Exhibit 10.18
BRIDGE LOAN AGREEMENT
ProtoSource Corporation (the "Company")
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
The undersigned (the "Lender") hereby promises to lend, as provided herein, the
amount specified in Item 2 below in the Company. ProtoSource Corporation (the
"Borrower") shall execute a series of notes in connection with the extension of
credit made by various Lenders in the aggregate principal amount up to $750,000
(the "Credit"). In consideration of the extension of the Credit, each Lender
shall receive shares of the Common stock in proportion to the amount of the
Credit which is extended by such Creditor; the aggregate number of shares of
Common Stock of the Borrower shall be up to 150,000 shares.
1. ACKNOWLEDGEMENT OF RECEIPT
Lender hereby acknowledges receipt of a copy of the Company's Prospectus
dated May 14, 1997, the Company's Form 10-QSB dated March 31, 1997, and the
Company's Proxy Statement dated April 10, 1997, and the other documents relating
to an investment in the Common Stock that were included therein or were received
by the Lender from the Company or from another party acting on behalf of the
Company prior to executing this Agreement (collectively, the "Offering
Documents"). Terms used herein without definition shall have the meanings
assigned thereto in the Offering Documents.
2. PAYMENT
Subject to the terms and conditions set forth in the Offering Documents,
the Lender is hereby required, together with other lenders, to lend the Company
an amount not to exceed Seven Hundred Fifty Thousand ($750,000) Dollars. Such
amount is to be raised on a Best Efforts basis and may be advanced immediately
for use by the Company upon receipt of same. These loans, together comprising
the Bridge Loan are to be made subject to the form or promissory Note attached
hereto as Exhibit A. Andrew, Alexander, Wise & Company Incorporated (the
"Placement Agent"), will transfer the loan amounts as received by the Lenders.
Subsequent to the execution of the Bridge Loan, and subject to the approval of
the National Association of Securities Dealers, Inc. ("NASD"), the Placement
Agent intends to raise a minimum of Four Million ($4,000,000) Dollars through a
secondary public offering of the Company's Shares, (the "Secondary Offering").
The Placement Agent will transfer the Subscription payment less ten percent
(10%) sales commission and three percent (3%) non-accountable expense allowance
earned in the placement of the Bridge Loan as such funds are received by said
Placement Agent. In the event that the Subscription payment amount is received
directly by the Company, the Company shall forward to Placement Agent any fees
due in connection with such Subscription.
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3. ACCEPTANCE OF LOAN
The Company has the right to accept or reject the Loan in whole or in part. This
Agreement will be deemed to be accepted by the Company only when signed by the
Company. Once accepted by the Company, this loan is irrevocable except (a) as
required by applicable state securities laws, and (b) as otherwise provided in
the Offering Documents.
4. Lender UNDERSTANDS THAT:
(a) No federal or state agency has made any finding or determination as to
the fairness of the offering for investment, or any recommendation or
endorsement, of the Common Stock.
(b) Lender's right to transfer all or any part of the Common Stock will be
restricted for the reasons and in the manner set forth in the Offering
Documents, and such Common Stock may not be transferred unless registered under
the Securities Act of 1933, (the "Securities Act"), and any applicable state
securities laws, or an exemption from such registration is available. Lender
recognizes that the Company has not made any representations with respect to
registration of the Common Stock under the Securities Act or any applicable
state securities laws, other than set forth in Section 4(c) below, that the
exemption afforded by Rule 144 under the Securities Act will be available, that
there is an active current market for the Common Stock, and that a sale of the
Common Stock by the Lender will accordingly be restricted.
(c) The Company will use cause a registration statement under the
Securities Act covering the Common Stock (the "Registration Statement") to be
filed with the Commission upon the first to occur of (i) December 31, 1997; or
(ii) concurrently with the final closing date for the Secondary Offering, and
will use its Best Efforts to cause such Registration Statement to become
effective as soon as practicable. All expenses of the Registration Statement
including, but not limited to, legal, accounting, printing and other related
fees will be borne by the Company.
5. Lender HEREBY REPRESENTS, WARRANTS AND AGREES THAT:
(a) Lender is acquiring the Common Stock for Lender's own account for
investment and not for the account of others or with a view to distribution or
resale of such Common Stock or any interest therein. Lender shall not sell,
hypothecate or otherwise dispose of Common Stock except as permitted by the
Offering Documents and unless such Common Stock is registered under the
Securities Act and any applicable state securities laws or in the opinion of
counsel, an exemption from the registration requirements of the Securities Act
and any applicable state securities laws is available.
(b) Lender is aware that Common Stock may not be liquidated readily in
cases of emergency. Lender has adequate means of providing for Lender's current
needs and possible personal contingencies and has no need for liquidity of this
investment.
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(c) Lender has carefully read and understands the terms of the Offering
Documents, and the Company has made available to Lender all other documents that
Lender has requested relating to an investment in the Common Stock and has
afforded Lender the opportunity to discuss the investment with and to ask
questions of the Company and has provided answers to all of Lender's questions
concerning the offering of Common Stock. The Company has also afforded Lender
the opportunity to obtain any additional nonproprietary information necessary to
verify the accuracy of any information in the Offering Documents. In evaluating
the suitability of an investment in the Common Stock, Lender has not received or
relied upon any representations or other information (whether oral or written)
made by the Company other than as set forth in the Offering Documents or as
contained in other documents supplied at the request of Lender as aforesaid.
(d) Lender recognizes that an investment in the Common Stock involves
certain risks and Lender has taken full cognizance of and understands all of the
risk factors related to a purchase of the Common Stock, including, without
limitation, those set forth in the "RISK FACTORS" attached hereto as Exhibit B.
(e) Lender has not relied upon the Company for any tax or legal advise in
connection with Lender's purchase of Common Stock, and Lender has consulted
Lender's own adviser with respect to the tax and other legal aspects of the
acquisition of Common Stock.
(f) Lender will not duplicate or furnish copies of the Offering Documents
to persons other than Lender's investment and tax advisors, accountants or legal
counsel assisting Lender in the evaluation of the Common Stock.
(g) Lender has such knowledge and experience in financial and business
matters generally that Lender is capable of evaluating the meets and risks of an
investment in the Common Stock. Lender, or Lender's professional advisor, has
the capacity to protect Lender's concerns in connection with the purchase of
Common Stock, and Lender is able to bear the economic risk of an investment in
Common Stock.
(h) Lender, if a corporation, partnership, trust or other entity, is duly
formed and is validly existing and in good standing under the laws of its
jurisdiction of organization and has all powers and is authorized, has taken all
required action, and otherwise has duly qualified to execute and perform this
Agreement and to purchase and hold the Common Stock, and this Agreement has been
duly executed and delivered by Lender and constitutes the legal, valid and
binding obligation of Lender enforceable against Lender in accordance with its
terms. The Individual signing this Agreement on behalf of Lender represents that
he or she has full power and authority to execute and deliver this Agreement in
such capacity and on behalf of Lender. Lender and/or the individual signing this
Agreement on Lender's behalf will provide to the Company such information as its
shall reasonable request to substantiate the foregoing. Lender has furnished to
the Corporation:
1. if the Lender is a corporation, the articles or certificate of
incorporation and by-laws
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of the Lender and a copy (certified by the secretary or other authorized
officer of the Lender) of appropriate corporate resolutions authorizing
Lender's investment in the Common Stock;
2. if Lender is a trust, the trust agreement of Lender;
3. if Lender is a partnership, the partnership agreement (or other
evidence of due authorization to make Lender's investment in the
Common Stock.
(i) Lender, if executing this agreement in a representative or fiduciary
capacity, has full power and authority to execute and deliver this Agreement in
such capacity and on behalf of the subscribing individual for whom Lender is
executing this Agreement, and such individual has full right and power to
perform pursuant to this Agreement and become a shareholder of the Corporation.
(j) Lender, if a corporation, partnership, trust or other entity, was not
formed reformed or recapitalized for the specific purpose of investing in the
Company.
(k) Lender will make such additional representations and warranties and
furnish such information regarding Lender's investment experience and financial
position as the Company may reasonably require. All information that Lender has
provided to the Company is correct and complete as of the date set forth below
and if there should be any material change in the information set forth herein
or in any other information provided to the Company prior to Lender's admission
to the Company, Lender will immediately furnish such revised or corrected
information to the Company.
6. Lender understands the meaning and legal consequences of the
representations and warranties and the restrictions and limitations on transfer
contained in this Agreement and in the Offering Documents and hereby agrees to
indemnify and hold harmless the Company, the Board members, and their
affiliates, advisors, agents and employees, from and against any and all loss,
damage or liability due to or arising out of any inaccuracy in or breach or any
of those representations or warranties by Lender. Notwithstanding the provisions
of this Section 6, however, no representation, warranty, acknowledgement or
agreement made in this Agreement by Lender will in any manner be deemed to
constitute a waiver of any rights granted to Lender under federal or state
securities laws. Lender acknowledges specifically that the representations and
warranties and understandings and agreements set forth in this Agreement will
survive the date of this Agreement.
7. CERTIFICATION OF STATUS AS AN ACCREDITED INVESTOR
Lender certifies that Lender qualifies as an "accredited investor" within
the meaning of Rule 501 (a) of Regulation D promulgated under the Securities
Act, [for the reason set forth herein]. The Lender if an entity has checked the
appropriate box below indicating Lender's status as an accredited investor:
(check applicable box)
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Certain Entities
[ ] (A) a bank, as defined in Section 3(a)(2) of the Act or a savings and
loan company or other institution as defined in Section 3(a) (5) (A) of the
Act;
[ ] (B) a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended;
[ ] (C) an insurance company as defined in Section 2(13) of the Act;
[ ] (D) an investment company registered under the Investment Company Act of
1940, as amended or a business development company as defined in Section
2(a)(48) thereunder;
[ ] (E) A small business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958, as amended;
[ ] (F) a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as amended;
[ ] (G) an organization described in Section 50l(c)(3) of the Internal
Revenue Code of 1986, as amended, or a corporation, Massachusetts or
similar business trust, or partnership not formed for the specific purpose
of acquiring the securities offered in the offering in the offering, with
total assets in excess of $5,000,000; or
[ ] (H) a trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered in the offering, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) promulgated under the Act; or
[ ] (I) a corporation or partnership in which each and every shareholder of
such corporation or each and every partner (including, in the case of a
limited partnership, each and every limited partner) of such partnership is
an "accredited investor" as such term is defined in Rule 501 (a)
promulgated under the Act.
OTHER
[ ] (J) Any natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his purchase exceeds $1,000,000;
[ ] (K) Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
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[ ] (L) Any trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person described as having such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment, or the
issuer reasonably believes immediately prior to making the sale that such
purchaser comes within this description;
[X] (M) Any entity in which all of the equity owners are accredited investors.
8. CERTIFICATION OF STATUS AS A UNITED STATES PERSON
Lender hereby certifies under penalties of perjury that: (i) if Lender is a
natural person, he or she is a citizen or resident of the United States, or (ii)
if Lender is a partnership, corporation, trust or other entity, it was organized
under the laws of one of the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ (or the laws of the
District of Columbia).
9. MISCELLANEOUS
(a) Failure by the Company to exercise any right or remedy under this
Agreement or any other agreement between the Company and Lender, or delay by the
Company in exercising the same, shall not operate as a waiver. No waiver by the
Company shall be effective unless it is in writing and signed by the Company.
(b) In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict with such statute
or rule of law and shall be deemed modified to conform therewith. Any provision
hereof which may prove invalid or unenforceable shall not affect the validity or
enforceability of any other provision hereof.
(c) Notices required or permitted to be given under this Agreement shall be
in writing and shall be deemed to be sufficiently given when sent by registered
or certified United States mail, postage prepaid, addressed to the party for
whom intended at the address of such party as set forth below.
(d) This Agreement is not transferable or assignable by Lender.
(e) This Agreement and all questions relating to its validity,
interpretation, performance, and enforcement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to
conflict of law principles (except insofar as affected by the state securities
or "Blue Sky" laws of the jurisdiction in which the offerings described herein
have been made). Lender understands that this Agreement (i) shall be binding
upon Lender and Lender's legal representatives, successors and assigns and shall
inure to the benefit of the Company, its successors and assigns, (ii) shall
survive Lender's admission as a shareholder of the Company; (iii) shall, if
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Lender consists of more than one person, be the joint and several obligations of
all such persons; and (iv) may be executed by Lender and accepted by the Company
in one or more counterparts, each of which shall be an original and all of which
together shall constitute one instrument.
10. FOR NEW YORK RESIDENTS
Lender understands that the offering of Common Stock has not been reviewed
by the Attorney General of the State of New York because of the Company's
representations that this is intended to be a non-public offering pursuant to
Regulation D promulgated under the Securities Act, and that if all of the
conditions and limitations of Regulation D are not complied with, the offering
will be resubmitted to the Attorney General for amended exemption. Lender
understands that any offering literature used in connection with this offering
has not been pre-filed with the Attorney General and has not been reviewed by
the Attorney General. The Common Stock is being purchased for Lender's own
account for investment, and not for distribution or resale to others. Lender
agrees that Lender will not sell or otherwise transfer the Common Stock unless
an exemption from such registration is available. Lender represents that Lender
has adequate means of providing for Lender's current needs and possible personal
contingencies, and that Lender has no need for liquidity of this investment.
All documents, records, and books pertaining to this investment have been
made available for inspection by Lender's attorney and/or Lender's accountant
and Lender, and the books and records of the Company will be available upon
reasonable notice, for inspection by investors at reasonable hours at its
principal place of business.
11. FORM OF OWNERSHIP
Please indicate the form of ownership you desire for the Common Stock;
Individual (one signature required)
----
Joint Tenants with Right of Survivorship (all parties must sign)
----
Tenants in Common (all parties must sign)
----
Tenants by the Entirety (all parties must sign)
----
Community Property (one signature required if interest held in one name,
i.e. managing spouse; two signatures required if interest is held in both
names)
----
X Corporation (signature of authorized officer or officers required)
----
Partnership (signature of general partner and any additional signatures
required by partnership agreement required)
----
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Trust (signature of trustee and any additional signatures required by trust
instrument required)
----
Other Entities (all signatures required by governing instrument required)
----
Please PRINT below the exact name (registration) you desire for the Common
Stock:
World Spirit Inc.
------------------------------
In WITNESS WHEREOF, Lender has executed this Agreement this 16th day of June
1997.
If Lender is a Natural Person:
------------------------------
(Signature of Lender)
------------------------------
(Name of Lender)
(Please Print of Type)
If Lender is not a Natural Person:
World Spirit Inc.
--------------------------------
(Type or Print Name of Corporation, Partnership, Trust or Other Entity)
--------------------------------
(Signature of Individual Signing)
(Capacity of Individual Signing on behalf of Corporation, Partnership, Trust
or Other Entity)
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Investment Representation Letter and Agreement
Name: World Spirit Inc.
Address: ▇▇▇ ▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
June 16, 1997
ProtoSource Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
I am receiving 50,000 (50,000) shares (the "Shares") of the common stock of
ProtoSource Corporation, a California corporation (the "Company"), for no
additional consideration, in connection with a concurrent loan by me to the
Company. I understand and acknowledge that the Shares will be shares of the
common stock of the Company.
In connection therewith, I hereby represent and certify to you and agree that:
1. I am receiving the Shares for investment only and not with a view to
their resale or distribution. I am not receiving the Shares as a result of any
advertisement, general solicitation, public meeting or other public offering.
2. I understand that the Shares are not registered under the Securities Act
of 1933, as amended (the "Act"), or qualified under the California Corporate
Securities Law of 1968, as amended (the"CSL"), and must be held by me
indefinitely unless they are subsequently registered under the Act, and
qualified under the CSL, or an exemption from such registration or qualification
is available. I understand that the resale of such Shares will be restricted so
that such resale may be made only in accordance with the appropriate exemptions
(including holding such Shares for periods of time specified in Rule 144
promulgated under the Act and compliance with the other provisions thereof, if
such exemption is available) under the Act and the CSL, or registration under
the Act and qualification under the CSL.
3. I am an accredited investor as that term is defined in Regulation D
under the Act. Based upon my experience in business and as an investor, I am
aware of the risks of an investment in restricted securities, and I have no need
for any income from my investment. I am aware that the Hares may have no value
now, and the Company has not made any representation as to their value now or in
the future. I have such knowledge and experience in financial and business
matters so that I am capable of assessing the merits and risks of acquiring the
Shares. I have reviewed the Company's definitive prospectus dated May 14, 1997,
the Company's last Form 1O-QSB, and its proxy statement dated April 10, 1997,
and have had an opportunity to ask questions of and receive answers from
management of the Company and to obtain any additional information that the
Company possesses or can acquire without unreasonable effort or expense relating
to the Company's business, financial condition and results of operation,
although the Company has made no representation or warranty except as expressly
contained herein.
4. I understand that all certification evidencing the Shares will bear
legend substantially in the following form:
"The Securities represented by this certificate have not been registered
under the Securities Act of 19337 as amended (the "Act"), or qualified
under any state securities law. These securities may not be sold,
transferred, pledged or hypothecated in the absence of an effective
registration statement for the securities under the Act and qualified under
any applicable state securities law, or unless an opinion of counsel
acceptable to counsel to the Company, and other assurances satisfactory to
the Company, have been delivered to the Company prior to the transaction to
the effect that registration and qualification is not required."
5. I have consulted with the and legal counsel selected by the undersigned,
and with such financial advisors, who have reviewed the merits of an investment
in the Shares. The undersigned, together with such persons, has sufficient
knowledge and experience in business and financial matters to evaluate the meets
of the risks of an investment in the Shares, and the undersigned, fully aware of
the risks involved, has determined that an investment in the Shares is
consistent with the undersigned's investment objectives. The undesigned is
relying solely o~ e undersigned's own tax advisors with respect to the tax
factors relating to an investment in the Shares.
6. I understand that 10% of my loan proceeds to the (Company will be used
to pay sales commissions to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and Company, Incorporated
(hereinafter "AAWC") ~ connection with this transaction. In addition, I
understand that AAWC shall be allocated an additional 3% of my loan proceeds as
and for a non-accountable expense allowance.
7. I hereby agree as follows:
(a) If the undersign, or any subsequent holder, desires to transfer any of
the Shares, the undersigned must give to the Company prior written notice of
such proposed transfer including the name and address of the proposed
transferee. Unless registered and qualified as provided herein, such transfer
may be made only either (i) upon publication by Securities and Exchange
Commission (the "Commission") of a ruling, interpretation, opinion or "no action
letter" based upon facts presented to the Commission, or (ii) upon receipt by
the Company of an opinion of counsel acceptable to counsel to the Company, in
either case to the effect that the proposed transfer will not violate the
provisions of the Act, the Securities Exchanges Act of 1934, as amended any
state securities laws, or the rules and regulations promulgated under any such
acts or laws.
(b) Prior to any such proposed transfer, and as a condition thereto, if
such offer is not made pursuant to our effective registration statement under
the Act, the undersigned, or any subsequent holder, will, if requested by the
Company, deliver to the Company (i) and investment letter setting forth
investment representations of the proposed transferee and such proposed
transferee's covenant to comply with the transfer provisions set forth in this
Section 7 and elsewhere in this Agreement, signed by the proposed transferee,
and (ii) an agreement by the transferee to indemnify the Company to the same
extent as set forth in Section 7 (c) hereof.
(c) The undersigned acknowledges that the undersigned understands the
meaning and legal consequences of the representation and warranties contained
herein, and the undersigned hereby agrees to indemnify and hold harmless the
Company and its agents and representatives and each of their heirs, legal
representative, successors and assigns from and against any and all loss, damage
or liability (including without limitation all attorneys' fees and costs
incurred in enforcing this indemnity provision) due to or arising out of (i) the
inaccuracy of any representation or the breach of any warranty of the
undersigned contained in, or any other breach of, this letter agreement, (ii)
any transfer of any of the Shares in violation of the Act, the Securities and
Exchange Act of 1934, as amended, any state securities laws, or the rules and
regulation promulgated under any of such acts or laws, (iii) any transfer of any
to the Shares not in accordance herewith or (iv) any undue statement or omission
to state any material fact in connection with the investment representation or
with respect to the facts and representations supplied by the undersigned to
counsel to the Company upon which its opinion as to a proposed transfer shall
have been based.
(d) The Company may place a stop order with its transfer agent and
registrar, if any, with respect to any of the Shares or any certificates unto
which such Shares are exchanged.
(e) Notwithstanding the above, the Company will use cause a registration
statement under the Securities Act covering the Common Stock (the "Registration
Statement") to be filed with the Commission upon the first to occur of (i)
December 31, 1997; or (ii) concurrently with the final closing date for the
Secondary Offering and will use its Best Efforts to cause such Registration
Statement to become effective as soon as practicable. All expenses of the
Registration Statement including, but not limited to, legal, accounting,
printing and other related fees will be done by the Company.
8. In conjunction with the investment referred to in this Investment
Representation Letter and Agreement, by its execution of the acceptance and
agreement below, Company agrees as follows:
(a) Upon funding and proper documentation of the loan which serves as
consideration for the issuance of the Shares, the Company agrees to issue to the
undersigned investor for no additional consideration one (1) share of its common
stock for each five dollars ($5.00) lent to the Company by the undersigned
investor.
(b) The Company will offer not more than $750,000 of aggregated loans on a
Best Efforts Basis only.
Very truly yours,
World Spirit Inc.
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Investor
----------------------------------------
Name (Please Type or Print)
By: President
Accepted and agreed to:
Dated: June , 1997
ProtoSource Corporation, a California corporation
By:
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
PROMISSORY NOTE
$250,000 New York, New York
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June 16, 1997
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Date
A. GENERAL; TERMS OF PAYMENT; USE OF PROCEEDS; PREPAYMENT
1. FOR VALUE RECEIVED, the undersigned, ProtoSource Corporation, a
corporation organized under the laws of the State of California (the"Borrower"),
hereby promises to pay to the order of WORLD SPIRIT INC.(the "Lender"), at the
offices of Andrew, Alexander, Wise & Company, Incorporated hereinafter "AAWC")
at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ the principal sum of $250,000 on
the first to occur of the following; (i) upon the closing of a public or private
offering of securities of the Borrower for at least $1,000,000 (the "Closing");
or (ii) fifteen months from the date hereof.
The Borrower will pay interest on the unpaid principal amount hereof at the
rate of 12 per cent per annum computed on the basis of a 360-day year, at
maturity (whether by acceleration or otherwise).
The loan proceeds shall be used as bridge financing until the occurrence of
the Closing.
2. PREPAYMENT. The Borrower shall have the right to prepay this Note in
whole or in part at any time without penalty or premium.
B. EVENTS OF DEFAULT; REMEDIES
1. If any of the following events shall occur and be continuing (each an
"Event of Default") (a) the Borrower fails to make any payment when due under
the Note; (b) the Borrower shall default in the performance or observance of any
covenant or agreement contained herein or any agreement between the Borrower and
the Lender; (c) the Borrower sells, agrees to sell, leases, agrees to lease to a
third party all or substantially all of its assets or stock; (d) the Borrower
terminates its business operations; (e) any representation or warranty made by
or on behalf of the Borrower in this Note or in any other certificate,
agreement, instrument or statement delivered to the Lender by or on behalf of
the borrower shall at any time prove to have been incorrect when made in any
material respect; (f) the Borrower shall default in the payment of principal or
interest on any indebtedness for borrowed money including without limitation,
any portion of the Credit (as such term is defined below) of which this loan
forms a part, or shall default in the performance or observance of the terms of
any instrument pursuant to which such indebtedness was created or is secured,
the effect of which default is to cause or permit any holder of any such
indebtedness to cause the same to become due prior to its stated maturity (and
whether or not such default is waived by the holder thereof; (g) any change in
the condition or affairs (financial or otherwise) of the Borrower shall occur
which, in the opinion of the Lender, increases its risk with respect to the loan
evidenced by this Note; (h) any judgement against the Borrower or any
attachment, levy, or execution against any of there properties for any amount
shall remain unpaid or shall not be released, discharged dismissed, stayed or
fully bonded for a period of thirty (30) days or more after its entry, issue or
levy, as the case may be; (i) the Borrower shall become insolvent or be unable
or admit in writing its inability, to pay its debts as they mature; or (j) the
Borrower shell make an assignment for the benefit of creditors or a trustee,
receiver or liquidator shall be appointed for the Borrower or for any of their
property, or the commencement of any proceeding by the Borrower under any
bankruptcy, reorganization arrangement of debt insolvency, readjustment of debt,
receivership, liquidation or dissolution law or statute, or the commencement of
any such proceeding without the consent of the Borrower and such proceeding
shall continue undischarged for a period of 30 days. Then, the Lender may
declare the entire unpaid principal amount of this Note and all interest and
fees accrued and unpaid hereon to be forthwith due and payable, whereupon the
same shall become and be forthwith due and payable by the Borrower.
2. In case any one or more Event(s) of Default hereunder or under any
related document shall happen and be continuing, Lender may proceed to protect
and enforce Lender's rights either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant, condition, or
agreement contained in this Note, or in aid of the exercise of any power granted
in this Note to enforce any other legal or equitable right of Lender. After an
Event of Default, Borrower shall pay to Lender immediately upon written demand
therefore any amounts reasonably expended or incurred by Lender in collecting
any amount due hereunder including, without limitation, attorneys fees and
costs, whether or not any legal action is instituted in connection therewith.
C. MISCELLANEOUS
1. Amendments. No amendment, modification or waiver of any provision of
this Note nor consent to any departure by the Borrower therefrom shall be
effective unless the same shall be in writing and signed by the Lender and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it is given.
2. Constructions. This Note shall be deemed to be a contract made under the
laws of the State of New York and shall be construed in accordance with the laws
of said State.
3. Successors and Assigns. This Note shall be binding upon the Borrower and
its heirs, legal representatives, successors and assigns, and the terms hereof
shall inure to the benefit of the Lender and its successors and assigns,
including subsequent borders thereof.
4. Severability. The provisions of this Note are severable, and if any
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or enforceability shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.
5. No Waiver: Remedies Cumulative. No failure on the part of the Lender to
exercise and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Lender of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right Borrower hereby waives presentment, demand, protest, notice
of dishonor and all other notices and demands, except as expressly set forth
herein. Borrower also hereby waives the right to trial by jury in any litigation
related to this Note. written.
6. Costs and Expenses. The Borrower shall reimburse the Lender of all costs
and expenses incurred by it and shall pay the reasonable fees and disbursements
of counsel to the Lender connection with the enforcement of the Lenders rights
hereunder. The Borrower shall also pay any and all taxes (other than taxes on or
measured by net income of the holder of this Note) incurred in connection with
the execution and delivery of this Note.
7. Series of Notes. This, Note is one of a series of notes executed by the
Borrower in connection with the extension of credit made by various creditors
(together the "Creditor") in the aggregate principal amount up to $750,000 (the
"Credit~). In consideration of the extension of the Credit, each Creditor shall
receive shares of the Common stock in proportion to the amount of the Credit
which is extended by such Creditor; the aggregate number of shares of Common
Stock of the Borrower shall be up to 150,000 shares.
IN WITNESS WHEREOF, Borrower has executed this Note on the day and year
first above
ProtoSource Corporation
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
REGISTRATION RIGHTS AGREEMENT
W I T N E S S E T H:
--------------------
WHEREAS, the Stockholders are the purchasers of am aggregate of 150,000
shares of Common Stock of the Company (the "Shares") issued in connection with
interim financing on this date of the Company in an aggregate amount not to
exceed $750,000 (the "Bridge Financing"), and
WHEREAS, the Company and the Stockholders desire that certain terms and
provisions be applicable to the Shares hereinafter referred to as Registrable
Securities") held by the Stockholders;
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein, and for other good and valuable consideration, the adequacy and receipt
of which are hereby acknowledged, the parties hereby agree as follows:
Section 1. Registration Rights. The Company covenants and agrees with the
Stockholders that the Company will file with the Securities and Exchange
Commission ("SEC") a Registration Statement, (the "Registration Statement") a
post-effective amendment to an existing Registration Statement (the "Amendment")
or a Regulation A Offering Statement (an "Offering Statement") under the
Securities Act of 1933, as amended (the "Act"), registering or qualifying the
Registrable Securities for sale concurrently with the proposed Secondary Public
Offering of the Company's Securities (the "Secondary Offering) to be placed by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Wise & Company, Incorporated (the "Placement Agent") or if such
Secondary Offering is not completed by December 31, 1997. The Company will use
its best efforts, through its officers, directors, auditors md counsel in all
matters necessary or advisable, to cause to become effective such Registration
Statement as promptly as practicable, and, for a period of one year hereafter,
to reflect in the Amendment, Registration Statement or Offering Statement,
financial statements which are prepared in accordance with Section 10(a)(3) of
the Act and any facts or events arising that, individually, or in the aggregate,
represent a fundamental and/or material change in the information set forth in
the Amendment, Registration Statement or Offering Statement to enable any
Stockholder of the Registrable Securities to sell such Registrable Securities
during said two-year period.
Section 2. Piggyback Registration Rights. The Company covenants and agrees
with the Stockholders and any other holders of the Registrable securities that
if, at anytime within the period commencing from the date hereof, and ending
five (5) years thereafter, it proposes to file a Registration Statement,
Amendment or Offering Statement, as the case may be (collectively, a
"Registration Statement") with respect to any class of security (other than
pursuant to a Registration Statement on Forms S-4 or S-8 or any successor form)
under the Act in a primary registration on behalf of the Company and for in a
secondary registration on behalf of holders of securities, and the Registration
Statement to be used may be used for registration of the Registrable Securities,
the Company will give written notice to the holders of the Registrable
Securities at least thirty (30) days prior to the filing of such Registration
Statement at the addresses appearing on the records of the Company of its
intention to file a Registration Statement, and will offer to include in such
Page 1
Registration Statement, all or any portion of the Shares, and limited, in the
case of a Regulation A offering, the amount of the available exemption. The
offer to include the Shares is limited by subparagraphs (a) and (b) of this
Section 2. In any event, the maximum number of Registrable Securities which
shall be registered shall not exceed that number for which the Company has
received written requests for inclusion therein within fifteen (15) days after
the giving of notice by the Company The Company will use its best efforts,
through its officers, directors, auditors and counsel in all matters necessary
or advisable, to cause to become effective such Registration Statement as
promptly as practicable. All registrations requested pursuant to this Section 2
are referred to herein as "Piggyback Registrations." All Piggyback Registrations
pursuant to this Section 2 will be made solely at the Company's expense, except
for the Stockholders' co~el fees and sales commissions incurred if the
Registrable Securities be sold.
(a) Priority on Primary Registrations. If a Piggyback Registration includes
an underwritten primary registration on behalf of the Company and the
underwriter so requests, the Company and such holder of Registrable
Securities will enter into an underwriting agreement with such underwriter
for such offering, which shall be reasonably satisfactory in substance and
form to the Company, such holder of Registrable Securities and the
underwriter, and such agreement shall contain such representations and
warranties by the Company md such holder of Registrable Securities and such
other terms and provisions as are customarily contained in underwriting
agreement with respect to secondary distributors, including, without
limitation, indemnities substantially to the effect and to the extent
provided Section 8. Furthermore, if the underwriter(s) for the offering
being registered by the Company shall determine ln good faith and advise
the company in writing that in its/their opinion the number of Registrable
Securities requested to be included in such registration exceeds the number
that can be sold in such offering without materially adversely affecting
the distribution of such securities by the Company (such opinion to state
the reasons therefor). then the Company will promptly furnish the holders
of the Registrable Securities with a copy of such opinion and the Company
will include in such registration (1) first, the securities that the
Company proposes to sell and (ii) second, the Registrable Securities
requested to be included in such registration, apportioned and pro rata
among the holders of the Registrable Securities, but in any event not less
than 50% of the Shares? and (iii) third, securities of the holders of other
securities requesting registration.
(b) Priority on Secondary Registrations. If a Piggyback Registration
consists only of an underwritten secondary registration on behalf of
holders of securities of the Company and the underwriter(s) for the
offering being registered by the Company advise the Company in writing that
in its/their opinion the number of Registrable Securities requested to be
included in such registration exceeds the number that can be sold in such
offering without materially adversely affecting the distribution of such
securities by the Company (such opinion to state the reasons therefor).
then the Company will promptly furnish the holders of the Registrable
Securities with a copy of such opinion and the Company will include in such
registration (1) first, the securities requested to be included therein by
the holders requesting such registration and the Registrable Securities
requested to be included in such
Page 2
registration above, pro rata, among all such holders on the basis of the
number of shares requested to be included by each such holder, but in any
event not less than 50% of the Registrable Securities and (ii) second,
other securities requested to be included in such registration.
Notwithstanding the foregoing, if any such underwriter shall determine in good
faith and advise the Company in writing that the distribution of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company, then the holders of the
Registrable Securities shall delay their offering and sale for such period
ending on the earliest of (i) 90 days following the effective date of the
Company's registration Statement, (ii) the day upon which the underwriting
syndicate, if any, for such offering shall have been disbanded or, (iii) such
date as the Company, managing underwriter and holders of Registrable Securities
shall otherwise agree. In the event of such delay, the Company shall file such
supplements, post-effective amendments and take any such other steps as may be
necessary to permit such holders to make their proposed offering and sale for a
period of 120 days immediately following the end of such period of delay. If any
party disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company, the underwriter, and the
Stockholder's. Notwithstanding the foregoing, the Company shall not be required
to file a registration statement to include Shares pursuant to this Section 2 if
an opinion of independent counsel for the Stockholders, that all of the
Registrable Securities proposed to be disposed of may be transferred pursuant to
the provisions of Rule 144 under the Act shall have been delivered to counsel
for the Company.
Section 3. Other Registration Rights. In addition to the rights above
provided, the Company will cooperate with the then Stockholders in preparing and
signing any Registration Statement, in addition to the Registration Statements
and Offering Statements discussed above, required In order to sell or transfer
the Registrable Securities and will supply all information required therefor,
but such additional Registration Statement shall be at the then Holders' cost
and expense; provided, however, that if the Company elects to register and
qualify additional shares of Common Shares, the cost and expenses of such
Registration Statement will be pro-rated, between the Company and the Holders of
the Registrable Securities according to the aggregate sales price of the
securities being registered.
Section 4. Certain Understandings. The Stockholders understand that the
Company makes no representations of any kind concerning its intent or ability to
offer or sell any of the Registrable Securities in a public offering or
otherwise and that its sole rights to have the Registrable Securities registered
under the Act are contained in this Agreement. So long as there are Registrable
Securities outstanding and the Company is subject to the reporting requirements
of the Act and the Securities E;exchange Act of 1934 (the "Exchange Act"), the
Company will file the reports required to be filed by it under the Act and the
Exchange Act and the rules and regulations adopted by the SEC hereunder, and
will take such further action as the holders of Registrable Securities may
reasonably request, all to the extent required from time to time to enable the
holders of Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (i) Rule 144
Page 3
under the Act, as such Rule may be amended from time to tune, or (ii) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of the
holders of Registrable Securities, the Company will deliver to the holders of
Registrable Securities a written statement as to whether it has complied with
such information requirements.
Section 5. Company Obligations. In connection with the registration of the
Registrable Securities pursuant to this agreement, the Company shall:
(a) furnish to the holders of the Registrable Securities and to the
underwriter(s), if any, thereof such reasonable number of copies of the
Registration Statement, preliminary prospectus, final prospectus and such
other documents as such holders and underwriters may request in order to
facilitate the public offering of such securities;
(b) use its best efforts to register or qualify the Registrable Securities
under state securities laws of the jurisdictions which the holders thereof
may reasonably request in writing within 20 days following the original
filing of such Registration Statement, and do any and all other acts and
things which may be necessary or advisable to enable the holders of
Registrable Securities to consummate the disposition of Registrable
Securities in such jurisdictions except that the Company shall not be
required to execute a general consent to service of process or to qualify
to do business as a foreign corporation in any jurisdiction wherein it is
not so qualified;
(c) notify the holders of the Registrable Securities promptly when such
Registration Statement has become effective or a supplement to my
prospectus forming a part of such Registration Statement has been filed;
and
(d) advise the holders of the Registrable Securities, promptly after it
shall.receive notice or obtain knowledge thereof of the issuance of any
stop order by the SEC suspending the effectiveness of such Registration
Statement, or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
(e) prepare and file with the SEC such amendments and supplements to such
Registration Statement, and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to
comply with the provisions of the Act with respect to the disposition of
all Registrable Securities and other securities covered by such
Registration Statement, until the earlier of (a) such time as all of such
Registrable Securities and securities have been disposed of in accordance
with the intended methods of disposition by seller or sellers thereof set
forth in such Registration Statement, or (b) the expiration of 90 days
after such Registration Statement becomes effective,
(f) furnish to the holders of the Registrable Securities a signed
counterpart, addressed to the holders of the Registrable Securities, of (a)
an opinion of counsel for the Company
Page 4
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date of
the closing of such underwritten public offering), and (b) a "cold comfort"
letter signed by the independent public accountants who have certified the
Company's financial statements included in such Registration Statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, as the holders of the
Registrable Securities may reasonably request;
(g) promptly notify the holders of the Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the
Act, of the happening of my event as a result of which the prospectus
included in such registration statement, as then in effect, would include
an untrue statement of a material fact or omit to state any material fact
re~red to be stated therein or necessary to malice the statements therein
not misleading in the light of the circumstances then existing, and at the
reasonable request of the holders of the Registrable Securities prepare and
furnish to the holders of the Registrable Securities such 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 Registrable
Securities of 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 not
misleading in the light of the circumstances under which they were made,
(h) in connection with the preparation and filing of the Registration
Statement registering Registrable Securities under the Act, the Company
will give the holders of Registrable Securities and their counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
SEC, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent
public accountants who have certified its financial statements as shall be
reasonably necessary, in the opinion of the holders of Registrable
Securities, or their counsel, to conduct a reasonable investigation within
the meaning of the Act.
(i) otherwise use of all of its or their reasonable efforts to comply with
all applicable rules and regulations of the SEC and make available to its
securities holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of the Section ii(a) of the Act; and
Page 5
(j) provide and cause to be maintained a transfer agent and registrant for
such Registrable Securities from and after a date not later than the
effective date of such registration statement.
Section 6. Expenses. The Company will bear all expenses attendant to
registering the Registrable Securities, including, without limitation, all
registration and filing fees, all listing fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses and the fees and
disbursements of counsel for the Company and its independent public accountants,
including the expenses of "cold comfort" letters and expenses any special audits
required by or incident to such performance and compliance, premiums and other
costs of policies of policies of insurance against liabilities arising out of
the public offering of the Registrable Securities being registered and any fees
and disbursements of underwriters customarily paid by issuers and sellers of
securities, but excluding underwriting discounts and commissions, if any,
applicable to the sale of such securities. Furthermore, the Company shall not be
required to pay the fees an disbursements of counsel and accountants for any
holder of Registrable Securities or other expenses incurred by any holder of
Registrable Securities or other expenses incurred by any holder thereof that are
not customarily paid by an issuer in response to the exercise of registration
rights.
Section 7. Indemnification and Contribution. The Stockholders understand
that indemnification and contribution provisions such as the following are
customarily included in an underwriting agreement and agree that they will enter
into an agreement containing~ such provisions or provisions substantially
similar thereto as a condition precedent to the registration by the Company of
any of their Registrable Securities:
(s) The Company will indemnify and hold harmless each holder of Registrable
Securities which are included in a Registration Statement pursuant to the
provisions of this Agreement and any underwriter (as defined in the Act)
for such holder, each officer, director, employee, agent and counsel, if
any, of each such holder and underwriter, and each person, if any' who
controls such holder or such underwriter within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act (each, a "person who
controls" or a "controlling person"), from and against, any and all loss,
claim, damage, liability, costs and expense (including, without limitation,
reasonable legal expenses) to which such holder or any such underwriter,
officer, director, employee, agent, counsel of controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities, costs or expenses (or actions or proceedings in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such
Registration statement, any prospectus contained therein or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage, liability, cost or expense arises out of or is
based upon an untrue statement or alleged untrue
Page 6
statement or omission or alleged omission so made in reliance upon and in
strict conformity with information furnished by or on behalf of such
holder, underwriter, officer, director, employee, agent, counsel or
controlling person in writing specifically for use in the preparation
thereof.
(b) Each holder of Registrable Securities included in a registration
pursuant to the provisions of this Agreement will indemnify and hold
harmless the Company, any underwriter, each officer, director, employee,
agent, counsel of and each person who controls the Company or such
underwriter from and against, any and all losses, damages, liabilities,
costs or expenses to which the Company or such officer, director' employee,
agent, counsel or controlling person may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement of alleged untrue statement of any
material fact contained in such Registration Statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements thereon, in light of the circumstances in which they were made,
not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was so made in reliance upon and in strict conformity with written
information furnished by or on behalf or such holder specifically for use
in the preparation thereof,
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of Section 7(a) or (b) of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions,
shall indemnified part will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said subparagraph (a) or
(b), promptly notify the indemnifying party of the commencement thereof,
but the omission to so notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party otherwise
than hereunder. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof,
the indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those
available to the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall
have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party pursuant to the provisions of Section 7(a) or (b)
for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense
Page 7
thereof, other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the
provisions of the immediately preceding sentence, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of the commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 7 from the
indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages or liabilities referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party, as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of such
indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages or liabilities, as well as
any other relevant equable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference
to, among other things, whether any action in question including any untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, provided, however, that any
holder of Registrable Securities shall not be required to contribute in an
amount greater than the dollar amount of the proceeds received by such
holder of Registrable Securities with respect to the sale of any
securities. The amount paid or payable by a party as a result of the
losses, claims, ▇▇▇~ages and liabilities referred to above shall be deemed
to include, subject to the limitations set for~ in this Section 7(d). any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which, does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of a fraudulent misrepresentation (within the meaning of
Section 1 l(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation
Section 8. No Inconsistent Agreements. The Company shall not on or after
the date of this Agreement enter into ▇▇▇ agreement with respect to its
securities which is inconsistent with the rights granted to the holders of
Registrable Securities, this Agreement or otherwise conflicts with the
provisions hereof. The Company has not previously entered into or become a party
to nor is it bound by any agreement with respect to its securities granting any
registration rights to any person, except as set forth in or as contemplated by
the Merger Agreement. The rights granted to the holders of the securities of the
Company under any other agreements.
Page 8
Section 9. Miscellaneous.
(a) All notices or other communications given or made hereunder shall be in
writing and shall be delivered by hand, against written receipt, or mailed
by registered or certified mail, ret~n receipt requested, postage prepaid,
to the Stockholders at their respective address appearing on the records of
the Company and to the Company at its address set forth above. Notices
shall be deemed given on the date of receipt or, if mailed, three business
days after ma~ling, except notices of change of address, which shall be
deemed given when received.
(b) Notwithstanding the place where this Agreement may be executed by the
Stockholders or the Company, they agree that all the terms and provisions
hereof shall be construed in accordance with and governed by the laws of
the State of New York without regard to principles of conflict of laws.
(c) This Agreement constitutes the entire agreement between the
Stockholders and the Company with respect to the subject matter hereof and
may be amended only by writing executed by each of them.
(d) This Agreement shall be binding upon and inure to the benefit of each
of the Stockholder' and the Company and their respective heirs, legal
representatives, successors and assigns.
(e) The Stockholders and the Company each hereby submit to the
non-exclusive jurisdiction of the courts of the State of New York located
in New York, New York and of the federal courts located in the Southern
District of New York with respect to any action or legal proceeding
commenced by either of them with respect to this Agreement or to the
Registrable Securities. Each of them irrevocably waives any objection they
now have or hereafter may have respecting the venue of any such action or
proceeding brought in such a court or respecting ~e fact that such courts
an inconvenient forum and consents to the service of process in any such
action or proceeding by means of registered or certified mail, return
receipt requested, in care of the address set forth above or below or at
such other address as either of them shall furnish in writing to the other.
(f) The parties hereto acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement, this being in addition to any other remedy to which they
may be entitled by law or equity.
(g) The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement.
Page 9
(h) The waiver by either the Stockholders or the Company of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach or any provision of this Agreement.
(i) The Stockholders and the Company agree to execute and deliver all
further documents, agreements and instruments and to take such other
further action as may be necessary or appropriate to carry out the purposes
and intent of this Agreement.
(j) This Agreement may be executed by one or more counterparts, each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
(k) References in this Agreement to the pronouns "him," "he" and "his" are
not intended to convey the masculine gender alone and are employed in a
generic sense and apply equally to the feminine gender or to an entity.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
firrt written above.
ProtoSource Corporation
By:
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
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WORLD SPIRIT INC.
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By Its President
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