SECURITIES PURCHASE AGREEMENT
This
SECURITIES
PURCHASE AGREEMENT,
dated
as of October 11,
2006
(the
“Agreement”),
by
and among TXP Corporation, a Nevada corporation (the “Company”) and Kuekenhof
Equity Fund, L.P., a Delaware limited partnership (collectively, the
“Investor”).
BACKGROUND
WHEREAS,
the
Company wishes to sell, and the Investor wishes to purchase, up to an aggregate
of $1,500,000 (the “Purchase
Price”)
in
shares of the Company’s common stock, par value $.001 per share (the
“Shares”),
for a
per share purchase price of $0.32, together with warrants to purchase 2,343,750
shares of Common Stock, in the form annexed hereto as Exhibit
“A”,
at an
exercise price equal to $0.50 per share and warrants to purchase 2,343,750
shares of Common Stock, in the form annexed hereto as Exhibit
“B”,
at an
exercise price equal to $1.00 per share. The warrants and the shares of Common
Stock issuable upon exercise of the warrants shall collectively be referred
to
herein at the “Warrants”
and
the
“Warrant
Shares”,
respectively.
WHEREAS,
the
issuance of the Shares and the Warrants will be made in reliance upon the
provisions of Section 4(2) ("Section
4(2)")
of the
United States Securities Act of 1933, as amended, and/or Regulation D
("Regulation
D")
and
the other rules and regulations promulgated thereunder (the "Securities
Act"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in securities to be made hereunder.
This
Agreement and the Warrants shall collectively be referred to herein at the
“Transaction
Documents”).
All
capitalized terms not otherwise defined herein shall have the meanings given
to
them in the Transaction Documents.
NOW
THEREFORE in
consideration of the premises and the mutual covenants, agreements,
representations and warranties contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto hereby agree as follows:
ARTICLE
1.
CLOSING
1.1
Closing
Date.
Subject
to the satisfaction or waiver of the terms and conditions of this Agreement
and
the satisfaction or waiver of the conditions to Closing as set forth in Section
1.2 and 1.3 below, within five (5) business days from the execution of this
Agreement (the “Closing
Date”),
the
Investor agrees to purchase from the Company, and the Company agrees to sell
to
the Investor, up
to an
aggregate of $1,500,000 in Shares at per share purchase price of $0.32, together
with warrants to purchase 2,343,750 shares of Common Stock at an exercise
price
equal to $0.50 per share and warrants to purchase 2,343,750 shares of Common
Stock at an exercise price equal to $1.00 per share.
1.2 Company
Closing Conditions.
The
obligation of the Company hereunder to issue and sell the Shares and Warrants
to
the Investor at the Closing is subject to the satisfaction, at or before
the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing the Investor with prior written
notice thereof:
(i) The
Investor shall have executed each of the Transaction Documents to be executed
by
them and delivered the same to the Company.
(ii) The
Investor shall have completed and executed the Confidential Investor
Questionnaire, annexed hereto as Exhibit
“C”,
and
delivered the same to the Company.
(iii) The
Investor shall have delivered to the Company the Purchase Price for the Shares
and the Warrants being purchased by the Investor by wire transfer of immediately
available funds pursuant to the written wire instructions provided by the
Company.
(iv) The
representations and warranties of the Investor shall be true and correct
as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date),
and the Investor shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents
to be
performed, satisfied or complied with by it at or prior to the Closing
Date.
1.3 Investor
Closing Conditions.
The
obligation of the Investor hereunder to purchase the Shares and Warrants
at the
Closing is subject to the satisfaction, at or before the Closing Date thereof,
of each of the following conditions, provided that these conditions are for
the
Investor's sole benefit and may be waived by the Investor at any time in
its
sole discretion by providing the Company with prior written notice
thereof:
(i) The
Company shall have executed each of the Transaction Documents to be executed
by
it and delivered the same to the Investor.
(ii) The
Common Stock shall be authorized for quotation on the Principal Market, trading
in the Common Stock shall not have been suspended by the Principal Market
or the
SEC at any time beginning on the date hereof and through and including the
Closing Date, and the Company shall not have been notified of any pending
or
threatened proceeding or other action to delist or suspend trading in the
Common
Stock.
(iii) The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date),
and the Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date.
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(iv) The
Company shall have delivered to the Investor the Shares being purchased by
the
Investor at the Closing.
(v) The
Company shall have executed and delivered to the Investor the Warrants being
purchased by the Investor at the Closing.
ARTICLE
2.
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
2.1
Organization
and Standing of the Subscribers.
The
Investor is a corporation, partnership or other entity duly incorporated
or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
2.2 Compliance
with Law.
The
Investor’s trading activities with respect to Shares and the Warrant Shares will
be in compliance with all applicable state and federal securities laws, rules
and regulations and rules and regulations of the principal market on which
the
Company’s Common Stock is listed.
2.3
Intent.
The
Investor is entering into this Agreement for his own account for investment
purposes only and not with a view to or for sale in connection with any
distribution of the Shares, the Warrants or the Warrant Shares. The Investor
has
no present arrangement (whether or not legally binding) at any time to sell
the
Shares, the Warrants or the Warrant Shares to or through any person or entity;
provided, however, that by making the representations herein, the Investor
does
not agree to hold such securities for any minimum or other specific term
and
reserves the right to dispose of the Shares, the Warrants and the Warrant
Shares
at any time in accordance with federal and state securities laws applicable
to
such disposition.
2.4 Investment
Experience.
The
Investor acknowledges that he can bear the economic risk and complete loss
of
its investment in the securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits
and
risks of the investment contemplated hereby.
2.5
Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform
this
Agreement and to purchase the Shares and acquire the Warrants being issued
to it
hereunder. This Agreement has been duly authorized, executed and delivered
by
all necessary corporate or partnership action, and no further consent or
authorization of the Investor or its Board of Directors, stockholders, partners,
members, as the case may be, is required and constitutes, or shall constitute
when executed and delivered, a valid and binding obligation of the Investor
enforceable against the Investor in accordance with the terms
thereof,
subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and
similar laws of general applicability relating to or affecting creditors’ rights
generally and to general principles of equity.
2.6 No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
the Investor of the transactions contemplated hereby or relating hereto do
not
and will not (i) result in a violation of the Investor’s charter documents or
bylaws or other organizational documents or (ii) conflict with, or constitute
a
default (or an event which with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument or
obligation to which the Investor is a party or by which its properties or
assets
are bound, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable
to the
Investor or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a material adverse effect
on the Investor). The Investor is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of
its
obligations under this Agreement or to purchase the Shares or acquire the
Warrants in accordance with the terms hereof, provided that for purposes
of the
representation made in this sentence, the Investor is assuming and relying
upon
the accuracy of the relevant representations and agreements of the Company
herein.
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2.7. Information
on Company.
The
Investor has been furnished with or has had access at the XXXXX Website of
the
Commission to the Company's Form 10-KSB for the year ended December 31, 2005
as
filed with the Commission, together with all subsequently filed Forms 10-QSB,
8-K, and filings made with the Commission available at the XXXXX website
(hereinafter referred to collectively as the "SEC
Reports").
In
addition, the Investor has received in writing from the Company such other
information concerning its operations, financial condition and other matters
as
the Investor has requested in writing (such other information is collectively,
the "Other
Written Information"),
and
considered all factors the Investor deems material in deciding on the
advisability of investing in the securities. The
Investor has had full opportunity to conduct, and has conducted, a complete
and
thorough due diligence investigation of the Company, and such opportunity
has
been made available to the Investor’s professional representative(s) to ask
questions of and receive answers from representatives of the Company concerning
the Company and its financial condition and prospects, as well as request
additional information necessary to verify the accuracy of the SEC Reports
and
Other Written Information provided to Investor. The foregoing, however, does
not
limit or modify the representations and warranties of the Company contained
in
this Agreement or the right of Investor to rely thereon.
2.8. Information
on Investor.
The
Investor is, and will be at the time of the issuance of the Shares and the
Warrants, an "accredited investor", as such term is defined in Regulation
D
promulgated by the Commission under the 1933 Act, is experienced in investments
and business matters, has made investments of a speculative nature and has
purchased securities of United States publicly-owned companies in private
placements in the past and, with its representatives, has such knowledge
and
experience in financial, tax and other business matters as to enable the
Investor to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with
respect
to the proposed purchase, which represents a speculative investment. The
Investor has the authority and is duly and legally qualified to purchase
and own
the Shares and the Warrants. The Investor is able to bear the risk of such
investment for an indefinite period and to afford a complete loss thereof.
The
information set forth on the signature page hereto regarding the Investor
is
accurate.
2.9. Purchase
of Shares and Receipt
of Warrants.
The
Investor will purchase the Shares and receive the Warrants as principal for
his
own account for investment only and not with a view toward, or for resale
in
connection with, the public sale or any distribution thereof.
4
2.10. Compliance
with Securities Act.
The
Investor understands and agrees that the Shares and the Warrants have not
been
registered under the 1933 Act or any applicable state securities laws, by
reason
of their issuance in a transaction that does not require registration under
the
1933 Act (based in part on the accuracy of the representations and warranties
of
Investor contained herein), and that such securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from
such
registration.
Resales
of the securities by the Investor will be made in compliance with all applicable
securities laws.
2.11. Communication
of Offer.
The
offer to sell the securities was directly communicated to the Investor by
the
Company. At no time was the Investor presented with or solicited by any leaflet,
newspaper or magazine article, radio or television advertisement, or any
other
form of general advertising or solicited or invited to attend a promotional
meeting otherwise than in connection and concurrently with such communicated
offer.
2.12. Confidentiality/Public
Announcement.
From the
date of this Agreement and until the Company makes a public announcement
of the
transactions contemplated by this Agreement by filing a Form 8-K, Investor
agrees he will not disclose publicly or privately the nature of the transactions
contemplated under this Agreement unless expressly agreed to in writing by
the
Company, or only to the extent required by law.
2.13. No
Governmental Review.
The
Investor understands that no United States federal or state agency or any
other
governmental or state agency has passed on or made recommendations or
endorsement of the securities or the suitability of the investment in the
securities nor have such authorities passed upon or endorsed the merits of
the
offering of the securities.
2.14.
No
Market Manipulation.
The
Investor has not taken, and will not take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate
the
sale or resale of the securities or affect the price at which the securities
may
be issued or resold.
2.15.
Short
Position and Short Sales.
The
Investor covenants that neither he nor any of his affiliates will engage
in any
illegal short sales of or illegal hedging transactions with respect to the
Common Stock.
2.16 Restricted
Securities.
The
Investor understands
that the securities have not been registered under the 1933 Act and the
Investor will
not
sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of
the securities unless pursuant to an effective registration statement under
the
1933 Act. Notwithstanding anything to the contrary contained in this Agreement,
the
Investor
may
transfer (without restriction but with the need for an opinion of counsel)
the
securities to its Affiliates (as defined below) provided that each such
Affiliate is an “accredited investor” under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement. For the
purposes of this Agreement, an “Affiliate”
of
any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such
person or entity. Affiliate includes each subsidiary of the Company. For
purposes of this definition, “control”
means
the
power to direct the management and policies of such person or firm, directly
or
indirectly, whether through the ownership of voting securities, by contract
or
otherwise.
5
2.17. Survival.
The
foregoing representations and warranties shall survive for a period of two
years
from the date hereof.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
3.2. Authority.
(i)
The
Company has the requisite corporate power and corporate authority to enter
into
and perform its obligations under this Agreement and to issue the Shares,
the
Warrants and the Warrant Shares pursuant to their respective terms, (ii)
the
execution, issuance and delivery of the this Agreement, the Warrants by the
Company and the consummation by it of the transactions contemplated thereby
have
been duly authorized by all necessary corporate action and no further consent
or
authorization of the Company or its Board of Directors or stockholders is
required, and (iii)
this
Agreement and the Warrants have been duly executed and delivered by the Company
and shall constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors’ rights
and remedies or by other equitable principles of general application. The
Company has duly and validly authorized and reserved for issuance shares
of
Common Stock sufficient in number for the conversion of the exercise of the
Warrants. The Company further acknowledges that its obligation to issue Warrant
Shares upon exercise of the Warrants in accordance with this Agreement is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the
Company.
3.3. Common
Stock.
The
Company has registered its Common Stock pursuant to Section 12(b)
or
(g)
of the
Exchange Act and is in full compliance with all reporting requirements of
the
Exchange Act, and the Company is in compliance with all requirements for
the
continued listing or quotation of its Common Stock, and such Common Stock
is
currently listed or quoted on, the Principal Market. As of the date hereof,
the
Principal Market is the OTC Bulletin Board and the Company has not received
any
notice regarding, and to its knowledge there is no threat of, the termination
or
discontinuance of the eligibility of the Common Stock for such posting or
listing.
3.4. SEC
Documents.
The
SEC
Reports contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein
and do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not misleading
in light of the circumstances under which they were made.
Since
the date of the financial statements included in the SEC Reports, there has
been
no material adverse event relating to the Company's business, financial
condition or affairs not disclosed in the SEC Reports. The SEC Reports do
not
contain any untrue statement of a material fact.
6
3.5. Exemption
from Registration; Valid Issuances.
Subject
to the accuracy of the Investor’s representations in Article 2, the sale of the
Shares and the Warrants will not require registration under the Securities
Act
and/or any applicable state securities law (other than any SEC, Principal
Market
or state securities filings that may be required to be made by the Company
subsequent to closing and any registration statement that may be filed pursuant
hereto). When issued and paid for in accordance with the Warrants, the Warrant
Shares will be duly and validly issued, fully paid, and non-assessable. Neither
the sales of the Shares and the Warrants pursuant to, nor the Company’s
performance of its obligations under this Agreement and the Warrants will
(i)
result
in the creation or imposition by the Company of any liens, charges, claims
or
other encumbrances upon the Shares, the Warrants or the Warrant Shares, except
as contemplated herein, any of the assets of the Company, or (ii)
entitle
the holders of outstanding capital shares to preemptive or other rights to
subscribe for or acquire the capital shares or other securities of the Company.
None of the securities shall subject the Investor to personal liability to
the
Company or its creditors by reason of the possession thereof.
3.6. No
Directed Selling, General Solicitation or Advertising in Regard to this
Transaction.
Neither
the Company nor any of its affiliates nor, to the knowledge of the Company,
any
person acting on its or their behalf (i)
has
conducted or will conduct any general solicitation (as that term is used
in Rule
502(c)
of
Regulation D)
or
general advertising with respect to the sale of the Shares and the Warrants,
or
(ii)
has made
or will make any offers or sales of any security or solicited any offers
to buy
any security under any circumstances that would require registration of the
sale
of the securities under the Securities Act.
3.7. No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
the Company of the transactions contemplated hereby or relating hereto do
not
and will not (i) result in a violation of the Company’s charter documents or
bylaws or other organizational documents or (ii) conflict with, or constitute
a
default (or an event which with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument or
obligation to which the Company is a party or by which its properties or
assets
are bound, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable
to the
Investor or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a material adverse effect
on the Company). The Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of
its
obligations under this Agreement sell the Warrants in accordance with the
terms
hereof, provided that for purposes of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
7
3.8. No
Material Adverse Change.
Since
December 31, 2005 no material adverse effect has occurred or exists with
respect
to the Company, except as disclosed in the SEC Reports filed prior to the
date
hereof and available on XXXXX.
3.9. Litigation
and Other Proceedings.
Except
as disclosed in the SEC Reports, there are no lawsuits or proceedings pending
or, to the knowledge of the Company, threatened, against the Company, nor
has
the Company received any written or oral notice of any such action, suit,
proceeding or investigation, which could reasonably be expected to have a
material adverse effect. Except as set forth in the SEC Reports, no judgment,
order, writ, injunction or decree or award has been issued by or, to the
knowledge of the Company, requested of any court, arbitrator or governmental
agency which could result in a material adverse effect. There is no action,
proceeding or investigation by the Company currently pending or that the
Company
intends to initiate.
3.10. No
Misleading or Untrue Communication.
The
Company and, to the knowledge of the Company, any person representing the
Company, or any other person selling or offering to sell the Warrants in
connection with the transaction contemplated by this Agreement, have not
made,
at any time, any oral communication in connection with the offer or sale
of the
same which, together with all such communications, including the SEC Reports,
taken as a whole, contained any untrue statement of a material fact or omits
to
state a material fact necessary in order to make the statements contained
herein
or therein not misleading in light of the circumstances under which they
were
made.
3.11 Reservation
of Common Stock.
As of
the date hereof, the Company has reserved and the Company shall continue
to
reserve and keep available at all times shares of Common Stock for the purpose
of enabling the Company to issue the Warrant Shares pursuant to any exercise
of
the Warrants in an amount not less than the number needed to provide for
the
issuance of Warrant Shares, as may be adjusted from time to time. The Company
further agrees that if at any time the number of shares of Common Stock
issuable
upon
conversion of the Warrants would cause the Company to be obligated to issue
a
number of shares of Common Stock in excess of its authorized capital (after
taking into account all other capital shares equivalents then existing),
it
shall promptly commence all necessary corporate and stockholder action necessary
to increase its authorized capital so as to eliminate the aforesaid
condition.
3.12. Listing
of Common Stock.
The
Company hereby agrees to maintain the listing or quotation of the Common
Stock
on a principal market, and as soon as required by the rules of the principal
market to list the Shares and the Warrant Shares on the principal market.
The
Company further agrees, if the Company applies to have the Common Stock traded
on any other principal market, it will include in such application the Shares
and the Warrant Shares, and will take such other action as is necessary or
desirable in the opinion of the Investor to cause the Shares and the Warrant
Shares to be listed on such other principal market as promptly as possible.
The
Company will take all action necessary to continue the listing and trading
of
its Common Stock on a principal market and will comply in all respects with
the
Company’s reporting, filing and other obligations under the bylaws or rules of
the principal market.
8
3.12. Exchange
Act Registration.
The
Company will cause its Common Stock to continue to be registered under Section
12(b)
or
(g)
of the
Exchange Act, will use its best efforts to comply in all respects with its
reporting and filing obligations under the Exchange Act.
3.13. Corporate
Existence; Conflicting Agreements.
The
Company will take all steps necessary to preserve and continue the corporate
existence of the Company. The Company shall not enter into any agreement,
the
terms of which agreement would restrict or impair the right or ability of
the
Company to perform any of its obligations under this Agreement or any of
the
other Transaction Documents.
3.14. Issuance
of Shares and Warrant Shares.
The
sale of the Shares and the Warrants and the issuance of the Warrant Shares
pursuant to exercise of the Warrants shall be made in accordance with the
provisions and requirements Section 4(2)
or
Regulation D
and any
applicable state securities law. The Company shall make any necessary SEC
and
“blue sky” filings required to be made by the Company in connection with the
sale of such securities to the Investor as required by all applicable
laws.
ARTICLE
4.
LEGENDS
4.1 Shares
Legend.
The
Shares and the Warrant Shares shall bear the following or similar
legend:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO TXP CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) Warrants
Legend.
The
Warrants shall bear the following or
similar legend:
"THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE
STATE
SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT
OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO TXP CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
9
ARTICLE
5.
REGISTRATION
RIGHTS
5.1
Mandatory
Registration.
The
Company shall prepare, and, as soon as practicable, but in no event later
than
December
15, 2006 (the
“Scheduled
Filing Date”),
file
with the United States Securities and Exchange Commission (the “SEC”)
a
registration statement on Form SB-2 (the “Registration
Statement”)
covering the resale of all of the Shares and the Warrant Shares. In the event
that Form SB-2 is unavailable for such registration, the Company shall use
such
other form as is available for such registration. The Registration Statement
prepared pursuant hereto shall register for resale that number of shares
of
Common Stock equal to the number of Shares and Warrant Shares as of the
Scheduled Filing Date. The Company shall use its best efforts to respond
to any
comments issued by the SEC with respect to the Registration Statement as
soon as
practicable after receipt of such comments and shall use its best efforts
to
cause the Registration Statement to be declared effective by the SEC as soon
as
practicable, but no later than ninety (90) days after the Scheduled Filing
Date
(the “Scheduled
Effectiveness Date”).
5.2 Non-Registration
Event.
The
Company and the Investor agree that the Investor will suffer damages if the
Registration Statement is not declared effective by the SEC by the Scheduled
Effectiveness Date (a “Non-Registration
Event”)
and it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if the Registration Statement is not declared effective on or
before the Scheduled Effectiveness Date, then the Company shall deliver to
the
Investor, as liquidated damages, an amount equal to one percent (1%) for
each
thirty (30) days or part thereof of the Purchase Price for the first sixty
(60)
days after the occurrence of a Non-Registration Event. If there is an ongoing
and uncured Non-Registration Event (an “Ongoing
Non-Registration Event”)
during
the period beginning sixty one (61) days after the Non-Registration Event,
then
the Company shall deliver to the Investor, as liquidated damages, an amount
equal to two percent (2%) for each thirty (30) days or part thereof of the
Purchase Price after the occurrence of an Ongoing Non-Registration Event.
Notwithstanding the foregoing, Liquidated Damages shall only accrue during
a
Non-Registration Event or Ongoing Non-Registration Event until twelve (12)
months from the Closing Date. The Company must pay the Liquidated Damages
in
cash or at the Company’s election with shares of Common Stock valued at the
closing bid price of the Common Stock on the first trading day of each thirty
day or shorter period for which liquidated damages are payable.
Notwithstanding the foregoing, the Company shall not be liable to the Investor
under this Section 5.2 for any events or delays occurring as a consequence
of
the acts or omissions of the Investor contrary to the obligations undertaken
by
Investor in this Agreement. Liquidated Damages will not accrue nor be payable
pursuant to this Section 5.2 nor will a Non-Registration Event be deemed
to have
occurred for times during which Securities are transferable by the Investor
pursuant to Rule 144(k) under the 1933 Act.
10
5.3 Piggy-Back
Registrations.
If, at
any time prior to the expiration of the Registration Period (as hereinafter
defined) that there
is
not an effective Registration Statement covering all of the Shares and the
Warrant
Shares,
the
Company proposes to file with the SEC a Registration Statement for its own
account or the account of others under the 1933 Act of any of its securities
(other than a Registration Statement on Form S-4 or Form S-8 (or their
equivalents at such time) relating to securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans),
the
Company shall promptly send to the Investor written notice of the Company's
intention to file a Registration Statement and of the Investor's rights under
this Section 5.3 and, if within five (5) days after receipt of such notice,
the
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Shares and the Warrant Shares
the
Investor requests to be registered for resale, subject to the priorities
set
forth in this Section 5.3. No right to registration of the Shares and the
Warrant Shares under this Section 5.3 shall be construed to limit any
registration required under Section 5.1. The obligations of the Company under
this Section 5.2 may be waived by the Investor. In the event that the
Registration Statement being filed by the Company under this Section 5.3
is for
an underwritten offering, the Investor shall, unless otherwise agreed to
by the
Company, offer and sell the Shares and the Warrant Shares in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering. If the managing
underwriter(s) advise the Company, in writing, that in their reasonable good
faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration:
(1)
first,
all securities the Company proposes to sell for its own account;
(2) second,
all of the securities the Investor requests to be registered for his account;
and
(3) third,
up
to the full number of securities proposed to be registered for the account
of
the holders of securities entitled to inclusion of their securities in the
Registration Statement by reason of demand or mandatory registration
rights.
5.4
The
Company shall keep each of the Registration Statement required to be filed
hereunder effective pursuant to Rule 415 at all times until (i) the date
as of
which the Investor may sell all of the Shares and the Warrant Shares covered
by
such Registration Statement pursuant to Rule 144(k) promulgated under the
1933
Act (or successor thereto) or (ii) the date on which (A) the Investor shall
have
sold all of the Shares and the Warrant Shares covered by such Registration
Statement and (B) none of the Shares and the Warrants are outstanding (the
"Registration
Period"),
each
of which Registration Statements (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any 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 in which they were made, not misleading.
11
5.5 The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
be
necessary to keep such Registration Statement effective at all times during
the
Registration Period, and, during such period, comply with the provisions
of the
1933 Act with respect to the disposition of all the Shares and the Warrant
Shares covered by such Registration Statement until such time as all of such
Shares and Warrant Shares shall have been disposed of in accordance with
the
intended methods of disposition by the Investor as set forth in such
Registration Statement.
5.6 The
Investor agrees that the Company shall not be precluded from registering
any
additional shares of its Common Stock underlying securities of the Company
in
the Registration Statement.
5.7 All
expenses incurred in connection with
registrations, filings, or qualifications pursuant to Article
5, including all registration, filing, and qualification fees; printers’ and
accounting fees; fees and disbursements of counsel for the Company
shall be
borne and paid by the Company.
ARTICLE
6.
GENERAL
PROVISIONS
6.1 Specific
Performance. The
parties hereto acknowledge and agree that the breach of this Agreement would
cause irreparable damage to the non-breaching parties and that the non-breaching
parties will not have an adequate remedy at law. Therefore, the obligations
of
each of the parties under this Agreement, shall be enforceable by a decree
of
specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive
and
shall be in addition to any other remedies which any party may have under
this
Agreement or otherwise.
6.2 Further
Assurances. The
parties hereto each agree to execute and deliver such other documents or
agreements and to take such other action as may be reasonably necessary or
desirable for the implementation of this Agreement and the consummation of
the
transactions contemplated hereby.
6.3 Governing
Law; Venue.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Texas. Venue.
The
parties (a) hereby irrevocably and unconditionally submit to the jurisdiction
of
the state and federal courts sitting in Dallas County, Texas for the purpose
of
any suit, action or other proceeding arising out of or based upon this
Agreement, (b) agree not to commence any suit, action or other proceeding
arising out of or based upon this Agreement except in the state and federal
courts sitting in Dallas County, Texas, and (c) hereby waive, and agree not
to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-referenced courts, that its property is exempt or immune from
attachment or execution, that the suit, action or proceeding is brought in
an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in
or by
such court.
12
6.4 Headings. Section
headings of this Agreement are for reference purposes only and are to be
given
no effect in the construction or interpretation of this Agreement.
6.5 Binding
Effect. This
Agreement is irrevocable and shall be binding upon and inure to the benefit
of
the parties and their respective successors and permitted assigns.
6.6 Counterparts.
This
Agreement may be executed in counterparts, each of which when executed by
any
party will be deemed to be an original and all of which counterparts will
together constitute one and the same Agreement. Delivery of executed copies
of
this Agreement by telecopier will constitute proper delivery, provided that
originally executed counterparts are delivered to the parties within a
reasonable time thereafter.
6.7 Expenses.
Each
party shall pay its own expenses incident to the negotiation, preparation
and
performance of this Agreement and the transactions contemplated hereby,
including all fees and expenses of its counsel and accountants for all
activities of such counsel and accountants undertaken pursuant to this
Agreement, whether or not the transactions contemplated hereby are
consummated.
6.8 Amendments;
Waivers.
This
Agreement may not be amended or modified, nor may compliance with any condition
or covenant set forth herein be waived, except by a writing duly and validly
executed by Investor and the Company, or, in the case of a waiver, the party
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall
any
waiver on the part of any party of any such right, power or privilege, or
any
single or partial exercise of any such right, power or privilege, preclude
any
further exercise thereof or the exercise of any other such right, power or
privilege.
5.10 Notices.
All
notices, requests, and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given,
delivered and received
(i) upon
personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, and if not so confirmed, then on the next business day; (iii)
five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) business
day
after the
business
day of
deposit
with a nationally recognized overnight courier, specifying next-day delivery,
with written verification of receipt. All communications shall be sent to
the
respective parties at their addresses as set forth on the
signature page hereto
or
to
such
email address, facsimile number, or address as subsequently modified by written
notice given in accordance with this Section 5.10.
[Remainder
of page intentionally left blank.]
13
IN
WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year
first written above.
| TXP CORPORATION | ||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxx | |
|
Name: Xxxxxxx Xxxxxx |
||
| Title: Chief Executive Officer | ||
|
KUEKENHOF
EQUITY FUND, L.P.
|
||
|
By: KUEKENHOF CAPITAL MANAGEMENT,
LLC,
its General Partner
|
||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxx | |
|
Name: Xxxxxxx Xxxxx |
||
14
Exhibit
“c”
CONFIDENTIAL
INVESTOR QUESTIONNAIRE
The
Subscriber represents and warrants that he, she or it comes within one category
marked below, and that for any category marked, he, she or it has truthfully
set
forth, where applicable, the factual basis or reason the Subscriber comes
within
that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY
CONFIDENTIAL. The undersigned agrees to furnish any additional information
which
the Company deems necessary in order to verify the answers set forth
below.
Category
A _____ The
undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.
Explanation.
In calculating net worth you may include equity in personal property and
real
estate, including your principal residence, cash, short-term investments,
stock
and securities. Equity in personal property and real estate should be based
on
the fair market value of such property less debt secured by such
property.
Category
B _____ The
undersigned is an individual (not a partnership, corporation, etc.) who had
an
income in excess of $200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each of those years
(in
each case including foreign income, tax exempt income and full amount of
capital
gains and losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of reaching
the same income level in the current year.
Category
C _____ The
undersigned is a director or executive officer of the Company which is issuing
and selling the Securities.
Category
D _____ The
undersigned is a bank; a savings and loan association; insurance company;
registered investment company; registered business development company; licensed
small business investment company (“SBIC”); or employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment decision is made by a
plan
fiduciary which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total assets
in
excess of $5,000,000 or (c) is a self directed plan with investment decisions
made solely by persons that are accredited investors. (describe
entity)
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
Category
E _____ The
undersigned is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940. (describe entity)
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
15
Category
F _____ The
undersigned is either a corporation, partnership, Massachusetts business
trust,
or non-profit organization within the meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not formed for the specific purpose of
acquiring the Common Stock and with total assets in excess of $5,000,000.
(describe entity)
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
Category
G _____ The
undersigned is a trust with total assets in excess of $5,000,000, not formed
for
the specific purpose of acquiring the Securities, where the purchase is directed
by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the
Act.
Category
H _____ The
undersigned is an entity (other than a trust) in which all of the equity
owners
are “accredited investors” within one or more of the above categories. If
relying upon this Category alone, each equity owner must complete a separate
copy of this Agreement. (describe entity)
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
Category
I _____
The
undersigned is not within any of the categories above and is therefore not
an
accredited investor.
The
undersigned agrees that the undersigned will notify the Company at any time
on
or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and
complete.
6.9 SUITABILITY
(please
answer each question)
(a) For
an
individual Subscriber, please describe your current employment, including
the
company by which you are employed and its principal business:
___________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
(b) For
an
individual Subscriber, please describe any college or graduate degrees held
by
you:
___________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
(c) For
all
Subscribers, please list types of prior investments:
___________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
16
(d) For
all
Subscribers, please state whether you have participated in other private
placements
before:
YES_______ NO_______
(e) If
your
answer to question (d) above was “YES”, please indicate frequency of such prior
participation in private
placements
of:
|
Public
Companies
|
Private
Companies
|
Public
or Private VoIP or other
Communications
Companies
|
|||
|
Frequently
|
|
|
|||
|
Occasionally
|
|
|
|||
|
Never
|
|
|
(f) For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For
trust, corporate, partnership and other institutional Subscribers, do you
expect
your total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
(h) For
all
Subscribers, do you have any other investments or contingent liabilities
which
you reasonably anticipate could cause you to need sudden cash requirements
in
excess of cash readily available to you:
YES_______ NO_______
(i) For
all
Subscribers, are you familiar with the risk aspects and the non-liquidity
of
investments such as the securities for which you seek to subscribe?
YES_______ NO_______
(j)
For all
Subscribers, do you understand that there is no guarantee of financial return
on
this investment and that you run the risk of losing your entire
investment?
YES_______ NO_______
6.10 MANNER
IN WHICH TITLE IS TO BE HELD.
(circle
one)
(a) Individual
Ownership
(b) Community
Property
(c) Joint
Tenant with Right of Survivorship
(both parties must
sign)
(d) Partnership*
(e) Tenants
in Common
(f) Company*
17
(g) Trust*
(h) Other*
*If
Securities are being subscribed for by an entity, the attached Certificate
of
Signatory must also be completed.
6.11 NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please check
one):
Yes
_________ No
__________
If
Yes,
please describe:
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
*If
Subscriber is a Registered Representative with an NASD member firm, have
the
following acknowledgment signed by the appropriate party:
The
undersigned NASD member firm acknowledges receipt of the notice required
by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name
of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
6.12 The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Article VII and such answers have been provided under the
assumption that the Company will rely on them.
[REMAINDER
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18
