Eagle Broadband Inc. This offering consists of $822,500 of the Company’s 5 Year Convertible Debentures convertible into the Company’s Common Stock. SUBSCRIPTION AGREEMENT
____________________
____________________
This
offering consists of $822,500 of the Company’s 5 Year Convertible
Debentures
convertible into the
Company’s
Common Stock.
____________________
___________________
SUBSCRIPTION
PROCEDURES
Convertible
Debentures of Eagle
Broadband Inc. (the
“Company”) are being offered (the “Debentures”). This offering is being made in
accordance with the exemptions from registration provided for under Section
4(2)
of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506 of
Regulation D promulgated under the 1933 Act.
In
order
to purchase Debentures, each subscriber must complete and execute a
questionnaire (the “Questionnaire”) and a subscription agreement (the
“Subscription Agreement”). In addition, the Holder, as defined herein, must make
a payment for the amount being purchased directly to the Company. All
subscriptions are subject to acceptance by the Company, which shall not occur
until the Company has returned the signed Company Signature Page.
The
Questionnaire is designed to enable the Holder to demonstrate the minimum legal
requirements under federal and state securities laws to purchase the Debentures.
The Signature Page for the Questionnaire and the Subscription Agreement contain
representations relating to the subscription and should be reviewed carefully
by
each subscriber.
If
you
are a foreign person or foreign entity, you may be subject to a withholding
tax
equal to thirty percent (30%) of any dividends paid by the Company. In order
to
eliminate or reduce such withholding tax you must submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of
a
lower rate of withholding tax on interest or dividends.
Payment
of the full subscription amount will be made by wire transfer by Dutchess
Private Equities Fund, LP (the “Holder”) on or prior to the closing per the wire
instructions that will be established. In the event of a termination of the
offering or the rejection of a subscription, subscription funds will be returned
by the Company without interest or charges.
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED
THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Eagle
Broadband Inc.
This
Subscription Agreement is made between Eagle
Broadband Inc.,
a Texas
corporation (the “Company”), and the undersigned prospective Holder (the
“Holder”) who is subscribing hereby for the Company’s convertible debentures
(the “Debentures”) on February 10, 2006. This subscription is submitted to you
in accordance with and subject to the terms and conditions described in this
Subscription Agreement, together with any Exhibits thereto, relating to an
offering (the “Offering”) of Eight Hundred and Twenty-two Thousand Five Hundred
dollars ($822,500) of Debentures. The Offering is limited to accredited
Investors and is made in accordance with the exemptions from registration
provided for under Section 4(2) of the 1933 Act and Rule 506 of Regulation
D
promulgated under the 1933 Act (“Regulation D”).
Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Debenture Registration Rights Agreement, the
Debenture Agreement, Security Agreement and Warrant Agreement (collectively,
the
"Transaction Documents").
1. SUBSCRIPTION.
(a) The
closing shall be deemed to have occurred on the date in the preamble of this
document (the “Closing Date” or a “Closing”). The Company shall pay twelve
percent (12%) annual coupon on the unpaid principal amount of this Debenture
(the “Debenture”) at such times and in such amounts as outlined in the Debenture
Agreement.
(b) Upon
receipt by the Company of the requisite payment for the Debentures being
purchased, the Debentures so purchased will be forwarded by the Company to
the
Holder or its broker, as listed on the signature page, and the name of such
Holder will be registered on the Debenture transfer books of the Company as
the
record owner of such Debentures.
(c) As
long
as the Holder owns the Debenture, the Holder shall have the right to change
the
terms for the balance of the Debenture it then holds, to match the terms of
any
other offering of securities made by the Company.
(d) The
Holder shall fund four hundred and forty-seven thousand five hundred dollars
($447,500) upon the initial closing and an additional three hundred and
seventy-five thousand dollars ($375,000) simultaneously on the date the
registration statement covering this Offering is filed with the United States
Securities and Exchange Commission ("SEC").
(e) The
Holder will be granted a security interest in all the assets currently owned
or
hereinafter acquired (except for the Exclusions, as defined in the Security
Agreement), including ownership of Subsidiaries as defined in Schedule 3(a)
of
this Agreement, and the assets of the Subsidiaries to be memorialized in the
Security and Pledge Agreement between the Company and the Holder of this
date.
2. REPRESENTATIONS
AND WARRANTIES OF THE HOLDER.
The
Holder hereby represents and warrants to, and agrees with, the Company as
follows:
(a) The
Holder has been furnished with, and has carefully read the applicable form
of
Debenture Registration Rights Agreement, and the Debenture and
is
familiar with and understands the terms of the Offering. With respect to tax
and
other economic considerations involved in his investment, the Holder is not
relying on the Company. The Holder has carefully considered and has, to the
extent the Holder believes such discussion necessary, discussed with the Holder
's professional legal, tax, accounting and financial advisors the suitability
of
an investment in the Company, by purchasing the Debentures, for the Holder
's
particular tax and financial situation and has determined that the investment
being made by the Holder is a suitable investment for the Holder.
(b) The
Holder acknowledges that all documents, records, and books pertaining to this
investment which the Holder has requested, have been made available for
inspection, or the Holder has had access thereto.
(c) The
Holder has had a reasonable opportunity to ask questions of and receive answers
from a person or persons acting on behalf of the Company concerning the
Offering, and if such opportunity was taken, then all such questions have been
answered to the full satisfaction of the Holder.
(d) The
Holder will not sell, or otherwise dispose of the Debentures or the Common
Stock
issued upon conversion of the Debentures without registration under the 1933
Act
or applicable state securities laws or compliance with an exemption therefrom
including but not limited to: Rule 144A, 144(k), as promulgated under the
Securities Act of 1933 (herein after referred to as an "Exemption"). The
Debentures have not been registered under the 1933 Act or under the securities
laws of any state. Resales of the Common Stock underlying the Debentures or
issued in payment of accrued interest on the Debentures are to be registered
by
the Company pursuant to the terms of the Debenture Registration Rights Agreement
incorporated herein and made a part hereof.
(e) The
Holder recognizes that an investment in the Debentures involves substantial
risks, including loss of the entire amount of such investment. Further, the
Holder has carefully read and considered the schedules attached
hereto.
(f)
The
Holder acknowledges that each certificate representing the Debentures (and
the
shares of Common Stock issued upon conversion of the Debentures, unless
registered or with an Exemption) or in payment of interest on the Debentures
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT
(OR
ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR
(iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH
ACT.
If
the
Holder sends a Notice of Conversion (See Exhibit A attached hereto), and
provided a registration statement under the Securities Act of 1933 is in effect
as to the sale, then in such event the Company shall have its transfer agent
send Holder the appropriate number of shares of Common Stock without restrictive
legends (other than a legend referring to the resale registration and prospectus
delivery requirements) and not subject to stop transfer instructions.
(g) If
this
Subscription Agreement is executed and delivered on behalf of a corporation
or
legal entity other than a natural person: (i) such corporation or other entity
has the full legal right and power and all authority and approval required
(a)
to execute and deliver, or authorize execution and delivery of this Subscription
Agreement and all other Transaction Documents executed and delivered by or
on
behalf of such corporation in connection with the purchase of the Debentures,
and (b) to purchase and hold the Debentures; and (ii) the signature of the
party
signing on behalf of such corporation or entity is binding upon such
corporation.
(h) The
Holder is not subscribing for the Debentures as a result of, or pursuant to,
any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or meeting.
(i) The
Holder is purchasing the Debentures for its own account for investment, and
not
with a view toward the resale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act. The Holder has
not
offered or sold any portion of the Debentures being acquired nor does the Holder
have any present intention of dividing the Debentures with others or of selling,
distributing or otherwise disposing of any portion of the Debentures either
currently or after the passage of a fixed or determinable period of time or
upon
the occurrence or non-occurrence of any predetermined event or circumstance
in
violation of the 1933 Act provided, however, that by making the representations
herein, Holder does not agree to hold any of the Debentures for any minimum
or
other specific term and reserves the right to dispose of the Debentures at
any
time in accordance with or pursuant to a registration statement or an exemption
under the 1933 Act. Holder is neither an underwriter of, nor a dealer in, the
Debentures or the Common Stock issuable upon conversion thereof or upon the
payment of interest thereon and is not participating in the distribution or
resale of the Debentures or the Common Stock issuable upon conversion or
exercise thereof.
(j) The
Holder or the Holder's representatives, as the case may be, has such knowledge
and experience in financial, tax and business matters so as to enable the Holder
to utilize the information made available to the Holder in connection with
the
Offering to evaluate the merits and risks of an investment in the Debentures
and
to make an informed investment decision with respect thereto.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
Except
as
set forth in the Schedules attached hereto, the Company represents and warrants
to the Holder that:
a. Organization
and Qualification.
The
Company and its “SUBSIDIARIES” (which for purposes of this Subscription
Agreement means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest) (a complete list of which
is set forth in Schedule 3(a)) are corporations duly organized and validly
existing in good standing under the laws of the respective jurisdictions of
their incorporation, and have the requisite corporate power and authorization
to
own their properties and to carry on their business as now being conducted.
Both
the Company and its Subsidiaries are duly qualified to do business and are
in
good standing in every jurisdiction in which their ownership of property or
the
nature of the business conducted by them makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Subscription
Agreement, “MATERIAL ADVERSE EFFECT” means any material adverse effect on the
business, properties, assets, operations, results of operations, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as
a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority
or
ability of the Company to perform its obligations under the Transaction
Documents.
b.
Authorization;
Enforcement; Compliance with Other Instruments.
(i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents, and to issue the
Debentures in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation
by
it of the transactions contemplated hereby and thereby, including without
limitation the reservation for issuance and the issuance of the Debentures
pursuant to this Subscription Agreement, have been duly and validly authorized
by the Company's Board of Directors and no further consent or authorization
is
required by the Company, its Board of Directors, or its shareholders, (iii)
the
Transaction Documents have been duly and validly executed and delivered by
the
Company, and (iv) the Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
c.
Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of
350,000,000 shares of Common Stock, of which as of the date hereof, 303,086,275
shares are issued and outstanding. All of such outstanding shares have been,
or
upon issuance will be, validly issued and are fully paid for and nonassessable.
Except as disclosed in the SEC Documents (as defined in Section 3(f) below)
or
Schedule 3(c) which is attached hereto and made a part hereof (i) no shares
of
the Company's capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding shares of capital stock, 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, (iv) 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 1933 Act (except the as otherwise set forth in the
Transaction Documents), (v) there are no outstanding securities of the Company
or any of its Subsidiaries which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by
which
the Company or any of its Subsidiaries is or may become bound to redeem a
security of the Company or any of its Subsidiaries, (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Subscription
Agreement, (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement and (viii)
there is no dispute as to the class of any shares of the Company's capital
stock. The Company has furnished to the Holder, or the Holder has had access
through XXXXX to, true and correct copies of the Company's Articles of
Incorporation, as in effect on the date hereof (the “ARTICLES OF
INCORPORATION”), and the Company's By-laws, as in effect on the date hereof (the
“BY-LAWS”).
d. Issuance
of Debentures.
A
sufficient number of Debentures issuable pursuant to this Subscription
Agreement, but not more than 4.99% of the shares of Common Stock outstanding
as
of the date hereof, has been duly authorized and reserved for issuance pursuant
to this Subscription Agreement. Upon issuance in accordance with this
Subscription Agreement, the Debentures will be validly issued, fully paid for
and nonassessable and free from all taxes, liens and charges with respect to
the
issue thereof. In the event the Company cannot register a sufficient number
of
shares of Common Stock, due to the remaining number of authorized shares of
Common Stock being insufficient, the Company will use its best efforts to
register the maximum number of shares it can based on the remaining balance
of
authorized shares and will use its best efforts to increase the number of its
authorized shares as soon as reasonably practicable.
e.
No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby will not (i) result in a violation of the Articles of Incorporation,
any
Certificate of Designations, Preferences and Rights of any outstanding series
of
preferred stock of the Company or the By-laws or (ii) conflict with, or
constitute a material default (or an event which 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,
contract, indenture mortgage, indebtedness or instrument to which the Company
or
any of its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree, including United States federal and
state
securities laws and regulations and the rules and regulations of the principal
securities exchange or trading market on which the Common Stock is traded or
listed (the “Principal Market”), applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in the SEC Documents,
neither the Company nor its Subsidiaries is in violation of any term of, or
in
default under, the Articles of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws or their organizational charter or by-laws, respectively,
or any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to
the
Company or its Subsidiaries, except for possible conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that
would
not individually or in the aggregate have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, statute, ordinance, rule, order
or
regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Subscription
Agreement and as required under the 1933 Act, the Company is not required to
obtain any consent, authorization, permit or order of (except the listing
approval of the Principal Market), or make any filing or registration (except
the filing of a registration statement) with, any court, governmental authority
or agency, regulatory or self-regulatory agency or other third party 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 hereof
or thereof. All consents, authorizations, permits, 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 and
are
in full force and effect as of the date hereof (except the listing approval
and
registration statement). The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of
the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting
of
the Common Stock by the Principal Market in the foreseeable future.
f.
SEC
Documents; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (“SEC”)
pursuant to the reporting requirements of the Securities and Exchange Act of
1934 (“1934 Act”) (all of the foregoing filed since 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 Holder or its
representatives, or they have had access through XXXXX, to true and complete
copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and
the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the
SEC, contained any untrue statement of a material fact or omitted to state
a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, and are
not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC 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 written information provided by or on behalf of the
Company to the Holder which is not included in the SEC Documents, including,
without limitation, information referred to in Section 3(d) of this Subscription
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements therein, in the light of
the
circumstance under which they are or were made, and are not
misleading.
g.
Absence
of Certain Changes.
Except
for the Company’s intention to sell its security monitoring business and as set
forth in the SEC Documents filed at least thirty (30) days prior to the date
hereof, there has been no change or development in the business, properties,
assets, operations, financial condition, results of operations or prospects
of
the Company or its Subsidiaries which has had or reasonably could have a
Material Adverse Effect. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its Subsidiaries have any knowledge
or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h.
Absence
of Litigation.
Except
as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
executive officers of Company or any of its Subsidiaries, threatened against
or
affecting the Company, the Common Stock or any of the Company's Subsidiaries
or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, in which an adverse decision could have a Material
Adverse Effect.
i.
Acknowledgment
Regarding the Purchase of Debentures.
The
Company acknowledges and agrees that the Holder is acting solely in the capacity
of an arm's length investor with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Holder is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and
the
transactions contemplated hereby and thereby and any advice given by the Holder
or any of its respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby
is
merely incidental to the Holder's purchase of the Debentures. The Company
further represents to the Holder 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.
j. Intentionally
omitted.
k.
Employee
Relations.
Neither
the Company nor any of its Subsidiaries is involved in any union labor dispute
nor, to the knowledge of the Company or any of its Subsidiaries, is any such
dispute threatened. Neither the Company nor any of its Subsidiaries is a party
to a collective bargaining agreement, and the Company and its Subsidiaries
believe that relations with their employees are good. No executive officer
(as
defined in Rule 501(f) of the 0000 Xxx) has notified the Company that such
officer intends to leave the Company's employ or otherwise terminate such
officer's employment with the Company.
l.
Intellectual
Property Rights.
All
patents, patent applications, trademark registrations and applications for
trademark registration held by the Company are owned free and clear of all
mortgages, liens, charges or encumbrances whatsoever. No licenses have been
granted with respect to these items and the Company and its Subsidiaries do
not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, and, except as set forth on Schedule 3(l),
there is no claim, action or proceeding being made or brought against, or to
the
Company's knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service xxxx registrations, trade secret
or other infringement; and the Company and its Subsidiaries are unaware of
any
facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
property.
m.
Environmental
Laws.
The
Company and its Subsidiaries (i) are 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 where, in each of the three foregoing cases, the failure to so comply
would have, individually or in the aggregate, a Material Adverse
Effect.
n.
Title.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
as
are described in the SEC Documents or Schedule 3(n) or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its Subsidiaries.
Any real property and facilities held under lease by the Company or any of
its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
o.
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 have a Material
Adverse Effect.
p.
Regulatory
Permits.
The
Company and its Subsidiaries have in full force and effect all certificates,
approvals, authorizations and permits from the appropriate federal, state,
local
or foreign regulatory authorities and comparable foreign regulatory agencies,
necessary to own, lease or operate their respective properties and assets and
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, approval, authorization or permit, except
for such certificates, approvals, authorizations or permits which if not
obtained, or such revocations or modifications which, would not have a Material
Adverse Effect.
q.
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, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
r.
No
Materially Adverse Contracts.
Neither
the Company nor any of its Subsidiaries 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. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment
of
the Company's officers has or is expected to have a Material Adverse
Effect.
s.
Tax
Status.
The
Company has filed all federal and state income tax returns, as required and
the
Company and each of its Subsidiaries has made or filed all United States federal
and state income and all other tax returns, reports and declarations required
by
any jurisdiction to which it is subject. Except as disclosed in the SEC
Documents, there are no unpaid taxes in any material amount claimed to be due
by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
t.
Certain
Transactions.
Except
as set forth in the SEC Documents filed at least ten days prior to the date
hereof and 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 is presently a party to any transaction with the
Company or any of its Subsidiaries (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.
u.
Dilutive
Effect.
The
Company understands and acknowledges that the number of shares of Common Stock
issuable upon purchases pursuant to this Subscription Agreement will increase
in
certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines following
the effective date of the registration statement covering the Common Stock
underlying the Debentures (the “Effective Date”). The Company’s executive
officers and directors have studied and fully understand the nature of the
transactions contemplated by this Subscription 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, subject
to
such limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock upon purchases pursuant to this
Subscription Agreement is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
shareholders of the Company.
v. Additional
Financings.
The
Company shall not, directly nor indirectly, without the prior written consent
of
the Holder, offer, sell, grant any option to purchase, or otherwise dispose
of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its Common Stock or securities convertible into Common
Stock, or file any registration statement, including those on Form S-8 for
any
securities (a "SUBSEQUENT FINANCING"), in either case ending on the earlier
to
occur of (i) 360 (three hundred and sixty) days after the effective date of
the
registration statement covering resale of the shares of Common Stock underlying
the Debentures (the “Effective Date”) and (ii) the date on which the full Face
Amount, accrued interest and penalties, if any, on the Debentures have been
paid
("Lock Up Period"), as set forth in the Debenture Agreement.
After
May
2, 2006, the Holder shall permit one (1) issuance and registration of the
Company’s Common Stock for The Tail Wind Fund, solely for settlement of the
current lawsuit.
During
the twelve (12) month period following Closing, or if there is any outstanding
balance on the Debentures, the Holder shall retain a first right of refusal
for
any additional financings. The Company must submit to the Holder a duly
authorized term sheet of the financing and the Holder may elect, in writing
within five (5) days, to exercise its right to finance the Company upon the
same
terms and conditions, as set forth in the Debenture Agreement. In the event
the
Holder does not elect to complete such financing within such period, the Company
may proceed with the proposed third-party financing on the same terms and
conditions as contained in the notice to Holder.
If
at any
time while the Debenture or Warrants are outstanding, if the Company issues
or
agrees to issue any Common Stock or securities convertible into or exercisable
for shares of Common Stock (or modify any of the foregoing which may be
outstanding prior to the execution of this Agreement) to any person or entity
at
a price per share or conversion or exercise price per share less than the Fixed
Conversion Price, or if less than the Warrant exercise price in respect of
the
Warrant Shares, with or without the consent of the Holder, the Fixed Conversion
Price and Warrant Exercise Price shall automatically be reduced to a price
twenty percent (20%) lower than the price of the new issuance. Additionally,
if
the Company shall, issue or agree to issue any of the aforementioned services
to
any person, firm or corporation at terms deemed by the Holder to be more
favorable to the other person or entity than the terms or conditions of this
Offering, then the Holder is granted the right, at its election, to modify
any
term of this Offering to match any more favorable term provided by the Company
to such person or entity. The rights of the Holder in this Section (v) are
in
addition to any other right the Holder has pursuant to this Subscription
Agreement and the Transaction Documents.
In
the
event the exercise of the rights described in the preceding paragraph
would
result in the issuance of an amount of Common Stock of the Company that would
exceed the maximum amount that may be issued to the Holder calculated in the
manner described in Section 3 (d) of this Agreement, then the issuance of such
additional shares of Common Stock of the Company to such Subscriber will be
deferred in whole or in part until such time as such Subscriber is able to
beneficially own such Common Stock without exceeding the maximum amount set
forth calculated in the manner described in Section 3 (d) of this Agreement.
The
determination of when such common stock may be issued shall be made by each
Holder.
x. Xxxxxxxx-Xxxxx
Compliance. The
Company hereby acknowledges that they are current with the requirement of
Xxxxxxxx-Xxxxx Act of 2002 (“Sarbox”), and will remain compliant with Sarbox and
its rules and regulations for reporting requirements in the time frame required
by Sarbox, and any updates to deadlines imposed by Sarbox.
x. Code
of Ethics.
The
Company has adopted a Code of Ethics and has filed the Code with the
SEC.
y. No
Disagreements with Accountants, Auditors and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants, auditors
and
lawyers formerly or presently employed by the Company, including but not limited
to disputes or conflicts over payment owed to such accountants, auditors or
lawyers.
z. Investment
Company.
Neither
the Company nor any Affiliate is an "investment company" within the meaning
of
the Investment Company Act of 1940.
aa. Company
Predecessor. All
representations made by or relating to the Company of a historical nature and
all undertaking described herein shall relate and refer to the Company, its
predecessors, and the Subsidiaries.
bb. Option
Plan Restrictions.
The
only officer, director, employee and consultant stock option or stock incentive
plan currently in effect or contemplated by the Company has been submitted
to
the Holder or is described in past filings with the SEC. No other plan will
be
adopted nor may any options or equity not included in such plan be issued until
after the Debenture is paid in full.
4. COVENANTS
OF THE COMPANY
a.
Best
Efforts.
The
Company shall use its best efforts timely to satisfy each of the conditions
to
be satisfied by it as provided in this Subscription Agreement.
b.
Blue
Sky.
The
Company shall, at its sole cost and expense, make all filings and reports
relating to the offer and sale of the Debentures and the Common Stock underlying
the Debentures as required under the applicable securities or “Blue Sky” laws of
such states of the United States as specified by the Holder or as required
by
law.
c.
Reporting
Status.
Until
the earlier of (i) the date that the Holder may sell all of the Common Stock
underlying the Debentures acquired pursuant to this Subscription Agreement
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act
(or
successor thereto), or (ii) the date on which the Holder shall have sold all
the
Common Stock underlying the Debentures, the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as a reporting company under the 1934
Act.
d. Use
of
Proceeds.
The
Company shall use the entire proceeds from this Debenture exclusively to further
the growth and interest of the Company. Any other use of the funds contemplated
herein, shall be considered a breach of contract and an event of
Default.
e. Conditions
to Closing.
The
Company shall sign and be in compliance with the Transaction Documents with
the
Holder.
f.
Financial
Information.
The
Company agrees to make available to the Holder via XXXXX or other electronic
means the following: (i) within five (5) business days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K and any Registration Statements
or
amendments filed pursuant to the 1933 Act; (ii) on the same day as the release
thereof, facsimile copies of all press releases issued by the Company or any
of
its Subsidiaries, (iii) copies of any notices and other information made
available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders and (iv) within two (2) calendar days of filing or delivery
thereof, copies of all documents filed with, and all correspondence sent to,
the
Principal Market, any securities exchange or market, or the National Association
of Securities Dealers, Inc.
g. Reservation
of Common Stock.
Subject
to the following sentence, the Company shall take all action necessary to at
all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the issuance of the Common
Stock
underlying the Debentures. In the event that the Company determines that it
does
not have a sufficient number of authorized shares of Common Stock to reserve
and
keep available for issuance, the Company shall use its best efforts to increase
the number of authorized shares of Common Stock by seeking shareholder approval
for the authorization of such additional shares. The Holder shall have the
right
to reasonably determine the amount of shares to be re-registered such as are
necessary to satisfy the terms of the Agreement.
h.
Listing.
The
Company shall promptly secure the listing of all of the Common Stock underlying
the Debentures upon the Principal Market and each other national securities
exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain, such listing. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market, unless the Holder and
the
Company agree otherwise. Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the delisting
or
suspension of the Common Stock on the Principal Market (excluding suspensions
of
not more than one trading day resulting from business announcements by the
Company). The Company shall promptly provide to the Holder copies of any notices
it receives from the Principal Market regarding the continued eligibility of
the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.
i. Transactions
With Affiliates.
During
the Lock-Up Period, set forth in Section 3 (v), the Company shall not, and
shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
or permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, persons who were officers or directors at
any
time during the previous two years, shareholders who beneficially own five
percent (5%) or more of the Common Stock, or affiliates or with any individual
related by blood, marriage or adoption to any such individual or with any entity
in which any such entity or individual owns a five percent (5%) or more
beneficial interest (each a “RELATED PARTY”) during the Lock Up Period; except
for (i) customary employment arrangements and benefit programs on reasonable
terms (including changes currently under discussion with the Company's Board
of
Directors concerning the compensation, to be payable in stock, of the Chairman
of the Board), (ii) any agreement, transaction, commitment or arrangement on
an
arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, or (iii) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who
is
also an officer of the Company or any Subsidiary of the Company shall not be
a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. “AFFILIATE” for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a five percent (5%) or more equity interest in that person or entity,
(ii) has five percent (5%) or more common ownership with that person or entity,
(iii) controls that person or entity, or (iv) shares common control with that
person or entity. “CONTROL” or "CONTROLS" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
j.
Corporate
Existence.
The
Company shall use its commercially reasonable best efforts to preserve and
continue the corporate existence of the Company.
k. Notice
of Certain Events Affecting Registration.
The
Company shall promptly notify Holder upon the occurrence of any of the following
events in respect of a registration statement or related prospectus covering
the
Common Stock underlying the Debentures: (i) 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;
(ii) 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; (iii) receipt
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Common Stock underlying the
Debentures for sale in any jurisdiction or the initiation or threatening of
any
proceeding for such purpose; (iv) 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 (v) 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 the
Holder any such supplement or amendment to the related prospectus.
l. Indemnification.
In
consideration of the Holder’s execution and delivery of this Agreement and the
Debenture Registration Rights Agreement and acquiring the Debentures hereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Holder and all of its shareholders, officers, directors, employees and direct
or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses
in
connection therewith (irrespective of whether any such Indemnitee is a party
to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(i)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby,
(iii) any cause of action, suit or claim brought or made against such Indemnitee
by a third party and arising out of or resulting from the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (iv) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Debentures, (v) the status
of the Holder as an investor in the Company, except, in the case of any of
such
clauses, insofar as any such Indemnified Liability was attributable to gross
negligence, willful misconduct or any illegal activity on the part of Holder
and, in the case of clause, (v) only, insofar as any such Indemnified Liability
was attributable to an untrue statement, alleged untrue statement, omission
or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Holder which is specifically
intended by the Holder for use in the preparation of any Registration Statement,
preliminary prospectus or prospectus. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each
of
the Indemnified Liabilities which is permissible under applicable law. The
indemnity provisions contained herein shall be in addition to any cause of
action or similar rights the Holder may have, and any liabilities to which
the
Holder may be subject. Notwithstanding the foregoing, the Company shall have
no
indemnification responsibility in the event Holder fails to timely notify the
Company of a claim or potential claim for which indemnification is sought,
but
only to the extent the Company is prejudiced thereby. The Company shall have
the
right to control the defense of any such claim and the Holder shall not consent
to any settlement of any such claim without the prior written consent of the
Company (which shall not be unreasonably withheld or delayed). The Holder shall
provide indemnification comparable in scope and coverage to the Company and
corresponding related persons in respect of any Indemnified Liability if and
to
the extent attributable to gross negligence, willful misconduct or any illegal
activity on the part of Holder, and shall be obligated to reimburse the Company
and such persons to the same extent as the Company’s reimbursement obligations
under Section 4(m) below.
m. Reimbursement.
If (i)
the Holder, other than by reason of its gross negligence or willful misconduct,
becomes involved in any capacity in any action, proceeding or investigation
brought by any shareholder of the Company, in connection with or as a result
of
the consummation of the transactions contemplated by the Transaction Documents,
or if the Holder is impleaded in any such action, proceeding or investigation
by
any person, or (ii) the Holder, other than by reason of its gross negligence
or
willful misconduct or by reason of its trading of the Common Stock in a manner
that is illegal under the federal securities laws, becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC against
or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents,
or
if the Holder is impleaded in any such action, proceeding or investigation
by
any person, then in any such case, the Company will reimburse the Holder for
its
reasonable legal and other expenses (including the cost of any investigation
and
preparation) incurred in connection therewith, as such expenses are incurred.
In
addition, other than with respect to any matter in which the Holder is a named
party, the Company will pay to Holder the charges, as mutually
agreed by
the
Holder and the Company, for the time of any officers or employees of the Holder
devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Subscription Agreement. The reimbursement obligations of the
Company under this section shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions
to
any affiliates of Holder that are actually named in such action, proceeding
or
investigation, and partners, directors, agents, employees, attorneys,
accountants, auditors and controlling persons (if any), as the case may be,
of
Holder and any such affiliate, and shall be binding upon and inure to the
benefit of any successors of the Company, Holder and any such affiliate and
any
such person.
n.
Transfer
Agent.
The
Company covenants and agrees that, in the event that the Company's agency
relationship with the transfer agent should be terminated for any reason prior
to the Maturity Date (as defined in the Debenture Agreement), the Company shall
immediately appoint a new transfer agent immediately.
5. OPINION
LETTER/BOARD RESOLUTION
Prior
to
or on the Closing Date the Company shall deliver to the Holder an opinion letter
signed by counsel for the Company in the form attached hereto as Exhibit D.
If
so
requested by the Holder, the Company shall instruct counsel to write a 144
opinion letter provided the necessary paperwork has been submitted and the
Exemption applies (as defined in the Debenture Agreement). If the Company’s
counsel fails to provide a Rule 144 opinion letter in a timely manner, then
the
Company shall: (a) pay the Investor’s counsel to write said Rule 144 opinion
letter; and (b) instruct the designated transfer agent to accept and rely upon
the Rule 144 Opinion letter. Also, prior to or on the Closing Date, the Company
shall deliver to the Holder a signed Board Resolution authorizing this Offering,
which shall be attached hereto as Exhibit E.
6. DELIVERY
INSTRUCTIONS; FEES
The
Debentures being purchased hereunder shall be delivered the Holder on the
Closing Date at which time funds will be wired to the Company and the Debentures
will be delivered to the Holder, per the Holder’s instructions.
7. UNDERSTANDINGS.
The
Holder understands, acknowledges and agrees as follows:
a. No
U.S.
federal or state agency or any agency of any other jurisdiction has made any
finding or determination as to the fairness of the terms of the Offering for
investment nor any recommendation or endorsement of the Debentures or the
Company.
b. The
representations, warranties and agreements of the Holder and the Company
contained herein shall be true and correct in all material respects on and
as of
the date of the sale of the Debentures as if made on and as of such date and
shall survive the execution and delivery of this Subscription Agreement and
the
purchase of the Debentures.
c. In
making
an investment decision, the Holder is relying on its own examination of the
Company and the terms of the Offering, including the merits and risks involved.
The shares have not been recommended by any federal or state securities
commission or regulatory authority. Furthermore, the foregoing authorities
have
not confirmed the accuracy or determined the adequacy of this document. Any
representation to the contrary is a criminal offense.
d. The
Offering is intended to be exempt from registration by virtue of Section 4(2)
of
the 1933 Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made
by
the undersigned herein and in the Questionnaire.
e. It
is
understood that in order not to jeopardize the Offering’s exempt status under
Section 4(2) of the 1933 Act and Regulation D, the Holder may, at a minimum,
be
required to fulfill the investor suitability requirements
thereunder.
f. The
shares may not be resold except as permitted under the securities act and
applicable state securities laws, pursuant to registration or exemption
therefrom. Holder should be aware that they will be required to bear the
financial risks of this investment for an indefinite period of
time.
|
8.
|
DISPUTES
SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS
LAW.
|
a.
All
disputes arising under this agreement shall be governed by and interpreted
in
accordance with the laws of the Commonwealth of Massachusetts, without regard
to
principles of conflict of laws. The parties to this agreement will submit all
disputes arising under this agreement to arbitration in Boston, Massachusetts
before a single arbitrator of the American Arbitration Association (“AAA”). The
arbitrator shall be selected by application of the rules of the AAA, or by
mutual agreement of the parties, except that such arbitrator shall be an
attorney admitted to practice law in the Commonwealth of Massachusetts. No
party
to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
9. MISCELLANEOUS.
a. Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Subscription Agreement must be in writing and
will
be deemed to have been delivered (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided a confirmation of
transmission is mechanically or electronically generated and kept on file by
the
sending party); or (iii) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If
to the
Company:
Xxxxx
Xxxxx
Eagle
Broadband, Inc. Corp
000
XXXXXXXXXX XXXXX
XXXXXX
XXXX, XXXXX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
If
to the
Holder:
Dutchess
Capital Management, LLC
Xxxxxxx
Xxxxxxxx
00
Xxxxxxxxxxxx Xxx, Xxxxx 0
Xxxxxx,
XX 00000
(000)
000-0000
(000)
000-0000
Each
party shall provide five (5) business days prior notice to the other party
of
any change in address, phone number or facsimile number.
b. All
pronouns and any variations thereof used herein shall be deemed to refer to
the
masculine, feminine, impersonal, singular or plural, as the identity of the
person or persons may require.
c. Neither
this Subscription Agreement nor any provision hereof shall be waived, modified,
changed, discharged, terminated, revoked or canceled, except by an instrument
in
writing signed by the party effecting the same against whom any change,
discharge or termination is sought.
d. Notices
required or permitted to be given hereunder shall be in writing and shall be
deemed to be sufficiently given when personally delivered or sent by facsimile
transmission: (i) if to the Company, at it’s executive offices, or (ii) if to
the Holder, at the address for correspondence set forth in the Questionnaire,
or
at such other address as may have been specified by written notice given in
accordance with this paragraph.
e. This
Subscription Agreement shall be enforced, governed and construed in all respects
in accordance with the laws of the Commonwealth of Massachusetts, as such laws
are applied by Massachusetts courts to agreements entered into, and to be
performed in, Massachusetts by and between residents of Massachusetts, and
shall
be binding upon the undersigned, the undersigned's heirs, estate and legal
representatives and shall inure to the benefit of the Company and its
successors. If any provision of this Subscription Agreement is invalid or
unenforceable under any applicable statue or rule of law, then such provisions
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law shall
not
affect the validity or enforceability of any other provision
hereof.
f. This
Agreement shall not be assignable.
g. This
Subscription Agreement, together with Exhibits A, B, C, D and E attached hereto
and made a part hereof, constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended only by
a
writing executed by both parties hereto.
h. This
Subscription Agreement may be executed in two or more counterparts, all of
which
taken together shall constitute one instrument. Execution and delivery of this
Subscription Agreement by exchange of facsimile copies bearing the facsimile
signature of a party shall constitute a valid and binding execution and delivery
of this Subscription Agreement by such party. Such facsimile copies shall
constitute enforceable original documents.
i.
When
in
this Agreement or the Transaction Documents, reference is made to any party,
such reference shall be deemed to include the successors, assigns, heirs and
legal representatives of such party. No party hereto may transfer any rights
under this Agreement or the Transaction Documents, unless the transferee agrees
to be bound by, and comply with all of the terms and provision of this Agreement
and the Transaction Documents, as if an original signatory hereto on the date
hereof.
10.
Intentionally Omitted.
11.
WAIVER.
The
Holder's delay or failure at any time or times hereafter to require strict
performance by Company of any undertakings, agreements or covenants shall not
waiver, affect, or diminish any right of the Holder under this Agreement to
demand strict compliance and performance herewith. Any waiver by the Holder
of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of
the
same or a different type. None of the undertakings, agreements and covenants
of
the Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification
is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.
12.
No Oral Agreements
This
Written Agreement and the accompanying Transaction Documents represent the
FINAL
AGREEEMENTS between the Company and the Holders and may not be contradicted
by
evidence of prior, contemporaneous, or subsequent oral agreements of the
parties; there are no unwritten oral agreements among the
parties.
[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK)
QUESTIONNAIRE
The
information contained in this Questionnaire is being furnished in order to
determine whether the undersigned’s subscription to purchase the Debentures
described in the Subscription Agreement may be accepted.
ALL
INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY.
The
undersigned understands, however, that the Company may present this
Questionnaire to such parties as it deems appropriate if called upon to
establish that the proposed offer and sale of the Securities is exempt from
registration under the 1933 Act, as amended. Further, the undersigned
understands that the offering is required to be reported to the Securities
and
Exchange Commission, and to various state securities and “blue sky”
regulators.
IN
ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY THE COMPANY, THE
UNDERSIGNED MUST COMPLETE FORM W-9.
I. PLEASE
CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.
1. The
undersigned: (a) has total assets in excess of $5,000,000; (b) was not formed
for the specific purpose of acquiring the securities; and (c) has its principal
place of business in ___________.
2. The
undersigned is a natural person whose individual net worth* or joint net worth
with his or her spouse exceeds $1,000,000.
3. The
undersigned is a natural person who had an individual income* in excess of
$200,000 in each of the two most recent years and who reasonably expects an
individual income in excess of $200,000 in the current year. Such income is
solely that of the undersigned and excludes the income of the undersigned’s
spouse.
4. The
undersigned is a natural person who, together with his or her spouse, has had
a
joint income* in excess of $300,000 in each of of the two most recent years
and
who reasonably expects a joint income in excess of $300,000 in the current
year.
* For
purposes of this Questionnaire, the term “net worth” means the excess of total
assets over total liabilities. In determining “income”, an investor should add
to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to XXX or Xxxxx retirement
plan,
alimony payments and any amount by which income from long-term capital gains
has
been reduced in arriving at adjusted gross income.
5. The
undersigned is:
(a) a
bank as
defined in Section 3(a)(2) of the 1933 Act; or
(b) a
savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of
the 1933 Act whether acting in its individual or fiduciary capacity;
or
(c) a
broker
or dealer registered pursuant to Section 15 of the 1934 Act; or
(d) an
insurance company as defined in Section 2(13) of the 1933 Act; or
(e) An
investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of the Investment
Company Act of 1940; or
(f) a
small
business investment company licensed by the U.S. Small Business Administration
under Section 301 (c) or (d) of the Small Business Investment Act of 1958;
or
X 6. The
undersigned is an entity in which all of the equity owners are accredited
investors.
II. HOLDER
INFORMATION.
Name
of
Entity ___Dutchess
Private Equities Fund, , L.P._
Person’s
Name Xxxxxxx
Xxxxxxxx
Title:_Managing
Member
State
of
Organization ____Delaware___________________
Principal
Business Address ___50 Commonwealth Ave__
City,
State, Zip Code ______Boston,
MA 02116__________
Taxpayer
Identification Number _________________________
- Phone
__000-000-0000________
Fax ___000-000-0000___
Send
Correspondence to:
____________50
Commonwealth Ave, Suite 2__________
____________Boston,
MA 02116____________________
_______________________________________________
SIGNATURE
PAGE
Your
signature on this Signature Page evidences your agreement to be bound by the
Questionnaire, Subscription Agreement and Debenture Registration Rights
Agreement.
1. The
undersigned hereby represents that (a) the information contained in the
Questionnaire is complete and accurate and (b) the undersigned will notify
the
Company
immediately if any material change in any of the information occurs prior to
the
acceptance of the undersigned’s subscription and will promptly send the
Company
written
confirmation of such change.
2. The
undersigned signatory hereby certifies that he/she has read and understands
the
Subscription Agreement and Questionnaire, and the representations made by the
undersigned in the Subscription Agreement and Questionnaire are true and
accurate.
$822,500
February
10, 2006
______________________________ ________________________
Amount
of
Debentures being purchased Date
Dutchess
Private Equities Fund, LP
By:
/s/Xxxxxxx X. Xxxxxxxx
(Signature)
Name:
Xxxxxxx
X. Xxxxxxxx
----------------------------------------------
(Please
Type or Print)
Title:
Managing Member,
Dutchess
Capital Management, LLC;
General
Partner to:
Dutchess
Private Equities Fund, LP
----------------------------------------------
(Please
Type or Print)
COMPANY
ACCEPTANCE PAGE
This
Subscription Agreement accepted and agreed
to
this
10th day of February, 2006.
By
Eagle Broadband Inc.
and duly
authorized to sign on behalf of the Company:
By:
/s/Xxxxx Xxxxx
Name: Xxxxx
Xxxxx
Title: President
and Chief Executive Officer
By:
/s/Xxxxxxx Xxxxxx, Xx.
Name: Xxxxxxx
Xxxxxx, Xx.
Title: Vice
President of Administration
LIST
OF
EXHIBITS
-----------------
EXHIBIT
A Notice
of
Conversion
EXHIBIT
B Debenture
Registration Rights Agreement
EXHIBIT
C Debenture
Agreement
EXHIBIT
D Opinion
of Company's Counsel
EXHIBIT
E Board
Resolution
LIST
OF
SCHEDULES
-----------------
Schedule
3(a) Subsidiaries
Schedule
3(c) Capitalization
Schedule
3(n) Liens
Exhibit
A
NOTICE
OF CONVERSION
(To
be
Executed by the Registered Owner in order to Convert Debenture)
TO:
EAGLE
BROADBAND INC.
The
undersigned hereby irrevocably elects, as of ________________, to convert
$________________ of its convertible debenture (the “Debenture”) into Common
Stock of Eagle Broadband Inc. (the “Company”) according to the conditions set
forth in the Debenture issued by the Company.
Date
of
Conversion________________________________________________
Applicable
Conversion Price________________________________________
Number
of
Debentures Issuable upon this Conversion_______________________
Name(Print)_
Dutchess Private Equities Fund, LP_____
Xxxxxxx______________00
Xxxxxxxxxxxx Xxx, Xxxxxx, XX 02116_________
Phone_____000-000-0000_____________
Fax________000-000-0000___________
By:_______________________________________
EXHIBIT
D OPINION OF COMPANY'S COUNSEL
Holders
of [Company] [Describe Securities] _______________,
2006
Re: Eagle
Broadband Inc.
Ladies
and Gentlemen:
As
counsel to Eagle
Broadband Inc.
(the
“Company”), we are familiar with its Articles of Incorporation and Bylaws and
with the corporate proceedings taken by it in connection with the proposed
issuance and sale of convertible debentures (the “Securities”) pursuant to the
related Subscription Agreement (including all Exhibits and Appendices thereto)
(collectively the “Agreements”).
We
have
been furnished with copies, certified or otherwise identified to our
satisfaction, of the Agreements, and have examined such other documents,
agreements and records as we deemed necessary to render the opinions set forth
below.
In
conducting our examination, we have assumed the following: (i) that each of
the
Agreements has been executed by each of the parties thereto in the same form
as
the forms which we have examined, (ii) the genuineness of all signatures, the
legal capacity of natural persons, the authenticity and accuracy of all
documents submitted to us as originals, and the conformity to originals of
all
documents submitted to us as copies, (iii) that each of the Agreements has
been
duly and validly authorized, executed and delivered by the party or parties
thereto other than the Company, and (iv) that each of the Agreements constitutes
the valid and binding agreement of the party or parties thereto other than
the
Company, enforceable against such party or parties in accordance with the
Agreements’ terms.
Based
upon the subject to the foregoing, we are of the opinion that:
1. The
Company has been duly incorporated and is validly existing as a corporation
in
good standing under the laws of the State of Nevada, and has all requisite
corporate power and authority to own its properties and conduct its business
as
presently conducted.
2. The
authorized capital stock of the Company consists of -_______ shares of Common
Stock, .001 par value per share, (“Common Stock”).
3. To
our
knowledge, (i)the Company’s equity securities are not registered under Section
12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and (ii) the Company is required to file reports with the
Securities and Exchange Commission pursuant to Section 15(d) of the Exchange
Act.;
4. When
duly
countersigned by the Company’s transfer agent and registrar, and delivered to
you or upon your order against payment of the agreed consideration therefor
in
accordance with the provisions of the Agreements, the Securities [and any Common
Stock to be issued upon the conversion of the Securities] as described in the
Agreements represented thereby will be duly authorized and validly issued,
fully
paid and nonassessable;
5 The
Company has the requisite corporate power and authority to enter into the
Subscription Agreement and to sell and deliver the Securities and the Common
Stock to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by
all
necessary corporate action by the Company to our knowledge, no approval of
any
governmental or other body is required for the execution and delivery of each
of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except
as
enforceability may be limited by general equitable principles, public policy,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally, and except as to compliance
with federal, state, and foreign securities laws, as to which no opinion is
expressed;
6. Neither
the execution, delivery and performance of the Subscription Agreement and
Securities by the Company and the performance of its obligations thereunder
do
not and will not constitute a breach or violation of any of the terms and
provisions of, or constitute a default under or conflict with or violate any
provision of (i) the Company’s Certificate of Incorporation or By-Laws, (ii) any
indenture, mortgage, deed of trust, agreement or other instrument to which
the
Company is party or by which it or any of its property is bound, (iii) any
applicable statute or regulation or as other, (iv) or any judgment, decree
or
order of any court or governmental body having jurisdiction over the Company
or
any of its property.
7. To
the
best of our knowledge, there is no pending or threatened litigation,
investigation or other proceedings against the Company.
8. The
Company complies with the eligibility requirements for the use of Form SB-2,
under the Securities Act of 1933, as amended.
This
opinion is rendered only with regard to the matters set out in the numbered
paragraphs above. No other opinions are intended nor should they be inferred.
This opinion is based solely upon the laws of the United States and the State
of
New York and the Nevada General Corporation Law and does not include an
interpretation or statement concerning the laws of any other state or
jurisdiction. Insofar as the enforceability of the Subscription Agreement and
Securities may be governed by the laws of other states, we have assumed that
such laws are identical in all respects to the laws of the State of New
York.
The
opinions expressed herein are given to you solely for your use in connection
with the transaction contemplated by the Subscription Agreement and Securities
and may not be relied upon by any other person or entity or for any other
purpose without our prior consent.
Very
truly yours,
By: _____________________
EXHBIT
E
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
EAGLE
BROADBAND, INC.
EFFECTIVE
February 10, 2006
The
undersigned Directors of Eagle Broadband, Inc., Inc. (the "Company") takes
the
following actions by consent with a meeting.
IT
HAS BEEN RESOLVED:
The
officers of the Company are instructed to take all actions necessary to execute,
deliver, and perform the steps required of the Company in connection with
registration of shares pursuant to the Debenture Agreement, Warrant Agreement
and Subscription Agreement of this date. All shares have been fully paid and
should be issued without restrictive legend, or if the shares have been not
registered for sale under the Securities Act of 1933, as amended, then the
certificates shall be marked with proper legend.
FURTHER,
IT HAS BEEN RESOLVED:
That
each
member of the Board jointly and individual hereby agree not to issue a stop
transfer order on any of the shares defined herein, if to Dutchess Private
Equities Fund, LP. ("Dutchess")
FURTHER,
IT HAS BEEN RESOLVED:
The
officers do hereby consent to the appointment of Xxxxxxx Xxxxxxxx of Dutchess
Capital Management, LLC to issue shares pursuant to the shares due to the Holder
as outlined in the Irrevocable Transfer Agent Agreement solely for the benefit
of Dutchess.
FURTHER,
IT HAS BEEN RESOLVED:
That
the
board has given the requisite authority for the Company to enter into the
Subscription Agreement, Warrant Agreement, Security Agreement, Debenture
Agreement, Debenture Registration Rights Agreement, Stock Transfer Agent
Agreement, Investment Agreement and Equity Line Registration Rights Agreement
(collectively, the "Transaction Documents") with Dutchess Private Equities
Fund,
LP ("Dutchess") dated February 10, 2006
FURTHER,
IT HAS BEEN RESOLVED:
That
in
the event counsel for the Company is unable to write an opinion regarding the
issuance of Shares for any of the Transactions Documents, where required, that
the Transfer Agent shall accept the opinion of the Holder's counsel, Xxx
Xxxxxxx, Esq.
FURTHER,
IT HAS BEEN RESOLVED:
That
the
board shall issue up to two hundred and forty-six thousand seven hundred and
fifty dollars ($246,750) worth of shares of Common Stock pursuant to the Warrant
Agreement between the Company and Dutchess; and, up to the amount of shares
registered for resale in the SB-2 filed for Dutchess' underlying Debentures.
This
resolution is signed by the Board, to be effective as of February 10, 2006
Date:
February 10, 2006
________________________________
Xxxxx
Xxxxx
Chief
Excectutive Officer
_______________________________
Xxxxxx
Xxxx
Director
________________________________
H.
Xxxx Xxxxxx
Director
________________________________
Xxxxx
X. Xxxxxx
Director
________________________________
X.
X. Xxxxxxxxxxx
Director
________________________________
Xxxxx
X. Persons
Director
________________________________
Xxxxx
X. Xxxxxxxxx
Director
SCHEDULE
3(a)
SUBSIDIARIES
Name State
of
Incorporation EIN
________
________________
________
Atlantic
Pacific Communications, Inc. Texas 7606387219
Xxxxx
Telecom Services,
L.L.C. Texas
32003915165
Clearworks
Communications,
Inc.
Texas
32001289712
Clearworks
Home Systems,
Inc.
Texas 7606451247
Clearworks
Integration Services,
Inc.
Texas
7605145006
Clearworks
Land Development,
Inc. Texas
32002033408
Clearworks
Structured Wiring Services, Inc. Texas
7605486475
Xxxxxxxxxx.xxx,
Inc.
Delaware 0000000000
Contact
Wireless,
Inc. Texas 4605064527
Eagle
Home Systems,
Inc.
Texas
32007753133
EBI
Funding
Corp.
Texas
201208911
Etoolz,
Inc.
Texas
7429390937
Link-Two
Communications,
Inc.
Texas
7605130081
Northpointe
Telecom Services,
L.L.C. Texas 32001445991
Stonegate
Telecom,
L.L.C.
Texas 32001898132
Teravista
Telecom Services,
L.L.C.
Texas
32002199365
UCGI
Corporation
Texas 3522018970
United
Computing Group, Inc. Texas 7605778038
SCHEDULE
3(c) CAPITALIZATION
Securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this
Agreement.
| · |
Common
Stock Purchase Warrant issued to Crestview Capital Master, L.L.C.,
dated
June 1, 2004 for the purchase of 479,715
shares.
|
| · |
Common
Stock Purchase Warrant issued to Bristol Investment Fund, Ltd., dated
June
1, 2004 for the purchase of 137,061
shares.
|
| · |
Common
Stock Purchase Warrant issued to Crescent International Ltd., dated
June
1, 2004 for the purchase of 175,000
shares.
|
SCHEDULE
3(n)
LIENS
On
December 5, 2005, the State of Texas filed a tax lien against Clearworks
Communications, Inc., a wholly owned subsidiary of the Company, in Galveston
and
Xxxxxx Counties, Texas, related to a state sales tax assessment.
On
January 10, 2006, the State of Texas filed a tax lien against D.S.S. Security,
Inc., a wholly owned subsidiary of the Company, in Xxxxxx County, Texas, related
to a state sales tax assessment.
