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SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT (this “ Agreement
”) is made and entered into as of October 9th, 2007, by and
among Nighthawk Systems, Inc., a Nevada corporation, and its
subsidiaries, and its subsidiaries (collectively, the “
Company ”), and the investors listed on
Schedule 1 attached hereto (who shall execute this Agreement
and who are collectively referred to as the “
Investors ”).
RECITALS
WHEREAS, the Company and the Investors are
executing and delivering this Agreement in reliance upon an
exemption from securities registration pursuant to Section 4(2)
and/or Rule 506 of Regulation D (“ Regulation
D ”) as promulgated by the United States Securities
and Exchange Commission (the “ Commission
”) under the Securities Act of 1933, as amended (the “
Securities Act ”);
WHEREAS, the Company desires to authorize, issue
and sell shares of its Series B Convertible Preferred Stock, $0.001
par value per share (the “ Series B Stock
”) to the Investors, and the Investors desire to purchase
shares of the Series B Stock, all on the terms and subject to the
conditions herein set forth; and
WHEREAS, contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and
delivering a Security Agreement (the “ Security
Agreement ”) pursuant to which the Company and its
wholly-owned subsidiaries agree to provide the Investors a security
interest in Pledged Collateral (as such term is defined therein) to
secure the Company’s obligations under the Transaction
Documents (as defined herein).
NOW, THEREFORE, for and in consideration of the
foregoing premises, the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1.
Authorization of Securities .
The Company has authorized the number of shares of Series B
Stock as provided herein, which shall be entitled to the rights,
privileges and preferences set forth in the Company’s
Articles of Incorporation as modified by the Certificate of
Designation for the Series B Stock that has been filed by the
Company with the Nevada Secretary of State on, before or within
fifteen (15) days of the Closing. As used in this Agreement,
the term “ Preferred Stock ” shall mean
the shares of Series B Stock issued and outstanding immediately
after the closing described in Section 3 hereof and all
shares of Series B Stock issued in exchange or substitution
therefor. The Series B Stock shall be convertible into shares
of the Common Stock, $0.001 par value per share (the “
Common Stock ”), as set forth in the Articles
of Incorporation. The Company shall authorize and reserve a
sufficient number of its previously authorized but unissued shares
of Common Stock to satisfy the rights of conversion and purchase of
the holders of the Series B Stock. Any shares of Common Stock
issuable upon conversion of the Series B Stock, when issued, shall
be referred to as “ Conversion Shares
”.
2.
Sale and Purchase of Shares of the Series B
Stock . Subject to the terms and conditions herein,
the Company agrees to sell to the Investors, and each of the
Investors severally agrees to purchase from the Company on the date
hereof in accordance with this Agreement, the number of shares of
Series B Stock set forth opposite such Investor’s name on
Schedule 1 at a purchase price of Ten Dollars ($10.00) per
share (the “ Purchase Commitment ”).
The Company’s agreement with each Investor is a
separate agreement, and the sale of the Series B Stock to each
Investor is a separate sale.
3.
The Closing . The closing of
the sale of the Series B Stock shall take place at 10:00 a.m.
Boston time (the “ Closing ”). The
date and time on which the Closing occurs shall be referred to as
the “ Closing Date ”. On the
Closing Date, the Company shall deliver to each of the Investors
purchasing shares of the Series B Stock on such date a stock
certificate for the number of shares of Series B Stock being
acquired by such Investor, which shares shall be registered in the
Investor’s name or as otherwise designated by the Investor.
At the Closing, each Investor shall pay to the Company the
purchase price for the Purchase Commitment set forth on Schedule
1 by wire transfer of immediately available funds or bank or
cashier’s check payable to the Company.
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4.
Representations and Warranties by the
Company . As a material inducement to each of the
Investors to enter into this Agreement and to purchase the number
of shares of the Series B Stock set forth after such
Investor’s name on Schedule 1 , with the understanding
that each Investor will be relying thereon in consummating the
transactions contemplated hereunder, the Company hereby represents
and warrants to each Investor that, except as set forth (i) in the
Disclosure Schedule attached hereto and prepared and delivered by
the Company to the Investors on the date hereof (the “
Disclosure Schedule ”), or (ii) the SEC
Documents (as defined herein), the statements contained in this
Section 4 are true and correct. The Disclosure
Schedule is arranged in sections corresponding to the sections and
subsections of this Section 4 :
4.1.
Organization, Qualification and Power
. The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority,
and all governmental licenses, governmental authorizations,
governmental consents and governmental approvals, required to carry
on its business as now conducted and to own, lease and operate the
assets and properties of the Company as now owned, leased and
operated. The Company is duly qualified or licensed to do
business as a foreign corporation and is in good standing in every
jurisdiction in which the character or location of its properties
and assets owned, leased or operated by the Company or the nature
of the business conducted by the Company requires such
qualification or licensing, except where the failure to be so
qualified, licensed or in good standing in such other jurisdiction
could not, individually or in the aggregate, have a Material
Adverse Effect (as defined herein) on the Company. The
Company has heretofore delivered to the Investors complete and
accurate copies of its Articles of Incorporation and Bylaws, as
currently in effect. The Company has previously delivered to the
Investors a complete and accurate list of all jurisdictions in
which the Company is qualified or licensed to do business as of the
date hereof.
4.2.
Authorization; Enforcement .
The Company has full power and authority to enter into this
Agreement, the related Security Agreement, any and all agreements
referenced herein or therein, and all agreements and documents
related to the foregoing (collectively, the “
Transaction Documents ”) and to carry out the
transactions contemplated in the Transaction Documents. The
Board of Directors of the Company and the Company’s
stockholders have taken all action required by law, the
Company’s charter documents and otherwise to duly and validly
authorize and approve the execution, delivery and performance by
the Company of the Transaction Documents and the consummation by
the Company of the transactions contemplated in the Transaction
Documents and no other corporate proceedings on the part of the
Company are necessary to authorize the Transaction Documents or to
consummate the transactions contemplated thereby. The
Transaction Documents have been duly and validly executed and
delivered by the Company and constitute the legal, valid and
binding obligations of the Company, enforceable against it in
accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights
generally and rules of law governing specific performance,
injunctive relief or other equitable remedies.
4.3.
Capitalization of the Company .
The Company has authorized (a) 200,000,000 shares of Common
Stock, 121,141,392 of which shares are issued and
outstanding, and (b) 4,995,000 shares of series B Preferred Stock,
0 of which are issued and outstanding and (c) 5,000 shares of
Series A Preferred Stock, all of which has been issued and
subsequently converted to Common Stock (together with the Common
Stock the “ Capital Stock ”). All
of the issued and outstanding shares of the Capital Stock are duly
authorized, validly issued, fully paid, non-assessable and, except
for the Series B Stock, free of preemptive rights. There are
no outstanding obligations of the Company to repurchase, redeem or
otherwise acquire any of its securities excluding the Investors.
There are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or by
which it is bound relating to the voting or registration of any
shares of Capital Stock. As of the date hereof, (i) there are
no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock
of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or
any of its subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, (iii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities
Act, and (iv) there are no outstanding registration statements and
there are no outstanding comment letters from the
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Commission or any other regulatory agency.
There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the
issuance of the Preferred Stock as described in this Agreement.
4.4.
Non-Contravention . Neither the
execution, delivery and performance by the Company of the
Transaction Documents nor the consummation of the transactions
contemplated therein will (i) contravene or conflict with the
charter documents of the Company, (ii) contravene or conflict
with or constitute a violation of any provision of any Applicable
Law (as defined herein) binding upon or applicable to the Company
or any of the Company’s assets, (iii) result in the creation
or imposition of any Lien (as defined herein) on any of the
Company’s assets, other than Permitted Liens (as defined
herein), (iv) be in conflict with, constitute (with or without due
notice or lapse of time or both) a default under, result in the
loss of any material benefit under, or give rise to any right of
termination, cancellation, increased payments or acceleration under
any terms, conditions or provisions of any material note, bond,
lease, mortgage, indenture, license, contract, franchise, permit,
instrument or other agreement or obligation to which the Company is
a party, or by which any of its properties or assets may be bound,
or (v) to the knowledge of the Company, disrupt or impair any
business relationship with any material supplier, customer,
distributor, sales representative or employee of the Company.
Neither the Company nor its subsidiaries is in violation of
any term of or in default under its charter documents or any
material contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The
business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material
law, ordinance, or regulation of any governmental entity.
Except as specifically contemplated by this Agreement and as
required under the Securities Act and any Applicable Law, the
Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform
any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms thereof. All consents,
authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing.
4.5.
Consents and Approvals . No
consent, approval, order or authorization of or from, or
registration, notification, declaration or filing with (hereinafter
sometimes separately referred to as a “ Consent
” and sometimes collectively as “
Consents ”), any Person, including, without
limitation, any Governmental Authority (as defined herein), is
required in connection with the execution, delivery or performance
of the Transaction Documents by the Company or the consummation by
the Company of the transactions contemplated therein. To the
knowledge of the Company, there are no facts relating to the
identity or circumstances of the Company that would prevent or
materially delay obtaining any of the Consents.
4.6.
Financial Statements; Undisclosed
Liabilities .
(a)
The Company has previously delivered to the
Investors complete and accurate copies of the audited balance
sheet of the Company as of December 31, 2006 (the “
Latest Balance Sheet ”) and the unaudited
statements of income of the Company quarter ended June 30, 2007
(such statements of income and the Latest Balance Sheet being
herein referred to as the “ Latest Financial
Statements ”). The Latest Financial
Statements are based upon the information contained in the books
and records of the Company and fairly and accurately present the
financial condition of the Company as of the dates thereof and
results of operations for the periods referred to therein.
The Latest Financial Statements have been prepared in
accordance with GAAP (as defined herein) applicable to unaudited
interim financial statements (and thus may not contain all notes
and may not contain prior period comparative data which are
required for compliance with GAAP), and reflect all adjustments
necessary to a fair and accurate statement of the financial
condition and results of operations of the Company for the
interim periods presented.
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(b)
All accounts, books and ledgers related to the
business of the Company and its subsidiaries are properly and
accurately kept, are complete in all material respects, and
there are no material inaccuracies or discrepancies of any kind
contained or reflected therein. Neither the Company nor
its subsidiaries have any of its material records, systems,
controls, data, or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by
any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means
of access thereto and therefrom) are not under the exclusive
ownership (excluding licensed software programs) and direct
control of the Company or its subsidiaries.
(c)
Except as and to the extent reflected in the
Latest Balance Sheet, the Company does not have any Liabilities
(as defined herein) of any nature (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become
due, whether known or unknown, and regardless of when asserted),
other than Liabilities incurred in the Ordinary Course of
Business (as defined herein) since the date of the Latest
Balance Sheet and Liabilities arising in connection with this
Agreement and the transactions contemplated herein.
4.7.
Assets and Properties .
(a)
Except as previously disclosed in the SEC
Filings, the Company has good and valid right, title and
interest in and to or, in the case of leased properties or
properties held under license, good and valid leasehold or
license interests in, all of their assets and properties,
including, but not limited to, all of the machinery, equipment,
terminals, computers, vehicles, and all other assets and
properties (real, personal or mixed, tangible or intangible)
reflected in the Latest Balance Sheet and all of the assets
purchased or otherwise acquired since the date of the Latest
Balance Sheet, except those assets and properties disposed of in
the Company’s ordinary course of business after the date
of the Latest Balance Sheet. The Company holds title to
each such property and asset free and clear of all Liens, except
Permitted Liens, and is in sole possession of, and has sole
control of, its material assets.
(b)
Except as previously disclosed in the SEC
Filings, the material equipment owed by the Company has been
properly maintained and is in good operating condition and
repair and is adequate for the uses for which they are currently
being put by the Company, normal wear and tear excepted.
To the knowledge of the Company, no such asset is in need
of maintenance or repair, except for routine maintenance and
repairs that are in the ordinary course.
(c)
Except as previously disclosed in the SEC
Filings, the Company owns or has the right to use all material
property, real or personal, tangible or intangible, which is
necessary for the operation of its business in substantially the
same manner as it has been conducted during the period covered
by the Latest Balance Sheet.
4.8.
Compliance with Applicable Laws .
The Company has not violated or infringed, nor is it in
violation or infringement of, any Applicable Law or any order,
writ, injunction or decree of any Governmental Authority in
connection with its activities. The Company, and its
officers, directors, agents and employees, have complied with all
Applicable Laws. No claims have been filed against the
Company alleging a violation of any Applicable Law.
4.9.
Permits . The Company has
conducted its business in compliance with all material terms and
conditions of all licenses, permits, quotas, authorizations,
registrations and other approvals that are necessary to the
operation of, or relate solely to, the Company’s business
(collectively, the “ Permits ”).
Each Permit is valid and in full force and effect and none
of the Permits will be terminated, revoked, modified or become
terminable or impaired in any respect for any reason, except as
would not have a Material Adverse Effect.
4.10.
Receivables . The accounts
receivable and other receivables reflected on the Latest Balance
Sheet, and those arising after the date thereof, are valid
receivables that have arisen from bona fide transactions in the
Company’s ordinary course of business, are not subject to
valid counterclaims or setoffs, and are collectible in
accordance with their terms, except as and to the extent of the
bad debt allowance reflected on the Latest Balance Sheet.
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4.11.
Litigation . There are no
(a) actions, suits, claims, hearings, arbitrations, proceedings
(public or private) or governmental investigations that have
been brought by or against any Governmental Authority or any
other Person, nor any investigations or reviews by any
Governmental Authority against or affecting the Company, pending
or, to the Company’s knowledge, threatened, against or by
the Company or any of its assets or which seek to enjoin or
rescind the transactions contemplated by this Agreement; or (b)
existing orders, judgments or decrees of any Governmental
Authority naming the Company as an affected party or otherwise
affecting any of the assets or the business of the Company.
4.12.
Labor and Employment Matters .
The Company has previously delivered to the Investors a
complete and accurate list of all current employees, officers and
directors of the Company, which list includes their base salaries
and bonus. All employees of the Company are employed on an
at-will basis. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge
of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its
subsidiaries’ employees is a member of a union and the
Company and its subsidiaries believe that their relations with
their employees are good.
4.13.
Tax Matters . Except as
otherwise noted in it’s filings with the SEC, as and with the
exception of its corporate federal income tax return for the year
ended December 31, 2006, the Company has, or will have prior
to Closing (a) properly completed and filed on a timely basis
all tax returns (federal, provincial, state, county, local and
other) relating to all excise, payroll, real estate, capital stock,
intangible, value-added, income, sales, use, service, employment,
property and, without limitation of the foregoing, all other taxes
of every kind and nature which the Company is required to file in
connection with its business prior to the Closing Date (i.e., the
due date for such tax return being on or before the Closing Date)
and for which the non-payment of, or failure to file, could result
in a Lien on any of the Company’s assets, or result in the
Investors becoming liable or responsible therefor, and (b) paid in
full all Taxes (as defined herein), interest, penalties,
assessments or deficiencies shown to be due to any taxing authority
on such returns. The Company is not currently the beneficiary
of any extension of time within which to file any such return.
The Company is not a party to any pending or, to the
knowledge of the Company, any threatened action or proceeding
against the Company for the assessment or collection of Taxes by
any Governmental Authority, and there is no basis for any such
action or proceeding. There are no audits pending with
respect to any liabilities for Taxes of the Company.
4.14.
Bank Accounts; Powers of Attorney .
The Company has previously delivered to the Investors a
complete and accurate list of the names of all (i) financial
institutions, investment banking and brokerage houses, and other
similar institutions at which the Company maintains accounts,
deposits, safe deposit boxes of any nature, and the names of all
persons authorized to draw thereon or make withdrawals therefrom
and a description of such accounts; and (ii) Persons holding
general or special powers of attorney from the Company and copies
thereof.
4.15.
Indemnification, Guarantee or Assumption of
Liability Obligations . The Company is not a party to
any Contract that contains any provisions requiring the Company to
indemnify, guarantee or assume liabilities of any Person.
There is no event, circumstance or other basis that could
give rise to any indemnification, guarantee or assumption of
liabilities obligation of the Company to its officers and directors
under the Company’s Articles of Incorporation, Bylaws,
similar governing documents, or any Contract between the Company
and any of its officers or directors or to any other Person under
any Contract.
4.16.
Employee Benefit Plans . The
Company does not have any liability arising directly or indirectly
under Section 412 of the Code, or Section 302 of Title IV of ERISA.
The Company does not have any liability arising directly or
indirectly to or with respect to any “multiemployer
plan” within the meaning of Section 4001(a)(3) of ERISA.
The Company does not have any liability arising under the
Consolidated Omnibus Reconciliation Act of 1985, as amended,
Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA. Nothing has occurred or failed to occur with respect
to any the Company Pension Plan that could result in any liability
to the Investors.
4.17.
Disclosure . No representation
or warranty by the Company in this Agreement and no statement
contained or to be contained in any document, certificate or other
writing furnished or to be furnished by the Company to the
Investors, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
There is no fact that has not been disclosed to the Investors
of which any
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officer or director of the Company is aware which
has or could reasonably be expected to have a Material Adverse
Effect.
4.18.
Investigation by the Investors .
Notwithstanding anything to the contrary in this Agreement,
(i) no investigation by the Investors shall affect the
representations and warranties of the Company under any of the
Transaction Document or contained in any other writing to be
furnished to the Investors in connection with the transactions
contemplated thereunder, and (ii) such representations and
warranties shall not be affected or deemed waived by reason of the
fact that the Investors knew or should have known that any of the
same is or might be inaccurate in any respect.
4.19.
Environmental Laws . The
Company and its subsidiaries are (i) in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“ Environmental Laws ”),
(ii) have received all Permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct
their respective businesses, and (iii) are in compliance with all
terms and conditions of any such Permit, license or approval.
4.20.
Insurance . The Company and
each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such
subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the
earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
4.21.
Regulatory Permits . The
Company and its subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state
or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization
or permit.
4.22.
Internal Accounting Controls .
The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, and
(iii) the recorded amounts for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
4.23.
SEC Documents: Financial Statements .
Since the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the Commission under the Securities Exchange Act
of 1934, as amended (the “ Exchange Act
”) (all of the foregoing filed prior to the date hereof or
amended after the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as
the “ SEC Documents ”). The Company
has delivered to the Investors or their representatives, or made
available through the Commission’s website at www.sec.gov.,
complete and accurate copies of the SEC Documents. As of
their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the “ Financial
Statements ”) complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto.
Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be
otherwise indicated in such Financial Statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude 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 its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). No other information provided by
or on behalf of the Company to the Investor which is not included
in the SEC Documents, including, without limitation, information
referred to in the Transaction Documents, contains any untrue
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statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
4.24.
10(b)-5 . The SEC Documents do
not include any untrue statements of material fact, nor do they
omit to state any material fact required to be stated therein
necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
4.25.
Acknowledgment Regarding Investor’s
Purchase of the Preferred Stock . The Company
acknowledges and agrees that the Investors are acting solely in the
capacity of an arm’s-length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby.
The Company further acknowledges that the Investors are not
acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and
the transactions contemplated thereby and any advice given by the
Investors or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to such Investor’s
purchase of the Preferred Stock or the Conversion Shares. The
Company further represents to the Investor that the Company’s
decision to enter into the Transaction Documents has been based
solely on the independent evaluation by the Company and its
representatives.
4.26.
No General Solicitation . None
of the Company, its subsidiaries or Affiliates (as defined herein),
nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection
with the offer or sale of the Preferred Stock.
4.27.
No Integrated Offering . None
of the Company, its subsidiaries or Affiliates, nor any person
acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of
the Preferred Stock under the Securities Act or cause this offering
of the Preferred Stock to be integrated with prior offerings by the
Company for purposes of the Securities Act.
4.28.
Certain Transactions . Except
for arm’s-length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no
less favorable than the Company could obtain from third parties and
other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the
Company, its subsidiaries or Affiliates is presently a party to any
transaction with the Company, its subsidiaries or Affiliates (other
than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
4.29.
Fees and Rights of First Refusal .
The Company is not obligated to offer the securities offered
hereunder on a right of first refusal basis or otherwise to any
third parties, including but not limited to, current or former
shareholders of the Company, its subsidiaries, Affiliates,
underwriters, brokers, agents or other third parties.
4.30.
No Material Adverse Breaches, etc .
None of the Company, its subsidiaries or Affiliates is
subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the
judgment of the Company’s officers has or is expected in the
future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations
or prospects of the Company or its subsidiaries. None of the
Company, its subsidiaries or Affiliates is in breach of any
contract or agreement which breach, in the judgment of the
Company’s officers, has or is expected to have a Material
Adverse Effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries.
7
4.31.
Use of Proceeds. The Company
shall use the proceeds from the sale of Preferred Stock for the
following:
(a)
Four million five hundred thousand dollars
($4,500,000) for the purchase of the set-top box division of
Eagle Broadband, Inc.
(b)
Nine hundred and thirty-five thousand
dollars ($935,000) for general working capital
(c)
Two Hundred and sixty thousand dollars
($260,000) for the repayment of the Debenture listed in 4.32
below.
(d)
Three hundred thousand dollars ($300,000) to a
designee of the Investor.
(e)
Five thousand dollars ($5,000) to Gersten
Savage, LLP to act as escrow agent.
4.32 . The Investor and the Company agree
to cancel the Convertible Debenture between the Company and
Dutchess Private Equities Fund, LTD dated September 4, 2007.
5.
Representations of the Investors .
Each of the Investors severally represents to the Company for
such Investor that:
5.1.
Investment Intent . The shares
of the Series B Stock and the Conversion Shares into which such
shares may be converted that are being acquired by the Investor are
being purchased for investment for the Investor’s own account
and not with the view to, or for resale in connection with, any
distribution or public offering thereof. The Investor has no
present plan or intention to engage in a sale, exchange, transfer,
distribution, redemption, reduction in any way of the
Investor’s risk of ownership by short sale or otherwise, or
other disposition, directly or indirectly of the Series B Stock
being acquired by the Investor pursuant to the Transaction
Documents or the Conversion Shares into which such shares may be
converted. &nb
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