or Bylaws of
the Company, and (d) will not result in the creation or
imposition of any Lien. The Company is not in violation of, or
(with or without notice or lapse of time or both) in default
under, any term or provision of its Articles of Incorporation
or Bylaws or of any indenture, loan or credit agreement, note
agreement, deed of trust, mortgage, security agreement or
other agreement, lease or other instrument, commitment or
arrangement to which the Company is a party or by which any of
the Company's properties, assets or rights is bound or
affected, except for any such violations or default which
individually and in the aggregate, are not likely to have a
material adverse effect on the Company's financial condition,
results of operation or business. The Company is not subject
to any restriction of any kind or character which materially
and adversely affects in any way its business, properties,
assets or prospects or which prohibits the Company from
entering into this Agreement or would prevent or make
burdensome its performance of or compliance with all or any
part of this Agreement and the Transaction Documents or the
Warrants or the consummation of the transactions contemplated
hereby or thereby.
6.7 BINDING OBLIGATIONS. This Agreement, the Transaction
Documents, and the Warrants constitute the legal, valid and
binding obligations of the Company and when executed and
delivered, will be enforceable against the Company in
accordance with their respective terms, except as such
enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights
generally.
6.8 SEC REPORTS AND FINANCIAL STATEMENTS. New Visual has filed
with the United States Securities and Exchange Commission (the
"Commission"), its Annual Report on Form 10-KSB for the fiscal
year ended October 31, 1999 and its Quarterly Reports on Form
10-QSB for the periods ended January 31, 2000, April 30, 2000
and July 31, 2000 (as such documents have been amended through
the date hereof, the "New Visual Reports"). The consolidated
financial statements of New Visual included in the New Visual
Reports comply in all material respects with applicable
accounting requirements and with the published rules and
regulations of the Commission with respect thereto, have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto),
and fairly present the consolidated financial position of New
Visual and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and
cash flows for the periods then ended.
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6.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the New
Visual Reports or Company press releases, since July 31, 2000,
(i) New Visual has conducted its business only in the ordinary
course and consistent with prior practice and (ii) there has
not been (A) any event or occurrence which will have a
material adverse effect on New Visual's financial condition or
results of operations, or (B) any material change by New
Visual in its accounting principles, practices or methods
(except to the extent required by GAAP).
6.10 DISCLOSURE. To the knowledge of New Visual, no representation
or warranty by New Visual contained in this Agreement nor any
statement or certificate furnished or to be furnished by or on
behalf of New Visual to Investors in connection herewith or
pursuant hereto contains or will contain any untrue statement
of a material fact, or omits or will omit to state any
material fact required to make the statements contained herein
or therein not misleading.
6.11 ABSENCE OF UNDISCLOSED LIABILITIES. New Visual has no material
liabilities or obligations of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and
whether due or to become due, except (a) as and to the extent
disclosed in the New Visual Reports and (b) for liabilities
and obligations that (i) were incurred after July 31, 2000, in
the ordinary course of business consistent with prior practice
and (ii) individually and in the aggregate are not material to
New Visual.
6.12 USE OF PROCEEDS. The Company will not apply any portion of a
Draw Down towards payment of any costs or expenses related to
its production of the Company's pending motion picture project
tentatively titled "Top Secret Surf Film."
7. REPRESENTATIONS AND WARRANTIES BY THE INVESTORS. In order to induce the
Company to enter into this Agreement and to sell the Common Shares and Warrants,
each Investor (as to such Investor only and not as to any other Investor) hereby
covenants with, and represents and Warrants to, the Company as follows:
7.1 ORGANIZATION, STANDING, ETC. Each Investor that is not a
natural person is, as applicable, a corporation, general or
limited partnership, or limited liability company duly
organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and has all
requisite power and authority to carry on its business, to own
and hold its properties and assets, to enter into this
Agreement and the Transaction Documents to be entered into by
it, to purchase the Securities and to carry out the provisions
hereof and thereof.
7.2 ACTS AND PROCEEDINGS. All acts and proceedings required of the
Investor for the authorization, execution and delivery of this
Agreement and the Transaction Documents and the performance of
this Agreement and the Transaction Documents have been
lawfully and validly taken or will have been so taken prior to
the Effective Date.
7.3 BINDING OBLIGATIONS. This Agreement and the Transaction
Documents constitute the legal, valid and binding obligations
of the Investor and when executed and delivered, will be
enforceable against the Investor in accordance with their
respective terms, except as such enforcement is limited by
bankruptcy, insolvency, and other similar laws affecting the
enforcement of creditors' rights generally.
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7.4 INVESTMENT INTENT.
(a) The Investor acknowledges that the Securities are
being issued to Investor in reliance upon one or more
exemptions from registration contained in the
Securities Act and applicable state securities laws.
The reliance by the Company upon such exemptions is
based in part upon the representations set forth in
this Section 7.4 and in Section 5 hereof.
(b) Investor has such knowledge and experience in
financial and business matters that it is capable of
evaluating the merits and risks of an investment in
the Securities and of making an informed investment
decision.
(c) Investor is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act.
8. CONDITIONS OF PARTIES' OBLIGATIONS.
8.1 CONDITIONS OF INVESTORS' OBLIGATIONS AT THE CLOSINGS. The
obligation of each Investor to purchase and pay for the
Securities which it has agreed to purchase on each Closing
Date is subject to the fulfillment prior to or on the date of
such Closing of the following conditions, any of which may be
waived in whole or in part by the Investors.
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company under this Agreement
shall be deemed to have been made again on the date
of such Closing and shall then be true and correct in
all material respects.
(b) COMPLIANCE WITH AGREEMENT. The Company shall have
performed and complied with all agreements and
conditions required by this Agreement to be performed
or complied with by it on or before such Closing
Date.
(c) SUPPORTING DOCUMENTS. The Investors shall have
received the following:
(i) Copies of resolutions of the Board certified
by the Secretary of the Company, authorizing
the execution, delivery and performance of
this Agreement and the Registration Rights
Agreement and the performance of the
Warrants, and all other documents and
instruments to be delivered pursuant hereto
and thereto; and
(ii) Such additional supporting documentation and
other information with respect to the
transactions contemplated hereby as the
Investors or their counsel may reasonably
request.
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(d) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all
certificates, opinions, agreements, instruments and
documents mentioned herein or incident to any such
transactions, shall be reasonably satisfactory in
form and substance to the Investors and to their
counsel.
(e) NO MATERIAL ADVERSE CHANGE. Since the Effective Date
there shall have been no material adverse change in
the Company's business, financial condition, assets
or operations.
(f) NO PENDING LITIGATION. Since the Effective Date there
shall be no pending or threatened litigation
regarding this Agreement or the transactions
contemplated hereby.
(g) REGISTRATION RIGHTS AGREEMENT. The Company and each
of the Investors shall have entered into a
Registration Rights Agreement substantially in the
form of ANNEX E hereto (the "REGISTRATION RIGHTS
AGREEMENT").
(h) EMPLOYMENT OF RAY WILLENBERG, JR. Ray Willenberg,
Jr., the Company's President, Chief Executive Officer
and Chairman of the Board, shall still be employed by
the Company in an executive capacity (regardless of
position) and shall be able to perform the duties
associated therewith.
8.2 CONDITIONS OF COMPANY'S OBLIGATIONS. The Company's obligation
to issue and sell the Securities to the Investors on the date
of each Closing is subject to the fulfillment prior to or at
the date of such Closing of the following conditions, any of
which may be waived in whole or in part by the Company.
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Investors under this Agreement
shall be deemed to have been made again on the date
of such Closing, and shall then be true and correct
in all material respects.
(b) COMPLIANCE WITH AGREEMENT. The Investors shall have
performed and complied with all agreements and
conditions required by this Agreement to be performed
or complied with by each of them on or before such
Closing Date.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all
certificates, opinions, agreements, instruments and
documents mentioned herein or incident to any such
transactions, shall be reasonably satisfactory in
form and substance to the Company and to its counsel.
(d) REGISTRATION RIGHTS AGREEMENT. The Company and each
of the Investors shall have entered into the
Registration Rights Agreement.
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9. ENFORCEMENT.
9.1 REMEDIES AT LAW OR IN EQUITY. If any Default shall occur or if
any representation or warranty made by or on behalf of the
Company in this Agreement or in any certificate, report or
other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect
as of the date of this Agreement or as of the date of any
Closing or as of the date it was made, furnished or delivered,
the holder of any Security may proceed to protect and enforce
its rights by suit in equity or action at law, whether for the
specific performance of any term contained in this Agreement
or for an injunction against the breach of any such term or in
aid of the exercise of any power granted in this Agreement, or
to enforce any other legal or equitable right of such holder
of any such Securities, or to take any one or more of such
actions. In the event a holder brings such an action against
the Company, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including without
limitation such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all
fees, costs and expenses of appeals.
9.2 CUMULATIVE REMEDIES. None of the rights, powers or remedies
conferred upon any holder of Securities shall be mutually
exclusive, and each such right, power or remedy shall be
cumulative and in addition to every other right, power or
remedy, whether conferred hereby or now or hereafter available
at law, in equity, by statute or otherwise.
9.3 NO IMPLIED WAIVER. Except as expressly provided in this
Agreement, no course of dealing between the Company and any
Investor or the holder of any Security and no delay in
exercising any such right, power or remedy conferred hereby or
now or hereafter existing at law in equity, by statute or
otherwise, shall operate as a waiver of, or otherwise
prejudice, any such right, power or remedy.
10. DEFINITIONS. Unless the context otherwise requires, the terms defined in
this Section 10 shall have the meanings herein specified for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms herein defined.
"AFFILIATE" shall mean any Person which directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.
"AGREEMENT" shall mean this Securities Purchase Agreement.
"AVERAGE SALES PRICE" shall have the meaning set forth in Section 2.
"BOARD" shall mean the Board of Directors of the Company.
"COMPANY" shall mean New Visual Entertainment, Inc., a Utah
corporation.
"CLOSING" shall have the meaning set forth in Section 4.1.
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"CLOSING DATE" shall have the meaning set forth in Section 4.2.
"CLOSING SHARES" shall have the meaning assigned to it in Section 2.2
hereof.
"COMMON SHARES" shall have to meaning assigned to it in the Recitals
hereof.
"COMMON STOCK" shall have the meaning assigned to it in Recitals
hereof.
"COMMISSION" shall mean the Securities and Exchange Commission.
"DEFAULT" shall mean a default or failure in the due observance or
performance of any covenant, condition or agreement on the part of the Company
or any of its Subsidiaries to be observed or performed under the terms of this
Agreement, if such default or failure in performance shall remain unremedied for
ten (10) days.
"DRAW DOWN" shall have the meaning assigned to it in Section 1.
"DRAW DOWN AMOUNT" shall have the meaning assigned to it in Section
3.1.
"DRAW DOWN NOTICE" shall have the meaning assigned to it in Section
3.3.
"EFFECTIVE DATE" shall mean the date of this Agreement.
"EQUITY SECURITY" shall mean any stock or similar security of the
Company or any security convertible or exchangeable, with or without
consideration, into or for any stock or similar security, or any security
carrying any warrants or right to subscribe to or purchase any stock or similar
security, or any such warrants or right.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"INVESTOR" shall have the meaning assigned to it in the Recitals and on
ANNEX A hereto.
"INVESTMENT" shall have the meaning set forth in the Recitals.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
statute or other law.
"NEW VISUAL REPORTS" shall have the meaning assigned to it in Section
6.8.
"PERMITTED LIENS" shall mean (a) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings; (b) Liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmen's and similar Liens, if the obligations secured by
such Liens are not then delinquent or are being contested in good faith by
appropriate proceedings; and (c) Liens incidental to the conduct of the business
of the Company or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
12
<PAGE>
"PERSON" shall include any natural person, corporation, trust,
association, company, partnership, joint venture and other entity and any
government, governmental agency, instrumentality or political subdivision.
"PRICING PERIOD" shall be the period of time beginning on the day the
Company sends a Draw Down Notice and ending five business days thereafter.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned to it
in Section 8.1.
"REQUIRED PAYMENT" shall have the meaning assigned to it in Section 2.
"RULE 144" shall have them meaning assigned to it in Section
5.1(c)(iii).
"SECURITIES" shall have the meaning assigned to it in the Recitals.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A WARRANTS" shall have the meaning set forth in Section 3.1(c).
"SERIES B WARRANTS" shall have the meaning set forth in Section 3.1(c).
"SUBSIDIARY" shall mean any corporation, association or other business
entity at least 50% of the outstanding voting stock of which is at the time
owned or controlled directly or indirectly by the Company or by one or more of
such subsidiary entities or both, where "voting stock" means any shares of stock
having general voting power in electing the board of directors (irrespective of
whether or not at the time stock of any other class or classes has or might have
voting power by reason of any contingency).
"TERM" shall be the period of time in which this Agreement is in
effect, beginning on the Effective Date and ending on November 17, 2002.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in Section
6.1.
"WARRANTS" shall have the meaning given in the Recitals hereof.
"WARRANT SHARES" shall have the meaning given in the Recitals hereof.
11. MISCELLANEOUS.
13
<PAGE>
11.1 RIGHTS OF HOLDERS INTER SE. Each holder of Securities shall
have the absolute right to exercise or refrain from exercising
any right or rights which such holder may have by reason of
this Agreement or any Security, including, without limitation,
the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement
or any agreement effecting any such modification, and such
holder shall not incur any liability to any other holder or
holders of Securities with respect to exercising or refraining
from exorcising any such right or rights.
11.2 EXCULPATION AMONG INVESTORS AND HOLDERS. Each Investor
acknowledges that it is not relying upon any other Investor,
or any officer, director, employee, agent, partner or
Affiliate of any such other Investor, in making its investment
or decision to invest in the Company or in monitoring such
investment. Each Investor agrees that no Investor nor any
controlling person, officer, director, stockholder, partner,
agent or employee of any Investor shall be liable for any
action heretofore or hereafter taken or omitted to be taken by
any of them relating to or in connection with the Company or
the Securities, or both. Without limiting the generality of
the foregoing, no Investor (nor any of its Affiliates,
officers, directors, stockholders, partners, agents or
employees) or other holder of any Security shall have any
obligation, liability or responsibility whatsoever for the
accuracy, completeness or fairness of any or all information
about the Company or any Subsidiary or their respective
properties, business or financial and other affairs, acquired
by such Investor or holder from the Company or any Subsidiary
or the respective officers, directors, employees, agents,
representatives, counsel or auditors of either, and in turn
provided to another Investor or holder, nor shall any such
Investor (or such other Person) have any obligation or
responsibility whatsoever to provide any such information to
any other Investor (or such other Person) or holder or to
continue to provide any such information if any information is
provided.
11.3 NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in
writing and shall be delivered or mailed first class postage
prepaid, registered or certified mail,
(a) If to any holder of any of the Securities, addressed to
such holder at its address shown on ANNEX A hereto, or at such other
address as such holder may specify by written notice to the Company, or
(b) If to the Company at the address first above written or at
such other address as the Company may specify by written notice to the
Investors,
and each such notice, request, consent and other communication shall for all
purposes of the Agreement be treated as being effective or having been given
when delivered, if delivered personally, or, if sent by mail, at the earlier of
its actual receipt or three days after the same has been deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and postage prepaid as aforesaid.
14
<PAGE>
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made in, pursuant to or in
connection with this Agreement shall survive the execution and
delivery of this Agreement, any investigation at any time made
by or on behalf of any Investor, and the sale and purchase of
the Securities and payment therefor. All statements contained
in any certificate, instrument or other writing delivered by
or on behalf of the Company pursuant hereto or in connection
with or contemplation of the transactions herein contemplated
shall constitute representations and warranties by the Company
hereunder. Any claim against the Company based upon any
inaccuracy in any of the representations or breach of any of
the warranties hereunder must be asserted against the Company,
either by written notice given to the Company specifying with
reasonable particularity the claimed inaccuracy or breach or
by institution of an action at law or suit in equity against
the Company and the serving of the process and complaint with
respect thereto upon the Company, within two (2) years from
the Effective Date.
11.5 SEVERABILITY. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this
Agreement be determined to be illegal or unenforceable, all
other provisions of this Agreement and of each other agreement
entered into pursuant to this Agreement, shall be given effect
separately from the provision or provisions determined to be
illegal or unenforceable and shall not be affected thereby.
11.6 ASSIGNMENT. Any Investor may assign its rights to purchase the
Common Shares and/or the Warrant Shares, in whole or in part,
to any "accredited investor" as such term is defined in Rule
501 of Regulation D of the Securities Act.
11.7 PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not, and, in
particular, shall inure to the benefit of and be enforceable
by the holder or holders at the time of any of the Securities.
Subject to the immediately preceding sentence, this Agreement
shall not run to the benefit of or be enforceable by any
Person other than a party to this Agreement and its successors
and assigns.
11.8 HEADINGS. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only
and do not constitute a part of this Agreement.
11.9 CHOICE OF LAW. It is the intention of the parties that the
internal substantive laws of California should govern the
enforceability and validity of this Agreement, the
construction of its terms and the interpretation of the rights
and duties of the parties, without regard to choice of law
provisions.
11.10 EXPENSES. The Company agrees, upon consummation of the
transactions contemplated hereby, to pay, and hold the
Investors and holders of the Securities harmless from
liability for the payment of the expenses incurred by them in
connection with the Investment, including fees and expenses of
their counsel arising in connection with the negotiation and
execution of this Agreement and the consummation of the
transactions contemplated hereby. Investors acknowledge that
such payment has been included in the initial Draw Down
Amount.
15
<PAGE>
11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, with the same effect as if all parties had
signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall
constitute one and the some instrument.
(Signature Page Follows)
16
<PAGE>
(Securities Purchase Agreement Signature Page)
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NEW VISUAL ENTERTAINMENT, INC.
By: /s/ Ray Willenberg, Jr.
-------------------------------------
Ray Willenberg, Jr.
Chief Executive Officer
LILLY BETER CAPITAL GROUP, LTD.
By: /s/ Richard Kosloske
-------------------------------------
Name: Richard Kosloske
-----------------------------------
Title: President
----------------------------------
INTERNATIONAL CARIBBEAN TRUST LIMITED
By: /s/ John Maxmin
-------------------------------------
Name: John Maxmin
-----------------------------------
Title: Agent of Record for this Agreement
----------------------------------
17
<PAGE>
PROMETHEUS TRUST LIMITED
By: /s/ John Maxmin
-------------------------------------
Name: John Maxmin
-----------------------------------
Title: Agent of Record for this Agreement
----------------------------------
CUTTING EDGE TRUST LIMITED
By: /s/ John Maxmin
-------------------------------------
Name: John Maxmin
-----------------------------------
Title: Agent of Record for this Agreement
----------------------------------
WIND & SEA TRUST LIMITED
By: /s/ John Maxmin
-------------------------------------
Name: John Maxmin
-----------------------------------
Title: Agent of Record for this Agreement
----------------------------------
MONTGOMERY LANDING TRUST LIMITED
By: /s/ John Maxmin
-------------------------------------
Name: John Maxmin
-----------------------------------
Title: Agent of Record for this Agreement
----------------------------------
QUAIL RUN TRUST LIMITED
By: /s/ John Maxmin
-------------------------------------
Name: John Maxmin
-----------------------------------
Title: Agent of Record for this Agreement
----------------------------------
TRU COLOR TRUST LIMITED
By: /s/ John Maxmin
-------------------------------------
Name: John Maxmin
-----------------------------------
Title: Agent of Record for this Agreement
----------------------------------
18
<PAGE>
<TABLE>
ANNEX A
SCHEDULE OF INVESTORS
<CAPTION>
REQUIRED PAYMENT
(TO BE CALCULATED
INVESTOR AS % OF DRAW DOWN NUMBER OF SERIES A NUMBER OF SERIES B
(NAME & ADDRESS) AMOUNT) WARRANT SHARES WARRANT SHARES
<S> <C> <C> <C>
INTERNATIONAL CARIBBEAN TRUST LIMITED 12.5% 375,000 125,000
c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
LILLY BETER CAPITAL GROUP LTD. 12.5% 375,000 125,000
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
PROMETHEUS TRUST LIMITED 12.5% 375,000 125,000
c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
CUTTING EDGE TRUST LIMITED 12.5% 375,000 125,000
c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
WIND & SEA TRUST LIMITED 12.5% 375,000 125,000
c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
MONTGOMERY LANDING TRUST LIMITED 12.5% 375,000 125,000
c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
QUAIL RUN TRUST LIMITED 12.5% 375,000 125,000
c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
TRU COLOR TRUST LIMITED 12.5% 375,000 125,000
c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
</TABLE>
19
<PAGE>
ANNEX B
FORM OF SERIES A WARRANT CERTIFICATE
20
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
EXCHANGED OR TRANSFERRED IN ANY MANNER IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT NO SUCH REGISTRATION IS REQUIRED.
SERIES A WARRANT CERTIFICATE
NEW VISUAL ENTERTAINMENT, INC.
No. WR- _____ __________ Warrants
Date: November 17, 2000
THIS CERTIFIES THAT, for value received, ___________________________,
or its registered assigns, is entitled to purchase from NEW VISUAL
ENTERTAINMENT, INC., a Utah corporation (the "Company"), at any time or from
time to time during the period specified in Paragraph 2, _____________________
fully paid and nonassessable shares of the Company's Common Stock, par value
$0.001 per share (the "Common Stock"), at an exercise price per share equal to
the lesser of $6.00 or 50% of the average of the closing sales price of the
Company's Common Stock as reported on the principal exchange on which the Common
Stock is traded (as reported by the Wall Street Journal or, if not reported
thereby, by another authoritative source) over the five consecutive trading days
immediately preceding the date of the exercise of this Warrant (the "Exercise
Price"). The term "Warrant Shares," as used herein, refers to the shares of
Common Stock purchasable hereunder. The Warrant Shares and the Exercise Price
are subject to adjustment as provided in Paragraph 4.
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions of this Warrant Certificate, this Warrant may be
exercised by the holder of this Warrant and/or any permitted transferee
specified in Section 7 below (the "holder"), in whole or in part, by the
surrender of this Warrant together with a completed exercise agreement in the
form attached to this Warrant Certificate (the "Exercise Agreement"), to the
Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder), and upon payment of the Exercise Price.
At the option of the holder, the Exercise Price may be paid to the Company in
cash, by certified or official bank check or by wire transfer for the account of
the Company. The Warrant Shares so purchased shall be deemed to be issued to the
holder or such holder's designee, as the record owner of such shares, as of the
close of business on the date on which this Warrant shall have been surrendered,
the completed Exercise Agreement shall have been delivered, and payment shall
have been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased shall be delivered to the holder within a reasonable time,
not to exceed three business days after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the holder and shall be registered in the name of the holder or
such other name as shall be designated by such holder.
1
<PAGE>
2. PERIOD OF EXERCISE. This Warrant may be exercised, at the option of
the holder, in whole or in part, at any time from the date of the execution of
this Warrant and (b) ending at 5:00 p.m., Eastern time, on the third anniversary
of the date of this Warrant (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient number
of shares of Common Stock to provide for the exercise of this Warrant.
(c) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4. In the event that any adjustment of the
Exercise Price as required herein results in a fraction of a cent, such Exercise
Price shall be rounded up to the nearest cent.
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK. During the
Exercise Period, if the Company subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or
otherwise) any shares of Common Stock into a greater number of shares,
then, after the date of record for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. During the Exercise Period, if the Company
combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) any shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
(b) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the
number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of shares
of Common Stock issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
2
<PAGE>
(c) CONSOLIDATION, MERGER OR SALE. During the Exercise Period,
in case of any consolidation of the Company with, or merger of the
Company into any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of
this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares
of stock, securities or assets as may be issued or payable with respect
to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant had
such consolidation, merger or sale or conveyance taken place. In any
such case, the Company will make appropriate provision to insure that
the provisions of this Paragraph 4 will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant.
(d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
that requires any adjustment of the Exercise Price, then, and in each
such case, the Company shall give notice thereof to the holder, which
notice shall state the Exercise Price resulting from such adjustment
and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based. Such calculation shall be certified by
independent public accountants then engaged by the Company.
(e) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the
Exercise Price in effect at the time such adjustment is otherwise
required to be made, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price.
(f) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional shares which
would otherwise be issuable in an amount equal to the same fraction of
the Market Price (as defined herein) of a share of Common Stock on the
date of such exercise.
(g) OTHER NOTICES. In case:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make
any other distribution (including dividends or distributions
payable in cash out of retained earnings) to the holders of
the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares
of stock of any class or other rights;
3
<PAGE>
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or
consolidation or merger of the Company with or into or sale of
all or substantially all its assets to, another corporation or
entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder (a)
notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription
rights or for determining the legal holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and
(b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up,
notice of the date (or, if not then known, a reasonable approximation
thereof by the Company) when the same shall take place. Such notice
shall also specify the date on which the holders of Common Stock shall
be entitled to receive such dividend, distribution, or subscription
rights or to exchange their Common Stock for stock or other securities
or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up,
as the case may be. Such notice shall be given at least 30 days prior
to the record date or the date on which the Company's books are closed
in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in
clauses (i), (ii), (iii) and (iv) above.
(h) CERTAIN DEFINITIONS:
(i) "Market Price" as of any date, means (a) the
average of the last reported sale prices on the principal
trading market for the Common Stock for the five trading days
immediately preceding the date of any such determination, or
(b) if market value cannot be calculated as of such date on
the foregoing basis, Market Price shall be the fair market
value as reasonably determined in good faith by the Board of
Directors of the Company. The manner of determining the Market
Price of the Common Stock sets forth in the foregoing
definition shall apply with respect to any other security in
respect of which a determination as to market value must be
made hereunder.
(ii) "Common Stock" for the purposes of this
Paragraph 4, includes the Common Stock, par value $0.001 per
share, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, or sale of the character
referred to in Paragraph 4(c), the stock or other securities
or property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise
of this Warrant shall be made without charge to the holder or such shares for
any issuance tax or other costs in respect thereof, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
4
<PAGE>
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder to any voting rights or other rights as a shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the holder to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the holder, shall give rise to any liability of such
holder for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
7. TRANSFER AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment
in the form attached hereto, at the office of the Company referred to
in Paragraph 7(d) below, provided, HOWEVER, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph
7(e). Until due presentment for registration of transfer on the books
of the Company, the Company may treat the registered holder as the
owner and holder of this Warrant for all purposes, and the Company
shall not be affected by any notice to the contrary.
(b) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of this Warrant and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any
such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
(c) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer or replacement as provided
in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if
any, incurred by the Holder) in connection with the preparation,
execution, and delivery of Warrants pursuant to this Paragraph 7.
(d) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office of the Company as it may
designate by notice to the holder), a register for this Warrant, in
which the Company shall record the name and address of the person in
whose name this Warrant has been issued, as well as the name and
address of each transferee and each prior owner of this Warrant.
(e) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time
of the surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or in the case of
any exercise, the Warrant Shares issuable hereunder) shall not be
registered under the Securities Act and under applicable state
securities or blue sky laws, the Company may require, as a condition of
allowing such exercise, transfer, or exchange (i) that the holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel, which opinion and counsel are reasonably
acceptable to the Company, to the effect that such exercise, transfer
or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, and (ii) that the holder
or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company. The first holder of
this Warrant, by taking and holding the same, represents to the Company
that such holder is acquiring this Warrant for investment and not with
a view to the distribution thereof.
5
<PAGE>
8. NOTICES. All notices, requests and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed to the office of the Company at 5920 Friars Road, Suite
104, San Diego, California 92108 Attention: Chief Executive Officer, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 8 or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF UTAH WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
10. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision it may only be
amended by an instrument signed by the Company and the holder.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of
reference only, and shall not affect the meaning or construction of any
of the provisions of this Warrant.
(c) SEVERABILITY AND SAVINGS CLAUSE. If any one or more of the
provisions contained in this Agreement is for any reason (i) objected
to, contested or challenged by any court, government authority, agency,
department, commission or instrumentality of the United States or any
state or political subdivision thereof, or any securities industry
self-regulatory organization (collectively, "Governmental Authority"),
or (ii) held to be invalid, illegal or unenforceable in any respect,
the Company and the holder agree to negotiate in good faith to modify
such objected to, contested, challenged, invalid, illegal or
6
<PAGE>
unenforceable provision. It is the intention of Company and the holder
that there shall be substituted for such objected to, contested,
challenged, invalid, illegal or unenforceable provision a provision as
similar to such provision as may be possible and yet be acceptable to
any objecting Governmental Authority and be valid, legal and
enforceable. Further, should any provisions of this Agreement ever be
reformed or rewritten by a judicial body, those provisions as rewritten
will be binding, but only in that jurisdiction, on the holder and the
Company as if contained in the original Agreement. The invalidity,
illegality or unenforceability of any one or more provisions of this
Warrant will not affect the validity and enforceability of any other
provisions of this Warrant.
WITNESS the signature of a proper officer of the Company as of the date
first above written.
NEW VISUAL ENTERTAINMENT, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ATTEST:
------------------------------
Secretary
7
<PAGE>
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE)
FOR VALUE RECEIVED, _______________________________________ hereby
sells, assigns and transfers unto
--------------------------------------------------------------------------------
(Please print name, address and taxpayer identification number or social
security number of transferee.)
the accompanying Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint:
--------------------------------------------------------------------------------
attorney, to transfer the accompanying Warrant Certificate on the books of the
Company, with full power of substitution. The transferee's tax identification or
social security number is _____________________.
Dated: , .
--------------------- -------
[HOLDER]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
8
<PAGE>
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO EXERCISE THE WARRANT CERTIFICATE)
To: :
---------------------------------
The undersigned hereby irrevocably elects to exercise ____________ of the
Warrants represented by the accompanying Warrant Certificate to purchase the
shares of Common Stock issuable upon the exercise of such Warrants and requests
that certificates for such shares be issued in the name of:
--------------------------------------------------------------------------------
(Please print name and address.)
--------------------------------------------------------------------------------
(Please insert social security or other identifying number.)
The undersigned represents that it is acquiring the shares of Common Stock for
its own account and not with a view to distribution, and it will not sell these
shares unless they have been registered under the Securities Act of 1933 or an
exemption from such registration requirement is available.
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
--------------------------------------------------------------------------------
(Please print name and address.)
--------------------------------------------------------------------------------
(Please insert social security or other identifying number.)
Dated: , .
--------------------- -------
---------------------------------------
Holder
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
9
<PAGE>
ANNEX C
FORM OF SERIES B WARRANT CERTIFICATE
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
EXCHANGED OR TRANSFERRED IN ANY MANNER IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT NO SUCH REGISTRATION IS REQUIRED.
SERIES B WARRANT CERTIFICATE
NEW VISUAL ENTERTAINMENT, INC.
No. WR- _____ __________ Warrants
Date: November 17, 2000
THIS CERTIFIES THAT, for value received, ___________________________,
or its registered assigns, is entitled to purchase from NEW VISUAL
ENTERTAINMENT, INC., a Utah corporation (the "Company"), at any time or from
time to time during the period specified in Paragraph 2, _____________________
fully paid and nonassessable shares of the Company's Common Stock, par value
$0.001 per share (the "Common Stock"), at an exercise price of $6.00 per share
(the "Exercise Price"). The term "Warrant Shares," as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4.
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE. Subject to the provisions of this Warrant
Certificate, this Warrant may be exercised by the holder of this Warrant and/or
any permitted transferee specified in Section 7 below (the "holder"), in whole
or in part, by the surrender of this Warrant together with a completed exercise
agreement in the form attached to this Warrant Certificate (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder), and upon payment of the
Exercise Price.
(a) PAYMENT FOR SHARES. At the option of the holder, the Exercise
Price may be paid to the Company in cash, by certified or
official bank check or by wire transfer for the account of the
Company.
(b) CASHLESS EXERCISE ELECTION. The holder may elect, in lieu of
payment of the Exercise Price, to convert this Warrant, in
whole or in part, into a number of Warrant Shares determined
by dividing (i) the aggregate Market Value of the Warrant
Shares or other securities otherwise issuable upon exercise of
this Warrant minus the aggregate Exercise Price of such
Warrant Shares by (b) the Market Value of one Warrant Share.
Market Value shall be determined pursuant to Section 4(h)(i).
1
<PAGE>
(c) ISSUANCE OF CERTIFICATES The Warrant Shares purchased pursuant
to this Section 1 shall be deemed to be issued to the holder
or such holder's designee, as the record owner of such shares,
as of the close of business on the date on which this Warrant
shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made
for such shares as set forth above. Certificates for the
Warrant Shares so purchased shall be delivered to the holder
within a reasonable time, not to exceed three business days
after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as
may be requested by the holder and shall be registered in the
name of the holder or such other name as shall be designated
by such holder.
2. PERIOD OF EXERCISE. This Warrant may be exercised, at the option of
the holder, in whole or in part, at any time from the date of the execution of
this Warrant and (b) ending at 5:00 p.m., Eastern time, on the third anniversary
of the date of this Warrant (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient number
of shares of Common Stock to provide for the exercise of this Warrant.
(c) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4. In the event that any adjustment of the
Exercise Price as required herein results in a fraction of a cent, such Exercise
Price shall be rounded up to the nearest cent.
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK. During the
Exercise Period, if the Company subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or
otherwise) any shares of Common Stock into a greater number of shares,
then, after the date of record for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. During the Exercise Period, if the Company
combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) any shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
2
<PAGE>
(b) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the
number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of shares
of Common Stock issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
(c) CONSOLIDATION, MERGER OR SALE. During the Exercise Period,
in case of any consolidation of the Company with, or merger of the
Company into any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of
this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares
of stock, securities or assets as may be issued or payable with respect
to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant had
such consolidation, merger or sale or conveyance taken place. In any
such case, the Company will make appropriate provision to insure that
the provisions of this Paragraph 4 will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant.
(d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
that requires any adjustment of the Exercise Price, then, and in each
such case, the Company shall give notice thereof to the holder, which
notice shall state the Exercise Price resulting from such adjustment
and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based. Such calculation shall be certified by
independent public accountants then engaged by the Company.
(e) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the
Exercise Price in effect at the time such adjustment is otherwise
required to be made, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price.
(f) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional shares which
would otherwise be issuable in an amount equal to the same fraction of
the Market Price (as defined herein) of a share of Common Stock on the
date of such exercise.
(g) OTHER NOTICES. In case:
3
<PAGE>
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make
any other distribution (including dividends or distributions
payable in cash out of retained earnings) to the holders of
the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares
of stock of any class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or
consolidation or merger of the Company with or into or sale of
all or substantially all its assets to, another corporation or
entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder (a)
notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription
rights or for determining the legal holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and
(b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up,
notice of the date (or, if not then known, a reasonable approximation
thereof by the Company) when the same shall take place. Such notice
shall also specify the date on which the holders of Common Stock shall
be entitled to receive such dividend, distribution, or subscription
rights or to exchange their Common Stock for stock or other securities
or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up,
as the case may be. Such notice shall be given at least 30 days prior
to the record date or the date on which the Company's books are closed
in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in
clauses (i), (ii), (iii) and (iv) above.
(h) CERTAIN DEFINITIONS:
(i) "Market Price" as of any date, means (a) the
average of the last reported sale prices on the principal
trading market for the Common Stock for the five trading days
immediately preceding the date of any such determination, or
(b) if market value cannot be calculated as of such date on
the foregoing basis, Market Price shall be the fair market
value as reasonably determined in good faith by the Board of
Directors of the Company. The manner of determining the Market
Price of the Common Stock sets forth in the foregoing
definition shall apply with respect to any other security in
respect of which a determination as to market value must be
made hereunder.
4
<PAGE>
(ii) "Common Stock" for the purposes of this
Paragraph 4, includes the Common Stock, par value $0.001 per
share, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, or sale of the character
referred to in Paragraph 4(c), the stock or other securities
or property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder to any voting rights or other rights as a shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the holder to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the holder, shall give rise to any liability of such
holder for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
7. TRANSFER AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment
in the form attached hereto, at the office of the Company referred to
in Paragraph 7(d) below, provided, HOWEVER, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph
7(e). Until due presentment for registration of transfer on the books
of the Company, the Company may treat the registered holder as the
owner and holder of this Warrant for all purposes, and the Company
shall not be affected by any notice to the contrary.
(b) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of this Warrant and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any
such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
(c) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer or replacement as provided
in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if
any, incurred by the Holder) in connection with the preparation,
execution, and delivery of Warrants pursuant to this Paragraph 7.
(d) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office of the Company as it may
designate by notice to the holder), a register for this Warrant, in
which the Company shall record the name and address of the person in
whose name this Warrant has been issued, as well as the name and
address of each transferee and each prior owner of this Warrant.
5
<PAGE>
(e) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time
of the surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or in the case of
any exercise, the Warrant Shares issuable hereunder) shall not be
registered under the Securities Act and under applicable state
securities or blue sky laws, the Company may require, as a condition of
allowing such exercise, transfer, or exchange (i) that the holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel, which opinion and counsel are reasonably
acceptable to the Company, to the effect that such exercise, transfer
or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, and (ii) that the holder
or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company. The first holder of
this Warrant, by taking and holding the same, represents to the Company
that such holder is acquiring this Warrant for investment and not with
a view to the distribution thereof.
8. NOTICES. All notices, requests and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed to the office of the Company at 5920 Friars Road, Suite
104, San Diego, California 92108 Attention: Chief Executive Officer, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 8 or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF UTAH WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
10. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision it may only be
amended by an instrument signed by the Company and the holder.
6
<PAGE>
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of
reference only, and shall not affect the meaning or construction of any
of the provisions of this Warrant.
(c) SEVERABILITY AND SAVINGS CLAUSE. If any one or more of the
provisions contained in this Agreement is for any reason (i) objected
to, contested or challenged by any court, government authority, agency,
department, commission or instrumentality of the United States or any
state or political subdivision thereof, or any securities industry
self-regulatory organization (collectively, "Governmental Authority"),
or (ii) held to be invalid, illegal or unenforceable in any respect,
the Company and the holder agree to negotiate in good faith to modify
such objected to, contested, challenged, invalid, illegal or
unenforceable provision. It is the intention of Company and the holder
that there shall be substituted for such objected to, contested,
challenged, invalid, illegal or unenforceable provision a provision as
similar to such provision as may be possible and yet be acceptable to
any objecting Governmental Authority and be valid, legal and
enforceable. Further, should any provisions of this Agreement ever be
reformed or rewritten by a judicial body, those provisions as rewritten
will be binding, but only in that jurisdiction, on the holder and the
Company as if contained in the original Agreement. The invalidity,
illegality or unenforceability of any one or more provisions of this
Warrant will not affect the validity and enforceability of any other
provisions of this Warrant.
WITNESS the signature of a proper officer of the Company as of the date
first above written.
NEW VISUAL ENTERTAINMENT, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ATTEST:
-----------------------------
Secretary
7
<PAGE>
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE)
FOR VALUE RECEIVED, _______________________________________ hereby
sells, assigns and transfers unto
--------------------------------------------------------------------------------
(Please print name, address and taxpayer identification number or social
security number of transferee.)
the accompanying Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint:
--------------------------------------------------------------------------------
attorney, to transfer the accompanying Warrant Certificate on the books of the
Company, with full power of substitution. The transferee's tax identification or
social security number is _____________________.
Dated: , .
--------------------- -------
-----------------------------------
Holder
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
8
<PAGE>
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO EXERCISE THE WARRANT CERTIFICATE)
To: :
---------------------------------
The undersigned hereby irrevocably elects to exercise ____________ of the
Warrants represented by the accompanying Warrant Certificate to purchase the
shares of Common Stock issuable upon the exercise of such Warrants and requests
that certificates for such shares be issued in the name of:
--------------------------------------------------------------------------------
(Please print name and address.)
--------------------------------------------------------------------------------
(Please insert social security or other identifying number.)
The undersigned represents that it is acquiring the shares of Common Stock for
its own account and not with a view to distribution, and it will not sell these
shares unless they have been registered under the Securities Act of 1933 or an
exemption from such registration requirement is available.
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
--------------------------------------------------------------------------------
(Please print name and address.)
--------------------------------------------------------------------------------
(Please insert social security or other identifying number.)
Dated: , .
--------------------- -------
-------------------------------------
Holder
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
9
<PAGE>
ANNEX D
FORM OF DRAW DOWN NOTICE
Reference is made to the Securities Purchase Agreement dated as of
November 17, 2000 (the "Purchase Agreement ") between New Visual Entertainment,
Inc., a Utah corporation (the "Company") and the Investors named therein.
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.
In accordance with Section 3.4 of the Purchase Agreement, the Company
hereby issues this Draw Down Notice and submits a Draw Down request for the Draw
Down Amount indicated below.
Draw Down Amount:
-----------------------------------
Pricing Period start date:
--------------------------
Pricing Period end date:
-----------------------------
The Company hereby certifies that the conditions set forth in the
Purchase Agreement have been satisfied as of the date hereof.
Dated:
-----------------------------
NEW VISUAL ENTERTAINMENT, INC.
By:
----------------------------------
Name:
Title:
Facsimile No.:
Wire Instructions:
------------------
Contact Name:
-----------------------
10
<PAGE>
ANNEX E
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of November 17,
2000, among NEW VISUAL ENTERTAINMENT, INC., a Utah corporation (the "Company"),
and each entity listed on the signature pages hereof (each, a "Holder" and
collectively, the "Holders").
RECITALS:
1. The Holders are the holders of shares (the "Shares") of the
Company's common stock, par value $0.001 per share (the "Common Stock"), and
Warrants to purchase shares (the "Warrant Shares") of Common Stock.
2. The Holder and the Company are parties to that certain Securities
Purchase Agreement, of even date herewith (the "Purchase Agreement"), pursuant
to which the Holders agreed, collectively, to purchase $5 million of Common
Stock in accordance with the provisions thereof.
3. For good and valuable consideration, the receipt of which is hereby
acknowledged, the Company is willing to grant the registration rights set forth
in this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
AFFILIATE: the meaning set forth in Rule 12b-2 under the Exchange Act.
EFFECTIVENESS PERIOD: as defined in Section 5.1(b).
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
FORM S-3: a Registration Statement effected on Form S-3 pursuant to the
Securities Act.
INCIDENTAL REGISTRATION: as defined in Section 3.1.
PIGGY-BACK REQUEST: as defined in Section 3.1.
PROSPECTUS: the prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all materials incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
1
<PAGE>
REGISTRABLE SECURITIES: any shares of Common Stock acquired by any
Holder from the Company including, without limitation, shares of Common Stock
purchased under the Purchase Agreement, the Shares, the Warrant Shares and any
other securities issued or issuable with respect to such shares by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise,
PROVIDED THAT any particular shares of such Registrable Securities shall cease
to be Registrable Securities when (i) a Registration Statement with respect to
the sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
Registration Statement, (ii) such shares shall have become eligible to be sold
to the public by the Holders pursuant to Rule 144 under the Securities Act,
(iii) subsequent disposition of such shares shall not require registration or
qualification of them under the Securities Act or of any similar state law then
in force, or (iv) such shares shall have ceased to be outstanding.
REGISTRATION: a registration of securities (including Registrable
Securities) under the Securities Act.
REGISTRATION EXPENSES: any and all expenses incident to performance of
or compliance with this Agreement by the Company and its subsidiaries,
including, without limitation (i) all SEC, stock exchange, NASDAQ and other
registration, listing and filing fees (other than fees and expenses incurred in
connection with compliance with state securities or blue sky laws); (ii) all
fees and expenses incurred in connection with compliance with the rules for
trading securities on the NASDAQ or on any stock exchange on which the Common
Stock is traded (including reasonable fees and disbursements of counsel to the
underwriters in connection with such compliance and the preparation of a Blue
Sky Memorandum and legal investment survey), (iii) all expenses of printing,
distributing, mailing and delivering, any Registration Statement, any
Prospectus, any underwriting agreements, transmittal letters, securities sales
agreements, securities certificates and other documents relating to the
performance of or compliance with this Agreement, (iv) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses of any "cold comfort" letters
required by or incident to such performance and compliance, (v) the fees and
expenses of any trustee, transfer agent, registrar, escrow agent or custodian,
(vi) the expenses customarily borne by the issuer incurred in connection with
making road show presentations, if any, to facilitate the distribution and sale
of Registrable Securities, and (vii) all internal expenses of the Company
(including all salaries and expenses of officers and employees performing legal
or accounting duties).
REGISTRATION REQUEST: shall have the meaning set forth in Section 2.
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REGISTRATION STATEMENT: any registration statement of the Company that
covers any Registrable Securities filed or to be filed pursuant to this
Agreement in connection with a Registration of Registrable Securities pursuant
to Section 3, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
RULE 144: Rule 144 (or any successor provision) under the Securities
Act.
S-3 REGISTRATION STATEMENT: shall have the meaning set forth in Section
2.
SEC: the Securities and Exchange Commission.
SECURITIES ACT: the Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: a Registration in
which securities of the Company (including Registrable Securities) are sold to
an underwriter for reoffering to the public.
WARRANTS shall mean the Series A Warrants and/or the Series B Warrants
issued to the Holders pursuant to the Purchase Agreement.
SECTION 2. REGISTRATION UPON DEMAND. At any time during the term of
this Agreement if the Company is eligible to effect the Registration of its
Common Stock on Form S-3 for a secondary offering, any Holder or group of
Holders may deliver a written request that Registrable Securities having an
aggregate sales price to the public of at least $1,000,000 be registered
pursuant to the terms of this Agreement (a "Registration Request"). Within 31
days after a Registration Request, the Company shall use its best efforts to
prepare and file a Registration Statement to effect the Registration of all
Registrable Securities which the Company has been requested to register pursuant
to the Registration Request to the extent requisite to permit the public
disposition of such Registrable Securities. The Company shall use its best
efforts to cause the Registration Statement that is the subject of this Section
2 (the "S-3 Registration Statement") to be declared effective by the SEC upon
the earlier to occur of (a) 120 days after the date of the Registration Request,
(ii) 90 days following the filing of the S-3 Registration Statement, or (iii)
ten business days after receipt of a "no review" or similar letter from the SEC.
SECTION 3. INCIDENTAL REGISTRATION RIGHTS.
3.1 REQUESTS FOR INCIDENTAL REGISTRATION. If the Company proposes to
register any of its equity securities (other than pursuant to a Registration on
Form S-4 or S-8 or any successor form) and the Registration form to be used may
be used for Registration of the Registrable Securities, it will give prompt
written notice to each Holder of its intention to effect such Registration (the
"Incidental Registration"). Within ten business days of receiving such written
notice of an Incidental Registration, such Holder may make a written request
(the "Piggy-Back Request") that the Company include in the proposed Incidental
Registration all, or a portion, of the Registrable Securities owned by such
Holder (which Piggy-Back Request shall set forth the Registrable Securities
intended to be disposed of by such Holder and the intended method of disposition
thereof).
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3.2 OBLIGATION TO EFFECT INCIDENTAL REGISTRATION. (a) The Company will
use its best efforts to include in any Incidental Registration all Registrable
Securities which the Company has been requested to register pursuant to any
timely Piggy-Back Request to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered.
(b) Notwithstanding the preceding Sections 3.1 and 3.2(a):
(i) the Company shall not be obligated pursuant to this
Section 3 to effect a Registration of Registrable Securities requested
pursuant to a timely Piggy-Back Request if the Company discontinues the
related Incidental Registration at any time prior to the effective date
of any Registration Statement filed in connection therewith; and
(ii) if a Registration pursuant to this Section 3 involves an
underwritten offering, and the managing underwriter shall advise the
Company that, in its opinion, the number of securities requested and
otherwise proposed to be included in such Registration exceeds the
number which can be sold in such offering without adversely affecting
the marketability of the offering, the Company will include in such
Registration to the extent of the number which the Company is so
advised can be sold in such offering, FIRST, the securities the Company
proposes to sell for its own account in such Registration and SECOND,
the Registrable Securities of each of the Holders requesting to be
included in such Registration in proportion, as nearly as practicable,
to the number of shares of Registrable Securities for which a
Piggy-Back Request has been submitted by each such Holder at the time
of filing of the Registration Statement.
SECTION 4. UNDERWRITERS.
4.1 UNDERWRITTEN OFFERS. The provisions of this Section 4 do not
establish additional registration rights but instead set forth procedures
applicable, in addition to those set forth in Sections 3 and 5, to any
Registration which is an underwritten offering.
4.2 SELECTION OF UNDERWRITERS. If a Registration of Registrable
Securities is being effected pursuant to Section 3 and such securities are to be
distributed by or through one or more underwriters, the Company shall have the
right to select one or more underwriters to administer the offering.
4.3 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. Each Holder may not
participate in any underwritten Registrations hereunder unless such Holder
agrees to sell the Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Company.
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4.4 HOLDBACK AGREEMENT OF THE HOLDER. If and whenever the Company
proposes to register any of its equity securities under the Securities Act for
its own account (other than on Form S-4 or S-8 or any successor form) or is
required to use reasonable efforts to effect the Registration of any Registrable
Securities under the Securities Act pursuant to Section 3, each Holder agrees
not to effect any public sale or distribution, including any sale pursuant to
Rule 144, of any Registrable Securities, of any other equity securities of the
Company, or any securities convertible into or exchangeable for any equity
securities of the Company, within 15 days prior to and 90 days (unless advised
in writing by the managing underwriter that a longer period, not to exceed 180
days, is required) after the effective date of the Registration Statement
relating to such Registration, except as part of such Registration or with the
prior written consent of the Company and the managing underwriter, if any.
SECTION 5. REGISTRATION PROCEDURES.
5.1 OBLIGATIONS OF THE COMPANY. If and whenever the Company is required
pursuant to Section 2 or Section 3 to effect a Registration of Registrable
Securities, the Company shall, subject to the provisions of Section 2 or Section
3:
(a) prepare and file with the SEC a Registration Statement covering
such Registrable Securities and use commercially reasonable efforts to cause
such Registration Statement to become effective and remain effective as provided
herein;
(b) use commercially reasonable efforts to prepare and file with the
SEC such amendments and supplements to such Registration Statement as may be
necessary to keep such Registration Statement and Prospectus used in connection
therewith effective at least until the earlier of (i) 90 days after the
effective date of such Registration Statement, and (ii) the completion of the
distribution by the Holders of all of the Registrable Securities covered by such
Registration Statement (the "Effectiveness Period");
(c) use commercially reasonable efforts to register or qualify the
Registrable Securities covered by such Registration Statement under the
securities or blue sky laws of such states within the United States as the
Company determines, PROVIDED that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
state wherein it is not so qualified, subject itself to taxation in any state
wherein it is not so subject, or take any action which would subject it to
general service of process in any state wherein it is not so subject; and
(d) (i) notify each Holder of Registrable Securities covered by such
Registration Statement if, to its knowledge, such Registration Statement, at the
time it or any amendment thereto became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and, as
promptly as practicable, prepare and file with the SEC a post-effective
amendment to such Registration Statement and use commercially reasonable efforts
to cause such post-effective amendment to become effective such that such
Registration Statement, as so amended, shall not contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
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<PAGE>
or necessary to make the statements therein not misleading, and (ii) notify each
Holder of Registrable Securities covered by such Registration Statement, at any
time when a Prospectus relating thereto is required to be delivered under the
Securities Act, if, to its knowledge, the Prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and, as promptly as practicable, prepare
and furnish to such Holder a reasonable number of copies of a supplement to or
an amendment of such Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such Prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Each Holder agrees that upon receipt of any notice from the Company
pursuant to Section 5.1(d), such Holder will promptly discontinue the Holder's
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until the Holder shall have received notice
from the Company that such Registration Statement has been amended and/or copies
of the supplemented or amended Prospectus contemplated by Section 5.1(d) have
been furnished. If so directed by the Company, each Holder of Registrable
Securities will deliver to the Company all copies, other than permanent file
copies, in such Holder's possession of the Prospectus covering such Registrable
Securities at the time of receipt of such notice.
5.2 SELLER INFORMATION. The Company may require each Holder of any
Registrable Securities as to which any Registration is being effected to furnish
to the Company such information regarding such Holder and the distribution of
such Registrable Securities as the Company may from time to time reasonably
request and as shall be required by law in connection therewith. Each Holder
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially false or misleading.
SECTION 6. REGISTRATION EXPENSES.
The Company shall pay all Registration Expenses arising from or
incidental to the performance of, or compliance with, this Agreement, PROVIDED
that each Holder requesting such Registration shall bear any transfer taxes
applicable to its Registrable Securities registered thereunder, customary (both
as to type and amount) commissions, discounts or other compensation payable to
the underwriters (including fees and expenses of underwriters' counsel), selling
brokers, managers or other similar persons engaged in the distribution of any of
the Registrable Securities, and the fees and expenses of each Holder's own
counsel.
SECTION 7. INDEMNIFICATION.
7.1 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. The Company
may require, as a condition to including any Registrable Securities of a Holder
in any Registration Statement filed pursuant to this Agreement that the Company
shall have received an undertaking satisfactory to it from such Holder to
indemnify, defend and hold harmless, the Company, its directors and officers and
each person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Company from and against
6
<PAGE>
any and all losses, claims, damages and liabilities, joint or several, to which
any of the foregoing may become subject, under the Securities Act or otherwise,
based upon or arising out of any untrue statement or alleged untrue statement of
a material fact in a Registration Statement, any preliminary prospectus, final
Prospectus or summary Prospectus, or any amendment or supplement thereto, or
omission or alleged omission to state therein any material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in the preparation of such Registration
Statement, preliminary prospectus, final Prospectus, summary Prospectus,
amendment or supplement. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling person and shall survive the transfer of such
Registrable Securities by such Holder.
7.2 INDEMNIFICATION PAYMENTS. Any indemnification required to be made
by an indemnifying party pursuant to this Section 7 shall be made by periodic
payments to the indemnified party during the course of the action or proceeding,
as and when bills are received by such indemnifying party with respect to an
indemnifiable loss, claim, damage, liability or expense incurred by such
indemnified party.
7.3 OTHER REMEDIES. If for any reason the foregoing indemnity is
unavailable, other than by reason of the exceptions provided therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities,
actions, proceedings or expenses in such proportion as is appropriate to reflect
the relative benefits to and faults of the indemnifying party on the one hand
and the indemnified party on the other in connection with the offering of
Registrable Securities (taking into account the portion of the proceeds of the
offering realized by each such party) and the statements or omissions or alleged
statements or omissions which resulted in such loss, claim, damage, liability,
action, proceeding or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statements or omissions.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this Section 7.3 except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 7 if such indemnification were enforceable under applicable law.
SECTION 8. MISCELLANEOUS.
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8.1 ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
8.2 NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election and unless notice is otherwise
given to the Company by the record owner, be treated as the Holder of such
Registrable Securities for purposes of any request or other action by the Holder
of such Registrable Securities pursuant to this Agreement. If the beneficial
owner of any Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Securities.
8.3 TERM. This Agreement shall be effective as of the date hereof and
shall continue in effect thereafter until the earlier of (a) its termination by
the consent of the parties hereto or their respective successors in interest,
(b) the date on which no Registrable Securities remain outstanding, (c) the date
on which the Holders may resell all of the Registrable Securities under Rule
144, and (d) November 17, 2005.
8.4 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by telecopy or telegram:
(i) If to a Holder, at the address set forth on the
signature pages hereto.
(ii) If to the Company, at:
New Visual Entertainment, Inc.
5920 Friars Road, Suite 104
San Diego, California 92108
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
8.5 AMENDMENTS; WAIVERS; ETC. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
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<PAGE>
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity.
8.6 SEVERABILITY. If any provision of this Agreement, including any
phrase, sentence, clause, Section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
8.8 SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall not be
assignable or otherwise transferable by the Holder without the prior written
consent of the Company; PROVIDED, HOWEVER, that the Holder may assign this
Agreement to any transferee of the Warrants or the Purchase Agreement. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
8.9 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section 8 with
respect to indemnification of certain third parties hereunder, nothing in this
Agreement shall confer any rights upon any person or entity other than the
parties hereto and their respective heirs, successors and permitted assigns.
8.10 HEADINGS. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
8.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
8.12 CONFIDENTIALITY. Each Holder shall treat as confidential and shall
not use confidential information of the Company acquired from the Company
pursuant to this Agreement except in accordance with the terms and provisions of
this Agreement and the Holder's rights and obligations hereunder, and will not
disclose the same or any part thereof to any third party without the prior
written approval of the Company; provided, however, that nothing contained
herein shall in any way restrict or impair any Holder's right to use, disclose,
or otherwise deal with any information of the Company which:
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(i) at the time of the disclosure is generally available to
the public or thereafter becomes generally available to the public by
publication or otherwise through no act of such Holder;
(ii) was in such Holder's possession prior to the time of
disclosure hereunder and was not acquired directly or indirectly from
the Company;
(iii) is independently made available to such Holder as a
matter of right by a third party, or
(iv) was developed independently of the confidential
information obtained from the Company.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NEW VISUAL ENTERTAINMENT, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
HOLDERS:
LILLY BETER CAPITAL GROUP, LTD.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address: 3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
INTERNATIONAL CARRIBEAN TRUST LIMITED
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address: c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
PROMETHEUS TRUST LIMITED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address: c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
11
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CUTTING EDGE TRUST LIMITED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address: c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
WIND & SEA TRUST LIMITED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address: c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
MONTGOMERY LANDING TRUST LIMITED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address: c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
QUAIL RUN TRUST LIMITED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address: c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
TRU COLOR TRUST LIMITED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address: c/o Lilly Beter Capital Group, Ltd.
3925 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
12
