EXHIBIT 10.1 BRIDGE LOAN AGREEMENT

 

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                                                                    EXHIBIT 10.1

 

                              BRIDGE LOAN AGREEMENT

 

 

        THIS BRIDGE LOAN AGREEMENT, dated as of December 15, 2005, is entered

into by and between AMEDIA NETWORKS, INC., a Delaware corporation with

headquarters located at 101 Crawfords Corner Road, Holmdel, New Jersey 07733

(the "Company"), and each individual or entity named on an executed counterpart

of the signature page hereto (each such signatory is referred to as a "Buyer")

(each agreement with a Buyer being deemed a separate and independent agreement

between the Company and such Buyer, except that each Buyer acknowledges and

consents to the rights granted to each other Buyer [each, an "Other Buyer"]

under such agreement and the Transaction Agreements, as defined below, referred

to therein).

 

 

                              W I T N E S S E T H:

 

        WHEREAS, the Company and the Buyer are executing and delivering this

Agreement in accordance with and in reliance upon the exemption from securities

registration for offers and sales to accredited investors afforded, INTER ALIA,

by Rule 506 under Regulation D ("Regulation D") as promulgated by the United

States Securities and Exchange Commission (the "SEC") under the Securities Act

of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and

 

        WHEREAS, each Buyer wishes to lend funds in the amount of the Purchase

Price (as defined below) to the Company, subject to and upon the terms and

conditions of this Agreement and acceptance of this Agreement by the Company,

the repayment of which will be represented by a Secured Promissory Note of the

Company (the "Note"), on the terms and conditions referred to herein; and

 

        WHEREAS, in connection with the loan to be made by the Buyer, the

Company has agreed to issue the Note and the Warrant (as defined below) to the

Buyer;

 

        NOW THEREFORE, in consideration of the premises and the mutual covenants

contained herein and other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the parties agree as follows:

 

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        1.       AGREEMENT TO PURCHASE; PURCHASE PRICE.

 

        A.       PURCHASE.

 

        (i)      Subject to the terms and conditions of this Agreement and the

other Transaction Agreements (as defined below), the Buyer hereby agrees to loan

to the Company the principal amount specified on the Buyer's signature page of

this Agreement (the "Purchase Price"), out of the aggregate amount being loaned

by all Buyers of US $1,000,000 (the "Aggregate Purchase Price"). The Buyers and

the Other Buyers have agreed that the Company may enter into one or more

Permitted New Transactions (as defined below), in which event the term

"Aggregate Purchase Price" shall be deemed to refer to the sum of (x) the

aggregate amount loaned by all Buyers under this Agreement and (y) the aggregate

amount loaned by all parties identified as Buyers under such Permitted New

Transactions; provided, however, that in no event will the Aggregate Purchase

Price be more than $1,500,000 (the "Maximum Aggregate Purchase Price")

 

        (ii)     The obligation to repay the loan of the relevant Purchase Price

from the Buyer shall be evidenced by the Company's issuance of one or more Notes

to the Buyer in the principal amount of one hundred eight percent (108%) of the

Purchase Price paid by the Buyer on or in connection with the Closing Date. Each

Note shall be payable on the date (the "Stated Maturity Date") which is one

hundred twenty days after the Closing Date or the date on which the New

Transaction Threshold (as defined below) occurs. Each Note, which shall be shall

be in the form of ANNEX I annexed hereto. Repayment of the Note shall be secured

under the terms of a Security Interest Agreement between the Company, as debtor,

and the Buyer, as secured party (the "Security Interest Agreement"),

substantially in the form annexed hereto as ANNEX V.

 

        (iii)    In consideration of the loan to be made by the Buyer, the

Company will issue to such Buyer the Warrant to purchase the number of shares of

the Company's Common Stock as provided in Section 4 hereof.

 

        (iv)     The loan to be made by the Buyer and the issuance of the Note

and the Warrant to the Buyer and the other transactions contemplated hereby are

sometimes referred to herein and in the other Transaction Agreements as the

purchase and sale of the Securities (as defined below), and are referred to

collectively as the "Transactions."

 

        B.       CERTAIN DEFINITIONS. As used herein, each of the following terms

has the meaning set forth below, unless the context otherwise requires:

 

                "Affiliate" means, with respect to a specific Person referred to

in the relevant provision, another Person who or which controls or is controlled

by or is under common control with such specified Person.

 

                "Buyer Control Person" means each director, executive officer,

promoter, and such other Persons as may be deemed in control of the Buyer

pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

 

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                "Buyer's Allocable Share" means the fraction, of which the

numerator is the Buyer's Purchase Price and the denominator is the Aggregate

Purchase Price.

 

                "Certificates" means the ink-signed Note and the Warrant, each

duly executed by the Company and issued on the Closing Date in the name of the

Buyer.

 

                "Closing Date" means the date of the closing of the

Transactions, as provided herein. "Company Control Person" means each director,

executive officer, promoter, and such other Persons as may be deemed in control

of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934

Act (as defined below).

 

                "Disclosure Letter" means a letter and any modifications

thereof, the latest of which is dated at least one Trading Day prior to the

Closing Date, from the Company to the Buyer; provided, however, that the

Disclosure Letter shall be arranged in sections corresponding to the identified

Sections of this Agreement, but the disclosure in any such section of the

Disclosure Letter shall qualify other provisions in this Agreement to the extent

that it would be readily apparent to an informed reader from a reading of such

section of the Disclosure Letter that it is also relevant to other provisions of

this Agreement.

 

                "Escrow Agent" means Krieger & Prager LLP, the escrow agent

identified in the Joint Escrow Instructions attached hereto as ANNEX II (the

"Joint Escrow Instructions").

 

                "Escrow Funds" means the Purchase Price delivered to the Escrow

Agent as contemplated by Sections 1(c) and (d) hereof.

 

                "Escrow Property" means the Escrow Funds and the Certificates

delivered to the Escrow Agent as contemplated by Section 1(c) hereof.

 

                "Holder" means the Person holding the relevant Securities at the

relevant time.

 

                "Last Audited Date" means December 31, 2004.

 

                "Material Adverse Effect" means an event or combination of

events, which individually or in the aggregate, would reasonably be expected to

(x) adversely affect the legality, validity or enforceability of the Purchased

Securities or any of the Transaction Agreements, (y) have or result in a

material adverse effect on the results of operations, assets, or financial

condition of the Company and its subsidiaries, taken as a whole, or (z)

adversely impair the Company's ability to perform fully on a timely basis its

material obligations under any of the Transaction Agreements or the transactions

contemplated thereby.

 

                "New Common Stock" means shares of Common Stock and/or

securities convertible into, and/or other rights exercisable for, Common Stock,

which are offered or sold in a New Transaction.

 

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                "New Investor" means the third party investor, purchaser or

lender (howsoever denominated) in a New Transaction.

 

                "New Transaction" means

 

        (i) the offer or sale of New Common Stock by or on behalf of the Company

        to a New Investor and/or

 

        (ii) the grant of a security interest in or pledge of (x) any or all of

        the Company's assets by the Company and/or (y) shares of the Company's

        Common Stock or securities convertible into or exercisable for the

        Company's Common Stock by any other party

 

in a transaction offered or consummated after the date hereof; provided,

however, that it is specifically understood that the term "New Transaction" (1)

includes, but is not limited to, a sale of Common Stock or of a security

convertible into Common Stock or an equity or credit line transaction, but (2)

does not include (a) the issuance of Common Stock upon the exercise or

conversion of options, warrants or convertible securities outstanding on the

date hereof, or in respect of any other financing agreements as in effect on the

date hereof and identified in the Disclosure Letter (provided the same is not

amended after the date of the Disclosure Letter) or the Company SEC Documents

(provided the same is not amended after the date hereof), (b) the issuance of

Common Stock pursuant to an Employee Stock Option Plan (an "ESOP") of the

Company, such ESOP having been properly approved by the shareholders of the

Company, (c) the issuance of Common Stock pursuant to a non-employee director or

consultants' stock option plan of the Company, (d) the issuance of Common Stock

upon the exercise of any options or warrants referred to in the preceding

clauses of this paragraph (provided the same is not amended after the date

hereof), (e) the issuance of shares to a Strategic Partner, (f) the issuance of

any securities or the grant of a security interest pursuant to a Permitted New

Transaction.

 

                "Person" means any living person or any entity, such as, but not

necessarily limited to, a corporation, partnership or trust.

 

                "Principal Trading Market" means the Over the Counter Bulletin

Board or such other market on which the Common Stock is principally traded at

the relevant time, but shall not included the "pink sheets."

 

                "Purchased Securities" means the Note and the Warrant.

 

                "Registrable Securities" means the Warrant Shares, unless such

shares can then be sold by the Holder without volume or other restrictions or

limit.

 

                "Registration Rights Provisions" means the piggy-back

registration rights contemplated by the terms of this Agreement, including, but

not necessarily limited to, Section 4(h) hereof, and of the other Transaction

Agreements.

 

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                "Registration Statement" means an effective registration

statement covering the Registrable Securities.

 

                "Securities" means the Note, the Warrant and the Shares.

 

                "Shares" means the shares of Common Stock representing any of

the Warrant Shares.

 

                "State of Incorporation" means Delaware.

 

                "Strategic Partner" means a third party, whether or not

currently affiliated with the Company, hereof, which party (i) is engaged in a

business which is the business in which the Company is engaged or a similar or

related business, and (ii) either (a) subsequently purchases equity securities

of the Company (or securities convertible into equity securities of the

Company), or (b) enters into an agreement for one or more of the following: the

licensing by the Company of all or any portion of its technology to such third

party, the licensing by such third party of all or any portion of its technology

to the Company, or any other coordination of all or a portion of their

respective business activities or operations by the Company and such third

party.

 

                "Trading Day" means any day during which the Principal Trading

Market shall be open for business.

 

                "Transfer Agent" means, at any time, the transfer agent for the

Company's Common Stock.

 

                "Transaction Agreements" means this Bridge Loan Agreement, the

Note, the Security Interest Agreement, the Joint Escrow Instructions, and the

Warrant, and includes all ancillary documents referred to in those agreements.

 

                "Warrant" means the warrant issued to the Buyer as contemplated

by Section 4 of this Agreement.

 

                "Warrant Shares" means the shares of Common Stock issuable upon

exercise of the Warrant.

 

        C.       FORM OF PAYMENT; DELIVERY OF CERTIFICATES.

 

        (i)      The Buyer shall pay the Purchase Price by delivering immediately

available good funds in United States Dollars to the Escrow Agent no later than

the date prior to the Closing Date.

 

        (ii)     No later than the Closing Date, but in any event promptly

following payment by the Buyer to the Escrow Agent of the Purchase Price, the

Company shall deliver the

 

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Certificates, each duly executed on behalf of the Company and issued in the name

of the Buyer, to the Escrow Agent.

 

        (iii)    By signing this Agreement, each of the Buyer and the Company,

subject to acceptance by the Escrow Agent, agrees to all of the terms and

conditions of, and becomes a party to, the Joint Escrow Instructions, all of the

provisions of which are incorporated herein by this reference as if set forth in

full.

 

        D.       METHOD OF PAYMENT. Payment into escrow of the Purchase Price

shall be made by wire transfer of funds to:

 

                Bank of New York

                350 Fifth Avenue

                New York, New York 10001

 

                ABA# 021000018

                For credit to the account of Krieger & Prager LLP

                 Account No.: [To be provided to the Buyer by Krieger &

                             Prager LLP]

                Re:      Amedia 12/05 Bridge Transaction

                For:     [Name of Buyer]

 

        2.       LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;

INDEPENDENT INVESTIGATION.

 

        The Buyer represents and warrants to, and covenants and agrees with, the

Company as follows:

 

        A.       Without limiting Buyer's right to sell the Securities pursuant

to an effective registration statement or otherwise in compliance with the 1933

Act, the Buyer is purchasing the Securities for its own account for investment

only and not with a view towards the public sale or distribution thereof and not

with a view to or for sale in connection with any distribution thereof.

 

        B.       The Buyer is (i) an "accredited investor" as that term is

defined in Rule 501 of the General Rules and Regulations under the 1933 Act by

reason of Rule 501(a)(3), (ii) experienced in making investments of the kind

described in this Agreement and the related documents, (iii) able, by reason of

the business and financial experience of its officers (if an entity) and

professional advisors (who are not affiliated with or compensated in any way by

the Company or any of its Affiliates or selling agents), to protect its own

interests in connection with the transactions described in this Agreement, and

the related documents, and to evaluate the merits and risks of an investment in

the Securities, and (iv) able to afford the entire loss of its investment in the

Securities.

 

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        C.       All subsequent offers and sales of the Securities by the Buyer

shall be made pursuant to registration of the relevant Securities under the 1933

Act or pursuant to an exemption from registration.

 

        D.       The Buyer understands that the Securities are being offered and

sold to it in reliance on specific exemptions from the registration requirements

of the 1933 Act and state securities laws and that the Company is relying upon

the truth and accuracy of, and the Buyer's compliance with, the representations,

warranties, agreements, acknowledgments and understandings of the Buyer set

forth herein in order to determine the availability of such exemptions and the

eligibility of the Buyer to acquire the Securities.

 

        E.       The Buyer and its advisors, if any, have been furnished with or

have been given access to all materials relating to the business, finances and

operations of the Company and materials relating to the offer and sale of the

Securities which have been requested by the Buyer, including those set forth on

in any annex attached hereto. The Buyer and its advisors, if any, have been

afforded the opportunity to ask questions of the Company and its management and

have received complete and satisfactory answers to any such inquiries. Without

limiting the generality of the foregoing, the Buyer has also had the opportunity

to obtain and to review the Company's filings on EDGAR listed on ANNEX VI hereto

(the documents listed on such Annex VI, to the extent available on EDGAR or

otherwise provided to the Buyer as indicated on said Annex VI, collectively, the

"Company's SEC Documents").

 

        F.       The Buyer understands that its investment in the Securities

involves a high degree of risk.

 

        G.       The Buyer hereby represents that, in connection with its

purchase of the Securities, it has not relied on any statement or representation

by the Company or any of its officers, directors and employees or any of its

attorneys or agents, except as specifically set forth herein.

 

        H.       The Buyer understands that no United States federal or state

agency or any other government or governmental agency has passed on or made any

recommendation or endorsement of the Securities.

 

        I.       This Agreement and the other Transaction Agreements to which the

Buyer is a party, and the transactions contemplated thereby, have been duly and

validly authorized, executed and delivered on behalf of the Buyer and are valid

and binding agreements of the Buyer enforceable in accordance with their

respective terms, subject as to enforceability to general principles of equity

and to bankruptcy, insolvency, moratorium and other similar laws affecting the

enforcement of creditors' rights generally.

 

        3.       COMPANY REPRESENTATIONS, ETC. The Company represents and

warrants to the Buyer as of the date hereof and as of the Closing Date that,

except as otherwise provided in the Disclosure Letter or in the Company's SEC

Documents:

 

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        A.       RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no

preemptive rights of any shareholder of the Company, as such, to acquire the

Note, the Warrant or the Shares. No party has a currently exercisable right of

first refusal which would be applicable to any or all of the transactions

contemplated by the Transaction Agreements.

 

        B.       STATUS. The Company is a corporation duly organized, validly

existing and in good standing under the laws of the State of Incorporation and

has the requisite corporate power to own 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 each jurisdiction where

the nature of the business conducted or property owned by it makes such

qualification necessary, other than those jurisdictions in which the failure to

so qualify would not have or result in a Material Adverse Effect. The Company

has registered its stock and is obligated to file reports pursuant to Section 12

or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the

"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The

Company has received no notice, either oral or written, with respect to the

continued eligibility of the Common Stock for such quotation on the Principal

Trading Market, and the Company has maintained all requirements on its part for

the continuation of such quotation.

 

        C.       AUTHORIZED SHARES.

 

        (i)      The authorized capital stock of the Company consists of (x)

75,000,000 shares of Common Stock, $.001 par value per share, of which

approximately 21,359,814 are outstanding as of the date hereof, and (y)

5,000,000 shares of Preferred Stock, $.001 par value, of which (1) 52,500 shares

of the Series A 7% Convertible Preferred Stock, par value $.001 per share and

having a Stated Value of $100 per share, are authorized and approximately 21,403

shares are outstanding as of the date hereof; and (2) 85,000 shares of the

Series B 8% Convertible Preferred Stock, par value $.001 per share and having a

Stated Value of $100 per share, are authorized and approximately 76,650 shares

are outstanding as of the date hereof.

 

        (ii)     Other than the convertible preferred shares referred to in the

immediately preceding subparagraph (i), there are no outstanding securities

which are convertible into shares of Common Stock, whether such conversion is

currently exercisable or exercisable only upon some future date or the

occurrence of some event in the future. If any such securities are listed on the

Disclosure Letter, the number or amount of each such outstanding convertible

security and the conversion terms are set forth in said Disclosure Letter.

 

        (iii)    All issued and outstanding shares of Common Stock have been duly

authorized and validly issued and are fully paid and non-assessable. The Company

has sufficient authorized and unissued shares of Common Stock as would be

necessary to effect the issuance of the Shares on the Closing Date, were the

Warrant fully exercised on that date.

 

        (iv)     As of the Closing Date, the Shares shall have been duly

authorized by all necessary corporate action on the part of the Company, and,

when issued upon exercise of the

 

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Warrant, in accordance with its terms, will have been duly and validly issued,

fully paid and non-assessable and will not subject the Holder thereof to

personal liability by reason of being such Holder.

 

        D.       TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the

other Transaction Agreements, and the transactions contemplated thereby, have

been duly and validly authorized by the Company, this Agreement has been duly

executed and delivered by the Company and this Agreement is, and the Note, the

Warrant and each of the other Transaction Agreements, when executed and

delivered by the Company, will be, valid and binding agreements of the Company

enforceable in accordance with their respective terms, subject as to

enforceability to general principles of equity and to bankruptcy, insolvency,

moratorium, and other similar laws affecting the enforcement of creditors'

rights generally.

 

        E.       NON-CONTRAVENTION. The execution and delivery of this Agreement

and each of the other Transaction Agreements by the Company, the issuance of the

Securities, and the consummation by the Company of the other transactions

contemplated by this Agreement, the Note, the Warrant and the other Transaction

Agreements do not and will not conflict with or result in a breach by the

Company of any of the terms or provisions of, or constitute a default under (i)

the certificate of incorporation or by-laws of the Company, each as currently in

effect, (ii) any indenture, mortgage, deed of trust, or other material agreement

or instrument to which the Company is a party or by which it or any of its

properties or assets are bound, including any listing agreement for the Common

Stock except as herein set forth, or (iii) to its knowledge, any existing

applicable law, rule, or regulation or any applicable decree, judgment, or order

of any court, United States federal or state regulatory body, administrative

agency, or other governmental body having jurisdiction over the Company or any

of its properties or assets, except such conflict, breach or default which would

not have or result in a Material Adverse Effect.

 

        F.       APPROVALS. No authorization, approval or consent of any court,

governmental body, regulatory agency, self-regulatory organization, or stock

exchange or market or the shareholders of the Company is required to be obtained

by the Company for the issuance and sale of the Securities to the Buyer as

contemplated by this Agreement, except such authorizations, approvals and

consents that have been obtained.

 

        G.       FILINGS. None of the Company's SEC Documents contained, at the

time they were filed, any untrue statement of a material fact or omitted to

state any material fact required to be stated therein or necessary to make the

statements made therein in light of the circumstances under which they were

made, not misleading. Since November 1, 2004, the Company has timely filed all

requisite forms, reports and exhibits thereto required to be filed by the

Company with the SEC.

 

        H.       ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there

has been no material adverse change and no Material Adverse Effect, except as

disclosed in the Company's SEC Documents. Since the Last Audited Date, except as

provided in the Company's

 

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SEC Documents, the Company has not (i) incurred or become subject to any

material liabilities (absolute or contingent) except liabilities incurred in the

ordinary course of business consistent with past practices; (ii) discharged or

satisfied any material lien or encumbrance or paid any material obligation or

liability (absolute or contingent), other than current liabilities paid in the

ordinary course of business consistent with past practices; (iii) declared or

made any payment or distribution of cash or other property to shareholders with

respect to its capital stock, or purchased or redeemed, or made any agreements

to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or

transferred any other tangible assets, or canceled any debts owed to the Company

by any third party or claims of the Company against any third party, except in

the ordinary course of business consistent with past practices; (v) waived any

rights of material value, whether or not in the ordinary course of business, or

suffered the loss of any material amount of existing business; (vi) made any

increases in employee compensation, except in the ordinary course of business

consistent with past practices; or (vii) experienced any material problems with

labor or management in connection with the terms and conditions of their

employment.

 

        I.       FULL DISCLOSURE. To the best of the Company's knowledge, there

is no fact known to the Company (other than general economic conditions known to

the public generally or as disclosed in the Company's SEC Documents) that has

not been disclosed in writing to the Buyer that would reasonably be expected to

have or result in a Material Adverse Effect.

 

        J.       ABSENCE OF LITIGATION. There is no action, suit, proceeding,

inquiry or investigation before or by any court, public board or body pending

or, to the knowledge of the Company, threatened against or affecting the Company

before or by any governmental authority or nongovernmental department,

commission, board, bureau, agency or instrumentality or any other person,

wherein an unfavorable decision, ruling or finding would have a Material Adverse

Effect or which would adversely affect the validity or enforceability of, or the

authority or ability of the Company to perform its obligations under, any of the

Transaction Agreements. The Company is not aware of any valid basis for any such

claim that (either individually or in the aggregate with all other such events

and circumstances) could reasonably be expected to have a Material Adverse

Effect. There are no outstanding or unsatisfied judgments, orders, decrees,

writs, injunctions or stipulations to which the Company is a party or by which

it or any of its properties is bound, that involve the transaction contemplated

herein or that, alone or in the aggregate, could reasonably be expect to have a

Material Adverse Effect.

 

        K.       ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section

3(e) hereof, (i) neither the Company nor any of its subsidiaries is in default

in the performance or observance of any material obligation, agreement, covenant

or condition contained in any material indenture, mortgage, deed of trust or

other material agreement to which it is a party or by which its property is

bound, and (ii) no Event of Default (or its equivalent term), as defined in the

respective agreement to which the Company or its subsidiary is a party, and no

event which, with the giving of notice or the passage of time or both, would

become an Event of Default (or its equivalent

 

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term) (as so defined in such agreement), has occurred and is continuing, which

would have a Material Adverse Effect.

 

        L.       ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR EVENTS. To

the Company's knowledge, none of the following has occurred during the past five

(5) years with respect to a Company Control Person:

 

        (1) A petition under the federal bankruptcy laws or any state insolvency

        law was filed by or against, or a receiver, fiscal agent or similar

        officer was appointed by a court for the business or property of such

        Company Control Person, or any partnership in which he was a general

        partner at or within two years before the time of such filing, or any

        corporation or business association of which he was an executive officer

        at or within two years before the time of such filing;

 

        (2) Such Company Control Person was convicted in a criminal proceeding

        or is a named subject of a pending criminal proceeding (excluding

        traffic violations and other minor offenses);

 

        (3) Such Company Control Person was the subject of any order, judgment

        or decree, not subsequently reversed, suspended or vacated, of any court

        of competent jurisdiction, permanently or temporarily enjoining him

        from, or otherwise limiting, the following activities:

 

                (i) acting, as an investment advisor, underwriter, broker or

                dealer in securities, or as an affiliated person, director or

                 employee of any investment company, bank, savings and loan

                association or insurance company, as a futures commission

                merchant, introducing broker, commodity trading advisor,

                commodity pool operator, floor broker, any other Person

                regulated by the Commodity Futures Trading Commission ("CFTC")

                or engaging in or continuing any conduct or practice in

                connection with such activity;

 

                (ii) engaging in any type of business practice; or

 

                (iii) engaging in any activity in connection with the purchase

                or sale of any security or commodity or in connection with any

                violation of federal or state securities laws or federal

                commodities laws;

 

        (4) Such Company Control Person was the subject of any order, judgment

        or decree, not subsequently reversed, suspended or vacated, of any

        federal or state authority barring, suspending or otherwise limiting for

        more than 60 days the right of such Company Control Person to engage in

        any activity described in paragraph (3) of this item, or to be

        associated with Persons engaged in any such activity; or

 

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        (5) Such Company Control Person was found by a court of competent

        jurisdiction in a civil action or by the CFTC or SEC to have violated

        any federal or state securities law, and the judgment in such civil

        action or finding by the CFTC or SEC has not been subsequently reversed,

        suspended, or vacated.

 

        M.       NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the

Company's knowledge, the Company has no liabilities or obligations other than

those disclosed in the Transaction Agreements or the Company's SEC Documents or

those incurred in the ordinary course of the Company's business since the Last

Audited Date, or which individually or in the aggregate, do not or would not

have a Material Adverse Effect. No event or circumstances has occurred or exists

with respect to the Company or its properties, business, operations, condition

(financial or otherwise), or results of operations, which, 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.

There are no proposals currently under consideration or currently anticipated to

be under consideration by the Board of Directors or the executive officers of

the Company which proposal would (x) change the articles or certificate of

incorporation or other charter document or by-laws of the Company, each as

currently in effect, with or without shareholder approval, which change would

reduce or otherwise adversely affect the rights and powers of the shareholders

of the Common Stock or (y) materially or substantially change the business,

assets or capital of the Company, including its interests in subsidiaries.

 

        N.       NO INTEGRATED OFFERING. Neither the Company nor any of its

Affiliates nor any Person acting on its or their behalf has, directly or

indirectly, at any time since June 1, 2005, made any offer or sales of any

security or solicited any offers to buy any security under circumstances that

would eliminate the availability of the exemption from registration under

Regulation D in connection with the offer and sale of the Securities as

contemplated hereby.

 

        O.       DILUTION. The number of shares issuable upon exercise of the

Warrant may have a dilutive effect on the ownership interests of the other

shareholders (and Persons having the right to become shareholders) of the

Company. The Company's executive officers and directors have studied and fully

understand the nature of the Securities being sold hereby and recognize that

they have such 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 Warrant Shares upon exercise of the Warrant 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, and the Company will honor such obligations, including honoring every

Notice of Exercise (as contemplated by the Warrant), unless the Company is

su