STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the ___ day of March 2005 (the "Agreement") between CORNELL CAPITAL PARTNERS, LP, a Delaware
limited partnership (the "Investor"), and AMERICANA PUBLISHING, INC., a corporation organized and existing under the laws of the
State of Colorado (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and
sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company up to Ten Million U.S.
Dollars ($10,000,000) of the Company's common stock, par value $0.001 per share (the "Common Stock"); and
WHEREAS, such investments will be made in reliance upon the provisions of Regulation D ("Regulation D") of the Securities
Act of 1933, as amended, and the regulations promulgated thereunder (the "Securities Act"), and or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect to any or all of the investments to be made
hereunder.
WHEREAS, the Company has engaged Newbridge Securities Corporation (the "Placement Agent"), to act as the Company's exclusive
placement agent in connection with the sale of the Company's Common Stock to the Investor hereunder pursuant to the Placement Agent
Agreement dated the date hereof by and among the Company, the Placement Agent and the Investor (the "Placement Agent Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
Certain Definitions
Section 1.1. "Advance" shall mean the portion of the Commitment Amount requested by the Company in the Advance Notice.
Section 1.2. "Advance Date" shall mean the date the Xxxxx Xxxxxxxx Attorney Trust Account is in receipt of the funds
from the Investor and Xxxxx Xxxxxxxx, Esq., is in possession of free trading shares from the Company and therefore an Advance by the
Investor to the Company can be made and Xxxxx Xxxxxxxx, Esq. can release the free trading shares to the Investor. The Advance Date
shall be the first (1st) Trading Day after expiration of the applicable Pricing Period for each Advance.
Section 1.3. "Advance Notice" shall mean a written notice to the Investor setting forth the Advance amount that the
Company requests from the Investor and the Advance Date.
Section 1.4. "Advance Notice Date" shall mean each date the Company delivers to the Investor an Advance Notice requiring
the Investor to advance funds to the Company, subject to the terms of this Agreement. No Advance Notice Date shall be less than five
(5) Trading Days after the prior Advance Notice Date.
Section 1.5. "Bid Price" shall mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of the Common
Stock on the Principal Market or if the Common Stock is not traded on a Principal Market, the highest reported bid price for the
Common Stock, as furnished by the National Association of Securities Dealers, Inc.
Section 1.6. "Closing" shall mean one of the closings of a purchase and sale of Common Stock pursuant to Section 2.3.
Section 1.7. "Commitment Amount" shall mean the aggregate amount of up to Ten Million U.S. Dollars ($10,000,000) which
the Investor has agreed to provide to the Company in order to purchase the Company's Common Stock pursuant to the terms and
conditions of this Agreement.
Section 1.8. "Commitment Period" shall mean the period commencing on the earlier to occur of (i) the Effective Date, or
(ii) such earlier date as the Company and the Investor may mutually agree in writing, and expiring on the earliest to occur of (x)
the date on which the Investor shall have made payment of Advances pursuant to this Agreement in the aggregate amount of Ten Million
U.S. Dollars ($10,000,000), (y) the date this Agreement is terminated pursuant to Section 2.4, or (z) the date occurring twenty-four
(24) months after the Effective Date.
Section 1.9. "Common Stock" shall mean the Company's common stock, par value $0.001 per share.
Section 1.10. "Condition Satisfaction Date" shall have the meaning set forth in Section 7.2.
Section 1.11. "Damages" shall mean any loss, claim, damage, liability, costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12. "Effective Date" shall mean the date on which the SEC first declares effective a Registration Statement
registering the resale of the Registrable Securities as set forth in Section 7.2(a).
Section 1.13. "Escrow Agreement" shall mean the escrow agreement among the Company, the Investor, and Xxxxx Xxxxxxxx,
Esq., dated the date hereof.
Section 1.14. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Section 1.15. "Material Adverse Effect" shall mean any condition, circumstance, or situation that would prohibit or
otherwise materially interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement
or the Registration Rights Agreement in any material respect.
Section 1.16. "Market Price" shall mean the lowest VWAP of the Common Stock during the Pricing Period.
Section 1.17. "Maximum Advance Amount" shall be Two Hundred Fifty Thousand U.S. Dollars (US$250,000) per Advance Notice.
Section 1.18. "NASD" shall mean the National Association of Securities Dealers, Inc.
Section 1.19. "Person" shall mean an individual, a corporation, a partnership, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or instrumentality thereof.
Section 1.20. "Placement Agent" shall mean Newbridge Securities Corporation, a registered broker-dealer.
Section 1.21. "Pricing Period" shall mean the five (5) consecutive Trading Days after the Advance Notice Date.
Section 1.22. "Principal Market" shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock
Exchange, the OTC Bulletin Board or the New York Stock Exchange, whichever is at the time the principal trading exchange or market
for the Common Stock.
Section 1.23. "Purchase Price" shall be set at ninety five percent (95%) of the Market Price during the Pricing Period.
Section 1.24. "Registrable Securities" shall mean the shares of Common Stock to be issued hereunder (i) in respect of
which the Registration Statement has not been declared effective by the SEC, (ii) which have not been sold under circumstances
meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act ("Rule 144")
or (iii) which have not been otherwise transferred to a holder who may trade such shares without restriction under the Securities
Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive
legend.
Section 1.25. "Registration Rights Agreement" shall mean the Registration Rights Agreement dated the date hereof,
regarding the filing of the Registration Statement for the resale of the Registrable Securities, entered into between the Company and
the Investor.
Section 1.26. "Registration Statement" shall mean a registration statement on Form S-1 or SB-2 (if use of such form is
then available to the Company pursuant to the rules of the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate, and which form shall be available for the resale of
the Registrable Securities to be registered thereunder in accordance with the provisions of this Agreement and the Registration
Rights Agreement, and in accordance with the intended method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.
Section 1.27. "Regulation D" shall have the meaning set forth in the recitals of this Agreement.
Section 1.28. "SEC" shall mean the Securities and Exchange Commission.
Section 1.29. "Securities Act" shall have the meaning set forth in the recitals of this Agreement.
Section 1.30. "SEC Documents" shall mean Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current Reports
on Form 8-K and Proxy Statements of the Company as supplemented to the date hereof, filed by the Company for a period of at least
twelve (12) months immediately preceding the date hereof or the Advance Date, as the case may be, until such time as the Company no
longer has an obligation to maintain the effectiveness of a Registration Statement as set forth in the Registration Rights Agreement.
Section 1.31. "Trading Day" shall mean any day during which the New York Stock Exchange shall be open for business.
Section 1.32. "VWAP" shall mean the volume weighted average price of the Company's Common Stock as quoted by Bloomberg,
LP.
ARTICLE II.
Advances
Section 2.1. Investments.
(a) Advances. Upon the terms and conditions set forth herein (including, without limitation, the provisions of
Article VII hereof), on any Advance Notice Date the Company may request an Advance by the Investor by the delivery of an Advance
Notice. The number of shares of Common Stock that the Investor shall receive for each Advance shall be determined by dividing the
amount of the Advance by the Purchase Price. No fractional shares shall be issued. Fractional shares shall be rounded to the next
higher whole number of shares. The aggregate maximum amount of all Advances that the Investor shall be obligated to make under this
Agreement shall not exceed the Commitment Amount.
Section 2.2. Mechanics.
(a) Advance Notice. At any time during the Commitment Period, the Company may deliver an Advance Notice to the
Investor, subject to the conditions set forth in Section 7.2; provided, however, the amount for each Advance as designated by the
Company in the applicable Advance Notice, shall not be more than the Maximum Advance Amount. The aggregate amount of the Advances
pursuant to this Agreement shall not exceed the Commitment Amount. The Company acknowledges that the Investor may sell shares of the
Company's Common Stock corresponding with a particular Advance Notice on the day the Advance Notice is received by the Investor.
There shall be a minimum of five (5) Trading Days between each Advance Notice Date.
(b) Date of Delivery of Advance Notice. An Advance Notice shall be deemed delivered on (i) the Trading Day it
is received by facsimile or otherwise by the Investor if such notice is received prior to 12:00 noon Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by facsimile or otherwise after 12:00 noon 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.
Section 2.3. Closings. On each Advance Date, which shall be the first (1st) Trading Day after expiration of the
applicable Pricing Period for each Advance, (i) the Company shall deliver to Xxxxx Xxxxxxxx, Esq. (the "Escrow Agent") shares of the
Company's Common Stock, representing the amount of the Advance by the Investor pursuant to Section 2.1 herein, registered in the name
of the Investor which shall be delivered to the Investor, or otherwise in accordance with the Escrow Agreement and (ii) the Investor
shall deliver to Escrow Agent the amount of the Advance specified in the Advance Notice by wire transfer of immediately available
funds which shall be delivered to the Company, or otherwise in accordance with the Escrow Agreement. In addition, on or prior to the
Advance Date, each of the Company and the Investor shall deliver to the other through the Investor's counsel, 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. Payment of funds to the Company and delivery of the Company's Common Stock to the Investor shall
occur in accordance with the conditions set forth above and those contained in the Escrow Agreement; provided, however, that to the
extent the Company has not paid the fees, expenses, and disbursements of the Investor, the Investor's counsel, or the Company's
counsel in accordance with Section 12.4, the amount of such fees, expenses, and disbursements may be deducted by the Investor (and
shall be paid to the relevant party) from the amount of the Advance with no reduction in the amount of shares of the Company's Common
Stock to be delivered on such Advance Date.
Section 2.4. Termination of Investment. The obligation of the Investor to make an Advance to the Company pursuant to
this Agreement shall terminate permanently (including with respect to an Advance Date that has not yet occurred) in the event that
(i) there shall occur any stop order or suspension of the effectiveness of the Registration Statement for an aggregate of fifty (50)
Trading Days, other than due to the acts of the Investor, during the Commitment Period, and (ii) the Company shall at any time fail
materially to comply with the requirements of Article VI and such failure is not cured within thirty (30) days after receipt of
written notice from the Investor, provided, however, that this termination provision shall not apply to any period commencing upon
the filing of a post-effective amendment to such Registration Statement and ending upon the date on which such post effective
amendment is declared effective by the SEC.
Section 2.5. Agreement to Advance Funds.The Investor agrees to advance the amount specified in the Advance Notice to the
Company after the completion of each of the following conditions and the other conditions set forth in this Agreement:
(a) the execution and delivery by the Company, and the Investor, of this Agreement and the Exhibits hereto;
(b) the Escrow Agent shall have received the shares of Common Stock applicable to the Advance in accordance
with Section 2.3. Such shares shall be free of restrictive legends.
(c) the Company's Registration Statement with respect to the resale of the Registrable Securities in accordance
with the terms of the Registration Rights Agreement shall have been declared effective by the SEC;
(d) the Company shall have obtained all material permits and qualifications required by any applicable state
for the offer and sale of the Registrable Securities, or shall have the availability of exemptions therefrom. The sale and issuance
of the Registrable Securities shall be legally permitted by all laws and regulations to which the Company is subject;
(e) the Company shall have filed with the Commission in a timely manner all reports, notices and other
documents required of a "reporting company" under the Exchange Act and applicable Commission regulations;
(f) the fees as set forth in Section 12.4 below shall have been paid or can be withheld as provided in Section
2.3; and
(g) the conditions set forth in Section 7.2 shall have been satisfied.
(h) the Company shall have provided to the Investor an acknowledgement, from White & Associates as to its
ability to provide all consents required in order to file a registration statement in connection with this transaction;
(i) The Company's transfer agent shall be DWAC eligible.
Section 2.6. Lock Up Period.
(i) During the Commitment Period, the Company shall not issue or sell (i) any Common Stock or
Preferred Stock without consideration or for a consideration per share less than the Bid Price on the date of issuance or (ii) issue
or sell any warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration per share less than the Bid Price on the date of issuance.
(ii) On the date hereof, the Company shall obtain from each officer and director a lock-up agreement,
as defined below, in the form annexed hereto as Schedule 2.6 agreeing to only sell in compliance with the volume limitation of Rule
144.
Section 2.7. Hardship. In the event the Investor sells shares of the Company's Common Stock after receipt of an Advance
Notice and the Company fails to perform its obligations as mandated in Section 2.3, and specifically the Company fails to deliver to
the Escrow Agent on the Advance Date the shares of Common Stock corresponding to the applicable Advance, the Company acknowledges
that the Investor shall suffer financial hardship and therefore shall be liable for any and all losses, commissions, fees, or
financial hardship caused to the Investor.
ARTICLE III.
Representations and Warranties of Investor
Investor hereby represents and warrants to, and agrees with, the Company that the following are true and as of the date
hereof and as of each Advance Date:
Section 3.1. Organization and Authorization. The Investor is duly incorporated or organized and validly existing in the
jurisdiction of its incorporation or organization and has all requisite power and authority to purchase and hold the securities
issuable hereunder. The decision to invest and the execution and delivery of this Agreement by such Investor, the performance by
such Investor of its obligations hereunder and the consummation by such Investor of the transactions contemplated hereby have been
duly authorized and requires no other proceedings on the part of the Investor. The undersigned has the right, power and authority to
execute and deliver this Agreement and all other instruments (including, without limitations, the Registration Rights Agreement), on
behalf of the Investor. This Agreement has been duly executed and delivered by the Investor and, assuming the execution and delivery
hereof and acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.
Section 3.2. Evaluation of Risks. The Investor has such knowledge and experience in financial tax and business matters
as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and
of protecting its interests in connection with this transaction. It recognizes that its investment in the Company involves a high
degree of risk.
Section 3.3. No Legal Advice From the Company. The Investor acknowledges that it had the opportunity to review this
Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. The
Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.
Section 3.4. Investment Purpose. The securities are being purchased by the Investor for its own account, for investment
and without any view to the distribution, assignment or resale to others or fractionalization in whole or in part. The Investor
agrees not to assign or in any way transfer the Investor's rights to the securities or any interest therein and acknowledges that the
Company will not recognize any purported assignment or transfer except in accordance with applicable Federal and state securities
laws. No other person has or will have a direct or indirect beneficial interest in the securities. The Investor agrees not to sell,
hypothecate or otherwise transfer the Investor's securities unless the securities are registered under Federal and applicable state
securities laws or unless, in the opinion of counsel satisfactory to the Company, an exemption from such laws is available.
Section 3.5. Accredited Investor. The Investor is an "Accredited Investor" as that term is defined in Rule 501(a)(3) of
Regulation D of the Securities Act.
Section 3.6. Information. The Investor and its advisors (and its counsel), if any, have been furnished with all
materials relating to the business, finances and operations of the Company and information it deemed material to making an informed
investment decision. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company and
its management. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors, if
any, or its representatives shall modify, amend or affect the Investor's right to rely on the Company's representations and
warranties contained in this Agreement. The Investor understands that its investment involves a high degree of risk. The Investor
is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and
enables such Investor to obtain information from the Company in order to evaluate the merits and risks of this investment. The
Investor has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision
with respect to this transaction.
Section 3.7. Receipt of Documents. The Investor and its counsel have received and read in their entirety: (i) this
Agreement and the Exhibits annexed hereto; (ii) all due diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; (iii) the Company's Form 10-KSB for the year ended December 31, 2003
and Form 10-QSB for the period ended September 30, 2004; and (iv) answers to all questions the Investor submitted to the Company
regarding an investment in the Company; and the Investor has relied on the information contained therein and has not been furnished
any other documents, literature, memorandum or prospectus.
Section 3.8. Registration Rights Agreement and Escrow Agreement. The parties have entered into the Registration Rights
Agreement and the Escrow Agreement, each dated the date hereof.
Section 3.9. No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of the shares of Common Stock offered hereby.
Section 3.10. Not an Affiliate. The Investor is not an officer, director or a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under common control with the Company or any "Affiliate" of
the Company (as that term is defined in Rule 405 of the Securities Act).
Section 3.11. Trading Activities. The Investor's trading activities with respect to the Company's Common Stock shall be
in compliance with all applicable federal and state securities laws, rules and regulations and the rules and regulations of the
Principal Market on which the Company's Common Stock is listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company, the Investor agrees that it shall not, and that it will cause its affiliates not to,
engage in any short sales of or hedging transactions with respect to the Common Stock, provided that the Company acknowledges and
agrees that upon receipt of an Advance Notice the Investor is permitted to sell the shares to be issued to the Investor pursuant to
the Advance Notice during the applicable Pricing Period.
ARTICLE IV.
Representations and Warranties of the Company
Except as stated below, on the disclosure schedules attached hereto or in the SEC Documents (as defined herein), the Company
hereby represents and warrants to, and covenants with, the Investor that the following are true and correct as of the date hereof:
Section 4.1. Organization and Qualification. The Company is duly incorporated or organized and validly existing in the
jurisdiction of its incorporation or organization and has all requisite power and authority corporate power to own its properties and
to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Registration Rights Agreement, the Escrow Agreement, the Placement
Agent Agreement and any related agreements, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the Placement Agent Agreement and any related agreements by the
Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders,
(iii) this Agreement, the Registration Rights Agreement, the Escrow Agreement, the Placement Agent Agreement and any related
agreements have been duly executed and delivered by the Company, (iv) this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent Agreement and assuming the execution and delivery thereof and acceptance by the Investor and any
related agreements constitute the valid and binding obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
Section 4.3. Capitalization. As of the date hereof, the authorized capital stock of the Company consists of 500,000,000
shares of Common Stock, par value $0.001 per share and 20,000,000 shares of Preferred Stock, no par value, of which 29,638,084 shares
of Common Stock and no shares of Preferred Stock were issued and outstanding. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. Except as disclosed in the SEC Documents, no shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. Except as disclosed
in the SEC Documents, as of the date hereof, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt
securities (iii) there are no outstanding registration statements other than on Form S-8 and (iv) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under
the Securities Act (except pursuant to the Registration Rights Agreement). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the
transactions described herein or therein. The Company has furnished to the Investor true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "By-laws"), and the terms of all securities convertible into or exercisable for Common
Stock and the material rights of the holders thereof in respect thereto.
Section 4.4. No Conflict. The execution, delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby will not (i) result in a violation of the Certificate of Incorporation, any
certificate of designations of any outstanding series of preferred stock of the Company or By-laws or (ii) conflict with or
constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any
of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and regulations of the Principal Market on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which any material property or asset of the Company or any of its
subsidiaries is bound or affected and which would cause a Material Adverse Effect. Except as disclosed in the SEC Documents, neither
the Company nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted in violation of any material law, ordinance, regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state
securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by
this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company and its subsidiaries are unaware of any fact or circumstance which might give
rise to any of the foregoing.
Section 4.5. SEC Documents; Financial Statements. Since January 1, 2003, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC under of the Exchange Act. The Company has delivered
to the Investor or its representatives, or made available through the SEC's website at xxxx://xxx.xxx.xxx, true and complete copies
of the SEC Documents. As of their respective dates, the financial statements of the Company disclosed in the SEC Documents (the
"Financial Statements") complied as to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and, fairly present in all material respects the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Investor
which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Section 4.6. 10b-5. The SEC Documents do not include any untrue statements of material fact, nor do they omit to state
any material fact required to be stated therein necessary to make the statements made, in light of the circumstances under which they
were made, not misleading.
Section 4.7. No Default. Except as disclosed in the SEC Documents, the Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it is or its property is bound and neither the execution, nor the
delivery by the Company, nor the performance by the Company of its obligations under this Agreement or any of the exhibits or
attachments hereto will conflict with or result in the breach or violation of any of the terms or provisions of, or constitute a
default or result in the creation or imposition of any lien or charge on any assets or properties of the Company under its
Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other material agreement applicable to the
Company or instrument to which the Company is a party or by which it is bound, or any statute, or any decree, judgment, order, rules
or regulation of any court or governmental agency or body having jurisdiction over the Company or its properties, in each case which
default, lien or charge is likely to cause a Material Adverse Effect on the Company's business or financial condition.
Section 4.8. Absence of Events of Default. Except for matters described in the SEC Documents and/or this Agreement, no
Event of Default, as defined in the respective agreement to which the Company is a party, and no event which, with the giving of
notice or the passage of time or both, would become an Event of Default (as so defined), has occurred and is continuing, which would
have a Material Adverse Effect on the Company's business, properties, prospects, financial condition or results of operations.
Section 4.9. Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses
to use all material trademarks, trade names, service marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. The Company and its subsidiaries do not have any knowledge of any infringement by the
Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secret or other similar rights of others, and, to the knowledge of the Company,
there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
Section 4.10. Employee Relations. Neither the Company nor any of its subsidiaries is involved in any labor dispute nor,
to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees
are good.
Section 4.11. Environmental Laws. The Company and its subsidiaries are (i) in compliance with any and all applicable
material foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit, license or approval.
Section 4.12. Title. Except as set forth in the SEC Documents, the Company has good and marketable title to its
properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest other than such as are not material to the business of the Company. Any real property and facilities held under lease by
the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Section 4.13. Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in
the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been refused
any insurance coverage sought or applied for and neither the Company nor any such subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole.
Section 4.14. Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses,
and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
Section 4.15. Internal Accounting Controls. The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
Section 4.16. No Material Adverse Breaches, etc. Except as set forth in the SEC Documents, neither the Company nor any
of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or is expected in the future to have a Material Adverse Effect on the
business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries. Except
as set forth in the SEC Documents, neither the Company nor any of its subsidiaries is in breach of any contract or agreement which
breach, in the judgment of the Company's officers, has or is expected to have a Material Adverse Effect on the business, properties,
operations, financial condition, results of operations or prospects of the Company or its subsidiaries.
Section 4.17. Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company's subsidiaries, wherein an unfavorable decision, ruling or
finding would (i) have a Material Adverse Effect on the transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC Documents, have a Material Adverse Effect on the
business, operations, properties, financial condition or results of operation of the Company and its subsidiaries taken as a whole.
Section 4.18. Subsidiaries. Except as disclosed in the SEC Documents, the Company does not presently own or control,
directly or indirectly, any interest in any other corporation, partnership, association or other business entity.
Section 4.19. Tax Status. Except as disclosed in the SEC Documents, the Company and each of its subsidiaries has made or
filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.
Section 4.20. Certain Transactions. Except as set forth in the SEC Documents none of the officers, directors, or
employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner.
Section 4.21. Fees and Rights of First Refusal. The Company is not obligated to offer the securities offered hereunder
on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of
the Company, underwriters, brokers, agents or other third parties.
Section 4.22. Use of Proceeds. The Company shall use the net proceeds from this offering for general corporate purposes,
including, without limitation, the payment of loan incurred by the Company. However, in no event shall the Company use the net
proceeds from this offering, for the payment (or loaned to any such person for the payment) of any judgment, or other liability,
incurred by any executive officer, officer, director or employee of the Company, except for any liability owed to such person for
services rendered, or if any judgment or other liability is incurred by such person originating from services rendered to the
Company, or the Company has indemnified such person from liability.
Section 4.23. Further Representation and Warranties of the Company. For so long as any securities issuable hereunder
held by the Investor remain outstanding, the Company acknowledges, represents, warrants and agrees that it will maintain the listing
of its Common Stock on the Principal Market.
Section 4.24. Opinion of Counsel. Investor shall receive an opinion letter from counsel to the Company on the date
hereof.
Section 4.25. Opinion of Counsel. The Company will obtain for the Investor, at the Company's expense, any and all
opinions of counsel which may be reasonably required in order to sell the securities issuable hereunder without restriction.
Section 4.26. Dilution. The Company is aware and acknowledges that issuance of shares of the Company's Common Stock
could cause dilution to existing shareholders and could significantly increase the outstanding number of shares of Common Stock.
ARTICLE V.
Indemnification
The Investor and the Company represent to the other the following with respect to itself:
Section 5.1. Indemnification.
(a) In consideration of the Investor's execution and delivery of this Agreement, and in addition to all of the
Company's other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor, and
all of its officers, directors, partners, employees and agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Investor Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by the Investor Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Registration
Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made against such Investor Indemnitee not arising out of any action or inaction of an Investor Indemnitee, and
arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Investor Indemnitees. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this Agreement, and in addition to all of the
Investor's other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the Company and
all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in connection with
the transactions contemplated by this Agreement) (collectively, the "Company Indemnitees") from and against any and all Indemnified
Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Investor in this Agreement, the Registration Rights
Agreement, or any instrument or document contemplated hereby or thereby executed by the Investor, (b) any breach of any covenant,
agreement or obligation of the Investor(s) contained in this Agreement, the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the Investor, or (c) any cause of action, suit or claim brought or
made against such Company Indemnitee based on misrepresentations or due to a breach by the Investor and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed
pursuant hereto by any of the Company Indemnitees. To the extent that the foregoing undertaking by the Investor may be unenforceable
for any reason, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
(c) The obligations of the parties to indemnify or make contribution under this Section 5.1 shall
survive termination.
ARTICLE VI.
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the Registration Rights Agreement to remain in full force and
effect and the Company shall comply in all material respects with the terms thereof.
Section 6.2. Listing of Common Stock. The Company shall maintain the Common Stock's authorization for quotation on the
National Association of Securities Dealers Inc.'s Over the Counter Bulletin Board.
Section 6.3. Exchange Act Registration. The Company will cause its Common Stock to continue to be registered under
Section 12(g) of the Exchange Act, will file in a timely manner all reports and other documents required of it as a reporting company
under the Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said
Exchange Act.
Section 6.4. Transfer Agent Instructions. Upon effectiveness of the Registration Statement the Company shall deliver
instructions to its transfer agent to issue shares of Common Stock to the Investor free of restrictive legends on or before each
Advance Date
Section 6.5. Corporate Existence. The Company will take all steps necessary to preserve and continue the corporate
existence of the Company.
Section 6.6. Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance. The Company will
immediately notify the Investor upon its becoming aware of the occurrence of any of the following events in respect of a registration
statement or related prospectus relating to an offering of Registrable Securities: (i) receipt of any request for additional
information by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the registration statement or related prospectus; (ii) the issuance by the SEC or any
other Federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or
related prospectus of any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and the Company will
promptly make available to the Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to
the Investor any Advance Notice during the continuation of any of the foregoing events.
Section 6.7. Restriction on Sale of Capital Stock. During the Commitment Period, the Company shall not issue or sell
(i) any Common Stock or Preferred Stock without consideration or for a consideration per share less than the bid price of the Common
Stock determined immediately prior to its issuance, (ii) issue or sell any Preferred Stock warrant, option, right, contract, call, or
other security or instrument granting the holder thereof the right to acquire Common Stock without consideration or for a
consideration per share less than such Common Stock's Bid Price determined immediately prior to its issuance, or (iii) file any
registration statement on Form S-8.
Section 6.8. Consolidation; Merger. The Company shall not, at any time after the date hereof, effect any merger or
consolidation of the Company with or into, or a transfer of all or substantially all the assets of the Company to another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as the Investor is entitled to receive pursuant to this
Agreement.
Section 6.9. Issuance of the Company's Common Stock. The sale of the shares of Common Stock shall be made in accordance
with the provisions and requirements of Regulation D and any applicable state securities law.
ARTICLE VII.
Conditions for Advance and Conditions to Closing
Section 7.1. Conditions Precedent to the Obligations of the Company. The obligation hereunder of the Company to issue
and sell the shares of Common Stock to the Investor incident to each Closing is subject to the satisfaction, or waiver by the
Company, at or before each such Closing, of each of the conditions set forth below.
(a) Accuracy of the Investor's Representations and Warranties. The representations and warranties of the
Investor shall be true and correct in all material respects.
(b) Performance by the Investor. The Investor shall have performed, satisfied and complied in all respects
with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed,
satisfied or complied with by the Investor at or prior to such Closing.
Section 7.2. Conditions Precedent to the Right of the Company to Deliver an Advance Notice and the Obligation of the
Investor to Purchase Shares of Common Stock. The right of the Company to deliver an Advance Notice and the obligation of the
Investor hereunder to acquire and pay for shares of the Company's Common Stock incident to a Closing is subject to the fulfillment by
the Company, on (i) the date of delivery of such Advance Notice and (ii) the applicable Advance Date (each a "Condition Satisfaction
Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall have filed with the SEC a Registration
Statement with respect to the resale of the Registrable Securities in accordance with the terms of the Registration Rights
Agreement. As set forth in the Registration Rights Agreement, the Registration Statement shall have previously become effective and
shall remain effective on each Condition Satisfaction Date and (i) neither the Company nor the Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and the Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action), and (ii) no other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist. The Registration Statement must have been declared effective by the SEC
prior to the first Advance Notice Date.
(b) Authority. The Company shall have obtained all permits and qualifications required by any applicable state
in accordance with the Registration Rights Agreement for the offer and sale of the shares of Common Stock, or shall have the
availability of exemptions therefrom. The sale and issuance of the shares of Common Stock shall be legally permitted by all laws and
regulations to which the Company is subject.
(c) Fundamental Changes. There shall not exist any fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post-effective amendment to the Registration Statement.
(d) Performance by the Company. The Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by this Agreement (including, without limitation, the conditions
specified in Section 2.5 hereof) and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly
and adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may
have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock. The trading of the Common Stock is not suspended
by the SEC or the Principal Market (if the Common Stock is traded on a Principal Market). The issuance of shares of Common Stock
with respect to the applicable Closing, if any, shall not violate the shareholder approval requirements of the Principal Market (if
the Common Stock is traded on a Principal Market). The Company shall not have received any notice threatening the continued listing
of the Common Stock on the Principal Market (if the Common Stock is traded on a Principal Market).
(g) Maximum Advance Amount. The amount of an Advance requested by the Company shall not exceed the Maximum
Advance Amount. In addition, in no event shall the number of shares issuable to the Investor pursuant to an Advance cause the
aggregate number of shares of Common Stock beneficially owned by the Investor and its affiliates to exceed nine and 9/10 percent
(9.9%) of the then outstanding Common Stock of the Company. For purposes of this section, beneficial ownership shall be calculated
in accordance with Section 13(d) of the Exchange Act.
(h) No Knowledge. The Company has no knowledge of any event which would be more likely than not to have the
effect of causing such Registration Statement to be suspended or otherwise ineffective.
(i) Other. On each Condition Satisfaction Date, the Investor shall have received the certificate executed by
an officer of the Company in the form of Exhibit A attached hereto.
ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1. Due Diligence Review. Prior to the filing of the Registration Statement the Company shall make available
for inspection and review by the Investor, its advisors and representatives, and any underwriter participating in any disposition of
the Registrable Securities on behalf of the Investor pursuant to the Registration Statement, any such registration statement or
amendment or supplement thereto or any blue sky, NASD or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose
of such review, and cause the Company's officers, directors and employees to supply all such information reasonably requested by the
Investor or any such representative, advisor or underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to
time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to the Investor, its advisors, or its
representatives, unless prior to disclosure of such information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality agreement in form reasonably satisfactory to the Company and
the Investor.
(b) Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors
or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase
stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of
the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the
specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the
prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.2 shall be construed to mean that such persons or entities other than
the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent
any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or
entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE IX.
Choice of Law/Jurisdiction
Section 9.1. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the
State of New Jersey without regard to the principles of conflict of laws. The parties further agree that any action between them
shall be heard in Xxxxxx County, New Jersey, and expressly consent to the jurisdiction and venue of the Superior Court of New Jersey,
sitting in Xxxxxx County, New Jersey and the United States District Court of New Jersey, sitting in Newark, New Jersey, for the
adjudication of any civil action asserted pursuant to this paragraph.
ARTICLE X.
Assignment; Termination
Section 10.1. Assignment. Neither this Agreement nor any rights of the Company hereunder may be assigned to any other
Person.
Section 10.2. Termination. The obligations of the Investor to make Advances under Article II hereof shall terminate
twenty-four (24) months after the Effective Date. Notwithstanding the foregoing, the Company may terminate this Agreement upon
thirty (30) days written notice to the Investor provided that (i) there are no Advances outstanding, and (ii) The Company has paid
all amounts owed pursuant to the Convertible Debentures issued to the Buyers, as set forth in the Securities Purchase Agreement dated
the date hereof between the Company and the Investor. Any termination of this Agreement pursuant to this Section 10.2 (b) shall not
terminate the Registration Rights Agreement unless the Investor has disposed of all the Investor Shares (as defined below) and all
shares issued to the Investor pursuant to Advances, or all such shares are eligible for resale pursuant to Rule 144(k).
ARTICLE XI.
Notices
Section 11.1. Notices. Any notices, consents, waivers, or other communications required or permitted to be given under
the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile, provided a copy is mailed by U.S. certified mail, return receipt requested; (iii) three
(3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company, to: Americana Publishing, Inc.
000 Xxx Xxxxx XX - Xxxxx 000X
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Investor(s): Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy to: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party shall provide five (5) days' prior written notice to the other party of any change in address or facsimile number.
ARTICLE XII.
Miscellaneous
Section 12.1. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be
considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to
the other party. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days
of the execution and delivery hereof, though failure to deliver such copies shall not affect the validity of this Agreement.
Section 12.2. Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between
the Investor, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged with enforcement.
Section 12.3. Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the
trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg,
L.P. or any successor thereto. The written mutual consent of the Investor and the Company shall be required to employ any other
reporting entity.
Section 12.4. Fees and Expenses. The Company hereby agrees to pay the following fees:
(a) Structuring Fees. Each of the parties shall pay its own fees and expenses (including the fees of any
attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions
contemplated hereby, except that the Company will pay a structuring fee of Fifteen Thousand Dollars ($15,000) to Yorkville Advisors
Management, LLC, which shall be paid on the date hereof. Subsequently on each advance date, the Company will pay Yorkville Advisors
Management, LLC a structuring fee of Five Hundred Dollars ($500) and any outstanding fees of Xxxxxxxxxxx & Xxxxxxxx, LLP directly out
the proceeds of any Advances hereunder.
(b) Commitment Fees.
(i) On each Advance Date the Company shall pay to the Investor, directly from the gross proceeds held
in escrow, an amount equal to ten percent (10%) of the amount of each Advance. The Company hereby agrees that if such payment, as is
described above, is not made by the Company on the Advance Date, such payment will be made at the direction of the Investor as
outlined and mandated by Section 2.3 of this Agreement.
(ii) Upon the execution of this Agreement, the Company shall issue to the Investor One Million Four
Hundred Seventy Eight Thousand Nine Hundred Forty (1,478,940) shares of the Company's Common Stock (the "Investor's Shares").
(iii) Warrants. Upon the execution of this Agreement, the Company shall issue to the Investor a
warrant to purchase 13,521,060 shares of the Company's Common Stock (the "Cornell Warrant Shares") for a period of three (3) years at
an exercise price of $0.001 per share
(iv) Fully Earned. The Investor's Shares and the Cornell Warrant Shares shall be deemed fully earned
as of the date hereof.
(v) Registration Rights. The Investor's Shares and the Warrant Shares will have "piggy-back"
registration rights.
Section 12.5. Brokerage. Each of the parties hereto represents that it has had no dealings in connection with this
transaction with any finder or broker who will demand payment of any fee or commission from the other party. The Company on the one
hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on account of services purported to have been rendered on
behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby.
Section 12.6. Confidentiality. If for any reason the transactions contemplated by this Agreement are not consummated,
each of the parties hereto shall keep confidential any information obtained from any other party (except information publicly
available or in such party's domain prior to the date hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other written information without retaining copies thereof,
previously furnished by it as a result of this Agreement or in connection herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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:
AMERICANA PUBLISHING, INC.
By:
Name: Xxxxxx Xxxxxx, Xx.
Title: CEO
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By:
Name: Xxxx Xxxxxx
Title: Portfolio Manager
EXHIBIT A
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
AMERICANA PUBLISHING, INC.
The undersigned, Xxxxxx Xxxxxx, Xx. hereby certifies, with respect to the sale of shares of Common Stock of AMERICANA
PUBLISHING, INC. (the "Company"), issuable in connection with this Advance Notice and Compliance Certificate dated
___________________ (the "Notice"), delivered pursuant to the Standby Equity Distribution Agreement (the "Agreement"), as follows:
1. The undersigned is the duly elected CEO 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 on or
prior to the Advance Date related to the Notice and has complied in all material respects with all obligations and conditions
contained in the Agreement.
4. The undersigned hereby represents, warrants and covenants that it has made all filings ("SEC Filings") required to
be made by it pursuant to applicable securities laws (including, without limitation, all filings required under the Securities
Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K, etc. All SEC Filings and other public disclosures made by the Company,
including, without limitation, all press releases, analysts meetings and calls, etc. (collectively, the "Public Disclosures"), have
been reviewed and approved for release by the Company's attorneys and, if containing financial information, the Company's independent
certified public accountants. None of the Company's Public Disclosures contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
5. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of _________________.
AMERICANA PUBLISHING, INC.
By:
Name: Xxxxxx Xxxxxx, Xx.
Title: CEO
SCHEDULE 2.6
AMERICANA PUBLISHING, INC.
The undersigned hereby agrees that for a period commencing on the date hereof and expiring on the termination of the
Agreement dated March __, 2005 between Americana Publishing, Inc., (the "Company"), and Cornell Capital Partners, LP, (the
"Investor") (the "Lock-up Period"), he, she or it will not, directly or indirectly, without the prior written consent of the Investor,
issue, offer, agree or offer to sell, sell, grant an option for the purchase or sale of, transfer, pledge, assign, hypothecate,
distribute or otherwise encumber or dispose of except pursuant to Rule 144 of the General Rules and Regulations under the Securities
Act of 1933, any securities of the Company, including common stock or options, rights, warrants or other securities underlying,
convertible into, exchangeable or exercisable for or evidencing any right to purchase or subscribe for any common stock (whether or
not beneficially owned by the undersigned), or any beneficial interest therein (collectively, the "Securities").
In order to enable the aforesaid covenants to be enforced, the undersigned hereby consents to the placing of legends and/or
stop-transfer orders with the transfer agent of the Company's securities with respect to any of the Securities registered in the name
of the undersigned or beneficially owned by the undersigned, and the undersigned hereby confirms the undersigned's investment in the
Company.
Dated: _______________, 2005
Signature
Name: ____________________________________
Address:
City, State, Zip Code:
Print Social Security Number
or Taxpayer I.D. Number
