STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the 4th day of May 2011 (this
"Agreement") between YA GLOBAL MASTER SPV LTD., a Cayman Islands
exempt limited partnership (the "Investor"), and OMAGINE, INC.,
a corporation organized and existing under the laws of the
State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and
subject to the conditions contained herein, the Company shall
issue and sell to the Investor, from time to time as provided
herein, and the Investor shall purchase from the Company up to
$5,000,000 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 rules and 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 transactions to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
Article I. Certain Definitions
Section 1.01 "Advance" shall mean the portion of the Commitment
Amount requested by the Company in an Advance Notice.
Section 1.02 "Advance Date" shall mean the 1st Trading Day after
expiration of the applicable Pricing Period for each Advance.
Section 1.03 "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 1.04 "Advance Notice Date" shall mean each date the
Company delivers (in accordance with Section 2.01(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.
Section 1.05 "Affiliate" shall have the meaning set forth in
Section 3.08.
Section 1.06 "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 1.07 "By-laws" shall have the meaning set forth in
Section 4.03.
Section 1.08 "Certificate of Incorporation" shall have the
meaning set forth in Section 4.03.
Section 1.09 "Closing" shall mean any of the closings of a
purchase and sale of Common Stock made pursuant to an Advance
wherein such sale of Common Stock and the payment of the
relevant Purchase Price is completed pursuant to this Agreement.
Section 1.10 "Commitment Amount" shall mean the aggregate amount
of up to $5,000,000 which the Investor has agreed to provide to
the Company in order for the Investor to purchase the Shares
pursuant to the terms and conditions of this Agreement.
Section 1.11 "Commitment Fee" and "Commitment Shares" shall have
the meanings set forth in Section 12.04 (b).
Section 1.12 "Commitment Period" shall mean the period
commencing on the Effective Date, and expiring upon the
termination of this Agreement in accordance with Section 10.02.
Section 1.13 "Common Stock" shall have the meaning set forth in
the recitals of this Agreement.
Section 1.14 "Company Indemnitees" shall have the meaning set
forth in Section 5.02.
Section 1.15 "Condition Satisfaction Date" shall have the
meaning set forth in Section 7.01.
Section 1.16 "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 1.17 "Effective Date" shall mean the date on which the
SEC first declares effective a Registration Statement
registering the resale of the Shares.
Section 1.18 "Environmental Laws" shall have the meaning set
forth in Section 4.10.
Section 1.19 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Section 1.20 "Indemnified Liabilities" shall have the meaning
set forth in Section 5.01.
Section 1.21 "Inspectors" shall have the meaning set forth in
Section 6.17.
Section 1.22 "Investor Indemnitees" shall have the meaning set
forth in Section 5.01.
Section 1.23 "Market Price" shall mean the lowest daily VWAP of
the Common Stock during the relevant Pricing Period.
Section 1.24 "Material Adverse Effect" shall mean any condition,
circumstance, or situation that may result in, or reasonably be
expected to result in (i) a material adverse effect on the
legality, validity or enforceability of this Agreement or the
transactions contemplated herein, (ii) a material adverse effect
on the results of operations, assets, business or condition
(financial or otherwise) of the Company, taken as a whole, or
(iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its
obligations under this Agreement.
2
Section 1.25 "Maximum Advance Amount" shall be the greater of
(i) $200,000 or (ii) the average of the Daily Value Traded for
each of the 5 Trading Days prior to an Advance Notice Date where
Daily Value Traded is the product obtained by multiplying the
daily trading volume for such day by the Bid Price for such day.
Section 1.26 "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 1.27 "Plan of Distribution" shall have the meaning set
forth in Section 6.01(a).
Section 1.28 "Pricing Period" shall mean the 5 consecutive
Trading Days after an Advance Notice Date.
Section 1.29 "Principal Market" shall mean the Nasdaq Global
Select Market, the Nasdaq Global Market, the Nasdaq Capital
Market, the NYSE Euronext, the New York Stock Exchange
or the OTC Bulletin Board whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.30 "Purchase Price" shall be set at 95% of the Market
Price during the relevant Pricing Period.
Section 1.31 "Records" shall have the meaning set forth in
Section 6.17.
Section 1.32 "Registrable Securities" shall mean (i) the Shares,
and (ii) any securities issued or issuable with respect to any
of the foregoing by way of exchange, stock dividend or stock
split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization
or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities
when (a) the Registration Statement has been declared effective
by the SEC and such Registrable Securities have been disposed of
pursuant to the Registration Statement, (b) such Registrable
Securities have been sold under circumstances under which all of
the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("Rule 144") are met, or
(c) in the opinion of counsel to the Company such Registrable
Securities may be sold without registration or without any time,
volume or manner limitations pursuant to Rule 144.
Section 1.33 "Registration Period" shall have the meaning set
forth in Section 6.01(b).
Section 1.34 "Registration Statement" shall mean a registration
statement on Form S-1 or Form S-3 or 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 registration of the resale by
the Investor of the Registrable Securities under the Securities
Act.
Section 1.35 "Regulation D" shall have the meaning set forth in
the recitals of this Agreement.
Section 1.36 "SEC" shall mean the United States Securities and
Exchange Commission.
3
Section 1.37 "SEC Documents" shall have the meaning set forth in
Section 4.05.
Section 1.38 "Securities Act" shall have the meaning set forth
in the recitals of this Agreement.
Section 1.39 "Settlement Document" shall have the meaning set
forth in Section 2.02(a).
Section 1.40 "Shares" shall mean the shares of Common Stock to
be issued from time to time hereunder pursuant to Advances and
the Commitment Shares.
Section 1.41 "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.42 "VWAP" means, for any Trading Day, the daily volume
weighted average price of the Common Stock on such date on the
Principal Market as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:00 p.m.
(New York City time).
Article II. Advances
Section 2.01 Advances; Mechanics. 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 Common Stock
on the following terms:
(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 7.01; provided, however, that
(i) the amount for each Advance as designated by the Company in
the applicable Advance Notice shall not be more than the Maximum
Advance Amount, (ii) the aggregate amount of the Advances
pursuant to this Agreement shall not exceed the Commitment
Amount, and (iii) in no event shall the number of shares of
Common Stock issuable to the Investor pursuant to an Advance
cause the aggregate number of shares of Common Stock
beneficially owned (as calculated pursuant to Section 13(d) of
the Exchange Act) by the Investor and its affiliates to exceed
9.99% of the then outstanding Common Stock (the "Ownership
Limitation"). Notwithstanding any other provision in this
Agreement, the Company acknowledges and agrees that upon receipt
of an Advance Notice, the Investor may sell shares that it is
unconditionally obligated to purchase under such Advance
Notice prior to taking possession of such shares.
(b) Date of Delivery of Advance Notice.
Advance Notices shall be delivered in accordance with the
instructions set forth on the bottom of Exhibit A. An Advance
Notice shall be deemed delivered on (i) the Trading Day it is
received by facsimile or otherwise by the Investor if such
notice is received prior to 5:00 pm Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by
facsimile or otherwise after 5:00 pm Eastern Time on a Trading
Day or at any time on a day which is not a Trading Day. No
Advance Notice may be deemed delivered on a day that is not a
Trading Day.
4
(c) Ownership Limitation.
In connection with each Advance Notice delivered by the Company,
any portion of an Advance that would cause the Investor to
exceed the Ownership Limitation shall automatically be
withdrawn.
(d) Registration Limitation.
In connection with each Advance Notice, any portion of an
Advance that would cause the aggregate number of Shares to
exceed the aggregate number of shares of Common Stock available
for resale under the Registration Statement shall automatically
be deemed to be withdrawn by the Company with no further action
required by the Company. At the Company's request from time to
time, the Investor shall report to the Company the total amount
of Shares offered and sold pursuant to this Agreement and the
portion of the total Commitment Amount remaining.
Section 2.02 Closings. Each Closing shall take place on, or as
soon as practicable after, each Advance Date in accordance with
the procedures set forth below. In connection with each Closing
the Company and the Investor shall fulfill each of its
obligations as set forth below:
(a) Within 1 Trading Day after each Advance Date, the Investor
shall deliver to the Company a written document (each a
"Settlement Document") setting forth the amount of the Advance
(taking into account any adjustments pursuant to Section 2.01(c)
or Section 2.01(d)), the Purchase Price, the number of shares of
Common Stock to be issued and subscribed for (which in no event
will be greater than the Ownership Limitation), and a report by
Bloomberg, LP indicating the VWAP for each of the Trading Days
during the Pricing Period, in each case taking into account the
terms and conditions of this Agreement. The Settlement Document
shall be in the form attached hereto as Exhibit B and the
Investor will use its best efforts to deliver the Settlement
Document to the Investor by 11 am New York time on the Trading
Day after the Advance Date.
(b) Upon receipt of the Settlement Document with respect to each
Advance, the Company shall (i) immediately review and either
approve such Settlement Document or provide any corrections to
the Settlement Document (a "Corrected Settlement Document") and
return it to the Investor and (ii) along with the return of each
Settlement Document or Corrected Settlement Document confirm to
the Investor that it has obtained all material permits and
qualifications required for the issuance and transfer of the
shares of Common Stock applicable to such Advance, or shall have
the availability of exemptions therefrom and that the sale and
issuance of such shares of Common Stock shall be legally
permitted by all laws and regulations to which the Company is
subject.
(c) Upon receipt of any Corrected Settlement Document pursuant
to the above, the Investor shall immediately review and either
approve such Corrected Settlement Document or if the Investor
feels additional corrections are necessary, such Corrected
Settlement Document will be promptly submitted to an
independent, reputable appraiser jointly selected by the Company
and the Investor. Such appraiser will review and if necessary,
revise, such Corrected Settlement Document. The determination of
such appraiser shall be deemed binding upon all parties absent
manifest error and the fees and expenses of such appraiser shall
be borne equally by both parties.
5
(d) Immediately after a Settlement Document or Corrected
Settlement Document with respect to an Advance is deemed final,
the Company will, or will cause its transfer agent to,
electronically transfer such number of shares of Common Stock
registered in the name of the Investor as shall equal (x) the
amount of the Advance specified in such Advance Notice (as may
be reduced according to the terms of this Agreement), divided by
(y) the Purchase Price by crediting the Investor's account or
its designee's account at the Depository Trust Company through
its Deposit Withdrawal Agent Commission System or by such other
means of delivery as may be mutually agreed upon by the parties
hereto (which in all cases shall be freely tradable, registered
shares in good deliverable form) against payment of the Purchase
Price in same day funds to an account designated by the Company.
No fractional shares shall be issued, and any fractional amounts
shall be rounded to the next higher whole number of shares. Any
certificates evidencing shares of Common Stock delivered
pursuant hereto shall be free of restrictive legends.
(e) 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.
(f) Each of the Company and the Investor acknowledge and agree
that with respect to each Settlement Document that "time is of
the essence" with respect to a Closing occurring on, or as close
as possible to the, the relevant Advance Date, and with respect
to each Corrected Settlement Document that "time is of the
essence" with respect to a Closing occurring immediately after
either (i) approval of such Corrected Settlement Document by the
Investor, or (ii) receipt by the parties of the appraiser's
determination.
Section 2.03 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 2.02, the Company agrees that in addition to and in
no way limiting the rights and obligations set forth in Article
V hereto and in addition to any other remedy to which the
Investor is entitled at law or in equity, including, without
limitation, specific performance, it will hold the Investor
harmless against any loss, claim, damage, or expense (including
reasonable legal fees and expenses), as incurred, arising out of
or in connection with such default by the Company and
acknowledges that irreparable damage would occur in the event of
any such default. It is accordingly agreed that the Investor
shall be entitled to an injunction or injunctions to prevent
such breaches of this Agreement and to specifically enforce,
without the posting of a bond or other security, the terms and
provisions of this Agreement.
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:
Section 3.01 Organization and Authorization. The Investor is
duly organized, validly existing and in good standing under the
laws of the Cayman Islands and has all requisite power and
authority to purchase and hold the Shares. The decision to
invest and the execution and delivery of this Agreement by such
Investor, the performance by such Investor of its obligations
6
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 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 3.02 Evaluation of Risks. The Investor has such
knowledge and experience in financial, tax and business matters
as to be capable of evaluating the merits and risks of, and
bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this
transaction. It recognizes that its investment in the Company
involves a high degree of risk.
Section 3.03 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 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
the Company's 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 3.04 Investment Purpose. The Registrable 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 Registrable
Securities or any interest therein and acknowledges that the
Company will not recognize any purported assignment or transfer
of the Registrable Securities 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
Registrable Securities. The Investor agrees not to sell,
hypothecate or otherwise transfer the Registrable Securities
unless such Registrable 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 3.05 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 3.06 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
7
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 3.07 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 3.08 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 3.09 Trading Activities. The Investor's trading
activities with respect to the 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 Common Stock is listed or traded.
Neither the Investor nor its affiliates has an open short
position in the Common Stock. The Investor agrees that it shall
not, and that it will cause its affiliates not to, engage in any
short sales of 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 prior to receiving
such shares.
Article IV. Representations and Warranties of the Company
Except as stated below or in the SEC Documents, the Company
hereby represents and warrants to, the Investor that the
following are true and correct as of the date hereof:
Section 4.01 Organization and Qualification. The Company is duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware 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 4.02 Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power
and authority to enter into and perform this Agreement and any
related agreements, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this 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 and
any related agreements have been duly executed and delivered by
the Company, (iv) this Agreement and assuming the execution and
delivery thereof and acceptance by the Investor, 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
8
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 4.03 Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and
850,000 shares of Preferred Stock, $0.001 par value per share
("Preferred Stock"), of which 12,409,890 shares of Common Stock
and no shares of Preferred Stock are issued and outstanding as
of the date hereof. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as
disclosed in the SEC Documents, no shares of Common Stock are
subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company.
Except as disclosed in the SEC Documents, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or
any of its subsidiaries, (ii) there are no outstanding debt
securities (iii) there are no outstanding registration
statements other than on Form S-8 and (iv) there are no
agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their
securities under the Securities Act (except pursuant to this
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 or made available to the Investor true and correct
copies of the Company's Re-Stated Certificate of Incorporation
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 4.04 No Conflict. The execution, delivery and
performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or By-laws
or (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations
of the Principal Market on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which
any material property or asset of the Company or any of its
subsidiaries is bound or affected and which would cause a
Material Adverse Effect. Except as disclosed in the SEC
Documents, neither the Company nor its subsidiaries is in
violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter
or by-laws, respectively, or any material contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree
or order or any statute, rule or regulation applicable to the
9
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 in accordance with the terms
hereof or thereof except as such consent, authorization or order
has been obtained 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 4.05 SEC Documents; Financial Statements. The Common
Stock is registered pursuant to Section 12(g) of the Exchange
Act and 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 for the two years preceding the
date hereof (or such shorter period as the Company was required
by law or regulation to file such material) (all of the
foregoing filed within the two years preceding the date hereof
or amended after the date hereof and all exhibits included
therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter
referred to as the "SEC Documents") on timely basis or has
received a valid extension of such time of filing and has filed
any such SEC Document prior to the expiration of any such
extension. The Company has delivered to the Investors 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 SEC Documents
complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none
of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of
the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). 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 circumstance under which they are or were
made, not misleading.
Section 4.06 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
10
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.
Section 4.07 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.
Section 4.08 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 4.09 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.
Section 4.10 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.
11
Section 4.11 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 4.12 Insurance. The Company and each of its subsidiaries
are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are
engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither
the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse
Effect.
Section 4.13 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 4.14 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 4.15 No Material Adverse Breaches. 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.
Section 4.16 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
12
Company, the Common Stock or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect.
Section 4.17 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 4.18 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 4.19 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 4.20 Fees and Rights of First Refusal. The Company is
not obligated to offer the securities offered hereunder on a
right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of
the Company, underwriters, brokers, agents or other third
parties.
Section 4.21 Use of Proceeds. The Company shall use the net
proceeds from this offering for working capital and other
general corporate purposes.
Section 4.22 Dilution. The Company is aware and acknowledges
that issuance of shares of the Common Stock could cause dilution
to existing shareholders and could significantly increase the
outstanding number of shares of Common Stock.
Section 4.23 Acknowledgment Regarding Investor's Purchase of
Shares. The Company acknowledges and agrees that the Investor is
acting solely in the capacity of an arm's length investor with
respect to this Agreement and the transactions contemplated
hereunder. The Company further acknowledges that the Investor 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 hereunder and any advice given by
the Investor or any of its representatives or agents in
connection with this Agreement and the transactions contemplated
hereunder is merely
13
incidental to the Investor's purchase of the Shares hereunder.
The Company is aware and acknowledges that it may not be able to
request Advances under this Agreement if the Registration
Statement is not declared effective or if any issuances of
Common Stock pursuant to any Advances would violate any rules of
the Principal Market. The Company further is aware and
acknowledges that any fees paid pursuant to this Agreement
(including the Commitment Fee and issuance of the Commitment
Shares) shall be earned on the date hereof and not refundable or
returnable under any circumstances.
Article V. Indemnification
The Investor and the Company represent to the other the
following with respect to itself:
Section 5.01 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 untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares as
originally filed or in any amendment thereof, or in any related
prospectus, or in any amendment thereof or supplement thereto,
or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on
behalf of the Investor specifically for inclusion therein; (b)
any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or any other
certificate, instrument or document contemplated hereby or
thereby; (c) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement or any other
certificate, instrument or document contemplated hereby or
thereby; and (d) any cause of action, suit or claim brought or
made against such Investor Indemnitee not arising out of any
action or inaction of an Investor Indemnitee, and arising out of
or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Investor
Indemnitees. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities, which is permissible under
applicable law.
Section 5.02 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,
14
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 untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement for the registration of
the Shares as originally filed or in any amendment thereof, or
in any related prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
Investor will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the
Investor by or on behalf of the Company specifically for
inclusion therein; (b) any misrepresentation or breach of any
representation or warranty made by the Investor in this
Agreement or any instrument or document contemplated hereby or
thereby executed by the Investor; (c) any breach of any
covenant, agreement or obligation of the Investor(s) contained
in this Agreement or any other certificate, instrument or
document contemplated hereby or thereby executed by the
Investor; or (d) any cause of action, suit or claim brought or
made against such Company Indemnitee not arising out of any
action or inaction of a Company 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 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.
Section 5.03 Promptly after receipt by an Investor Indemnitee or
Company Indemnitee under this Article V of notice of the
commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified
Liability, such Investor Indemnitee or Company Indemnitee shall,
if an Indemnified Liability in respect thereof is to be made
against any indemnifying party under this Article V deliver to
the indemnifying party a written notice of the commencement
thereof; but the failure to so notify the indemnifying party
will not relieve such indemnifying party of liability under this
Article V unless and to the extent the indemnifying party did
not otherwise learn of such action and such failure results in
the forfeiture by the indemnifying party of substantial rights
and defenses and will not, in any event, relieve the
indemnifying party from any obligations provided in this Article
V. The indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Investor
Indemnitee or Company Indemnitee, as the case may be; provided,
however, that an Investor Indemnitee or Company Indemnitee shall
have the right to retain its own counsel with the fees and
expenses of not more than one counsel for such Investor
Indemnitee or Company Indemnitee to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the
Investor Indemnitee or Company Indemnitee and the indemnifying
party would be inappropriate due to actual or potential
differing interests between such Investor Indemnitee or Company
Indemnitee and any other party represented by such counsel in
such proceeding. The Investor Indemnitee or Company Indemnitee
shall cooperate fully with the indemnifying party in connection
with any negotiation or defense of any
15
such action or claim by the indemnifying party and shall furnish
to the indemnifying party all information reasonably available
to the Investor Indemnitee or Company Indemnitee which relates
to such action or claim. The indemnifying party shall keep the
Investor Indemnitee or Company Indemnitee fully apprised at all
times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall
be liable for any settlement of any action, claim or proceeding
effected without its prior written consent, provided, however,
that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall,
without the prior written consent of the Investor Indemnitee or
Company Indemnitee, consent to entry of any judgment or enter
into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant
or plaintiff to such Investor Indemnitee or Company Indemnitee
of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder,
the indemnifying party shall be subrogated to all rights of the
Investor Indemnitee or Company Indemnitee with respect to all
third parties, firms or corporations relating to the matter for
which indemnification has been made.
Section 5.04 The indemnification required by this Article V
shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when
bills are received.
Section 5.05 The indemnity agreements contained herein shall be
in addition to (i) any cause of action or similar right of the
Investor Indemnitee or Company Indemnitee against the
indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
Section 5.06 The obligations of the parties to indemnify or make
contribution under this Article V shall survive the termination
of this Agreement.
Article VI. Covenants of the Company
Section 6.01 Registration Statement.
(a) Filing of a Registration Statement.
The Company shall prepare and file with the SEC a Registration
Statement, or multiple Registration Statements for the resale by
the Investor of the Registrable Securities. The Company in its
sole discretion may chose when to file such Registration
Statements; provided, however, that the Company shall not have
the ability to request any Advances until the effectiveness of a
Registration Statement. Each Registration Statement shall
contain the "Plan of Distribution" section in substantially the
form attached hereto as Exhibit D.
(b) Maintaining a Registration Statement.
The Company shall cause any Registration Statement that has been
declared effective to remain effective at all times until all
Registrable Securities contained in such Registration Statement
cease to be Registrable Securities (the "Registration Period").
Each Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to
state a material fact required to be
16
stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading.
(c) Filing Procedures.
Prior to the filing of any Registration Statement with the SEC,
the Company shall, (i) furnish a draft of such Registration
Statement to the Investor for its review and comment and (ii)
not less than three business days prior to the filing of a
Registration Statement and not less than one business day prior
to the filing of any related amendments and supplements to all
Registration Statements (except for any amendments or
supplements caused by the filing of any annual reports on Form
10-K, quarterly reports on Form 10-Q and periodic reports on
Form 8-K), furnish to the Investor copies of all such documents
proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be
subject to the reasonable and prompt review of the Investor. The
Investor shall furnish comments on a Registration Statement to
the Company within 24 hours of the receipt thereof.
(d) Delivery of Final Documents.
The Company shall furnish to the Investor without charge, (i) at
least one copy of such Registration Statement as declared
effective by the SEC and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated
therein by reference, all exhibits and each preliminary
prospectus, (ii) at the request of the Investor, 10 copies of
the final prospectus included in such Registration Statement and
all amendments and supplements thereto (or such other number of
copies as the Investor may reasonably request) and (iii) such
other documents as the Investor may reasonably request from time
to time in order to facilitate the disposition of the
Registrable Securities owned by the Investor.
(e) Amendments and Other Filings.
The Company shall (i) prepare and file with the SEC such
amendments (including post-effective amendments) and supplements
to a Registration Statement and the related prospectus used in
connection with such Registration Statement, which prospectus is
to be filed pursuant to Rule 424 promulgated under the
Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period,
and prepare and file with the SEC such additional Registration
Statements in order to register for resale under the Securities
Act all of the Registrable Securities; (ii) cause the related
prospectus to be amended or supplemented by any required
prospectus supplement (subject to the terms of this Agreement),
and as so supplemented or amended to be filed pursuant to Rule
424; (iii) provide the Investor copies of all correspondence
from and to the SEC relating to a Registration Statement
(provided that the Company may excise any information contained
therein which would constitute material non-public information,
and (iv) comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time
as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant
to this Agreement (including pursuant to this Section 6.01(e))
by reason of the Company's filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Exchange Act,
the Company shall incorporate such report by reference into the
Registration Statement, if applicable, or
17
shall file such amendments or supplements with the SEC either on
the day on which the Exchange Act report is filed which created
the requirement for the Company to amend or supplement the
Registration Statement, if feasible, or otherwise promptly
thereafter.
(f) Blue-Sky.
The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investor reasonably
requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements
to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all
times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change to
its certificate of incorporation or by-laws, (x) qualify to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6.01(f), (y) subject
itself to general taxation in any such jurisdiction, or (z) file
a general consent to service of process in any such
jurisdiction. The Company shall promptly notify the Investor of
the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of
the Registrable Securities for sale under the securities or
"blue sky" laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
Section 6.02 Listing of Common Stock. The Company shall at all
times maintain the Common Stock's authorization for quotation on
the Principal Market.
Section 6.03 Opinion of Counsel. The Company shall cause the
Investor to have received an opinion from counsel substantially
in the form attached hereto as Exhibit C prior to the first
Advance Notice.
Section 6.04 Exchange Act Registration. The Company will cause
its Common Stock to continue to be registered under Section
12(g) of the Exchange Act, will file in a timely manner all
reports and other documents required of it as a reporting
company under the Exchange Act and will not take any action or
file any document (whether or not permitted by Exchange Act or
the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations
under said Exchange Act.
Section 6.05 Transfer Agent Instructions. On the Effective Date
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 6.06 Corporate Existence. The Company will take all
steps necessary to preserve and continue the corporate existence
of the Company.
Section 6.07 Notice of Certain Events Affecting Registration;
Suspension of Right to Make an Advance. The Company will
immediately notify the Investor in writing, upon its becoming
18
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
from the SEC or any other Federal or state governmental
authority during the period of effectiveness of the
Registration Statement of any request for additional information
or 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, or of the necessity to
amend the Registration Statement or supplement a related
prospectus to comply with the Securities Act or any other law;
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, and the Investor shall not sell any Shares
pursuant to a Registration Statement, during the continuation of
any of the foregoing events.
Section 6.08 Consolidation; Merger. If an Advance Notice has
been delivered to the Investor and the transaction contemplated
in such Advance Notice has not yet been closed in accordance
with Section 2.02 hereof, then the Company shall not 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.
Section 6.09 Issuance of the Company's Common Stock. The sale of
the shares of Common Stock hereunder 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, 10-K, 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 Chief Executive
Officer and, if containing financial information, the Company's
independent certified public accountants.
Section 6.11 Market Activities. The Company will not, directly
or indirectly, 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 under applicable laws and
regulations to facilitate the sale or resale of the Common
Stock.
19
Section 6.12 Opinion of Counsel Concerning Resales. Provided
that the Investor's resale of Common Stock received pursuant to
this Agreement may be freely sold by the Investor either
pursuant to an effective Registration Statement, in accordance
with Rule 144, or otherwise, the Company shall obtain for the
Investor, at the Company's expense, any and all opinions of
counsel which may be required by the Company's transfer agent to
issue such shares free of restrictive legends, or to remove
legends from such shares.
Section 6.13 Expenses. The Company, whether or not the
transactions contemplated hereunder are consummated or this
Agreement is terminated, will pay all expenses incident to the
performance of its obligations hereunder, including but not
limited to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement
thereto, of each prospectus and of each amendment and supplement
thereto; (ii) the preparation, issuance and delivery of any
Shares issued pursuant to this Agreement, (iii) all fees and
disbursements of the Company's counsel, accountants and other
advisors, (iv) the qualification of the Shares under
securities laws in accordance with the provisions of this
Agreement, including filing fees in connection therewith, (v)
the printing and delivery of copies of any prospectus and any
amendments or supplements thereto, (vi) the fees and expenses
incurred in connection with the listing or qualification of the
Shares for trading on the Principal Market, or (vii) filing fees
of the SEC and the Principal Market.
Section 6.14 Sales. Without the written consent of the Investor,
the Company will not, directly or indirectly, offer to sell,
sell, contract to sell, grant any option to sell or otherwise
dispose of any shares of Common Stock (other than the Shares
offered pursuant to the provisions of this Agreement) or
securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire, Common Stock
during the period beginning on the 5th Trading Day immediately
prior to an Advance Notice Date and ending on the 5th Trading
Day immediately following the corresponding Advance Date.
Section 6.15 Current Report. Promptly after the date hereof (and
prior to the Company delivering an Advance Notice to the
Investor hereunder), the Company shall file with the SEC a
report on Form 8-K or such other appropriate form as determined
by counsel to the Company, relating to the transactions
contemplated by this Agreement and shall provide the Investor
with a reasonable opportunity to review such report prior to its
filing.
Section 6.16 Compliance With Laws. The Company will not,
directly or indirectly, 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 or which caused or resulted in, or
which would in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any
security of the Company.
Section 6.17 Due Diligence. If, after the execution of this
Agreement, the Investor believes, after consultation with its
legal counsel, that it could reasonably be deemed to be an
underwriter of Registrable Securities, at the request of the
Investor, the Company shall make available for inspection by (i)
the Investor and (ii) one firm of accountants or other agents
retained by the Investor (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and
20
employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall
agree, and the Investor hereby agrees, to hold in strict
confidence and shall not make any disclosure (except to an
Investor) or use any Record or other information which the
Company determines in good faith to be confidential, and of
which determination the Inspectors are so notified, unless (a)
the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in any Registration Statement or is
otherwise required under the Securities Act, (b) the release of
such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been
made generally available to the public other than by disclosure
in violation of this or any other agreement of which the
Inspector and the Investor has knowledge. The Investor agrees
that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
Article VII.
Conditions for Advance and Conditions to Closing
Section 7.01 Conditions Precedent to the Right of the Company to
Deliver an Advance Notice. The right of the Company to deliver
an Advance Notice and the obligations of the Investor hereunder
with respect to an Advance is subject to the satisfaction by the
Company, on each Advance Notice Date and Advance Date (each, a
"Condition Satisfaction Date"), of each of the following
conditions:
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true
and correct in all material respects.
(b) Registration of the Common Stock with the SEC.
There is an effective Registration Statement pursuant to which
the Investor is permitted to utilize the prospectus thereunder
to resell all of the shares of Common Stock issuable pursuant to
such Advance Notice. 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 SEC regulations.
(c) Authority.
The Company shall have obtained all permits and qualifications
required by any applicable state 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.
(d) No Material Notices.
None of the following events shall have occurred and be
continuing: (i) receipt by the Company of any request for
additional information from the SEC or any other federal or
state governmental, administrative or self regulatory
authority during the period of effectiveness of the Registration
Statement, the response to which would require any amendments or
supplements to the Registration Statement or related prospectus;
(ii) the issuance by the SEC or any other federal or state
governmental
21
authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for
that purpose; (iii) receipt by the Company 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 occurrence of any
event that makes any statement made in the Registration
Statement or related prospectus or 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 and
as of the date which they were made, not misleading; and (v) the
Company's reasonable determination that a post-effective
amendment to the Registration Statement would be required. 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.
(e) 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 to be performed, satisfied or
complied with by the Company at or prior to each Condition
Satisfaction Date.
(f) 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 a Material
Adverse Effect.
(g) No Suspension of Trading in or Delisting of Common Stock.
The Common Stock is trading on a Principal Market and all of the
Shares issuable pursuant to such Advance Notice will be listed
or quoted for trading on such Principal Market and the Company
believes, in good faith, that trading of the Common Stock on a
Principal Market will continue uninterrupted for the foreseeable
future. The issuance of shares of Common Stock with respect to
the applicable Advance Notice will not violate the shareholder
approval requirements of the Principal Market. The Company shall
not have received any notice threatening the continued listing
or quotation of the Common Stock on the Principal Market.
(h) Maximum Advance Amount.
The amount of an Advance requested by the Company shall not
exceed the Maximum Advance Amount.
(i) Authorized.
There shall be a sufficient number of authorized but unissued
and otherwise unreserved shares of Common Stock for the issuance
of all of the shares issuable pursuant to such Advance Notice.
22
(j) 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.
(k) Consecutive Advance Notices.
Except with respect to the first Advance Notice, the Company
shall have delivered all Shares relating to all prior Advances.
Article VIII.
Non-Disclosure of Non-Public Information
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.
Article IX.
Choice of Law/Jurisdiction
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 10.01 Assignment. Neither this Agreement nor any rights
of the parties hereto may be assigned to any other Person.
Section 10.02 Termination.
(a) Unless earlier terminated as provided hereunder, this
Agreement shall terminate automatically on the earliest of (i)
the first day of the month next following the 24-month
anniversary of the Effective Date, or (ii) the date on which the
Investor shall have made payment of Advances pursuant to this
Agreement in the aggregate amount of the Commitment Amount.
(b) The Company may terminate this Agreement effective upon
fifteen Trading Days' prior written notice to the Investor;
provided that (i) there are no Advances outstanding, and
(ii) the Company has paid all amounts owed to the Investor
pursuant to this Agreement. This Agreement may be terminated at
any time by the mutual written consent of the parties, effective
as of the date of such mutual written consent unless otherwise
provided in such written consent. In the event of any
termination of this Agreement by the
23
Company hereunder, so long as the Investor owns any shares of
Common Stock issued hereunder, unless all of such shares of
Common Stock may be resold by the Investor without registration
and without any time, volume or manner limitations pursuant to
Rule 144, the Company shall not suspend or withdraw the
Registration Statement or otherwise cause the Registration
Statement to become ineffective, or voluntarily delist the
Common Stock from the Principal Market. In the event of any such
termination by the Company, the Investor will promptly inform
the Company in writing of Investor's (i) ownership of shares of
Common Stock issued hereunder, and (ii) thereafter, of its sale
or disposition of all such Shares.
(c) 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 50 Trading Days during the Commitment Period
for any reason other than due to the acts of the Investor, 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 30 days after receipt of written notice from the
Investor, provided, however, that this termination provision
shall not apply to any period commencing upon the filing of a
post-effective amendment to such Registration Statement and
ending upon the date on which such post effective amendment is
declared effective by the SEC.
(d) Nothing in this Section 10.02 shall be deemed to release the
Company or the Investor from any liability for any breach under
this Agreement, or to impair the rights of the Company or the
Investor to compel specific performance by the other party of
its obligations under this Agreement. The indemnification
provisions contained in Article V shall survive termination
hereunder.
Article XI. 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) 3 days after being sent by
U.S. certified mail, return receipt requested, or (iv) 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, except for Advance Notices which shall be
delivered in accordance with the instructions set forth on the
bottom of Exhibit A, shall be:
24
If to the Company, to: Omagine, Inc.
Empire State Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor(s): YA Global Master SPV Ltd.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ -▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each party shall provide 5 days' prior written notice to the
other party of any change in address or facsimile number.
Article XII. Miscellaneous
Section 12.01 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 4 additional original executed signature
pages to be physically delivered to the other party within 5
days of the execution and delivery hereof, though failure to
deliver such copies shall not affect the validity of this
Agreement.
Section 12.02 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
25
referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither
the Company nor the Investor makes any representation, warranty,
covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than
by an instrument in writing signed by the party to be charged
with enforcement.
Section 12.03 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 12.04 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 the
Company shall pay a structuring fee of $5,000 to Yorkville
Advisors, LLC, which has been paid prior to the date hereof.
(b) Commitment Fee.
On the date hereof, the Company shall pay to the Investor a
commitment fee (the "Commitment Fee") of $150,000 by issuing
that number of shares of Common Stock (such shares, the
"Commitment Shares") to the Investor within three days of the
date hereof that is equal to the Commitment Fee divided by the
VWAP for the Trading Day immediately prior to the date hereof.
(c) Commitment Shares.
The Commitment Shares shall be deemed fully earned as of the
date they are issued regardless of the amount of Advances, if
any, that the Company is able to, or chooses to, request
hereunder. The Commitment Shares shall be included in any
registration statement filed by the Company after the date
hereof, unless such shares may be resold without any limitation
pursuant to Rule 144.
Section 12.05 Brokerage. Each of the parties hereto represents
that it has had no dealings in connection with this transaction
with any finder or broker who will demand payment of any fee
or commission from the other party. The Company on the one hand,
and the Investor, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or
finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby.
26
Section 12.06 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 to it as a result of this Agreement or in
connection herewith.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
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:
OMAGINE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice-President
INVESTOR:
YA GLOBAL MASTER SPV LTD.
By: Yorkville Advisors, LLC
Its: Investment Manager
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Member
28
EXHIBIT A
ADVANCE NOTICE
OMAGINE, INC.
The undersigned, _______________________ hereby certifies, with
respect to the sale of shares of Common Stock of OMAGINE, 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 ▇▇-▇, ▇▇▇, ▇-▇, ▇▇▇.). 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 Chief Executive Officer 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 _____________________.
6. 9.99% of the outstanding Common Stock of the Company as of
the date hereof is
___________.
The undersigned has executed this Advance Notice this ____ day
of _________________.
OMAGINE, INC.
By:
Name:
Title:
Please deliver this Advance Notice by mail, email or facsimile
with a follow up phone call to:
Yorkville Advisors, LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Attention: Trading Department and Compliance Officer
Confirmation Telephone Number: (201) 985-8300 ext. 129.
EXHIBIT B
FORM OF SETTLEMENT DOCUMENT
VIA FACSIMILE & EMAIL
Omagine, Inc.
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Vice-President
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇.▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Below please find the settlement information
with respect to the Advance Notice Date of: __________
1.
(a) Amount of Advance Notice: $__________
(b) Amount of Advance Notice (after taking
into account any adjustments pursuant to
Section 2.01): $__________
2. Market Price: $__________
3. Purchase Price (Market Price X 95%) per share: $__________
4. Number of Shares due to Investor: __________
Please issue the number of Shares due to the Investor to the
account of the Investor as follows:
[TO COME AT THE TIME OF EACH SETTLEMENT DOCUMENT]
Sincerely,
YA GLOBAL MASTER SPV, LTD.
Approved By Omagine, Inc.:
__________________________
Name:
EXHIBIT C
FORM OF OPINION
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware, with corporate
power and authority to own, lease and operate its properties and
to conduct its business as described in the Company's public
filings, including reports filed or furnished by the Company
under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") and the rules and regulations of the Commission
thereunder (the "Public Filings") and to enter into and perform
its obligations under the Standby Equity Distribution Agreement.
2. The Company has the requisite corporate power and authority
to enter into and perform its obligations under the Standby
Equity Distribution Agreement and to issue the Common Shares in
accordance with their terms. The execution and delivery of the
Standby Equity Distribution Agreement by the Company and the
consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of
Directors or stockholders is required. The Standby Equity
Distribution Agreement has been duly executed and delivered, and
the Standby Equity Distribution Agreement constitutes the valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms.
3. The Common Shares are duly authorized and, upon issuance in
accordance with the terms of the Standby Equity Distribution
Agreement, will be duly and validly issued, fully paid and
nonassessable, free of any liens, encumbrances and preemptive or
similar rights contained in the Company's Certificate of
Incorporation or By-laws or, to our knowledge, in any agreement
filed by the Company as an exhibit to the Company's Public
Filings.
4. The execution, delivery and performance of the Standby Equity
Distribution Agreement by the Company and the consummation by
the Company of the transactions contemplated thereby (other than
performance by the Company of its obligations under the
indemnification sections of such agreements, as to which no
opinion need be rendered) will not (i) result in a violation of
the Company's Certificate of Incorporation or By-Laws; (ii)
conflict with, or constitute a default (or an event that 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 or, indenture
filed by the Company as an exhibit to the Company's Public
Filings; or (iii) to our knowledge, result in a violation of any
federal or Delaware law, rule or regulation, order, judgment or
decree applicable to the Company or by which any property or
asset of the Company is bound or affected.
5. Based upon your representations, warranties and covenants
contained in the Standby Equity Distribution Agreement, the
Common Shares may be issued to you without registration under
the Securities Act of 1933, as amended.
6. To our knowledge and other then as set forth in the Public
Filings, there are no legal or governmental proceedings pending
to which the Company is a party or of which any
property or assets of the Company is subject which is required
to be disclosed in any Public Filings.
EXHIBIT D
PLAN OF DISTRIBUTION
The selling stockholder of the Common Stock or any of its
pledgees, assignees or successors-in-interest ( a "Selling
Stockholder") may, from time to time, sell any or all of their
Shares (the "Resale Shares") on the OTC Bulletin Board or any
other stock exchange, market or trading facility on which the
shares of Common Stock are traded or in private transactions.
These sales may be at fixed or negotiated prices. A Selling
Stockholder may use any one or more of the following methods
when selling Resale Shares:
.. ordinary brokerage transactions and transactions in which the
broker dealer solicits purchasers;
.. block trades in which the broker dealer will attempt to sell
Resale Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
.. purchases by a broker-dealer as principal and resale by the
broker dealer for its account;
.. an exchange distribution in accordance with the rules of the
applicable exchange;
.. privately negotiated transactions;
.. broker-dealers may agree with the Selling Stockholders to sell
a specified number of such Resale Shares at a stipulated price
per share;
.. through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
.. a combination of any such methods of sale; or
.. any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell Resale Shares under
Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), if available, rather than under this
prospectus.
Broker-dealers engaged by the Selling Stockholders may
arrange for other broker dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the
Selling Stockholders (or, if any broker-dealer acts as agent for
the purchaser of Resale Shares, from the purchaser) in amounts
to be negotiated, but, except as set forth in a supplement to
this Prospectus, in the case of an agency transaction not in
excess of a customary brokerage commission in compliance with
NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
In connection with the sale of the Resale Shares or
interests therein, the Selling Stockholders may enter into
hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume.
The Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which
require the delivery to such broker-dealers or other financial
institutions of the Shares offered by this prospectus, which
Shares such broker-dealers or other financial institutions may
resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).
YA Global Master SPV Ltd. is, and any other Selling
Stockholder, broker-dealer or agent that is involved in selling
the Shares may be deemed to be, an "underwriter" within the
meaning of the Securities Act in connection with such sales. In
such event, any commissions received by such broker-dealers or
agents and any profit on the sale of the Resale Shares purchased
by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has
informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock. In no event shall any
broker-dealer receive fees, commissions or markups which, in the
aggregate, would exceed eight percent (8%).
The Company is required to pay certain fees and expenses
incurred by the Company incident to the registration of the
Shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because YA Global Master SPV Ltd. is, and any other Selling
Stockholder may be deemed to be, an "underwriter" within the
meaning of the Securities Act, they will be subject to the
prospectus delivery requirements of the Securities Act including
Rule 172 thereunder. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this
prospectus. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the Resale Shares
by the Selling Stockholders.
We agreed to keep this prospectus effective until the
earlier of (i) the date on which the Shares may be resold by the
Selling Stockholders without registration and without regard to
any volume limitations by reason of Rule 144 under the
Securities Act or any other rule of similar effect or (ii) all
of the Shares have been resold pursuant to this prospectus or
Rule 144 under the Securities Act or any other rule of similar
effect. The Resale Shares will be sold only through registered
or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states, the
Resale Shares may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available
and is complied with.
Under applicable rules and regulations under the Exchange
Act, any person engaged in the distribution of the Resale Shares
may not simultaneously engage in market making activities with
respect to the Common Stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of
the distribution. In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including Regulation M, which
may limit the timing of purchases and sales of shares of the
Common Stock by the Selling Stockholders or any other person. We
will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a
copy of this prospectus to each purchaser of Resale Shares at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).