STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the 13th day of May, 2005 (the
"Agreement") between CORNELL CAPITAL PARTNERS, LP, a
Delaware limited partnership (the "Investor"), and EYI INDUSTRIES,
INC., a corporation organized and existing under the laws of the
State of Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and
sell to the Investor, from time to time as provided herein, and
the Investor shall purchase from the Company up to Ten Million
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 ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq. Escrow Account is in receipt of the funds from the
Investor and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq., as the Investor's Counsel, is in
possession of free trading shares from the Company and therefore an
Advance by the Investor to the Company can be made and ▇▇▇▇▇
▇▇▇▇▇▇▇▇, 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 six
(6) 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, 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 eight
percent (98%) 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 six (6) 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.
(c) Pre-Closing Share Credit. Within two (2) business
days after the Advance Notice Date, the Company shall credit shares
of the Company's Common Stock to the Investor's counsel's balance
account with The Depository Trust Company through its Deposit
Withdrawal At Custodian system, in an amount equal to the amount
of the requested Advance divided by the closing Bid Price of the
Company's Common Stock as of the Advance Notice Date multiplied
by one point one (1.1). Any adjustments to the number of shares
to be delivered to the Investor at the Closing as a result of
fluctuations in the closing Bid Price of the Company's Common
Stock shall be made as of the date of the Closing. Any excess
shares shall be credited to the next Advance. In no event
shall the number of shares issuable to the Investor pursuant to an
Advance cause the Investor to own in excess of nine and 9/10
percent (9.9%) of the then outstanding Common Stock of the Company.
(d) Hardship. In the event the Investor sells the
Company's Common Stock pursuant to subsection (c) above and the
Company fails to perform its obligations as mandated in Section
2.5 and 2.2 (c), and specifically fails to provide the Investor
with the shares of Common Stock for 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.
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 the Investor's Counsel, as defined pursuant
to the Escrow Agreement, 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. (the "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
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
LLP 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.
(a) 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:
(i) the execution and delivery by the
Company, and the Investor, of this Agreement and the Exhibits hereto;
(ii) Investor's Counsel shall have received the
shares of Common Stock applicable to the Advance in accordance with
Section 2.2(c) hereof;
(iii) 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;
(iv) 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;
(v) 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;
(vi) 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
(vii) the conditions set forth in Section 7.2 shall
have been satisfied.
(viii) the Company shall have provided to the
Investor an acknowledgement, from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ as to its ability
to provide all consents required in order to file a registration statement
in connection with this transaction;
(ix) 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.
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 year ended December 31, 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. 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). Neither
the Investor nor its Affiliates has an open short position in the
Common Stock of the Company, and the Investor agrees that it will 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 will sell the Shares to be issued to the
Investor pursuant to the Advance Notice, even if the Shares have not
been delivered to the Investor.
Section 3.10. 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 and, except as set forth below, the
Investor shall not and will cause its affiliates not to engage in
any short sale as defined in any applicable SEC or National Association
of Securities Dealers rules on any hedging transactions with respect
to the Common Stock. The Investor shall be entitled to sell Common
Stock 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 300,000,000
shares of Common Stock, par value $0.001 per share and 10,000,000
shares of Preferred Stock of which 165,520,535 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 Articles of Incorporation, as
amended and as in effect on the date hereof (the "Articles of
Incorporation"), and the Company's By-laws, as in effect on
the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
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
▇▇▇▇://▇▇▇.▇▇▇.▇▇▇, 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 ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service ▇▇▇▇ registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is
no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its
subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service ▇▇▇▇
registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
Section 4.10. Employee Relations. Neither the Company nor
any of its subsidiaries is involved in any labor dispute nor, to the
knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company's or its subsidiaries' employees is a
member of a union and the Company and its subsidiaries believe that
their relations with their employees are good.
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 represents that the
net proceeds from this offering will be used for general corporate
purposes. However, in no event shall the net proceeds from this offering
be used by the Company 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. Not later than
two (2) business days after each Advance Notice Date and prior to each
Closing and the effectiveness of the Registration Statement and resale of
the Common Stock by the Investor, the Company will deliver instructions
to its transfer agent to issue shares of Common Stock free of restrictive
legends.
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. Expectations Regarding Advance Notices. Within
ten (10) days after the commencement of each calendar quarter occurring
subsequent to the commencement of the Commitment Period, the
Company must notify the Investor, in writing, as to its reasonable
expectations as to the dollar amount it intends to raise during such
calendar quarter, if any, through the issuance of Advance Notices. Such
notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices. The
failure by the Company to comply with this provision can be cured by the
Company's notifying the Investor, in writing, at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.8. 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 6.9. 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 6.10. 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 Investor to own
in excess of nine and 9/10 percent (9.9%) of the then outstanding
Common Stock of the Company.
(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.
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
▇▇▇▇▇▇ County, New Jersey, and expressly consent to the jurisdiction
and venue of the Superior Court of New Jersey, sitting in ▇▇▇▇▇▇
County, New Jersey and the United States District Court of New Jersey,
sitting in Newark, New Jersey, for the adjudication of any civil action
asserted pursuant to this paragraph.
ARTICLE X.
Assignment; Termination
Section 10.1. Assignment. Neither this Agreement nor any
rights of the Company hereunder may be assigned to any other Person.
Section 10.2. Termination. The obligations of the Investor to
make Advances under Article II hereof shall terminate twenty-
four (24) months after the Effective Date.
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:
EYI Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - ▇▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy
to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ LLP
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▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the
Investor(s):
Cornell Capital Partners, LP
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▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a
Copy to:
Cornell Capital Partners, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number.
ARTICLE XII.
Miscellaneous
Section 12.1. Counterparts. This Agreement may be executed in
two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts
have been signed by each party and delivered to the other party. In the
event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party
within five (5) days of the execution and delivery hereof, though failure
to deliver such copies shall not affect the validity of this Agreement.
Section 12.2. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the
Investor, the Company, their affiliates and persons acting on their behalf
with respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the 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 and Legal 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. 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 ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 five percent (5%) of the amount of each Advance. The
Company hereby agrees that if such payment, as is described above, is
not made by the Company on the Advance Date, such payment will be
made at the direction of the Investor as outlined and mandated by Section
2.3 of this Agreement.
(ii) The Company and the Investor hereby
agree and acknowledge that the Company previously issued the Investor
One Million Two Hundred Sixty-Six Thousand Five Hundred and
Eighty-Nine (1,266,859) shares of the Company's Common Stock (the
"Investor's Shares"). In addition, the Company and the Investor hereby
acknowledge and agree that the Company previously paid the Investor a
fee of Twenty-five Thousand Dollars ($25,000.00).
(iii) Fully Earned. The Investor's Shares shall
be deemed fully earned as of the date hereof.
(iv) Registration Rights. The Investor's Shares
will have "piggy-back" registration rights.
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:
EYI INDUSTRIES, INC.
By:/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
INVESTOR:
CORNELL CAPITAL
PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Portfolio Manager
EXHIBIT A
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
EYI INDUSTRIES, INC.
The undersigned, _______________________ hereby certifies,
with respect to the sale of shares of Common Stock of EYI Industries,
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 President 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 Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
_________________.
EYI INDUSTRIES, INC.
By:
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
SCHEDULE 2.6
EYI INDUSTRIES, INC.
The undersigned hereby agrees that for a period commencing on
the date hereof and expiring on the termination of the Agreement dated
May ___, 2005 between EYI Industries, 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
Address:
City, State, Zip Code:
Print Social Security
Number
or Taxpayer I.D. Number
