DEBENTURE SECURITIES PURCHASE AGREEMENT
Exhibit 10.12
THISSECURITIES PURCHASE AGREEMENT
(this “Agreement”), dated as
of September 24, 2009, by and among ADVENTURE ENERGY, INC., a
Florida 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 up to Fifty Thousand Dollars ($50,000) of secured convertible
debentures (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”),
which shall be funded no later than the fifth (5th)
business day following the date hereof (the “Closing”), for a
total purchase price of up to Fifty Thousand Dollars ($50,000), (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 an Investor Registration Rights Agreement substantially
in the form attached hereto as Exhibit A (the “Investor 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 there under, and applicable state securities laws;
WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Security Agreement substantially in the form attached
hereto as Exhibit
B (the “Security Agreement”)
pursuant to which the Company has agreed to provide the Buyer a security
interest in Pledged Collateral (as this term is defined in the Security
Agreement) to secure the Company’s obligations under this Agreement, the
Convertible Debenture, the Investor Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, the Security Agreement, the Pledge and
Escrow Agreement or any other obligations of the Company to the
Buyer;
WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Second Amended and Restated Pledge and Escrow
Agreement substantially in the form attached hereto as Exhibit C (the “Pledge and Escrow
Agreement”) pursuant to which the Company has agreed to provide the Buyer
a security interest in the Pledged Shares (as this term is defined in the Pledge
and Escrow Agreement) to secure the Company’s obligations under this Agreement,
the Convertible Debenture, the Investor Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, the Security Agreement, the Pledge and
Escrow Agreement or any other obligations of the Company to the
Buyer; and
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:
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1. PURCHASE
AND SALE OF CONVERTIBLE DEBENTURES.
(a)Purchase of Convertible Debentures.
Subject to the satisfaction (or waiver) of the terms and conditions of this
Agreement, each Buyer agrees, severally and not jointly, to purchase at the
Closing and the Company agrees to sell and issue to each Buyer, severally and
not jointly, at the Closing, Convertible Debentures in amounts corresponding
with the Subscription Amount set forth opposite each Buyer’s name on Schedule I
hereto.
(b)Closing Date. The Closing of the
purchase and sale of the Convertible Debentures shall take place at 10:00 a.m.
Eastern Standard Time within two (2) 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 later date as is mutually
agreed to by the Company and the Buyer(s)) (the “Closing Date”). The Closing
shall take place at a location that 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 the Closing Date,
(i) the Buyers shall deliver to the Company such aggregate proceeds for the
Convertible Debentures to be issued and sold to such Buyer(s), minus the fees to
be paid directly from the proceeds of the Closing as set forth herein, and
(ii) the Company shall deliver to each Buyer, Convertible Debentures which
such Buyer(s) is purchasing 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 Convertible Debentures and, upon conversion of Convertible
Debentures, the Buyer will acquire the Conversion Shares then issuable, for its
own account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, such Buyer reserves the right to dispose
of the Conversion Shares at any time in accordance with or pursuant to an
effective Registration Statement (the “Registration Statement”) covering such
Conversion Shares or an available exemption under the Securities
Act.
(b)Accredited Investor Status. Each Buyer
is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of
Regulation D.
(c)Reliance on Exemptions. Each Buyer
understands that the Convertible Debentures 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 such
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 Convertible Debentures and the Conversion Shares,
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 Convertible Debentures and the Conversion
Shares 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
Convertible Debentures and the Conversion Shares.
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(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 Convertible Debentures or the Conversion Shares, or the
fairness or suitability of the investment in the Convertible Debentures or the
Conversion Shares, nor have such authorities passed upon or endorsed the merits
of the offering of the Convertible Debentures or the Conversion
Shares.
(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.
(g)Legends. Each Buyer agrees to the
imprinting, so long as is required by this Section 2(g), of a restrictive legend
in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES 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 shall not contain any legend (including the
legend set forth above), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Conversion Shares pursuant
to Rule 144, (iii) if such Conversion 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 promptly after the effective date (the
“Effective
Date”) of a Registration Statement if required by the Company’s transfer
agent to effect the removal of the legend hereunder. If all or any portion of
the Convertible Debentures are exercised by a Buyer that is not an Affiliate of
the Company (a “Non-Affiliated
Buyer”) at a time when there is an effective registration statement to
cover the resale of the Conversion Shares, such Conversion Shares shall be
issued free of all legends. The Company agrees that following the Effective Date
or 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
Non-Affiliated Buyer to the Company or the Company’s transfer agent of a
certificate representing Conversion 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 is
not an affirmative statement or representation that such Conversion Shares are
freely tradable. Each Buyer, severally and not jointly with the other Buyers,
agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 3(g) is predicated upon the Company’s
reliance that the buyer will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein.
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(h)Authorization, Enforcement. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and is a valid and binding agreement of such Buyer enforceable in
accordance with its 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.
(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, the Security
Agreement, the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Agreement, and the Pledge and Escrow Agreement; (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-K for the
fiscal year ended December 31, 2008; (iv) the Company’s Form 10-Q for the fiscal
quarter ended June 30, 2009 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 Convertible
Debentures 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.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers that, except as set forth
in the SEC Documents (as defined herein):
(a)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 a material
adverse effect on the Company and its subsidiaries taken as a
whole.
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(b)Authorization, Enforcement, Compliance
with Other Instruments. (i) The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Security Agreement,
the Investor Registration Rights Agreement, the Irrevocable Transfer Agent
Agreement, the Pledge and Escrow Agreement, and any related agreements
(collectively the “Transaction Documents”) and to issue the Convertible
Debentures and the Conversion Shares 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 Convertible
Debentures the Conversion Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion or exercise thereof,
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 have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company’s
other obligations under such documents.
(c)Capitalization. As of the date hereof,
the authorized capital stock of the Company consists of 150,000,000 shares of
Common Stock, par value $0.001 per share and 5,000,000 shares of Preferred
Stock, $0.001 par value per share (“Preferred Stock”), of which 18,200,000
shares of Common Stock and 1,300,000 shares of Preferred Stock were 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 (as
defined in Section 3(f)), 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 of this Agreement, (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 and (iii) 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) and (iv) there are no outstanding registration statements and
there are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Convertible
Debentures as described in this Agreement. The Company has furnished to the
Buyer true and correct copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and
the terms of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
(d)Issuance of Securities. The Convertible
Debentures are duly authorized and, upon issuance in accordance with the terms
hereof, shall be duly issued, fully paid and nonassessable, are free from all
taxes, liens and charges with respect to the issue thereof. The Conversion
Shares issuable upon conversion of the Convertible Debentures have been duly
authorized and reserved for issuance. Upon conversion or exercise in accordance
with the Convertible Debentures the Conversion Shares will be duly issued, fully
paid and nonassessable.
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(e)No Conflicts. Except as disclosed in
the SEC Documents, the execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a material violation of the
Certificate of Incorporation, any certificate of designations of any outstanding
series of preferred stock of the Company or the 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 National Association of Securities Dealers Inc.’s OTC
Bulletin Board on which the Common Stock is quoted) applicable to the Company or
any of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected. Except as disclosed in the SEC
Documents, neither the Company nor its subsidiaries is in violation of any term
of or in default under 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, 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. Except as
disclosed in the SEC Documents, 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.
(f)SEC Documents: Financial Statements.
Since the Company has been a filing reports with the SEC, the Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC under of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) (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”). The
Company has delivered to the Buyers or their representatives, or made available
through the SEC’s website at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇., 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 Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(g)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.
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(h) Absence
of Litigation. Except as disclosed in the SEC Documents and the Disclosure
Schedule (the “Disclosure Schedule”) attached hereto as Exhibit F, 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 operations of the Company and its
subsidiaries taken as a whole.
(i)Acknowledgment Regarding Buyer’s
Purchase of the Convertible Debentures. The Company acknowledges and agrees that
the Buyer(s) 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 the Buyer(s) 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 the
Buyer(s) 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 Convertible Debentures or the Conversion Shares.
The Company further represents to the 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.
(j)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 Convertible Debentures or the Conversion
Shares.
(k)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 Convertible Debentures or the Conversion Shares under the
Securities Act or cause this offering of the Convertible Debentures or the
Conversion Shares to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(l)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.
(m)Intellectual Property Rights. The
Company and its subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service ▇▇▇▇ 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 ▇▇▇▇ 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 ▇▇▇▇ 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.
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(n)Environmental Laws. The Company and its
subsidiaries are (i) in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“Environmental Laws”), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval.
(o)Title. 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.
(p)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.
(q)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.
(r)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, and (iii) the recorded amounts for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(s)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.
(t)Tax Status. Except as set forth in the
SEC Documents, the Company and each of its subsidiaries has made and 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.
8
(u)Certain Transactions. Except as set
forth in the SEC Documents, and except for arm’s length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed in the SEC Documents, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (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.
(v)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.
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 Conversion Shares 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 Conversion Shares, or obtain an
exemption for the Conversion Shares 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 Conversion Shares
without restriction pursuant to Rule 144(k) promulgated under the Securities Act
(or successor thereto), or (ii) the date on which (A) the Buyer(s) shall have
sold all the Conversion Shares and (B) none of the Convertible Debentures 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,
Estimated. The Company will use the proceeds from the sale of the Convertible
Debentures as follows:
|
i)
|
$31,800
to rework of the Company’s ▇▇▇▇▇▇▇▇ #1 and #2 ▇▇▇▇▇ in Green County,
Kentucky;
|
|
ii)
|
$6,000
to purchase two #35 pump jacks to be utilized on ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇.
|
|
iii)
|
$3,000
to pay for bonding and permitting for the drilling of two new ▇▇▇▇▇ on the
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ leasehold in ▇▇▇▇▇ County,
Kentucky.
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9
(e)Reservation of Shares. 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 issuance of the Conversion Shares. If at any
time the Company does not have available such shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all of the
Conversion Shares, the Company shall call and hold a special meeting of the
shareholders within thirty (30) days of such occurrence, for the sole 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. Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common
Stock.
(f)Listings or Quotation. The Company
shall promptly secure the listing or quotation of the Conversion Shares upon
each national securities exchange, automated quotation system or The National
Association of Securities Dealers Inc.’s Over-The-Counter Bulletin Board
(“OTCBB”) or other market, if any, upon which shares of Common Stock are then
listed or quoted (subject to official notice of issuance) and shall use its best
efforts to maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Conversion Shares from time to time issuable under
the terms of this Agreement. The Company shall maintain the Common Stock’s
authorization for quotation on the OTCBB.
(h)Transfer Agent. The Company covenants
and agrees that, in the event that the Company’s agency relationship with the
transfer agent should be terminated for any reason prior to a date which is one
(1) year after the Closing Date, the Company shall immediately appoint a new
transfer agent and shall require that the new transfer agent execute and agree
to be bound by the terms of the Irrevocable Transfer Agent Instructions (as
defined herein).
(i)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 Debenture shall remain
outstanding.
(j)Rights of First Refusal. For a period
of eighteen (18) months from the date hereof, if the Company intends to raise
additional capital by the issuance or sale of capital stock of the Company,
including without limitation shares of any class of common stock, any class of
preferred stock, options, warrants or any other securities convertible or
exercisable into shares of common stock (whether the offering is conducted by
the Company, underwriter, placement agent or any third party) the Company shall
be obligated to offer to the Buyers such issuance or sale of capital stock, by
providing in writing the principal amount of capital it intends to raise and
outline of the material terms of such capital raise, prior to the offering such
issuance or sale of capital stock to any third parties including, but not
limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents or
other third parties. The Buyers shall have ten (10) business days from
receipt of such notice of the sale or issuance of capital stock to accept or
reject such capital raising offer. The Buyer’s acceptance shall be made in
writing and shall be on the same terms as the issuance or sale presented by the
Company to the Buyer.
(k)Liens. The Company hereby acknowledges,
confirms and agrees that Buyer has and shall continue to have valid, enforceable
and perfected first-priority liens upon and security interests in the Pledged
Property and the Pledged Shares as further detailed in the Transaction Documents
and new subsidiaries heretofore granted pursuant to any and all security agreements or
otherwise granted to or held by Buyer.
10
(l)Increase in Authorized Capital. The
Company shall take all actions necessary to increase its authorized shares of
common stock to 150,000,000 within one hundred and twenty (120) days hereof. The
Company shall furnish to each Buyer and its legal counsel promptly before the
same is filed with the SEC, one copy of the proxy or information statement and
any amendment thereto, and shall deliver to each Buyer promptly each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such proxy or information statement (other than any portion thereof
which contains information for which the Company has sought confidential
treatment). The Company will promptly respond to any and all comments received
from the SEC (which comments shall promptly be made available to each Buyer).
The Company shall comply with the filing and disclosure requirements of Section
14 under the 1934 Act in connection with obtaining the approval of the Company’s
stockholders to increase its authorized shares of common stock. The Company
represents and warrants that its Board of Directors has approved the proposal
contemplated by this Section 4(p) and shall indicate such approval in the proxy
or information statement used in connection with the Stockholder
Approval.
(m)Obligations. Company covenants and
agrees that all amounts owed, together with interest accrued and accruing
thereon, and fees, costs, expenses and other charges (collectively, the
“Obligations”) now or hereafter payable by the
Company to Buyer under the Convertible Debentures and all other agreements,
contracts, instruments or other items delivered in connection therewith
(collectively, along with this Agreement and the agreements executed in
connection herewith, shall be referenced herein as the “Transaction
Documents”) are
unconditionally owing by the Company to Buyer, without offset, setoff, defense
or counterclaim of any kind, nature or description whatsoever. All terms of the
Transaction Documents not modified by this Agreement shall remain in full force
and effect. An event of default under any of the Transaction Document shall
constitute an Event of Default on all other Transaction
Documents.
5.TRANSFER
AGENT INSTRUCTIONS.
(a) [Intentionally left
blank]
(b) The
Company warrants that the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the other Transaction Documents. If a Buyer effects a sale,
assignment or transfer of the Securities in accordance with Section 2(f), the
Company shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment and, with respect to any transfer, shall permit the
transfer. In the event that such sale, assignment or transfer involves
Conversion Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. Nothing in this Section 5 shall affect in any
way the Buyer’s obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyer(s) shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
11
(c)
Upon receipt of a Conversion Notice the Transfer Agent shall within five
(5)Trading Days thereafter (i) issue and surrender to a common carrier for
overnight delivery to the address as specified in the Conversion Notice a
certificate, registered in the name of the Buyer or its designees, for the
number of shares of Common Stock to which the Buyer shall be entitled as set
forth in the Conversion Notice (ii) provided the Transfer Agent is participating
in DTC Fast
Automated Securities Transfer Program, upon the request of the Buyers, credit
such aggregate number of shares of Common Stock to which the Buyers shall be
entitled to the Buyer’s or their designees’ balance account with DTC through its
DWAC system provided the Buyer causes its bank or broker to initiate the DWAC
transaction.
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 Date, 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 Escrow Agent the Purchase Price for Convertible Debentures in respective
amounts as set forth next to each Buyer as outlined on Schedule I attached
hereto and the Escrow Agent shall have delivered the net proceeds to the Company
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 Date 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
Date.
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
Buyer(s).
(ii)The Common Stock shall be authorized
for quotation on the OTCBB, 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 by the
OTCBB.
(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. If requested by the Buyer, the Buyer shall have received a certificate,
executed by the President of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Buyer including, without limitation an update as of the Closing Date
regarding the representation contained in Section 3(c)
above.
12
(iv)The Company shall have executed and
delivered to the Buyer(s) the Convertible Debentures in the respective amounts
set forth opposite each Buyer(s) name on Schedule I attached
hereto.
(v)If requested by the Buyer, the Company
shall have provided to the Buyer(s) a certificate of good standing from the
secretary of state from the state in which the company is
incorporated.
(vi)The Company shall have delivered to the
Escrow Agent the Pledged Shares.
(vii)The Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Convertible Debentures, shares of Common Stock to effect
the conversion of all of the Conversion Shares then
outstanding.
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 Investor 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 Investor 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 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 parties hereto, any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Convertible Debentures or the status of the Buyer or
holder of the Convertible Debentures the Conversion Shares, as a Buyer of
Convertible Debentures in the Company. 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, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this Agreement,
the Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby executed by the Buyer, or (c) any
cause of action, suit or claim brought or made against such Company Indemnitee
based on material misrepresentations or due to a material breach and arising out
of or resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the parties hereto. 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.
13
9.GOVERNING
LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
California without regard to the principles of conflict of laws. The parties
further agree that any action between them shall be heard in the State of
California and expressly consent to the jurisdiction and venue of the Courts of
the State of California and the United States District Court for the appropriate
district sitting in California 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. 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.
(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:
14
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If
to the Company, to:
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▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇
▇▇▇,
▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Phone:
▇▇▇-▇▇▇-▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
|
|
|
| If to the Buyer: | ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ |
| ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |
| Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
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).
15
(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(s) for the fees and
expenses of Yorkville Advisors Management, LLC described in Section 4(g)
above.
(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]
16
IN WITNESS WHEREOF, the Buyers and the Company
have caused this Securities Purchase Agreement to be duly executed as of the
date first written above.
|
COMPANY:
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By:
|
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Name:▇▇▇▇▇
▇▇▇▇▇▇▇▇
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Title: President
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17
EXHIBIT
A
FORM OF INVESTOR
REGISTRATION RIGHTS AGREEMENT
EXHIBIT
B
SECURITY
AGREEMENT
EXHIBIT
C
PLEDGE AND ESCROW
AGREEMENT
18
SCHEDULE
I
SCHEDULE OF
BUYERS
|
Name
|
Signature
|
Address/Facsimile
Number
of Buyer
|
Amount
of Subscription
|
|
Atlas
Capital Partners, LLC
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
$50,000
|
|
19