PRIVATE EQUITY CREDIT AGREEMENT BY AND BETWEEN EAGLE BROADBAND, INC. AND BRITTANY CAPITAL MANAGEMENT LIMITED Dated January 12, 2007
Exhibit
10.23
BY
AND BETWEEN
EAGLE
BROADBAND, INC.
AND
BRITTANY
CAPITAL MANAGEMENT LIMITED
Dated
January
12, 2007
THIS
PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 12th day of January,
2007 (this “AGREEMENT”), by and between BRITTANY CAPITAL MANAGEMENT
LIMITED,
a
corporation organized and existing under the laws of the Bahamas (“INVESTOR”),
and EAGLE BROADBAND, INC., a Texas corporation (the “COMPANY”).
WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to Investor, from time to time as
provided herein, and Investor shall purchase, up to Five Million Dollars
($5,000,000) of the Common Stock (as defined below) and
WHEREAS,
such investments will be made in reliance upon the provisions of Section
4(2)
(“SECTION 4(2)”) of the Securities Act of 1933, Regulation D, and the rules and
regulations promulgated thereunder (the “SECURITIES ACT”), and/or upon such
other exemption from the registration requirements of the Securities Act
as may
be available with respect to any or all of the investments in Common Stock
to be
made hereunder.
NOW,
THEREFORE, the parties hereto agree as follows:
ARTICLE
I
CERTAIN
DEFINITIONS
Section
1.1 DEFINED TERMS as used in this Agreement, the following terms shall have
the
following meanings specified or indicated (such meanings to be equally
applicable to both the singular and plural forms of the terms defined)
“AGREEMENT”
shall have the meaning specified in the preamble hereof.
“AVERAGE
DAILY VOLUME” shall mean the Average of the Daily Volume for the relevant
days.
“BLACKOUT
NOTICE” shall have the meaning specified in the Registration Rights
Agreement.
“BLACKOUT
SHARES” shall have the meaning specified in Section 2.6.
“BYLAWS”
shall have the meaning specified in Section 4.8.
“CERTIFICATE”
shall have the meaning specified in Section 4.8.
“CLOSING”
shall mean one of the closings of a purchase and sale of shares of Common
Stock
pursuant to Section 2.3.
“CLOSING
BID PRICE” shall mean the closing bid price of the Common Stock on the Principal
Market.
“CLOSING
DATE” shall mean, with respect to a Closing, the [seventh (7th)]
Trading Day following the Put Date related to a Closing, or such earlier
date as
the Company and Investor shall agree, provided all conditions to a Closing
have
been satisfied on or before such Trading Day.
“COMMITMENT
PERIOD” shall mean the period commencing on the Effective Date, and ending on
the earlier of (i) the date on which Investor shall have purchased Put Shares
pursuant to this Agreement for an aggregate Purchase Price of the Maximum
Commitment Amount, (ii) the date this Agreement is terminated pursuant to
Section 2.5, or (iii) the date occurring thirty-six (36) months from the
Effective Date.
“COMMON
STOCK” shall mean the Company’s common stock, $0.001 par value per share, and
any shares of any other class of common stock whether now or hereafter
authorized, having the right to participate in the distribution of dividends
(as
and when declared) and assets (upon liquidation of the Company).
“COMMON
STOCK EQUIVALENTS” shall mean any securities that are convertible into or
exchangeable for Common Stock or any options or other rights to subscribe
for or
purchase Common Stock or any such convertible or exchangeable
securities.
“COMPANY”
shall have the meaning specified in the preamble to this Agreement.
“CONDITION
SATISFACTION DATE” shall have the meaning specified in Section 7.2.
“DAMAGES”
shall mean any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements and costs and
expenses of expert witnesses and investigation).
“DISCOUNT”
shall mean seven percent (7%).
“DTC”
shall have the meaning specified in Section 2.3.
“DWAC”
shall have the meaning specified in Section 2.3.
“EFFECTIVE
DATE” shall mean the date on which the SEC first declares effective a
Registration Statement registering resale of the Registrable Securities as
set
forth in Section 7.2(a).
“EXCHANGE
ACT” shall mean the Securities Exchange Act of 1934, as amended and the rules
and regulations promulgated thereunder.
“FAST”
shall have the meaning specified in Section 2.3.
“INVESTMENT
AMOUNT” shall mean the aggregate dollar amount (within the range specified in
Section 2.2) to be invested by Investor to purchase Interim Put Shares and
Put
Shares with respect to any Put as notified by the Company to Investor in
accordance with Section 2.2.
“INVESTOR”
shall have the meaning specified in the preamble to this Agreement.
“LEGEND”
shall have the meaning specified in Section 8.1.
“MARKET
PRICE” in respect of given Put shall mean the lowest Closing Bid Price during
the Valuation Period.
“MATERIAL
ADVERSE EFFECT” shall mean any effect on the business, operations, properties,
prospects or financial condition of the Company that is material and adverse
to
the Company or to the Company and such other entities controlling or controlled
by the Company, and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company
to
enter into and perform its obligations under any of (a) this Agreement and
(b)
the Registration Rights Agreement.
“MAXIMUM
COMMITMENT AMOUNT” shall mean Five Million Dollars ($5,000,000).
“MAXIMUM
PUT AMOUNT” shall mean, with respect to any Put, the lesser of (a) $500,000.00,
or (b) Two Hundred (200%) percent of the product of (i) Average Daily Volume,
and (ii) the Average Closing Bid Price for the three (3) trading days
immediately preceding the Put Date.
“MINIMUM
PUT AMOUNT” shall mean, with respect to any Put, Fifty Thousand Dollars
($50,000).
“NASD”
shall mean the National Association of Securities Dealers, Inc.
“NEW
BID
PRICE” shall have the meaning specified in Section 2.6.
“OLD
BID
PRICE” shall have the meaning specified in Section 2.6.
“OUTSTANDING”
shall mean, with respect to the Common Stock, at any date as of which the
number
of shares of Common Stock is to be determined, all issued and outstanding
shares
of Common Stock, including all shares of Common Stock issuable in respect
of
outstanding convertible securities, scrip or any certificates representing
fractional interests in shares of Common Stock; provided, however, that
Outstanding shall not include any shares of Common Stock then directly or
indirectly owned or held by or for the account of the Company.
“PERSON”
shall mean an individual, a corporation, a partnership, an association, a
trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
“PRINCIPAL
MARKET” shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the
Over the Counter Bulletin Board, the American Stock Exchange or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
“PURCHASE
PRICE” shall mean the Market Price less the product of the Discount and the
Market Price.
“PUT”
shall mean each occasion that the Company elects to exercise its right to
tender
a Put Notice requiring Investor to purchase shares of Common Stock, subject
to
the terms and conditions of this Agreement.
“PUT
DATE” shall mean the Trading Day during the Commitment Period that a Put Notice
is deemed delivered pursuant to Section 2.2(b).
“PUT
NOTICE” shall mean a written notice, substantially in the form of Exhibit B
hereto, to Investor setting forth the Investment Amount with respect to which
the Company intends to require Investor to purchase shares of Common Stock
pursuant to the terms of this Agreement.
PUT
SHARES” shall be the number of Put Shares deliverable on a Closing Date equal to
the Investment Amount divided by the Purchase Price.
“REGISTRABLE
SECURITIES” shall mean the (a) Put Shares, (b) the Blackout Shares and (c) any
securities issued or issuable with respect to any of the foregoing by way
of
exchange, stock dividend or stock split or in connection with a combination
of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (i) a Registration
Statement has been declared effective by the SEC and such Registrable Securities
have been disposed of pursuant to a Registration Statement, (ii) such
Registrable Securities have been sold under circumstances under which all
of the
applicable conditions of Rule 144 are met, (iii) such time as such Registrable
Securities have been otherwise transferred to holders who may trade such
shares
without restriction under the Securities Act, and the Company has delivered
a
new certificate or other evidence of ownership for such securities not bearing
a
restrictive legend or (iv) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to Investor, such Registrable Securities
may be sold without registration under the Securities Act the need for an
exemption from any such registration requirements and without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then
in
effect) under the Securities Act.
“REGISTRATION
RIGHTS AGREEMENT” shall mean the registration rights agreement in the form of
Exhibit A hereto.
“REGISTRATION
STATEMENT” shall mean a registration statement on Form S-1 (if use of such form
is then available to the Company pursuant to the rules of the SEC and, if
not,
on such other form promulgated by the SEC for which the Company then qualifies
and which counsel for the Company shall deem appropriate and which form shall
be
available for the resale of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement and the
Registration Rights Agreement and in accordance with the intended method
of
distribution of such securities), for the registration of the resale by Investor
of the Registrable Securities under the Securities Act.
“REGULATION
D” shall have the meaning specified in the recitals of this
Agreement.
“RULE
144” shall mean Rule 144 under the Securities Act or any similar provision then
in force under the Securities Act.
“SEC”
shall mean the Securities and Exchange Commission.
“SECTION
4(2)” shall have the meaning specified in the recitals of this
Agreement.
“SECURITIES
ACT” shall have the meaning specified in the recitals of this
Agreement.
“SEC
DOCUMENTS” shall mean, as of a particular date, all reports and other documents
file by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since
the beginning of the Company’s then most recently completed fiscal year as of
the time in question (provided that if the date in question is within ninety
days of the beginning of the Company’s fiscal year, the term shall include all
documents filed since the beginning of the second preceding fiscal
year).
“SUBSCRIPTION
DATE” shall mean the date on which this Agreement is executed and delivered by
the Company and Investor.
“TRADING
DAY” shall mean any day during which the Principal Market shall be open for
business.
“TRANSACTION
DOCUMENTS” means the Private Equity Credit Agreement, the Registration Rights
Agreement, and the Closing Certificate.
“TRANSFER
AGENT” shall mean the transfer agent for the Common Stock (and to any substitute
or replacement transfer agent for the Common Stock upon the Company’s
appointment of any such substitute or replacement transfer agent).
“UNDERWRITER”
shall mean any underwriter participating in any disposition of the Registrable
Securities on behalf of Investor pursuant to a Registration
Statement.
“VALUATION
EVENT” shall mean an event in which the Company at any time during a Valuation
Period takes any of the following actions:
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(a)
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subdivides
or combines the Common Stock;
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(b)
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pays
a dividend in shares of Common Stock or makes any other distribution
of
shares of Common Stock, except for dividends paid with respect
to the
Preferred Stock;
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(c)
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issues
any options or other rights to subscribe for or purchase shares
of Common
Stock other than pursuant to this Agreement and the price per share
for
which shares of Common Stock may at any time thereafter be issuable
pursuant to such options or other rights shall be less than the
Bid Price
in effect immediately prior to such
issuance;
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(d)
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issues
any securities convertible into or exchangeable for shares of Common
Stock
and the consideration per share for which shares of Common Stock
may at
any time thereafter be issuable pursuant to the terms of such convertible
or exchangeable securities shall be less than the Bid Price in
effect
immediately prior to such issuance;
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(e)
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issues
shares of Common Stock otherwise than as provided in the foregoing
subsections (a) through (d), at a price per share less, or for
other
consideration lower, than the Bid Price in effect immediately prior
to
such issuance, or without
consideration;
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(f)
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makes
a distribution of its assets or evidences of indebtedness to the
holders
of Common Stock as a dividend in liquidation or by way of return
of
capital or other than as a dividend payable out of earnings or
surplus
legally available for dividends under applicable law or any distribution
to such holders made in respect of the sale of all or substantially
all of
the Company’s assets (other than under the circumstances provided for in
the foregoing subsections (a) through (e);
or
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(g)
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takes
any action affecting the number of Outstanding Common Stock, other
than an
action described in any of the foregoing subsections (a) through
(f)
hereof, inclusive, which in the opinion of the Company’s Board of
Directors, determined in good faith, would have a materially adverse
effect upon the rights of Investor at the time of a
Put.
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“VALUATION
PERIOD” shall mean the period of five (5) Trading Days immediately following the
date on which the applicable Put Notice is deemed to be delivered and during
which the Purchase Price of the Common Stock is valued; provided, however,
that
if a Valuation Event occurs during any Valuation Period, a new Valuation
Period
shall begin on the Trading Day immediately after the occurrence of such
Valuation Event and end on the fifth (5th) Trading Day thereafter.
ARTICLE
II
PURCHASE
AND SALE OF COMMON STOCK
Section
2.1 INVESTMENTS.
(a) PUTS.
Upon the terms and conditions set forth herein (including, without limitation,
the provisions of Article VII), on any Put Date the Company may exercise
a Put
by the delivery of a Put Notice.
(b) FLOOR
PRICE. In
the
event that during a Valuation Period, the Closing Bid Price on any Trading
Day
falls below [seventy-five percent (75%)] of the Bid Price for the three (3)
Trading Days immediately prior to a Put Date (a “Low Bid Price”), for each such
Trading Day the Company shall be under no obligation to sell one-fifth (1/5)
of
the Investment Amount specified in the Put Notice, and the Investment Amount
shall accordingly be deemed reduced by such amount. In the event that during
a
Valuation Period there exists Low Bid Prices for any three (3) Trading Days—not
necessarily consecutive—then, unless the Company confirms in writing by the
close of business on the third such Trading Day of its desire to sell the
full
Investment Amount by waiving the Low Bid Price, the balance of each party’s
obligation for the Investment Amount under such Put Notice shall terminate
on
such third Trading Day (“Termination Day”), and the Investment Amount shall be
adjusted to include only one-fifth of the initial Investment Amount for each
Trading Day during the Valuation Period prior to the Termination Day that
the
Closing Bid Price equals or exceeds the Low Bid Price.
Section
2.2 MECHANICS.
(a) PUT
NOTICE. At any time during the Commitment Period (and with respect to any
Put
Notice other than the first Put Notice after the prior Closing Date), the
Company may deliver a Put Notice to Investor, subject to the conditions set
forth in Section 7.2; provided, however, the Investment Amount for each Put
as
designated by the Company in the applicable Put Notice shall be neither less
than the Minimum Put Amount nor more than the Maximum Put Amount.
(b) DATE
OF
DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the
Trading Day it is received by facsimile or otherwise by Investor if such
notice
is received on or prior to 12:00 noon New York time, or (ii) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after
12:00
noon New York time on a Trading Day or at anytime on a day which is not a
Trading Day.
Section
2.3 CLOSINGS. On or prior to each Closing Date for a Put, the Company shall
deliver to the Investor one or more certificates representing the Put Shares
to
be purchased by Investor pursuant to Section 2.1 herein, registered in the
name
of Investor within one (1) business day after the Closing Date, and Investor
shall deliver to the Company the Investment Amount by wire transfer of
immediately available funds to an account designated by the Company. In lieu
of
delivering physical certificates representing the Common Stock issuable in
accordance with clause (a) of this Section 2.3, and provided that the Transfer
Agent then is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of Investor, the
Company shall use its commercially reasonable efforts to cause the Transfer
Agent to electronically transmit, prior to the applicable Closing Date the
applicable Put Shares by crediting the Investor’s account of the Investor’s
prime broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”)
system, and provide proof satisfactory to the Investor of such delivery.
In
addition, on or prior to such Closing Date, each of the Company and Investor
shall deliver to the each other all documents, instruments and writings required
to be delivered or reasonably requested by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated
herein.
Section
2.4 [INTENTIONALLY OMITTED]
Section
2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of Investor pursuant
to
this Agreement to purchase shares of Common Stock shall, at Investor’s option,
terminate (including with respect to a Closing Date that has not yet occurred)
in the event that (a) there shall occur any stop order or suspension of the
effectiveness of any Registration Statement for an aggregate of thirty
(30)Trading Days during the Commitment Period, for any reason other than
deferrals or suspension during a Blackout Period in accordance with the
Registration Rights Agreement, as a result of corporate developments subsequent
to the Subscription Date that would require such Registration Statement to
be
amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act, or (b) the Company shall at
any
time fail to comply with the requirements of Section 6.3, 6.4, or 6.6 and
such
failure shall continue for more than thirty (30) days.
Section
2.6 BLACKOUT SHARES. In the event that, (a) within fifteen (15) Trading Days
following any Closing Date, the Company gives a Blackout Notice to Investor
of a
Blackout Period in accordance with the Registration Rights Agreement, and
(b)
the Closing Bid Price on the Trading Day immediately preceding such Blackout
Period (“OLD BID PRICE”) is greater than the Closing Bid Price on the first
Trading Day following such Blackout Period that Investor may sell its
Registrable Securities pursuant to an effective Registration Statement (“NEW BID
PRICE”), then the Company shall issue to Investor the number of additional
shares of Registrable Securities (the “BLACKOUT SHARES”) equal to the difference
between (i) the product of the number of Put Shares held by Investor immediately
prior to the Blackout Period that were issued on the most recent Closing
Date(the “REMAINING PUT SHARES”) multiplied by the Old Bid Price, divided by the
New Bid Price, and (ii) the Remaining Put Shares.
Section
2.7 [INTENTIONALLY LEFT BLANK]
Section
2.8 LIQUIDATED DAMAGES. Each of the Company and Investor acknowledge and
agree
that the requirement to issue Blackout Shares under Section 2.6 shall give
rise
to liquidated damages and not penalties. Each of the Company and Investor
further acknowledge that (a) the amount of loss or damages likely to be incurred
is incapable or is difficult to precisely estimate, (b) the amounts specified
in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by Investor in
connection with a Blackout Period under the Registration Rights Agreement,
and
(c) each of the Company and Investor are sophisticated business parties and
have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm’s length.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF INVESTOR
Investor
represents and warrants to the Company that:
Section
3.1 INTENT. Investor is entering into this Agreement for its own account
and
Investor has no present arrangement (whether or not legally binding) at any
time
to sell the Common Stock to or through any person or entity; provided, however,
Investor reserves the right to dispose of the Common Stock at any time in
accordance with federal and state securities laws applicable to such
disposition.
Section
3.2 SOPHISTICATED INVESTOR. Investor is a sophisticated investor (as described
in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as defined
in
Rule 501 of Regulation D), and Investor has such experience in business and
financial matters that it is capable of evaluating the merits and risks of
an
investment in the Common Stock. Investor acknowledges that an investment
in the
Common Stock is speculative and involves a high degree of risk.
Section
3.3 AUTHORITY. (a) Investor has the requisite power and authority to enter
into
and perform its obligations under this Agreement and the transactions
contemplated hereby in accordance with its terms; (b) the execution and delivery
of this Agreement and the Registration Rights Agreement, and the consummation
by
it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary action and no further consent or authorization of Investor
or
its partners is required; and (c) this Agreement has been duly authorized
and
validly executed and delivered by Investor and is a valid and binding agreement
of Investor enforceable against it in accordance with its terms, subject
to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other
equitable principles of general application.
Section
3.4 NOT AN AFFILIATE. Investor is not an officer, director or “affiliate” (as
that term is defined in Rule 405 of the Securities Act) of the Company or
of
Dutchess Capital Management LLC and its affiliates.
Section
3.5 ORGANIZATION AND STANDING. Investor is a corporation duly organized,
validly
existing and in good standing under the laws of the Bahamas, and has all
requisite power and authority to own, lease and operate its properties and
to
carry on its business as now being conducted. Investor is duly qualified
as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes
such
qualification necessary, other than those in which the failure so to qualify
would not have a material adverse effect on Investor.
Section
3.6 ABSENCE OF CONFLICTS. The execution and delivery of this Agreement and
any
other document or instrument contemplated hereby, and the consummation of
the
transactions contemplated hereby and thereby, and compliance with the
requirements hereof and thereof, will not (a) violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, (b)
violate any provision of any indenture, instrument or agreement to which
Investor is a party or is subject, or by which Investor or any of its assets
is
bound, or conflict with or constitute a material default thereunder, (c)
result
in the creation or imposition of any lien pursuant to the terms of any such
indenture, instrument or agreement, or constitute a breach of any fiduciary
duty
owed by Investor to any third party, or (d) require the approval of any
third-party (that has not been obtained) pursuant to any material contract,
instrument, agreement, relationship or legal obligation to which Investor
is
subject or to which any of its assets, operations or management may be
subject.
Section
3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has received all documents,
records, books and other information pertaining to Investor’s investment in the
Company that has been requested by Investor. Investor has reviewed or received
copies of the SEC Documents.
Section
3.8 MANNER OF SALE. At no time was Investor presented with or solicited by
or
through any leaflet, public promotional meeting, television advertisement
or any
other form of general solicitation or advertising.
Section
3.9 FINANCIAL CAPABILITY. Investor presently has the financial capacity and
the
necessary capital to perform its obligations hereunder.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Investor that, except as disclosed in
the SEC
Documents:
Section
4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly organized
and
validly existing and in good standing under the laws of the State of Texas,
and
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing
in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which
the
failure so to qualify would not have a Material Adverse Effect.
Section
4.2 AUTHORITY. (a) The Company has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement and the
Registration Rights Agreement and to issue the Put Shares and the Blackout
Shares, if any; (b) the execution and delivery of this Agreement and the
Registration Rights Agreement by the Company and the consummation by it of
the
transactions contemplated hereby and thereby have been duly authorized by
all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (c) each
of
this Agreement and the Registration Rights Agreement has been duly executed
and
delivered by the Company and constitute valid and binding obligations of
the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.
Section
4.3 CAPITALIZATION. As of January 10, 2007, the authorized capital stock
of the
Company consisted of 350,000,000 shares of Common Stock, of which 21,526,862
shares were issued and outstanding, and 5,000,000 shares of Preferred Stock,
none of which are issued and outstanding. Except as set forth in Schedule
4.3,
as of January 10, 2007, there were no options, warrants, or rights to subscribe
to, securities, rights or obligations convertible into or exchangeable for
or
giving any right to subscribe for any shares of capital stock of the Company.
All of the outstanding shares of Common Stock of the Company have been duly
and
validly authorized and issued and are fully paid and nonassessable.
Section
4.4 COMMON STOCK. The Company has registered the Common Stock pursuant to
Section 12(b) or 12(g) of the Exchange Act and is in full compliance with
all
reporting requirements of the Exchange Act, and the Company has maintained
all
requirements for the continued listing or quotation of the Common Stock,
and
such Common Stock is currently listed or quoted on the Principal Market.
As of
the date of this Agreement, the Principal Market is the American Stock
Exchange.
Section
4.5 SEC DOCUMENTS. The Company has delivered or made available to Investor
true
and complete copies of the SEC Documents (including, without limitation,
proxy
information and solicitation materials). To the best of Company’s knowledge, the
Company has not provided to Investor any information that, according to
applicable law, rule or regulation, should have been disclosed publicly prior
to
the date hereof by the Company, but which has not been so disclosed. As of
their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the Securities Act or the Exchange Act, and none of the SEC
Documents 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 light of the circumstances under which they were made,
not misleading. In the opinion of management, the financial statements of
the
Company included in the SEC Documents comply as to form and substance in
all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such financial
statements or the notes thereto or (b) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed
or
summary statements) and fairly present in all material respects the financial
position of the Company as of 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).
Section
4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. To the best of Company’s
knowledge, the sale and issuance of the Put Shares and the Blackout Shares,
if
any, in accordance with the terms and on the bases of the representations
and
warranties set forth in this Agreement, may and shall be properly issued
by the
Company to Investor pursuant to Section 4(2), Regulation D and/or any applicable
state law. When issued and paid for as herein provided, the Put Shares, and
the
Blackout Shares, if any, shall be duly and validly issued, fully paid, and
nonassessable. Neither the sales of the Put Shares or the Blackout Shares,
if
any, pursuant to, nor the Company’s performance of its obligations under, this
Agreement or the Registration Rights Agreement shall (a) result in the creation
or imposition of any liens, charges, claims or other encumbrances upon the
Put
Shares or the Blackout Shares, if any, or any of the assets of the Company,
or
(b) entitle the holders of Outstanding Common Stock to preemptive or other
rights to subscribe to or acquire the Common Stock or other securities of
the
Company. The Put Shares and the Blackout Shares, if any, shall not subject
Investor to personal liability for obligations of the Company by reason of
the
ownership thereof.
Section
4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS TRANSACTION.
Neither the Company nor any of its affiliates nor any person acting on its
or
their behalf (a) has conducted or will conduct any general solicitation (as
that
term is used in Rule 502(c) of Regulation D) or general advertising with
respect
to any of the Put Shares or the Blackout Shares, if any, or (b) made any
offers
or sales of any security or solicited any offers to buy any security under
any
circumstances that would require registration of the Common Stock under the
Securities Act.
Section
4.8 CORPORATE DOCUMENTS. The Company has furnished or made available to Investor
true and correct copies of the Company’s Certificate of Incorporation, as
amended and in effect on the date hereof (the “CERTIFICATE”), and the Company’s
Bylaws, as amended and in effect on the date hereof (the “BYLAWS”).
Section
4.9 NO CONFLICTS. The execution, delivery and performance of this Agreement
by
the Company and the consummation by the Company of the transactions contemplated
hereby, including without limitation the issuance of the Put Shares and the
Blackout Shares, if any, do not and will not (a) result in a violation of
the
Certificate or Bylaws or (b) conflict with, or constitute a material default
(or
an event that with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any “lock-up” or similar provision of any underwriting or similar agreement
to which the Company is a party, or (c) result in a violation of any federal,
state, or local law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company
or
by which any property or asset of the Company is bound or affected (except
for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with
or
in default under any of the foregoing. The business of the Company is not
being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
do
not and will not have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of
its
obligations under this Agreement or issue and sell the Common Stock in
accordance with the terms hereof (other than any SEC, NASD or state securities
filings that may be required to be made by the Company subsequent to any
Closing, any registration statement that may be filed pursuant hereto, and
any
shareholder approval required by the rules applicable to companies whose
common
stock trades on the American Stock Exchange); provided that, for purposes
of the
representation made in this sentence, the Company is assuming and relying
upon
the accuracy of the relevant representations and agreements of Investor
herein.
Section
4.10 NO MATERIAL ADVERSE CHANGE. Since August 31, 2006, no event has occurred
that would have a Material Adverse Effect on the Company, except as disclosed
in
the SEC Documents.
Section
4.11 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or obligations
that are material, individually or in the aggregate, and that are not disclosed
in the SEC Documents or otherwise publicly announced, other than those incurred
in the ordinary course of the Company’s businesses since August 31, 2006 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company.
Section
4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since August 31, 2006, no event
or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been
so
publicly announced or disclosed in the SEC Documents.
Section
4.13 NO INTEGRATED OFFERING. 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,
other than pursuant to this Agreement, under circumstances that would require
registration of the Common Stock under the Securities Act.
Section
4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may beset forth in the SEC
Documents, there are no lawsuits or proceedings pending or to the best knowledge
of the Company threatened, against the Company, nor has the Company received
any
written or oral notice of any such action, suit, proceeding or investigation,
which would have a Material Adverse Effect. Except as set forth in the SEC
Documents, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which would have a Material Adverse
Effect.
Section
4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company, and any Person
representing the Company, in connection with the transactions contemplated
by
this Agreement, have not made, at any time, any oral communication in connection
with the offer or sale of the same which contained any untrue statement of
a
material fact or omitted to state any material fact necessary in order to
make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section
4.16 MATERIAL NON-PUBLIC INFORMATION. The Company is not in possession of,
nor
has the Company or its agents disclosed to Investor, any material non-public
information that (a) if disclosed, would reasonably be expected to have a
materially adverse effect on the price of the Common Stock or(b) according
to
applicable law, rule or regulation, should have been disclosed publicly by
the
Company prior to the date hereof but which has not been so
disclosed.
ARTICLE
V
COVENANTS
OF INVESTOR
Section
5.1 COMPLIANCE WITH LAW. Investor’s trading activities with respect to shares of
the Common Stock will be in compliance with all applicable state and federal
securities laws, rules and regulations and the rules and regulations of the
NASD
and the Principal Market on which the Common Stock is listed.
Section
5.2 TRADING
IN SECURITIES. The Company specifically acknowledges that, except to the
extent
specifically provided herein or in any of the other Transaction Agreements
(but
limited in each instance to the extent so specified), the Investor retains
the
right (but is not otherwise obligated) to buy, sell, engage in hedging
transactions or otherwise trade in the Registrable Securities at any time.
Section
5.3. SHORT
SALES. During the term of this Agreement, the Investor agrees not to engage
in
any short sales of the Common Stock. For purposes of this Agreement, sales
of
the Company’s Common Stock executed during or after a Valuation Period in
respect of Common Stock that the Investor expects to purchase pursuant to
a Put
Notice are not deemed “short sales”.
ARTICLE
VI
COVENANTS
OF THE COMPANY
Section
6.1 REGISTRATION RIGHTS. The Company shall use its best efforts to cause
the
Registration Rights Agreement to remain in full force and effect and the
Company
shall comply in all respects with the terms thereof.
Section
6.2 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
available and the Company shall reserve and keep available at all times,
free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue the Put Shares and the Blackout
Shares, if any; such amount of shares of Common Stock to be reserved shall
be
4,200,000 for the Put Shares under the terms and conditions of this Agreement
and a good faith estimate by the Company in consultation with Investor of
the
number of Blackout Shares, if any, that will need to be issued. The number
of
shares so reserved from time to time, as theretofore increased or reduced
as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder.
Section
6.3 LISTING OF COMMON STOCK. The Company shall use its best efforts to maintain
the listing of the Common Stock on a Principal Market, and will cause the
Put
Shares and the Blackout Shares, if any, to be listed on the Principal Market.
The Company further shall, if the Company applies to have the Common Stock
traded on any other Principal Market, include in such application the Put
Shares
and the Blackout Shares, if any, and shall take such other action as is
necessary or desirable in the reasonable opinion of Investor to use its best
efforts to cause the Common Stock to be listed on such other Principal Market
as
promptly as possible. The Company shall use its commercially reasonable efforts
to continue the listing and trading of the Common Stock on the Principal
Market
(including, without limitation, maintaining sufficient net tangible assets)
and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the NASD and the Principal
Market.
Section
6.4 EXCHANGE ACT REGISTRATION. The Company shall take all commercially
reasonable steps to cause the Common Stock to continue to be registered under
Section 12(g) or 12(b) of the Exchange Act, will use its commercially reasonable
efforts to comply in all material respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate
or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act.
Section
6.5 LEGENDS. Upon effectiveness of the Registration Statement, and for so
long
as the Registration Statement is effective, the Company shall deliver
instructions to its transfer agent to issue the Shares to the Investor,
substantially in the form of Exhibit E hereto, that are covered for resale
by
the Registration Statement free of restrictive legends.
Section
6.6 CORPORATE EXISTENCE. The Company shall take all commercially reasonable
steps necessary to preserve and continue the corporate existence of the
Company.
Section
6.7 ADDITIONAL SEC DOCUMENTS. The Company shall deliver to Investor, promptly
after the originals thereof are submitted to the SEC for filing, copies of
all
SEC Documents so furnished or submitted to the SEC, unless an SEC document
is
filed using the ▇▇▇▇▇ system in which case the Company shall not be required
to
deliver such SEC Document to the Investor.
Section
6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT
TO MAKE
A PUT. The Company shall promptly notify Investor upon the occurrence of
any of
the following events in respect of a registration statement or related
prospectus in respect of an offering of Registrable Securities: (a) receipt
of
any request for additional information by the SEC or any other federal or
state
governmental authority during the period of effectiveness of the registration
statement for amendments or supplements to the registration statement or
related
prospectus; (b) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of
any
Registration Statement or the initiation of any proceedings for that purpose;
(c) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening
of any
proceeding for such purpose; (d) the happening of any event that makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
registration statement, related prospectus or documents so that, in the case
of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the
case of
the related prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (e) the Company’s reasonable
determination that a post-effective amendment to the registration statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of
the
foregoing events.
Section
6.9 EXPECTATIONS REGARDING PUT NOTICES. Within ten (10) days after the
commencement of each calendar quarter occurring subsequent to the commencement
of the Commitment Period, the Company undertakes to notify Investor as to
its
reasonable expectations as to the dollar amount it intends to raise during
such
calendar quarter, if any, through the issuance of Put Notices. Such notification
shall constitute only the Company’s good faith estimate with respect to such
calendar quarter and shall in no way obligate the Company to raise such amount
during such calendar quarter or otherwise limit its ability to deliver Put
Notices during such calendar quarter. The failure by the Company to comply
with
this provision can be cured by the Company’s notifying Investor at any time as
to its reasonable expectations with respect to the current calendar
quarter.
Section
6.10 CONSOLIDATION; MERGER. The Company shall not, at any time after the
date
hereof, effect any merger or consolidation of the Company with or into, or
a
transfer of all or substantially all of the assets of the Company to, another
entity unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to Investor such
shares
of Common Stock and/or securities as Investor is entitled to receive pursuant
to
this Agreement.
Section
6.11 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of the Put Shares
and
the issuance of the Blackout Shares, if any, shall be made in accordance
with
the provisions and requirements of Regulation D and any applicable state
law.
Section
6.12 [INTENTIONALLY LEFT BLANK]
Section
6.13 DILUTION. The number of shares of Common Stock issuable as Put Shares
may
increase substantially in certain circumstances, including, but not necessarily
limited to, the circumstance wherein the trading price of the Common Stock
declines during the period between the Effective Date and the end of the
Commitment Period. The Company’s executive officers and directors have studied
and fully understand the nature of the transactions contemplated by this
Agreement and recognize that they have a potential dilutive effect. The board
of
directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Put Shares is
binding
upon the Company and enforceable regardless of the dilution such issuance
may
have on the ownership interests of other shareholders of the
Company.
Section
6.14 USE OF PROCEEDS. The Company will use the proceeds received hereunder
for
internal working capital purposes, and, unless specifically consented to
in
advance in each instance by the Investor, the Company shall not, directly
or
indirectly, use such proceeds for any loan to or investment in any other
affiliated corporation, partnership enterprise or other affiliated
person.
Section
6.15 CERTAIN AGREEMENTS. (i) The Company covenants and agrees that it will
not,
without the prior written consent of the Investor, enter into any subsequent
or
further private equity credit agreement similar in nature to this Agreement
for
the offer or sale of Common Stock or Common Stock Equivalents (collectively,
“New Common Stock”) with any third party from the date of this Agreement until
the Effective Date.
(ii) The
provisions of subparagraph 6.15(i) will not apply to (x) an underwritten
public
offering of shares of Common Stock or Preferred Stock; (y) an offering of
convertible Preferred Stock at market or above; or (z) the issuance of
securities (other than for cash) in connection with an acquisition, merger,
consolidation, sale of assets, disposition or the exchange of the capital
stock
for assets, stock, strategic arrangements, or other joint venture interests.
Section
6.16. LOCK-UP. The Company agrees that it shall cause any and all of its
officers, insiders, Affiliates or other related parties to refrain from selling
any Common Stock during any Valuation Period, excluding Common Stock sold
pursuant to a Rule 10b5-1 trading plan, which was executed prior to the
commencement of the Valuation Period.
ARTICLE
VII
CONDITIONS
TO DELIVERY OF
PUT
NOTICES AND CONDITIONS TO CLOSING
Section
7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL
COMMON STOCK. The obligation hereunder of the Company to issue and sell the
Put
Shares to Investor incident to each Closing is subject to the satisfaction,
at
or before each such Closing, of each of the conditions set forth
below.
(a)
ACCURACY OF INVESTOR’S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Investor shall be true and correct in all material respects
as of
the date of this Agreement and as of the date of each such Closing as though
made at each such time, except for changes which have not had a Material
Adverse
Effect.
(b)
PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and complied
in all respects with all covenants, agreements and conditions required by
this
Agreement to be performed, satisfied or complied with by Investor at or prior
to
such Closing.
Section
7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE
AND
THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right of the Company
to
deliver a Put Notice and the obligation of Investor hereunder to acquire
and pay
for the Put Shares incident to a Closing is subject to the satisfaction,
on (a)
the date of delivery of such Put Notice and (b) the applicable Closing Date
(each a “CONDITION SATISFACTION DATE”), of each of the following conditions:
(a) REGISTRATION
OF REGISTRABLE SECURITIES WITH THE SEC. As set forth in the Registration
Rights
Agreement, the Company shall have filed with the SEC the Registration Statement
with respect to the resale of the Registrable Securities by Investor and
such
Registration Statement shall have been declared effective by the SEC prior
to
the first Put Date. For the purposes of any Put Notice with respect to the
Registrable Securities other than the Registrable Securities, the Company
shall
have filed with the SEC a Registration Statement with respect to the resale
of
such Registrable Securities by Investor which shall have been declared effective
by the SEC prior to the Put Date therefore.
(b) EFFECTIVE
REGISTRATION STATEMENT. As set forth in the Registration Rights Agreement,
a
Registration Statement shall have previously become effective for the resale
by
Investor of the Registrable Securities subject to such Put Notice and such
Registration Statement shall remain effective on each Condition Satisfaction
Date and (i) neither the Company nor Investor shall have received notice
that
the SEC has issued or intends to issue a stop order with respect to such
Registration Statement or that the SEC otherwise has suspended or withdrawn
the
effectiveness of such Registration Statement, either temporarily or permanently,
or intends or has threatened to do so (unless the SEC’s concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action),and (ii) no other suspension
of the
use or withdrawal of the effectiveness of such Registration Statement or
related
prospectus shall exist.
(c) ACCURACY
OF THE COMPANY’S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company shall be true and correct in all material respects
as
of each Condition Satisfaction Date as though made at each such time (except
for
representations and warranties specifically made as of a particular date)
with
respect to all periods, and as to all events and circumstances occurring
or
existing to and including each Condition Satisfaction Date, except for any
conditions which have temporarily caused any representations or warranties
herein to be incorrect and which have been corrected with no continuing
impairment to the Company or Investor.
(d) PERFORMANCE
BY THE COMPANY. The Company shall have performed, satisfied and complied
in all
material respects with all covenants, agreements and conditions required
by this
Agreement and the Registration Rights Agreement to be performed, satisfied
or
complied with by the Company at or prior to each Condition Satisfaction
Date.
(e) NO
INJUNCTION. No statute, rule, regulation, executive order, decree, ruling
or
injunction shall have been enacted, entered, promulgated or adopted by any
court
or governmental authority of competent jurisdiction that prohibits or directly
and materially adversely affects any of the transactions contemplated by
this
Agreement, and no proceeding shall have been commenced that may have the
effect
of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.
(f) ADVERSE
CHANGES. Since the date of filing of the Company’s most recent SEC Document, no
event that had or is reasonably likely to have a Material Adverse Effect
has
occurred.
(g) NO
SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the
Common
Stock shall not have been suspended by the SEC, the Principal Market or the
NASD, the Common Stock shall have been approved for listing or quotation
on the
Principal Market, and shall not have been delisted or any notice in respect
thereof shall have been received from the Principal Market.
(h) LEGAL
OPINION. The Company shall have caused to be delivered to Investor and to
the
Company’s transfer agent, the first Put Notice, and an opinion of the Company’s
legal counsel in the form of Exhibit C hereto, addressed to
Investor.
(i) [INTENTIONALLY
OMITTED]
(j) FIVE
PERCENT LIMITATION. On each Closing Date, the number of Put Shares then to
be
purchased by Investor shall not exceed the number of such shares that, when
aggregated with all other shares of Registrable Securities then owned by
Investor beneficially or deemed beneficially owned by Investor, would result
in
Investor owning more than 4.99% of all of such Common Stock as would be
outstanding on such Closing Date, as determined in accordance with Section
16 of
the Exchange Act and the regulations promulgated thereunder. For purposes
of
this Section 7.2(j), in the event that the amount of Common Stock outstanding
as
determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder is greater on a Closing Date than on the date upon
which
the Put Notice associated with such Closing Date is given, the amount of
Common
Stock outstanding on such Closing Date shall govern for purposes of determining
whether Investor, when aggregating all purchases of Common Stock made pursuant
to this Agreement and Blackout Shares, if any, would own more than 4.99%
of the
Common Stock following such Closing Date.
(k) TWENTY
PERCENT LIMITATION. Notwithstanding any other provision of this Agreement,
the
maximum aggregate number of Put Shares and Blackout Shares issuable to Investor
under this Agreement shall not exceed the number of such shares that, when
aggregated with all other shares of Registrable Securities then owned by
Investor beneficially or deemed beneficially owned by Investor, would result
in
Investor owning more than 19.99% of all of such Common Stock as would be
outstanding immediately prior to the execution and delivery of this Agreement
by
both parties, unless the Company has obtained all necessary approvals in
accordance with the rules and requirements of the Principal Market, which
the
Company may or may not seek in its discretion. Failure to seek or obtain
such
approval(s) will not change any other term or condition of this
Agreement.
(l) NO
KNOWLEDGE. The Company shall have no knowledge of any event more likely than
not
to have the effect of causing such Registration Statement to be suspended
or
otherwise ineffective (which event is more likely than not to occur within
the
fifteen Trading Days following the Trading Day on which such Notice is deemed
delivered).
(m) [INTENTIONALLY
OMITTED]
(n) SHAREHOLDER
VOTE. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements
of the
Principal Market.
(o) NO
VALUATION EVENT. No Valuation Event shall have occurred since the Put
Date.
(p)
OTHER.
On each Condition Satisfaction Date, Investor shall have received and been
reasonably satisfied with such other certificates and documents as shall
have
been reasonably requested by Investor in order for Investor to confirm the
Company’s satisfaction of the conditions set forth in this Section 7.2,
including, without limitation, a certificate in substantially the form and
substance of Exhibit D hereto, executed by an executive officer of the Company
and to the effect that all the conditions to such Closing shall have been
satisfied as at the date of each such certificate.
Section
7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The
Company shall make available for inspection and review by Investor, advisors
to
and representatives of Investor (who may or may not be affiliated with Investor
and who are reasonably acceptable to the Company), any Underwriter, any
Registration Statement or amendment or supplement thereto or any blue sky,
NASD
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of
the
Company as may be reasonably necessary for the purpose of such review, and
cause
the Company’s officers, directors and employees to supply all such information
reasonably requested by Investor or any such representative, advisor or
Underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made
or
submitted by any of them), prior to and from time to time after the filing
and
effectiveness of such Registration.
(b) Each
of
the Company, its officers, directors, employees and agents shall in no event
disclose non-public information to Investor, advisors to or representatives
of
Investor.
(c) Nothing
herein shall require the Company to disclose non-public information to Investor
or its advisors or representatives, and the Company represents that it does
not
disseminate non-public information to any investors who purchase stock in
the
Company in a public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the contrary,
the
Company shall, as hereinabove provided, immediately notify the advisors and
representatives of Investor and any Underwriters of any event or the existence
of any circumstance(without any obligation to disclose the specific event
or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during
the
course of due diligence by such persons or entities), which, if not disclosed
in
the prospectus included in a Registration Statement would cause such prospectus
to include a material misstatement or to omit a material fact required to
be
stated therein in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Nothing contained
in this
Section 7.3 shall be construed to mean that such persons or entities other
than
Investor (without the written consent of Investor prior to disclosure of
such
information) may not obtain non-public information in the course of conducting
due diligence in accordance with the terms and conditions of this Agreement
and
nothing herein shall prevent any such persons or entities from notifying
the
Company of their opinion that based on such due diligence by such persons
or
entities, any Registration Statement contains an untrue statement of a material
fact or omits a material fact required to be stated in such Registration
Statement or necessary to make the statements contained therein, in light
of the
circumstances in which they were made, not misleading.
ARTICLE
VIII
[INTENTIONALLY
OMITTED]
ARTICLE
IX
NOTICES
Section
9.1 NOTICES. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (a) personally served, (b) deposited
in the
mail, registered or certified, return receipt requested, postage prepaid,
(c)
delivered by reputable air courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice given in accordance herewith. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address
or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business
day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall
first
occur. The addresses for such communications shall be:
If
to the
Company: Eagle
Broadband, Inc.
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy (which shall not constitute notice) to:
Eagle
Broadband, Inc.
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to
Investor:
Brittany
Capital Management Limited
▇/▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
PO
Box
N-10818
Nassau,
New Providence
Bahamas
with
a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇
& ▇▇▇▇▇▇, LLP
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇.
▇▇▇▇▇
▇▇▇▇▇▇▇
Southridge
Capital Management LLC
▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Either
party hereto may from time to time change its address or facsimile number
for
notices under this Section 9.1 by giving at least ten (10) days’ prior written
notice of such changed address or facsimile number to the other party
hereto.
Section
9.2 INDEMNIFICATION.
The Company agrees to indemnify and hold harmless Investor and its officers,
directors, employees, and agents, and each Person or entity, if any, who
controls Investor within the meaning of Section 15 of the Securities Act
or
Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which Investor, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the
part of
Company contained in this Agreement, as such Damages are incurred, except
to the
extent such Damages result primarily from Investor’s failure to perform any
covenant or agreement contained in this Agreement or Investor’s or its
officer’s, director’s, employee’s, agent’s or Controlling Person’s negligence,
recklessness or bad faith in performing its obligations under this Agreement.
Section
9.3 METHOD
OF
ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any
Indemnified Party (as defined below) under Section 9.2 shall be asserted
and
resolved as follows:
(a)
In
the event any claim or demand in respect of which any person claiming
indemnification under any provision of Section 9.2 (an “INDEMNIFIED PARTY”)
might seek indemnity under Section 9.2 is asserted against or sought to be
collected from such Indemnified Party by a person other than a party hereto
or
an affiliate thereof (a “THIRD PARTY CLAIM”), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if
any,
and specifying the nature of and basis for such Third Party Claim and for
the
Indemnified Party’s claim for indemnification that is being asserted under any
provision of Section 9.2 against any person (the “INDEMNIFYING PARTY”), together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such Third Party Claim (a “CLAIM NOTICE”) with
reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails
to provide the Claim Notice with reasonable promptness after the Indemnified
Party receives notice of such Third Party Claim, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with respect to such
Third
Party Claim to the extent that the Indemnifying Party’s ability to defend has
been prejudiced by such failure of the Indemnified Party. The Indemnifying
Party
shall notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying Party
of
either a Claim Notice or an Indemnity Notice (as defined below) (the “DISPUTE
PERIOD”) whether the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party under Section 9.2 and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.(i)If the Indemnifying Party
notifies the Indemnified Party within the Dispute Period that the Indemnifying
Party desires to defend the Indemnified Party with respect to the Third Party
Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall
have
the right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third
Party
Claim by all appropriate proceedings, which proceedings shall be vigorously
and
diligently prosecuted by the Indemnifying Party to a final conclusion or
will be
settled at the discretion of the Indemnifying Party (but only with the consent
of the Indemnified Party in the case of any settlement that provides for
any
relief other than the payment of monetary damages or that provides for the
payment of monetary damages as to which the Indemnified Party shall not be
indemnified in full pursuant to Section 9.2). The Indemnifying Party shall
have
full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at
the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party’s delivery of the notice referred to in the first sentence of
this clause (i), file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if requested
by
the Indemnifying Party, the Indemnified Party will, at the sole cost and
expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects
to
contest. The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this clause (i), and except as provided in the preceding sentence,
the Indemnified Party shall bear its own costs and expenses with respect
to such
participation. Notwithstanding the foregoing, the Indemnified Party may takeover
the control of the defense or settlement of a Third Party Claim at any time
if
it irrevocably waives its right to indemnity under Section 9.2 with respect
to
such Third Party Claim. (ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 9.3(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party
fails
to give any notice whatsoever within the Dispute Period, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings,
which
proceedings shall be prosecuted by the Indemnified Party in a reasonable
manner
and in good faith or will be settled at the discretion of the Indemnified
Party(with the consent of the Indemnifying Party, which consent will not
be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder to
the
Indemnified Party with respect to such Third Party Claim and if such dispute
is
resolved in favor of the Indemnifying Party in the manner provided in
clause(iii) below, the Indemnifying Party will not be required to bear the
costs
and expenses of the Indemnified Party’s defense pursuant to this clause (ii) or
of the Indemnifying Party’s participation therein at the Indemnified Party’s
request, and the Indemnified Party shall reimburse the Indemnifying Party
in
full for all reasonable costs and expenses incurred by the Indemnifying Party
in
connection with such litigation. The Indemnifying Party may participate in,
but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to this clause (ii), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation. (iii) If the Indemnifying
Party notifies the Indemnified Party that it does not dispute its liability
or
the amount of its liability to the Indemnified Party with respect to the
Third
Party Claim under Section 9.2 or fails to notify the Indemnified Party within
the Dispute Period whether the Indemnifying Party disputes its liability
or the
amount of its liability to the Indemnified Party with respect to such Third
Party Claim, the amount of Damages specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under Section 9.2
and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
or
the amount of its liability with respect to such claim, the Indemnifying
Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
(b)
In
the event any Indemnified Party should have a claim under Section 9.2 against
the Indemnifying Party that does not involve a Third Party Claim, the
Indemnified Party shall deliver a written notification of a claim for indemnity
under Section 9.2 specifying the nature of and basis for such claim, together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an “INDEMNITY NOTICE”) with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party
to
give the Indemnity Notice shall not impair such party’s rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the
claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim
or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under Section 9.2 and the Indemnifying
Party
shall pay the amount of such Damages to the Indemnified Party on demand.
If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30)
days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(c)
The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar rights of the Indemnified Party against the Indemnifying
Party
or others, and (ii)any liabilities the Indemnifying Party may be subject
to.
ARTICLE
X
MISCELLANEOUS
Section
10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without
regard
to the principles of conflicts of law. Each of the Company and Investor hereby
submit to the exclusive jurisdiction of the United States Federal and state
courts located in New York with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section
10.2 JURY TRIAL WAIVER. The Company and the Investor hereby waive a trial
by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with the Transaction Documents.
Section
10.3 SPECIFIC ENFORCEMENT. The Company and the Investor acknowledge and agree
that irreparable damage would occur to the Investor in the event that any
of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
the
Investor shall be entitled to an injunction or injunctions to prevent or
cure
breaches of the provisions of this Agreement and to enforce specifically
the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section
10.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the Company and Investor and their respective successors. Neither this
Agreement nor any rights of Investor or the Company hereunder may be assigned
by
either party to any other person. Notwithstanding the foregoing, (a) the
provisions of this Agreement shall inure to the benefit of, and be enforceable
by, any transferee of any of the Common Stock purchased or acquired by Investor
hereunder with respect to the Common Stock held by such person, and (b)
Investor’s interest in this Agreement may be assigned at any time, in whole but
not in part, to any affiliate of Investor.
Section
10.5 THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit
of
the Company and Investor 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, other than as contemplated under Section 6.10.
Section
10.6 TERMINATION. This Agreement shall terminate: (a) at the end of Commitment
Period, (b) at the option of the Company at any time, or (c) as otherwise
provided herein (unless extended by the agreement of the Company and Investor);
provided, however, that the provisions of Article VI, VIII, and Sections
9.2,
10.1, 10.2, and 10.3 shall survive the termination of this
Agreement.
Section
10.7 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and the instruments
referenced herein contain the entire understanding of the Company and Investor
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor Investor
makes
any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than
by
an instrument in writing signed by the party to be charged with
enforcement.
Section
10.8 FEES AND EXPENSES. Each of the Company and Investor agrees to pay its
own
expenses in connection with the preparation of this Agreement and performance
of
its obligations hereunder. Any legal fees and expenses incurred by either
the
Company or by the Investor in connection with the preparation, negotiation,
execution and delivery of any amendments to this Agreement or relating to
the
enforcement of the rights of any party, after the occurrence of any breach
of
the terms of this Agreement by the other party or any default by the other
party
in respect of the transactions contemplated hereunder, shall be paid on demand
by the party which breached the Agreement and/or defaulted, as the case may
be.
The Company shall pay all fees of any unaffiliated broker/dealer, and
Underwriter, if required, pursuant to rules of the SEC. The Company shall
pay
all transfer agent fees, stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto.
Section
10.9 NO BROKERS. Each of the Company and Investor represents that it has
had no
dealings in connection with this transaction with any finder or broker who
will
demand payment of any fee or commission from the other party. The Company
agrees
to indemnify the Investor against and hold the other harmless from any and
all
liabilities to any persons claiming brokerage commissions or finder’s fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section
10.10 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which may be executed by less than all of the Company and shall be
deemed to be an original instrument which shall be enforceable against the
parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by
a
party, may be delivered to the other parties hereto by facsimile transmission
of
a copy of this Agreement bearing the signature of the parties so delivering
this
Agreement.
Section
10.11 SURVIVAL; SEVERABILITY. The representations, warranties, covenants
and
agreements of the Company hereto shall survive each Closing hereunder for
a
period of one (1) year thereafter. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to
be
illegal, unenforceable or void, this Agreement shall continue in full force
and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement
to
any party.
Section
10.12 FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other
party may reasonably request in order to carry out the intent and accomplish
the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
Section
10.13 NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed
to be the language chosen by the parties to express their mutual intent,
and no
rules of strict construction will be applied against any party.
Section
10.14 EQUITABLE RELIEF. The Company recognizes that in the event that it
fails
to perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to Investor.
The
Company therefore agrees that Investor shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
Section
10.15 TITLE AND SUBTITLES. The titles and subtitles used in this Agreement
are
used for the convenience of reference and are not to be considered in construing
or interpreting this Agreement.
Section
10.16 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied
upon
for the determination of the trading price of the Common Stock on any given
Trading Day for the purposes of this Agreement shall be Bloomberg L.P. or
any
successor thereto. The written mutual consent of Investor and the Company
shall
be required to employ any other reporting entity.
Section
10.17 PUBLICITY. The Company and Investor shall consult with each other in
issuing any press releases or otherwise making public statements with respect
to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure
is
required by law, in which such case the disclosing party shall provide the
other
parties with prior notice of such public statement. Investor acknowledges
that
this Agreement and all or part of the Transaction Documents may be deemed
to be
“material contracts” as that term is defined by Item 601(b)(10) of Regulation
S-K, and that the Company may therefore be required to file such documents
as
exhibits to reports or registration statements filed under the Securities
Act or
the Exchange Act.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Private Equity Credit Agreement to be executed
by the undersigned, thereunto duly authorized, as of the date first set forth
above.
EAGLE
BROADBAND, INC.
By: /s/
▇▇▇▇▇ ▇▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇▇
Title:
President and CEO
BRITTANY
CAPITAL MANAGEMENT LIMITED
By: /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
Director
EXHIBITS
EXHIBIT
A Registration
Rights Agreement
EXHIBIT
B Put
Notice
EXHIBIT
C Opinion
EXHIBIT
D Closing
Certificate
EXHIBIT
E Transfer
Agent Instructions
Schedule
4.3 Options,
Warrants