SECURITIES PURCHASE AGREEMENT BY AND BETWEEN THEATER XTREME ENTERTAINMENT GROUP, INC. AND KINZER TECHNOLOGY, LLC DECEMBER 22, 2006
BY
AND BETWEEN
AND
XXXXXX
TECHNOLOGY, LLC
DECEMBER
22, 2006
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TABLE
OF CONTENTS
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Page
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ARTICLE
I DEFINITIONS
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1
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1.1
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Definitions
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1
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ARTICLE
II PURCHASE AND SALE
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4
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2.1
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Closing
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4
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2.2
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Deliveries
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5
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ARTICLE
III REPRESENTATIONS AND WARRANTIES
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5
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3.1
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Representations
and Warranties of the Company
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5
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3.2
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Representations
and Warranties of Purchaser
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15
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ARTICLE
IV OTHER AGREEMENTS OF THE PARTIES
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17
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4.1
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Transfer
Restrictions.
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17
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4.2
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Acknowledgment
of Dilution
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19
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4.3
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Furnishing
of Information
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19
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4.4
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Integration
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20
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4.5
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Reservation
and Listing of Conversion Shares.
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20
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4.6
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Exercise
Procedures
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20
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4.7
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Securities
Laws Disclosure; Publicity
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20
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4.8
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Shareholder
Rights Plan
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21
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4.9
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[INTENTIONALLY
DELETED.]
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21
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4.10
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No
Impairment
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21
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4.11
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Indemnification
of Purchaser
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21
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4.12
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Blue
Sky Filings
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22
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4.13
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Piggy-Back
Registrations
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22
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ARTICLE
V MISCELLANEOUS
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23
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i
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5.1
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Fees
and Expenses
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23
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5.2
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Entire
Agreement
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23
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5.3
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Notices
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23
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5.4
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Amendments;
Waivers
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23
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5.5
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Headings
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24
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5.6
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Successors
and Assigns
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24
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5.7
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No
Third-Party Beneficiaries
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24
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5.8
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Governing
Law
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24
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5.9
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Survival
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25
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5.10
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Execution
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25
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5.11
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Severability
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25
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5.12
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Rescission
and Withdrawal Right
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25
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5.13
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Replacement
of Securities
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25
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5.14
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Remedies
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26
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5.15
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Payment
Set Aside
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26
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5.16
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Usury
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26
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5.17
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Liquidated
Damages
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26
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5.18
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Construction
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27
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ii
EXHIBITS:
Exhibit
A Form
of
Debenture
Exhibit
B Form
of
Warrant
SCHEDULES:
Schedule
3.1(d) Conflicts
Schedule
3.1(e) Filings, Consents and Approvals
Schedule
3.1(g) Participation Rights
Schedule
3.1(z) Indebtedness
Schedule
3.1(ee) Senior Indebtedness
iii
This
Securities Purchase Agreement (this “Agreement”) is dated as of December 22,
2006 by and between Theater Xtreme Entertainment Group, Inc., a Florida
corporation (the “Company”), and Xxxxxx Technology, LLC, a Virginia limited
liability company (“Purchaser”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act, the Company desires to issue and sell
to
Purchaser, and Purchaser desires to purchase from the Company, securities
of the
Company as more fully described in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of
which
are hereby acknowledged, the Company and Purchaser agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms
that are not otherwise defined herein have the respective
meanings given to such terms in the Debenture or Warrant (as defined herein),
and (b) the following terms have the respective meanings set forth in this
Section 1.1:
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as
such
terms are used in and construed under Rule 144 under the Securities Act.
“Cash
Amount”
shall
have the meaning ascribed to such term in Section 4.5(c).
“Closing”
means
the closing of the purchase and sale of the Debenture and Warrant pursuant
to
Section 2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed
and
delivered by the applicable parties thereto, and all conditions precedent
to (i)
the Purchaser’s obligations to pay the Purchase Price and (ii) the Company’s
obligations to deliver the Debenture and Warrant have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any other
class
of securities into which such securities may hereafter be reclassified or
changed.
“Common
Stock Equivalents”
means
any securities of the Company which would entitle the holder thereof to acquire
at any time Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the
holder thereof to receive, Common Stock.
1
“Company
Counsel”
means
Xxxxxxx Xxxxx Xxxxxxx and Xxxxxxxxx, LLP with offices at 0000 Xxxxxx Xxxxxx,
00xx
Xxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000−7599.
“Contracts”
shall
have the meaning ascribed to such term in Section 3.1(jj).
“Debenture”
means
the 10% Debenture issued by the Company to Purchaser, in the form of
Exhibit
A
attached
hereto.
“Designated
Officers”
means
Xxxxx X. Xxxxx, Xxxxxxx Xxxxxx, and Xxxxx X. Xxxxxxxx, the Chief Executive
Officer, President, and Chief Financial Officer of the Company, respectively
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Evaluation
Date”
shall
have the meaning ascribed to such term in Section 3.1(r).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Financial
Statements”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Form
8-K Filing”
shall
have the meaning ascribed to such term in Section 4.7.
“GAAP”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness”
shall
have the meaning ascribed to such term in Section 3.1(z).
“Intellectual
Property Rights”
shall
have the meaning ascribed to such term in Section 3.1(o).
“Legend
Removal Date”
shall
have the meaning ascribed to such term in Section 4.1(c).
“Liens”
means
a
lien, charge, security interest, pledge, encumbrance, right of first refusal,
preemptive right or other preferential arrangement or restriction.
“Material
Adverse Effect”
shall
have the meaning assigned to such term in Section 3.1(b).
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(m).
“Maximum
Rate”
shall
have the meaning ascribed to such term in Section 5.16.
2
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Plans”
shall
have the meaning ascribed to such term in Section 3.1(kk).
“Proceeding”
means
an action, claim, suit, arbitration, inquiry, notice of violation, investigation
or proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
“Purchase
Price”
shall
have the meaning ascribed to such term in Section 2.1.
“Purchaser
Counsel”
means
Xxxxx Xxxxxx LLP with offices at 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx 00000-0000.
“Purchaser
Party”
shall
have the meaning ascribed to such term in Section 4.11.
“Registrable
Securities”
means
(i) all Warrant Shares, (ii) any additional shares of Common Stock issuable
in
connection with any anti-dilution provisions in the Warrant (in each case,
without giving effect to any limitations on exercise set forth in the Warrant)
and (iii) any securities issued or issuable upon any stock split, dividend
or
other distribution, recapitalization or similar event with respect to the
foregoing.
“Required
Filings”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Required
Minimum”
means,
as of any date, the maximum aggregate number of shares of Common Stock then
issued or potentially issuable in the future pursuant to the Transaction
Documents.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means
the Debenture, the Warrant and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated hereunder.
“Short
Sales”
means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).
“Subsidiary”
with
respect to a Person, means another Person more than 50% of the equity and
voting
interests of which are owned, directly or indirectly, by the first such
Person.
3
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the
New York Stock Exchange or the OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the Debenture, the Warrant, and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
“Transfer
Agent”
means
Stock Trans, Inc, with a mailing address of 00 X. Xxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxx 00000 and a facsimile number of (610)649−7302, and any successor
transfer agent of the Company.
“VWAP”
means,
for any date, the price determined by the first of the following clauses
that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date
(or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the
OTC
Bulletin Board is not a Trading Market, the volume weighted average price
of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the last bid price per share of the Common
Stock so reported on such date (or the nearest preceding date); or (d) in
all
other cases, the fair market value of a share of Common Stock as determined
by
an independent appraiser selected in good faith by the Purchaser and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by
the
Company.
“Warrant”
means
the Common Stock purchase warrant delivered to Purchaser at the Closing in
accordance with Section 2.2(a) hereof, in the form of Exhibit
B
attached
hereto.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrant.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing.
Upon
the terms and subject to the conditions set forth herein, substantially
concurrent with the execution and delivery of this Agreement by the parties
hereto, the Company shall and hereby agrees to sell, and Purchaser, shall
and
hereby agrees to purchase, Seven Hundred Thousand Dollars ($700,000.00) in
principal amount of the Debenture. On December 22, 2006 (the “Closing Date”),
Purchaser shall deliver to the Company, via wire transfer, immediately available
funds equal to Seven Hundred Thousand Dollars ($700,000.00) (the “Purchase
Price”), and the Company shall deliver to Purchaser the Debenture and Warrant,
and the Company and Purchaser shall deliver the other items set forth in
Section
2.2 deliverable at the Closing. Upon satisfaction of the conditions set forth
in
Section 2.2, the Closing shall occur at the offices of Purchaser Counsel
or such
other location as the parties shall mutually agree.
4
2.2 Deliveries
(a) On
the
Closing Date, the Company shall deliver or cause to be delivered to Purchaser
the following:
(i) a
legal
opinion of Company Counsel, in a form reasonably acceptable to Purchaser
Counsel;
(ii) the
Debenture registered in
the
name of Purchaser;
(iii) the
Warrant registered in the name of Purchaser;
and
(iv) any
other
document reasonably requested by Purchaser or Purchaser Counsel.
(b) On
the
Closing Date, Purchaser shall deliver or cause to be delivered to the Company
the Purchase Price by wire transfer to the account as specified in writing
by
the Company.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to
Purchaser:
(a) Subsidiaries.
The
Company does not directly or indirectly control or own any interest in any
other
Person.
(b) Organization
and Qualification.
The
Company is an entity duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, with the requisite
power and authority to own, lease and use its properties and assets and to
carry
on its business as currently conducted. The Company is not in violation or
default of any of the provisions of its articles of incorporation or bylaws.
The
Company is duly qualified to conduct business and is in good standing as
a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may
be,
could not have or reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company, or (iii)
a
material adverse effect on the Company’s ability to perform fully on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or
(iii),
a “Material Adverse Effect”), and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
or
curtail such power and authority or qualification.
5
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance of each of the Transaction Documents
by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on
the
part of the Company and no further consent or action is required by the Company,
its Board of Directors or its stockholders in connection therewith other
than
actions necessary to satisfy the Company’s post-closing obligations under the
Transaction Documents including, to the extent necessary, making the Required
Filings. Each Transaction Document has been duly executed by the Company
and,
when delivered in accordance with the terms hereof and thereof, will constitute
the valid and legally binding obligation of the Company enforceable against
the
Company in accordance with its terms except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium
and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar
as
indemnification and contribution provisions may be limited by applicable
law.
The Company is not in violation of any of the provisions of its articles
of
incorporation or by-laws.
(d) No
Conflicts.
Except
as set forth on Schedule 3.1(d)
attached
hereto, the execution, delivery and performance of the Transaction Documents
by
the Company and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not: (i) conflict with or
violate any provision
of the Company’s articles of incorporation or bylaws, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any
of
the properties or assets of the Company, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company debt or otherwise) or other understanding
to
which the Company is a party or by which any property or asset of the Company
is
bound or affected, or (iii) subject to the Required Filings, conflict with
or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
the
Company is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected; except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings,
Consents and Approvals.
Except
as set forth on Schedule
3.1(e),
the
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
in
connection with the execution, delivery and performance by the Company of
the
Transaction Documents, other than (i) filings required pursuant to Section
4.7,
and (ii) such filings (if any) as are required to be made under applicable
state
securities laws (collectively, the “Required Filings”). All filings of the
Company required to be filed with federal, state, local or governmental
authorities (including the Federal Trade Commission) in connection with the
Company’s sale of franchises are current as of the date of this
Agreement.
6
(f) Issuance
of the Securities.
The
Debenture and Warrant are duly authorized and, when issued and paid for in
accordance with this Agreement, will be duly and validly issued, fully paid
and
nonassessable, free and clear of all Liens imposed by the
Company other than those provided for in the Transaction Documents. The Warrant
Shares, when issued and paid for in accordance with the terms of the Transaction
Documents, will: (i) be validly issued, fully paid and nonassessable;
(ii)
be
issued in compliance with an exemption from registration under all applicable
federal and state securities laws; and (iii) be free
and
clear of all Liens imposed by the Company. The Company has reserved from
its
duly authorized capital stock a number of shares of Common Stock for issuance
of
the Warrant Shares at least equal to the Required Minimum.
(g) Capitalization.
The
capitalization of the Company is as follows: 50,000,000 shares of Common
Stock,
par value $.001 per share, are authorized, of which 19,836,175 shares are
issued
and outstanding on the date hereof, and 5,000,000 shares of preferred stock,
without
par value, are authorized, of which no shares are issued or outstanding.
Except
as set forth on Schedule 3.1(g)
attached
hereto, no Person has any right of first refusal, preemptive right, right
of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. In addition to the Warrant offered
for sale to Purchaser hereunder, there are three outstanding warrants to
purchase 440,000 shares of Common Stock in the aggregate at an exercise price
of
$1.00 per share. There are no other outstanding warrants or options, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe
for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound
to
issue additional shares of Common Stock or Common Stock Equivalents other
than
pursuant to the exercise of employee stock options under the Company’s stock
option plans or the issuance of shares of Common Stock to employees pursuant
to
the Company’s employee stock purchase plan or pursuant to the warrants referred
to in the preceding sentence. Except as set forth on Schedule
3.1(g),
the
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than Purchaser)
and will not result in a right of any holder of Company securities to adjust
the
exercise, conversion, exchange or reset price under any of such securities.
All
of the outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued
in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance
and
sale of the Securities. There are no stockholders’ agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among
any
holder of securities of the Company.
(h) SEC
Reports; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two (2) years preceding the date hereof (or such shorter period as
the
Company was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the
7
“SEC
Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any
such
extension. As of their respective dates of filing with the Commission, the
SEC
Reports, together with any amendments thereto, complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable,
and none of the SEC Reports, when filed, contained any untrue statement of
a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports (the “Financial
Statements”) comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. The Financial Statements have
been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in the Financial Statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP and are subject to routine year-end adjustments
which
are not material in the aggregate. The Financial Statements fairly present
in
all material respects the financial position of the Company as of and for
the
dates thereof and the results of operations and cash flows for the periods
then
ended, subject, in the case of unaudited statements, to normal, year-end
audit
adjustments as referred to above.
(i) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report filed
prior
to the date hereof, (i) there has been no event, occurrence or development
that
has had
or
that could reasonably be expected to result in a Material Adverse Effect,
(ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables, new real estate leases, and accrued expenses incurred
in the ordinary course of business consistent with past practice, and (B)
liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or disclosed in filings made with the Commission, (iii)
the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to
its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem
any shares of its capital stock, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information. Except
for the
issuance of the Securities contemplated by this Agreement, no event, liability
or development has occurred or exists with respect to the Company or its
business, properties, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws at the time
this
representation is made that has not been publicly disclosed at least one
Trading
Day prior to the date that this representation is made.
(j) Litigation.
There
is no Proceeding pending or, to the knowledge of the Company, threatened
against
or affecting the Company or any of its properties before or by any court,
arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents
or the
Debenture and Warrant, or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company, nor any director or officer thereof, is or has been the
8
subject
of any Proceeding involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty. There has
not
been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission or the Federal Trade Commission involving
the Company or any current or former director or officer of the Company.
The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the
Exchange Act or the Securities Act.
(k) Labor
Relations.
No
labor dispute exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect. None of the Company’s
employees
is a member of a union that relates to such employee’s relationship with the
Company, and the Company is not a party to a collective bargaining agreement,
and the Company believes that its relationships with its employees are good.
No
executive officer, to the knowledge of the Company, is or is now expected
to be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement,
or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company to
any
liability with respect to any of the foregoing matters. The Company is in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have
a
Material Adverse Effect.
(l) Compliance.
The
Company (i) is not in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company under), nor
has
the Company received notice of a claim that it is in default under or that
it is
in violation of, any indenture, loan or credit agreement or any other agreement,
contract or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental
body,
or (iii) is or has been in violation of any statute, rule or regulation of
any
governmental authority, including without limitation all foreign, federal,
state
and local laws applicable to its business, including franchise laws, and
all
such laws that affect the environment, except in each case as could not have
or
reasonably be expected to result in a Material Adverse Effect.
(m) Regulatory
Permits.
The
Company possesses all certificates, authorizations and permits issued by
the
appropriate federal, state, local or foreign regulatory authorities necessary
to
conduct its business as described in the SEC Reports,
except where the failure to possess such permits could not have or reasonably
be
expected to result in a Material Adverse Effect (“Material Permits”), and the
Company has not received any notice of Proceedings relating to the revocation
or
modification of any certificates, authorizations or permits applicable to
the
Company.
(n) Title
to Assets.
The
Company has good and marketable title in fee simple to all real property
owned
by it that is material to the business of the Company and good and marketable
title in all personal
property owned by it that is material to the business of the
9
Company,
in each case free and clear of all Liens, except for purchase money security
interests, Liens as do not materially affect the value of such property and
do
not materially interfere with the use made and proposed to be made of such
property by the Company and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to penalties.
Any
real property and facilities held under lease by the Company are held by
it
under valid, subsisting and enforceable leases with which the Company is
in
material compliance.
(o) Patents
and Trademarks.
The
Company has, or has rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights
and similar rights necessary for use in connection with its business as
described in the SEC Reports and which the failure to so have would have
a
Material Adverse Effect (collectively, the “Intellectual Property Rights”). The
Company has not received a notice (written or otherwise) that the Intellectual
Property Rights used by the Company violates or infringes upon the rights
of any
Person. To the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another Person of
any
of the Intellectual Property Rights. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all of its
intellectual properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(p) Insurance.
The
Company is insured against such losses and risks and in such amounts as
management of the Company believes to be prudent. The Company has
no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(q) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company
(other than for services as employees, officers and directors), including
any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 other than
(i)
for payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(r) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in compliance with all provisions of the Xxxxxxxx-Xxxxx Act of
2002
which are applicable to it as of the Closing Date. The Company maintains
a
system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability,
(iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the
10
existing
assets at reasonable intervals and appropriate action is taken with respect
to
any differences. If applicable to the Company on the date hereof, the Company
has established disclosure controls and procedures (as defined in Exchange
Act
Rules 13a−15(e) and 15d−15(e)) for the Company and designed such disclosure
controls and procedures to ensure that information required to be disclosed
by
the Company in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Commission’s rules and forms. If applicable to the Company on the date
hereof, the Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the end of the period
covered by the Company’s most recently filed periodic report under the Exchange
Act (such date, the “Evaluation Date”). The Company presented in its most
recently filed periodic report under the Exchange Act the conclusions of
the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company’s internal control
over financial reporting (as such term is defined in the Exchange Act) that
has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
(s) Brokerage
or Finder’s Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect
to the transactions contemplated by the Transaction Documents. Purchaser
shall
have no obligation with respect to any fees or with respect to any claims
made
by or on behalf of other Persons for fees of a type contemplated in this
Section
that may be due in connection with the transactions contemplated by the
Transaction Documents.
(t) Private
Placement.
Assuming the accuracy of Purchaser’s representations and warranties set forth in
Section 3.2, no registration under the Securities Act is required for the
offer
and sale of the Securities by the Company to Purchaser as contemplated hereby.
The
issuance and sale of the Securities hereunder does not contravene the rules
and
regulations of the Trading Market.
(u) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt
of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The
Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act of 1940, as amended.
(v) Registration
Rights.
Other
than Purchaser, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company, except
for any such rights which have been satisfied by the Company.
(w) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to
its
knowledge is likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating terminating
such
registration. The Company has not, in the twelve (12) months preceding the
date
hereof, received notice from any Trading
11
Market
on
which the Common Stock is or has been listed or quoted to the effect that
the
Company is not in compliance with the listing or maintenance requirements
of
such Trading Market. The Company is, and has no reason to believe that it
will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements. Trading in the Common Stock has not
been
suspended by the Commission or the Company’s principal Trading
Market.
(x) Disclosure.
Subject
to the limitations acknowledged by Purchaser in Section 3.2(f)(iii), all
disclosure furnished by or on behalf of the Company to Purchaser regarding
the
Company, its business and the transactions contemplated hereby, is true and
correct and does not contain any untrue statement of a material fact or omit
to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
The
press
releases disseminated by the Company during the twelve (12) months prior
to the
Closing Date did not contain, at the time of their respective releases, any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary in order to make the statements, in light
of the
circumstances under which they were made and when made, not misleading. The
Company acknowledges and agrees that Purchaser makes no or has made no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2
hereof.
(y) No
Integrated Offering.
Assuming the accuracy of Purchaser’s representations and warranties set forth in
Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any offers
or
sales of
any
security or solicited any offers to buy any security, under circumstances
that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or any applicable
shareholder approval provision of any Trading Market on which any of the
securities of the Company are listed or designated.
(z) Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that
will
be required to be paid on or in respect of the Company’s existing debts and
other liabilities (including known contingent liabilities) as they mature;
(ii)
the Company’s assets do not constitute unreasonably small capital to carry on
its business as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of
the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate
all
of its assets, after taking into account all anticipated uses of the cash,
would
be sufficient to pay all amounts on or in respect of its liabilities when
such
amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account
the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy
or
reorganization laws of any jurisdiction within one year from the Closing
Date.
The balance sheet of the Company at September 30, 2006, contained in the
SEC
Reports sets forth as of the date thereof all outstanding secured and unsecured
Indebtedness of the Company, or for which the Company has any commitments.
Since
September 30, 2006,
12
the
Company has not incurred any Indebtedness except as set forth on Schedule
3.1(z).
For the
purposes of this Agreement, “Indebtedness” shall mean: (a) any liabilities for
borrowed money or amounts owed in excess of $50,000 (other than trade accounts
payable incurred in the ordinary course of business); (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness
of
others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions
in the
ordinary course of business; and (c) the present value of any lease payments
in
excess of $50,000 due under leases required to be capitalized in accordance
with
GAAP. The Company is not in default with respect to any Indebtedness. Except
as
set forth on Schedule
3.1(z),
there is
no outstanding Indebtedness of the Company owed to any Person who owns directly
or indirectly five percent (5%) or more of the issued and outstanding capital
stock of the Company.
(aa) Tax
Status.
The
Company has properly completed and timely filed all necessary federal, state
and
foreign income and franchise tax returns required to be filed by it, and
has
paid all taxes shown to be payable thereon or which are otherwise due and
payable by it or as to which claim for payment has been made. There is (i)
no
claim for any tax that is an encumbrance against any of the Company’s assets and
properties, (ii) no audit of any tax return relating to the Company that
is
being conducted with respect to the Company, and (iii) no extension of any
statute of limitations on the assessment of any tax with respect to the Company.
The Company has no knowledge of a tax deficiency which has been asserted
or
threatened against the Company. The Company has withheld all amounts required
to
be withheld by law from payment made to any Person, whether that Person is
an
employee, independent contractor, or otherwise.
(bb) No
General Solicitation.
Neither
the Company nor any Person acting on behalf of the Company has offered or
sold
any securities of the Company by any form of general solicitation or general
advertising.
(cc) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other Person
acting on behalf of the Company, has (i) directly or indirectly, used any
funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds,
(iii)
failed to disclose fully any contribution made by the Company (or made by
any
Person acting on its behalf of which the Company has knowledge) which is
in
violation of law, or (iv) violated in any material respect any provision
of the
Foreign Corrupt Practices Act of 1977, as amended.
(dd) Accountants.
The
Company’s accounting firm is Xxxxxxx Xxxxx LLP. To the knowledge and belief of
the Company, such
accounting firm is a registered public accounting firm as required by the
Exchange Act.
(ee) Seniority.
Except
as set forth on Schedule
3.1(ee),
as of
the Closing Date, no Indebtedness or other claim against the Company is senior
to the Debenture in right of payment, whether with respect to interest or
upon
liquidation or dissolution, or otherwise, other than indebtedness secured
by
purchase money
security interests (which is senior only as to underlying assets covered
thereby) and capital lease obligations (which is senior only as to the property
covered thereby).
13
(ff) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company on the one hand and the accountants
and lawyers formerly or presently employed by the Company
on the other hand. At December 11, 2006, the Company owed $9,175 and $95,455.59
to its accountants and lawyers, respectively.
(gg) Acknowledgment
Regarding Purchaser’s Purchase of the Securities.
The
Company acknowledges and agrees that Purchaser is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated
thereby. The Company further acknowledges that Purchaser is not acting as
a
financial advisor or fiduciary of the Company (or in any similar capacity)
with
respect to the Transaction Documents and the transactions contemplated thereby
and any advice given by Purchaser or any of its respective representatives
or
agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to Purchaser’s purchase of the
Securities. The Company further represents to Purchaser that the Company’s
decision to enter into the Transaction Documents has been based solely on
the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
(hh) Acknowledgment
Regarding Purchaser’s Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Section 3.2(g) hereof), it is understood and acknowledged by
the
Company: (i) that Purchaser has not been asked to agree, nor has Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities
of
the Company, or “derivative” securities based on securities issued by the
Company or to hold any securities of the Company for any specified term;
(ii)
that future open market or other transactions by Purchaser with respect to
securities of the Company after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s
publicly-traded securities; and (iii) that Purchaser shall not be deemed
to have
any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The Company further understands and acknowledges that
(a) Purchaser may engage in hedging activities at various times during the
period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares deliverable with
respect
to Securities are being determined and (b) such hedging activities (if any)
could reduce the value of the existing stockholders’ equity interests in the
Company at and after the time that the hedging activities are being conducted.
The Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.
(ii) Regulation
M Compliance.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result
in the
stabilization or manipulation of the price of any security of the Company
to
facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
or
paid any compensation for soliciting purchases of, any of the securities
of the
Company, or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company.
14
(jj) Contracts.
All of
the Company’s material contracts, agreements, understandings and arrangements,
whether written or oral (collectively, the “Contracts”) are valid, subsisting,
in full force and effect and binding upon the Company and the other parties
thereto. The Company is not in default under any of the Contracts. To the
knowledge of the Company, no other party to any such Contract is in default
thereunder, nor does any condition exist that with notice or lapse of time
or
both would constitute a default by such other party thereunder, except as
would
not be reasonably expected to have a Material Adverse Effect.
(kk) Employee
Benefit Plans.
The SEC
Reports describe all material employee benefit plans (including any “multiple
employer plan” within the meaning of the Code or ERISA), arrangements, policies,
programs, agreements or commitments maintained by the Company (collectively,
the
“Plans”). Except as would not reasonably be expected to have a Material Adverse
Effect, (i) each Plan (and related trust, insurance contract or fund) has
been
established and administered in accordance with its terms, and complies in
form
and in operation with the applicable requirements of ERISA and the Code and
other applicable law and regulation, (ii) no claim with respect to the
administration or the investment of the assets of any Plan (other than routine
claims for benefits) is pending and all contributions (including all employer
contributions and employee salary reduction contributions) which are due
have
been paid to each Plan, (iii) each Plan that is intended to be qualified
under
Section 401(a) of the Code is so qualified and has been so qualified during
the
period since its adoption; each trust created under any such Plan is exempt
from
tax under Section 501(a) of the Code and has been so exempt since its creation
and (iv) there are no unfunded obligations under any Plan which are not fully
reflected on the Financial Statements.
(ll) Product
Liability Claims.
There
have been no: (i) product or service warranty claims made by the Company’s
customers which were not reimbursed or assumed by the Company’s suppliers other
than routine claims in the ordinary course of business; (ii) product recalls
by
the Company; or (iii) product and/or service warranties outstanding or currently
being offered by the Company to its customers (other than those of third
parties
for which the Company has no obligation or responsibility and the Company’s
standard quality guarantee to replace any defective product or service) other
than 30-day installation warranties for which the Company receives no additional
consideration and longer-term service warranties for which the Company does
receive additional consideration. Furthermore, neither the Company nor any
of
its predecessors in interest have been subject to any product or service
liability claim relating to any of the Company’s products, services, or
operation of business of the Company and, to the knowledge of the Company,
no
such claim is threatened and no circumstance or condition exists that would
reasonably be expected to give rise to such a claim.
(mm) Environmental
Claims.
There
are no environmental claims, or environmental liabilities, pending or, to
the
knowledge of the Company, threatened against the Company by any Person
(including, without limitation, any governmental entity) relating to: (i)
any of
the assets or properties of the Company; (ii) any property currently or formerly
operated, occupied or leased by the Company; or (iii) any current or former
product of the Company that has been manufactured, sold, transported or disposed
of. In addition, the Company has not released any hazardous material. The
Company is in compliance with all environmental laws.
15
3.2 Representations
and Warranties of Purchaser.
Purchaser hereby makes the following representations and warranties to
the
Company:
(a) Organization;
Authority.
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry
out its
obligations hereunder and thereunder. The execution, delivery and performance
by
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Purchaser. Each
Transaction Document to which it is a party has been duly executed by Purchaser
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and legally binding obligation of Purchaser, enforceable
against it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be
limited by applicable law. The Purchaser’s Federal taxpayer identification
number and mailing address for notices have been provided to the
Company.
(b) Own
Account.
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law. Purchaser is acquiring the Securities as principal for its own account
and
not with a view to
or for
distributing or reselling such Securities or any part thereof in violation
of
the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other Person to distribute or regarding
the distribution of such Securities (this representation and warranty not
limiting such Purchaser’s right to sell the Securities in compliance with
applicable federal and state securities laws) in violation of the Securities
Act
or any applicable state securities law. Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.
(c) Purchaser
Status.
At the
time Purchaser was offered the Securities, it was, and at the date hereof
it is,
either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under
the
Securities Act, or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act. Purchaser is not required to be registered
as
a broker-dealer under Section 15 of the Exchange Act.
(d) Experience
of Purchaser.
Purchaser has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks
of the
investment
in the Securities, and has so evaluated the merits and risks of such investment.
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published
in any
newspaper, magazine or similar media or broadcast over television or radio
or
presented
at any seminar or any other general solicitation or general
advertisement.
16
(f) Available
Information.
Purchaser understands and acknowledges that
(i) Purchaser
has been given access to, and prior to the execution of the Transaction
Documents, an opportunity to ask questions of and receive answers from, the
Company concerning the terms and conditions of the offering of the Securities
and to obtain any other information that Purchaser requested with respect
to the
Company’s operations and Purchaser’s proposed investment in the Company in order
to evaluate the investment and verify the accuracy of all information furnished
to it regarding the Company;
(ii) Purchaser
has been given access to all of the SEC Reports; and
(iii) Financial
projections have been provided to Purchaser by the Company as part of the
information sought by Purchaser, that such projections are based on assumptions
made by the Designated Officers as to Company operations, that although such
assumptions are believed by the Designated Officers to be reasonable, not
all
assumptions will actually eventuate and therefore, such projections represent
possible but necessarily the most likely financial results for the Company,
and
that such projections must therefore be viewed as estimates only, and there
can
be no assurance of their accuracy.
(g) Purchases,
Sales and Confidentiality Prior To The Date Hereof.
Other
than the transaction contemplated hereunder, Purchaser has not, nor has any
Affiliate of Purchaser,
purchased or sold (including Short Sales) any securities of the Company during
the period commencing from September 28, 2006 and ending on the date hereof.
Purchaser and its Affiliates have used reasonable efforts to maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this
transaction).
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) Purchaser
acknowledges that the Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of the
Securities other than (i) pursuant to an effective registration statement
or
Rule 144, (ii) to the Company, (iii) to an Affiliate
of Purchaser or, (iv) in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide to the
Company
an opinion of counsel selected by the transferor and reasonably acceptable
to
the Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company and the Transfer Agent, to the effect that such
transfer does not require registration of such transferred Securities under
the
Securities Act. In the case of (iii) and (iv) above, as a condition of transfer,
any such transferee shall agree in writing to be bound by the terms of this
Agreement.
17
(b) Purchaser
agrees to the imprinting, so long as is required by this Section 4.1, of
a
legend on any of the Securities, as applicable, in substantially the
following form:
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAS
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer
or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a
pledge
or transfer would not be subject to approval of the Company and no legal
opinion
of legal counsel of the pledgee, secured party or pledgor shall be required
in
connection therewith. Further, no notice shall be required of such pledge.
At
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably
request
in connection with a pledge or transfer of the Securities including, if the
Securities are subject to registration with the Commission under the Securities
Act, the preparation and filing of any required prospectus supplement under
Rule
424(b)(3) under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates
evidencing the Warrant Shares shall not contain any legend (including the
legend
set forth in Section 4.1(b) hereof): (i) while a registration statement covering
the resale of such security is effective under the Securities
Act, (ii) following any sale of such Warrant Shares pursuant to Rule 144,
(iii)
if such Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff
of
the Commission). Under any such circumstances the Company shall cause its
counsel to issue a legal opinion to the Transfer Agent if required by the
Transfer Agent to effect the removal of the legend hereunder. If all or any
portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, or if such
Warrant Shares may be sold under Rule 144(k) or if such legend on the Warrant
Shares is not otherwise required under applicable requirements of the Securities
Act (including judicial interpretations
18
and
pronouncements issued by the staff of the Commission) then such Warrant Shares
shall be issued free of all legends. The Company agrees that at such time
as
such legend is no longer required under this Section 4.1(c), it will, no
later
than three Trading Days following the delivery by Purchaser to the Company
or
the Transfer Agent of a certificate representing Warrant Shares, issued with
a
restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver
or cause to be delivered to Purchaser a certificate representing such shares
that is free from all restrictive and other legends. The Company may not
make
any notation on its records or give instructions to the Transfer Agent that
enlarge the restrictions on transfer set forth in this Section. If possible,
certificates for Warrant Shares subject to legend removal hereunder shall
be
transmitted by the Transfer Agent to Purchaser by crediting the account of
Purchaser’s prime broker with the Depository Trust Company System.
(d) In
addition to Purchaser’s other available remedies, the Company shall pay to
Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each
$2,000 of Warrant Shares (based on the VWAP of the Common Stock on the date
such
Securities
are submitted to the Transfer Agent) delivered for removal of the restrictive
legend and subject to Section 4.1(c), $10 per Trading Day (increasing to
$20 per
Trading Day 5 Trading Days after such damages have begun to accrue) for each
Trading Day after the second Trading Day following the Legend Removal Date
until
such certificate is delivered without a legend. Nothing herein shall limit
Purchaser’s right to pursue actual damages for the Company’s failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and Purchaser shall have the right to pursue all remedies available
to it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
(e) Purchaser
agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance that Purchaser will sell any Securities
pursuant
to either the registration requirements of the Securities Act, including
any
applicable prospectus delivery requirements, or an exemption therefrom, and
that
if Securities are sold pursuant to a registration statement, they will be
sold
in compliance with the plan of distribution set forth therein and upon
compliance with the prospectus delivery requirement.
4.2 Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including without limitation
its
obligation to issue the Warrant Shares pursuant to the Transaction Documents,
are unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.
4.3 Furnishing
of Information.
As long
as Purchaser owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all
reports required to be filed by the Company after the date hereof pursuant
to
the Exchange Act. As long as Purchaser owns Securities, if the Company is
not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to Purchaser and make publicly
19
available
in accordance with Rule 144(c) such information as is required for Purchaser
to
sell the Securities under Rule 144. The Company further covenants that it
will
take such further action as Purchaser may reasonably request, to the extent
required from time to time to enable Purchaser to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
4.4 Integration.
The
Company shall not, and shall use its best efforts to ensure that no Affiliate
of
the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section
2
of the Securities Act) that would be integrated with the offer or sale of
the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to Purchaser or that would be integrated
with
the offer and sale of the Securities for purposes of the rules and regulations
of any Trading Market.
4.5 Reservation
and Listing of Conversion Shares.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may
be
required to fulfill its obligations in full under the Transaction Documents.
(b) The
Company shall (i) in the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the shares of Common Stock issued or issuable
under
the Transaction Documents, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing on each Trading Market
as soon
as possible thereafter, (iii) provide to Purchaser evidence of such listing,
and
(iv) maintain the listing of such Common Stock on each such Trading
Market.
(c) In
the
case of a breach by the Company of Section 4.5(a), in addition to the other
remedies available to Purchaser, Purchaser shall have the right to require
the
Company to either: (i) use its best efforts to obtain the required shareholder
approval necessary to permit the issuance of such shares of Common Stock
as soon
as is possible, but in any event not later than the seventy-fifth
(75th)
day
after such notice, or (ii) within five Trading Days after delivery of a written
notice, pay cash to Purchaser, as liquidated damages and not as a penalty,
in an
amount equal to the number of shares of Common Stock not issuable by the
Company
multiplied by one hundred fifteen percent (115%) of the average VWAP over
the
ten (10) Trading Days immediately prior to the date of such notice or, if
greater, the ten (10) Trading Days immediately prior to the date of payment
(the
“Cash Amount”). If Purchaser elects the first option under the preceding
sentence and the Company fails to obtain the required shareholder approval
on or
prior to the seventy-fifth (75th)
day
after such notice, then within three Trading Days after such seventy-fifth
(75th)
day,
the Company shall pay the Cash Amount to such Purchaser, as liquidated damages
and not as a penalty.
4.6 Exercise
Procedures.
The
form of Notice of Exercise included in the Warrant sets forth the totality
of
the procedures required of Purchaser in order to exercise the Warrant other
than
the payment for Warrant Shares. No additional legal opinion or other information
or instructions shall be required of Purchaser to exercise the Warrant. The
Company shall honor exercises of the Warrant and shall deliver Warrant Shares
in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
20
4.7 Securities
Laws Disclosure; Publicity.
Within
the time prescribed by law, the Company shall file a Current Report on Form
8-K
with the Commission (the “Form 8-K Filing”) describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits
to such Form 8-K Filing each of the Transaction Documents, in the form required
by the Exchange Act. Thereafter, the Company shall timely file any filings
and
notices required by the Commission or applicable law with respect to the
transactions contemplated hereby and provide copies thereof to Purchaser
promptly after filing. The Company shall, at least two (2) Trading Days prior
to
the filing or dissemination of any disclosure required by this paragraph,
provide a copy thereof to Purchaser for its review. The Company and Purchaser
shall consult with each other in issuing any press releases or otherwise
making
public statements or filings and other communications with the Commission
or any
regulatory agency or Trading Market with respect to the transactions
contemplated hereby, and neither party shall issue any such press release
or
otherwise make any such public statement, filing or other communication without
the prior consent of the other, except if such disclosure is required by
law, in
which case the disclosing party shall promptly provide the other party with
prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name
of Purchaser or any of its Affiliates, or include the name of Purchaser or
any
of its Affiliates in any filing with the Commission or any regulatory agency
or
Trading Market, without the prior written consent of Purchaser, except to
the
extent such disclosure is required by law or Trading Market regulations,
in
which case the Company shall provide Purchaser with prior notice of such
disclosure. The Company shall not, and shall cause each of its officers,
directors, employees and agents not to, provide Purchaser or any of its
Affiliates with any material nonpublic information regarding the Company
from
and after the filing of the Form 8-K Filing without the express written consent
of Purchaser. In the event of a breach of the foregoing covenant by the Company
or any of its or officers, directors, employees and agents, in addition to
any
other remedy provided herein or in the Transaction Documents, Purchaser shall
have the right to require the Company to make a public disclosure, in the
form
of a press release, public advertisement or otherwise, of such material
nonpublic information. Neither Purchaser nor any of its Affiliates shall
have
any liability to the Company or any of its officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing,
neither the Company nor Purchaser shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby.
4.8 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or, with the consent of the
Company, any other Person, that Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter adopted by the Company, or that Purchaser
could be deemed to trigger the provisions of any such plan or arrangement,
by
virtue of receiving the Securities under the Transaction Documents or under
any
other agreement between the Company and the Purchaser.
4.9 [INTENTIONALLY
DELETED.]
4.10 No
Impairment.
At all
times after the date hereof, the Company will not take or permit any action,
or
cause or permit any Affiliate to take or permit any action that impairs or
adversely affects the rights of Purchaser under the Transaction
Documents.
21
4.11 Indemnification
of Purchaser.
Subject
to the provisions of this Section 4.11, the Company will indemnify and hold
Purchaser and its directors, officers, Affiliates, shareholders, members,
partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of
such
title or any other title) (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs
and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of
any of
the representations, warranties, covenants or agreements made by the Company
in
this Agreement or in the other Transaction Documents, or (b) any Proceeding
instituted against any Purchaser Party in connection with or as a result
of the
transactions contemplated by the Transaction Documents (unless such Proceeding
is based upon a breach of Purchaser’s representations, warranties or covenants
under the Transaction Documents or any conduct by Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any Proceeding
shall be brought against any Purchaser Party in respect of which indemnity
may
be sought pursuant to this Agreement, such Purchaser Party shall promptly
notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably acceptable to
the
Purchaser Party. Any Purchaser Party shall have the right to employ separate
counsel in any such Proceeding and participate in the defense thereof, but
the
fees and expenses of such counsel shall be at the expense of such Purchaser
Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel, or
(iii)
in such Proceeding there is, in the reasonable opinion of such separate counsel,
a material conflict on any material issue between the position of the Company
and the position of such Purchaser Party, in which case the Company shall
be
responsible for the reasonable fees and expenses of no more than one such
separate counsel for all Purchaser Parties. The Company will not be liable
to
any Purchaser Party under this Agreement (i) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the
extent
that a loss, claim, damage or liability is attributable to any Purchaser
Party’s
breach of any of the representations, warranties, covenants or agreements
made
by such Purchaser Party in this Agreement or in the other Transaction
Documents.
Purchaser’s rights to indemnification set forth herein shall not be deemed
waived or otherwise effected by any investigation made, or any knowledge
acquired, by Purchaser.
4.12 Blue
Sky Filings.
The
Company shall take such action as the Company shall reasonably determine
is
necessary in order to obtain an exemption for, or to qualify the Securities
for,
sale to Purchaser at the Closing under applicable securities or “Blue Sky” laws
of the states of the United States, and shall provide evidence of such actions
promptly upon request of Purchaser.
4.13 Piggy-Back
Registrations.
If at
any time there is not an effective registration statement covering all of
the
Registrable Securities and the Company shall determine to prepare and file
with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under
the
Securities Act) or their then equivalents relating to equity securities to
be
issued solely in connection with any acquisition of any entity or
22
business
or equity securities issuable in connection with the stock option or other
employee benefit plans, then the Company shall send to Purchaser a written
notice of such determination and, if within fifteen (15) days after the date
of
such notice, Purchaser shall so request in writing, subject to customary
lead
underwriter cutbacks, the Company shall include in such registration statement
all or any part of such Registrable Securities Purchaser requests to be
registered; provided,
however,
that
the Company shall not be required to register any Registrable Securities
pursuant to this Section 4.13 that are eligible for resale pursuant to Rule
144(k) promulgated under the Securities Act or that are the subject of a
then
effective registration statement. All fees and expenses of the registration
and
sale shall be borne by the Company whether or not any Registrable Securities
are
sold pursuant to a registration statement, provided that the Company shall
not
be responsible for broker or similar commissions of Purchaser. The Company
shall
also indemnify Purchaser pursuant to customary terms.
ARTICLE
V
MISCELLANEOUS
5.1 Fees
and Expenses.
Except
as
expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and
other
experts, if any, and all other expenses incurred by such party incident to
the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp taxes and other taxes and duties levied in
connection with the delivery of the Securities to Purchaser.
5.2 Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto,
contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous agreements and
understandings, oral or written, with respect to such matters, which the
parties
acknowledge have been merged into such documents, exhibits and
schedules.
Without
intending any limitations on the generality of the foregoing, the parties
acknowledge that the Transaction Documents supersede that certain Letter
of
Interest dated December 5, 2006. At or after the Closing, and without further
consideration, the Company will execute and deliver to Purchaser such further
documents as may be reasonably requested in order to give practical effect
to
the intention of the parties under the Transaction Documents.
5.3 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile prior
to
5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after
the date of transmission, if such notice or communication is delivered via
facsimile on a day that is not a Trading Day or later than 5:30 p.m. (New
York
City time) on any Trading Day, (c) the 2nd
Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The facsimile number and address for such
notices and communications shall be as set forth on the signature pages attached
hereto with respect to the Company, and as set forth in writing with respect
to
Purchaser.
23
5.4 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and Purchaser
or,
in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to
be a
continuing waiver in the future or a waiver of any subsequent default or
a
waiver of any other provision, condition or requirement hereof, nor shall
any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.5 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
5.6 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Purchaser. Purchaser may assign any or all of its rights under
this
Agreement to any Person to whom Purchaser assigns or transfers any Securities,
as applicable, provided that (i) such transferee agrees in writing to be
bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to “Purchaser,” (ii) such transferee is an “accredited
investor” as defined in Rule 501(a) under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act, or
(iii) such transfer does not violate any representation or warranty made
in this
Agreement by Purchaser.
5.7 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.11.
5.8 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in Albany, New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in Albany, New York for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to
assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Proceeding is improper or is an
inconvenient venue for such Proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address
in
effect for notices to it under this Agreement and agrees that such service
shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
24
in
any
other manner permitted by law. The parties hereto hereby irrevocably waive
to
the fullest extent permitted by applicable law any and all right to a trial
by
jury in any Proceeding arising out of or relating to this Agreement or any
of
the Transaction Documents or the transactions contemplated hereby or thereby.
If
either
party shall commence an action or proceeding to enforce any provisions of
the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and
other reasonable costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
5.9 Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Securities, provided that the
representations and warranties shall only survive for the applicable statute
of
limitations.
5.10 Execution.
This
Agreement may be executed in two or more counterparts, all of which when
taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered
to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on
whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
5.11 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants
and
restrictions set forth herein shall remain in full force and effect and shall
in
no way be affected, impaired or invalidated, and the parties hereto shall
use
their commercially reasonable efforts to find and employ an alternative means
to
achieve the same or substantially the same result as that contemplated by
such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
that
may be hereafter declared invalid, illegal, void or unenforceable.
5.12 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) any of the other Transaction Documents, whenever
Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations
within
the periods therein provided, then Purchaser may rescind or withdraw, in
its
sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice
to its
future actions and rights; provided,
however,
in the
case of a rescission of an exercise of a Warrant, Purchaser shall be required
to
return any shares of Common Stock delivered in connection with any such
rescinded exercise notice.
5.13 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof (in the case of mutilation),
or
in lieu of and substitution therefor, a new certificate or instrument, but
only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and upon provision of
25
an
indemnity reasonably acceptable to the Company and the Transfer Agent. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
5.14 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, Purchaser
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agrees to waive and not
to
assert in any Proceeding for specific performance of any such obligation
the
defense that a remedy at law would be adequate.
5.15 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to Purchaser pursuant
to any
Transaction Document or Purchaser enforces or exercises its rights thereunder,
and such payment or payments or the proceeds of such enforcement or exercise
or
any part thereof are subsequently invalidated, declared to be fraudulent
or
preferential, set aside, recovered from, disgorged by or are required to
be
refunded, repaid or otherwise restored to the Company, a trustee, receiver
or
any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then
to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
5.16 Usury.
To the
extent it may lawfully do so, the Company hereby agrees not to insist upon
or
plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage
of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by Purchaser
in order to enforce any right or remedy under any Transaction Document.
Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of
the
Company under the Transaction Documents for payments in the nature of interest
shall not exceed the maximum lawful rate authorized under applicable law
(the
“Maximum Rate”), and, without limiting the foregoing, in no event shall any rate
of interest or default interest, or both of them, when aggregated with any
other
sums in the nature of interest that the Company may be obligated to pay under
the Transaction Documents exceed such Maximum Rate. It is agreed that if
the
maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract
rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to Purchaser with respect
to indebtedness evidenced by the Transaction Documents, such excess shall
be
applied by Purchaser to the unpaid principal balance of any such indebtedness
or
be refunded to the Company, the manner of handling such excess to be at
Purchaser’s election.
26
5.17 Liquidated
Damages.
The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
5.18 Construction.
The
parties agree that each of them and/or their respective counsel has reviewed
and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
[Remainder
of Page Intentionally Left Blank]
27
IN
WITNESS WHEREOF,
the
parties hereto have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
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By:
/s/
Xxxxx X. Xxxxx
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Title:
Chief Executive Officer
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Address:
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000 Xxxxxxxxx Xxxx. |
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Xxxxxx
X & X
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Xxxxxx,
XX 00000
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Facsimile:
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000-000-0000 |
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Attention:
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With
a copy to (which shall not constitute notice):
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Xxxxxxx
Xxxxx Xxxxxxx & Ingersoll, LLP
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0000
Xxxxxx Xxxxxx, 00xx Xxxxx
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Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000−7599
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Attention:
Xxxxxx Xxxx
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Facsimile:
(000) 000-0000
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28
[Counterpart
signature page to that certain Securities Purchase Agreement by and between
Theater Xtreme Entertainment Group, Inc. and Xxxxxx Technology, LLC, dated
December 22, 2006.]
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XXXXXX
TECHNOLOGY, LLC
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By:
/s/ Authorized Signatory
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29
Exhibits
and Schedules to the Securities Purchase Agreement have been intentionally
omitted.
30
