STANDBY EQUITY DISTRIBUTION AGREEMENT
Exhibit
10.9
THIS
AGREEMENT
dated as
of the 14th day of June 2006 (the “Agreement”) between CORNELL
CAPITAL PARTNERS, LP,
a
Delaware limited partnership (the “Investor”), and SEREFEX
CORPORATION,
a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”).
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Investor, from time to time
as
provided herein, and the Investor shall purchase from the Company up to Five
Million Dollars ($5,000,000) of the Company’s common stock, par value
$0.0001 per share (the “Common Stock”); and
WHEREAS,
such
investments will be made in reliance upon the provisions of Regulation D
(“Regulation D”) of the Securities Act of 1933, as amended, and the regulations
promulgated thereunder (the “Securities Act”), and or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments to be made hereunder.
WHEREAS,
the
Company has engaged Newbridge Securities Corporation (the “Placement
Agent”), to act as the Company’s exclusive placement agent in connection with
the sale of the Company’s Common Stock to the Investor hereunder pursuant to the
Placement Agent Agreement dated the date hereof by and among the Company, the
Placement Agent and the Investor (the “Placement Agent Agreement”).
NOW,
THEREFORE,
the
parties hereto agree as follows:
ARTICLE
I.
Certain
Definitions
Section
1.1. “Advance”
shall mean the portion of the Commitment Amount requested by the Company in
the
Advance Notice.
Section
1.2. “Advance
Date” shall mean the first (1st)
Trading
Day after expiration of the applicable Pricing Period for each
Advance.
Section
1.3. “Advance
Notice” shall mean a written notice in the form of Exhibit A attached hereto to
the Investor executed by an officer of the Company and setting forth the Advance
amount that the Company requests from the Investor.
Section
1.4. “Advance
Notice Date” shall mean each date the Company delivers (in accordance with
Section 2.2(b) of this Agreement) to the Investor an Advance Notice requiring
the Investor to advance funds to the Company, subject to the terms of this
Agreement. No Advance Notice Date shall be less than five (5) Trading Days
after
the prior Advance Notice Date.
Section
1.5. “Bid
Price” shall mean, on any date, the closing bid price (as reported by Bloomberg
L.P.) of the Common Stock on the Principal Market or if the Common Stock is
not
traded on a Principal Market, the highest reported bid price for the Common
Stock, as furnished by the National Association of Securities Dealers,
Inc.
Section
1.6. “Closing”
shall mean one of the closings of a purchase and sale of Common Stock pursuant
to Section 2.3.
Section
1.7. “Commitment
Amount” shall mean the aggregate amount of up to Five Million
Dollars ($5,000,000) which the Investor has agreed to provide to the
Company in order to purchase the Company’s Common Stock pursuant to the terms
and conditions of this Agreement.
1
Section
1.8. “Commitment
Period” shall mean the period commencing on the earlier to occur of (i) the
Effective Date, or (ii) such earlier date as the Company and the Investor may
mutually agree in writing, and expiring on the earliest to occur of (x) the
date
on which the Investor shall have made payment of Advances pursuant to this
Agreement in the aggregate amount of the Commitment Amount, (y) the date this
Agreement is terminated pursuant to Section 10.2 or (z) the date occurring
twenty-four (24) months after the Effective Date.
Section
1.9. “Common
Stock” shall mean the Company’s common stock, par value $0.0001 per
share.
Section
1.10. “Condition
Satisfaction Date” shall have the meaning set forth in
Section 7.2.
Section
1.11. “Damages”
shall mean any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorney’s fees and disbursements and costs and
expenses of expert witnesses and investigation).
Section
1.12. “Effective
Date” shall mean the date on which the SEC first declares effective a
Registration Statement registering the resale of the Registrable Securities
as
set forth in Section 7.2(a).
Section
1.13. Intentionally
Omitted.
Section
1.14. “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Section
1.15. “Material
Adverse Effect” shall mean any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company
to
enter into and perform any of its obligations under this Agreement or the
Registration Rights Agreement in any material respect.
Section
1.16. “Market
Price” shall mean the lowest VWAP of the Common Stock during the Pricing
Period.
Section
1.17. “Maximum
Advance Amount” shall be Three Hundred Thousand Dollars ($300,000) per
Advance Notice.
Section
1.18. “NASD”
shall mean the National Association of Securities Dealers, Inc.
Section
1.19. “Person”
shall mean an individual, a corporation, a partnership, an association, a trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
Section
1.20. “Placement
Agent” shall mean Newbridge Securities Corporation, a registered
broker-dealer.
Section
1.21. “Pricing
Period” shall mean the five (5) consecutive Trading Days after the Advance
Notice Date.
Section
1.22. “Principal
Market” shall mean the Nasdaq National Market, the Nasdaq Capital Market, the
American Stock Exchange, the OTC Bulletin Board or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
Section
1.23. “Purchase
Price” shall be set at ninety five percent (95%) of the Market Price during the
Pricing Period.
Section
1.24. “Registrable
Securities” shall mean the shares of Common Stock to be issued
hereunder (i)
in
respect of which the Registration Statement has not been declared effective
by
the SEC, (ii) which have not been sold under circumstances meeting all of the
applicable conditions of Rule 144 (or any similar provision then in force)
under
the Securities Act (“Rule 144”) or (iii) which have not been otherwise
transferred to a holder who may trade such shares without restriction under
the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive
legend.
Section
1.25. “Registration
Rights Agreement” shall mean the Registration Rights Agreement dated the date
hereof, regarding the filing of the Registration Statement for the resale of
the
Registrable Securities, entered into between the Company and the
Investor.
2
Section
1.26. “Registration
Statement” shall mean a registration statement on Form S-1 or SB-2 (if use of
such form is then available to the Company pursuant to the rules of the SEC
and,
if not, on such other form promulgated by the SEC for which the Company then
qualifies and which counsel for the Company shall deem appropriate, and which
form shall be available for the resale of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement and
the Registration Rights Agreement, and in accordance with the intended method
of
distribution of such securities), for the registration of the resale by the
Investor of the Registrable Securities under the Securities Act.
Section
1.27. “Regulation
D” shall have the meaning set forth in the recitals of this
Agreement.
Section
1.28. “SEC”
shall mean the United States Securities and Exchange Commission.
Section
1.29. “Securities
Act” shall have the meaning set forth in the recitals of this
Agreement.
Section
1.30. “SEC
Documents” shall mean Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB, Current Reports on Form 8-K and Proxy Statements of the Company as
supplemented to the date hereof, filed by the Company for a period of at least
twelve (12) months immediately preceding the date hereof or the Advance Date,
as
the case may be, until such time as the Company no longer has an obligation
to
maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
Section
1.31. “Trading
Day” shall mean any day during which the New York Stock Exchange shall be open
for business.
Section
1.32. “VWAP”
shall mean the volume weighted average price of the Company’s Common Stock as
quoted by Bloomberg, LP.
ARTICLE
II.
Advances
Section
2.1. Advances.
Subject
to the terms and conditions of this Agreement (including, without limitation,
the provisions of Article VII hereof), the Company, at its sole and exclusive
option, may issue and sell to the Investor, and the Investor shall purchase
from
the Company, shares of the Company’s Common Stock by the delivery, in the
Company’s sole discretion, of Advance Notices. The number of shares of Common
Stock that the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the Purchase Price. No
fractional shares shall be issued. Fractional shares shall be rounded to the
next higher whole number of shares. The aggregate maximum amount of all Advances
that the Investor shall be obligated to make under this Agreement shall not
exceed the Commitment Amount.
Section
2.2. Mechanics.
(a) Advance
Notice. At any time during the Commitment Period, the Company may require the
Investor to purchase shares of Common Stock by delivering an Advance Notice
to
the Investor, subject to the conditions set forth in Section 7.2; provided,
however, the amount for each Advance as designated by the Company in the
applicable Advance Notice shall not be more than the Maximum Advance Amount
and
the aggregate amount of the Advances pursuant to this Agreement shall not exceed
the Commitment Amount. The Company acknowledges that the Investor may sell
shares of the Company’s Common Stock corresponding with a particular Advance
Notice after the Advance Notice is received by the Investor. There shall be
a
minimum of five (5) Trading Days between each Advance Notice Date.
(b) Date
of
Delivery of Advance Notice. An Advance Notice shall be deemed delivered on
(i)
the Trading Day it is received by facsimile or otherwise by the Investor if
such
notice is received prior to 5:00 pm Eastern Time, or (ii) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after 5:00
pm
Eastern Time on a Trading Day or at any time on a day which is not a Trading
Day. No Advance Notice may be deemed delivered on a day that is not a Trading
Day.
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Section
2.3. Closings.
On each Advance Date (i) the Company shall deliver to the Investor such number
of shares of the Common Stock registered in the name of the Investor as shall
equal (x) the amount of the Advance specified in such Advance Notice pursuant
to
Section 2.1 herein, divided by (y) the Purchase Price and (ii) upon receipt
of
such shares, the Investor shall deliver to the Company the amount of the Advance
specified in the Advance Notice by wire transfer of immediately available funds.
In addition, on or prior to the Advance Date, each of the Company and the
Investor shall deliver to the other all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement in order
to implement and effect the transactions contemplated herein. To the extent
the
Company has not paid the fees, expenses, and disbursements of the Investor
in
accordance with Section 12.4, the amount of such fees, expenses, and
disbursements may be deducted by the Investor (and shall be paid to the relevant
party) directly out of the proceeds of the Advance with no reduction in the
amount of shares of the Company’s Common Stock to be delivered on such Advance
Date.
| (a) |
Company’s
Obligations Upon Closing.
|
(i) The
Company shall deliver to the Investor the shares of Common Stock applicable
to
the Advance in accordance with Section 2.3. The certificates evidencing such
shares shall be free of restrictive legends.
(ii) the
Company’s Registration Statement with respect to the resale of the shares of
Common Stock delivered in connection with the Advance shall have been declared
effective by the SEC;
(iii) the
Company shall have obtained all material permits and qualifications required
by
any applicable state for the offer and sale of the Registrable Securities,
or
shall have the availability of exemptions therefrom. The sale and issuance
of
the Registrable Securities shall be legally permitted by all laws and
regulations to which the Company is subject;
(iv) the
Company shall have filed with the SEC in a timely manner all reports, notices
and other documents required of a “reporting company” under the Exchange Act and
applicable Commission regulations;
(v) the
fees
as set forth in Section 12.4 below shall have been paid or can be withheld
as
provided in Section 2.3; and
(vi) The
Company’s transfer agent shall be DWAC eligible.
(b) Investor’s
Obligations Upon Closing.
Upon
receipt of the shares referenced in Section 2.3(a)(i) above and provided the
Company is in compliance with its obligations in Section 2.3, the Investor
shall
deliver to the Company the amount of the Advance specified in the Advance Notice
by wire transfer of immediately available funds.
Section
2.4. Lock
Up
Period. On the date hereof, the Company shall obtain from each officer and
director a lock-up agreement, as defined below, in the form annexed hereto
as
Schedule 2.4.
Section
2.5. Hardship.
In the event the Investor sells shares of the Company’s Common Stock after
receipt of an Advance Notice and the Company fails to perform its obligations
as
mandated in Section 2.3, and specifically the Company fails to deliver to the
Investor on the Advance Date the shares of Common Stock corresponding to the
applicable Advance pursuant to Section 2.3(a)(i), the Company acknowledges
that
the Investor shall suffer financial hardship and therefore shall be liable
for
any and all losses, commissions, fees, or financial hardship caused to the
Investor.
4
ARTICLE
III.
Representations
and Warranties of Investor
Investor
hereby represents and warrants to, and agrees with, the Company that the
following are true and correct as of the date hereof and as of each Advance
Date:
Section
3.1. Organization
and Authorization. The Investor is duly incorporated or organized and validly
existing in the jurisdiction of its incorporation or organization and has all
requisite power and authority to purchase and hold the securities issuable
hereunder. The decision to invest and the execution and delivery of this
Agreement by such Investor, the performance by such Investor of its obligations
hereunder and the consummation by such Investor of the transactions contemplated
hereby have been duly authorized and requires no other proceedings on the part
of the Investor. The undersigned has the right, power and authority to execute
and deliver this Agreement and all other instruments (including, without
limitations, the Registration Rights Agreement), on behalf of the Investor.
This
Agreement has been duly executed and delivered by the Investor and, assuming
the
execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.
Section
3.2. Evaluation
of Risks. The Investor has such knowledge and experience in financial, tax
and
business matters as to be capable of evaluating the merits and risks of, and
bearing the economic risks entailed by, an investment in the Company and of
protecting its interests in connection with this transaction. It recognizes
that
its investment in the Company involves a high degree of risk.
Section
3.3. No
Legal
Advice From the Company. The Investor 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. The Investor
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.
Section
3.4. Investment
Purpose. The securities are being purchased by the Investor for its own account,
and for investment purposes. The Investor agrees not to assign or in any way
transfer the Investor’s rights to the securities or any interest therein and
acknowledges that the Company will not recognize any purported assignment or
transfer except in accordance with applicable Federal and state securities
laws.
No other person has or will have a direct or indirect beneficial interest in
the
securities. The Investor agrees not to sell, hypothecate or otherwise transfer
the Investor’s securities unless the securities are registered under Federal and
applicable state securities laws or unless, in the opinion of counsel
satisfactory to the Company, an exemption from such laws is
available.
Section
3.5. Accredited
Investor. The Investor is an “Accredited Investor” as that term is defined in
Rule 501(a)(3) of Regulation D of the Securities Act.
Section
3.6. Information.
The Investor and its advisors (and its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information it deemed material to making an informed investment
decision. The Investor 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 Investor
or its advisors, if any, or its representatives shall modify, amend or affect
the Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement. The Investor understands that its investment
involves a high degree of risk. The Investor is in a position regarding the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Investor to obtain information from
the Company in order to evaluate the merits and risks of this investment. The
Investor has sought such accounting, legal and tax advice, as it has considered
necessary to make an informed investment decision with respect to this
transaction.
5
Section
3.7. Receipt
of Documents. The Investor and its counsel have received and read in their
entirety: (i) this Agreement and the Exhibits annexed hereto; (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 year ended December 31, 2005 and Form 10-QSB for
the period ended March 31, 2006; and (iv) answers to all questions the
Investor submitted to the Company regarding an investment in the Company; and
the Investor has relied on the information contained therein and has not been
furnished any other documents, literature, memorandum or prospectus.
Section
3.8. Registration
Rights Agreement. The parties have entered into the Registration Rights
Agreement dated the date hereof.
Section
3.9. 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 shares of Common
Stock offered hereby.
Section
3.10. Not
an
Affiliate. The Investor is not an officer, director or a person that directly,
or indirectly through one or more intermediaries, controls or is controlled
by,
or is under common control with the Company or any “Affiliate” of the Company
(as that term is defined in Rule 405 of the Securities Act).
Section
3.11. Trading
Activities. The Investor’s trading activities with respect to the Company’s
Common Stock shall be in compliance with all applicable federal and state
securities laws, rules and regulations and the rules and regulations of the
Principal Market on which the Company’s Common Stock is listed or traded.
Neither
the Investor nor its affiliates has an open short position in the Common Stock
of the Company, the Investor 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, provided
that the
Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be issued to the Investor pursuant
to the Advance Notice
during
the applicable Pricing Period.
ARTICLE
IV.
Representations
and Warranties of the Company
Except
as
stated below, on the disclosure schedules attached hereto or in the SEC
Documents (as defined herein), the Company hereby represents and warrants to,
and covenants with, the Investor that the following are true and correct as
of
the date hereof:
Section
4.1. Organization
and Qualification. The Company is duly incorporated or organized and validly
existing in the jurisdiction of its incorporation or organization and has all
requisite corporate power to own its properties and to carry on its 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 a Material Adverse Effect on
the
Company and its subsidiaries taken as a whole.
6
Section
4.2. Authorization,
Enforcement, Compliance with Other Instruments. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Placement Agent Agreement
and
any related agreements, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Registration Rights Agreement,
the Placement Agent Agreement and any related agreements by the Company and
the
consummation by it of the transactions contemplated hereby and thereby, 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) this Agreement, the Registration Rights Agreement, the
Placement Agent Agreement and any related agreements have been duly executed
and
delivered by the Company, (iv) this Agreement, the Registration Rights
Agreement, the Placement Agent Agreement and assuming the execution and delivery
thereof and acceptance by the Investor and any related agreements 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.
Section
4.3. Capitalization.
The authorized capital stock of the Company consists of 300,000,000 shares
of
Common Stock and zero shares of Preferred Stock, of which 151,013,985 shares
of
Common Stock are issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and nonassessable. Except as disclosed
in
the SEC Documents, no shares of Common Stock are subject to preemptive rights
or
any other similar rights or any liens or encumbrances suffered or permitted
by
the Company. Except as disclosed in the SEC Documents, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company or any
of
its subsidiaries, or contracts, commitments, understandings or arrangements
by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries
or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities (iii) there are no outstanding
registration statements other than on Form S-8 and (iv) there are no agreements
or arrangements under which the Company or any of its subsidiaries is obligated
to register the sale of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement). There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of
the
transactions described herein or therein. The Company has furnished to the
Investor true and correct 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 By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect
thereto.
Section
4.4. No
Conflict. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of Incorporation,
any certificate of designations of any outstanding series of preferred stock
of
the Company or By-laws or (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 Company
or
any of its subsidiaries is a party, or 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 Principal Market
on
which the Common Stock is quoted) applicable to the Company or any of its
subsidiaries or by which any material property or asset of the Company or any
of
its subsidiaries is bound or affected and which would cause a Material Adverse
Effect. Except as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles
of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted in violation of any material
law, ordinance, 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
fact or circumstance which might give rise to any of the foregoing.
7
Section
4.5. 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 Exchange Act since January 1, 2004. The Company has delivered to
the
Investor or its representatives, or made available through the SEC’s website at
xxxx://xxx.xxx.xxx, true and complete copies of the SEC Documents. As of their
respective dates, the financial statements of the Company disclosed in the
SEC
Documents (the “Financial Statements”) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company
to
the Investor which is not included in the SEC Documents 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 circumstances under
which they were made, not misleading.
Section
4.6. 10b-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.
Section
4.7. No
Default. Except as disclosed in the SEC Documents, the Company is not in default
in the performance or observance of any material obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it is or
its
property is bound and neither the execution, nor the delivery by the Company,
nor the performance by the Company of its obligations under this Agreement
or
any of the exhibits or attachments hereto will conflict with or result in the
breach or violation of any of the terms or provisions of, or constitute a
default or result in the creation or imposition of any lien or charge on any
assets or properties of the Company under its Certificate of Incorporation,
By-Laws, any material indenture, mortgage, deed of trust or other material
agreement applicable to the Company or instrument to which the Company is a
party or by which it is bound, or any statute, or any decree, judgment, order,
rules or regulation of any court or governmental agency or body having
jurisdiction over the Company or its properties, in each case which default,
lien or charge is likely to cause a Material Adverse Effect on the Company’s
business or financial condition.
Section
4.8. Absence
of Events of Default. Except for matters described in the SEC Documents and/or
this Agreement, no Event of Default, as defined in the respective agreement
to
which the Company is a party, and no event which, with the giving of notice
or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a Material Adverse Effect
on
the Company’s business, properties, prospects, financial condition or results of
operations.
Section
4.9. Intellectual
Property Rights. The Company and its subsidiaries own or possess adequate rights
or licenses to use all material 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.
Section
4.10. Employee
Relations. Neither the Company nor any of its subsidiaries is involved in any
labor dispute nor, to the knowledge of the Company or any of its subsidiaries,
is any such dispute threatened. None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe
that their relations with their employees are good.
8
Section
4.11. Environmental
Laws. The Company and its subsidiaries are (i) in compliance with any and all
applicable material foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(“Environmental Laws”), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval.
Section
4.12. Title.
Except as set forth in the SEC Documents, the Company has good and marketable
title to its properties and material assets owned by it, free and clear of
any
pledge, lien, security interest, encumbrance, claim or equitable interest other
than such as are not material to the business of the Company. Any 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.
Section
4.13. Insurance.
The Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
Section
4.14. 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.
Section
4.15. Internal
Accounting Controls. The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance
that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
Section
4.16. No
Material Adverse Breaches, etc. Except as set forth in the SEC Documents,
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 on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Except as set forth in the SEC Documents, 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 on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
9
Section
4.17. Absence
of Litigation. Except as set forth in the SEC Documents, there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or
affecting the Company, the Common Stock or any of the Company’s subsidiaries,
wherein an unfavorable decision, ruling or finding would (i) have a Material
Adverse Effect on the transactions contemplated hereby (ii) adversely affect
the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a Material Adverse Effect on the business, operations,
properties, financial condition or results of operation of the Company and
its
subsidiaries taken as a whole.
Section
4.18. Subsidiaries.
Except as disclosed in the SEC Documents, the Company does not presently own
or
control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity.
Section
4.19. Tax
Status. Except as disclosed in the SEC Documents, the Company and each of its
subsidiaries has made or filed all federal and state income and all other 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.
Section
4.20. Certain
Transactions. Except as set forth 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),
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.
Section
4.21. 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.
Section
4.22. Use
of
Proceeds. The Company shall use the net proceeds from this offering for general
corporate purposes, including, without limitation, the payment of loans incurred
by the Company. However, in no event shall the Company use the net proceeds
from
this offering for the payment (or loan to any such person for the payment)
of
any judgment, or other liability, incurred by any executive officer, officer,
director or employee of the Company, except for any liability owed to such
person for services rendered, or if any judgment or other liability is incurred
by such person originating from services rendered to the Company, or the Company
has indemnified such person from liability.
Section
4.23. Further
Representation and Warranties of the Company. For so long as any securities
issuable hereunder held by the Investor remain outstanding, the Company
acknowledges, represents, warrants and agrees that it will maintain the listing
of its Common Stock on the Principal Market.
Section
4.24. Opinion
of Counsel. Investor shall receive an opinion letter from counsel to the Company
on the date hereof.
Section
4.25. Opinion
of Counsel. The Company will obtain for the Investor, at the Company’s expense,
any and all opinions of counsel which may be reasonably required in order to
sell the securities issuable hereunder without restriction.
Section
4.26. Dilution.
The Company is aware and acknowledges that issuance of shares of the Company’s
Common Stock could cause dilution to existing shareholders and could
significantly increase the outstanding number of shares of Common Stock.
10
ARTICLE
V.
Indemnification
The
Investor and the Company represent to the other the following with respect
to
itself:
Section
5.1. Indemnification.
(a) In
consideration of the Investor’s execution and delivery of this Agreement, and in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Investor, and
all
of its officers, directors, partners, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Investor 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 Investor 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 Investor 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 or the Registration Rights
Agreement 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 this Agreement or the Registration Rights Agreement 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 Investor
Indemnitee not arising out of any action or inaction of an Investor Indemnitee,
and arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Investor Indemnitees. 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 Investor’s other obligations under this Agreement, the
Investor shall defend, protect, indemnify and hold harmless the Company and
all
of its officers, directors, shareholders, 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 Company
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
Investor in this Agreement, the Registration Rights Agreement, or any instrument
or document contemplated hereby or thereby executed by the Investor, (b) any
breach of any covenant, agreement or obligation of the Investor(s) contained
in
this Agreement, the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the Investor,
or (c) any cause of action, suit or claim brought or made against such Company
Indemnitee based on misrepresentations or due to a breach by the Investor and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Company Indemnitees. To the extent that
the foregoing undertaking by the Investor may be unenforceable for any reason,
the Investor shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities, which is permissible under applicable
law.
(c) The
obligations of the parties to indemnify or make contribution under this Section
5.1 shall survive termination.
11
ARTICLE
VI.
Covenants
of the Company
Section
6.1. Registration
Rights. The Company shall cause the Registration Rights Agreement to remain
in
full force and effect and the Company shall comply in all material respects
with
the terms thereof.
Section
6.2. Listing
of Common Stock. The Company shall maintain the Common Stock’s authorization for
quotation on the Principal Market.
Section
6.3. Exchange
Act Registration. The Company will cause its Common Stock to continue to be
registered under Section 12(g) of the Exchange Act, will file in a timely manner
all reports and other documents required of it as a reporting company under
the
Exchange Act and will not take any action or file any document (whether or
not
permitted by Exchange Act or the rules thereunder) to terminate or suspend
such
registration or to terminate or suspend its reporting and filing obligations
under said Exchange Act.
Section
6.4. Transfer
Agent Instructions. Upon effectiveness of the Registration Statement the Company
shall deliver instructions to its transfer agent to issue shares of Common
Stock
to the Investor free of restrictive legends on or before each Advance
Date.
Section
6.5. Corporate
Existence. The Company will take all steps necessary to preserve and continue
the corporate existence of the Company.
Section
6.6. Notice
of
Certain Events Affecting Registration; Suspension of Right to Make an Advance.
The Company will immediately notify the Investor upon its becoming aware of
the
occurrence of any of the following events in respect of a registration statement
or related prospectus relating to an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other
Federal or state governmental authority during the period of effectiveness
of
the Registration Statement for amendments or supplements to the registration
statement or related prospectus; (ii) the issuance by the SEC or any other
Federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus of any document incorporated or deemed to be incorporated therein
by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein not misleading,
and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in the light of
the
circumstances under which they were made, not misleading; and (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available
to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
Section
6.7. Restriction
on Sale of Capital Stock. During the Commitment Period, the Company shall not,
without the prior written consent of the Investor, (i) issue or sell any Common
Stock or Preferred Stock without consideration or for a consideration per share
less than the Bid Price of the Common Stock determined
immediately prior to its issuance, (ii) issue or sell any
Preferred Stock
warrant, option, right, contract, call, or other security or instrument granting
the holder thereof the right to acquire Common Stock without consideration
or
for a consideration per share less than the Bid
Price
of the Common Stock determined
immediately prior to its issuance, or (iii) file any registration statement
on
Form S-8. Notwithstanding the forgoing, the Company shall be entitled to issue
up to 5,000,000 shares to its Chief Financial Officer for services rendered.
12
Section
6.8. Consolidation;
Merger. The Company shall not, at any time after the date hereof, effect any
merger or consolidation of the Company with or into, or a transfer of all or
substantially all the assets of the Company to another entity (a “Consolidation
Event”) unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to the Investor such
shares of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement.
Section
6.9. Issuance
of the Company’s Common Stock. The sale of the shares of Common Stock shall be
made in accordance with the provisions and requirements of Regulation D and
any applicable state securities law.
Section
6.10. 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.
Section
6.11. Market
Activities. The
Company will not, directly or indirectly, (i) take any action designed to cause
or result in, or that constitutes or might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the Company
to
facilitate the sale or resale of the Common Stock or (ii) sell, bid for or
purchase the Common Stock, or pay anyone any compensation for soliciting
purchases of the Common Stock.
ARTICLE
VII.
Conditions
for Advance and Conditions to Closing
Section
7.1. Conditions
Precedent to the Obligations of the Company. The obligation hereunder of the
Company to issue and sell the shares of Common Stock to the Investor incident
to
each Closing is subject to the satisfaction, or waiver by the Company, at or
before each such Closing, of each of the conditions set forth
below.
(a) Accuracy
of the Investor’s Representations and Warranties. The representations and
warranties of the Investor shall be true and correct in all material
respects.
(b) Performance
by the Investor. The Investor shall have performed, satisfied and complied
in
all respects with all covenants, agreements and conditions required by this
Agreement and the Registration Rights Agreement to be performed, satisfied
or
complied with by the Investor at or prior to such Closing.
Section
7.2. Conditions
Precedent to the Right of the Company to Deliver an Advance Notice. The right
of
the Company to deliver an Advance Notice is subject to the fulfillment by the
Company, on such Advance Notice (a “Condition Satisfaction Date”), of each of
the following conditions:
(a) Registration
of the Common Stock with the SEC. The Company shall have filed with the SEC
a
Registration Statement with respect to the resale of the Registrable Securities
in accordance with the terms of the Registration Rights Agreement. As set forth
in the Registration Rights Agreement, the Registration Statement shall have
previously become effective and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investor shall have
received notice that the SEC has issued or intends to issue a stop order with
respect to the Registration Statement or that the SEC otherwise has suspended
or
withdrawn the effectiveness of the Registration Statement, either temporarily
or
permanently, or intends or has threatened to do so (unless the SEC’s concerns
have been addressed and the Investor is reasonably satisfied that the SEC no
longer is considering or intends to take such action), and (ii) no other
suspension of the use or withdrawal of the effectiveness of the Registration
Statement or related prospectus shall exist. The Registration Statement must
have been declared effective by the SEC prior to the first Advance Notice
Date.
13
(b) Authority.
The Company shall have obtained all permits and qualifications required by
any
applicable state in accordance with the Registration Rights Agreement for the
offer and sale of the shares of Common Stock, or shall have the availability
of
exemptions therefrom. The sale and issuance of the shares of Common Stock shall
be legally permitted by all laws and regulations to which the Company is
subject.
(c) Fundamental
Changes. There shall not exist any fundamental changes to the information set
forth in the Registration Statement which would require the Company to file
a
post-effective amendment to the Registration Statement.
(d) Performance
by the Company. The Company shall have performed, satisfied and complied in
all
material respects with all covenants, agreements and conditions required by
this
Agreement and the Registration Rights Agreement to be performed, satisfied
or
complied with by the Company at or prior to each Condition Satisfaction
Date.
(e) No
Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits or
directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated
by
this Agreement.
(f) No
Suspension of Trading in or Delisting of Common Stock. The trading of the Common
Stock is not suspended by the SEC or the Principal Market (if the Common Stock
is traded on a Principal Market). The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market (if the Common Stock is traded
on
a Principal Market). The Company shall not have received any notice threatening
the continued listing of the Common Stock on the Principal Market (if the Common
Stock is traded on a Principal Market).
(g) Maximum
Advance Amount. The amount of an Advance requested by the Company shall not
exceed the Maximum Advance Amount. In addition, in no event shall the number
of
shares issuable to the Investor pursuant to an Advance cause the aggregate
number of shares of Common Stock beneficially owned by the Investor and its
affiliates to exceed nine and 9/10 percent (9.9%) of the then outstanding Common
Stock of the Company. For the purposes of this section beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange
Act.
(h) No
Knowledge. The Company has no knowledge of any event which would be more likely
than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective.
(i) Executed
Advance Notice. The Investor shall have received the Advance Notice executed
by
an officer of the Company and the representations contained in such Advance
Notice shall be true and correct as of each Condition Satisfaction
Date.
14
ARTICLE
VIII.
Due
Diligence Review; Non-Disclosure of Non-Public Information
Section
8.1. Non-Disclosure
of Non-Public Information.
(a) The
Company covenants and agrees that it shall refrain from disclosing, and shall
cause its officers, directors, employees and agents to refrain from disclosing,
any material non-public information to the Investor without also disseminating
such information to the public, unless prior to disclosure of such information
the Company identifies such information as being material non-public information
and provides the Investor with the opportunity to accept or refuse to accept
such material non-public information for review.
(b) Nothing
herein shall require the Company to disclose non-public information to the
Investor or its advisors or representatives, and the Company represents that
it
does not disseminate non-public information to any investors who purchase stock
in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of
any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically
or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of
the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE
IX.
Choice
of Law/Jurisdiction
Section
9.1. 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, New Jersey and
the United States District Court of New Jersey, sitting in Newark, New Jersey,
for the adjudication of any civil action asserted pursuant to this
paragraph.
ARTICLE
X.
Assignment;
Termination
Section
10.1. Assignment.
Neither this Agreement nor any rights of the Company hereunder may be assigned
to any other Person.
Section
10.2. Termination.
(a) The
obligations of the Investor to make Advances under Article II hereof shall
terminate twenty-four (24) months after the Effective Date.
(b) The
obligation of the Investor to make an Advance to the Company pursuant to this
Agreement shall terminate permanently (including with respect to an Advance
Date
that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for
an
aggregate of fifty (50) Trading Days, other than due to the acts of the
Investor, during the Commitment Period, or (ii) the Company shall at any time
fail materially to comply with the requirements of Article VI and such failure
is not cured within thirty (30) days after receipt of written notice from the
Investor, provided, however, that this termination provision shall not apply
to
any period commencing upon the filing of a post-effective amendment to such
Registration Statement and ending upon the date on which such post effective
amendment is declared effective by the SEC.
15
ARTICLE
XI.
Notices
Section
11.1. 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 facsimile, provided a copy is mailed by U.S. certified
mail, return receipt requested; (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:
|
Serefex
Corporation
|
|
0000
Xxxxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx X
|
|
|
Xxxxxx,
Xxxxxxx 00000
|
|
|
Attention: Xxxxx
X. Xxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
Williams,
Schifino, Mangioni and Steady P.A.
|
|
Xxx
Xxxxx Xxxx Xxxxxx, Xxxxx 000
|
|
|
Xxxxx,
Xxxxxxx 00000
|
|
|
Attention:
Xxxxxxx Xxxxxxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
If
to the Investor(s):
|
Cornell
Capital Partners, LP
|
|
000
Xxxxxx Xxxxxx -Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Attention: Xxxx
Xxxxxx
|
|
|
Portfolio
Manager
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a Copy to:
|
Xxxxx
Xxxxxxxx, Esq.
|
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
Each
party shall provide five (5) days’ prior written notice to the other party of
any change in address or facsimile number.
16
ARTICLE
XII.
Miscellaneous
Section
12.1. 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. In the event any signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party within
five (5) days of the execution and delivery hereof, though failure to deliver
such copies shall not affect the validity of this Agreement.
Section
12.2. Entire
Agreement; Amendments. This Agreement supersedes all other prior oral or written
agreements between the Investor, 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
the
Investor 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.
Section
12.3. Reporting
Entity for the Common Stock. The reporting entity relied upon for the
determination of the trading price or trading volume of the Common Stock on
any
given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P.
or
any successor thereto. The written mutual consent of the Investor and the
Company shall be required to employ any other reporting entity.
Section
12.4. Fees
and
Expenses. The Company hereby agrees to pay the following fees:
(a) Structuring
Fees. Each of the parties shall pay its own fees and expenses (including
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated
hereby, except that (i) the Company has paid the Investor or its designee a
structuring fee of Fifteen Thousand Dollars ($15,000), and (ii) On each
Advance Date, the Company shall pay Yorkville Advisors, LLC a structuring fee
of
Five Hundred Dollars ($500) directly out the gross proceeds of each
Advance.
(b) Due
Diligence Fee. Company has paid the Investor a non-refundable due diligence
fee
of Five Thousand Dollars ($5,000) upon submission of the due diligence documents
to the Investor.
(c) Commitment
Fees.
(i) On
each
Advance Date the Company shall pay to the Investor, directly out of the gross
proceeds of each Advance, an amount equal to five percent (5%) of the amount
of
each Advance. The Company hereby agrees that if such payment, as is described
above, is not made by the Company on the Advance Date, such payment shall be
made as outlined and mandated by Section 2.3 of this Agreement.
(ii) Upon
the
execution of this Agreement the Company shall issue to the Investor 2,666,667
shares
of
Common Stock (the “Investor’s Shares”) (an amount equal to Two Hundred Forty
Thousand Dollars ($240,000) worth of Common Stock).
(iii) Fully
Earned. The Investor’s Shares shall be deemed fully earned as of the date
hereof.
(iv) Registration
Rights. The Investor’s Shares will have “piggy-back” registration
rights.
17
Section
12.5. Brokerage.
Each of the parties hereto represents that it has had no dealings in connection
with this transaction with any finder or broker who will demand payment of
any
fee or commission from the other party. The Company on the one hand, and the
Investor, on the other hand, agree to indemnify the other against and hold
the
other harmless from any and all liabilities to any person claiming brokerage
commissions or finder’s fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section
12.6. Confidentiality.
If for any reason the transactions contemplated by this Agreement are not
consummated, each of the parties hereto shall keep confidential any information
obtained from any other party (except information publicly available or in
such
party’s domain prior to the date hereof, and except as required by court order)
and shall promptly return to the other parties all schedules, documents,
instruments, work papers or other written information without retaining copies
thereof, previously furnished by it as a result of this Agreement or in
connection herein.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
18
IN
WITNESS WHEREOF,
the
parties hereto have caused this Standby Equity Distribution Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first
set
forth above.
|
COMPANY:
|
|
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Serefex
Corporation
|
|
|
By:
|
|
|
Name: Xxxxx
Xxxx
|
|
|
Title: Chief
Executive Officer
|
|
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INVESTOR:
|
|
|
Cornell
Capital Partners, LP
|
|
|
By: Yorkville
Advisors, LLC
|
|
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Its: General
Partner
|
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By:
|
|
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Name: Xxxx
Xxxxxx
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|
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Title: Portfolio
Manager
|
|
19
EXHIBIT
A
ADVANCE
NOTICE
SEREFEX
CORPORATION
The
undersigned, _______________________ hereby certifies, with respect to the
sale
of shares of Common Stock of SEREFEX
CORPORATION
(the
“Company”) issuable in connection with this Advance Notice, delivered pursuant
to the Standby Equity Distribution Agreement (the “Agreement”), as follows:
1. The
undersigned is the duly elected ______________ of the Company.
2. There
are
no fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post effective amendment
to
the Registration Statement.
3.
The
Company has performed in all material respects all covenants and agreements
to
be performed by the Company and has complied in all material respects with
all
obligations and conditions contained in the Agreement on or prior to the Advance
Notice Date, and shall continue to perform in all material respects all
covenants and agreements to be performed by the Company through the applicable
Advance Date. All conditions to the delivery of this Advance Notice are
satisfied as of the date hereof.
4. The
undersigned hereby represents, warrants and covenants that it has made all
filings (“SEC Filings”) required to be made by it pursuant to applicable
securities laws (including, without limitation, all filings required under
the
Securities Exchange Act of 1934, which include Forms 10-Q or 10-QSB, 00-X xx
00-XXX, 0-X, xxx.). All SEC Filings and other public disclosures made by the
Company, including, without limitation, all press releases, analysts meetings
and calls, etc. (collectively, the “Public Disclosures”), have been reviewed and
approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified public accountants. None of the
Company’s Public Disclosures contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading.
5. The
Advance requested is _____________________.
The
undersigned has executed this Certificate this ____ day of
_________________.
SEREFEX
CORPORATION
By:_____________________
Name:___________________
Title:____________________
20
SCHEDULE
2.4
SEREFEX
CORPORATION
The
undersigned hereby agrees that for a period commencing on June ___, 2006 and
expiring on the termination of the Standby Equity Distribution Agreement dated
June ___, 2005 between the Serefex Corporation (the “Company”) and the Cornell
Capital Partners, LP (the “Investor”) (the “Lock-up Period”), he, she or it will
not, directly or indirectly, without the prior written consent of the Investor,
issue, offer, agree or offer to sell, sell, grant an option for the purchase
or
sale of, pledge, assign, hypothecate, distribute or otherwise encumber or
dispose of any securities of the Company, including common stock or options,
rights, warrants or other securities underlying, convertible into, exchangeable
or exercisable for or evidencing any right to purchase or subscribe for any
common stock (whether or not beneficially owned by the undersigned), or any
beneficial interest therein (collectively, the “Securities”) except in
accordance with the volume limitations set forth in Rule 144(e) of the General
Rules and Regulations under the Securities Act of 1933, as amended.
In
order
to enable the aforesaid covenants to be enforced, the undersigned hereby
consents to the placing of legends and/or stop-transfer orders with the transfer
agent of the Company’s securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned, and the undersigned hereby confirms the undersigned’s investment in
the Company.
Dated:
_______________, 2006
Signature
Name:
____________________________________
Address:
City,
State, Zip Code:
Print
Social Security Number
or
Taxpayer I.D. Number
21
