SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of April 19, 2007, by and among PURE
BIOFUELS CORP.,
a Nevada
corporation (the “Company”),
and
the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
collectively “Buyers”).
WITNESSETH
WHEREAS,
the
Company and the Buyer(s) are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer(s), as provided herein,
and the Buyer(s) shall purchase (i) up to Three Million Dollars ($3,000,000)
of
secured convertible debentures in the form attached hereto as “Exhibit
A”
(the
“Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.001
(the “Common
Stock”)
(as
converted, the “Conversion
Shares”),
and
(ii) warrants substantially in the form attached hereto as “Exhibit
B”
(the
“Warrants”),
to
acquire up to that number of additional shares of Common Stock set forth
opposite such Buyer’s name in column (5) of the Schedule I (as exercised, the
“Warrant
Shares”)
for a
total purchase price of up to Three Million Dollars ($3,000,000), (the
“Purchase
Price”)
in the
respective amounts set forth opposite each Buyer(s) name on Schedule I (the
“Subscription
Amount”);
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement (the
“Registration
Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
WHEREAS,
the
Convertible Debentures are secured by (i) a
security interest in all of the assets of the Company and in all of the capital
stock of the Company's subsidiaries owned by the Company as evidenced by the
security agreement of even date herewith (the “Security
Agreement”),
(ii)
a guaranty by all the subsidiaries of the Company as evidenced by the guaranty
agreement of even date herewith (the “Guaranty
Agreement”),
which
guaranty shall be secured by a pledge of all the assets of each subsidiary
pursuant to the Security Agreement and a mortgage in favor of the Buyers in
all
of the real property of the subsidiaries (the “Mortgage”),
and
(iii) certain shares of common stock owned by an officer of the Company (the
“Pledged
Shares”)
as
evidenced by the pledge of even date herewith (the “Pledge
Agreement”)
which
Pledged Shares shall be held in escrow by U.S. Bank National Association (the
“Escrow
Agent”)
in
accordance with the escrow agreement of even date herewith. (the Pledge
Agreement together with the Guaranty Agreement, the Mortgage, and the Security
Agreement are collectively referred to herein as the “Security
Documents”);
and
WHEREAS,
the
Convertible Debentures, the Conversion Shares, the Warrants, and the Warrants
Shares collectively are referred to herein as the “Securities”).
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE
AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase
of Convertible Debentures.
The
purchase, sale and issuance of the Convertible Debentures and Warrants shall
take place at one or more closings (each of which is referred to in this
Agreement as a “Closing”).
Subject to the satisfaction (or waiver) of the terms and conditions of this
Agreement, each Buyer agrees, severally and not jointly, to purchase at each
Closing and the Company agrees to sell and issue to each Buyer, severally and
not jointly, at each Closing, Convertible Debentures in amounts corresponding
with the Subscription Amount set forth opposite each Buyer’s name on Schedule I
hereto and the Warrants to acquire up that number of Warrant Shares as set
forth
opposite such Buyer’s name in column (5) on Schedule I .
(b) Closing
Dates.
The
Closing of the purchase and sale of the Convertible Debentures and Warrants
shall take place at 10:00 a.m. Eastern Standard Time on the first (1st) business
day following the date hereof, subject to notification of satisfaction of the
conditions to the Closing set forth herein and in Sections 6 and 7 below (or
such other date as is mutually agreed to by the Company and the Buyer(s)) (the
“Closing
Date”).
The
initial Closing (the “Initial
Closing”)
and
each subsequent closing shall take place at the offices of Yorkville Advisors,
LLC, 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or such
other place as is mutually agreed to by the Company and the Buyer(s)).
(c) Form
of Payment.
Subject
to the satisfaction of the terms and conditions of this Agreement, on each
Closing Date, (i) the Buyers shall deliver to the Company such aggregate
proceeds for the Convertible Debentures and Warrants to be issued and sold
to
such Buyer at such Closing, minus the fees to be paid directly from the proceeds
of such Closing as set forth herein, and (ii) the Company shall deliver to
each Buyer, Convertible Debentures and Warrants which such Buyer is purchasing
at such Closing in amounts indicated opposite such Buyer’s name on Schedule I,
duly executed on behalf of the Company.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose.
Each
Buyer is acquiring the Securities for its own account, not as a nominee or
agent, for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, and each Buyer has
no
present intention of selling, granting any participation in, or otherwise
distributing the same, except pursuant to sales registered or exempted under
the
Securities Act; provided, however, that by making the representations herein,
such Buyer reserves the right to dispose of the Securities at any time in
accordance with or pursuant to an effective registration statement covering
such
Securities or an available exemption under the Securities Act. Such Buyer does
not presently have any agreement or understanding, directly or indirectly,
with
any Person to distribute any of the Securities.
(b) Accredited
Investor Status.
Each
Buyer is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D and shall submit to the
Company such further assurances of such status as may reasonably be requested
by
the Company.
(c) Reliance
on Exemptions.
Each
Buyer understands that the Securities 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 such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
(d) Information.
Each
Buyer and its advisors (and his or, its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Securities, which have been requested
by
such Buyer. Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer
or
its advisors, if any, or its representatives shall modify, amend or affect
such
Buyer’s right to rely on the Company’s representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the Securities
involves a high degree of risk. Each Buyer is in a position regarding the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Buyer to obtain information from
the
Company in order to evaluate the merits and risks of this investment. Each
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
Securities. Each buyer can bear the economic risk of such Buyer’s investment and
is able, without impairing such Buyer’s financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of
such Buyer’s investment.
(e) No
Governmental Review.
Each
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
Each
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder,
(B)
such Buyer shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration requirements, or (C) such Buyer provides the
Company with reasonable assurances (in the form of seller and broker
representation letters) that such Securities can be sold, assigned or
transferred pursuant to Rule 144, Rule 144(k), or Rule 144A promulgated under
the Securities Act, as amended (or a successor rule thereto) (collectively,
“Rule
144”),
in
each case following the applicable holding period set forth therein; (ii) any
sale of the Securities 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 Securities 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 Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder. Each Buyer understands that, although Rule 144 is
not
exclusive, the Securities and Exchange Commission has expressed its opinion
that
persons proposing to sell restricted securities received in a private offering
other than in a registered offering or pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales and that such persons and the brokers
who
participate in the transactions do so at their own risk.
(g) Legends.
Each
Buyer understands and agrees that the certificates evidencing the Shares or
the
Conversion Shares, or any other securities issued in respect of the Shares
or
the Conversion Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, bear the following legend (in addition
to any legend required by the Registration Rights Agreement or under applicable
state securities laws):
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 HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates
evidencing the Conversion Shares or Warrant Shares shall not contain any legend
(including the legend set forth above), (i) following the sale of such
Conversion Shares or Warrant Shares pursuant to a registration statement
(including the Registration Statement) covering the resale of such security
which is effective under the Securities Act, (ii) following any sale of such
Conversion Shares or Warrant Shares pursuant to Rule 144, (iii) if such
Conversion Shares or Warrant Shares are eligible for sale under Rule 144(k),
or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued
by
the staff of the SEC). The Company shall cause its counsel to issue a legal
opinion to the Company’s transfer agent as soon as practicable upon notice by
the Buyer that it is selling Conversion Shares or Warrant Shares pursuant to
a
Registration Statement if required by the Company’s transfer agent to effect the
removal of the legend hereunder. The Company agrees that at such time as such
legend is no longer required under this Section 2(g), it will, no later than
three (3) Trading Days following the delivery by a Buyer that is not an
Affiliate of the company (a “Non-Affiliated Buyer”) to the Company or the
Company’s transfer agent of a certificate representing Conversion Shares or
Warrant Shares, as the case may be, issued with a restrictive legend (such
third
Trading Day, the “Legend
Removal Date”),
deliver or cause to be delivered to such Non-Affiliated Buyer a certificate
representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to
any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. Each Buyer acknowledges that the Company’s agreement
hereunder to remove all legends from Conversion Shares or Warrant Shares is
not
an affirmative statement or representation that such Conversion Shares or
Warrant Shares are freely tradable.
(h) Authorization,
Enforcement.
Each
Buyer has all requisite power and authority to execute and deliver the
Transaction Documents, to purchase the Securities hereunder and to carry out
and
perform its obligations under the terms of the Transaction Documents. All action
on the part of each Buyer necessary for the authorization, execution, delivery
and performance of the Transaction Documents, and the performance of all of
the
Buyer’s obligations under the Transaction Documents, has been taken or will be
taken prior to the Closing. The Transaction Documents have been duly and validly
authorized, executed and delivered on behalf of such Buyer and are valid and
binding agreements of such Buyer enforceable in accordance with their terms,
except as such enforceability may be limited by general principles of equity
or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies. No
consent, approval, authorization, order, filing, registration or qualification
of or with any court, governmental authority or third person is required to
be
obtained by the Buyer in connection with the execution and delivery of the
Transaction Documents by the Buyer or the performance of the Buyer’s obligations
hereunder or thereunder.
(i) Receipt
of Documents.
Each
Buyer and his or its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein and
the Transaction Documents (as defined herein); (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
the fiscal year ended December 31, 2006; (iv) the Company’s Form 10-QSB for the
fiscal quarter ended September 30, 2006 and (v) answers to all questions each
Buyer submitted to the Company regarding an investment in the Company; and
each
Buyer has relied on the information contained therein and has not been furnished
any other documents, literature, memorandum or prospectus.
(j) Due
Formation of Corporate and Other Buyers.
If the
Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Securities and is not
prohibited from doing so.
(k) No
Legal Advice From the Company.
Each
Buyer acknowledges, that it had the opportunity to review this Agreement and
the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or
any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement
or
the securities laws of any jurisdiction.
(l) Brokers
or Finders.
Each
Buyer has not engaged any brokers, finders or agents, and neither the Company
nor any other Buyer has, nor will, incur, directly or indirectly, as a result
of
any action taken by each Buyer, any liability for brokerage or finders’ fees or
agents’ commissions or any similar charges in connection with the Transaction
Documents.
(m) Tax
Advisors.
Each
Buyer has reviewed with its own tax advisors the U.S. federal, state, local
and
foreign tax consequences of this investment and the transactions contemplated
by
the Transaction Documents. With respect to such matters, Each Buyer relies
solely on such advisors and not on any statements or representations of the
Company or any of its agents, written or oral. Each Buyer understands that
it
(and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by the
Transaction Documents.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
Except
as
disclosed in the SEC Documents (as defined below) or as set forth under the
corresponding section of the Disclosure Schedules which Disclosure Schedules
shall be deemed a part hereof and to qualify any representation or warranty
otherwise made herein to the extent of such disclosure, the Company hereby
represents and warrants to the Buyers that the following representations are
true and complete as of the date of the Initial Closing, (or as the date
otherwise indicated):
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3(a).
Other
than as set forth in Schedule 3(a), the Company owns, directly or indirectly,
all of the capital stock or other equity interests of each subsidiary free
and
clear of any liens, and all the issued and outstanding shares of capital stock
of each subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase
securities.
(b) Organization
and Qualification.
The
Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they
are
incorporated, and have the requisite corporate power to own their properties
and
to carry on their business as now being conducted. Each of the Company and
its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which 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 have or
reasonably be expected to result in (a) a material adverse effect on the results
of operations, assets, business or condition (financial or otherwise) of the
Company and the subsidiaries, taken as a whole, or (ii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (either of (i) or (ii)
a
“Material
Adverse Effect”)
and to
the Company’s knowledge no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization,
Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement, the Convertible
Debentures, the Warrants, the Security Documents, the Registration Rights
Agreement, the Transfer Agent Instructions (if and when executed and delivered
in accordance with Section 5 hereof), and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated
by
this Agreement (collectively the “Transaction
Documents”)
and to
issue the Securities in accordance with the terms hereof and thereof, (ii)
the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Securities, the reservation
for issuance and the issuance of the Conversion Shares, and the reservation
for
issuance and the issuance of the Warrant Shares, have been duly authorized
by
the Company’s Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii)
the
Transaction Documents, when executed and delivered by the Company, shall
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may
be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies.
(d) Capitalization.
Immediately prior to the Initial Closing, the authorized capital stock of the
Company consists of 93,750,000 shares of Common Stock of which as of March
5,
2007 62,132,419 shares of Common Stock are issued and outstanding. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Except as disclosed in Schedule 3(d): (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 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 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 capital stock of
the
Company or any of its subsidiaries; (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 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; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; and (vii) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement.
The Company has furnished to the Buyers true, correct and complete copies of
the
Company's Certificate of Incorporation, as amended 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. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Securities. Other than as set forth in Schedule 3(d), there are
no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
(e) Issuance
of Securities.
The
issuance of the Convertible Debentures and the Warrants is duly authorized
and
free from all taxes, liens and charges with respect to the issue thereof. Upon
conversion in accordance with the terms of the Convertible Debentures or
exercise in accordance with the Warrants, as the case may be, the Conversion
Shares and Warrant Shares, respectively, when issued will be validly issued,
fully paid and nonassessable, free from all taxes, liens and charges with
respect to the issue thereof. The Company has reserved from its duly authorized
capital stock the appropriate number of shares of Common Stock as set forth
in
this Agreement.
(f) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Convertible
Debentures and the Warrants, and reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation
of
any certificate of incorporation, certificate of formation, any certificate
of
designations or other constituent documents of the Company or any of its
subsidiaries or the bylaws 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
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 foreign, federal and state
securities laws and regulations and the rules and regulations of the National
Association of Securities Dealers Inc.’s OTC Bulletin Board) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected; except in the case
of
each of clauses (ii) and (iii), such as could
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.
The
business of the Company and its subsidiaries is not being conducted, and shall
not be conducted in violation of any material law, ordinance, or regulation
of
any governmental entity. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency
in
order for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to
the date hereof. The Company and its subsidiaries are unaware of any facts
or
circumstance, which might give rise to any of the foregoing.
(g) SEC
Documents; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Exchange Act of
1934, as amended (the “Exchange
Act”)
since
September 15, 2006 (all of the foregoing filed prior to the date hereof or
amended after the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to as the “SEC
Documents”)
on
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Document prior to the expiration of any such extension.
As of
their respective dates, the SEC Documents complied in all material respects
with
the requirements of the Exchange 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 dates, the financial statements of the Company included in
the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments).
(h) 10(b)-5.
The SEC
Documents do not include any untrue statements of material fact, nor do they
omit to state any material fact required to be stated therein necessary to
make
the statements made, in light of the circumstances under which they were made,
not misleading.
(i) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would have
a
Material Adverse Effect.
(j) Acknowledgment
Regarding Buyer’s Purchase of the Convertible Debentures.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by each Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to each Buyer that the Company’s
decision to enter into this Agreement has been based solely on the independent
evaluation by the Company and its representatives.
(k) No
General Solicitation.
Neither
the Company, nor any of its 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 under the Securities Act) in connection
with
the offer or sale of the Securities.
(l) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would require
registration of the Securities under the Securities Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(m) Employee
Relations.
Neither
the Company nor any of its subsidiaries is involved in any labor dispute or,
to
the knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its subsidiaries’ employees is a member of
a union.
(n) Intellectual
Property Rights.
To the
Company’s knowledge, the Company and its subsidiaries own or possess adequate
rights or licenses to use all trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets
and
rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement
by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and, to
the
knowledge of the Company there is no claim, action or proceeding being made
or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and
its
subsidiaries are unaware of any facts or circumstances which might give rise
to
any of the foregoing.
(o) Environmental
Laws.
Except
as could not reasonably by expected to have a Material Adverse Effect, to the
best of the Company’s knowledge the Company and its subsidiaries are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental
Laws”).
The
Company has received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses,
the
lack of which would have a Material Adverse Effect and are in compliance with
all terms and conditions of any such permit, license or approval.
(p) Title.
All
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(q) Insurance.
The
Company and each of its subsidiaries is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(r) Regulatory
Permits.
The
Company and its subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(s) Internal
Accounting Controls.
The
Company and each of its subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, and (iii) the recorded amounts for assets are
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) No
Material Adverse Breaches, etc.
Neither
the Company nor any of its subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is in breach of any contract or agreement which breach, in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect.
(u) Tax
Status.
The
Company and each of its subsidiaries has made and filed all federal and state
income and all other material tax returns, reports and declarations required
by
any jurisdiction to which it is subject and (unless and only to the extent
that
the Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has
paid
all taxes and other governmental assessments and charges that are material
in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes 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.
(v) Certain
Transactions.
Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees
of
the Company is presently a party to any transaction with the Company (other
than
for services as employees, officers and directors, reimbursement for reasonable
expenses incurred on behalf of the Company and for other standard employee
benefits made generally available to all employees), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any corporation, partnership, trust or other entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
(w) Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
(x) Investment
Company.
The
Company is not, and is not an affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(y) Registration
Rights.
Other
than each of the Buyers, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.
There are no outstanding registration statements not yet declared effective
and
there are no outstanding comment letters from the SEC or any other regulatory
agency.
(z) Private
Placement.
Assuming the accuracy of the Buyers’ representations and warranties set forth in
Section 2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Buyers as contemplated hereby.
The issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Primary Market (as defined below).
(aa) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to terminate, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the
date
hereof, received notice from any Primary Market on which the Common Stock is
or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Primary Market.
(bb) Manipulation
of Price.
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 in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company, other than,
in the case of clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the Securities.
(cc) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Convertible Debentures and the Warrant Shares
issuable upon exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Convertible Debentures in accordance with this Agreement
and the Convertible Debentures and its obligation to issue the Warrant Shares
upon exercise of the Warrants in accordance with this Agreement and the
Warrants, in each case, is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
(dd) Brokerage.
The
Company represents that no broker, agent, finder or other party has been
retained by it in connection with the transactions contemplated hereby and
that
no fee or commission has been agreed by the Company to be paid for or on account
of the transactions contemplated hereby.
(ee) Placement
Agent.
The
Company has retained Canaccord Xxxxx, Inc. and Xxxxxxxx, Curhan Ford & Co.
to assist the Company to raise at least $3,000,000 in subsequent financing,
the
proceeds of which can be used by the Company to repay the Convertible Debentures
issued hereunder.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to each 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 to qualify the Securities,
or obtain an exemption for the Securities for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of any such action
so
taken to the Buyers on or prior to the Closing Date.
(c) Reporting
Status.
Until
the earlier of (i) the date as of which the Buyer(s) may sell all of the
Securities without restriction pursuant to Rule 144(k) promulgated under the
Securities Act (or successor thereto), or (ii) the date on which (A) the Buyers
shall have sold all the Securities and (B) none of the Convertible Debentures
or
Warrants are outstanding (the “Registration
Period”),
the
Company shall file in a timely manner all reports required to be filed with
the
SEC pursuant to the Exchange Act and the regulations of the SEC thereunder,
and
the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Convertible Debentures as
follows: (i) $1,500,000 for construction and development of a bio-diesel plant
in Peru, (ii) $1,000,000 for the purchase of centrifuges, and (iii) $500,000
for
expenses relating to the offering and for general corporate and working capital
purposes.
(e) Reservation
of Shares.
On the
date hereof, the Company shall reserve for issuance to the Buyers 4,000,000
shares for issuance upon conversions of the Convertible Dentures and 704,082
shares for issuance upon exercise of the Warrants (collectively, the
“Share
Reserve”).
The
Company represents that it has sufficient authorized and unissued shares of
Common Stock available to create the Share Reserve after considering all other
commitments that may require the issuance of Common Stock. The Company shall
take all action reasonably necessary to at all times have authorized, and
reserved for the purpose of issuance, such number of shares of Common Stock
as
shall be necessary to effect the full conversion of the Convertible Debentures
and the full exercise of the Warrants. If at any time the Share Reserve is
insufficient to effect the full conversion of the Convertible Debentures or
the
full exercise of the Warrants, the Company shall increase the Share Reserve
accordingly. If the Company does not have sufficient authorized and unissued
shares of Common Stock available to increase the Share Reserve, the Company
shall call and hold a special meeting of the shareholders within thirty (30)
days of such occurrence, for the purpose of increasing the number of shares
authorized. The Company’s management shall recommend to the shareholders to vote
in favor of increasing the number of shares of Common Stock authorized.
(f) Listings
or Quotation.
The
Company’s Common Stock shall be listed or quoted for trading on any of (a) the
American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq Global
Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin Board
(“OTCBB”)
(each,
a “Primary
Market”).
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) 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) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents.
(g) Fees
and Expenses.
(i) Each
of
the Company and the Buyer(s) shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution
and delivery of the Transaction Documents. The Company shall pay Yorkville
Advisors, LLC a fee equal to five percent (5%) of the Purchase Price which
shall
be paid pro rata directly from the gross proceeds of the Closing.
(ii) The
Company shall pay a structuring and due diligence fee to Yorkville Advisors,
LLC
of Twenty Five Thousand Dollars ($25,000) which shall be paid directly from
the
proceeds of the Closing.
(h) Corporate
Existence.
So long
as any of the Convertible Debentures remain outstanding, the Company shall
not
directly or indirectly consummate any merger, reorganization, restructuring,
reverse stock split consolidation, sale of all or substantially all of the
Company’s assets or any similar transaction or related transactions (each such
transaction, an “Organizational
Change”)
unless, prior to the consummation an Organizational Change, the Company obtains
the written consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders’ rights and interests to
insure that the provisions of this Section 4(h) will thereafter be applicable
to
the Convertible Debentures.
(i) Transactions
With Affiliates.
So long
as any Convertible Debentures are outstanding, the Company shall not, and shall
cause each of its subsidiaries not to, enter into, amend, modify or supplement,
or permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or any
subsidiary’s officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below)
or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a
five
percent (5%) or more beneficial interest (each a “Related
Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
agreement, transaction, commitment, or arrangement on an arms-length basis
on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (d) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company; for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement or (e) any transaction or agreement that is not
required to be disclosed pursuant to Item 404 of Regulation SB. “Affiliate”
for
purposes hereof means, with respect to any person or entity, another person
or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity,
or
(iv) shares common control with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(j) RESERVED
(k) Short
Sales.
Neither
the Buyer(s) nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer(s) agrees that it shall not, and that it
will cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debentures shall remain outstanding.
(l) Lock
Up Agreements.
On the
date hereof, the Company shall obtain from each officer and director a lock
up
agreement in the form attached hereto as Exhibit
C.
(m) Additional
Registration Statements.
Until
the effective date of the initial Registration Statement, the Company will
not
file a registration statement under the Securities Act relating to securities
that are not the Securities.
(n) Review
of Public Disclosures.
All SEC
filings (including, without limitation, all filings required under the Exchange
Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other
public disclosures made by the Company, including, without limitation, all
press
releases, investor relations materials, and scripts of analysts meetings and
calls, shall be reviewed and approved for release by the Company’s attorneys
and, if containing financial information, the Company’s independent certified
public accountants.
(o) Disclosure
of Transaction.
Within
four Business Days following the date of this Agreement, the Company shall
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 Exchange
Act and attaching the material Transaction Documents (including, without
limitation, this Agreement, the form of the Convertible Debenture, the form
of
Warrant and the form of the Registration Rights Agreement) as exhibits to such
filing.
(p) Post
Closing Obligations.
(i) The
Company hereby covenants that the following obligations shall be fully satisfied
within the time periods set forth below:
(1) The
Pledged Shares as well as fully executed stock powers of attorney, signature
guaranteed as required by the transfer agent of the Company shall be deposited
with the Escrow Agent on or before 5:00 p.m. New York City time on Friday,
April
27, 2007 (the “Pledge
Deadline”).
(2) The
Company shall (a) file, or cause to be filed, all necessary forms and documents
as may be required to perfect in Peru the Buyer’s security interest in all the
assets of the subsidiaries of the Company and provided proof of such filing
to
the Buyer, and (b) cause its subsidiaries to grant to the Buyer a mortgage
in
all of the real property of each of the Company’s subsidiaries and file all
necessary forms and documents as may be required to perfect such mortgages
in
Peru, each on or before 5:00 p.m. New York City time on Friday, April 27, 2007
(the “Mortgage
Deadline”).
For
the avoidance of doubt, the Company shall be deemed to satisfy its obligations
under this Section 4(p)(i)(2) by filing a mortgage in the Registry of Real
Estate Property of Lima and a Personal Property Warranty in the Personal
Property Registry of Contracts (together, the “Peruvian
Security Documents”).
(ii) In
the
event that the Company does not fully comply with the covenants set forth in
Section 4(p)(i)(1) hereof by the Pledge Deadline, then the Company shall pay
to
the Buyer a one time payment of $100,000 as liquidated damages and not as a
penalty. Furthermore, in the event that the Company does not fully comply with
all the covenants set forth in Section 4(p)(i)(2) hereof by the Mortgage
Deadline, the Company shall pay to the Buyer $5,000 for each Business Day until
full compliance with all such covenants is satisfied as liquidated damages
and
not as a penalty. All payments made pursuant to this Section 4(p)(ii) shall
be
made within three (3) Business Days of the date first due and shall be made
in
cash or in Common Stock valued at the Closing Bid Price on the Trading Day
immediately prior to the date due (at the sole discretion of the Company).
All
payments pursuant to this Section 4(p) shall be capped at $1,000,000. It shall
be a material breach hereunder and an event of default under the Convertible
Debentures if the Company fails to fully comply with all of the covenants set
forth in Section 4(p)(i) within fourteen Business Days of the Mortgage Deadline,
which breach shall entitle the Buyer to all rights and remedies of default
including the right to accelerate the repayment of the Convertible
Debentures.
5. TRANSFER
AGENT INSTRUCTIONS.
If
the
Convertible Debentures remain outstanding as of July 19, 2007 then the Company
shall (i) use commercially reasonable efforts to appoint a new transfer agent
reasonably acceptable to the Buyer, and (ii) enter
into transfer agent instructions materially in the form of Exhibit D (the
“Transfer
Agent Instructions”)
with
the new transfer agent
as soon
as reasonably practicable but in no event later than August 19,
2007.
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer(s) at the Closing is subject to the satisfaction, at or before
the
Closing Dates, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) Each
Buyer shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer(s) shall have delivered to the Company the Purchase Price for the
Convertible Debentures and Warrants in the respective amounts as set forth
next
to each Buyer as set forth on Schedule I attached hereto, minus any fees to
be
paid directly from the proceeds the Closing as set forth herein, by wire
transfer of immediately available U.S. funds pursuant to the wire instructions
provided by the Company.
(c) The
representations and warranties of the Buyer(s) shall be true and correct in
all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer(s) 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(s)
at or
prior to the Closing Dates.
7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
at
the Closing is subject to the satisfaction, at or before the Closing Date,
of
each of the following conditions:
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyers.
(ii) The
Common Stock shall be authorized for quotation or trading on the Primary Market,
trading in the Common Stock shall not have been suspended for any reason, and
all the Conversion Shares issuable upon the conversion of the Convertible
Debentures shall be approved for listing or trading on the Primary Market.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) 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) and the Company 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
Company at or prior to the Closing Date.
(iv) The
Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures and Warrants in the respective amounts set forth opposite each
Buyer’s name on Schedule I attached hereto.
(v) The
Buyers shall have received an opinion of counsel from counsel to the Company
in
a form satisfactory to the Buyers.
(vi) The
Company shall have provided to the Buyers a true copy of a certificate of good
standing evidencing the formation and good standing of the Company from the
secretary of state (or comparable office) from the jurisdiction in which the
Company is incorporated, as of a date within 10 days of the Closing
Date.
(vii) The
Company shall have delivered to the Buyers a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(c) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the
Closing.
(viii) The
Company shall have filed, or authorized the Buyer to file, a form UCC-1 or
such
other forms as may be required to perfect in the United States the Buyer’s
security interest in the Pledged Property as detailed in the Security Agreement
and provided proof of such filing to the Buyer(s).
(ix) The
Company shall have created the Share Reserve.
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Convertible Debentures and the Conversion Shares, and all
of
their officers, directors, employees and agents (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 (the “Indemnified
Liabilities”),
incurred by the Buyer Indemnitees or any of them 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 this Agreement, the Convertible Debentures
or
the other Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (b) any breach of any covenant, agreement
or
obligation of the Company contained in this Agreement, or the other Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby. To the extent that the foregoing undertaking by the Company may
be
unenforceable for any reason, the Company shall make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities, which
is
permissible under applicable law.
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Indemnitees
or
any of them 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(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer or (b) any breach of any covenant, agreement
or
obligation of the Buyer(s) contained in this Agreement, the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby executed by the Buyer. To the extent that the foregoing undertaking
by each Buyer may be unenforceable for any reason, each Buyer shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
9. GOVERNING
LAW: MISCELLANEOUS.
(a) Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Xxxxxx
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Xxxxxx County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey
for
the adjudication of any civil action asserted pursuant to this Paragraph.
(b) Counterparts.
This
Agreement may be executed in two or more identical 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.
A
facsimile, telecopy or other reproduction of this Agreement may be executed
by
one or more parties hereto and delivered by such party by facsimile or any
similar electronic transmission device pursuant to which the signature of or
on
behalf of such party can be seen. Such execution and delivery shall be
considered valid, binding and effective for all purposes. At the request of
any
party hereto, all parties hereto agree to execute and deliver an original of
this Agreement as well as any facsimile, telecopy or other reproduction
hereof.
(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 shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf
with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein 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 any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
(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
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to the Company, to:
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Xx.
Xxxxxxx x Xxxxxxx 000 xx 000
|
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Xxx
Xxxxxx, Xxxx
|
|
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Xxxx
|
|
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Attention: Xxxx
Xxxxxxxx
|
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Telephone: x000-000-0000
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Facsimile: x000-000-0000
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With
copy to:
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ARC
Investment Partners, LLC
|
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0000
Xxxxxx Xxxxx Xxxxxx Xxxx., Xxxxx 000
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Xxxxxxx
Xxxxx, XX 00000
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Attention:
Xxxxxx
Xxxxxx
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Telephone: 000-000-0000
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Facsimile: 000-000-0000
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And:
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DLA
Piper US LLP
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0000
Xxxxxx xx xxx Xxxxxxxx
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Xxx
Xxxx, XX 00000-0000
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Attn:
Xxxxxx X. Xxxxxxxx, Esq.
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Telephone:
000-000-0000
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Facsimile:
000-000-0000
|
If
to the
Buyer(s), to its address and facsimile number on Schedule I, with copies to
the
Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer
shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival.
Unless
this Agreement is terminated under Section 9(l), the representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing
for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity.
The
Company and the Buyer(s) shall have the right to approve, before issuance any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall
use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall
be
provided with a copy thereof upon release thereof).
(k) 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 the 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.
(l) Termination.
In the
event that the Closing shall not have occurred with respect to the Buyers on
or
before five (5) business days from the date hereof due to the Company’s or the
Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the non-breaching party’s failure to waive such unsatisfied condition(s)),
the non-breaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated by the Company pursuant to this Section 9(l), the
Company shall remain obligated to reimburse the Buyer in the amount of $100,000,
payable in Common Stock at a per share price equal to the closing market price
of such Common Stock on the date of termination.
(m) 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.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
| |
|
COMPANY:
|
| By: /s/ Xxxx Xxxxxxxx | ||
|
Name: Xxxx
Xxxxxxxx
|
||
|
Title: CEO
|
||
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
| |
|
BUYERS:
CORNELL
CAPITAL PARTNERS, LP
|
|
By:
Yorkville
Advisors, LLC
|
||
|
Its: General
Partner
|
||
|
By: /s/
Xxxxxx Xxxxx
|
||
|
Name: Xxxxxx
Xxxxx
|
||
|
Its: Managing
Partner
|
||
