Exhibit 10.22

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of October 21, 2016,
by and between Mechanical Technology, Incorporated, a New York corporation
located at 325 Washington Avenue Extension, Albany, New York 12205 (the
“Company”), and Brookstone Partners Acquisition XXIV, LLC, a Delaware limited
liability company located at 122 East 42nd Street, Suite 4305, New York, New
York 10168 (the “Buyer”).

WHEREAS:

A.        The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the 1933 Act.

B.        The Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and subject to the conditions stated in this Agreement, an aggregate of
3,750,000 shares (the “Common Shares”) of the Company’s common stock, par value
$0.01 per share (the “Common Stock”).

C.        Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement) under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

NOW, THEREFORE, the Company and the Buyer hereby agree as follows:

1.                  PURCHASE AND SALE OF COMMON SHARES.

(A)                PURCHASE AND SALE OF COMMON SHARES.

(I)                 PURCHASE OF COMMON SHARES. SUBJECT TO THE SATISFACTION (OR
WAIVER, TO THE EXTENT LEGALLY PERMISSIBLE) OF THE CONDITIONS SET FORTH IN
SECTIONS 6 AND 7, THE COMPANY SHALL ISSUE AND SELL TO THE BUYER, AND THE BUYER
AGREES TO PURCHASE FROM THE COMPANY ON THE CLOSING DATE (AS DEFINED BELOW), THE
COMMON SHARES (THE “CLOSING”).

(II)               CLOSING. THE DATE AND TIME OF THE CLOSING (THE “CLOSING
DATE”) SHALL BE 10:00 A.M., NEW YORK CITY TIME, ON THE DATE HEREOF (OR SUCH
OTHER DATE AND TIME AS IS MUTUALLY AGREED TO BY THE COMPANY AND THE BUYER) AFTER
THE SATISFACTION (OR WAIVER, TO THE EXTENT LEGALLY PERMISSIBLE) OF THE
CONDITIONS TO THE CLOSING SET FORTH IN SECTIONS 6 AND 7, AT THE OFFICES OF
OLSHAN FROME WOLOSKY LLP, 1325 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019.

 

 

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(III)             PURCHASE PRICE. THE AGGREGATE PURCHASE PRICE FOR THE COMMON
SHARES TO BE PURCHASED BY THE BUYER AT THE CLOSING SHALL BE $2,737,500 (THE
“PURCHASE PRICE”) WHICH EQUATES TO APPROXIMATELY $0.73 PER COMMON SHARE.

(IV)             FORM OF PAYMENT. ON THE CLOSING DATE, AFTER ALL CLOSING
CONDITIONS SET FORTH IN SECTIONS 6 AND 7 HAVE BEEN SATISFIED (OR WAIVED, TO THE
EXTENT LEGALLY PERMISSIBLE), THE BUYER SHALL PAY THE PURCHASE PRICE TO THE
COMPANY FOR THE COMMON SHARES AT THE CLOSING (LESS THE AMOUNTS WITHHELD PURSUANT
TO SECTION 4(G)), BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS PURSUANT TO
THE COMPANY’S WIRE INSTRUCTIONS AS PROVIDED TO THE BUYER IN WRITING PRIOR TO THE
DATE HEREOF. ON THE CLOSING DATE, THE COMPANY SHALL DELIVER TO THE BUYER A STOCK
CERTIFICATE EVIDENCING THE COMMON SHARES DULY EXECUTED ON BEHALF OF THE COMPANY
AND REGISTERED IN THE NAME OF THE BUYER OR ITS DESIGNEE.

2.                  REPRESENTATIONS AND WARRANTIES OF THE BUYER.

The Buyer represents and warrants that:

(A)                NO PUBLIC SALE OR DISTRIBUTION. THE BUYER IS ACQUIRING THE
COMMON SHARES FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TOWARDS, OR FOR RESALE IN
CONNECTION WITH, THE PUBLIC SALE OR DISTRIBUTION THEREOF, EXCEPT PURSUANT TO
SALES REGISTERED OR EXEMPTED UNDER THE 1933 ACT; PROVIDED, HOWEVER, THAT BY
MAKING THE REPRESENTATIONS HEREIN, THE BUYER DOES NOT AGREE TO HOLD ANY OF THE
COMMON SHARES FOR ANY MINIMUM OR OTHER SPECIFIC TERM AND, SUBJECT THERETO,
RESERVES THE RIGHT TO DISPOSE OF THE COMMON SHARES AT ANY TIME IN ACCORDANCE
WITH OR PURSUANT TO A REGISTRATION STATEMENT OR AN APPLICABLE EXEMPTION UNDER
THE 1933 ACT. THE BUYER IS ACQUIRING THE COMMON SHARES HEREUNDER IN THE ORDINARY
COURSE OF ITS BUSINESS. THE BUYER DOES NOT PRESENTLY HAVE ANY AGREEMENT OR
UNDERSTANDING, DIRECTLY OR INDIRECTLY, WRITTEN OR OTHERWISE, WITH ANY PERSON (AS
DEFINED BELOW) TO ACT TOGETHER FOR THE PURPOSE OF ACQUIRING, HOLDING, VOTING OR
DISPOSING OF THE COMMON SHARES. AS USED HEREIN, “PERSON” MEANS AN INDIVIDUAL, A
LIMITED LIABILITY COMPANY, A PARTNERSHIP, A JOINT VENTURE, A CORPORATION, A
TRUST, AN UNINCORPORATED ORGANIZATION AND A GOVERNMENT OR ANY DEPARTMENT OR
AGENCY THEREOF.

(B)               ACCREDITED INVESTOR STATUS. THE BUYER IS AN “ACCREDITED
INVESTOR” AS THAT TERM IS DEFINED IN RULE 501(A) OF REGULATION D PROMULGATED
UNDER THE 1933 ACT BY REASON OF BEING AN ENTITY OF WHICH ALL OF THE EQUITY
OWNERS ARE “ACCREDITED INVESTORS.” 

(C)                RELIANCE ON EXEMPTIONS. THE BUYER UNDERSTANDS AND
ACKNOWLEDGES THAT THE COMMON SHARES ARE BEING OFFERED AND SOLD TO IT IN RELIANCE
ON SPECIFIC EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF UNITED STATES
FEDERAL AND STATE SECURITIES LAWS AND THAT THE COMPANY IS RELYING IN PART UPON
THE TRUTH AND ACCURACY OF, AND THE BUYER’S COMPLIANCE WITH, THE REPRESENTATIONS,
WARRANTIES, AGREEMENTS, ACKNOWLEDGMENTS AND UNDERSTANDINGS OF THE BUYER SET
FORTH HEREIN IN ORDER TO DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND THE
ELIGIBILITY OF THE BUYER TO ACQUIRE THE COMMON SHARES.  THE BUYER UNDERSTANDS
THAT NO FEDERAL OR STATE AGENCY OR ANY GOVERNMENT OR GOVERNMENTAL AGENCY HAS
PASSED UPON OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE COMMON SHARES.

(D)               INFORMATION; EXPERIENCE. THE BUYER ACKNOWLEDGES THAT IT
(INCLUDING THROUGH ITS ADVISORS, IF ANY) HAS HAD ACCESS TO ADEQUATE INFORMATION,
HAS MADE ITS OWN DUE

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DILIGENCE INVESTIGATION, AND HAS BEEN AFFORDED THE OPPORTUNITY TO ASK QUESTIONS
AND RECEIVE ANSWERS FROM THE COMPANY AND OBTAIN ADDITIONAL INFORMATION FROM THE
COMPANY REGARDING (I) THE OFFER AND SALE OF THE COMMON SHARES, AND (II) THE
BUSINESS, OPERATIONS, PROSPECTS AND FINANCIAL CONDITION OF THE COMPANY. THE
COMPANY HAS ANSWERED OR RESPONDED TO ALL SUCH QUESTIONS AND REQUESTS FOR
INFORMATION TO THE FULL SATISFACTION OF THE BUYER. NEITHER SUCH INQUIRIES NOR
ANY OTHER DUE DILIGENCE INVESTIGATIONS CONDUCTED BY THE BUYER OR ITS ADVISORS,
IF ANY, OR ITS REPRESENTATIVES SHALL MODIFY, AMEND OR AFFECT THE BUYER’S RIGHT
TO RELY ON THE COMPANY’S REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN. THE
BUYER HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT
IT IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN THE COMMON
SHARES. THE BUYER UNDERSTANDS THAT ITS INVESTMENT IN THE COMMON SHARES INVOLVES
A HIGH DEGREE OF RISK, INCLUDING BUT NOT LIMITED TO THOSE SET FORTH IN THE
COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2015 (THE
“FORM 10-K”), AS FILED WITH THE SEC ON MARCH 30, 2016, AND THE BUYER REPRESENTS
THAT THE BUYER AND ITS AFFILIATES HAVE THE FINANCIAL NET WORTH AND WHEREWITHAL
TO ENDURE A COMPLETE LOSS OF THEIR INVESTMENT. THE BUYER HAS SOUGHT SUCH
ACCOUNTING, LEGAL AND TAX ADVICE AS IT HAS CONSIDERED NECESSARY TO MAKE AN
INFORMED INVESTMENT DECISION WITH RESPECT TO ITS ACQUISITION OF THE COMMON
SHARES.  THE BUYER ACKNOWLEDGES AND AGREES THAT THE COMPANY DOES NOT MAKE AND
HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY ANY OF THE TRANSACTION DOCUMENTS OTHER THAN THOSE SPECIFICALLY
SET FORTH IN THIS AGREEMENT.  THE BUYER ALSO ACKNOWLEDGES THAT IT HAS BEEN
REPRESENTED BY COUNSEL DIFFERENT FROM THE COMPANY’S COUNSEL AND HAS NOT RELIED
ON THE COMPANY OR ITS COUNSEL IN THE PREPARATION, NEGOTIATION, EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND ANY OTHER
AGREEMENTS AND DOCUMENTS CONTEMPLATED HEREBY AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.

(E)                NO GOVERNMENTAL REVIEW. THE BUYER UNDERSTANDS THAT NO UNITED
STATES FEDERAL OR STATE AGENCY OR ANY OTHER GOVERNMENT OR GOVERNMENTAL AGENCY
HAS PASSED ON OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE COMMON SHARES OR
THE FAIRNESS OR SUITABILITY OF THE INVESTMENT IN THE COMMON SHARES NOR HAVE SUCH
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF THE COMMON
SHARES.

(F)                TRANSFER OR RESALE. THE BUYER UNDERSTANDS THAT, EXCEPT AS
PROVIDED IN THE REGISTRATION RIGHTS AGREEMENT: (I) THE COMMON SHARES HAVE NOT
BEEN AND ARE NOT BEING REGISTERED UNDER THE 1933 ACT OR ANY STATE SECURITIES
LAWS AND ARE THEREFORE “RESTRICTED” SECURITIES, AND MAY NOT BE OFFERED FOR SALE,
SOLD, ASSIGNED OR TRANSFERRED UNLESS (A) SUBSEQUENTLY REGISTERED THEREUNDER, (B)
THE BUYER SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL, IN A FORM
GENERALLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT SUCH COMMON SHARES TO BE
SOLD, ASSIGNED OR TRANSFERRED MAY BE SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO
AN EXEMPTION FROM SUCH REGISTRATION, OR (C) THE BUYER PROVIDES THE COMPANY WITH
REASONABLE ASSURANCE, INCLUDING, IF REQUESTED BY THE COMPANY, AN OPINION OF
COUNSEL IN A FORM GENERALLY ACCEPTABLE TO THE COMPANY, THAT SUCH COMMON SHARES
CAN BE SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO RULE 144 OR RULE 144A
PROMULGATED UNDER THE 1933 ACT (OR A SUCCESSOR RULE THERETO) (COLLECTIVELY,
“RULE 144”), (II) ANY SALE OF THE COMMON SHARES MADE IN RELIANCE ON RULE 144 MAY
BE MADE ONLY IN ACCORDANCE WITH THE TERMS OF RULE 144 AND FURTHER, IF RULE 144
IS NOT APPLICABLE, ANY RESALE OF THE COMMON SHARES UNDER CIRCUMSTANCES IN WHICH
THE SELLER (OR THE PERSON THROUGH WHOM THE SALE IS MADE) MAY BE DEEMED TO BE AN
UNDERWRITER (AS THAT TERM IS DEFINED IN THE 1933 ACT) MAY REQUIRE COMPLIANCE
WITH SOME OTHER EXEMPTION UNDER THE 1933 ACT OR THE RULES AND REGULATIONS OF THE

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SEC THEREUNDER, AND (III) NEITHER THE COMPANY NOR ANY OTHER PERSON IS UNDER ANY
OBLIGATION TO REGISTER THE COMMON SHARES UNDER THE 1933 ACT OR ANY STATE
SECURITIES LAWS OR TO COMPLY WITH THE TERMS AND CONDITIONS OF ANY EXEMPTION
THEREUNDER. NOTWITHSTANDING THE FOREGOING, THE COMMON SHARES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE COMMON SHARES AND SUCH PLEDGE OF COMMON SHARES SHALL
NOT BE DEEMED TO BE A TRANSFER, SALE OR ASSIGNMENT OF THE COMMON SHARES
HEREUNDER, AND TO THE EXTENT THE BUYER EFFECTS A PLEDGE OF COMMON SHARES, IT
SHALL NOT BE REQUIRED TO PROVIDE THE COMPANY WITH ANY NOTICE THEREOF OR
OTHERWISE MAKE ANY DELIVERY TO THE COMPANY PURSUANT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT (AS DEFINED BELOW), INCLUDING, WITHOUT LIMITATION,
THIS SECTION 2(F).

(G)               LEGENDS. THE BUYER UNDERSTANDS THAT, UNTIL SUCH TIME AS THE
RESALE OF THE COMMON SHARES HAS BEEN REGISTERED UNDER THE 1933 ACT AS
CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT, THE CERTIFICATES OR OTHER
INSTRUMENTS REPRESENTING THE COMMON SHARES, EXCEPT AS SET FORTH BELOW, SHALL
BEAR ANY LEGEND AS REQUIRED BY THE “BLUE SKY” LAWS OF ANY STATE AND A
RESTRICTIVE LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ALL APPLICABLE REGISTRATIONS THAT MAY BE
REQUIRED BY APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A
FORM GENERALLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT AND ANY OTHER APPLICABLE STATE SECURITIES LAWS.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Common Shares upon which it
is stamped or issue to such holder by electronic delivery at the applicable
balance account at The Depository Trust Company (“DTC”), if, unless otherwise
required by state securities laws, (i) such Common Shares are registered for
resale under the 1933 Act, (ii) in connection with a sale, assignment or other
transfer, such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that such sale, assignment or transfer
of the Common Shares may be made without registration under the applicable
requirements of the 1933 Act; provided, however, that if an opinion is required
by Company counsel in order to effect the issuance of a certificate without such
legend, counsel to the Company agrees, in its reasonable discretion, with the
conclusion set forth in such opinion of counsel provided to the Company, or
(iii) the Common Shares can be sold, assigned or transferred pursuant to Rule
144 (upon receipt of a representation letter from the holder(s) of the Common
Shares confirming such holder(s) will sell any Common Shares only in compliance
with the requirements of Rule 144, in a form reasonably acceptable to counsel to
the Company) or Rule 144A.  The Company shall be responsible for the fees of its
transfer agent and all DTC fees associated with such issuance. If a legend is no
longer required pursuant to the foregoing, the Company shall, within three (3)
Business Days (as defined below) following the delivery by the Buyer to the
Company’s transfer agent (with notice to the Company) of a legended certificate
or instrument representing such Common Shares and, if deemed necessary in the
opinion of the Company’s counsel, a representation letter in form reasonably
acceptable to such counsel, issue to the holder of the Common Shares a
certificate representing such Common Shares without such legend or issue such
Common Shares to such holder by electronic delivery at the applicable balance
account at DTC.

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(H)               ORGANIZATION; AUTHORIZATION; VALIDITY; ENFORCEMENT.  THE BUYER
IS A MEMBER-MANAGED LIMITED LIABILITY COMPANY ORGANIZED, VALIDLY EXISTING AND IN
GOOD STANDING UNDER THE LAWS OF ITS JURISDICTION OF FORMATION WITH FULL POWER
AND AUTHORITY TO OWN AND HOLD ITS PROPERTIES AND TO CARRY ON ITS BUSINESS AS NOW
CONDUCTED, AND IS DULY REGISTERED AND QUALIFIED TO CONDUCT ITS BUSINESS AND IS
IN GOOD STANDING UNDER THE LAWS OF EACH OTHER JURISDICTION IN WHICH IT OWNS OR
LEASES PROPERTIES OR CONDUCTS ANY BUSINESS SO AS TO REQUIRE SUCH QUALIFICATION,
EXCEPT AS HAS NOT HAD OR WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT UPON THE BUYER’S ABILITY TO CONDUCT ITS BUSINESS OR CONSUMMATE
THE TRANSACTIONS CONTEMPLATED HEREBY.  THE BUYER HAS FULL POWER AND AUTHORITY TO
ENTER INTO THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT AND TO PERFORM
ITS OBLIGATIONS THEREUNDER.  THIS AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT HAVE BEEN DULY AND VALIDLY AUTHORIZED, EXECUTED AND DELIVERED ON
BEHALF OF THE BUYER AND CONSTITUTE THE LEGAL, VALID AND BINDING OBLIGATIONS OF
THE BUYER ENFORCEABLE AGAINST THE BUYER IN ACCORDANCE WITH THEIR RESPECTIVE
TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL PRINCIPLES OF
EQUITY OR TO APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM,
LIQUIDATION AND OTHER SIMILAR LAWS RELATING TO, OR AFFECTING GENERALLY, THE
ENFORCEMENT OF APPLICABLE CREDITORS’ RIGHTS AND REMEDIES.  THE EXECUTION AND
DELIVERY OF THE TRANSACTION DOCUMENTS BY THE BUYER AND THE CONSUMMATION BY THE
BUYER OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, INCLUDING, WITHOUT
LIMITATION, THE PURCHASE OF THE COMMON SHARES, HAVE BEEN DULY AUTHORIZED BY THE
BUYER AND NO FURTHER FILING, CONSENT, OR AUTHORIZATION IS REQUIRED BY THE BUYER
OR ITS AFFILIATES.

(I)                 NO CONFLICTS. THE EXECUTION, DELIVERY AND PERFORMANCE BY THE
BUYER OF THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT AND THE
CONSUMMATION BY THE BUYER OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
DOES NOT AND WILL NOT (I) RESULT IN A VIOLATION OF THE ORGANIZATIONAL DOCUMENTS
OF THE BUYER, (II) CONFLICT WITH, OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH
WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT) UNDER, OR GIVE TO
OTHERS ANY RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION OF,
ANY AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH THE BUYER IS A PARTY OR (III)
RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT OR DECREE
(INCLUDING FEDERAL AND STATE SECURITIES LAWS) APPLICABLE TO THE BUYER, EXCEPT IN
THE CASE OF CLAUSES (II) AND (III) ABOVE, FOR SUCH CONFLICTS, DEFAULTS, RIGHTS
OR VIOLATIONS WHICH WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE ABILITY OF THE BUYER TO
PERFORM ITS OBLIGATIONS HEREUNDER AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

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(J)                 LIMITED PUBLIC MARKET.  THE BUYER UNDERSTANDS THAT THERE IS
AND MAY, AT A FUTURE DATE, BE A LIMITED PUBLIC MARKET FOR THE COMMON SHARES, AND
THAT THE COMPANY MAKES NO ASSURANCES AS TO THE NATURE OR LIQUIDITY OF THE PUBLIC
MARKET FOR THE COMMON SHARES.

(K)               NO BROKER.  THE BUYER REPRESENTS THAT NEITHER THE BUYER NOR
ANY OF ITS AFFILIATES HAS ENGAGED ANY PLACEMENT AGENT, BROKER OR OTHER AGENT IN
CONNECTION WITH THE SALE OF THE COMMON SHARES.

(L)                 ACKNOWLEDGEMENT REGARDING BUYER.  THE BUYER REPRESENTS AND
WARRANTS, AS OF IMMEDIATELY PRIOR TO THE CLOSING, THAT IT IS NOT (I) AN OFFICER
OR DIRECTOR OF THE COMPANY, (II) AN “AFFILIATE” OF THE COMPANY (AS DEFINED IN
RULE 144) OR (III) TO THE KNOWLEDGE OF THE BUYER, A “BENEFICIAL OWNER” OF MORE
THAN 10% OF THE SHARES OF COMMON STOCK (AS DEFINED FOR PURPOSES OF RULE 13D-3 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “1934 ACT”)).  THE BUYER
REPRESENTS THAT IT IS A UNITED STATES PERSON (AS DEFINED BY SECTION 7701(A)(30)
OF THE INTERNAL REVENUE CODE OF THE UNITED STATES.  THE BUYER’S PRINCIPAL PLACE
OF BUSINESS IS AS IDENTIFIED IN THE PREAMBLE OF THIS AGREEMENT.  THE BUYER
REPRESENTS AND WARRANTS THAT NEITHER IT, NOR ANY OF ITS AFFILIATES, HAVE BEEN OR
ARE SUBJECT TO ANY PROCEEDINGS OR EVENT THAT CONSTITUTES A “BAD ACTOR”
DISQUALIFICATION AS SET FORTH IN RULE 506(D)(1) OF REGULATION D PROMULGATED
UNDER THE SECURITIES ACT.

(M)             DIRECTOR DESIGNEES.  THE BUYER REPRESENTS AND WARRANTS THAT EACH
OF THE DIRECTOR DESIGNEES IDENTIFIED IN SECTION 3(MM) (I) IS NOT AND HAS NOT
BEEN SUBJECT TO ANY PROCEEDING OR EVENT THAT CONSTITUTES A “BAD ACTOR”
DISQUALIFICATION AS SET FORTH IN RULE 506(D)(1) PROMULGATED UNDER REGULATION D
OF THE SECURITIES ACT AND (II) MAINTAINS REASONABLY SUFFICIENT PROFESSIONAL
EXPERIENCE AND SOPHISTICATION TO SERVE ON THE BOARD OF DIRECTORS OF A
PUBLICLY-HELD CORPORATION OF LIKE KIND AND TYPE AS THE COMPANY.

(N)               PRINCIPAL PLACE OF BUSINESS. THE BUYER’S PRINCIPAL PLACE OF
BUSINESS IS LOCATED IN THE STATE OF NEW YORK.

(O)               INVESTMENT COMPANY STATUS.  THE BUYER IS NOT, AND IMMEDIATELY
FOLLOWING THE CLOSING WILL NOT BE, AN “INVESTMENT COMPANY” WITHIN THE MEANING OF
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND THE BUYER IS NOT A COMPANY
CONTROLLED BY AN “INVESTMENT COMPANY” OR A “PROMOTER” OR “PRINCIPAL UNDERWRITER”
FOR AN “INVESTMENT COMPANY” AS SUCH TERMS ARE DEFINED IN THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED.

(P)               NO GENERAL SOLICITATION. THE BUYER ACKNOWLEDGES THAT THE
COMMON SHARES WERE NOT OFFERED TO IT BY MEANS OF ANY FORM OF GENERAL OR PUBLIC
SOLICITATION OR GENERAL ADVERTISING, OR PUBLICLY DISSEMINATED ADVERTISEMENTS OR
SALES LITERATURE, INCLUDING (I) ANY ADVERTISEMENT, ARTICLE, NOTICE OR OTHER
COMMUNICATION PUBLISHED IN ANY NEWSPAPER, MAGAZINE, OR SIMILAR MEDIA, OR
BROADCAST OVER TELEVISION OR RADIO OR (II) ANY SEMINAR OR MEETING TO WHICH THE
BUYER OR ANY PERSON ASSOCIATED WITH THE BUYER WAS INVITED BY ANY OF THE
FOREGOING MEANS OF COMMUNICATIONS.

 

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3.                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Buyer that:

(A)                ORGANIZATION AND QUALIFICATION. EACH OF THE COMPANY AND ITS
“SUBSIDIARIES” (WHICH DEFINED TERM, FOR PURPOSES OF THIS AGREEMENT, MEANS ANY
ENTITY IN WHICH THE COMPANY, DIRECTLY OR INDIRECTLY, OWNS AT LEAST A MAJORITY OF
THE CAPITAL STOCK, EQUITY OR SIMILAR INTEREST) ARE ENTITIES DULY ORGANIZED AND
VALIDLY EXISTING, AND HAVE THE REQUISITE POWER AND AUTHORIZATION TO OWN THEIR
PROPERTIES AND TO CARRY ON THEIR BUSINESS AS NOW BEING CONDUCTED.  THE COMPANY,
MTI INSTRUMENTS (AS DEFINED BELOW) AND TURBONETICS (AS DEFINED BELOW) ARE IN
GOOD STANDING UNDER THE LAWS OF THE JURISDICTION IN WHICH THEY ARE FORMED.  EACH
OF THE COMPANY AND ITS SUBSIDIARIES IS DULY QUALIFIED AS A FOREIGN ENTITY TO DO
BUSINESS AND IS IN GOOD STANDING IN EVERY JURISDICTION IN WHICH ITS OWNERSHIP OF
PROPERTY OR THE NATURE OF THE BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION
NECESSARY, EXCEPT TO THE EXTENT THAT THE FAILURE TO BE SO QUALIFIED OR BE IN
GOOD STANDING WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT.  AS USED IN THIS AGREEMENT, “MATERIAL ADVERSE EFFECT” MEANS ANY MATERIAL
ADVERSE EFFECT ON THE BUSINESS, PROPERTIES, ASSETS, OPERATIONS, RESULTS OF
OPERATIONS, FINANCIAL CONDITION OR PROSPECTS OF THE COMPANY AND ITS
SUBSIDIARIES, TAKEN AS A WHOLE, OR THEIR ABILITY TO SATISFY THEIR OBLIGATIONS
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY HAS NO
SUBSIDIARIES, EXCEPT FOR (I) MTI INSTRUMENTS, INC., A NEW YORK CORPORATION (“MTI
INSTRUMENTS”) WHOLLY-OWNED BY THE COMPANY, AND (II) TURBONETICS ENERGY, INC., A
NEW YORK CORPORATION (“TURBONETICS”) WHOLLY-OWNED BY THE COMPANY THAT CURRENTLY
DOES NOT CONDUCT BUSINESS.  THE COMPANY ALSO OWNS A FORTY-SEVEN AND ONE-HALF
PERCENT (47.5%) EQUITY INTEREST IN MEOH POWER, INC., A DELAWARE CORPORATION
(“MEOH POWER”).

(B)               AUTHORIZATION; ENFORCEMENT; VALIDITY. THE COMPANY HAS THE
REQUISITE CORPORATE POWER AND AUTHORITY TO ENTER INTO AND PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND EACH OF
THE OTHER AGREEMENTS AND OTHER INSTRUMENTS TO BE ENTERED INTO BY ANY OF THE
PARTIES HERETO IN CONNECTION WITH ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT (COLLECTIVELY, THE “TRANSACTION DOCUMENTS”) AND TO ISSUE THE COMMON
SHARES IN ACCORDANCE WITH THE TERMS HEREOF AND THEREOF. THE EXECUTION AND
DELIVERY OF THE TRANSACTION DOCUMENTS BY THE COMPANY, THE PERFORMANCE OF ITS
OBLIGATIONS THEREUNDER AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF
THE COMMON SHARES, HAVE BEEN DULY AUTHORIZED BY THE COMPANY’S BOARD OF DIRECTORS
(THE “BOARD”) AND (OTHER THAN (I) THE FILING WITH THE SEC OF ONE OR MORE
REGISTRATION STATEMENTS (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) IN
ACCORDANCE WITH THE REQUIREMENTS OF THE REGISTRATION RIGHTS AGREEMENT, (II) THE
FILING OF A NOTICE OF EXEMPT OFFERING OF SECURITIES ON FORM D WITH THE SEC UNDER
REGULATION D PROMULGATED UNDER THE 1933 ACT, (III) THE FILING OF AN INTERIM
OTCQB CERTIFICATION WITH THE OTC MARKETS AND (IV) OTHER FILINGS AS MAY BE
REQUIRED BY STATE SECURITIES AGENCIES) NO FURTHER FILING, CONSENT, OR
AUTHORIZATION IS REQUIRED BY THE COMPANY OR ITS BOARD.  THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS HAVE BEEN DULY EXECUTED AND DELIVERED BY THE
COMPANY, AND CONSTITUTE THE LEGAL, VALID AND BINDING OBLIGATIONS OF THE COMPANY,
ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH THEIR RESPECTIVE TERMS,
EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL PRINCIPLES OF EQUITY,
APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION OR
SIMILAR LAWS RELATING TO, OR AFFECTING GENERALLY, THE ENFORCEMENT OF APPLICABLE
CREDITORS’ RIGHTS AND REMEDIES, OR LIMITS ON INDEMNIFICATION UNDER APPLICABLE
FEDERAL SECURITIES LAWS.

 

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(C)                ISSUANCE OF COMMON SHARES. THE ISSUANCE OF THE COMMON SHARES
IS DULY AUTHORIZED AND, UPON ISSUANCE IN ACCORDANCE WITH THE TERMS HEREOF, SHALL
BE VALIDLY ISSUED AND FREE FROM ALL PREEMPTIVE OR SIMILAR RIGHTS AND TAXES,
LIENS AND CHARGES WITH RESPECT TO THE ISSUE THEREOF AND THE COMMON SHARES SHALL
BE FULLY PAID AND NONASSESSABLE WITH THE HOLDERS BEING ENTITLED TO ALL RIGHTS
ACCORDED TO A HOLDER OF COMMON STOCK. AS OF IMMEDIATELY PRIOR TO THE CLOSING,
THERE ARE 69,751,518 SHARES OF COMMON STOCK THAT ARE AUTHORIZED AND UNISSUED.
ASSUMING THE ACCURACY OF EACH OF THE REPRESENTATIONS AND WARRANTIES OF THE BUYER
SET FORTH IN SECTION 2, THE OFFER AND ISSUANCE BY THE COMPANY OF THE COMMON
SHARES TO THE BUYER PURSUANT TO AND IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT ARE AND WILL BE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933
ACT.

(D)               NO CONFLICTS.  EXCEPT AS SET FORTH IN SCHEDULE 3(D), THE
EXECUTION, DELIVERY AND PERFORMANCE OF THE TRANSACTION DOCUMENTS BY THE COMPANY
AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY (INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF THE COMMON SHARES) WILL
NOT (I) RESULT IN A VIOLATION OF ANY CERTIFICATE OF INCORPORATION, CERTIFICATE
OR ARTICLES OF FORMATION OR ORGANIZATION, MEMORANDUM OF ASSOCIATION, CERTIFICATE
OF DESIGNATIONS, BYLAWS, ARTICLES OF ASSOCIATION, OPERATING AGREEMENTS OR OTHER
CONSTITUENT OR ORGANIZATIONAL DOCUMENTS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, OR (II) CONFLICT WITH, OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH
WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT) IN ANY RESPECT
UNDER, OR GIVE TO OTHERS ANY RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR
CANCELLATION OF, ANY MATERIAL AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH THE
COMPANY OR ANY OF ITS SUBSIDIARIES IS A PARTY, OR (III) RESULT IN A VIOLATION OF
ANY LAW, RULE, REGULATION, ORDER, JUDGMENT OR DECREE (INCLUDING FEDERAL AND
STATE SECURITIES LAWS AND REGULATIONS AND THE RULES AND REGULATIONS OF THE
FINANCIAL INDUSTRY REGULATORY AUTHORITY (“FINRA”) AND APPLICABLE LAWS OF THE
STATE OF NEW YORK AND ANY OTHER STATE LAWS) APPLICABLE TO THE COMPANY OR ANY OF
ITS SUBSIDIARIES OR BY WHICH ANY PROPERTY OR ASSET OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS BOUND OR AFFECTED, ALL EXCEPT TO THE EXTENT THAT ANY SUCH
VIOLATION WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

(E)                CONSENTS.  EXCEPT AS CONTEMPLATED BY THE PARENTHETICAL WITHIN
THE SECOND SENTENCE OF SECTION 3(B), NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES IS REQUIRED TO OBTAIN ANY CONSENT, AUTHORIZATION OR ORDER OF, OR
MAKE ANY FILING OR REGISTRATION WITH, ANY COURT, GOVERNMENTAL AGENCY OR ANY
REGULATORY OR SELF-REGULATORY AGENCY OR ANY OTHER PERSON IN ORDER FOR IT TO
EXECUTE, DELIVER OR PERFORM ANY OF ITS OBLIGATIONS UNDER OR CONTEMPLATED BY ANY
OF THE TRANSACTION DOCUMENTS, IN EACH CASE IN ACCORDANCE WITH THE TERMS HEREOF
OR THEREOF.  ALL CONSENTS, AUTHORIZATIONS, ORDERS, FILINGS AND REGISTRATIONS
WHICH THE COMPANY OR EACH OF ITS SUBSIDIARIES IS REQUIRED TO OBTAIN TO ENTER
INTO THIS AGREEMENT WILL HAVE BEEN OBTAINED OR EFFECTED ON OR PRIOR TO THE
CLOSING DATE, AND THE COMPANY IS UNAWARE OF ANY FACTS OR CIRCUMSTANCES THAT
MIGHT PREVENT THE COMPANY FROM OBTAINING OR EFFECTING ANY OF THE REGISTRATIONS,
APPLICATIONS OR FILINGS PURSUANT TO THE PRECEDING SENTENCE.  THE COMPANY IS NOT
IN MATERIAL VIOLATION OF ANY OF THE RULES OR REGULATIONS OF FINRA OR THE OTC
MARKETS GROUP QUOTATION SYSTEM AND HAS NO KNOWLEDGE OF ANY FACTS THAT WOULD
REASONABLY LEAD TO THE COMMON STOCK TO BE REMOVED FROM TRADING ON, OR BE
SUSPENDED FROM TRADING ON, THE OTC MARKETS GROUP QUOTATION SYSTEM IN THE
FORESEEABLE FUTURE. THE ISSUANCE BY THE COMPANY OF ANY OF THE COMMON SHARES
SHALL NOT HAVE THE EFFECT OF CAUSING THE COMMON STOCK TO BE REMOVED FROM
TRADING, OR BE SUSPENDED FROM TRADING ON, THE OTC MARKETS GROUP QUOTATION
SYSTEM; PROVIDED, HOWEVER, THAT SUCH REPRESENTATION IS LIMITED TO THE ACT OF
ISSUING THE COMMON SHARES.

 

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(F)                ACKNOWLEDGMENT REGARDING BUYER’S PURCHASE OF COMMON SHARES.
THE COMPANY ACKNOWLEDGES AND AGREES THAT THE BUYER IS ACTING SOLELY IN THE
CAPACITY OF AN ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION DOCUMENTS
AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND THAT THE BUYER IS NOT,
AS OF IMMEDIATELY PRIOR TO THE CLOSING, (I) AN OFFICER OR DIRECTOR OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (II) AN “AFFILIATE” OF THE COMPANY OR ANY OF
ITS SUBSIDIARIES (AS DEFINED IN RULE 144) OR (III) TO THE KNOWLEDGE OF THE
COMPANY, A “BENEFICIAL OWNER” OF MORE THAN 10% OF THE SHARES OF COMMON STOCK (AS
DEFINED FOR PURPOSES OF RULE 13D-3 OF THE 1934 ACT). THE COMPANY FURTHER
ACKNOWLEDGES THAT THE BUYER IS NOT ACTING AS A FINANCIAL ADVISOR OR FIDUCIARY OF
THE COMPANY OR ANY OF ITS SUBSIDIARIES (OR IN ANY SIMILAR CAPACITY) WITH RESPECT
TO THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY, AND ANY ADVICE GIVEN BY THE BUYER OR ANY OF ITS REPRESENTATIVES OR
AGENTS IN CONNECTION WITH THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, FOR WHICH A SEPARATE ENGAGEMENT WAS NOT
CONSUMMATED, IS MERELY INCIDENTAL TO THE BUYER’S PURCHASE OF THE COMMON SHARES.
THE COMPANY FURTHER REPRESENTS TO THE BUYER THAT THE COMPANY’S DECISION TO ENTER
INTO THE TRANSACTION DOCUMENTS HAS BEEN BASED SOLELY ON THE INDEPENDENT
EVALUATION BY THE COMPANY AND ITS REPRESENTATIVES.

(G)               NO GENERAL SOLICITATION; FEES. NEITHER THE COMPANY NOR ANY OF
ITS SUBSIDIARIES OR AFFILIATES, NOR ANY PERSON ACTING ON ITS OR THEIR BEHALF,
HAS ENGAGED IN ANY FORM OF GENERAL SOLICITATION OR GENERAL ADVERTISING (WITHIN
THE MEANING OF REGULATION D) IN CONNECTION WITH THE OFFER OR SALE OF THE COMMON
SHARES. THE COMPANY SHALL BE RESPONSIBLE FOR THE PAYMENT OF ANY PLACEMENT
AGENT’S FEES, FINANCIAL ADVISORY FEES, OR BROKERS’ COMMISSIONS (OTHER THAN FOR
PERSONS ENGAGED BY OR PROVIDING SERVICES TO THE BUYER OR ITS AFFILIATES (A
“BUYER PROVIDER”)) RELATING TO OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
HEREBY. THE COMPANY SHALL PAY, AND HOLD THE BUYER HARMLESS AGAINST, ANY
LIABILITY, LOSS OR EXPENSE (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND
OUT-OF-POCKET EXPENSES) IN CONNECTION WITH ANY CLAIM RELATING TO ANY SUCH
PAYMENT TO A PERSON THAT IS NOT A BUYER PROVIDER. THE COMPANY REPRESENTS THAT
NEITHER IT NOR ANY OF ITS SUBSIDIARIES HAS ENGAGED ANY PLACEMENT AGENT OR OTHER
AGENT IN CONNECTION WITH THE SALE OF THE COMMON SHARES.

(H)               NO INTEGRATED OFFERING. EXCEPT AS DISCLOSED ON SCHEDULE 3(H),
NONE OF THE COMPANY, ITS SUBSIDIARIES, ANY OF THEIR RESPECTIVE AFFILIATES, AND
ANY PERSON ACTING ON ANY OF THEIR BEHALF HAS, DIRECTLY OR INDIRECTLY, MADE ANY
OFFERS OR SALES OF ANY SECURITY OR SOLICITED ANY OFFERS TO BUY ANY SECURITY IN
THE PRIOR SIX (6) MONTHS UNDER CIRCUMSTANCES THAT WOULD ELIMINATE THE
AVAILABILITY OF THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT IN CONNECTION
WITH THE OFFER AND SALE BY THE COMPANY OF THE COMMON SHARES AS CONTEMPLATED
HEREBY, WHETHER THROUGH INTEGRATION WITH PRIOR OFFERINGS OR OTHERWISE, OR CAUSE
THE OFFER AND SALE OF THE COMMON SHARES CONTEMPLATED HEREBY TO REQUIRE APPROVAL
OF SHAREHOLDERS OF THE COMPANY FOR PURPOSES OF NEW YORK LAW OR ANY APPLICABLE
SHAREHOLDER APPROVAL REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, UNDER THE
RULES AND REGULATIONS OF ANY EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH ANY
OF THE SECURITIES OF THE COMPANY ARE LISTED OR QUOTED. FOLLOWING THE CLOSING,
NONE OF THE COMPANY, ITS SUBSIDIARIES AND ANY PERSON ACTING ON ANY OF THEIR
BEHALF WILL TAKE ANY ACTION OR STEPS REFERRED TO IN THE PRECEDING SENTENCE THAT
WOULD REQUIRE REGISTRATION OF ANY OF THE COMMON SHARES UNDER THE 1933 ACT OR
CAUSE THE OFFERING OF THE COMMON SHARES TO BE INTEGRATED WITH OTHER OFFERINGS
FOR PURPOSES OF ANY SUCH APPLICABLE SHAREHOLDER APPROVAL PROVISIONS; PROVIDED,
HOWEVER, THAT THE FOREGOING SHALL NOT APPLY TO ANY OFFERING OR ISSUANCE
INITIATED BY, PARTICIPATED IN OR CONSENTED TO BY THE BUYER OR ITS AFFILIATES OR
THE DIRECTOR DESIGNEES.  FOR PURPOSES OF THIS AGREEMENT, “AFFILIATE” MEANS, WITH
RESPECT TO ANY PERSON, ANY OTHER PERSON THAT DIRECTLY OR INDIRECTLY CONTROLS, IS
CONTROLLED BY, OR IS UNDER COMMON CONTROL WITH, SUCH PERSON.

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(I)                 APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT;
CORPORATE OPPORTUNITY DOCTRINE. THE COMPANY AND ITS BOARD HAVE TAKEN ALL
POSSIBLE ACTION IN ORDER TO RENDER INAPPLICABLE (I) ALL RESTRICTIONS ON THE
BUYER AS AN “INTERESTED SHAREHOLDER” UNDER SECTION 912 OF THE NEW YORK BUSINESS
CORPORATION LAW AND (II) ALL RESTRICTIONS ON THE BUYER UNDER ANY CONTROL SHARE
ACQUISITION, BUSINESS COMBINATION, POISON PILL (INCLUDING ANY DISTRIBUTION UNDER
A RIGHTS AGREEMENT) OR OTHER SIMILAR ANTI-TAKEOVER PROVISION UNDER THE
CERTIFICATE OF INCORPORATION (AS DEFINED BELOW) OR THE LAWS OF THE JURISDICTION
OF ITS FORMATION, WHICH ARE OR COULD BECOME APPLICABLE TO THE BUYER AS A RESULT
OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE COMPANY’S ISSUANCE OF
THE COMMON SHARES AND THE BUYER’S OWNERSHIP OF THE COMMON SHARES.

(J)                 SEC DOCUMENTS; FINANCIAL STATEMENTS. EXCEPT AS SET FORTH ON
SCHEDULE 3(J), DURING THE TWO (2) YEARS PRIOR TO THE DATE HEREOF, THE COMPANY
HAS TIMELY FILED ALL REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS
REQUIRED TO BE FILED BY IT WITH THE SEC PURSUANT TO THE REPORTING REQUIREMENTS
OF THE 1934 ACT (ALL OF THE FOREGOING FILED PRIOR TO THE DATE HEREOF OR PRIOR TO
THE CLOSING DATE, AND ALL EXHIBITS INCLUDED THEREIN AND FINANCIAL STATEMENTS,
NOTES AND SCHEDULES THERETO AND DOCUMENTS INCORPORATED BY REFERENCE THEREIN
BEING HEREINAFTER REFERRED TO AS THE “SEC DOCUMENTS”).  THE COMPANY HAS
DELIVERED TO THE BUYER OR ITS REPRESENTATIVES TRUE, CORRECT AND COMPLETE COPIES
OF THE SEC DOCUMENTS NOT AVAILABLE ON THE EDGAR SYSTEM.  AS OF THEIR RESPECTIVE
FILING DATES, THE SEC DOCUMENTS COMPLIED IN ALL MATERIAL RESPECTS WITH THE
REQUIREMENTS OF THE 1934 ACT AND THE RULES AND REGULATIONS OF THE SEC
PROMULGATED THEREUNDER APPLICABLE TO THE SEC DOCUMENTS, AND NONE OF THE SEC
DOCUMENTS, AT THE TIME THEY WERE FILED WITH THE SEC, CONTAINED ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMITTED TO STATE A MATERIAL FACT REQUIRED TO BE
STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN THE
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. AS OF
THEIR RESPECTIVE FILING DATES, THE FINANCIAL STATEMENTS OF THE COMPANY INCLUDED
IN THE SEC DOCUMENTS COMPLIED AS TO FORM IN ALL MATERIAL RESPECTS WITH
APPLICABLE ACCOUNTING REQUIREMENTS AND THE PUBLISHED RULES AND REGULATIONS OF
THE SEC WITH RESPECT THERETO. SUCH FINANCIAL STATEMENTS HAVE BEEN PREPARED IN
ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
CONSISTENTLY APPLIED, DURING THE PERIODS INVOLVED (“GAAP”) (EXCEPT (I) AS MAY BE
OTHERWISE INDICATED IN SUCH FINANCIAL STATEMENTS OR THE NOTES THERETO, OR (II)
IN THE CASE OF UNAUDITED INTERIM STATEMENTS, TO THE EXTENT THEY MAY EXCLUDE
FOOTNOTES OR MAY BE CONDENSED OR SUMMARY STATEMENTS) AND FAIRLY PRESENT IN ALL
MATERIAL RESPECTS THE FINANCIAL POSITION OF THE COMPANY AS OF THE DATES THEREOF
AND THE RESULTS OF ITS OPERATIONS AND CASH FLOWS FOR THE PERIODS THEN ENDED
(SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO NORMAL YEAR-END AUDIT
ADJUSTMENTS).  TO THE KNOWLEDGE OF THE COMPANY, NO OTHER INFORMATION PROVIDED BY
OR ON BEHALF OF THE COMPANY TO THE BUYER WHICH IS NOT INCLUDED IN THE SEC
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, INFORMATION REFERRED TO IN SECTION
2(D) OR IN THE DISCLOSURE SCHEDULES TO THIS AGREEMENT, CONTAINS ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT NECESSARY IN
ORDER TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCE UNDER
WHICH THEY ARE OR WERE MADE, NOT MISLEADING.

(K)               ABSENCE OF CERTAIN CHANGES.  SINCE DECEMBER 31, 2015, EXCEPT
AS DISCLOSED IN THE SEC DOCUMENTS FILED SUBSEQUENT TO THE FORM 10-K FILED WITH
RESPECT TO SUCH

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DATE AND PRIOR TO THE DATE HEREOF, THERE HAS BEEN NO MATERIAL ADVERSE EFFECT
WITH RESPECT TO  THE BUSINESS, ASSETS, PROPERTIES, OPERATIONS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS OR PROSPECTS OF THE COMPANY AND ANY OF ITS
SUBSIDIARIES, TAKEN AS A WHOLE.  SINCE DECEMBER 31, 2015, NEITHER THE COMPANY
NOR ANY OF ITS SUBSIDIARIES HAS (I) DECLARED OR PAID ANY DIVIDENDS, (II) SOLD
ANY ASSETS OUTSIDE OF THE ORDINARY COURSE OF BUSINESS, INDIVIDUALLY OR IN THE
AGGREGATE, IN EXCESS OF $100,000 OR (III) HAD CAPITAL EXPENDITURES OUTSIDE OF
THE ORDINARY COURSE OF BUSINESS, INDIVIDUALLY OR IN THE AGGREGATE, IN EXCESS OF
$150,000. NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS TAKEN ANY STEPS TO
SEEK PROTECTION PURSUANT TO ANY BANKRUPTCY LAW NOR DOES THE COMPANY HAVE ANY
KNOWLEDGE OR REASON TO BELIEVE THAT ITS CREDITORS INTEND TO INITIATE INVOLUNTARY
BANKRUPTCY PROCEEDINGS OR ANY ACTUAL KNOWLEDGE OF ANY FACT THAT WOULD REASONABLY
LEAD A CREDITOR TO DO SO. THE COMPANY AND ITS SUBSIDIARIES, ON A CONSOLIDATED
BASIS, ARE NOT AS OF THE DATE HEREOF, AND AFTER GIVING EFFECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY TO OCCUR AT THE CLOSING, WILL NOT BE INSOLVENT
(AS DEFINED BELOW). FOR PURPOSES OF THIS AGREEMENT, “INSOLVENT” MEANS, WITH
RESPECT TO ANY PERSON, (I) THE PRESENT FAIR MARKET VALUE OF SUCH PERSON’S ASSETS
IS LESS THAN THE AMOUNT REQUIRED TO PAY SUCH PERSON’S TOTAL INDEBTEDNESS (AS
DEFINED BELOW), (II) SUCH PERSON IS UNABLE TO PAY ITS DEBTS AND LIABILITIES,
SUBORDINATED, CONTINGENT OR OTHERWISE, AS SUCH DEBTS AND LIABILITIES BECOME
ABSOLUTE AND MATURED, (III) SUCH PERSON INTENDS TO INCUR OR BELIEVES THAT IT
WILL INCUR DEBTS THAT WOULD BE BEYOND ITS ABILITY TO PAY AS SUCH DEBTS MATURE OR
(IV) SUCH PERSON HAS UNREASONABLY SMALL CAPITAL WITH WHICH TO CONDUCT THE
BUSINESS IN WHICH IT IS ENGAGED AS SUCH BUSINESS IS NOW CONDUCTED AND IS
PROPOSED TO BE CONDUCTED.

(L)                 [RESERVED].

(M)             CONDUCT OF BUSINESS; REGULATORY PERMITS. NEITHER THE COMPANY NOR
ANY OF ITS SUBSIDIARIES IS IN VIOLATION OF ANY TERM OF OR IN DEFAULT UNDER ANY
CERTIFICATE OF DESIGNATIONS OF ANY OUTSTANDING SERIES OF PREFERRED STOCK OF THE
COMPANY (IF ANY), ITS CERTIFICATE OF INCORPORATION OR BYLAWS (AS DEFINED BELOW)
OR ANY OF THEIR OTHER ORGANIZATIONAL OR GOVERNING DOCUMENTS. NEITHER THE COMPANY
NOR ANY OF ITS SUBSIDIARIES IS IN VIOLATION OF ANY JUDGMENT, DECREE OR ORDER OR
ANY STATUTE, ORDINANCE, RULE OR REGULATION APPLICABLE TO THE COMPANY OR ANY OF
ITS SUBSIDIARIES, AND NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES PRESENTLY
CONDUCTS ITS BUSINESS IN VIOLATION OF ANY OF THE FOREGOING, EXCEPT AS DISCLOSED
ON SCHEDULE 3(M) AND FOR POSSIBLE VIOLATIONS WHICH COULD NOT, INDIVIDUALLY OR IN
THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT. DURING
THE TWO (2) YEARS PRIOR TO THE DATE HEREOF, THE COMMON STOCK HAS BEEN QUOTED ON
THE OTC MARKETS GROUP QUOTATION SYSTEM. DURING THE TWO (2) YEARS PRIOR TO THE
DATE HEREOF, (I) TRADING IN THE COMMON STOCK HAS NOT BEEN SUSPENDED BY THE SEC,
FINRA OR THE OTC MARKETS GROUP AND (II) THE COMPANY HAS RECEIVED NO
COMMUNICATION, WRITTEN OR ORAL, FROM THE SEC, FINRA OR THE OTC MARKETS GROUP
REGARDING THE SUSPENSION OR REMOVAL OF THE TRADING OF THE COMMON STOCK ON THE
OTC MARKETS GROUP QUOTATION SYSTEM.  EXCEPT AS DISCLOSED ON SCHEDULE 3(M), THE
COMPANY AND ITS SUBSIDIARIES POSSESS ALL CERTIFICATES, AUTHORIZATIONS AND
PERMITS ISSUED BY THE APPROPRIATE FEDERAL, STATE OR FOREIGN REGULATORY
AUTHORITIES NECESSARY TO CONDUCT THEIR RESPECTIVE BUSINESSES, EXCEPT WHERE THE
FAILURE TO POSSESS SUCH CERTIFICATES, AUTHORIZATIONS OR PERMITS WOULD NOT HAVE,
INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT, AND NEITHER THE
COMPANY NOR ANY SUCH SUBSIDIARY HAS RECEIVED ANY NOTICE OF PROCEEDINGS RELATING
TO THE REVOCATION OR MODIFICATION OF ANY SUCH CERTIFICATE, AUTHORIZATION OR
PERMIT.

 

11

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(N)               FOREIGN CORRUPT PRACTICES. NEITHER THE COMPANY, NOR ANY OF ITS
SUBSIDIARIES, NOR ANY DIRECTOR, OFFICER, AGENT, EMPLOYEE OR OTHER PERSON ACTING
ON BEHALF OF THE COMPANY OR ANY OF ITS SUBSIDIARIES HAS, IN THE COURSE OF ITS
ACTIONS FOR, OR ON BEHALF OF, THE COMPANY OR ANY OF ITS SUBSIDIARIES (I) USED
ANY CORPORATE FUNDS FOR ANY UNLAWFUL CONTRIBUTION, UNLAWFUL GIFT, UNLAWFUL
ENTERTAINMENT OR OTHER UNLAWFUL EXPENSES RELATING TO POLITICAL ACTIVITY, (II)
MADE ANY DIRECT OR INDIRECT UNLAWFUL PAYMENT TO ANY FOREIGN OR DOMESTIC
GOVERNMENT OFFICIAL OR EMPLOYEE FROM CORPORATE FUNDS, (III) VIOLATED OR IS IN
VIOLATION OF ANY PROVISION OF THE U.S. FOREIGN CORRUPT PRACTICES ACT OF 1977, AS
AMENDED, OR (IV) MADE ANY UNLAWFUL BRIBE, REBATE, PAYOFF, INFLUENCE PAYMENT,
KICKBACK OR OTHER UNLAWFUL PAYMENT TO ANY FOREIGN OR DOMESTIC GOVERNMENT
OFFICIAL OR EMPLOYEE.

(O)               SARBANES-OXLEY ACT. THE COMPANY IS IN COMPLIANCE IN ALL
MATERIAL RESPECTS WITH ANY AND ALL REQUIREMENTS OF THE SARBANES-OXLEY ACT OF
2002 THAT ARE EFFECTIVE AND APPLICABLE WITH RESPECT TO THE COMPANY AS OF THE
DATE HEREOF, AND ANY AND ALL APPLICABLE RULES AND REGULATIONS PROMULGATED BY THE
SEC THEREUNDER THAT ARE EFFECTIVE AND APPLICABLE WITH RESPECT TO THE COMPANY AS
OF THE DATE HEREOF.

(P)               TRANSACTIONS WITH AFFILIATES. EXCEPT AS A PRODUCT OF THE
ORDINARY COURSE OF BUSINESS OF THE COMPANY AND AS OTHERWISE DISCLOSED IN THE SEC
DOCUMENTS OR ON SCHEDULE 3(P), NONE OF THE OFFICERS, DIRECTORS OR EMPLOYEES OF
THE COMPANY OR ANY OF ITS SUBSIDIARIES IS PRESENTLY A PARTY TO ANY TRANSACTION
WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES (OTHER THAN FOR ORDINARY COURSE
SERVICES AS EMPLOYEES, OFFICERS OR 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 SUCH OFFICER, DIRECTOR OR EMPLOYEE OR, TO THE
KNOWLEDGE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, ANY CORPORATION,
PARTNERSHIP, TRUST OR OTHER ENTITY IN WHICH ANY SUCH OFFICER, DIRECTOR, OR
EMPLOYEE HAS A SUBSTANTIAL INTEREST OR IS AN OFFICER, DIRECTOR, TRUSTEE OR
PARTNER.

(Q)               EQUITY CAPITALIZATION. AS OF THE DATE HEREOF, THE AUTHORIZED
CAPITAL STOCK OF THE COMPANY CONSISTS OF 75,000,000 SHARES OF COMMON STOCK, OF
WHICH AS OF THE DATE HEREOF, 5,248,482 SHARES ARE ISSUED AND OUTSTANDING AND UP
TO AN ADDITIONAL 1,799,775 SHARES MAY BE RESERVED FOR ISSUANCE PURSUANT TO THE
COMPANY’S STOCK OPTION PLANS. NO PREFERRED STOCK IS AUTHORIZED, ISSUED OR
OUTSTANDING AS OF THE DATE HEREOF.  ALL OF SUCH OUTSTANDING SHARES HAVE BEEN
VALIDLY ISSUED AND ARE FULLY PAID AND NONASSESSABLE AND ALL OF SUCH SHARES
RESERVED FOR ISSUANCE WILL BE, UPON ISSUANCE, VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE. EXCEPT AS DISCLOSED IN SCHEDULE 3(Q) OR, FOR PURPOSES OF CLAUSE
(II) BELOW, AS SET FORTH IN THAT CERTAIN LIST OF COMPANY OPTION HOLDERS, DATED
OCTOBER 12, 2016 AND DELIVERED TO THE BUYER PRIOR TO THE DATE HEREOF: (I) NONE
OF THE COMPANY’S CAPITAL STOCK IS SUBJECT TO PREEMPTIVE RIGHTS OR ANY OTHER
SIMILAR RIGHTS OR ANY LIENS OR ENCUMBRANCES SUFFERED OR PERMITTED BY THE
COMPANY, (II) THERE ARE NO OUTSTANDING OPTIONS, WARRANTS, SCRIP, RIGHTS TO
SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR
SECURITIES OR RIGHTS CONVERTIBLE INTO, OR EXERCISABLE OR EXCHANGEABLE FOR, ANY
SHARES OF CAPITAL STOCK OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR CONTRACTS,
COMMITMENTS, UNDERSTANDINGS OR ARRANGEMENTS BY WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS OR MAY BECOME BOUND TO ISSUE ADDITIONAL SHARES OF CAPITAL STOCK
OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR OPTIONS, WARRANTS, SCRIP, RIGHTS TO
SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR
SECURITIES OR RIGHTS CONVERTIBLE INTO, OR EXERCISABLE OR EXCHANGEABLE FOR, ANY
SHARES OF CAPITAL STOCK OF THE COMPANY OR ANY OF ITS SUBSIDIARIES,

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(III) THERE ARE NO OUTSTANDING DEBT SECURITIES, NOTES, CREDIT AGREEMENTS, CREDIT
FACILITIES OR OTHER AGREEMENTS, DOCUMENTS OR INSTRUMENTS EVIDENCING INDEBTEDNESS
OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR BY WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS OR MAY BECOME BOUND, (IV) THERE ARE NO FINANCING STATEMENTS
SECURING OBLIGATIONS IN ANY MATERIAL AMOUNTS, EITHER SINGLY OR IN THE AGGREGATE,
FILED IN CONNECTION WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES, (V) THERE ARE
NO AGREEMENTS OR ARRANGEMENTS UNDER WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES
IS OBLIGATED TO REGISTER THE SALE OF ANY OF THEIR SECURITIES UNDER THE 1933 ACT
(EXCEPT PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT), (VI) THERE ARE NO
OUTSTANDING SECURITIES OR INSTRUMENTS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES
WHICH CONTAIN ANY REDEMPTION OR SIMILAR PROVISIONS, AND THERE ARE NO CONTRACTS,
COMMITMENTS, UNDERSTANDINGS OR ARRANGEMENTS BY WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS OR MAY BECOME BOUND TO REDEEM A SECURITY OF THE COMPANY OR ANY
OF ITS SUBSIDIARIES, (VII) THERE ARE NO SECURITIES OR INSTRUMENTS CONTAINING
ANTI-DILUTION OR SIMILAR PROVISIONS THAT WILL BE TRIGGERED BY THE ISSUANCE OF
ANY OF THE COMMON SHARES, (VIII) THE COMPANY DOES NOT HAVE ANY STOCK
APPRECIATION RIGHTS OR “PHANTOM STOCK” PLANS OR AGREEMENTS OR ANY SIMILAR PLAN
OR AGREEMENT, AND (IX) THE COMPANY AND ITS SUBSIDIARIES HAVE NO LIABILITIES OR
OBLIGATIONS REQUIRED TO BE DISCLOSED IN THE SEC DOCUMENTS BUT NOT SO DISCLOSED
IN THE SEC DOCUMENTS, OTHER THAN THOSE INCURRED IN THE ORDINARY COURSE OF THE
COMPANY’S OR ANY OF ITS SUBSIDIARIES’ RESPECTIVE BUSINESSES AND WHICH,
INDIVIDUALLY OR IN THE AGGREGATE, DO NOT OR WOULD NOT REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT. THE COMPANY HAS FURNISHED OR MADE AVAILABLE TO
THE BUYER TRUE, CORRECT AND COMPLETE COPIES OF THE COMPANY’S CERTIFICATE OF
INCORPORATION, AS AMENDED AND CORRECTED AND AS IN EFFECT ON THE DATE HEREOF (THE
“CERTIFICATE OF INCORPORATION”), AND THE COMPANY’S BYLAWS, AS AMENDED AND AS IN
EFFECT ON THE DATE HEREOF (THE “BYLAWS”), AND THE TERMS OF ALL SECURITIES
CONVERTIBLE INTO, OR EXERCISABLE OR EXCHANGEABLE FOR, SHARES OF COMMON STOCK AND
THE MATERIAL RIGHTS OF THE HOLDERS THEREOF IN RESPECT THERETO.  BETWEEN OCTOBER
12, 2016 AND THE CLOSING, THE COMPANY HAS NOT ISSUED ANY OPTIONS, WARRANTS,
SCRIP, RIGHTS TO SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY CHARACTER WHATSOEVER
RELATING TO, OR SECURITIES OR RIGHTS CONVERTIBLE INTO, OR EXERCISABLE OR
EXCHANGEABLE FOR, ANY SHARES OF CAPITAL STOCK OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES.

(R)                 INDEBTEDNESS AND OTHER CONTRACTS. EXCEPT AS DISCLOSED IN
SCHEDULE 3(R), NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES (I) HAS ANY
OUTSTANDING INDEBTEDNESS, (II) IS A PARTY TO ANY CONTRACT, AGREEMENT OR
INSTRUMENT, THE VIOLATION OF WHICH, OR DEFAULT UNDER WHICH, BY THE OTHER
PARTY(IES) TO SUCH CONTRACT, AGREEMENT OR INSTRUMENT COULD REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT, (III) IS IN VIOLATION OF ANY
TERM OF OR IN DEFAULT UNDER ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO
ANY INDEBTEDNESS, EXCEPT WHERE SUCH VIOLATIONS AND DEFAULTS WOULD NOT RESULT,
INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL ADVERSE EFFECT, OR (IV) IS A
PARTY TO ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO ANY INDEBTEDNESS, THE
PERFORMANCE OF WHICH, IN THE JUDGMENT OF THE COMPANY’S OFFICERS, HAS OR IS
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT. SCHEDULE 3(R) PROVIDES A DETAILED
DESCRIPTION OF THE MATERIAL TERMS OF ANY SUCH OUTSTANDING INDEBTEDNESS. FOR
PURPOSES OF THIS AGREEMENT: (X) “INDEBTEDNESS” OF ANY PERSON MEANS, WITHOUT
DUPLICATION (A) ALL INDEBTEDNESS FOR BORROWED MONEY, (B) ALL OBLIGATIONS ISSUED,
UNDERTAKEN OR ASSUMED AS THE DEFERRED PURCHASE PRICE OF PROPERTY OR SERVICES,
INCLUDING, WITHOUT LIMITATION, “CAPITAL LEASES” IN ACCORDANCE WITH GAAP (OTHER
THAN TRADE PAYABLES ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS CONSISTENT
WITH PAST PRACTICE), (C) ALL REIMBURSEMENT OR PAYMENT OBLIGATIONS WITH RESPECT
TO LETTERS OF CREDIT, SURETY BONDS AND OTHER SIMILAR INSTRUMENTS, (D) ALL
OBLIGATIONS EVIDENCED BY NOTES, BONDS, DEBENTURES OR SIMILAR INSTRUMENTS,
INCLUDING OBLIGATIONS SO EVIDENCED INCURRED IN CONNECTION WITH THE ACQUISITION
OF PROPERTY, ASSETS OR BUSINESSES, (E) ALL

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INDEBTEDNESS CREATED OR ARISING UNDER ANY CONDITIONAL SALE OR OTHER TITLE
RETENTION AGREEMENT, OR INCURRED AS FINANCING, IN EITHER CASE WITH RESPECT TO
ANY PROPERTY OR ASSETS ACQUIRED WITH THE PROCEEDS OF SUCH INDEBTEDNESS (EVEN
THOUGH THE RIGHTS AND REMEDIES OF THE SELLER OR BANK UNDER SUCH AGREEMENT IN THE
EVENT OF DEFAULT ARE LIMITED TO REPOSSESSION OR SALE OF SUCH PROPERTY), (F) ALL
MONETARY OBLIGATIONS UNDER ANY LEASING OR SIMILAR ARRANGEMENT WHICH, IN
CONNECTION WITH GAAP, IS CLASSIFIED AS A CAPITAL LEASE, (G) ALL INDEBTEDNESS
REFERRED TO IN CLAUSES (A) THROUGH (F) ABOVE SECURED BY (OR FOR WHICH THE HOLDER
OF SUCH INDEBTEDNESS HAS AN EXISTING RIGHT, CONTINGENT OR OTHERWISE, TO BE
SECURED BY) ANY MORTGAGE, LIEN, PLEDGE, CHARGE, SECURITY INTEREST OR OTHER
ENCUMBRANCE UPON OR IN ANY PROPERTY OR ASSETS (INCLUDING ACCOUNTS AND CONTRACT
RIGHTS) OWNED BY SUCH PERSON, EVEN THOUGH SUCH PERSON HAS NOT ASSUMED OR BECOME
LIABLE FOR THE PAYMENT OF SUCH INDEBTEDNESS, AND (H) ALL CONTINGENT OBLIGATIONS
(AS DEFINED BELOW) IN RESPECT OF INDEBTEDNESS OR OBLIGATIONS OF OTHERS OF THE
KINDS REFERRED TO IN CLAUSES (A) THROUGH (G) ABOVE; AND (Y) “CONTINGENT
OBLIGATION” MEANS, AS TO ANY PERSON, ANY DIRECT OR INDIRECT LIABILITY,
CONTINGENT OR OTHERWISE, OF THAT PERSON WITH RESPECT TO ANY INDEBTEDNESS OF
ANOTHER PERSON IF THE PRIMARY PURPOSE OR INTENT OF THE PERSON INCURRING SUCH
LIABILITY, OR THE PRIMARY EFFECT THEREOF, IS TO PROVIDE ASSURANCE TO THE OBLIGEE
OF SUCH LIABILITY THAT SUCH LIABILITY WILL BE PAID OR DISCHARGED, OR THAT ANY
AGREEMENTS RELATING THERETO WILL BE COMPLIED WITH, OR THAT THE HOLDERS OF SUCH
LIABILITY WILL BE PROTECTED (IN WHOLE OR IN PART) AGAINST LOSS WITH RESPECT
THERETO.

(S)                ABSENCE OF LITIGATION. THERE IS NO ACTION, SUIT, PROCEEDING,
INQUIRY OR INVESTIGATION BEFORE OR BY FINRA, ANY COURT, PUBLIC BOARD, GOVERNMENT
AGENCY, SELF-REGULATORY ORGANIZATION OR BODY PENDING OR, TO THE KNOWLEDGE OF THE
COMPANY, THREATENED AGAINST OR AFFECTING THE COMPANY OR ANY OF ITS SUBSIDIARIES,
THE COMMON STOCK OR ANY OF THE COMPANY’S OR ITS SUBSIDIARIES’ OFFICERS OR
DIRECTORS, WHETHER OF A CIVIL OR CRIMINAL NATURE OR OTHERWISE, IN THEIR
CAPACITIES AS SUCH, EXCEPT AS SET FORTH IN SCHEDULE 3(S). THE MATTERS SET FORTH
IN SCHEDULE 3(S) WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT.

(T)                 INSURANCE. THE COMPANY AND EACH OF ITS SUBSIDIARIES ARE
INSURED BY INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES
AND RISKS AND IN SUCH AMOUNTS AS MANAGEMENT OF THE COMPANY BELIEVES TO BE
PRUDENT AND CUSTOMARY IN THE BUSINESSES IN WHICH THE COMPANY AND ITS
SUBSIDIARIES ARE ENGAGED. NEITHER THE COMPANY NOR ANY SUCH SUBSIDIARY HAS BEEN
REFUSED ANY INSURANCE COVERAGE SOUGHT OR APPLIED FOR AND NEITHER THE COMPANY NOR
ANY SUCH SUBSIDIARY HAS ANY REASON TO BELIEVE THAT IT WILL NOT BE ABLE TO RENEW
ITS EXISTING INSURANCE COVERAGE AS AND WHEN SUCH COVERAGE EXPIRES OR TO OBTAIN
SIMILAR COVERAGE FROM SIMILAR INSURERS AS MAY BE NECESSARY TO CONTINUE ITS
BUSINESS AT A COST THAT WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.

(U)               EMPLOYEE RELATIONS.

(I)                 NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS A PARTY
TO ANY COLLECTIVE BARGAINING AGREEMENT AND DOES NOT EMPLOY ANY MEMBER OF A
UNION. TO THE COMPANY’S KNOWLEDGE, THERE IS NO PENDING OR THREATENED LABOR
DISPUTE, STRIKE OR WORK STOPPAGE AFFECTING THE COMPANY’S OR ITS SUBSIDIARIES’
BUSINESS. NO EXECUTIVE OFFICER OF THE COMPANY OR ANY OF ITS SUBSIDIARIES (AS
DEFINED IN RULE 501(F) OF THE 1933 ACT) HAS NOTIFIED THE COMPANY THAT SUCH
OFFICER INTENDS TO LEAVE THE COMPANY OR OTHERWISE TERMINATE SUCH OFFICER’S
EMPLOYMENT WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES. NO EXECUTIVE OFFICER OF
THE COMPANY OR ANY OF ITS SUBSIDIARIES, TO THE KNOWLEDGE OF THE COMPANY, IS, OR
IS NOW EXPECTED TO BE, IN VIOLATION OF ANY MATERIAL TERM OF ANY EMPLOYMENT
CONTRACT, CONFIDENTIALITY, DISCLOSURE OR PROPRIETARY INFORMATION AGREEMENT,
NON-COMPETITION AGREEMENT, OR ANY OTHER CONTRACT OR AGREEMENT OR ANY RESTRICTIVE
COVENANT, AND, TO THE KNOWLEDGE OF THE COMPANY, THE CONTINUED EMPLOYMENT OF EACH
SUCH EXECUTIVE OFFICER DOES NOT SUBJECT THE COMPANY OR ANY OF ITS SUBSIDIARIES
TO ANY LIABILITY WITH RESPECT TO ANY OF THE FOREGOING MATTERS.

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(II)               THE COMPANY AND ITS SUBSIDIARIES ARE IN COMPLIANCE WITH ALL
FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND REGULATIONS RESPECTING LABOR,
EMPLOYMENT AND EMPLOYMENT PRACTICES AND BENEFITS, TERMS AND CONDITIONS OF
EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE FAILURE TO BE IN COMPLIANCE WOULD
NOT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO RESULT
IN A MATERIAL ADVERSE EFFECT.

(V)               TITLE. THE COMPANY AND ITS SUBSIDIARIES HAVE GOOD AND
MARKETABLE TITLE IN FEE SIMPLE TO ALL MATERIAL REAL PROPERTY AND GOOD AND
MARKETABLE TITLE TO ALL MATERIAL PERSONAL PROPERTY OWNED BY THEM, IN EACH CASE
AS MATERIAL TO THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES AND FREE AND
CLEAR OF ALL LIENS, ENCUMBRANCES AND DEFECTS EXCEPT AS EITHER (I) SET FORTH ON
SCHEDULE 3(V) OR (II) AS DO NOT MATERIALLY AFFECT THE VALUE OF SUCH PROPERTY AND
DO NOT INTERFERE WITH THE CURRENT USE AND PROPOSED USE OF SUCH PROPERTY BY THE
COMPANY OR ITS SUBSIDIARIES. ANY REAL PROPERTY AND FACILITIES HELD UNDER LEASE
BY THE COMPANY OR ITS SUBSIDIARIES ARE HELD UNDER VALID, SUBSISTING AND
ENFORCEABLE LEASES.

(W)             INTELLECTUAL PROPERTY RIGHTS. THE COMPANY OR ITS SUBSIDIARIES
OWN OR POSSESS ADEQUATE RIGHTS OR LICENSES TO USE ALL TRADEMARKS, TRADE NAMES,
SERVICE MARKS, SERVICE MARK REGISTRATIONS, SERVICE NAMES, DOMAIN NAMES, ORIGINAL
WORKS OF AUTHORSHIP, PATENTS, PATENT RIGHTS, COPYRIGHTS, INVENTIONS, LICENSES,
APPROVALS, GOVERNMENTAL AUTHORIZATIONS, TRADE SECRETS AND OTHER INTELLECTUAL
PROPERTY RIGHTS AND ALL APPLICATIONS AND REGISTRATIONS THEREFOR (“INTELLECTUAL
PROPERTY RIGHTS”) NECESSARY TO CONDUCT THEIR RESPECTIVE BUSINESSES AS NOW
CONDUCTED, EXCEPT WHERE FAILURE TO SO OWN OR POSSESS WOULD NOT REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT. EXCEPT AS SET FORTH IN
SCHEDULE 3(W), NONE OF THE COMPANY’S OR ITS SUBSIDIARIES’ INTELLECTUAL PROPERTY
RIGHTS HAVE EXPIRED OR TERMINATED OR HAVE BEEN ABANDONED OR ARE EXPECTED TO
EXPIRE OR TERMINATE OR ARE EXPECTED TO BE ABANDONED, WITHIN TWO (2) YEARS AFTER
THE DATE OF THIS AGREEMENT. THE COMPANY DOES NOT HAVE ANY KNOWLEDGE OF ANY
INFRINGEMENT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF INTELLECTUAL PROPERTY
RIGHTS OF OTHERS. THERE IS NO CLAIM, ACTION OR PROCEEDING BROUGHT, OR TO THE
KNOWLEDGE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, BEING THREATENED, AGAINST
THE COMPANY OR ANY OF ITS SUBSIDIARIES REGARDING THEIR INTELLECTUAL PROPERTY
RIGHTS. NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS AWARE OF ANY FACTS OR
CIRCUMSTANCES WHICH MIGHT GIVE RISE TO ANY OF THE FOREGOING INFRINGEMENTS OR
CLAIMS, ACTIONS OR PROCEEDINGS. THE COMPANY AND ITS SUBSIDIARIES HAVE TAKEN
REASONABLE SECURITY MEASURES TO PROTECT THE SECRECY, CONFIDENTIALITY AND VALUE
OF ALL OF THEIR INTELLECTUAL PROPERTY RIGHTS.

(X)               ENVIRONMENTAL LAWS. THE COMPANY AND ITS SUBSIDIARIES (I) ARE
IN COMPLIANCE WITH ANY AND ALL ENVIRONMENTAL LAWS (AS DEFINED BELOW), (II) HAVE
RECEIVED ALL PERMITS, LICENSES OR OTHER APPROVALS REQUIRED OF THEM UNDER
APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT THEIR RESPECTIVE BUSINESSES AND (III)
ARE IN COMPLIANCE WITH ALL TERMS AND CONDITIONS OF ANY SUCH PERMIT, LICENSE OR
APPROVAL WHERE, IN EACH OF THE FOREGOING CLAUSES (I), (II) AND (III), THE
FAILURE TO SO COMPLY COULD BE REASONABLY EXPECTED TO HAVE, INDIVIDUALLY OR IN
THE AGGREGATE, A MATERIAL ADVERSE EFFECT. THE TERM “ENVIRONMENTAL LAWS” MEANS
ALL FEDERAL, STATE, LOCAL OR FOREIGN LAWS RELATING TO POLLUTION OR PROTECTION OF
HUMAN HEALTH OR THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, AMBIENT AIR,
SURFACE WATER, GROUNDWATER, LAND SURFACE OR SUBSURFACE STRATA), INCLUDING,
WITHOUT LIMITATION, LAWS RELATING TO EMISSIONS, DISCHARGES, RELEASES OR
THREATENED RELEASES OF CHEMICALS, POLLUTANTS, CONTAMINANTS, OR TOXIC OR
HAZARDOUS SUBSTANCES OR WASTES (COLLECTIVELY, “HAZARDOUS MATERIALS”) INTO THE
ENVIRONMENT, OR OTHERWISE RELATING TO THE MANUFACTURE, PROCESSING, DISTRIBUTION,
USE, TREATMENT, STORAGE, DISPOSAL, TRANSPORT OR HANDLING OF HAZARDOUS MATERIALS,
AS WELL AS ALL AUTHORIZATIONS, CODES, DECREES, DEMANDS OR DEMAND LETTERS,
INJUNCTIONS, JUDGMENTS, LICENSES, NOTICES OR NOTICE LETTERS, ORDERS, PERMITS,
PLANS OR REGULATIONS ISSUED, ENTERED, PROMULGATED OR APPROVED THEREUNDER.

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(Y)               SUBSIDIARY RIGHTS. THE COMPANY HAS THE UNRESTRICTED RIGHT TO
VOTE, AND (SUBJECT TO LIMITATIONS IMPOSED BY APPLICABLE LAW) TO RECEIVE
DIVIDENDS AND DISTRIBUTIONS ON, ALL CAPITAL SECURITIES OF ITS SUBSIDIARIES, AS
OWNED BY THE COMPANY.

(Z)                INVESTMENT COMPANY STATUS.  THE COMPANY IS NOT REQUIRED TO BE
REGISTERED AS, AND IMMEDIATELY FOLLOWING THE CLOSING WILL NOT BE REQUIRED TO
REGISTER AS, AN “INVESTMENT COMPANY” WITHIN THE MEANING OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, AND THE COMPANY IS NOT A COMPANY CONTROLLED BY
AN “INVESTMENT COMPANY” OR A “PROMOTER” OR “PRINCIPAL UNDERWRITER” FOR AN
“INVESTMENT COMPANY” AS SUCH TERMS ARE DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED.

(AA)            TAX STATUS. EXCEPT AS DISCLOSED ON SCHEDULE 3(AA), THE COMPANY
AND EACH OF ITS SUBSIDIARIES (I) HAS MADE OR FILED ALL U.S. FEDERAL AND STATE
INCOME AND ALL OTHER TAX RETURNS, REPORTS AND DECLARATIONS REQUIRED BY ANY
JURISDICTION TO WHICH IT IS SUBJECT, (II) HAS PAID ALL TAXES AND OTHER
GOVERNMENTAL ASSESSMENTS AND CHARGES THAT ARE MATERIAL IN AMOUNT AND DUE AND
OWING ON SUCH RETURNS, REPORTS AND DECLARATIONS, EXCEPT THOSE BEING CONTESTED IN
GOOD FAITH AND (III) HAS SET ASIDE ON ITS BOOKS PROVISION REASONABLY ADEQUATE
FOR THE PAYMENT OF ALL TAXES ACTUALLY DUE AND OWING FOR PERIODS SUBSEQUENT TO
THE PERIODS TO WHICH SUCH RETURNS, REPORTS OR DECLARATIONS APPLY. THERE ARE NO
UNPAID TAXES IN ANY MATERIAL AMOUNT CLAIMED TO BE DUE BY THE TAXING AUTHORITY OF
ANY JURISDICTION, AND THE OFFICERS OF THE COMPANY KNOW OF NO BASIS FOR ANY SUCH
CLAIM.

(BB)           INTERNAL ACCOUNTING AND DISCLOSURE CONTROLS. THE COMPANY AND EACH
OF ITS SUBSIDIARIES MAINTAIN A SYSTEM OF INTERNAL ACCOUNTING CONTROLS CUSTOMARY
FOR THE RESPECTIVE BUSINESSES OF SIMILAR TYPE AND SIZE AS THE COMPANY AND ITS
SUBSIDIARIES SUFFICIENT TO PROVIDE REASONABLE ASSURANCE THAT (I) TRANSACTIONS
ARE EXECUTED IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATIONS,
(II) TRANSACTIONS ARE RECORDED AS NECESSARY TO PERMIT PREPARATION OF FINANCIAL
STATEMENTS IN CONFORMITY WITH GAAP AND TO MAINTAIN ASSET AND LIABILITY
ACCOUNTABILITY, (III) ACCESS TO ASSETS OR INCURRENCE OF LIABILITIES IS PERMITTED
ONLY IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATION AND (IV)
THE RECORDED ACCOUNTABILITY FOR ASSETS AND LIABILITIES IS COMPARED WITH THE
EXISTING ASSETS AND LIABILITIES AT REASONABLE INTERVALS AND APPROPRIATE ACTION
IS TAKEN WITH RESPECT TO ANY DIFFERENCE. THE COMPANY MAINTAINS DISCLOSURE
CONTROLS AND PROCEDURES (AS SUCH TERM IS DEFINED IN RULE 13A-15 UNDER THE 1934
ACT) THAT ARE EFFECTIVE IN ENSURING THAT INFORMATION REQUIRED TO BE DISCLOSED BY
THE COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS UNDER THE 1934 ACT IS
RECORDED, PROCESSED, SUMMARIZED AND REPORTED, WITHIN THE TIME PERIODS SPECIFIED
IN THE RULES AND FORMS OF THE SEC, INCLUDING, WITHOUT LIMITATION, CONTROLS AND
PROCEDURES DESIGNED TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE
COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS UNDER THE 1934 ACT IS
ACCUMULATED AND COMMUNICATED TO THE COMPANY’S MANAGEMENT, INCLUDING ITS
PRINCIPAL EXECUTIVE OFFICER OR OFFICERS AND ITS PRINCIPAL FINANCIAL OFFICER OR
OFFICERS, AS APPROPRIATE, TO ALLOW TIMELY DECISIONS REGARDING REQUIRED
DISCLOSURE. DURING THE TWELVE (12) MONTHS PRIOR TO THE DATE HEREOF, NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES HAS RECEIVED ANY NOTICE OR CORRESPONDENCE
FROM ANY ACCOUNTANT RELATING TO ANY MATERIAL WEAKNESS IN ANY PART OF THE SYSTEM
OF INTERNAL ACCOUNTING CONTROLS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES.

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(CC)            OFF BALANCE SHEET ARRANGEMENTS. THERE IS NO TRANSACTION,
ARRANGEMENT, OR OTHER RELATIONSHIP BETWEEN THE COMPANY AND AN UNCONSOLIDATED OR
OTHER OFF BALANCE SHEET ENTITY THAT IS REQUIRED TO BE DISCLOSED BY THE COMPANY
IN ITS 1934 ACT FILINGS AND IS NOT SO DISCLOSED OR THAT OTHERWISE WOULD BE
REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.

(DD)          TRANSFER TAXES. THE COMPANY AGREES THAT IT SHALL PAY ALL STOCK
TRANSFER OR OTHER TAXES (OTHER THAN INCOME OR SIMILAR TAXES) WHICH ARE REQUIRED
TO BE PAID IN CONNECTION WITH THE SALE AND TRANSFER OF THE COMMON SHARES TO BE
SOLD TO THE BUYER.

(EE)            MANIPULATION OF PRICE. WITHIN THE LAST TWENTY-FOUR (24) MONTHS,
THE COMPANY HAS NOT, AND TO ITS KNOWLEDGE NO ONE ACTING ON ITS BEHALF HAS, (I)
TAKEN, DIRECTLY OR INDIRECTLY, ANY ACTION DESIGNED TO CAUSE OR TO RESULT, OR
THAT COULD REASONABLY BE EXPECTED TO CAUSE OR RESULT, IN THE STABILIZATION OR
MANIPULATION OF THE PRICE OF ANY SECURITY OF THE COMPANY WITH THE PURPOSE OF
FACILITATING THE SALE OF ANY OF THE COMMON SHARES, (II) SOLD, BID FOR,
PURCHASED, OR PAID ANY COMPENSATION FOR SOLICITING PURCHASES OF, ANY OF THE
COMMON SHARES, OR (III) PAID OR AGREED TO PAY TO ANY PERSON ANY COMPENSATION FOR
SOLICITING ANOTHER TO PURCHASE ANY OTHER SECURITIES OF THE COMPANY.

(FF)             ACKNOWLEDGEMENT REGARDING BUYER’S TRADING ACTIVITY. THE COMPANY
ACKNOWLEDGES AND AGREES, SUBJECT TO THE FINAL SENTENCE OF THIS CLAUSE (FF), THAT
(I) THE BUYER HAS NOT BEEN ASKED TO AGREE, NOR HAS THE BUYER AGREED, TO DESIST
FROM PURCHASING OR SELLING, LONG AND/OR SHORT, SECURITIES OF THE COMPANY, OR
“DERIVATIVE” SECURITIES BASED ON SECURITIES ISSUED BY THE COMPANY OR TO HOLD THE
COMMON SHARES FOR ANY SPECIFIED TERM (UNLESS OTHERWISE SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT), (II) THE BUYER, AND COUNTER-PARTIES IN
“DERIVATIVE” TRANSACTIONS TO WHICH THE BUYER IS A PARTY, DIRECTLY OR INDIRECTLY,
MAY IN THE FUTURE HAVE A “SHORT” POSITION IN THE COMMON STOCK, AND (III) THE
BUYER SHALL NOT BE DEEMED TO HAVE ANY AFFILIATION WITH OR CONTROL OVER ANY ARM’S
LENGTH COUNTER-PARTY IN ANY “DERIVATIVE” TRANSACTION. THE COMPANY FURTHER
UNDERSTANDS AND ACKNOWLEDGES THAT THE BUYER MAY ENGAGE IN HEDGING AND/OR TRADING
ACTIVITIES AT VARIOUS TIMES DURING THE PERIOD THAT THE COMMON SHARES ARE
OUTSTANDING, AND SUCH HEDGING AND/OR TRADING ACTIVITIES, IF ANY, CAN REDUCE THE
VALUE OF THE EXISTING SHAREHOLDERS’ EQUITY INTEREST IN THE COMPANY BOTH AT AND
AFTER THE TIME THE HEDGING AND/OR TRADING ACTIVITIES ARE BEING CONDUCTED.  THE
COMPANY ACKNOWLEDGES THAT, SUBJECT TO THE FINAL SENTENCE OF THIS CLAUSE (FF),
SUCH AFOREMENTIONED HEDGING AND/OR TRADING ACTIVITIES AFTER THE CLOSING DO NOT
CONSTITUTE A BREACH OF THIS AGREEMENT OR ANY OF THE DOCUMENTS EXECUTED IN
CONNECTION HEREWITH.  AS OF THE DATE HEREOF, NEITHER THE BUYER NOR ITS
AFFILIATES MAINTAIN A “SHORT” POSITION IN THE COMMON STOCK WITH RESPECT TO ANY
SUCH HEDGING AND/OR TRADING ACTIVITY.  NOTWITHSTANDING ANYTHING ELSE HEREIN TO
THE CONTRARY, (X) THE FOREGOING IS NOT A RECOGNITION OF OR ACKNOWLEDGEMENT WITH
RESPECT TO AND DOES NOT PERMIT THE BUYER’S OR ITS AFFILIATES’ VIOLATION OF
(I) THE INSIDER TRADING RULES AND REGULATIONS OF THE APPLICABLE UNITED STATES
FEDERAL AND STATE SECURITIES LAWS, INCLUDING, WITHOUT LIMITATION SECTION 10(B)
AND RULES 10B5-1 AND 10B5-2 OF THE

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1934 ACT, OR (II) INTERNAL COMPANY POLICIES WITH RESPECT TO THE PURCHASE OR SALE
OF COMPANY SECURITIES AS IN EFFECT ON THE DATE HEREOF OR AS MAY BE ADOPTED
HEREAFTER (“COMPANY INSIDER TRADING POLICIES”), AND (Y) BUYER, ITS AFFILIATES
AND THE DIRECTOR DESIGNEES SHALL AT ALL TIMES ABIDE BY ALL LAWS AND THE RULES,
REGULATIONS, ORDERS, JUDGMENTS AND DECREES OF ANY COURT, PUBLIC BOARD, AGENCY,
SELF-REGULATORY ORGANIZATION OR BODY (INCLUDING FEDERAL AND STATE SECURITIES
LAWS AND REGULATIONS AND THE RULES AND REGULATIONS OF FINRA) AND THE COMPANY
INSIDER TRADING POLICIES WITH RESPECT TO SUCH PERSON PURCHASING OR SELLING
“SHORT” OF ANY SECURITIES OF THE COMPANY OR ENGAGING IN A “DERIVATIVE
TRANSACTION” TO WHICH SUCH PERSON HAS A “SHORT” POSITION WITH RESPECT TO THE
COMPANY AND/OR COMMON STOCK.

(GG)           U.S. REAL PROPERTY HOLDING CORPORATION. THE COMPANY IS NOT, HAS
NEVER BEEN AND HAS NO PRESENT INTENTION OF BECOMING A U.S. REAL PROPERTY HOLDING
CORPORATION WITHIN THE MEANING OF SECTION 897 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, AND THE COMPANY SHALL SO CERTIFY UPON THE BUYER’S REQUEST.

(HH)           NO ADDITIONAL AGREEMENTS.  THE COMPANY DOES NOT HAVE ANY
AGREEMENT OR UNDERSTANDING WITH THE BUYER WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY THE TRANSACTION DOCUMENTS OTHER THAN AS SPECIFIED IN THE
TRANSACTION DOCUMENTS.

(II)               DISCLOSURE. THE COMPANY CONFIRMS THAT NEITHER IT NOR ANY
OTHER PERSON ACTING ON ITS BEHALF HAS PROVIDED THE BUYER OR ITS AGENTS OR
COUNSEL WITH ANY INFORMATION THAT CONSTITUTES OR COULD REASONABLY BE EXPECTED TO
CONSTITUTE MATERIAL, NONPUBLIC INFORMATION. THE COMPANY UNDERSTANDS AND CONFIRMS
THAT THE BUYER WILL RELY ON THE FOREGOING REPRESENTATIONS IN EFFECTING
TRANSACTIONS IN SECURITIES OF THE COMPANY.  TO THE KNOWLEDGE OF THE COMPANY, NO
EVENT OR CIRCUMSTANCE HAS OCCURRED OR INFORMATION EXISTS WITH RESPECT TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR ITS OR THEIR BUSINESS, PROPERTIES,
PROSPECTS, OPERATIONS OR FINANCIAL CONDITIONS, WHICH, UNDER APPLICABLE LAW, RULE
OR REGULATION, REQUIRES PUBLIC DISCLOSURE OR ANNOUNCEMENT BY THE COMPANY BUT
WHICH HAS NOT BEEN SO PUBLICLY ANNOUNCED OR DISCLOSED. THE COMPANY ACKNOWLEDGES
AND AGREES THAT THE BUYER DOES NOT MAKE AND HAS NOT MADE ANY REPRESENTATIONS OR
WARRANTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY ANY OF THE
TRANSACTION DOCUMENTS OTHER THAN THOSE SPECIFICALLY SET FORTH IN SECTION 2.

(JJ)               SHELL COMPANY STATUS. THE COMPANY IS NOT, AND HAS NEVER BEEN,
AN ISSUER IDENTIFIED IN RULE 144(I)(1) PROMULGATED UNDER THE 1933 ACT.

(KK)           STOCK OPTION PLANS. EACH STOCK OPTION GRANTED BY THE COMPANY WAS
GRANTED (I) IN ACCORDANCE WITH THE TERMS OF THE APPLICABLE STOCK OPTION PLAN OF
THE COMPANY AND (II) WITH AN EXERCISE PRICE AT LEAST EQUAL TO THE FAIR MARKET
VALUE OF THE COMMON STOCK ISSUABLE WITH RESPECT TO SUCH OPTION, BASED ON THE
APPLICABLE LISTING PRICE OF THE COMPANY’S COMMON STOCK, ON THE DATE SUCH STOCK
OPTION WOULD BE CONSIDERED GRANTED UNDER GAAP AND APPLICABLE LAW.  NO STOCK
OPTION GRANTED UNDER THE COMPANY’S STOCK OPTION PLAN HAS BEEN BACKDATED. THE
COMPANY HAS NOT KNOWINGLY GRANTED, AND THERE IS NO AND HAS BEEN NO POLICY OR
PRACTICE OF THE COMPANY TO KNOWINGLY GRANT, STOCK OPTIONS PRIOR TO, OR OTHERWISE
KNOWINGLY COORDINATE THE GRANT OF STOCK OPTIONS WITH, THE RELEASE OR OTHER
PUBLIC ANNOUNCEMENT OF MATERIAL INFORMATION REGARDING THE COMPANY OR ITS
FINANCIAL RESULTS OR PROSPECTS.

 

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(LL)               NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS. TO THE
KNOWLEDGE OF THE COMPANY, THERE ARE NO MATERIAL DISAGREEMENTS OF ANY KIND
PRESENTLY EXISTING, OR REASONABLY ANTICIPATED BY THE COMPANY TO ARISE, BETWEEN
THE COMPANY AND THE ACCOUNTANTS AND LAWYERS FORMERLY OR PRESENTLY ENGAGED BY THE
COMPANY AND THE COMPANY IS CURRENT WITH RESPECT TO ANY FEES OWED TO ITS
ACCOUNTANTS AND LAWYERS WHICH COULD AFFECT THE COMPANY’S ABILITY TO PERFORM ANY
OF ITS OBLIGATIONS UNDER ANY OF THE TRANSACTION DOCUMENTS. IN ADDITION, ON OR
PRIOR TO THE DATE HEREOF, THE COMPANY HAD DISCUSSIONS WITH ITS ACCOUNTANTS ABOUT
ITS FINANCIAL STATEMENTS PREVIOUSLY FILED WITH THE SEC. BASED ON THOSE
DISCUSSIONS, THE COMPANY HAS NO REASON TO BELIEVE THAT IT WILL NEED TO RESTATE
ANY SUCH FINANCIAL STATEMENTS OR ANY PART THEREOF.

(MM)       COMPOSITION OF BOARD.  EACH OF E. DENNIS O’CONNOR AND WALTER L. ROBB
(THE “RESIGNING DIRECTORS”) HAS RESIGNED AS A DIRECTOR OF THE COMPANY, EFFECTIVE
CONCURRENTLY WITH THE CLOSING.  THE BOARD HAS TAKEN ALL ACTION NECESSARY TO
APPOINT MATTHEW E. LIPMAN, MICHAEL TOPOREK AND EDWARD R. HIRSHFIELD
(THE “DIRECTOR DESIGNEES”) AS DIRECTORS OF THE COMPANY, EFFECTIVE CONCURRENTLY
WITH THE CLOSING, TO FILL THE VACANCIES ON THE BOARD CREATED BY THE RESIGNATION
OF THE RESIGNING DIRECTORS AND THE OTHER VACANCY ON THE BOARD SUCH THAT THE
DIRECTOR DESIGNEES WILL COMPRISE THREE (3) DIRECTORS OF A SEVEN (7) MEMBER
BOARD.  SPECIFICALLY, (I) MICHAEL TOPOREK HAS BEEN APPOINTED TO A DIRECTOR CLASS
WITH A TERM EXPIRING AT THE 2017 ANNUAL MEETING OF SHAREHOLDERS, (II) EDWARD R.
HIRSHFIELD HAS BEEN APPOINTED TO A DIRECTOR CLASS WITH A TERM EXPIRING AT THE
2018 ANNUAL MEETING OF SHAREHOLDERS, AND (III) MATTHEW E. LIPMAN HAS BEEN
APPOINTED TO A DIRECTOR CLASS WITH A TERM EXPIRING AT THE 2019 ANNUAL MEETING OF
SHAREHOLDERS.  THE BOARD HAS ALSO TAKEN ALL ACTION NECESSARY TO APPOINT EDWARD
R. HIRSHFIELD TO SERVE ON THE COMPENSATION COMMITTEE OF THE BOARD AND MATTHEW E.
LIPMAN TO SERVE ON THE AUDIT COMMITTEE AND GOVERNANCE AND NOMINATING COMMITTEE
OF THE BOARD, EFFECTIVE CONCURRENTLY WITH THE CLOSING.  NOTWITHSTANDING ANYTHING
IN THIS SECTION 3(MM) OR THE CERTIFICATE OF INCORPORATION TO THE CONTRARY, THE
TERM OF ANY DIRECTOR DESIGNEE, THE APPOINTMENT OF ANY DIRECTOR DESIGNEE AS
CONTEMPLATED BY THIS AGREEMENT AND THE COMPANY’S AND BOARD’S OBLIGATIONS WITH
REGARD TO THE PROMOTION OF THE RE-ELECTION OF ANY DIRECTOR DESIGNEE IS SUBJECT
TO THE LIMITATIONS AND QUALIFICATIONS SET FORTH IN SECTION 4(L).  ALL DIRECTOR
DESIGNEES SHALL, NOTWITHSTANDING ANY APPOINTMENT TO A PARTICULAR CLASS OF
DIRECTORS WITH A SPECIFIED TERM AND ANY TERMS OR PROVISIONS OF THE CERTIFICATE
OF INCORPORATION, STAND FOR ELECTION TO THE BOARD BY THE SHAREHOLDERS OF THE
COMPANY AT THE 2017 ANNUAL MEETING OF SHAREHOLDERS AS REQUIRED BY SECTION 705(C)
OF THE NEW YORK BUSINESS CORPORATION LAW.

4.                  COVENANTS.

(A)                BEST EFFORTS. EACH PARTY SHALL USE ITS BEST EFFORTS TIMELY TO
SATISFY EACH OF THE COVENANTS AND THE CONDITIONS TO BE SATISFIED BY IT AS
PROVIDED IN SECTIONS 6 AND 7.

(B)               FORM D AND BLUE SKY. THE COMPANY AGREES TO FILE A FORM D WITH
RESPECT TO THE COMMON SHARES AS REQUIRED UNDER REGULATION D AND TO PROVIDE A
COPY THEREOF TO THE BUYER PROMPTLY AFTER SUCH FILING. THE COMPANY SHALL, ON OR
BEFORE THE CLOSING DATE, TAKE SUCH ACTION AS THE COMPANY SHALL REASONABLY
DETERMINE IS NECESSARY IN ORDER TO OBTAIN AN EXEMPTION FOR OR TO QUALIFY THE
COMMON SHARES FOR SALE TO THE BUYER AT THE CLOSING PURSUANT TO THIS AGREEMENT
UNDER APPLICABLE SECURITIES OR “BLUE SKY” LAWS OF THE STATE OF NEW YORK (OR TO
OBTAIN AN EXEMPTION FROM SUCH QUALIFICATION), AND SHALL PROVIDE EVIDENCE OF ANY
SUCH ACTION SO TAKEN TO THE BUYER ON OR PRIOR TO THE CLOSING DATE.

 

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(C)                REPORTING STATUS. UNTIL THE EARLIER OF (I) THE DATE ON WHICH
THE HOLDERS (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) “BENEFICIALLY OWN”
(AS SET FORTH IN RULE 13D-3 AND RULE 13D-5(B)(L) OF THE 1934 ACT) AN AGGREGATE
OF TEN PERCENT (10%) OR LESS OF THE SHARES OF COMMON STOCK THEN OUTSTANDING (THE
“REPORTING PERIOD”), (II) THE TERMINATION OF THE REGISTRATION RIGHTS AGREEMENT,
(III) THE DATE WHEN THE HOLDERS MAY SELL ALL OF THE COMMON SHARES UNDER RULE 144
WITHOUT VOLUME LIMITATIONS AND/OR WITHOUT THE REQUIREMENT FOR CURRENT PUBLIC
INFORMATION, AND (IV) THE DATE THE BUYER OR ITS AFFILIATES WAIVE THIS SECTION
4(C), THE COMPANY (A) SHALL TIMELY FILE ALL REPORTS REQUIRED TO BE FILED WITH
THE SEC ON FORM 8-K, FORM 10-K AND FORM 10-Q, PROVIDED, THAT ANY FILING MADE
PURSUANT TO AN EXTENSION IN COMPLIANCE WITH RULE 12B-25 PROMULGATED UNDER THE
EXCHANGE ACT SHALL NOT BE CONSIDERED UNTIMELY, (B) SHALL NOT VOLUNTARILY
TERMINATE ITS STATUS AS AN ISSUER REQUIRED TO FILE REPORTS UNDER THE 1934 ACT
EVEN IF THE 1934 ACT OR THE RULES AND REGULATIONS THEREUNDER WOULD NO LONGER
REQUIRE OR OTHERWISE PERMIT SUCH TERMINATION, AND (C) SHALL TAKE ALL ACTIONS
NECESSARY TO MAINTAIN ITS ELIGIBILITY TO REGISTER THE COMMON SHARES FOR RESALE
BY THE HOLDERS ON FORM S-1.

(D)               USE OF PROCEEDS. THE COMPANY WILL USE THE PROCEEDS FROM THE
SALE OF THE COMMON SHARES SOLELY FOR GENERAL CORPORATE PURPOSES AND TO SATISFY
ALL FEES AND EXPENSES RELATED TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS
AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREUNDER, INCLUDING
REIMBURSEMENT TO THE BUYER OR ITS DESIGNEE(S) FOR ITS REASONABLE OUT-OF-POCKET
COSTS AND EXPENSES SOLELY AS SET FORTH IN SECTION 4(G). 

(E)                FINANCIAL INFORMATION. THE COMPANY AGREES TO SEND THE
FOLLOWING TO EACH DIRECTOR DESIGNEE DURING THE REPORTING PERIOD (I) UNLESS THE
FOLLOWING ARE FILED WITH THE SEC THROUGH THE EDGAR SYSTEM AND ARE AVAILABLE TO
THE PUBLIC THROUGH THE EDGAR SYSTEM, WITHIN THREE (3) BUSINESS DAYS (AS DEFINED
BELOW) AFTER THE FILING THEREOF WITH THE SEC, A COPY OF ITS ANNUAL REPORTS ON
FORM 10-K, ANY QUARTERLY REPORTS ON FORM 10-Q, ANY CURRENT REPORTS ON FORM 8-K
(OR ANY ANALOGOUS REPORTS UNDER THE 1934 ACT) AND ANY REGISTRATION STATEMENTS
(OTHER THAN ON FORM S-8) OR AMENDMENTS FILED PURSUANT TO THE 1933 ACT, (II)
WITHIN ONE (1) BUSINESS DAY OF THE RELEASE THEREOF, E-MAILED COPIES OF ALL PRESS
RELEASES ISSUED BY THE COMPANY, AND (III) COPIES OF ANY NOTICES AND OTHER
INFORMATION MADE AVAILABLE OR GIVEN TO THE SHAREHOLDERS OF THE COMPANY
GENERALLY, CONTEMPORANEOUSLY WITH THE MAKING AVAILABLE OR GIVING THEREOF TO THE
SHAREHOLDERS. FOR PURPOSES OF THIS AGREEMENT, “BUSINESS DAY” MEANS ANY DAY OTHER
THAN A SATURDAY, A SUNDAY OR A DAY ON WHICH BANKS IN THE STATE OF NEW YORK
GENERALLY ARE CLOSED FOR REGULAR BANKING BUSINESS.

(F)                LISTING. THE COMPANY SHALL PROMPTLY SECURE THE LISTING OR
QUOTATION OF ALL OF THE REGISTRABLE SECURITIES UPON EACH NATIONAL SECURITIES
EXCHANGE AND AUTOMATED QUOTATION SYSTEM, IF ANY, UPON WHICH THE COMMON STOCK IS
THEN LISTED (SUBJECT TO OFFICIAL NOTICE OF ISSUANCE) OR QUOTED AND SHALL
MAINTAIN SUCH LISTING OR QUOTATION OF ALL REGISTRABLE SECURITIES FROM TIME TO
TIME ISSUABLE UNDER THE TERMS OF THE TRANSACTION DOCUMENTS (UNLESS OTHERWISE
WAIVED BY THE BUYER OR ITS AFFILIATES).  DURING THE REPORTING PERIOD (UNLESS
OTHERWISE WAIVED BY THE BUYER OR ITS AFFILIATES), THE COMPANY SHALL MAINTAIN THE
AUTHORIZATION FOR QUOTATION OR THE LISTING OF THE COMMON STOCK, AS APPLICABLE,
ON THE OTC MARKETS GROUP QUOTATION SYSTEM, THE OTC BULLETIN BOARD OR ANY
NATIONAL SECURITIES EXCHANGE OR OTHER AUTOMATED QUOTATION SYSTEM.  NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES SHALL TAKE ANY ACTION WHICH WOULD BE
REASONABLY EXPECTED TO RESULT IN THE COMMON STOCK CEASING TO BE QUOTED ON, OR
BEING SUSPENDED FROM, THE OTC MARKETS GROUP QUOTATION SYSTEM.  THE COMPANY SHALL
PAY ALL FEES AND EXPENSES IN CONNECTION WITH SATISFYING ITS OBLIGATIONS UNDER
THIS SECTION 4(F).

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(G)               FEES. THE COMPANY SHALL REIMBURSE THE BUYER OR ITS DESIGNEE(S)
FOR ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($125,000) OF REASONABLE
OUT-OF-POCKET COSTS AND EXPENSES INCURRED BY THE BUYER AND ITS AFFILIATES IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS
(INCLUDING, WITHOUT LIMITATION, LEGAL FEES AND DISBURSEMENTS IN CONNECTION WITH
THE DOCUMENTATION, NEGOTIATION AND IMPLEMENTATION OF THE TRANSACTIONS
CONTEMPLATED BY THE TRANSACTION DOCUMENTS AND DUE DILIGENCE IN CONNECTION
THEREWITH), WHICH AMOUNT MAY BE WITHHELD BY THE BUYER FROM THE PURCHASE PRICE AT
THE CLOSING TO THE EXTENT NOT PREVIOUSLY REIMBURSED BY THE COMPANY. THE COMPANY
SHALL BE RESPONSIBLE FOR THE PAYMENT OF ANY PLACEMENT AGENT’S FEES, FINANCIAL
ADVISORY FEES, OR BROKER’S COMMISSIONS (OTHER THAN FOR A BUYER PROVIDER)
RELATING TO OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY
SHALL PAY, AND HOLD THE BUYER HARMLESS AGAINST, ANY LIABILITY, LOSS OR EXPENSE
(INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND OUT-OF-POCKET
EXPENSES) IN CONNECTION WITH ANY CLAIM RELATING TO ANY SUCH PAYMENT CONTEMPLATED
BY THE FOREGOING SENTENCE. EXCEPT AS OTHERWISE SET FORTH IN THE TRANSACTION
DOCUMENTS, EACH PARTY TO THIS AGREEMENT SHALL BEAR ITS OWN EXPENSES IN
CONNECTION WITH THE SALE OF THE COMMON SHARES TO THE BUYER. 

(H)               PLEDGE OF COMMON SHARES. THE COMPANY ACKNOWLEDGES AND AGREES
THAT THE COMMON SHARES MAY BE PLEDGED BY A HOLDER IN CONNECTION WITH A BONA FIDE
MARGIN AGREEMENT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE COMMON
SHARES. SUCH PLEDGE OF COMMON SHARES SHALL NOT BE DEEMED TO BE A TRANSFER, SALE
OR ASSIGNMENT OF THE COMMON SHARES HEREUNDER, AND NO HOLDER EFFECTING A PLEDGE
OF COMMON SHARES SHALL BE REQUIRED TO PROVIDE THE COMPANY WITH ANY NOTICE
THEREOF OR OTHERWISE MAKE ANY DELIVERY TO THE COMPANY PURSUANT TO THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING, WITHOUT LIMITATION, SECTION 2(F)
HEREOF; PROVIDED THAT A HOLDER AND ITS PLEDGEE SHALL BE REQUIRED TO COMPLY WITH
THE PROVISIONS OF SECTION 2(F) HEREOF IN ORDER TO EFFECT A SALE, TRANSFER OR
ASSIGNMENT OF COMMON SHARES TO SUCH PLEDGEE. THE COMPANY HEREBY AGREES TO
EXECUTE AND DELIVER SUCH DOCUMENTATION AS A PLEDGEE OF THE COMMON SHARES MAY
REASONABLY REQUEST IN CONNECTION WITH A PLEDGE OF THE COMMON SHARES TO SUCH
PLEDGEE BY A HOLDER.

(I)                 DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION.
ON OR BEFORE 8:30 A.M., NEW YORK CITY TIME, ON THE FIRST (1ST) BUSINESS DAY
AFTER THIS AGREEMENT HAS BEEN EXECUTED, THE COMPANY SHALL ISSUE A PRESS RELEASE
AND FILE A CURRENT REPORT ON FORM 8-K DESCRIBING THE TERMS OF THE TRANSACTIONS
CONTEMPLATED BY THE TRANSACTION DOCUMENTS IN THE FORM REQUIRED BY THE 1934 ACT
AND ATTACHING THE MATERIAL TRANSACTION DOCUMENTS (INCLUDING, WITHOUT LIMITATION,
THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT AS EXHIBITS TO SUCH FILING
(THE “8‑K FILING”)).  NEITHER THE COMPANY NOR THE BUYER SHALL ISSUE ANY PRESS
RELEASES OR MAKE ANY OTHER PUBLIC STATEMENTS WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER APPLICABLE
PARTY; PROVIDED, HOWEVER, THAT THE COMPANY SHALL BE ENTITLED, WITHOUT THE PRIOR
APPROVAL OF THE BUYER, TO ISSUE ANY PRESS RELEASE OR MAKE OTHER PUBLIC
DISCLOSURE WITH RESPECT TO SUCH TRANSACTIONS (I) IN SUBSTANTIAL CONFORMITY WITH
THE 8-K FILING AND CONTEMPORANEOUSLY THEREWITH AND (II) AS IS REQUIRED BY
APPLICABLE LAW AND REGULATIONS (PROVIDED THAT IN THE CASE OF CLAUSES (I) AND
(II) THE BUYER SHALL BE CONSULTED BY THE COMPANY IN CONNECTION WITH ANY SUCH
PRESS RELEASE OR OTHER PUBLIC DISCLOSURE PRIOR TO ITS RELEASE).

 

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(J)                 ADDITIONAL ISSUANCES OF SECURITIES.

(I)                 THE COMPANY SHALL NOT EFFECT ANY PUBLIC SALE OR DISTRIBUTION
OF ITS EQUITY SECURITIES OR ANY SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR
EXERCISABLE FOR ITS EQUITY SECURITIES, EXCEPT IN EACH CASE PURSUANT TO A DEMAND
REGISTRATION, DURING THE NINETY (90) DAY PERIOD BEGINNING ON THE EFFECTIVE DATE
OF ANY REGISTRATION STATEMENT IN CONNECTION WITH A DEMAND REGISTRATION, EXCEPT
PURSUANT TO A REGISTRATION STATEMENT COVERING (X) SALES OR DISTRIBUTIONS OF THE
COMPANY’S EQUITY SECURITIES OR ANY SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE
OR EXERCISABLE FOR ITS EQUITY SECURITIES PURSUANT TO A REGISTRATION STATEMENT ON
FORM S-4 OR FORM S-8 OR ANY SUCCESSOR FORM, (Y) THE ISSUANCE OF SHARES OF COMMON
STOCK UPON THE CONVERSION, EXERCISE OR EXCHANGE, BY THE HOLDER THEREOF, OF
OPTIONS, WARRANTS OR OTHER SECURITIES CONVERTIBLE INTO OR EXERCISABLE OR
EXCHANGEABLE FOR SHARES OF COMMON STOCK PURSUANT TO THE TERMS OF SUCH OPTIONS,
WARRANTS OR OTHER SECURITIES, OR (Z) THE ISSUANCE OF SHARES OF COMMON STOCK IN
CONNECTION WITH TRANSFERS TO DIVIDEND REINVESTMENT PLANS OR TO EMPLOYEE BENEFIT
PLANS IN ORDER TO ENABLE ANY SUCH EMPLOYEE BENEFIT PLAN TO FULFILL ITS FUNDING
OBLIGATIONS IN THE ORDINARY COURSE.

(II)               FROM THE DATE HEREOF UNTIL NINE (9) MONTHS AFTER THE CLOSING
DATE, THE COMPANY WILL NOT, UNLESS APPROVED BY THE BUYER, ITS AFFILIATES OR A
MAJORITY OF THE DIRECTOR DESIGNEES ON THE BOARD, (I) DIRECTLY OR INDIRECTLY,
OFFER, SELL, GRANT ANY OPTION TO PURCHASE, OR OTHERWISE DISPOSE OF (OR ANNOUNCE
ANY OFFER, SALE, GRANT OR ANY OPTION TO PURCHASE OR OTHER DISPOSITION OF) ANY OF
ITS OR ITS SUBSIDIARIES’ EQUITY OR EQUITY EQUIVALENT SECURITIES, INCLUDING
WITHOUT LIMITATION ANY DEBT, PREFERRED STOCK OR OTHER INSTRUMENT OR SECURITY
THAT IS, AT ANY TIME DURING ITS LIFE AND UNDER ANY CIRCUMSTANCES, CONVERTIBLE
INTO OR EXCHANGEABLE OR EXERCISABLE FOR COMMON STOCK OR COMMON STOCK EQUIVALENTS
(AS DEFINED BELOW), EXCEPT FOR ANY RIGHTS, WARRANTS OR OPTIONS ISSUED TO
EMPLOYEES, CONSULTANTS, OFFICERS OR DIRECTORS OF THE COMPANY, IN CONNECTION WITH
THEIR SERVICES TO THE COMPANY, AS APPROVED BY THE BOARD (ANY SUCH OFFER, SALE,
GRANT, DISPOSITION OR ANNOUNCEMENT BEING REFERRED TO AS A “SUBSEQUENT
PLACEMENT”), OR (II) BE PARTY TO ANY SOLICITATIONS, NEGOTIATIONS OR DISCUSSIONS
WITH REGARD TO THE FOREGOING. FOR THE AVOIDANCE OF DOUBT, THE FOREGOING SHALL
NOT APPLY TO DEBT THAT IS NOT CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE
FOR COMMON STOCK OR COMMON STOCK EQUIVALENTS. FOR PURPOSES OF THIS AGREEMENT,
(X) “COMMON STOCK EQUIVALENTS” MEANS, COLLECTIVELY, OPTIONS AND CONVERTIBLE
SECURITIES; (Y) “OPTIONS” MEANS ANY RIGHTS, WARRANTS OR OPTIONS TO SUBSCRIBE FOR
OR PURCHASE SHARES OF COMMON STOCK OR CONVERTIBLE SECURITIES; PROVIDED, THAT THE
DEFINED TERM “OPTIONS” SHALL NOT INCLUDE ANY RIGHTS, WARRANTS OR OPTIONS ISSUED
TO EMPLOYEES, CONSULTANTS, OFFICERS OR DIRECTORS OF THE COMPANY, IN CONNECTION
WITH THEIR SERVICES TO THE COMPANY, AS APPROVED BY THE BOARD; AND (Z)
“CONVERTIBLE SECURITIES” MEANS ANY STOCK OR SECURITIES (OTHER THAN OPTIONS)
DIRECTLY OR INDIRECTLY CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR
SHARES OF COMMON STOCK.

(III)             FROM AND AFTER THE CLOSING DATE, AS LONG AS THE BUYER,
TOGETHER WITH ITS AFFILIATES, “BENEFICIALLY OWN” (AS SET FORTH IN RULE 13D-3 AND
RULE 13D-5(B)(L) OF THE 1934 ACT) SHARES OF COMMON STOCK, THE COMPANY WILL NOT,
DIRECTLY OR INDIRECTLY, EFFECT ANY SUBSEQUENT PLACEMENT UNLESS THE COMPANY SHALL
HAVE FIRST COMPLIED WITH THIS SECTION 4(J)(III).

(1)               THE COMPANY SHALL DELIVER TO THE BUYER AN IRREVOCABLE WRITTEN
NOTICE (THE “OFFER NOTICE”) OF ANY PROPOSED OR INTENDED ISSUANCE OR SALE OR
EXCHANGE (THE “OFFER”) OF THE SECURITIES BEING OFFERED (THE “OFFERED
SECURITIES”) IN A SUBSEQUENT PLACEMENT, WHICH OFFER NOTICE SHALL (W) REASONABLY
IDENTIFY AND DESCRIBE THE OFFERED SECURITIES, (X) DESCRIBE THE PRICE AND OTHER
MATERIAL TERMS UPON WHICH THEY ARE TO BE ISSUED, SOLD OR EXCHANGED, AND THE
NUMBER OR AMOUNT OF THE OFFERED SECURITIES TO BE ISSUED, SOLD OR EXCHANGED, (Y)
IDENTIFY THE PERSONS OR ENTITIES (IF KNOWN) TO WHICH OR WITH WHICH THE OFFERED
SECURITIES ARE TO BE OFFERED, ISSUED, SOLD OR EXCHANGED AND (Z) OFFER TO ISSUE
AND SELL TO OR EXCHANGE WITH THE BUYER UP TO THE PROPORTION OF THE OFFERED
SECURITIES EQUAL TO THE BUYER’S (INCLUDING ITS AFFILIATES’) PRO RATA INTEREST IN
EQUITY SECURITIES OF THE COMPANY ON A FULLY-DILUTED BASIS.

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(2)               TO ACCEPT AN OFFER, IN WHOLE OR IN PART, THE BUYER MUST
DELIVER A WRITTEN NOTICE TO THE COMPANY PRIOR TO THE END OF THE FIFTH (5TH)
BUSINESS DAY AFTER THE BUYER’S RECEIPT OF THE OFFER NOTICE (THE “OFFER PERIOD”),
SETTING FORTH THE NUMBER OR AMOUNT OF THE OFFERED SECURITIES THAT THE BUYER
ELECTS TO PURCHASE (THE “NOTICE OF ACCEPTANCE”). NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED HEREIN, IF THE COMPANY DESIRES TO MODIFY OR AMEND THE TERMS
AND CONDITIONS OF THE OFFER PRIOR TO THE EXPIRATION OF THE OFFER PERIOD, THE
COMPANY MAY DELIVER TO THE BUYER A NEW OFFER NOTICE AND THE OFFER PERIOD SHALL
EXPIRE ON THE FIFTH (5TH) BUSINESS DAY AFTER THE BUYER’S RECEIPT OF SUCH NEW
OFFER NOTICE.

(3)               THE COMPANY SHALL HAVE SIXTY (60) DAYS FROM THE EXPIRATION OF
THE OFFER PERIOD ABOVE (I) TO OFFER, ISSUE, SELL OR EXCHANGE ALL OR ANY PART OF
SUCH OFFERED SECURITIES AS TO WHICH A NOTICE OF ACCEPTANCE HAS NOT BEEN GIVEN BY
THE BUYER (THE “REFUSED SECURITIES”) PURSUANT TO A DEFINITIVE AGREEMENT (THE
“SUBSEQUENT PLACEMENT AGREEMENT”), BUT ONLY TO THE OFFEREES DESCRIBED IN THE
OFFER NOTICE (IF SO DESCRIBED THEREIN) AND ONLY UPON TERMS AND CONDITIONS
(INCLUDING, WITHOUT LIMITATION, UNIT PRICES AND INTEREST RATES) THAT ARE NOT
MORE FAVORABLE TO THE ACQUIRING PERSON OR PERSONS OR LESS FAVORABLE TO THE
COMPANY THAN THOSE SET FORTH IN THE OFFER NOTICE AND (II) TO PUBLICLY ANNOUNCE
(A) THE EXECUTION OF SUCH SUBSEQUENT PLACEMENT AGREEMENT, AND (B) EITHER (X) THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY SUCH SUBSEQUENT PLACEMENT
AGREEMENT OR (Y) THE TERMINATION OF SUCH SUBSEQUENT PLACEMENT AGREEMENT, ALL AS
APPLICABLE AND WHICH SHALL BE FILED WITH THE SEC ON A CURRENT REPORT ON FORM 8-K
WITH SUCH SUBSEQUENT PLACEMENT AGREEMENT AND ANY DOCUMENTS CONTEMPLATED THEREIN
FILED AS EXHIBITS THERETO.

(4)               IN THE EVENT THE COMPANY SHALL PROPOSE TO SELL LESS THAN ALL
THE REFUSED SECURITIES (ANY SUCH SALE TO BE IN THE MANNER AND ON THE TERMS
SPECIFIED IN SECTION 4(J)(III)(3)), THEN THE BUYER MAY, AT ITS SOLE OPTION AND
IN ITS SOLE DISCRETION, REDUCE THE NUMBER OR AMOUNT OF THE OFFERED SECURITIES
SPECIFIED IN ITS NOTICE OF ACCEPTANCE TO AN AMOUNT THAT SHALL BE NOT LESS THAN
THE NUMBER OR AMOUNT OF THE OFFERED SECURITIES THAT THE BUYER ELECTED TO
PURCHASE PURSUANT TO SECTION 4(J)(III)(2) MULTIPLIED BY A FRACTION, (I) THE
NUMERATOR OF WHICH SHALL BE THE NUMBER OR AMOUNT OF OFFERED SECURITIES THE
COMPANY ACTUALLY PROPOSES TO ISSUE, SELL OR EXCHANGE (INCLUDING OFFERED
SECURITIES TO BE ISSUED OR SOLD TO THE BUYER PURSUANT TO SECTION 4(J)(III)(2)
PRIOR TO SUCH REDUCTION) AND (II) THE DENOMINATOR OF WHICH SHALL BE THE ORIGINAL
AMOUNT OF THE OFFERED SECURITIES. IN THE EVENT THAT THE BUYER SO ELECTS TO
REDUCE THE NUMBER OR AMOUNT OF OFFERED SECURITIES SPECIFIED IN ITS NOTICE OF
ACCEPTANCE, THE COMPANY MAY NOT ISSUE, SELL OR EXCHANGE MORE THAN THE REDUCED
NUMBER OR AMOUNT OF THE OFFERED SECURITIES UNLESS AND UNTIL SUCH SECURITIES HAVE
AGAIN BEEN OFFERED TO THE BUYER IN ACCORDANCE WITH SECTION 4(J)(III)(1).

(5)               UPON THE CLOSING OF THE ISSUANCE, SALE OR EXCHANGE OF ALL OR
LESS THAN ALL OF THE REFUSED SECURITIES, THE BUYER SHALL ACQUIRE FROM THE
COMPANY, AND THE COMPANY SHALL ISSUE TO THE BUYER, THE NUMBER OR AMOUNT OF
OFFERED SECURITIES SPECIFIED IN THE NOTICE OF ACCEPTANCE, AS REDUCED PURSUANT TO
SECTION 4(J)(III)(4) IF THE BUYER HAS SO ELECTED, UPON THE TERMS AND CONDITIONS
SPECIFIED IN THE OFFER.

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(6)               AFTER COMPLETION OF THE PROCEDURES AND STEPS CONTEMPLATED BY
THIS SECTION 4(J)(III), ANY OFFERED SECURITIES NOT ACQUIRED BY THE BUYER OR
OTHER PERSONS IN ACCORDANCE WITH SECTION 4(J)(III) MAY NOT BE ISSUED, SOLD OR
EXCHANGED UNTIL THEY ARE AGAIN OFFERED TO THE BUYER UNDER THE PROCEDURES
SPECIFIED IN THIS AGREEMENT.

(7)               THE COMPANY AND THE BUYER AGREE THAT IF THE BUYER ELECTS TO
PARTICIPATE IN THE OFFER, (I) NEITHER THE SUBSEQUENT PLACEMENT AGREEMENT WITH
RESPECT TO SUCH OFFER NOR ANY OTHER TRANSACTION DOCUMENTS RELATED THERETO
(COLLECTIVELY, THE “SUBSEQUENT PLACEMENT DOCUMENTS”) SHALL EXPRESSLY INCLUDE,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE BUYER, ANY TERM OR PROVISIONS WHEREBY
THE BUYER SHALL BE REQUIRED TO AGREE TO ANY RESTRICTIONS IN TRADING AS TO ANY
SECURITIES OF THE COMPANY OWNED BY THE BUYER PRIOR TO SUCH SUBSEQUENT PLACEMENT,
EXCEPT AS REQUIRED BY ANY APPLICABLE COMPANY PROCEDURES OR POLICIES THEN IN
EFFECT REGARDING THE PURCHASE AND SALE OF COMPANY SECURITIES WHILE IN POSSESSION
OF MATERIAL, NON-PUBLIC INFORMATION CONCERNING THE COMPANY, AND (II) ANY
REGISTRATION RIGHTS SET FORTH IN SUCH SUBSEQUENT PLACEMENT DOCUMENTS SHALL,
UNLESS PREVIOUSLY CONSENTED TO IN WRITING BY THE BUYER OR THE MAJORITY HOLDERS
(AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), NOT MATERIALLY INFRINGE THE
REGISTRATION RIGHTS CONTAINED IN THE REGISTRATION RIGHTS AGREEMENT.

(8)               NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 4(J)
AND UNLESS OTHERWISE AGREED TO BY THE BUYER, THE COMPANY SHALL EITHER CONFIRM IN
WRITING TO THE BUYER THAT THE TRANSACTION WITH RESPECT TO THE SUBSEQUENT
PLACEMENT HAS BEEN ABANDONED OR SHALL PUBLICLY DISCLOSE ITS INTENTION TO ISSUE
THE OFFERED SECURITIES, IN EITHER CASE IN SUCH A MANNER SUCH THAT THE BUYER WILL
NOT BE IN POSSESSION OF MATERIAL NON-PUBLIC INFORMATION AND THE BOARD’S
FIDUCIARY DUTIES SHALL BE FULFILLED, BY THE NINETIETH (90TH) DAY FOLLOWING
DELIVERY OF THE OFFER NOTICE. IF BY THE NINETIETH (90TH) DAY FOLLOWING DELIVERY
OF THE OFFER NOTICE NO PUBLIC DISCLOSURE REGARDING A TRANSACTION WITH RESPECT TO
THE OFFERED SECURITIES HAS BEEN MADE, AND NO NOTICE REGARDING THE ABANDONMENT OF
SUCH TRANSACTION HAS BEEN RECEIVED BY THE BUYER, SUCH TRANSACTION SHALL BE
DEEMED TO HAVE BEEN ABANDONED AND THE BUYER SHALL NOT BE DEEMED TO BE IN
POSSESSION OF ANY MATERIAL, NON-PUBLIC INFORMATION WITH RESPECT TO THE COMPANY.
SHOULD THE COMPANY DECIDE TO PURSUE SUCH TRANSACTION WITH RESPECT TO THE OFFERED
SECURITIES, THE COMPANY SHALL PROVIDE THE BUYER WITH ANOTHER OFFER NOTICE AND
THE BUYER WILL AGAIN HAVE THE RIGHT OF PARTICIPATION SET FORTH IN THIS SECTION
4(J)(III). THE COMPANY SHALL NOT BE PERMITTED TO DELIVER MORE THAN ONE SUCH
OFFER NOTICE TO THE BUYER IN ANY SIXTY (60) DAY PERIOD.

(K)               PUBLIC INFORMATION. AT ANY TIME DURING THE PERIOD COMMENCING
FROM THE SIX (6) MONTH ANNIVERSARY OF THE CLOSING DATE AND ENDING AT SUCH TIME
THAT ALL OF THE COMMON SHARES, IF A REGISTRATION STATEMENT IS NOT AVAILABLE FOR
THE RESALE OF ALL OF THE COMMON SHARES, MAY BE SOLD WITHOUT RESTRICTION OR
LIMITATION PURSUANT TO RULE 144 AND WITHOUT THE REQUIREMENT FOR THE COMPANY TO
BE IN COMPLIANCE WITH RULE 144(C), IF THE COMPANY SHALL (I) FAIL FOR ANY REASON
TO SATISFY THE CURRENT PUBLIC INFORMATION REQUIREMENTS OF RULE 144(C) OR (II)
HAVE EVER BEEN AN ISSUER DESCRIBED IN RULE 144(I)(1)(I) OR BECOMES SUCH AN
ISSUER, AND SHALL FAIL TO SATISFY ANY CONDITION SET FORTH IN RULE 144(I)(2)
(EACH, A “PUBLIC INFORMATION FAILURE”), THEN THE COMPANY SHALL BE DEEMED IN
BREACH OF THIS SECTION 4(K).

 

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(L)                 BOARD MATTERS.

(I)                 AS LONG AS THE BUYER, TOGETHER WITH ITS AFFILIATES,
“BENEFICIALLY OWN” (AS SET FORTH IN RULE 13D-3 AND RULE 13D-5(B)(L) OF THE 1934
ACT) SHARES OF COMMON STOCK, IF ANY DIRECTOR DESIGNEE CEASES TO BE A MEMBER OF
THE BOARD FOR ANY REASON THEN THE BUYER WILL BE ENTITLED TO RECOMMEND, SUBJECT
TO THE LIMITATIONS SET FORTH IN SECTION 4(L)(IV), FOR CONSIDERATION BY THE
BOARD, ANOTHER INDIVIDUAL (A “SUCCESSOR DESIGNEE”) TO SERVE AS A DIRECTOR IN
PLACE OF SUCH DIRECTOR DESIGNEE.  ANY SUCCESSOR DESIGNEE MUST (A) SATISFY THE
BOARD MEMBERSHIP CRITERIA THEN ESTABLISHED AND MAINTAINED BY THE BOARD AND THE
COMPANY CONSISTENT WITH PAST PRACTICE AND (B) BE REASONABLY ACCEPTABLE TO THE
BOARD IN ITS GOOD FAITH BUSINESS JUDGMENT AFTER EXERCISING ITS FIDUCIARY DUTIES
AND (C) NOT BE SUBJECT TO ANY OF THE “BAD ACTOR” DISQUALIFICATIONS SET FORTH IN
RULE 506(D)(1) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT.  SUBJECT TO
THE LIMITATIONS SET FORTH IN SECTION 4(L)(IV), THE BOARD WILL APPOINT THE
SUCCESSOR DESIGNEE AS A DIRECTOR PROMPTLY AFTER HE HAS BEEN RECOMMENDED BY THE
BUYER AND APPROVED BY THE BOARD IN ACCORDANCE HEREWITH AND SUCH SUCCESSOR
DESIGNEE WILL BE APPOINTED TO THE SAME CLASS OF DIRECTORS ON WHICH THE DIRECTOR
DESIGNEE THAT HE IS REPLACING THEN SERVES.  IN THE EVENT THE BOARD DECLINES TO
ACCEPT A CANDIDATE RECOMMENDED BY THE BUYER DUE TO A FAILURE TO MEET THE
STANDARDS ESTABLISHED BY THIS SECTION 4(L)(I), THE BUYER MAY PROPOSE A
REPLACEMENT, SUBJECT TO THE ABOVE AND BELOW CRITERIA.  UPON BECOMING A MEMBER OF
THE BOARD, THE SUCCESSOR DESIGNEE WILL BE DEEMED A “DIRECTOR DESIGNEE” FOR ALL
PURPOSES UNDER THIS AGREEMENT AND WILL SUCCEED TO ALL OF THE RIGHTS AND
PRIVILEGES OF, AND WILL BE BOUND BY THE TERMS AND CONDITIONS APPLICABLE TO, A
DIRECTOR DESIGNEE UNDER THIS AGREEMENT.

(II)               AS LONG AS THE BUYER, TOGETHER WITH ITS AFFILIATES,
“BENEFICIALLY OWN” (AS SET FORTH IN RULE 13D-3 AND RULE 13D-5(B)(L) OF THE 1934
ACT) SHARES OF COMMON STOCK, THE COMPANY WILL, PROVIDED THAT EACH SUCH DIRECTOR
DESIGNEE IS NOT THEN SUBJECT TO A “BAD ACTOR” DISQUALIFICATION AS SET FORTH IN
RULE 506(D)(1) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT AND SUBJECT
TO THE LIMITATIONS SET FORTH IN SECTION 4(L)(IV), INCLUDE THE DIRECTOR
DESIGNEE(S) ON THE SLATE OF NOMINEES RECOMMENDED FOR ELECTION BY THE BOARD IN
THE COMPANY’S PROXY STATEMENT AND ON ITS PROXY CARD RELATING TO EACH ANNUAL
MEETING OF SHAREHOLDERS AND EACH SPECIAL MEETING OF SHAREHOLDERS AT WHICH THE
CLASS OF DIRECTORS ON WHICH SUCH DIRECTOR DESIGNEE THEN SERVES IS UP FOR
ELECTION.  IN CONNECTION WITH SUCH MEETINGS (AND ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF), THE COMPANY WILL PUBLICLY RECOMMEND THAT THE COMPANY’S
SHAREHOLDERS VOTE IN FAVOR OF THE ELECTION OF EACH DIRECTOR DESIGNEE, SOLICIT
PROXIES FOR THE ELECTION OF EACH DIRECTOR DESIGNEE (IN MATERIALLY THE SAME
MANNER AS IT DOES FOR ALL OTHER DIRECTOR NOMINEES AT SUCH MEETING DEVOTING
MATERIALLY THE SAME RESOURCES TO SUCH SOLICITATION CONSISTENT WITH PRIOR
PRACTICE), AND CAUSE ALL COMMON STOCK REPRESENTED BY PROXIES GRANTED TO IT (OR
ANY OF ITS OFFICERS OR REPRESENTATIVES) TO BE VOTED IN FAVOR OF EACH DIRECTOR
DESIGNEE.

(III)             AS LONG AS THE BUYER, TOGETHER WITH ITS AFFILIATES,
“BENEFICIALLY OWN” (AS SET FORTH IN RULE 13D-3 AND RULE 13D-5(B)(L) OF THE 1934
ACT) SHARES OF COMMON STOCK AND SUBJECT TO THE LIMITATIONS SET FORTH IN SECTION
4(L)(IV), (A) THE BOARD WILL APPOINT AT LEAST ONE (1) DIRECTOR DESIGNEE TO SERVE
ON EACH COMMITTEE OF THE BOARD CREATED AFTER THE DATE HEREOF AND (B) THE COMPANY
WILL NOT CAUSE ANY DIRECTOR DESIGNEE TO BE REMOVED OR DISQUALIFIED FROM ANY
COMMITTEE OF THE BOARD TO WHICH SUCH INDIVIDUAL WAS APPOINTED PURSUANT TO THE
TERMS OF THIS AGREEMENT UNLESS HE IS LEGALLY PROHIBITED TO SERVE ON SUCH
COMMITTEE OR NO LONGER SERVES AS A DIRECTOR OF THE COMPANY AS A CONSEQUENCE OF A
REDUCTION IN DIRECTOR DESIGNEES/SUCCESSOR DESIGNEES PURSUANT TO SECTION 4(L)(IV)
OR OTHERWISE.

25

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(IV)             NOTWITHSTANDING ANYTHING ELSE HEREIN TO THE CONTRARY, THE
BUYER’S AND ITS AFFILIATES’ RIGHT TO RECOMMEND A SUCCESSOR DESIGNEE TO THE BOARD
OF THE COMPANY, AND THE COMPANY’S OBLIGATIONS PURSUANT TO SECTION 4(L)(I), (II)
AND (III) (INCLUDING ANY OBLIGATION TO APPOINT SUCH SUCCESSOR DESIGNEE TO THE
BOARD, TAKE ACTION TO RECOMMEND SUCH SUCCESSOR DESIGNEE OR ANY DIRECTOR DESIGNEE
FOR ELECTION AND INCLUSION ON A SLATE OF NOMINEES AND APPOINT A DIRECTOR
DESIGNEE TO BOARD COMMITTEES), SHALL BE BASED ON THE AMOUNT OF SHARES OF COMMON
STOCK OF THE COMPANY BENEFICIALLY OWNED BY THE BUYER AND ITS AFFILIATES AT ANY
APPLICABLE TIME.  PURSUANT TO THE FOREGOING, THE FOLLOWING SHALL APPLY:

(1)               IN THE EVENT THE BUYER, TOGETHER WITH ITS AFFILIATES,
“BENEFICIALLY OWN” (AS SET FORTH IN RULE 13D-3 AND RULE 13D-5(B)(L) OF THE 1934
ACT) TWENTY-FIVE PERCENT (25%) OR MORE OF THE SHARES OF COMMON STOCK THEN
OUTSTANDING, THE BUYER SHALL BE ENTITLED TO EXERCISE ITS RIGHTS PURSUANT TO
SECTION 4(L)(I) AND THE COMPANY SHALL BE BOUND BY THE AGREEMENTS AND COVENANTS
SET FORTH IN SECTION 4(L)(I), (II) AND (III) SUCH THAT THE COMPANY BOARD
CONTAINS A TOTAL OF THREE (3) DIRECTOR DESIGNEES AND/OR SUCCESSOR DESIGNEES;

(2)               IN THE EVENT THE BUYER, TOGETHER WITH ITS AFFILIATES,
“BENEFICIALLY OWN” (AS SET FORTH IN RULE 13D-3 AND RULE 13D-5(B)(L) OF THE 1934
ACT) LESS THAN TWENTY-FIVE PERCENT (25%), BUT TEN PERCENT (10%) OR MORE OF THE
SHARES OF COMMON STOCK THEN OUTSTANDING, THE BUYER SHALL BE ENTITLED TO EXERCISE
ITS RIGHTS PURSUANT TO SECTION 4(L)(I) AND THE COMPANY SHALL BE BOUND BY THE
AGREEMENTS AND COVENANTS SET FORTH IN SECTION 4(L)(I), (II) AND (III) SUCH THAT
THE COMPANY BOARD CONTAINS A TOTAL OF TWO (2) DIRECTOR DESIGNEES AND/OR
SUCCESSOR DESIGNEES; AND

(3)               IN THE EVENT THE BUYER, TOGETHER WITH ITS AFFILIATES,
“BENEFICIALLY OWN” (AS SET FORTH IN RULE 13D-3 AND RULE 13D-5(B)(L) OF THE 1934
ACT) LESS THAN TEN PERCENT (10%) OF THE SHARES OF COMMON STOCK THEN OUTSTANDING,
THE BUYER SHALL BE ENTITLED TO EXERCISE ITS RIGHTS PURSUANT TO SECTION 4(L)(I)
AND THE COMPANY SHALL BE BOUND BY THE AGREEMENTS AND COVENANTS SET FORTH IN
SECTION 4(L)(I), (II) AND (III) SUCH THAT THE COMPANY BOARD CONTAINS A TOTAL OF
ONE (1) DIRECTOR DESIGNEE OR SUCCESSOR DESIGNEE.

(V)               AS LONG AS AT LEAST ONE (1) DIRECTOR DESIGNEE IS A MEMBER OF
THE BOARD, THE SIZE OF THE BOARD SHALL BE FIXED AT SEVEN (7) DIRECTORS.

(VI)             EACH DIRECTOR DESIGNEE WILL BE (A) COMPENSATED FOR HIS SERVICE
AS A DIRECTOR AND WILL BE REIMBURSED FOR HIS EXPENSES ON THE SAME BASIS AS ALL
OTHER NON-EMPLOYEE DIRECTORS OF THE COMPANY, (B) GRANTED EQUITY-BASED
COMPENSATION AND OTHER BENEFITS ON THE SAME BASIS AS ALL OTHER NON-EMPLOYEE
DIRECTORS OF THE COMPANY, AND (III) ENTITLED TO THE SAME RIGHTS OF
INDEMNIFICATION AND DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE COVERAGE AS THE
OTHER NON-EMPLOYEE DIRECTORS OF THE COMPANY AS SUCH RIGHTS MAY EXIST FROM TIME
TO TIME.

(M)             CLOSING DOCUMENTS. PROMPTLY FOLLOWING THE CLOSING DATE, THE
COMPANY AGREES TO DELIVER, OR CAUSE TO BE DELIVERED, TO THE BUYER AND OLSHAN
FROME WOLOSKY LLP A COMPLETE CLOSING SET OF THE EXECUTED TRANSACTION DOCUMENTS
AND THE CLOSING DELIVERABLES PURSUANT TO SECTION 7.

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5.                  TRANSFER AGENT INSTRUCTIONS.

(A)                TRANSFER AGENT INSTRUCTIONS. IF THE BUYER EFFECTS A SALE,
ASSIGNMENT OR TRANSFER OF ANY COMMON SHARES IN ACCORDANCE WITH SECTION 2(F), THE
COMPANY SHALL, UPON RECEIPT OF A REPRESENTATION LETTER IN FORM REASONABLY
ACCEPTABLE TO THE COMPANY AND SUCH OTHER DOCUMENTATION OF SUCH SALE AS THE
COMPANY SHALL REASONABLY REQUIRE, PERMIT THE TRANSFER AND SHALL PROMPTLY
INSTRUCT ITS TRANSFER AGENT TO ISSUE ONE OR MORE CERTIFICATES OR CREDIT SHARES
TO THE APPLICABLE BALANCE ACCOUNTS AT DTC IN SUCH NAME AND IN SUCH DENOMINATIONS
AS SPECIFIED BY THE BUYER TO EFFECT SUCH SALE, TRANSFER OR ASSIGNMENT. IN THE
EVENT THAT SUCH SALE, ASSIGNMENT OR TRANSFER INVOLVES COMMON SHARES SOLD,
ASSIGNED OR TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
PURSUANT TO RULE 144 TO A PERSON OTHER THAN AN AFFILIATE OF THE COMPANY AND THE
COMMON SHARES ARE TO BE CERTIFICATED, THE TRANSFER AGENT SHALL ISSUE SUCH COMMON
SHARES TO THE BUYER, ASSIGNEE OR TRANSFEREE, AS THE CASE MAY BE, WITHOUT ANY
RESTRICTIVE LEGEND.  THE COMPANY ACKNOWLEDGES THAT A BREACH BY IT OF ITS
OBLIGATIONS HEREUNDER WILL CAUSE IRREPARABLE HARM TO THE BUYER. ACCORDINGLY, THE
COMPANY ACKNOWLEDGES THAT THE REMEDY AT LAW FOR A BREACH OF ITS OBLIGATIONS
UNDER THIS SECTION 5(A) WILL BE INADEQUATE AND AGREES, IN THE EVENT OF A BREACH
OR THREATENED BREACH BY THE COMPANY OF THE PROVISIONS OF THIS SECTION 5(A), THAT
THE BUYER SHALL BE ENTITLED, IN ADDITION TO ALL OTHER AVAILABLE REMEDIES, TO AN
ORDER AND/OR INJUNCTION RESTRAINING ANY SUCH BREACH OR THREATENED BREACH AND
REQUIRING IMMEDIATE ISSUANCE AND TRANSFER, WITHOUT THE NECESSITY OF SHOWING
ECONOMIC LOSS AND WITHOUT ANY BOND OR OTHER SECURITY BEING REQUIRED.

6.                  CONDITIONS TO THE COMPANY’S OBLIGATION TO CONSUMMATE THE
CLOSING.

The obligation of the Company hereunder to effect the transactions to be
consummated at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived (to the extent
legally permissible) by the Company at any time in its sole discretion by
providing the Buyer with prior written notice thereof:

(A)                THE BUYER SHALL HAVE DULY EXECUTED EACH OF THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY AND DELIVERED THE SAME TO THE COMPANY.

(B)               THE BUYER SHALL HAVE DELIVERED TO THE COMPANY THE PURCHASE
PRICE (LESS THE AMOUNTS WITHHELD PURSUANT TO SECTION 4(G)) FOR THE COMMON SHARES
AT THE CLOSING BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS PURSUANT TO THE
WIRE INSTRUCTIONS PROVIDED TO THE BUYER PURSUANT TO SECTION 1(A)(IV).

(C)                THE BUYER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE
EVIDENCING THE FORMATION AND GOOD STANDING OF THE BUYER IN SUCH ENTITY’S
JURISDICTION OF FORMATION ISSUED BY THE SECRETARY OF STATE (OR COMPARABLE
OFFICE) OF SUCH JURISDICTION, AS OF A DATE WITHIN FIFTEEN (15) DAYS OF THE
CLOSING DATE.

 

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(D)               THE BUYER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE,
IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, EXECUTED BY AN OFFICER OR THE
MANAGING MEMBER OF THE BUYER AND DATED AS OF THE CLOSING DATE, AS TO (I) THE
RESOLUTIONS CONSISTENT WITH SECTION 2(H) AS ADOPTED BY THE MANAGING MEMBER OF
THE BUYER, AND (II) THE CERTIFICATE OF FORMATION OF THE BUYER, EACH AS IN EFFECT
AT THE CLOSING.

(E)                THE BUYER SHALL HAVE OBTAINED ALL GOVERNMENTAL, REGULATORY OR
THIRD PARTY CONSENTS AND APPROVALS, IF ANY, NECESSARY FOR ITS PURCHASE OF THE
COMMON SHARES.

(F)                THE COMPANY SHALL HAVE RECEIVED A CERTIFICATION FROM EACH
DIRECTOR DESIGNEE, IN THE FORM SET FORTH IN EXHIBIT C AND DATED AS OF THE
CLOSING DATE, TO THE EFFECT THAT THE DIRECTOR DESIGNEE IS NOT AND HAS NOT BEEN
SUBJECT TO ANY PROCEEDING OR EVENT THAT CONSTITUTES A “BAD ACTOR”
DISQUALIFICATION AS SET FORTH IN RULE 506(D)(1) PROMULGATED UNDER REGULATION D
OF THE SECURITIES ACT.

(G)               THE REPRESENTATIONS AND WARRANTIES OF THE BUYER SHALL BE TRUE
AND CORRECT AS OF THE DATE WHEN MADE AND AS OF THE CLOSING DATE AS THOUGH MADE
AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND WARRANTIES THAT SPEAK AS OF A
SPECIFIC DATE WHICH SHALL BE TRUE AND CORRECT AS OF SUCH SPECIFIED DATE), AND
THE BUYER SHALL HAVE PERFORMED, SATISFIED AND COMPLIED IN ALL MATERIAL RESPECTS
WITH THE COVENANTS, AGREEMENTS AND CONDITIONS REQUIRED BY THIS AGREEMENT TO BE
PERFORMED, SATISFIED OR COMPLIED WITH BY THE BUYER AT OR PRIOR TO THE CLOSING
DATE.

7.                  CONDITIONS TO THE BUYER’S OBLIGATION TO CONSUMMATE THE
CLOSING.

The obligation of the Buyer hereunder to effect the transactions to be
consummated at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Buyer’s sole benefit and may be waived (to the extent
legally permissible) by the Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:

(A)                THE COMPANY SHALL HAVE DULY EXECUTED THE STOCK CERTIFICATE
REPRESENTING THE COMMON SHARES AND EACH OF THE TRANSACTION DOCUMENTS TO WHICH IT
IS A PARTY AND DELIVERED THE SAME TO THE BUYER.

(B)               THE BUYER SHALL HAVE RECEIVED THE OPINIONS OF COUCH WHITE, LLP
AND OBER, KALER, GRIMES & SHRIVER, P.C., THE COMPANY’S OUTSIDE COUNSEL, DATED AS
OF THE CLOSING DATE, ADDRESSED TO THE BUYER, IN FORM AND SUBSTANCE REASONABLY
ACCEPTABLE TO THE BUYER AS TO CERTAIN LEGAL MATTERS WITH RESPECT TO THIS
AGREEMENT.

(C)                THE COMPANY SHALL HAVE DELIVERED TO THE BUYER A CERTIFICATE
EVIDENCING THE FORMATION AND GOOD STANDING OF THE COMPANY AND MTI INSTRUMENTS IN
SUCH ENTITY’S JURISDICTION OF FORMATION ISSUED BY THE SECRETARY OF STATE (OR
COMPARABLE OFFICE) OF SUCH JURISDICTION, AS OF A DATE WITHIN FIFTEEN (15) DAYS
OF THE CLOSING DATE.

(D)               THE COMPANY SHALL HAVE DELIVERED TO THE BUYER (I) A
CERTIFICATE, AS OF A DATE WITHIN FIFTEEN (15) DAYS OF THE CLOSING DATE,
EVIDENCING THE COMPANY’S AND ITS SUBSIDIARIES GOOD STANDING WITH THE FRANCHISE
TAX BOARD OF THE STATE OF CALIFORNIA, AND (II) A CERTIFICATE EVIDENCING MTI
INSTRUMENTS’ QUALIFICATION AS A FOREIGN CORPORATION AND GOOD STANDING WITHIN THE
STATE OF PENNSYLVANIA ISSUED BY THE SECRETARY OF STATE (OR COMPARABLE OFFICE) OF
SUCH STATE.

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(E)                THE COMPANY SHALL HAVE DELIVERED TO THE BUYER A CERTIFIED
COPY OF THE CERTIFICATE OF INCORPORATION AS CERTIFIED BY THE SECRETARY OF STATE
(OR COMPARABLE OFFICE) OF THE STATE OF NEW YORK WITHIN FIFTEEN (15) DAYS OF THE
CLOSING DATE.

(F)                THE COMPANY SHALL HAVE DELIVERED TO THE BUYER A CERTIFICATE,
IN A FORM REASONABLY ACCEPTABLE TO THE BUYER, EXECUTED BY THE SECRETARY OF THE
COMPANY AND DATED AS OF THE CLOSING DATE, AS TO (I) THE RESOLUTIONS CONSISTENT
WITH SECTION 3(B), SECTION 3(I), AND SECTION 7(L) AS ADOPTED BY THE BOARD, (II)
THE CERTIFICATE OF INCORPORATION AND (III) THE BYLAWS, EACH AS IN EFFECT AT THE
CLOSING.

(G)               THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHALL BE
TRUE AND CORRECT AS OF THE DATE WHEN MADE AND AS OF THE CLOSING DATE AS THOUGH
MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND WARRANTIES THAT SPEAK AS OF A
SPECIFIC DATE WHICH SHALL BE TRUE AND CORRECT AS OF SUCH SPECIFIED DATE) AND THE
COMPANY SHALL HAVE PERFORMED, SATISFIED AND COMPLIED IN ALL RESPECTS WITH THE
COVENANTS, AGREEMENTS AND CONDITIONS REQUIRED BY THE TRANSACTION DOCUMENTS TO BE
PERFORMED, SATISFIED OR COMPLIED WITH BY THE COMPANY AT OR PRIOR TO THE CLOSING
DATE. 

(H)               THE COMPANY SHALL HAVE DELIVERED TO THE BUYER A LETTER FROM
THE COMPANY’S TRANSFER AGENT CERTIFYING THE NUMBER OF SHARES OF COMMON STOCK
ISSUED AND OUTSTANDING AS OF THE CLOSING DATE.

(I)                 THE COMMON STOCK (I) SHALL BE QUOTED ON THE OTC MARKETS
GROUP QUOTATION SYSTEM AND (II) SHALL NOT HAVE BEEN SUSPENDED, AS OF THE CLOSING
DATE, BY THE SEC, FINRA OR THE OTC MARKETS GROUP FROM TRADING ON THE OTC MARKETS
GROUP QUOTATION SYSTEM NOR SHALL SUSPENSION BY THE SEC, FINRA OR THE OTC MARKETS
GROUP HAVE BEEN KNOWN BY THE COMPANY TO BE THREATENED, AS OF THE CLOSING DATE,
IN WRITING BY THE SEC, FINRA OR THE OTC MARKETS GROUP.

(J)                 THE COMPANY SHALL HAVE OBTAINED ALL GOVERNMENTAL, REGULATORY
OR THIRD PARTY CONSENTS AND APPROVALS, IF ANY, NECESSARY FOR THE SALE OF THE
COMMON SHARES.

(K)               EACH OF THE RESIGNING DIRECTORS SHALL HAVE RESIGNED AS
DIRECTORS OF THE COMPANY, EFFECTIVE CONCURRENTLY WITH THE CLOSING, IN ACCORDANCE
WITH SECTION 3(MM).  THE BUYER SHALL HAVE RECEIVED CONDITIONAL RESIGNATION
LETTERS EXECUTED BY THE RESIGNING DIRECTORS EVIDENCING SUCH RESIGNATIONS IN A
FORM REASONABLY ACCEPTABLE TO THE BUYER. 

(L)                 THE BOARD SHALL HAVE ACTED BY WRITTEN CONSENT OR OTHERWISE
APPROVED AT A BOARD MEETING THE APPOINTMENT OF THE DIRECTOR DESIGNEES AS
DIRECTORS OF THE COMPANY AND TO EACH COMMITTEE OF THE BOARD, EFFECTIVE
CONCURRENTLY WITH THE CLOSING, IN ACCORDANCE WITH SECTION 3(MM).   

(M)             THE COMPANY SHALL HAVE DELIVERED TO THE BUYER AN OPTION EXERCISE
AND STOCK TRANSFER RESTRICTION AGREEMENT, SUBSTANTIALLY IN THE FORM ATTACHED
HERETO AS EXHIBIT B, EXECUTED BY THE COMPANY AND EACH OF THE INDIVIDUALS LISTED
ON ANNEX I.  

 

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(N)               THE COMPANY SHALL HAVE DELIVERED TO THE BUYER SUCH OTHER
DOCUMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS AS THE BUYER OR ITS COUNSEL MAY REASONABLY
REQUEST.

8.                  MISCELLANEOUS.

(A)                GOVERNING LAW; JURISDICTION; JURY TRIAL. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTIONS) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTIONS OTHER THAN THE STATE OF NEW
YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN,
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH
ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT
SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH
PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(B)               COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
COUNTERPARTS, ALL OF WHICH SHALL BE CONSIDERED ONE AND THE SAME AGREEMENT AND
SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH PARTY AND
DELIVERED TO THE OTHER PARTY; PROVIDED THAT A FACSIMILE, ELECTRONIC OR .PDF
SIGNATURE SHALL BE CONSIDERED DUE EXECUTION AND SHALL BE BINDING UPON THE
SIGNATORY THERETO WITH THE SAME FORCE AND EFFECT AS IF THE SIGNATURE WERE AN
ORIGINAL, NOT A FACSIMILE, ELECTRONIC OR .PDF SIGNATURE.

(C)                HEADINGS. THE HEADINGS OF THIS AGREEMENT ARE FOR CONVENIENCE
OF REFERENCE AND SHALL NOT FORM PART OF, OR AFFECT THE INTERPRETATION OF, THIS
AGREEMENT.

(D)               SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT IS PROHIBITED
BY LAW OR OTHERWISE DETERMINED TO BE INVALID OR UNENFORCEABLE BY A COURT OF
COMPETENT JURISDICTION, THE PROVISION THAT WOULD OTHERWISE BE PROHIBITED,
INVALID OR UNENFORCEABLE SHALL BE DEEMED AMENDED TO APPLY TO THE BROADEST EXTENT
THAT IT WOULD BE VALID AND ENFORCEABLE, AND THE INVALIDITY OR UNENFORCEABILITY
OF SUCH PROVISION SHALL NOT AFFECT THE VALIDITY OF THE REMAINING PROVISIONS OF
THIS AGREEMENT SO LONG AS THIS AGREEMENT AS SO MODIFIED CONTINUES TO EXPRESS,
WITHOUT MATERIAL CHANGE, THE ORIGINAL INTENTIONS OF THE PARTIES AS TO THE
SUBJECT MATTER HEREOF AND THE PROHIBITED NATURE, INVALIDITY OR UNENFORCEABILITY
OF THE PROVISION(S) IN QUESTION DOES NOT SUBSTANTIALLY IMPAIR THE RESPECTIVE
EXPECTATIONS OR RECIPROCAL OBLIGATIONS OF THE PARTIES OR THE PRACTICAL
REALIZATION OF THE BENEFITS THAT WOULD OTHERWISE BE CONFERRED UPON THE PARTIES.
THE PARTIES WILL ENDEAVOR IN GOOD FAITH NEGOTIATIONS TO REPLACE THE PROHIBITED,
INVALID OR UNENFORCEABLE PROVISION(S) WITH A VALID PROVISION(S), THE EFFECT OF
WHICH COMES AS CLOSE AS POSSIBLE TO THAT OF THE PROHIBITED, INVALID OR
UNENFORCEABLE PROVISION(S).

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(E)                ENTIRE AGREEMENT; AMENDMENTS. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS SUPERSEDE ALL OTHER PRIOR ORAL OR WRITTEN AGREEMENTS AMONG
THE BUYER, THE COMPANY, THEIR AFFILIATES AND PERSONS ACTING ON THEIR BEHALF WITH
RESPECT TO THE MATTERS DISCUSSED HEREIN, AND THIS AGREEMENT, THE OTHER
TRANSACTION DOCUMENTS AND THE INSTRUMENTS REFERENCED HEREIN AND THEREIN CONTAIN
THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE MATTERS COVERED
HEREIN AND THEREIN AND, EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR THEREIN,
NEITHER THE COMPANY NOR THE BUYER MAKES ANY REPRESENTATION, WARRANTY, COVENANT
OR UNDERTAKING WITH RESPECT TO SUCH MATTERS. NO PROVISION OF THIS AGREEMENT MAY
BE AMENDED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY THE COMPANY AND THE
BUYER, AND ANY AMENDMENT TO THIS AGREEMENT MADE IN CONFORMITY WITH THE
PROVISIONS OF THIS SECTION 8(E) SHALL BE BINDING ON THE BUYER AND HOLDERS OF
COMMON SHARES AND THE COMPANY. NO PROVISIONS HERETO MAY BE WAIVED OTHER THAN BY
AN INSTRUMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT IS SOUGHT.
THE COMPANY HAS NOT MADE ANY AGREEMENTS WITH THE BUYER RELATING TO THE TERMS OR
CONDITIONS OF THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS EXCEPT
AS SET FORTH IN THE TRANSACTION DOCUMENTS. WITHOUT LIMITING THE FOREGOING, THE
COMPANY CONFIRMS THAT, EXCEPT AS SET FORTH IN THIS AGREEMENT, THE BUYER HAS NOT
MADE ANY COMMITMENT OR PROMISE OR HAS ANY OTHER OBLIGATION TO PROVIDE ANY
FINANCING TO THE COMPANY OR OTHERWISE.

(F)                NOTICES. ANY NOTICES, CONSENTS, WAIVERS OR OTHER
COMMUNICATIONS REQUIRED OR PERMITTED TO BE GIVEN UNDER THE TERMS OF THIS
AGREEMENT MUST BE IN WRITING AND WILL BE DEEMED TO HAVE BEEN DELIVERED: (I) UPON
RECEIPT, WHEN DELIVERED PERSONALLY; (II) UPON RECEIPT, WHEN SENT BY E-MAIL
(PROVIDED CONFIRMATION OF TRANSMISSION IS ELECTRONICALLY GENERATED); OR (III)
ONE (1) BUSINESS DAY AFTER DEPOSIT WITH AN OVERNIGHT COURIER SERVICE, IN EACH
CASE PROPERLY ADDRESSED TO THE PARTY TO RECEIVE THE SAME. THE ADDRESSES AND
E-MAIL ADDRESSES FOR SUCH COMMUNICATIONS SHALL BE:

If to the Company:

Mechanical Technology, Incorporated
325 Washington Avenue Extension
Albany, New York 12205
Telephone:  518-218-2588
Attention:   Kevin G. Lynch, President & CEO
E-mail:        klynch@mtiinstruments.com

With a copy to:

Couch White, LLP
540 Broadway, 7th Floor
Albany, New York 12207
Telephone:  518-426-4600
Attention:   Brian P. Murphy, Esq.

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E-mail: 
 

John R. Vero, Esq.
bmurphy@couchwhite.com 
jvero@couchwhite.com  

 

 

If to the Buyer:

Brookstone Partners
122 East 42nd Street, Suite 4305
New York, New York 10168
Telephone:  212-302-0699
Attention:   Matthew Lipman
E-mail:        lipmanm@brookstonepartners.com

With a copy to:

Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, New York 10019
Telephone:  (212) 451-2307
Attention:   Jeffrey Spindler, Esq.
E-mail:        jspindler@olshanlaw.com

or to such other address and/or e-mail address and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) electronically generated by the
sender’s e-mail or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by e-mail or receipt from an
overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

(G)               SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF THE PARTIES AND THEIR RESPECTIVE SUCCESSORS AND
PERMITTED ASSIGNS. NEITHER PARTY SHALL ASSIGN THIS AGREEMENT OR ANY RIGHTS OR
OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY.

(H)               NO THIRD PARTY BENEFICIARIES. THIS AGREEMENT IS INTENDED FOR
THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED
ASSIGNS, AND IS NOT FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED
BY, ANY OTHER PERSON, EXCEPT THAT EACH BUYER INDEMNITEE AND COMPANY INDEMNITEE
(AS DEFINED BELOW) SHALL HAVE THE RIGHT TO ENFORCE THE OBLIGATIONS OF THE
COMPANY WITH RESPECT TO SECTION 8(K).

(I)                 SURVIVAL. THE REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE COMPANY CONTAINED IN SECTIONS 2 AND 3 SHALL SURVIVE THE CLOSING AND WILL
REMAIN IN FULL FORCE AND EFFECT UNTIL THE DATE THAT IS EIGHTEEN (18) MONTHS
FOLLOWING THE CLOSING DATE, AT WHICH TIME THEY WILL TERMINATE, EXCEPT THAT THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN (I) SECTION 3(X) (ENVIRONMENTAL
LAWS) SHALL SURVIVE THE CLOSING AND REMAIN IN FULL FORCE AND EFFECT UNTIL THE
DATE THAT IS THREE (3) YEARS FOLLOWING THE CLOSING DATE, (II) SECTION 3(AA) (TAX
STATUS) SHALL SURVIVE THE CLOSING AND REMAIN IN FULL FORCE AND EFFECT UNTIL THE
DATE THAT IS THIRTY (30) DAYS FOLLOWING THE EXPIRATION OF THE APPLICABLE STATUTE
OF LIMITATIONS, AND (III) SECTIONS 3(B) (AUTHORIZATION; ENFORCEMENT; VALIDITY)
AND 3(C) (ISSUANCE OF COMMON SHARES) SHALL SURVIVE THE CLOSING AND REMAIN IN
FULL FORCE AND EFFECT UNTIL THE DATE THAT IS FIVE (5) YEARS AFTER THE CLOSING
DATE.  ALL COVENANTS AND OTHER AGREEMENTS IN THIS AGREEMENT TO THE EXTENT THAT
BY THEIR TERMS ARE TO BE PERFORMED AT OR PRIOR TO THE CLOSING SHALL SURVIVE THE
CLOSING AND REMAIN IN FULL FORCE AND EFFECT UNTIL THE DATE THAT IS SIXTY (60)
DAYS FOLLOWING THE CLOSING DATE, AT WHICH TIME THEY SHALL TERMINATE AND ALL
OTHER COVENANTS AND AGREEMENTS IN THIS AGREEMENT SHALL SURVIVE THE CLOSING
INDEFINITELY (UNLESS SUCH COVENANT OR AGREEMENT BY ITS TERMS TERMINATES AS OF AN
EARLIER DATE).

32

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(J)                 FURTHER ASSURANCES. EACH PARTY SHALL DO AND PERFORM, OR
CAUSE TO BE DONE AND PERFORMED, ALL SUCH FURTHER ACTS AND THINGS, AND SHALL
EXECUTE AND DELIVER ALL SUCH OTHER AGREEMENTS, CERTIFICATES, INSTRUMENTS AND
DOCUMENTS, AS ANY OTHER PARTY MAY REASONABLY REQUEST IN ORDER TO CARRY OUT THE
INTENT AND ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY.

(K)               INDEMNIFICATION. 

(I)                 IN CONSIDERATION OF THE BUYER’S EXECUTION AND DELIVERY OF
THE TRANSACTION DOCUMENTS AND ACQUIRING THE COMMON SHARES THEREUNDER AND IN
ADDITION TO ALL OF THE COMPANY’S OTHER OBLIGATIONS UNDER THE TRANSACTION
DOCUMENTS, THE COMPANY SHALL DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS THE
BUYER AND ALL OF ITS PARTNERS, MANAGERS, MEMBERS, OFFICERS, DIRECTORS AND
EMPLOYEES AND ANY OF THE FOREGOING PERSONS’ AGENTS AND OTHER REPRESENTATIVES
(INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT) (COLLECTIVELY, THE “BUYER
INDEMNITEES”) FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
CLAIMS, LOSSES, COSTS, PENALTIES, FEES, LIABILITIES AND DAMAGES, AND EXPENSES IN
CONNECTION THEREWITH (IRRESPECTIVE OF WHETHER ANY SUCH BUYER INDEMNITEE IS A
PARTY TO THE ACTION FOR WHICH INDEMNIFICATION HEREUNDER IS SOUGHT), AND
INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS (COLLECTIVELY, THE “BUYER
INDEMNIFIED LIABILITIES”), INCURRED BY ANY BUYER INDEMNITEE AS A RESULT OF, OR
ARISING OUT OF, OR RELATING TO (A) ANY MISREPRESENTATION OR BREACH OF ANY
REPRESENTATION OR WARRANTY MADE BY THE COMPANY IN ANY OF THE TRANSACTION
DOCUMENTS OR ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY
OR THEREBY, (B) ANY BREACH OF ANY COVENANT, AGREEMENT OR OBLIGATION OF THE
COMPANY CONTAINED IN ANY OF THE TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE,
INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY OR (C) ANY CAUSE OF
ACTION, SUIT OR CLAIM BROUGHT OR MADE AGAINST SUCH BUYER INDEMNITEE BY A THIRD
PARTY (INCLUDING FOR THESE PURPOSES A DERIVATIVE ACTION BROUGHT ON BEHALF OF THE
COMPANY) AND ARISING OUT OF, RESULTING FROM OR RELATED TO (I) THE EXECUTION,
DELIVERY, PERFORMANCE OR ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS OR ANY
OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY IN
VIOLATION OF THE SAME, OR (II) ANY DISCLOSURE MADE BY THE COMPANY IN VIOLATION
OF SECTION 4(I); PROVIDED, THAT, INDEMNITY FOR A BUYER INDEMNITEE PURSUANT TO
SECTION 4(K)(I)(C)(I) SHALL NOT BE AVAILABLE TO SUCH BUYER INDEMNITEE TO THE
EXTENT THE BUYER INDEMNIFIED LIABILITY IS THE PRODUCT OF BUYER’S BREACH OF THE
TRANSACTION DOCUMENTS.  EXCEPT AS OTHERWISE SET FORTH HEREIN, THE MECHANICS AND
PROCEDURES WITH RESPECT TO THE RIGHTS AND OBLIGATIONS UNDER THIS SECTION 8(K)
SHALL BE THE SAME AS THOSE SET FORTH IN SECTION 7(C) OF THE REGISTRATION RIGHTS
AGREEMENT.

 

33

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(II)               IN CONSIDERATION OF THE COMPANY’S EXECUTION AND DELIVERY OF
THE TRANSACTION DOCUMENTS AND ISSUING THE COMMON SHARES THEREUNDER AND IN
ADDITION TO ALL OF THE BUYER’S OTHER OBLIGATIONS UNDER THE TRANSACTION
DOCUMENTS, THE BUYER SHALL DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS THE
COMPANY AND ALL OF ITS OFFICERS, DIRECTORS AND EMPLOYEES AND ANY OF THE
FOREGOING PERSONS’ AGENTS AND OTHER REPRESENTATIVES (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT) (COLLECTIVELY, THE “COMPANY INDEMNITEES”) FROM AND AGAINST ANY
AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES, COSTS, PENALTIES,
FEES, LIABILITIES AND DAMAGES, AND EXPENSES IN CONNECTION THEREWITH
(IRRESPECTIVE OF WHETHER ANY SUCH COMPANY INDEMNITEE IS A PARTY TO THE ACTION
FOR WHICH INDEMNIFICATION HEREUNDER IS SOUGHT), AND INCLUDING REASONABLE
ATTORNEYS’ FEES AND DISBURSEMENTS (COLLECTIVELY, THE “COMPANY INDEMNIFIED
LIABILITIES”), INCURRED BY ANY COMPANY INDEMNITEE AS A RESULT OF, OR ARISING OUT
OF, OR RELATING TO (A) ANY MISREPRESENTATION OR BREACH OF ANY REPRESENTATION OR
WARRANTY MADE BY THE BUYER IN ANY OF THE TRANSACTION DOCUMENTS OR ANY OTHER
CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY, (B) ANY
BREACH OF ANY COVENANT, AGREEMENT OR OBLIGATION OF THE BUYER CONTAINED IN ANY OF
THE TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT
CONTEMPLATED HEREBY OR THEREBY OR (C) ANY CAUSE OF ACTION, SUIT OR CLAIM BROUGHT
OR MADE AGAINST SUCH COMPANY INDEMNITEE BY A THIRD PARTY (INCLUDING FOR THESE
PURPOSES A DERIVATIVE ACTION BROUGHT ON BEHALF OF THE COMPANY) AND ARISING OUT
OF, RESULTING FROM OR RELATED TO (I) THE EXECUTION, DELIVERY, PERFORMANCE OR
ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE,
INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY IN VIOLATION OF THE SAME
OR (II) ANY DISCLOSURE MADE BY THE BUYER IN VIOLATION OF SECTION 4(I); PROVIDED,
THAT, INDEMNITY FOR A COMPANY INDEMNITEE PURSUANT TO SECTION 4(K)(II)(C)(I)
SHALL NOT BE AVAILABLE TO SUCH COMPANY INDEMNITEE TO THE EXTENT THE COMPANY
INDEMNIFIED LIABILITY IS THE PRODUCT OF THE COMPANY’S BREACH OF THE TRANSACTION
DOCUMENTS.  EXCEPT AS OTHERWISE SET FORTH HEREIN, THE MECHANICS AND PROCEDURES
WITH RESPECT TO THE RIGHTS AND OBLIGATIONS UNDER THIS SECTION 8(K) SHALL BE THE
SAME AS THOSE SET FORTH IN SECTION 7(C) OF THE REGISTRATION RIGHTS AGREEMENT.

(III)             NOTWITHSTANDING ANYTHING ELSE HEREIN TO THE CONTRARY, THE
INDEMNIFICATION PROVIDED FOR IN THIS SECTION 7(K) IS SUBJECT TO THE FOLLOWING
LIMITATIONS:

(1)               THE COMPANY SHALL HAVE NO OBLIGATION TO INDEMNIFY A BUYER
INDEMNITEE PURSUANT TO SECTION 7(K)(I) WITH RESPECT TO BUYER INDEMNIFIED
LIABILITIES, UNLESS THE AGGREGATE AMOUNT OF ALL SUCH BUYER INDEMNIFIED
LIABILITIES FOR WHICH THE COMPANY WOULD, BUT FOR THIS SECTION 7(K)(III)(1), BE
LIABLE THEREUNDER EXCEEDS ON AN AGGREGATE BASIS SEVENTY-FIVE THOUSAND UNITED
STATES DOLLARS ($75,000) (THE “DEDUCTIBLE”), IN WHICH EVENT THE BUYER
INDEMNITEES SHALL BE ENTITLED TO CLAIM INDEMNITY ONLY TO THE EXTENT OF SUCH
EXCESS. 

(2)               THE BUYER SHALL HAVE NO OBLIGATION TO INDEMNIFY A COMPANY
INDEMNITEE PURSUANT TO SECTION 7(K)(II) WITH RESPECT TO COMPANY INDEMNIFIED
LIABILITIES, UNLESS THE AGGREGATE AMOUNT OF ALL SUCH COMPANY INDEMNIFIED
LIABILITIES FOR WHICH THE BUYER WOULD, BUT FOR THIS SECTION 7(K)(III)(2), BE
LIABLE THEREUNDER EXCEEDS ON AN AGGREGATE BASIS THE DEDUCTIBLE, IN WHICH EVENT
THE COMPANY INDEMNITEES SHALL BE ENTITLED TO CLAIM INDEMNITY ONLY TO THE EXTENT
OF SUCH EXCESS. 

(3)               EXCEPT FOR CASES OF FRAUD OR WILLFUL MISCONDUCT,
NOTWITHSTANDING ANYTHING ELSE HEREIN TO THE CONTRARY, IN NO EVENT SHALL THE
TOTAL AGGREGATE LIABILITY OF EITHER OF THE COMPANY OR THE BUYER, CALCULATED
INDIVIDUALLY, EXCEED THE PURCHASE PRICE.

 

34

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(L)                 NO STRICT CONSTRUCTION. THE LANGUAGE USED IN THIS AGREEMENT
WILL BE DEEMED TO BE THE LANGUAGE CHOSEN BY THE PARTIES TO EXPRESS THEIR MUTUAL
INTENT, AND NO RULES OF STRICT CONSTRUCTION WILL BE APPLIED AGAINST ANY PARTY.

(M)             REMEDIES. EACH PARTY SHALL HAVE ALL RIGHTS AND REMEDIES SET
FORTH IN THE TRANSACTION DOCUMENTS AND ALL RIGHTS AND REMEDIES WHICH SUCH
PERSONS HAVE BEEN GRANTED AT ANY TIME UNDER ANY OTHER AGREEMENT OR CONTRACT AND
ALL OF THE RIGHTS WHICH SUCH PERSONS HAVE UNDER ANY LAW. ANY PERSON HAVING ANY
RIGHTS UNDER ANY PROVISION OF THIS AGREEMENT SHALL BE ENTITLED TO ENFORCE SUCH
RIGHTS SPECIFICALLY (WITHOUT POSTING A BOND OR OTHER SECURITY), TO RECOVER
DAMAGES BY REASON OF ANY BREACH OF ANY PROVISION OF THIS AGREEMENT AND TO
EXERCISE ALL OTHER RIGHTS GRANTED BY LAW. FURTHERMORE, EACH PARTY RECOGNIZES
THAT IN THE EVENT THAT IT FAILS TO PERFORM, OBSERVE, OR DISCHARGE, OR THREATENS
TO BREACH, ANY OR ALL OF ITS OBLIGATIONS UNDER THE TRANSACTION DOCUMENTS, ANY
REMEDY AT LAW MAY PROVE TO BE INADEQUATE RELIEF TO THE OTHER APPLICABLE PARTY.
EACH PARTY THEREFORE AGREES THAT THE OTHER PARTY SHALL BE ENTITLED TO TEMPORARY
AND PERMANENT INJUNCTIVE RELIEF IN ANY SUCH CASE WITHOUT THE NECESSITY OF
PROVING ACTUAL DAMAGES AND WITHOUT POSTING A BOND OR OTHER SECURITY.

(N)               RESCISSION AND WITHDRAWAL RIGHT. NOTWITHSTANDING ANYTHING TO
THE CONTRARY CONTAINED IN (AND WITHOUT LIMITING ANY SIMILAR PROVISIONS OF) THE
TRANSACTION DOCUMENTS, WHENEVER THE BUYER EXERCISES A RIGHT, ELECTION, DEMAND OR
OPTION UNDER A TRANSACTION DOCUMENT AND THE COMPANY DOES NOT TIMELY PERFORM ITS
RELATED OBLIGATIONS WITHIN THE PERIODS THEREIN PROVIDED, THEN THE BUYER MAY
RESCIND OR WITHDRAW, IN ITS SOLE DISCRETION FROM TIME TO TIME UPON WRITTEN
NOTICE TO THE COMPANY, ANY RELEVANT NOTICE, DEMAND OR ELECTION IN WHOLE OR IN
PART WITHOUT PREJUDICE TO ITS FUTURE ACTIONS AND RIGHTS.

(O)               PAYMENT SET ASIDE. TO THE EXTENT THAT THE COMPANY MAKES A
PAYMENT OR PAYMENTS TO THE BUYER HEREUNDER OR PURSUANT TO ANY OF THE OTHER
TRANSACTION DOCUMENTS OR THE BUYER ENFORCES OR EXERCISES ITS RIGHTS HEREUNDER OR
THEREUNDER, AND SUCH PAYMENT OR PAYMENTS OR THE PROCEEDS OF SUCH ENFORCEMENT OR
EXERCISE OR ANY PART THEREOF ARE SUBSEQUENTLY INVALIDATED, DECLARED TO BE
FRAUDULENT OR PREFERENTIAL, SET ASIDE, RECOVERED FROM, DISGORGED BY OR ARE
REQUIRED TO BE REFUNDED, REPAID OR OTHERWISE RESTORED TO THE COMPANY, A TRUSTEE,
RECEIVER OR ANY OTHER PERSON UNDER ANY LAW (INCLUDING, WITHOUT LIMITATION, ANY
BANKRUPTCY LAW, FOREIGN, STATE OR FEDERAL LAW, COMMON LAW OR EQUITABLE CAUSE OF
ACTION), THEN TO THE EXTENT OF ANY SUCH RESTORATION THE OBLIGATION OR PART
THEREOF ORIGINALLY INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUED IN
FULL FORCE AND EFFECT AS IF SUCH PAYMENT HAD NOT BEEN MADE OR SUCH ENFORCEMENT
OR SETOFF HAD NOT OCCURRED.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.

 

COMPANY:

 

 

 

MECHANICAL TECHNOLOGY, INCORPORATED

 

 

 

 

 

By:

 

 

 

Name:

Kevin G. Lynch

 

 

Title:

President & CEO

 

 

 

BUYER:

 

 

 

BROOKSTONE PARTNERS ACQUISITION XXIV, LLC

 

 

 

By:

BP XXIV Flow, LLC

its Managing Member

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

[Signature Page to Securities Purchase Agreement]

 

 

 

 

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Annex I

Signatories to Option Exercise and Stock Transfer Restriction Agreement

Frederick W. Jones,
Chief Financial Officer and Secretary

Kevin G. Lynch,
Director and Chief Executive Officer

Thomas J. Marusak,
Director

David C. Michaels,
Director

William P. Phelan,
Director

Walter L. Robb,
Director

E. Dennis O’Connor,
Director

 

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Exhibit A

Registration Rights Agreement

 

 

 

 

 

 

 

 

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Exhibit B

Option Exercise and Stock Transfer Restriction Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                                  

 

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Exhibit C

Form of “Bad Actor” Certification