AMENDED
AND RESTATED
ARTICLES
OF INCORPORATION
OF
CHDT
CORPORATION
In
accordance with Section 607.1007 of the Florida Statutes, the articles of
incorporation of CHDT Corporation, a Florida corporation, are hereby amended and
restated (the “Amended and Restated Articles of Incorporation”) to read in their
entirety as follows:
ARTICLE
I. NAME
The name
of the corporation is CHDT Corporation (the “Corporation”).
ARTICLE
II. PURPOSE
The
general purpose of the Corporation shall be the transaction of any and all
lawful business for which corporations may be incorporated under the Florida
Business Corporation Act.
ARTICLE
III. REGISTERED OFFICE AND AGENT; PRINCIPAL PLACE OF
BUSINESS
The street
address of the registered office of the Corporation shall be 350 Jim Moran
Blvd., Suite 120, Deerfield Beach, Florida 33442, and the registered agent of
the Corporation at such address shall be Gerry McClinton. The
principal place of business of the Corporation shall be 350 Jim Moran Blvd.,
Suite 120, Deerfield Beach, Florida 33442.
ARTICLE
IV. AUTHORIZED SHARES
Section 1.
Authorized
Shares
. The maximum number of shares which the Corporation is
authorized to issue is 700,000,000 shares, of which 600,000,000 shares shall be
Common Stock par value $0.0001 per share (the “Common Stock”), and 100,000,000
shares of Preferred Stock (the “Preferred Stock”).
Section
2.
Preferred
Stock
.
(a) Preferred
Stock shall be entitled to preference over Common Stock in the distribution of
dividends or assets, in such manner and to such extent, if any, as may be
determined, from time to time by the Board of Directors. The shares of Preferred
Stock may be divided into or issued in series. The Board of Directors is
expressly vested with and shall have authority to establish from time to time
the number of shares to be included in each series and, within the limitations
of law and the provisions of these Articles of Incorporation, to fix and
determine the voting rights and other designations, preferences, rights,
qualifications, limitations, and restrictions, if any, of each such
series. All shares of Preferred Stock of the same series shall be
identical with each other in all respects.
(b) The
authority of the Board of Directors with respect to each series shall include,
but not be limited to, determination of the following:
(i)
The number
of shares constituting such series and the distinctive designation of such
series;
(ii)
The
preferences and relative, participating, optional or other special rights, if
any, and the qualifications, limitations or restrictions on, with respect to any
series;
(iii)
The
dividend rate on the shares of each series, the dates at which dividends, if
declared, shall be payable, the conditions upon which such dividends are
payable, whether dividends shall be cumulative, non-cumulative, or partially
cumulative and, if cumulative or partially cumulative, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on shares
of such series;
(iv)
Whether
the shares of such series shall have voting rights in addition to any voting
rights and/or class voting rights that may be provided by law and, if so, the
terms and duration of such voting rights, including the number of votes per
share in any such series, which number may be more or less than one vote per
share, as the Board of Directors may determine;
(v)
Whether
the shares of such series shall have conversion or exchange privileges, and, if
so, the terms and conditions of such conversion or exchange, including the
amount and type of consideration per share payable in case of conversion or
exchange, the conversion price or prices or ratio or ratios or the rate or rates
at which such conversion or exchange may be effected, and provision for
adjustments of the conversion rate in such events as the Board of Directors
shall determine;
(vi)
Whether or
not the shares of such series shall be redeemable, and, if so, the terms and
conditions of redemption, including the date or dates upon or after which the
shares of such series shall be redeemable and the amount and type of
consideration per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(vii)
Whether
the shares of such series shall be subject to the operation of retirement or
sinking funds to be applied to the redemption or purchase of shares of that
series for retirement, and if such retirement or sinking fund or funds be
established, the amount thereof and the terms and provisions relative to the
operation thereof;
(viii)
The rights
of the shares of such series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of such series;
(ix)
Such other
special rights and protective provisions with respect to any series as the Board
of Directors may deem advisable; and
(x)
Any other
relative rights, preferences and limitations of such series.
The shares
of each series of the Preferred Stock may vary from the shares of any other
series thereof in any or all of the foregoing respects. The Board of Directors
may increase the number of shares of Preferred Stock designated for any existing
series by a resolution adding to such series authorized and unissued shares of
the Preferred Stock not designated for any other series. The Board of Directors
may decrease the number of shares of the Preferred Stock designated for any
existing series by a resolution, subtracting from such series unissued shares of
the Preferred Stock designated for such series, and the shares so subtracted
shall become authorized, unissued and undesignated shares of the Preferred
Stock.
Section
3.
Series
B-1 Convertible Preferred Stock
.
(a)
Designation
. The
distinctive serial designation of this series shall be “Series B-1 Convertible
Preferred Stock, $0.0001 par value per share” (hereinafter called “Series B-1
Preferred Stock”).
(b)
Authorized Shares
.
The number of shares in this Series B-1 Preferred Stock shall initially be
2,108,813, which number may from time to time be decreased (but not below the
number then outstanding), but not increased, by the Board of Directors. Shares
of this Series B-1 Preferred Stock purchased by the Corporation shall be
canceled and shall revert to authorized but unissued shares of Preferred Stock
undesignated as to series. Shares of this Series B-1 Preferred Stock may be
issued in fractional shares, which fractional shares shall entitle the holder,
in proportion to such holder’s fractional share, to all rights of a holder of a
whole share of this Series. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series B-1 Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B-1 Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B-1 Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to the Corporation’s Articles
of Incorporation.
(c)
Dividends.
The
holders of full or fractional shares of this Series B-1 Preferred Stock shall
not be entitled to any dividends or other distributions.
(d)
Conversion
. Each
share of the Series B-1 Preferred Stock that is issued and outstanding may be
converted into 66.66 shares of Common Stock (as such number may be adjusted
pursuant to Section 3(i) below) (the “Series B-1 Conversion Shares”) by the
holder thereof upon written demand to the Corporation and upon compliance with
any reasonable administrative requirements of the Corporation for such
conversion.
(e)
Merger
. In the event
of any merger, reorganization (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
Section 3(i) below), or consolidation of the Corporation with or into another
corporation (other than a liquidating event described in Section 3(f) below),
then in any such case the shares of this Series shall automatically be converted
into a number of shares of Common Stock equal to the Series B-1 Conversion
Shares, and such conversion shall be consummated prior to the record date for
holders of the shares of Common Stock for any such merger, reorganization, or
consolidation.
(f)
Liquidation and
Dissolution
. In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary, the holders
of full and fractional shares of this Series shall be entitled, before any
distribution or payment is made on any date to the holders of the Common Stock,
but after all distributions are made in full to all other series of issued and
outstanding shares of preferred stock, to be paid in full an amount per whole
share of this Series equal to $1.00, together with accrued dividends to such
distribution or payment date, whether or not earned or declared. If such payment
shall have been made in full to all holders of shares of this Series, the
holders of shares of this Series B-1 Preferred Stock as such shall have no right
or claim to any of the remaining assets of the Corporation. In the event the
assets of the Corporation available for distribution to the holders of shares of
this Series upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which such holders are entitled pursuant to the first paragraph of
this Section 3(f), no such distribution shall be made on account of any shares
of any other class or series of Preferred Stock ranking on a parity with the
shares of this Series upon such liquidation, dissolution or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
this Series, ratably in proportion to the full distributable, amounts for which
holders of all such parity shares are respectively entitled upon such
liquidation, dissolution or winding up.
Upon the
liquidation, dissolution or winding up of the Corporation, the holders of shares
of this Series B-1 Preferred Stock then outstanding shall be entitled to be paid
out of assets of the Corporation available for distribution to its shareholders
all amounts to which such holders are entitled pursuant to the first paragraph
of this Section 3(f) before any payment shall be made to the holders of Common
Stock or any other stock of the Corporation ranking junior upon liquidation to
this Series.
For the
purposes of this Section 3(f), the consolidation or merger of, or binding share
exchange by, the Corporation with any other corporation shall not be deemed to
constitute a liquidation, dissolution or winding up of the
Corporation.
(g)
Preferences
. This
Series B-1 Preferred Stock shall rank (i) junior to all other series or
classes of Preferred Stock of the Corporation, now existing or hereafter
created, as to payment of dividends and the distribution of assets, unless the
terms of any such other series or class shall provide otherwise; and
(ii) pari passu with the Series C Preferred Stock.
(h)
Voting Rights
. The
shares of the Series B-1 Preferred Stock shall have no voting rights unless
applicable law requires otherwise.
(i)
Adjustments
.
(i)
Adjustment Upon Common Stock
Event
. At any time or from time to time after the date on
which the first share of Series B-1 Preferred Stock was issued by the
Corporation (the “Series B-1 Original Issue Date”), upon the happening of a
Series B-1 Common Stock Event (as hereinafter defined), the Series B-1
Conversion Shares shall, simultaneously with the happening of such Series B-1
Common Stock Event, be adjusted proportionately by multiplying the Series B-1
Conversion Shares immediately prior to such Series B-1 Common Stock Event by a
fraction, (A) the numerator of which shall be the number of shares of Common
Stock issued and outstanding immediately prior to such Series B-1 Common Stock
Event, and (B) the denominator of which shall be the number of shares of Common
Stock issued and outstanding immediately after such Series B-1 Common Stock
Event, and the product so obtained shall thereafter be the Series B-1 Conversion
Shares. The Series B-1 Conversion Shares shall be readjusted in the same manner
upon the happening of each subsequent Series B-1 Common Stock
Event. As used herein, the term the “Series B-1 Common Stock Event”
shall mean (A) the issue by the Corporation of additional shares of Common Stock
as a dividend or other distribution on outstanding Common Stock, (B) a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock, or (C) a combination of the outstanding shares of Common
Stock into a smaller number of shares of Common Stock.
(ii)
Adjustments for Other
Dividends and Distributions
. If at any time or from time to
time after the Series B-1 Original Issue Date the Corporation pays a dividend or
makes another distribution to the holders of the Common Stock payable in
securities of the Corporation, other than an event constituting a Series B-1
Common Stock Event, then in each such event provision shall be made so that the
holders of the Series B-1 Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable upon conversion
thereof, the amount of securities of the Corporation which they would have
received had their Series B-1 Preferred Stock been converted into Common Stock
on the date of such event (or such record date, as applicable) and had they
thereafter, during the period from the date of such event (or such record date,
as applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this
Section 3
(i) with respect to the rights of the
holders of the Series B-1 Preferred Stock or with respect to such other
securities by their terms.
(iii)
Adjustment for
Reclassification, Exchange and Substitution
. If at any time or
from time to time after the Series B-1 Original Issue Date the Common Stock
issuable upon the conversion of the Series B-1 Preferred Stock is changed into
the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than by a
Series B-1 Common Stock Event or a stock dividend provided for elsewhere in this
Section 3
(i)), then in any such event each
holder of Series B-1 Preferred Stock shall have the right thereafter to convert
such stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the number of shares of Common Stock into which such shares of Series
B-1 Preferred Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(iv)
Certificate of
Adjustment
. In each case of an adjustment or readjustment of
the Series B-1 Conversion Shares, the Corporation, at its expense, shall cause
its chief financial officer (or other executive officer) to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
the Series B-1 Preferred Stock at the holder’s address as shown in the
Corporation’s books.
(v)
Fractional
Shares
. No fractional shares of Common Stock shall be issued
upon any conversion of Series B-1 Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay the holder cash equal to the product of such fraction
multiplied by the Common Stock’s fair market value as determined in good faith
by the Board as of the date of conversion.
(j)
No Impairment
. The
Corporation shall not avoid or seek to avoid the 4(g)(ii) observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith assist in carrying out all
such action as may be reasonably necessary or appropriate in order to protect
the rights, preferences and privileges of the holders of the Series B-1
Preferred Stock against impairment. This Section 3(j) is intended to prevent the
Corporation from any intentional violation of any of the express rights,
preferences and privileges of the Series B-1 Preferred Stock
herein.
Section
4.
Series C
Convertible Preferred Stock
.
(a)
Designation
. The
distinctive serial designation of this series shall be “Series C Convertible
Preferred Stock, $1.00 par value per share” (hereinafter called “Series C
Preferred Stock”).
(b)
Authorized Shares
.
The number of shares in this Series C Preferred Stock shall initially be 1,000,
which number may from time to time be decreased (but not below the number then
outstanding), but not increased, by the Board of Directors. Shares of this
Series C Preferred Stock purchased by the Corporation shall be canceled and
shall revert to authorized but unissued shares of Preferred Stock undesignated
as to series. Shares of this Series C Preferred Stock may be issued in
fractional shares, which fractional shares shall entitle the holder, in
proportion to such holder’s fractional share, to all rights of a holder of a
whole share of this Series.
(c)
Dividends
. The
holders of full or fractional shares of this Series C Preferred Stock shall not
be entitled to any dividends or other distributions.
(d)
Conversion
. The
holders of the Series C Preferred Stock shall have, and be subject to, the
following conversion rights:
(i) Each
share of the Series C Preferred Stock that is issued and outstanding may be
converted, at any time or from time to time, into 67,979.425 shares of Common
Stock (as such number may be adjusted pursuant to Section 4(i) below) (the
“Conversion Shares”) by the holder thereof upon written demand to the transfer
agent (or to the Corporation if the Corporation serves as its own transfer
agent) or as otherwise provided herein.
(ii) The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series C Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series C Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to the
Corporation’s Articles of Incorporation.
(iii) Before
any holder of Series C Preferred Stock shall be entitled to convert shares of
Series C Preferred Stock into shares of Common Stock, the holder shall surrender
the certificate for such shares of Series C Preferred Stock (or, if such
registered holder alleges that such certificate has been lost, stolen or
destroyed, a lost certificate affidavit and agreement reasonably acceptable to
the Corporation to indemnify the Corporation against any claim that may be made
against the Corporation on account of the alleged loss, theft or destruction of
such certificate), at the office of the transfer agent for the Series C
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series C
Preferred Stock represented by such certificate and, if applicable, any event on
which such conversion is contingent. The notice shall state the
holder’s name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If required
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
reasonably satisfactory to the Corporation, duly executed by the registered
holder or his, her or its attorney duly authorized in writing.
(iv) In
the event less than all the shares represented by a certificate are converted,
the Corporation shall promptly issue to the holder thereof a new certificate
representing the unconverted shares.
(v) The
conversion time shall be the date notice is provided by the holder of Series C
Preferred Stock to the Corporation in accordance with Section 4(d)(i)
above.
(e)
Merger
. In the event
of any merger, reorganization (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
Section 4(i) below) or consolidation of the Corporation with or into another
corporation (other than a Liquidation Event (as described in Section 4(f)
below)), then in any such case the shares of this Series shall automatically be
converted into a number of shares of Common Stock equal to the Conversion
Shares, and such conversion shall be consummated prior to the record date for
holders of the shares of Common Stock for any such merger, reorganization, or
consolidation.
(f)
Liquidation and
Dissolution
.
(i) In
the event of any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary (a “Liquidation Event”), the
holders of full and fractional shares of this Series shall be entitled, before
any distribution or payment is made on any date to the holders of the Common
Stock, but after all distributions are made in full to all other series of
issued and outstanding shares of Preferred Stock with a liquidation preference
senior to Series C Preferred Stock, to be paid in full an amount per whole share
of this Series equal to $700.00 (the “Series C Preferred Stock Liquidation
Preference”), together with accrued dividends to such distribution or payment
date, whether or not earned or declared. If such payment shall have been made in
full to all holders of shares of this Series that have not converted to Common
Stock in accordance with this Section 4, the holders of shares of this Series C
Preferred Stock as such shall have no right or claim to any of the remaining
assets of the Corporation. In the event the assets of the Corporation available
for distribution to the holders of shares of this Series upon a Liquidation
Event shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to this Section 4(f), no such distribution shall be made on
account of any shares of any other class or series of Preferred Stock ranking on
a parity with the shares of this Series upon such liquidation, dissolution or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of this Series, ratably in proportion to the full distributable,
amounts for which holders of all such parity shares are respectively entitled
upon such liquidation, dissolution or winding up.
(ii) Upon
a Liquidation Event, the holders of shares of this Series C Preferred Stock then
outstanding shall be entitled to be paid out of assets of the Corporation
available for distribution to its shareholders all amounts to which such holders
are entitled pursuant to this Section 4(f) before any payment shall be made to
the holders of Common Stock or any other stock of the Corporation ranking junior
upon liquidation to this Series.
(iii) For
the purposes of Section 4(f)(i) above, the consolidation or merger of, or
binding share exchange by, the Corporation with any other corporation shall not
be deemed to constitute a Liquidation Event.
(iv) Prior
to the occurrence of a Liquidation Event, and in any event not less than twenty
(20) calendar days prior to any payment date or ten (10) calendar days prior to
any record date for distributions or dividends to holders of record of Common
Stock, if earlier, with respect thereto, the Corporation will furnish each
holder of the Series C Preferred Stock written notice; together with a
certificate prepared by the chief financial officer (or any other executive
officer) of the Corporation describing in detail the facts of such Liquidation
Event, stating in detail the amount(s) per share of the Series C Preferred Stock
each holder of the Series C Preferred Stock would receive pursuant to the
provisions of this Section 4(f) and stating in detail the basis upon which such
amounts were determined. Notwithstanding the preceding, the holder or
holders of not less than a majority of the outstanding shares of Series C
Preferred Stock may, at any time upon written notice to the Corporation, reduce
the time, but not below five (5) business days, for notice pursuant to any
notice provisions specified herein for the benefit of such holders, and any such
reduction of time shall be binding upon all holders of such
securities.
(v) Notwithstanding
anything contained herein to the contrary, prior to the payment date with
respect to a Liquidation Event, each holder of Series C Preferred Stock shall
have the right to convert its shares of Series C Preferred Stock into Common
Stock in accordance with this Section 4.
(g)
Preferences
. So
long as any
shares
of Series C Preferred Stock remain outstanding, the Corporation shall not (by
merger, consolidation or otherwise), without the approval, by vote or written
consent, of the holders of at least a majority of the Series C Preferred Stock
then outstanding (i) adversely alter or change the rights, preferences, or
privileges of, or restrictions provided for the benefit of, the
Series C Preferred
Stock; or (ii) authorize or issue (by reclassification or otherwise) any
security having rights or preferences senior to or being on a parity with the
Series C Preferred Stock; provided, however, that the foregoing Section 4(g)(ii)
shall not apply to any issuance of preferred stock senior to the Series C
Preferred Stock that is either approved in advance by the two directors elected
by the Series C Preferred Stock or issued to an “accredited investor” (as
defined in Rule 501(a) or Regulation D under the Securities Act of 1933 as
amended) in return for $5,000,000 or more in net cash offering proceeds to the
Corporation. Notwithstanding the preceding, the Corporation may issue other
series or classes of Preferred Stock with rights as to payment of dividends that
are senior to Series C Preferred Stock. Except as otherwise provided herein,
Series C Preferred Stock shall rank
pari passu
with the Series
B-1 Preferred Stock. The foregoing shall not impair the ability of
the Corporation to issue shares of its Common Stock.
(h)
Voting Rights
. Except
as otherwise provided herein or otherwise required by applicable law, the shares
of the Series C Preferred Stock shall have no voting rights.
(i)
Adjustments.
(i)
Adjustment Upon Common Stock
Event
. At any time or from time to time after the date on
which the first share of Series C Preferred Stock was issued by the Corporation
(the “Series C Original Issue Date”), upon the happening of a Series C Common
Stock Event (as hereinafter defined), the Conversion Shares shall,
simultaneously with the happening of such Series C Common Stock Event, be
adjusted proportionately by multiplying the Conversion Shares immediately prior
to such Series C Common Stock Event by a fraction, (A) the numerator of which
shall be the number of shares of Common Stock issued and outstanding immediately
prior to such Series C Common Stock Event, and (B) the denominator of which
shall be the number of shares of Common Stock issued and outstanding immediately
after such Series C Common Stock Event, and the product so obtained shall
thereafter be the Conversion Shares. The Conversion Shares shall be readjusted
in the same manner upon the happening of each subsequent Series C Common Stock
Event. As used herein, the term the “Series C Common Stock Event”
shall mean (A) the issue by the Corporation of additional shares of Common Stock
as a dividend or other distribution on outstanding Common Stock, (B) a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock, or (C) a combination of the outstanding shares of Common
Stock into a smaller number of shares of Common Stock.
(ii)
Adjustments for Other
Dividends and Distributions
. If at any time or from time to
time after the Series C Original Issue Date the Corporation pays a dividend or
makes another distribution to the holders of the Common Stock payable in
securities of the Corporation, other than an event constituting a Series C
Common Stock Event, then in each such event provision shall be made so that the
holders of the Series C Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable upon conversion
thereof, the amount of securities of the Corporation which they would have
received had their Series C Preferred Stock been converted into Common Stock on
the date of such event (or such record date, as applicable) and had they
thereafter, during the period from the date of such event (or such record date,
as applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 4(i) with respect
to the rights of the holders of the Series C Preferred Stock or with respect to
such other securities by their terms.
(iii)
Adjustment for
Reclassification, Exchange and Substitution
. If at any time or
from time to time after the Series C Original Issue Date the Common Stock
issuable upon the conversion of the Series C Preferred Stock is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (
other
than
by a Series C
Common Stock Event or a stock dividend provided for elsewhere in this
Section 4(i)), then in any such event each holder of Series C Preferred
Stock shall have the right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the number of
shares of Common Stock into which such shares of Series C Preferred Stock could
have been converted immediately prior to such recapitalization, reclassification
or change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof.
(iv)
Certificate of
Adjustment
. In each case of an adjustment or readjustment of
the Conversion Shares, the Corporation, at its expense, shall cause its chief
financial officer (or other executive officer) to compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of the Series C
Preferred Stock at the holder’s address as shown in the Corporation’s
books.
(v)
Fractional
Shares
. No fractional shares of Common Stock shall be issued
upon any conversion of Series C Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay the holder cash equal to the product of such fraction
multiplied by the Common Stock’s fair market value as determined in good faith
by the Board as of the date of conversion.
(j)
Election of
Directors
.
(i) So
long as any Series C Preferred Stock is outstanding, (A) the holders of record
of the shares of Series C Preferred Stock, exclusively and as a separate class,
shall be entitled to elect two (2) directors of the Corporation (the “Series C
Director”), and (B) the holders of record of the shares of Common Stock and of
any other class or series of voting stock, voting together as a single class,
shall be entitled to elect the remaining five (5) directors of the
Corporation. Any director elected as provided in the preceding
sentence may be removed without cause by, and only by, the affirmative vote of
the holders of the shares of the class or series of stock entitled to elect the
director voting together as a single class, given either at a special meeting of
such shareholders duly called for that purpose or pursuant to a written consent
of shareholders. Section 2 of Article V below shall govern
the removal of directors for cause.
(ii) At
any meeting held for the purpose of electing a director, the presence in person
or by proxy of the holders of a majority of the outstanding shares of the class
or series entitled to elect the director will constitute a quorum for electing
the director. A vacancy in any directorship filled by the holders of
any class or series will be filled only by vote or written consent in lieu of a
meeting of the holders of such class or series or by any remaining director or
directors elected by the holders of such class or series pursuant to this
Section 4(j).
(k)
No Impairment
. The
Corporation shall not avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
shall at all times in good faith assist in carrying out all such action as may
be reasonably necessary or appropriate in order to protect the rights,
preferences and privileges of the holders of the Series C Preferred Stock
against impairment. This Section 4(k) is intended to prevent the
Corporation from any intentional violation of any of the express rights,
preferences and privileges of the Series C Preferred Stock herein.
(l)
Limitation on
Conversion
. In no event shall the holder be entitled to
convert the number of Series C Preferred Stock, which when those converted added
to the sum of the number of shares of Common Stock previously beneficially owned
(as such term is defined under Section 13(d) and Rule 13d-3 of the Securities
Exchange Act of 1934 (the “Exchange Act”)), by the holder, would exceed 4.99% of
the shares of Common Stock outstanding, as determined in accordance with Rule
13d-1(j) of the Exchange Act; provided, however, such limitation shall not apply
with respect to: (i) a mandatory conversion pursuant to Section 4(e) or (ii) an
election to convert in connection with a Liquidation Event pursuant to Section
4(f).
ARTICLE
V. DIRECTORS
Section
1.
Number
. The
business and affairs of the Corporation shall be managed under the direction of
the Board of Directors which shall consist of seven members of Directors, acting
by not less than a majority of the directors then in office.
Section
2.
Removal
. Any
director or the entire Board of Directors of the Corporation may be removed only
for cause. At any annual meeting of shareholders of the Corporation or at any
special meeting of shareholders of the Corporation, the notice of which shall
state that the removal of a director or directors is among the purposes of the
meeting, the holders of eighty percent (80%) or more of the combined voting
power of the then outstanding shares of capital stock entitled to vote thereon,
present in person or by proxy, may remove such director or directors for
cause.
Section
3.
Vacancies
. Any
vacancies in the Board of Directors (other than Series C Directors) resulting
from death, resignation, retirement, disqualification, removal from office or
other cause shall be filled solely by the Board of Directors, acting by not less
than a majority of the directors then in office, even if less than a quorum. Any
director so chosen shall hold office only until the next election of directors
by the shareholders.
ARTICLE
VI. AMENDMENTS
Unless
otherwise required by applicable laws or the provisions of these Amended and
Restated Articles of Incorporation, these Amended and Restated Articles of
Incorporation shall be amended only by the affirmative vote of the holders of a
majority of the shares entitled to vote on such amendment, voting as a single
class.
ARTICLE
VII. WRITTEN CONSENT
The power
of the shareholders of the Corporation to consent in writing, without a vote at
an annual or special meeting of shareholders of the Corporation, to the taking
of any action by the Corporation is specifically granted.
ARTICLE
VIII. OWNERSHIP OF STOCK BY THE CORPORATION
If the
Corporation acquires its own shares, such shares shall belong to the Corporation
and shall constitute treasury shares unless disposed of or canceled by the
Corporation.
ARTICLE
IX. CONTROL SHARE ACQUISITION
The
Control Share Acquisition provisions of the Florida General Corporation Act,
found in Title XXXVI, Chapter 607, Section 607.0902 of said act, shall not apply
to the Corporation.
CHDT
CORPORATION
By:
Stewart
Wallach Chief Executive Officer &
President
CERTIFICATE
TO AMENDED AND RESTATED
ARTICLES
OF INCORPORATION
OF
CHDT
CORPORATION
The
undersigned,
Stewart Wallach,
Chief Executive Officer and President
of CHDT Corporation, a Florida
corporation (the “Corporation”), does hereby certify as follows:
1. The
amendment and restatement of the Corporation’s articles of incorporation as
attached hereto requires approval of the holders of the Corporation’s Common
Stock and the holders of the Corporation’s Series B Convertible Preferred
Stock.
2. The
board of directors of the Corporation recommended by unanimous written consent
dated July 9, 2009 that the holders of Common Stock of the Corporation and the
holders of Series B Convertible Preferred Stock of the Corporation approve the
amendment and restatement of the Corporation’s articles of
incorporation. The amendment and restatement of the Corporation’s
articles of incorporation was approved by the holders of Common Stock of the
Corporation by written consent dated as of July 9, 2009 because the number of
Common Stock votes cast for the amendment was sufficient for
approval. The amendment and restatement of the Corporation’s articles
of incorporation was approved by the holders of Series B Convertible Preferred
Stock of the Corporation by written consent dated as of July 9, 2009 because the
number of Series B Convertible Preferred Stock votes cast for the amendment was
sufficient for approval.
3. The
undersigned officer of the Corporation has been duly authorized to submit these
Amended and Restated Articles of Incorporation of the Corporation to the Florida
Department of State for filing in accordance with Section 607.1007, Florida
Statutes.
CHDT
CORPORATION
By:
Stewart
Wallach Chief Executive Officer &
President
ACCEPTANCE OF REGISTERED
AGENT
Having
been named as Registered Agent and to accept service of process for the above
stated corporation at the place designated in this Certificate, I hereby accept
the appointment as Registered Agent and agree to act in this
capacity. I further agree to comply with the provisions of all
statutes relating to the proper and complete performance of my duties, and I am
familiar with and accept the obligations of my position as Registered
Agent.
Date: July 9,
2009
_____________________________
Gerry McClinton
STOCK
PURCHASE AGREEMENT
This Stock
Purchase Agreement (this “Agreement”) dated as of July 9, 2009, is by and among
CHDT Corporation, a Florida corporation and successor in interest to CBQ, Inc.,
a Colorado corporation (the “Company”), and Involve LLC, a Florida limited
liability company (the “Buyer”). The Company and the Buyer are
referred to individually as a “Party” and collectively herein as the
“Parties.”
RECITALS:
WHEREAS,
the Company seeks additional capital, and the Buyer is willing to make this
investment by purchasing shares of Series C Convertible Preferred Stock (“Series
C”) from the Company on the terms and conditions set forth in this
Agreement.
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933 (the “Securities Act”) and Rule 506
of Regulation D, as promulgated thereunder, the Company desires to issue and
sell to the Buyer and the Buyer desires to purchase preferred stock from the
Company.
NOW,
THEREFORE, in consideration of the mutual covenants, representations and
warranties made herein, and of the mutual benefits to be derived hereby, the
Parties agree as follows:
1.
Definition of Certain
Terms
. The words and terms defined in this Section-1, whenever
used in this Agreement, shall have the respective meanings indicated below for
all purposes of this Agreement.
“Accredited
Investor” has the meaning set forth in Regulation D promulgated under the
Securities Act.
“Affiliate”
has the meaning set forth in Rule 12b-2 of the regulations promulgated under the
Exchange Act.
“Amended
and Restated Articles of Incorporation” means the amended and restated articles
of incorporation of the Company in the form annexed as
Exhibit
A
.
“Basis”
means any past or present fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction that forms or could form the basis for any specified
consequence.
“Buyer”
has the meaning set forth in the preface above.
“Closing”
has the meaning set forth in Section 2(c) below.
“Closing
Date” has the meaning set forth in Section 2(c) below.
“Code”
means the Internal Revenue Code of 1986.
“Data
Laws” means laws, regulations, guidelines, and rules in any jurisdiction
(federal, state, provincial, or local) applicable to data privacy, data
security, and/or personal information
“Disclosure
Schedule” has the meaning set forth in Section 3 and 4 below.
“Employee
Benefit Plan” has the meaning as such term is defined in ERISA Section 3(3) and
any other employee benefit plan, program or arrangement of any
kind.
“Environmental,
Health, and Safety Requirements” shall mean, as amended and as now and hereafter
in effect, all federal, state, local, and foreign statutes, regulations,
ordinances, and other provisions having the force or effect of law, all judicial
and administrative orders and determinations, all contractual obligations, and
all common law concerning public health and safety, worker health and safety,
pollution, or protection of the environment, including, without limitation, all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances, or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation.
“ERISA”
means the Employee Retirement Income Security Act of 1974.
“Exchange
Act” means the Securities Exchange Act of 1934.
“Financial
Statements” has the meaning set forth in Section 3(f) below.
“Free Cash
Flow” means the cash flow provided by operating activities calculated in
accordance with GAAP, less capital expenditures, plus the net proceeds from
the sale of the Company’s equity securities excluding the sale of the Series C
shares under this Agreement.
“GAAP”
means United States generally accepted accounting principles as in effect from
time to time, consistently applied.
“HC” means
Harris Cramer LLP with offices located at 1555 Palm Beach Lakes Boulevard, Suite
310, West Palm Beach, Florida 33401.
“Intellectual
Property” means all of the following in any jurisdiction throughout the world:
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all advertising and promotional
materials, (h) all other proprietary rights, and (i) all copies and tangible
embodiments thereof (in whatever form or medium).
“Knowledge”
means information which a person, after reasonable investigation, knows or
should know. Knowledge of the Company includes its Subsidiaries and each of
their respective officers, directors, employees and managers regardless of
whether the information came (or should have come) to the person’s attention in
an official capacity.
“Liability”
or “Liabilities” means any liability or obligation of whatever kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for
Taxes.
“Lien”
means any mortgage, pledge, lien, encumbrance, charge, or other security
interest.
“Material
Adverse Effect” or “Material Adverse Change” means any effect or change that
would be (or could reasonably be expected to be) materially adverse to the
business, assets, condition (financial or otherwise), operating results,
operations, management or business prospects of the Company, or to the ability
of the Company to consummate timely the transactions contemplated hereby
(regardless of whether or not such adverse effect or change can be or has been
cured at any time or whether the Buyer has Knowledge of such effect or change on
the date hereof), including any adverse change, event, development, or effect
arising from or relating to (a) general business or economic conditions,
including such conditions related to the business of the Company and its
Subsidiaries, (b) national or international political or economic conditions,
including the engagement by the United States in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack upon the United States, or any of its
territories, possessions, or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States, (c) financial,
banking, credit or securities markets, (e) changes in laws, rules, regulations,
orders, or other binding directives issued by any governmental entity, and (f)
the taking of any action contemplated by this Agreement and the other agreements
contemplated hereby.
“Most
Recent Balance Sheet” means the balance sheet contained within the Most Recent
Financial Statements.
“Most
Recent Financial Statements” has the meaning set forth in Section 3(f)
below.
“Most
Recent Fiscal Month End” has the meaning set forth in Section 3(f)
below.
“Most
Recent Fiscal Year End” has the meaning set forth in Section 3(f)
below.
“New York
Litigation” means Celeste Trust Reg., Esquire Trade, et. al. v. CBQ, Inc.,
pending in the U.S. District Court for the Southern District of New
York.
“Ordinary
Course of Business” means the ordinary course of business consistent with past
custom and practice (including with respect to quantity and
frequency).
“Party”
has the meaning set forth in the preface above.
“Person”
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, any other business entity, or a governmental entity
(or any department, agency, or political subdivision thereof).
“Related
Party Indebtedness” has the meaning set forth in Section 3(dd)
below.
“SEC”
means the Securities and Exchange Commission.
“SEC
Documents” means any report, registration statement or any other document filed
or required to be filed with the SEC.
“Securities
Act” means the Securities Act of 1933.
“Security Interest” means any mortgage,
pledge, lien, encumbrance, charge, or other security interest, other than (a)
mechanic’s, materialmen’s, and similar liens, (b) liens for taxes not yet due
and payable, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of
money.
“Series B” means the Company’s Series B
Convertible Preferred Stock.
“Series B-1” means the Company’s Series
B-1 Convertible Preferred Stock as described in the Amended and Restated
Articles of Incorporation.
“Series C” means the Company’s Series C
Convertible Preferred Stock as described in the Amended and Restated Articles of
Incorporation.
“Subsidiaries”
means Capstone Industries, Inc., a Florida corporation, Black Box Innovations,
L.L.C., a Florida limited liability company, and Souvenir Direct, Inc., a
Florida corporation.
“Tax” or
“Taxes” means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code §59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not and including any obligations to
indemnify or otherwise assume or succeed to the Tax liability of any other
Person.
“Tax
Return” means any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
2.
Purchase and
Sale
.
(a)
Sale and Purchase of
Shares
. On the terms and subject to the conditions of this
Agreement, the Company agrees to sell and transfer to the Buyer, and the Buyer
agrees to purchase from the Company, a number of Series C shares upon payment of
the purchase price as described in Section 2(b) below. The number of Series C
shares shall be 1,000 which shall be convertible into 67,979.425 shares of
common stock per share of Series C or if all Series C are converted
67,979,425 shares of common stock.
(b)
Purchase
Price
. In consideration of the transfer of the Series C shares
to the Buyer and the other undertakings set forth in this Agreement, the Buyer
agrees to pay to the Company an amount of $700,000 in good funds on deposit (the
“Purchase Price”).
3.
Representations and
Warranties of the Company
. The Company represents and warrants
to the Buyer that the statements contained in this Section 3 are true, correct
as of the date of this Agreement and will be true, correct and complete as of
the Closing Date, except as set forth in the Disclosure Schedule, which will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3. The representations throughout this
Section 3 which are made by the Company also shall apply to its
Subsidiaries.
(a)
Organization, Qualification
and Corporate Power
. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Florida. Except as set forth in the
Section 3(a) of the
Disclosure Schedule
, the Company is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a Material Adverse Effect on the Company or on the ability of the Parties
to consummate the transactions contemplated by this Agreement. The
Company has full corporate power and authority to carry on the businesses in
which it is engaged and to use the properties owned by it.
(b)
Subsidiaries
.
Section 3(b) of the
Disclosure Schedule
sets forth for each Subsidiary of the Company (i) its
name and jurisdiction of incorporation, (ii) the number of authorized shares for
each class of its capital stock, (iii) the number of issued and outstanding
shares of each class of its capital stock, the names of the holders thereof, and
the number of shares held by each such holder, and (iv) the number of shares of
its capital stock held in treasury. All of the issued and outstanding
shares of capital stock of each Subsidiary of the Company have been duly
authorized and are validly issued, fully paid, and non-assessable. The Company
holds all of the outstanding shares of each, free and clear of any restrictions
on transfer (other than restrictions under the Securities Act and state
securities laws), Taxes, Liens, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
any of its Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock of any of its Subsidiaries or that could require any Subsidiary of the
Company to issue, sell, or otherwise cause to become outstanding any of its own
capital stock. There are no outstanding stock appreciation rights, phantom
stock, profit participation, or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of the
Company.
(c)
Capitalization
.
Section 3(c) of the
Disclosure Schedule
sets forth the number of authorized and outstanding
securities of the Company. Except as set forth in
Schedule 3(c) of the
Disclosure Schedule
, all of the issued shares of capital stock of the
Company have been duly authorized and are validly issued, fully paid, and
nonassessable. Except as set forth in
Section 3(c) of the
Disclosure Schedule,
there are not any outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other contracts or commitments that could require the Company to
issue, sell or otherwise cause to become outstanding any of the securities of
the Company. There are not any outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any securities of the
Company.
(d)
Authorization of
Transaction
. The Company has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Company, enforceable
in accordance with its terms. The execution, delivery, and performance of this
Agreement and all other agreements contemplated hereby have been duly authorized
by the Company.
(e)
Noncontravention
. Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
Certificate is subject or any provision of the articles of incorporation or
bylaws of the Company or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Company is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Security
Interest would not have a Material Adverse Effect on the Company or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement. Other than the filing of a Form D with the SEC, the
Company is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a Material Adverse Effect
with regard to the Company or on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(f)
Financial
Statements
. Attached hereto as
Section 3(f) of the
Disclosure Schedule
are the following financial statements (collectively
the “Financial Statements”): (i) audited consolidated balance sheets and
statements of operations, changes in stockholders’ equity, and cash flow as of
and for the fiscal years ended December 31, 2008 and 2007 (with 2008 being the
“Most Recent Fiscal Year End”) for the Company; and (ii) unaudited consolidated
balance sheets and statements of operations, and cash flow (the “Most Recent
Financial Statements”) as of and for the period ended March 31, 2009 (the “Most
Recent Fiscal Month End”) for the Company. The Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP throughout the
periods covered thereby, present fairly the financial condition of the Company
as of such dates and the results of operations of the Company for such periods,
are correct and complete, and are consistent with the books and records of the
Company (which books and records are correct and complete);
provided
,
however
, that the
Most Recent Financial Statements are subject to normal year-end adjustments
(which will not be material individually or in the aggregate) and lack footnotes
and other presentation items.
(g)
Material
Changes
. Since the Most Recent Fiscal Year End and except as
set forth in
Section
3(g) of the Disclosure Schedule
, (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any Liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) Liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made
any distribution of cash or other property to its directors or
officers and (v) the Company has not issued any equity securities to any
officer, director or Affiliate. Except for the issuance of the shares
contemplated by this Agreement or as set forth on
Section 3(g) of the
Disclosure Schedule
, no event, Liability or development has occurred or
exists with respect to the Company or their respective business, properties,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws at the time this representation is
made.
(h)
Undisclosed
Liabilities
. Except as listed in
Section 3(h) of the
Disclosure Schedule
, neither the Company nor its Subsidiaries has any
accrued, contingent or other Liabilities of any nature, either matured or
unmatured (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any liability), except for (i) Liabilities set forth
on the face of the Most Recent Financial Statements (rather than in any notes
thereto) and (ii) Liabilities which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of
law).
(i)
Litigation
.
Section 3(i) of the
Disclosure Schedule
sets forth each instance in which the Company and its
Subsidiaries (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency including any arbitration or mediation proceeding of any
federal, state, local, or foreign jurisdiction, except where the injunction,
judgment, order, decree, ruling, action, suit, proceeding, hearing, or
investigation would not have a Material Adverse Effect with regard to the
Company or its Subsidiaries.
(j)
Legal
Compliance
. Except as set forth in
Section 3(j) of the
Disclosure Schedule
, each of the Company, its Subsidiaries and their
respective predecessors and Affiliates is in compliance with all applicable
laws; including, ordinances, rules, regulations, judgments, orders and decrees
of any governmental entity applicable to it, its properties or other assets or
its business or operations , except for instances of noncompliance or possible
noncompliance that individually or in the aggregate have not had and could not
reasonably be expected to have a Material Adverse Effect. The Company
has in effect all approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits, easements, variances, exceptions, consents,
approvals, orders and rights of or with all governmental entities necessary for
it to own, lease or operate its properties and assets and to carry on its
business and operations as presently conducted, except for failures to have in
effect such permits that individually or in the aggregate have not had and could
not reasonably be expected to have a Material Adverse Effect. There has occurred
no default under, or violation of, any such permit, except individually or in
the aggregate as has not had and could not reasonably be expected to have a
Material Adverse Effect.
(k)
Labor
Relations
. No material labor dispute exists or, to the
Knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect. The Company’s employees are not members of a union that
relates to such employee’s relationship with the Company, and the Company is not
a party to a collective bargaining agreement, and the Company believes that its
relationship with its employees is good. No officer of the Company,
is or is expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such officer does not subject the
Company to any Liability with respect to any of the foregoing matters. The
Company is in compliance with all U.S. federal, state, local and foreign laws
and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(l)
Benefit
Plans
. Except as listed in
Section 3(l) of the
Disclosure Schedule
, neither the Company nor its Subsidiaries has adopted
any employee benefit plans.
(i) All
such employee benefit plans (and each related trust, insurance contract, or
fund) has been maintained, funded and administered in accordance with the terms
of such employee benefit plan and the terms of any applicable collective
bargaining agreement and complies in form and in operation in all respects with
the applicable requirements of ERISA, the Code, and other applicable
laws.
(ii) All
required reports and descriptions (including Form 5500 annual reports, summary
annual reports, and summary plan descriptions) have been timely filed and/or
distributed in accordance with the applicable requirements of ERISA and the Code
with respect to each such employee benefit plan.
(iii) All
contributions (including all employer contributions and employee salary
reduction contributions) that are due have been made within the time periods
prescribed by ERISA and the Code to each such employee benefit plan and all
contributions for any period ending on or before the Closing Date that are not
yet due have been made to each such employee benefit plan or accrued in
accordance with the past custom and practice of the Company or its Subsidiaries,
as applicable.
(iv) Each
such employee benefit plan that is intended to meet the requirements of a
"qualified plan" under Code Section 401(a) has received a determination from the
Internal Revenue Service that such employee benefit plan is so qualified, and
nothing has occurred since the date of such determination that could adversely
affect the qualified status of any such employee benefit plan. All such employee
benefit plans have been timely amended for all such requirements and have been
submitted to the Internal Revenue Service for a favorable determination letter
within the latest applicable remedial amendment period.
(v) There
have been no prohibited transactions (as defined in the Code and ERISA) with
respect to any such employee benefit plan. No fiduciary has any liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such employee benefit
plan. No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such employee benefit plan
(other than routine claims for benefits) is pending or, to the Knowledge of the
Company. The Company has no Knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
(vi) The
Company has delivered to the Buyer correct and complete copies of the Company
and its Subsidiaries plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent annual report (Form 5500, with all applicable attachments), and all
related trust agreements, insurance contracts, and other funding arrangements
that implement each such employee benefit plan.
(vii) Neither
the Company nor its Subsidiaries has any obligation to contribute to, or have
any Liability under or with respect to, any employee benefit plan. No asset of
the Company or its Subsidiaries is subject to any Lien under ERISA or the
Code.
(m)
Tax
Matters
. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company has filed all necessary federal, state and foreign income
and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no Knowledge of a tax deficiency which has been
asserted or threatened against the Company. The Internal Revenue
Service has reviewed the 2006 Form 1065 of Complete Power Solutions, LLC and
made no adjustments to that Tax Return.
(n)
Contracts
.
Section 3(n) of the
Disclosure Schedule
lists all written contracts and any oral agreements
to which the Company and its Subsidiaries is a party, the performance of which
will involve consideration in excess of $50,000 and any agreement under which
the consequences of a default or termination could have a Material Adverse
Effect. The Company has delivered to the Buyer a correct and complete
copy of each contract or other agreement listed in
Section 3(n) of the
Disclosure Schedule
and a written summary setting forth the terms and
conditions of each oral agreement referred to in
Section 3(n) of the
Disclosure Schedule
. With respect to each such agreement: (i)
the agreement is legal, valid, binding, enforceable, and in full force and
effect; (ii) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (iii) no party is in
breach or default, and no event has occurred that with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (iv) no party has repudiated any
provision of the agreement.
(o)
Intellectual
Property
.
Section 3(o) of the
Disclosure Schedule
identifies all Intellectual Property including
patents, patent applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and other
intellectual property rights and similar rights necessary or material for use in
connection with the Company’s business. The Company has not received
a notice (written or otherwise) that the Intellectual Property rights used by
the Company violates or infringes upon the rights of any Person. To the
Knowledge of the Company, all such Intellectual Property rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property rights. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property, except where failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(p)
Tangible
Assets
. The Company owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of their
businesses as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(q)
Transactions with
Affiliates
. Except as set forth in
Section 3(q) of the
Disclosure
Schedule
, none of the officers or directors of the Company and, to the
Knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $50,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee
benefits.
(r)
Powers of
Attorney
. There are no outstanding powers of attorney executed
on behalf of the Company or its Subsidiaries.
(s)
Questionable
Payments
. None of the Company, its Subsidiaries or any of their owners,
directors, or officers has used any funds of the Company or its Subsidiaries for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, or made any director or indirect unlawful payments to
government officials or employees from corporate funds, or established or
maintained any unlawful or unrecorded funds.
(t)
Product
Liability
. Neither the Company nor its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
it giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by either.
(u)
Guaranties
. Neither
the Company nor its Subsidiaries is a guarantor or otherwise liable for any
Liability or obligation (including indebtedness) of any other
Person.
(v)
Brokers’
Fees
. Neither the Company nor its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement.
(w)
Environmental, Health, and
Safety Matters
(i) To
the Company’s Knowledge, the Company is in compliance with
Environmental, Health, and Safety Requirements, except for such noncompliance as
would not have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company has obtained and complied with, and is
in compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health and Safety Requirements for the
occupation of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations (if any) are set forth on
Section 3(w)(i) of the
Disclosure Schedule
.
(ii) The
Company has not received any written notice, report or other information
regarding any actual or alleged material violation of Environmental, Health, and
Safety Requirements, or any material Liabilities or potential material
Liabilities, whether accrued, absolute, contingent, unliquidated or otherwise,
including any investigatory, remedial or corrective obligations, relating to the
Company or its facilities arising under Environmental, Health, and Safety
Requirements, the subject of which would have a Material Adverse
Effect.
(iii) Except
as set forth in
Section 3(w)(iii) of the
Disclosure Schedule
, the present and former activities of the Company
comply and have always complied in all material respects with all applicable
environmental laws.
(x)
Real
Property
. The Company does not own any real
property.
Section 3(x) of the
Disclosure Schedule
lists and describes briefly all real property leased
or subleased to the Company and/or its Subsidiaries. The Company has
delivered to the Buyer or its counsel correct and complete copies of the leases
and subleases listed in
Section 3(x) of the
Disclosure Schedule
. With respect to each lease and sublease
listed in
Section 3(x)
of the Disclosure Schedule
, except as otherwise stated
therein:
(i) the
lease or sublease is legal, valid, binding, enforceable, and in full force and
effect in all material respects;
(ii) the
transactions contemplated by this Agreement do not require the consent of any
other party to such lease will not result in a breach of or default under such
Lease, and will not otherwise cause such lease to cease to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing;
(iii) to
the Knowledge of the Company no party to the lease or sublease is in material
breach or material default, and, to its Knowledge, no event has occurred which,
with notice or lapse of time, would constitute a material breach or material
default or permit termination, modification, or acceleration
thereunder;
(iv) to
the Knowledge of the Company, no party to the lease or sublease has repudiated
any material provision thereof;
(v) there
are no material disputes, oral agreements, or forbearance programs in effect as
to the lease or sublease;
(vi) Neither
the Company nor its Subsidiaries has assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or subleasehold;
and
(vii) all
facilities leased or subleased thereunder have received all approvals of
governmental authorities (including material licenses and permits) required in
connection with the operation thereof, except where the lack of such approvals,
licenses or permits would not have a Material Adverse Effect with regard to the
Company and its Subsidiaries, and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all material
respects.
(y)
Customers and
Suppliers
.
(i)
Section 3(y)(i) of the
Disclosure Schedule
lists the five largest customers of the Company for
2007, 2008 and 2009 (through the date of this Agreement, or the Closing, as
applicable) and also any other potential customers which the Company believes,
based on projections it has supplied to the Buyer, will be one of the five
largest customers for 2009.
Section 3(y)(i) of the
Disclosure Schedule
sets forth opposite the name of each such customer
the percentage of net sales attributable to such customer.
(ii) Since
the date of the Most Recent Balance Sheet, no material supplier of the Company
has indicated that it shall stop, or materially decrease the rate of, supplying
materials, products or services to the Company, and no customer listed on
Section 3(y)(i) of the
Disclosure Schedule
has indicated that it shall stop, or materially
decrease the rate of, buying materials, products or services from the
Company.
(z)
Insurance
. The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company is engaged. The Company has no reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a significant
increase in cost. With respect to each such insurance policy: (i) the
policy is legal, valid, binding, enforceable, and in full force and effect; (ii)
the policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) neither the Company, nor any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred that, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (iv) no party
to the policy has repudiated any provision thereof.
(cc)
SEC
Reports
. Since January 1, 2007, the Company has timely made
all filings with the SEC that it has been required to make under the Securities
Act and the Exchange Act. To the Knowledge of the Company, all documents
required to be filed as exhibits to the SEC Documents have been so filed, and
all material contracts so filed as exhibits are in full force and effect, except
those which have expired in accordance with their terms, and neither the Company
nor its Subsidiaries is in material default with respect to such contracts. To
the Knowledge of the Company, each of the SEC Documents has complied in all
material respects with the Securities Act and Exchange Act in effect as of their
respective dates. To the Knowledge of the Company, none of the SEC Documents, as
of their respective dates, contained any untrue statements of a material fact or
omitted to state a material fact required to be stated herein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(dd)
Related Party
Indebtedness
.
Section 3(dd) of the
Disclosure Schedule
sets forth the Related Party Indebtedness of the
Company and its Subsidiaries. For the purposes of this Agreement,
“Related Party Indebtedness” shall mean any Liabilities owed to any director,
officer or Affiliate of the Company.
(ee)
Disclosure
. The
representations and warranties contained in this Section 3 do not contain any
untrue statements of a material fact or omit to state any material fact
necessary in order to make the statements and information contained in this
Section 3 not misleading.
4.
Representations and
Warranties of the Buyer
.
The Buyer represents and warrants to
the Company that the statements contained in this Section 4 are true, correct
and complete in all material respects as of the Closing Date and will be true,
correct and complete in all material respects as of the Closing Date, except as
set forth in the Disclosure Schedule, which will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
4.
(a)
Authorization of
Transaction
. The Buyer has full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. The execution, delivery,
and performance of this Agreement and all other agreements contemplated hereby
have been duly authorized by the Buyer.
(b)
Non-contravention
.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its charter, bylaws, or other governing
documents or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets are
subject.
(c)
Brokers’ Fees.
The
Buyer has no Liability to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
the Company could become liable or obligated.
(d)
Own
Account
. The Buyer understands that the shares are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the shares as principal for its
own account and not with a view to or for distributing or reselling such shares
or any part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such shares in
violation of the Securities Act or any applicable state securities law and has
no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such shares in violation of the
Securities Act or any applicable state securities law. The Buyer
shall not engage in any short sale of any Company securities during the first
two years immediately preceding the date first written above.
(e)
Experience of the
Buyer
. The Buyer has such, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the shares, and has so evaluated the merits and risks
of such investment. The Buyer is able to bear the economic risk of an
investment in the shares and, at the present time, is able to afford a complete
loss of such investment. The Buyer shall complete a written, signed
investor questionnaire and submit the same to the Company at the Closing in
order to document its status as an “accredited investor” under Rule 501(a) of
Regulation D.
(f)
Accredited Investor
Status
. As of the date of this Agreement, the Buyer is and on
the Closing Date, the Buyer will be an “accredited investor” as defined in Rule
501(a) under the Securities Act.
5.
Pre-Closing
Covenants
.
The Parties agree as follows with
respect to the period between the execution of this Agreement and the
Closing:
6.
Conditions to Obligation to
Close
.
(a)
Conditions to Obligation of
the Buyer to Close
. The obligation of the Buyer to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(i) the
representations and warranties of the Company contained in Section 3 shall be
true and correct in all material respects as of the Closing;
(ii) the
Company shall have performed and complied with all covenants, obligations and
conditions contained in this Agreement in all material respects through the
Closing;
(iii) the
delivery by the Company of the items set forth in Section 2(d) of this
Agreement;
(iv) there
shall not be any injunction, judgment, order, decree, ruling, or charge in
effect preventing consummation of any of the transactions contemplated by this
Agreement;
(v) the
Company shall have executed and delivered to the Buyer a certificate to the
effect that each of the conditions specified above in this Section 6(a)(i)-(iv)
are satisfied in all material respects;
(vi) the
Company shall have executed and delivered to the Buyer an opinion from the
Company’s counsel substantially in the form attached hereto as
Exhibit B
, addressed
to the Buyer, and dated as of the Closing Date;
(vii) the
Board of Directors of the Company shall have no more than seven directors of
which the Buyer shall have the right to designate two directors;
(viii) the
Company’s common stock shall continue to be listed on the Over-the-Counter
Bulletin Board;
(ix) the
Company shall have filed the Amended and Restated Articles of Incorporation with
the Florida Department of State;
(x)
Prior
to the Closing, the Company shall have settled the New York Litigation, and in
any event, if there has not been a settlement of the New York Litigation, the
Company or one of its affiliates shall provide for indemnification by an
agreement that is satisfactory to the Buyer in its sole discretion;
(xi) all
of Related Party Indebtedness owed to officers, directors and Affiliates of the
Company, as disclosed on
Section 3(cc) of the
Disclosure Schedule
shall be extended to no earlier than January 1,
2010;
(xii) the
Company shall authorize the issuance of Series B-1 to Howard Ullman and Stewart
Wallach in lieu of the Series B in accordance with a separate agreement of which
a copy is attached as
Exhibit
C
.
(xiii) all
actions to be taken by the Company in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the Buyer.
The Buyer
may waive any condition specified in this Section 6(a) if it executes a writing
so stating at or prior to the Closing.
(b)
Conditions to Obligations of
the Company to Close
. The obligation of the Company to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the
representations and warranties of the Buyer contained in Section 4 shall be true
and correct in all material respects as of the Closing;
(ii) the
Buyer shall have performed and complied with all covenants, obligations and
conditions contained in this Agreement through the Closing;
(iii) the
delivery by the Buyer of the items set forth in Section 2(d) of this
Agreement;
(iv) the
Buyer shall have delivered to the Company a certificate to the effect that each
of the conditions specified above in this Section 6(b)(i)-(iii) is satisfied in
all respects; and
(v) all
actions to be taken by the Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to the Company.
The
Company may waive any condition specified in this Section 6(b) if it executes in
writing so stating at or prior to the Closing.
(b)
Use of
Proceeds
. The Company shall use the net proceeds from the sale
of the shares for working capital purposes and shall not use such proceeds for
the satisfaction of any portion of the Company’s indebtedness including Related
Party Indebtedness (other than payment of trade payables in the Ordinary Course
of Business) or to, directly or indirectly, make any payments to any officer,
director, manager or Affiliate of the Company.
(c)
Participation in Future
Financing
.
(i) For
two years from the date hereof, upon any issuance by the Company of equity
securities or securities convertible into equity securities in a private
placement offering not registered under the Securities Act (a
“Subsequent Financing”), the Buyer shall have the right to participate in up to
an amount of the Subsequent Financing equal to 50% of the Subsequent Financing
on the same terms, conditions and price provided for in the Subsequent
Financing. Guarantees of debt financing or instruments evidencing
guarantees of debt shall not be deemed “equity securities” or “securities
convertible into equity securities” of the Company for purposes of
this Section 7(c).
(ii) At
least 10 business days prior to the closing of the Subsequent Financing, the
Company shall deliver to the Buyer a written notice of its intention to effect a
Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask the Buyer if it
wants to review the details of such financing (such additional notice, a
“Subsequent Financing Notice”). The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder and the Person or
Persons through or with whom such Subsequent Financing is proposed to be
effected and shall include a term sheet or similar document relating thereto as
an attachment.
(iii) If
the Buyer desires to participate in the Subsequent Financing, it must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the seventh day after the Buyer has received the Pre-Notice, that the Buyer
is willing to participate in the Subsequent Financing on the terms and
conditions set forth in the Pre-Notice, the amount of the Buyer’s participation,
and that the Buyer has such funds ready, willing, and available for investment
on the terms set forth in the Subsequent Financing Notice. If the
Company receives no notice from the Buyer as of the seventh day, the Buyer shall
be deemed to have notified the Company that it does not elect to
participate.
(iv) The
Company must provide the Buyer with a second Subsequent Financing Notice, and
the Buyer will again have the right of participation set forth above in this
Section 7(c), if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 60 days after the date of the initial
Subsequent Financing Notice.
(d)
Board of
Directors
. The Buyer shall have the right to designate two
members of the Company’s Board of Directors which shall consist of no more than
seven persons total.
(e)
Key Man Life
Insurance
. Within 14 days after the Closing Date, the Company
shall obtain key man life insurance for the life of Stewart Wallach, the
Company’s Chief Executive Officer, in the amount of $700,000. The Buyer shall be
the beneficiary of the policy. The Company shall maintain such
insurance for the two year period commencing at 12:01 a.m., local Miami, Florida
time, on the date of the legal transfer of the Series C by the Company to the
Buyer (the “Transfer Date”) and ending at 12:01 a.m., local Miami, Florida time,
on the date immediately following the second anniversary of the Transfer
Date. If the Company does not obtain the key man life insurance as
required pursuant to this Section 7(e), the Buyer shall have the right to
rescind the purchase of the Series C shares pursuant to this Agreement. Within
ten (10) days following the receipt of notice of exercise of such right of
recission, the Company shall refund the Purchase Price to the Buyer, provided
that the Buyer promptly returns the original certificates evidencing the shares
of Series C to the Company.
(f)
Increase in Authorized
Capital
. Within 60 days after the Closing Date, the Company
will use its best efforts to ensure that all of the outstanding shares of common
stock and all of the shares of common stock issuable under securities issued and
to be issued by the Company, including the shares of common stock underlying the
Series C, have been properly authorized. If such actions have not
been completed within 60 days after the Closing Date, the Company shall pay the
Buyer $2,500 each day until such time as the foregoing is completed, provided
that if the Company has used and is continuing to use its best efforst to
complete such actions, the $2,500 daily payment shall not apply until 90
days after the Closing Date.
(g)
Issuance of
Securities
. The Company shall not issue shares of common
stock, or any securities convertible or exercisable into or exchangeable for
shares of common stock (“Derivative Securities”) unless it has sufficient
authorized common stock to permit the common stock to be issued
and all Derivative Securities to be lawfully exercised as of the time
of the issuance of the common stock or the Derivative Securities.
(h)
Related Party
Debt
. The Company shall only pay Related Party Indebtedness
(as the same may be extended, modified or renewed) from Free Cash
Flow.
8.
Remedies for Breaches of
This Agreement
.
(b)
Indemnification
Provisions.
(i) In
the event the Company breaches (or in the event any third party alleges facts
that, if true, would mean the Company has breached) any of its representations,
warranties, or covenants contained herein and, provided that the Buyer make a
written claim for indemnification against the Company, then the Company shall be
obligated to indemnify the Buyer from and against the entirety of any and all
claims, losses, deficiencies, liabilities, obligations, damages, penalties,
punitive damages, costs, and expenses (including, without limitation, reasonable
legal, accounting and consulting fees) the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or the
alleged breach).
(ii) In
the event the Buyer breaches (or in the event any third party alleges facts
that, if true, would mean the Buyer has breached) any of its representations,
warranties, or covenants contained herein and, provided that the Company makes a
written claim for indemnification against the Buyer, then the Buyer shall be
obligated to indemnify the Company from and against the entirety of any and all
claims, losses, deficiencies, liabilities, obligations, damages, penalties,
punitive damages, costs, and expenses (including, without limitation, reasonable
legal, accounting and consulting fees) the Company may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or the
alleged breach).
(c)
Procedure for Third Party
Claims
. For the purpose of this Section 8(c), the Party
obligated to provide indemnification is referred to as the “Indemnifying Party”
and the Party receiving indemnification is referred to as the “Indemnified
Party.”
(i) Notice
to the Indemnifying Party shall be given promptly after receipt by the
Indemnified Party of actual notice of the commencement of any action or the
assertion of any claim that will likely result in a claim by it for indemnity
pursuant to this Agreement. Such notice shall set forth in reasonable
detail the nature of such action or claim to the extent known, and include
copies of any written correspondence or pleadings from the Indemnified Party
asserting such claim or initiating such action. The failure of an
Indemnified Party to provide such prompt notice shall not affect the Indemnified
Party’s right to indemnification or contribution hereunder to the extent that
such failure does not materially prejudice the ability to defend such
proceeding.
(ii) The
Indemnifying Party shall be entitled, at its own expense, to assume or
participate in the defense of such action or claim and may select counsel for
the Indemnified Party, subject to the consent of the Indemnified Party which
shall not be unreasonably withheld, and shall pay all fees and expenses of
counsel and, where applicable, local counsel to represent the Indemnified
Party.
(iii) Both
the Indemnifying Party and the Indemnified Party shall cooperate fully with one
another in connection with the defense, compromise, or settlement of any such
claim or action, including, without limitation, by making available to the other
all pertinent information and witnesses within its control. The
Indemnified Party shall not have the right to settle or compromise any claim
against it. The Indemnifying Party shall have the right to settle or
compromise any claim against the Indemnified Party without the consent of the
Indemnified Party provided that the terms of the settlement or compromise
provide for the unconditional release of the Indemnified Party and require the
payment of monetary damages only.
(iv) In
order to provide for just and equitable contribution, if a claim for
indemnification is made but it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) that such indemnification
may not be enforced, even though the express provisions under this Agreement
provide for indemnification under the circumstances, then the Indemnifying Party
shall contribute to the losses to which the Indemnified Party may be subject (i)
in accordance with the relative benefits received by the Indemnifying Party, on
the one hand, and the Indemnified Party, on the other hand, where applicable,
and (ii) if (and only if) the allocation provided in clause (i) of this sentence
is not permitted by applicable law, in such proportion as to reflect not only
the relative benefits, but also the relative fault of the Indemnifying Party, on
the one hand, and the Indemnified Party, on the other hand, in connection with
the statements, acts or omissions which resulted in such losses as well as any
relevant equitable considerations. No Party found liable for a
fraudulent misrepresentation shall be entitled to contribution from any Party
who is not also found liable for fraudulent misrepresentation. The
relative benefits received (or anticipated to be received) by the Indemnifying
Party shall be deemed to be equal to the Purchase Price specified under Section
2(b) above.
(v) Neither
termination nor the Closing of this Agreement shall affect this Section 8 which
shall remain operative and in full force and effect. These
indemnification provisions shall be binding upon the Indemnifying Party and its
successors and assigns and shall inure to the benefit of the Indemnified Party
and their respective successors, assigns, heirs and personal
representatives.
9.
Termination of
Agreement
.
(a) The
Parties may terminate this Agreement as provided below:
(i) The
Buyer and the Company may terminate this Agreement by mutual written consent at
any time prior to the Closing;
(ii) The
Buyer may terminate this Agreement by giving written notice to the Company at
any time prior to the Closing (A) in the event that the Company has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, the Buyer has notified the Company of the breach, and the
breach has continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing shall not have occurred on or before July 15, 2009,
by reason of the failure of any condition precedent under Section 6 hereof
(unless the failure results primarily from the Buyer breaching any
representation, warranty, or covenant contained in this Agreement);
and
(iii) The
Company may terminate this Agreement by giving written notice to the Buyer at
any time prior to the Closing (A) in the event the Buyer has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, the Company has notified the Buyer of the breach, and the
breach has continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing shall not have occurred on or before July 15, 2009
by reason of the failure of any condition precedent under Section 6 hereof
(unless the failure results primarily from the Company breaching any
representation, warranty, or covenant contained in this Agreement).
To the
Company: CHDT
Corporation
350 Jim Moran Boulevard, Suite
120
Deerfield Beach, FL 33442
Facsimile: (954)
252-3442
Attention: Mr. Stewart
Wallach
With a
Copy
to: Paul
Richter3901 Dominion Townes Circle
Richmond, VA 23223
To the
Buyer: Involve
LLC
℅ Harris Cramer LLP
1555 Palm Beach Lakes
Boulevard
Suite 310
West Palm Beach, FL 33401
Facsimile: (561)
659-0701
or to such
other address as any of them, by notice to the other may designate from time to
time. The transmission confirmation receipt from the sender’s
facsimile machine shall be evidence of successful facsimile
delivery. Time shall be counted from the date of
transmission.
Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(k)
Expenses
.
The Buyer and
the Company shall bear their own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(l)
Construction
.
The Parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
IN WITNESS
WHEREOF, the Parties hereto have executed this Agreement as of the date first
above written
CHDT CORPORATION
________________________________ By:
Stewart
Wallach, Chief Executive Officer
INVOLVE LLC
________________________________ By: