Exhibit 10.1
STANDBY EQUITY DISTRIBUTION AGREEMENT
-------------------------------------
THIS AGREEMENT dated as of the 30th day of March 2007 (the "Agreement")
between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the
"Investor"), and BRIGHTEC INC., a corporation organized and existing under the
laws of the State of Nevada (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 Ten Million Dollars ($10,000,000) of the Company's common stock,
par value $0.001 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 Ten Million Dollars ($10,000,000) 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.
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 $0.001 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.
2
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 subject to any reduction pursuant to
Section 2.2(c)..
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 six percent
(96%) 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.
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.
3
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
4
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.
(c) Minimum Acceptable Price. The lowest Market Price of
the Common Stock (before taking into account any discount used to calculate the
Purchase Price) for any particular Advance (the "Minimum Acceptable Price")
shall, in connection with each Advance Notice delivered by the Company, be equal
to sixty five percent (65%) of the VWAP on the Trading Day immediately preceding
the Advance Notice Date for such Advance Notice. Subject to the next sentence,
upon the issuance by the Company of an Advance Notice along with a Minimum
Acceptable Price, (i) the Company shall automatically reduce the amount of the
Advance set forth in such Advance Notice by twenty percent (20%) for each
Trading Day during the Pricing Period that the VWAP of the Common Stock is below
the Minimum Acceptable Price (each such day, an "Excluded Day"), and (ii) each
Excluded Day shall be excluded from the Pricing Period for purposes of
determining the Market Price. The number of shares of Common Stock to be
delivered to the Investor at the Closing (in accordance with Section 2.3 of this
Agreement) shall correspond with the Advance Notice amount as reduced pursuant
to clause (i) above, except that the Company shall be obligated to sell, and the
Investor shall be obligated to purchase any shares of Common Stock corresponding
to such Advance Notice that have been sold by the Investor and such shares shall
be priced at the greater of the Purchase Price or the applicable Minimum
Acceptable Price. The Company, and only the Company, may waive the Minimum
Acceptable Price with respect to any particular Advance Notice by providing the
Investor with written notice of waiver on or prior to the Advance Notice Date.
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;
5
(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; and
(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.
(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. Intentionally Omitted.
---------------------
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.
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,
6
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.
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 September 30, 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.
7
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.
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
8
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 245,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, $0.001 par value per share ("Preferred Stock"), of which
124,698,935 shares of Common Stock and 0 shares of Preferred 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 set forth on Schedule 4.3 attached hereto and 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
9
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.
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, 2006. The
Company has delivered to the Investor or its representatives, or made available
through the SEC's website at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇, true and complete copies of the
SEC Documents, including, but not limited to, the Company's Current Report on
Form 8-K filed with the SEC on August 25, 2005, with respect to non-reliance on
previously issued financial statements. 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. The Company hereby acknowledges that it currently has an outstanding
comment letter from the SEC, dated July 25, 2006, which it intends to address
with the SEC.
10
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 ▇▇▇▇ 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.
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.
11
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
12
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.
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.
13
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.
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
14
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 until the
termination of the applicable statute of limitations.
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
15
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 ten (10) calendar days prior
written notice to 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.
16
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
17
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.
(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
18
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.
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.
19
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 ▇▇▇▇▇▇ County, New Jersey, and expressly
consent to the jurisdiction and venue of the Superior Court of New Jersey,
sitting in ▇▇▇▇▇▇ 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 sixty (60) 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.
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:
20
If to the Company, to: Brightec Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. - ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
Telephone:
Facsimile:
With a copy to: ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor(s): Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ -▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
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
21
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) on the date hereof the
Company shall pay a structuring fee of Fifteen Thousand Dollars ($15,000) to
Yorkville Advisors, LLC 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 shall pay 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 four million (4,000,000) shares of Common
Stock (the "Investor's Shares").
(iii) Fully Earned. The Investor's Shares shall be
deemed fully earned as of the date hereof.
(iv) Registration Rights. The two million
(2,000,000) Investor's Shares will have demand registration rights and two
million (2,000,000) Investor's Shares will have "piggy-back" registration
rights.
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
22
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]
23
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:
BRIGHTEC INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Portfolio Manager
24
EXHIBIT A
ADVANCE NOTICE
BRIGHTEC INC.
The undersigned, _______________________ hereby certifies, with respect
to the sale of shares of Common Stock of BRIGHTEC INC. (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,
▇▇-▇ ▇▇ ▇▇-▇▇▇, ▇-▇, ▇▇▇.). 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
_________________.
BRIGHTEC INC.
By:
----------------------------------
Name:
Title:
If Returning This Advance Notice via Facsimile Please Send To: (▇▇▇) ▇▇▇-▇▇▇▇
If by Mail, via Federal Express To: Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇