Common use of Board Seats Clause in Contracts

Board Seats. Concurrent with the Initial Closing and at all times while the Buyer’s shareholdings in the Company exceed 10%, the Buyer shall be entitled (but not required) to nominate one director to the Company’s Board of Directors. At such time and at all times while Buyer’s stockholdings in the Company exceed 24.9%, Buyer shall be entitled (but not required) to nominate a second director to the Company’s Board of Directors. Buyer’s shareholdings percentage shall be based on the number of shares of Common Stock beneficially owned by Buyer (as defined in Section 13(d) under the 1934 Act and the rules adopted thereunder) without taking into account shares issuable in the future upon conversion of Notes or exercise of the Purchase Option. To the extent that the nominees referred to in the paragraph above are reasonably acceptable, the Board of Directors shall appoint such nominees to be directors until the next meeting of the Company’s stockholders to elect directors, and, subject to their fiduciary duty as directors of the Company, the Board of Directors of the Company shall nominate and recommend to the Company’s stockholders as a director each such nominee (or any successor(s) nominated by the Buyer and reasonably acceptable to the Company) at the next and each succeeding meeting of the Company’s stockholders to elect directors. If the Company is listed or applying for listing on a stock exchange or market which requires that a majority of the issuer’s directors be independent, each nominee shall be independent as defined by the rules of such stock exchange or market. Each nominee shall not be an affiliate of a company which is either in the same business as the Company or is a defendant or prospective defendant in an action by the Company and shall not be subject to a “bad actor” disqualification as defined in Rule 506 of the SEC pursuant to the 1933 Act. The Board of Directors will consist of not more than five (5) members during the two years following the Initial Closing Date without the consent of Buyer. Unless a Conversion Eligible Event of Default (as defined in the Notes) shall have occurred, Buyer shall not seek to elect a majority of the Board of Directors for a period of at least three (3) years from the Initial Closing Date.

Board Seats. Concurrent with As soon as practicable following the Initial Closing and at all times while the Buyer’s shareholdings in the Company exceed 10%date hereof, the Buyer shall be entitled (but not required) to nominate one director to the Company’s Board of Directors. At such time and at all times while Buyer’s stockholdings in the Company exceed 24.9%, Buyer shall be entitled (but not required) to nominate a second director to the Company’s Board of Directors. Buyer’s shareholdings percentage shall be based on the number of shares of Common Stock beneficially owned by Buyer (as defined in Section 13(d) under the 1934 Act and the rules adopted thereunder) without taking into account shares issuable in the future upon conversion of Notes or exercise of the Purchase Option. To the extent that the nominees referred to in the paragraph above are reasonably acceptable, the Board of Directors shall appoint such nominees to be directors until the next meeting of the Company’s stockholders to elect directors, and, subject to their fiduciary duty as directors of the Company, the Board of Directors of the Company shall nominate and recommend to the Company’s stockholders as a director each such nominee appoint Kenneth Shifrin (or any successor(s) nominated by the Buyer and substitutx xxxxxxxx xx Xurchaser reasonably acceptable to the Company) (the "Purchaser Nominee") to serve on the Board. The Company further agrees, with respect to the 2003 annual shareholders meeting and 2004 annual shareholders meeting, (a) to propose as a nominee for election to the Board at such meeting the next and each succeeding meeting individual designated as the Purchaser Nominee, (b) to include the name of the Purchaser Nominee on the Company’s stockholders 's proxy statement and proxy card for such meeting, (c) to elect recommend to its shareholders the election of the Purchaser Nominee of the Board, (d) to solicit proxies on behalf of the Purchaser Nominee to the same extent proxies are solicited on behalf of any other nominee for election to the Board and (e) to cause the attorneys-in-fact or proxies named in the applicable proxy cards to vote the shares with respect to which proxies are given in the manner directed by such proxy cards. Notwithstanding anything to the contrary herein, in the event that the attorneys-in-fact or proxies referenced in clause (e) of the preceding sentence utilize cumulative voting, such persons shall cumulate votes in favor of the Purchaser Nominee if such cumulative voting will result in the election of at least four directors. If the Company Purchaser Nominee is listed removed for cause or applying for listing on is otherwise unwilling or unable to serve as a stock exchange or market which requires that a majority director of the issuer’s directors be independentCompany for any reason, each nominee Purchaser shall be independent as defined by notify the rules of such stock exchange or market. Each nominee shall not be an affiliate Company in writing of a company which is either in the same business as replacement Purchaser Nominee and the Company or shall cause such replacement Purchaser Nominee to be appointed provided that such replacement Purchaser Nominee is a defendant or prospective defendant reasonably acceptable to the Company. The Company represents and warrants that its Articles of Incorporation and Bylaws permit the actions set forth in an action by this Section 4.1 without Company shareholder approval; provided that the Company and shall does not be subject make any representation as to a “bad actor” disqualification as defined in Rule 506 the applicability or requirements of any provision of the SEC pursuant Texas Business Corporation Act, as amended, with respect to the 1933 Act. The Board of Directors will consist of not more than five (5) members during the two years following the Initial Closing Date without the consent of Buyer. Unless a Conversion Eligible Event of Default (as defined in the Notes) shall have occurred, Buyer shall not seek to elect a majority of the Board of Directors for a period of at least three (3) years from the Initial Closing Datesuch actions.

Board Seats. Concurrent with As soon as practicable following the Initial Closing and at all times while the Buyer’s shareholdings in the Company exceed 10%date hereof, the Buyer shall be entitled (but not required) to nominate one director to the Company’s Board of Directors. At such time and at all times while Buyer’s stockholdings in the Company exceed 24.9%, Buyer shall be entitled (but not required) to nominate a second director to the Company’s Board of Directors. Buyer’s shareholdings percentage shall be based on the number of shares of Common Stock beneficially owned by Buyer (as defined in Section 13(d) under the 1934 Act and the rules adopted thereunder) without taking into account shares issuable in the future upon conversion of Notes or exercise of the Purchase Option. To the extent that the nominees referred to in the paragraph above are reasonably acceptable, the Board of Directors shall appoint such nominees to be directors until the next meeting of the Company’s stockholders to elect directors, and, subject to their fiduciary duty as directors of the Company, the Board of Directors of the Company shall nominate and recommend to the Company’s stockholders as a director each such nominee appoint Eugene Woznicki (or any successor(s) nominated by the Buyer and substitutx xxxxxxxx xx Xurchaser reasonably acceptable to the Company) (the "Purchaser Nominee") to serve on the Board. The Company further agrees, with respect to the 2003 annual shareholders meeting and 2004 annual shareholders meeting, (a) to propose as a nominee for election to the Board at such meeting the next and each succeeding meeting individual designated as the Purchaser Nominee, (b) to include the name of the Purchaser Nominee on the Company’s stockholders 's proxy statement and proxy card for such meeting, (c) to elect recommend to its shareholders the election of the Purchaser Nominee to the Board, (d) to solicit proxies on behalf of the Purchaser Nominee to the same extent proxies are solicited on behalf of any other nominee for election to the Board and (e) to cause the attorneys-in-fact or proxies named in the applicable proxy cards to vote the shares with respect to which proxies are given in the manner directed by such proxy cards. Notwithstanding anything to the contrary herein, in the event that the attorneys-in-fact or proxies referenced in clause (e) of the preceding sentence utilize cumulative voting, such persons shall cumulate votes in favor of the Purchaser Nominee if such cumulative voting will result in the election of at least eight directors. If the Company Purchaser Nominee is listed removed for cause or applying for listing on is otherwise unwilling or unable to serve as a stock exchange or market which requires that a majority director of the issuer’s directors be independentCompany for any reason, each nominee Purchaser shall be independent as defined by notify the rules of such stock exchange or market. Each nominee shall not be an affiliate Company in writing of a company which is either in the same business as replacement Purchaser Nominee and the Company or shall cause such replacement Purchaser Nominee to be appointed provided that such replacement Purchaser Nominee is a defendant or prospective defendant reasonably acceptable to the Company. The Company represents and warrants that its Articles of Incorporation and Bylaws permit the actions set forth in an action by this Section 4.1 without Company shareholder approval; provided that the Company and shall does not be subject make any representation as to a “bad actor” disqualification as defined in Rule 506 the applicability or requirements of any provision of the SEC pursuant Texas Business Corporation Act, as amended, with respect to the 1933 Act. The Board of Directors will consist of not more than five (5) members during the two years following the Initial Closing Date without the consent of Buyer. Unless a Conversion Eligible Event of Default (as defined in the Notes) shall have occurred, Buyer shall not seek to elect a majority of the Board of Directors for a period of at least three (3) years from the Initial Closing Datesuch actions.

Board Seats. Concurrent with (a) Subject to the Initial provisions of this Section 3.21, from the Closing Date and at all times while until such time as Vicis's fully diluted ownership of the Buyer’s shareholdings in the Company exceed Company, is less than 10%, the Buyer Vicis shall be entitled to designate one member of the Company’s Board of Directors pursuant to the procedures in subsection (but not requiredb) below; provided that, in the event that the number of directors on the Company’s Board of Directors is greater than five (5), Vicis shall have the right to nominate one director designate the number of members of the Company’s Board of Directors equal to the product of Vicis’s fully diluted ownership of the Company multiplied by the total number of directors of the Company, rounded up. By way of example, if the Board of Directors is expanded to six (6) members and Vicis’s fully diluted ownership of the Company is 25%, then Vicis would be entitled to designate 2 members of the Company’s Board of Directors. At Each person designated by Vicis is hereinafter referred to as a ”Designee” and collectively, the “Designees”. The Company covenants that it will increase the size of the board of directors and take such other action at any such time and at all times while Buyer’s stockholdings in as necessary to comply with the Company exceed 24.9%, Buyer shall be entitled requirements imposed upon it under this subsection. (but not requiredb) to nominate a second director to Beginning with the Company’s Board of Directors. Buyer’s shareholdings percentage shall be based on the number of shares of Common Stock beneficially owned by Buyer (as defined in Section 13(d) under the 1934 Act and the rules adopted thereunder) without taking into account shares issuable in the future upon conversion of Notes or exercise 2008 Annual Meeting of the Purchase Option. To the extent that the nominees referred to in the paragraph above are reasonably acceptable, the Board of Directors shall appoint such nominees to be directors until the next meeting Stockholders of the Company’s stockholders to elect directors, and, subject to their fiduciary duty as directors at each Annual Meeting of the Stockholders of the Company, the number of Designees to which Vicis is entitled under subsection (a) above will be nominated for inclusion in management slate of directors. Prior thereto, Vicis will advise the Company in writing of the identity of each such Designee, who shall be a natural person, and the Board shall have the opportunity to accept or reject such Designee, in its discretion to be reasonably exercised, provided that, the Company shall not be obligated to nominate a Designee if (i) the nomination of Directors such Designee would violate rules, regulations or other standards of the Commission or the Trading Market, (ii) the Designee is affiliated with a competitor of the Company, or (iii) the Designee does not meet the Company’s written director qualification standards. Until such time as the Company shall hold its 2008 Annual Meeting of the Stockholders, Vicis shall have the right to appoint one observer to the Board’s meetings. All Designees elected by stockholders of the Company shall be appointed to the standing committees of the Board of Directors. (c) In the event that (i) the Board shall fail to nominate and recommend to that any Designee be elected by the Company’s stockholders as or (ii) a director each such nominee (or any successor(s) nominated Designee elected by the Buyer and reasonably acceptable to the Company) at the next and each succeeding meeting stockholders of the Company’s stockholders to elect directors. If the Company is listed or applying for listing on a stock exchange or market which requires that a majority of the issuer’s directors be independent, each nominee shall be independent as defined by the rules of such stock exchange or market. Each nominee shall not be an affiliate of a company which is either in the same business as the Company or is a defendant or prospective defendant in an action by the Company and shall not be subject appointed to a “bad actor” disqualification as defined in Rule 506 of the SEC pursuant to the 1933 Act. The Board of Directors will consist of not more than five (5) members during the two years following the Initial Closing Date without the consent of Buyer. Unless a Conversion Eligible Event of Default (as defined in the Notes) shall have occurred, Buyer shall not seek to elect a majority all standing committees of the Board of Directors Directors, for any reason for any reason other than (x) the nomination or appointment of such Designee would violate rules, regulations or other standards of the Commission or the Trading Market, (y) the Designee is affiliated with a period competitor of the Company, or (z) the Designee does not meet the Company’s written director qualification standards, then for each Designee not so nominated and recommended for election or appointed to a standing committee of the Board of Directors, the Company shall issue to the Purchaser, as liquidated damages and not as a penalty, a five-year warrant to purchase 5,000,000 shares of Common Stock at least three an exercise price of $.01 and otherwise with such terms contained in, and in substantially the form of, the Series A Warrants (3the “Designee Warrants”). (d) years from At such time that Vicis's fully diluted ownership of the Initial Closing DateCompany is less than 10%, Vicis shall request that all Designees immediately resign their positions with the Company. (e) The rights granted under this Section 3.21 may not be assigned to any subsequent holder of the Notes