SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February
___, 2007, by and among GS CARBON CORP., a Delaware corporation (the "Company"),
and the Buyers listed on Schedule I attached hereto (individually, a "Buyer" or
collectively "Buyers").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase (i) up to One Million One
Hundred Twenty Five Thousand Dollars ($1,125,000) of secured convertible
debentures in the form attached hereto as "Exhibit A" (the "Convertible
Debentures"), which shall be convertible into shares of the Company's common
stock, par value $0.001 (the "Common Stock") (as converted, the "Conversion
Shares"), and (ii) warrants substantially in the form attached hereto as
"Exhibit B" (the "Warrants"), to acquire up to that number of additional shares
of Common Stock set forth opposite such Buyer's name in column (5) of the
Schedule I (as exercised, the "Warrant Shares") all of which shall be funded
within five (5) business day following the date hereof (the "Closing"), for a
total purchase price of up to One Million One Hundred Twenty Five Thousand
Dollars ($1,125,000), (the "Purchase Price") in the respective amounts set forth
opposite each Buyer(s) name on Schedule I (the "Subscription Amount");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "Registration Rights Agreement") pursuant to which the Company
has agreed to provide certain registration rights under the Securities Act and
the rules and regulations promulgated there under, and applicable state
securities laws;
WHEREAS, the Convertible Debentures are secured by (i) a security interest
in all of the assets of the Company and of each of the Company's subsidiaries as
evidenced by the security agreement of even date herewith (the "Security
Agreement"), and (ii) certain shares of common stock owned by officers of the
Company (the "Pledged Shares") as evidenced by the pledge and escrow agreement
of even date herewith (the "Pledge Agreement," and together with the Security
Agreement collectively the "Security Documents");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions (the "Irrevocable Transfer Agent Instructions"); and
WHEREAS, the Convertible Debentures, the Conversion Shares, the Warrants,
and the Warrants Shares collectively are referred to herein as the
"Securities").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to the satisfaction (or
waiver) of the terms and conditions of this Agreement, each Buyer
agrees, severally and not jointly, to purchase at each Closing and the
Company agrees to sell and issue to each Buyer, severally and not
jointly, at each Closing, Convertible Debentures in amounts
corresponding with the Subscription Amount set forth opposite each
Buyer's name on Schedule I hereto and the Warrants to acquire up that
number of Warrant Shares as set forth opposite such Buyer's name in
column (5) on Schedule I .
(b) Closing Dates. The Closing of the purchase and sale of the Convertible
Debentures and Warrants shall take place at 10:00 a.m. Eastern
Standard Time on the fifth (5th) business day following the date
hereof, subject to notification of satisfaction of the conditions to
the Closing set forth herein and in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyer(s))
(the "Closing Date"). The Closing shall occur at the offices of
Yorkville Advisors, LLC, 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx,
Xxx Xxxxxx 00000 (or such other place as is mutually agreed to by the
Company and the Buyer(s)).
(c) Form of Payment. Subject to the satisfaction of the terms and
conditions of this Agreement, on each Closing Date, (i) the Buyers
shall deliver to the Company such aggregate proceeds for the
Convertible Debentures and Warrants to be issued and sold to such
Buyer at such Closing, minus the fees to be paid directly from the
proceeds of such Closing as set forth herein, and (ii) the Company
shall deliver to each Buyer, Convertible Debentures and Warrants which
such Buyer is purchasing at such Closing in amounts indicated opposite
such Buyer's name on Schedule I, duly executed on behalf of the
Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Securities for its own
account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such
Buyer reserves the right to dispose of the Securities at any time in
accordance with or pursuant to an effective registration statement
covering such Securities or an available exemption under the
Securities Act. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute
any of the Securities.
(b) Accredited Investor Status. Each Buyer is an "Accredited Investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Each Buyer and its advisors (and his or, its counsel), if
any, have been furnished with all materials relating to the business,
finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his
purchase of the Securities, which have been requested by such Buyer.
Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management.
Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained in
Section 3 below. Each Buyer understands that its investment in the
Securities involves a high degree of risk. Each Buyer is in a position
regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such
Buyer to obtain information from the Company in order to evaluate the
merits and risks of this investment. Each Buyer has sought such
accounting, legal and tax advice, as it has considered necessary to
make an informed investment decision with respect to its acquisition
of the Securities.
(e) No Governmental Review. Each Buyer understands that no United States
federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the
Securities, or the fairness or suitability of the investment in the
Securities, nor have such authorities passed upon or endorsed the
merits of the offering of the Securities.
(f) Transfer or Resale. Each Buyer understands that except as provided in
the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such
Buyer shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration requirements, or (C)
such Buyer provides the Company with reasonable assurances (in the
form of seller and broker representation letters) that such Securities
can be sold, assigned or transferred pursuant to Rule 144, Rule
144(k), or Rule 144A promulgated under the Securities Act, as amended
(or a successor rule thereto) (collectively, "Rule 144"), in each case
following the applicable holding period set forth therein; (ii) any
sale of the Securities made in reliance on Rule 144 may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in
which the seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any obligation
to register the Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any
exemption thereunder.
(g) Legends. Each Buyer agrees to the imprinting, so long as is required
by this Section 2(g), of a restrictive legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates evidencing the Conversion Shares or Warrant Shares shall
not contain any legend (including the legend set forth above), (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, (ii) following any sale of such Conversion Shares or Warrant
Shares pursuant to Rule 144, (iii) if such Conversion Shares or
Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements
issued by the staff of the SEC). The Company shall cause its counsel
to issue a legal opinion to the Company's transfer agent promptly
after the effective date (the "Effective Date") of a Registration
Statement if required by the Company's transfer agent to effect the
removal of the legend hereunder. If all or any portion of the
Convertible Debentures or Warrants are exercised by a Buyer that is
not an Affiliate of the Company (a "Non-Affiliated Buyer") at a time
when there is an effective registration statement to cover the resale
of the Conversion Shares or the Warrant Shares, such Conversion Shares
or Warrant Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such
legend is no longer required under this Section 2(g), it will, no
later than three (3) Trading Days following the delivery by a
Non-Affiliated Buyer to the Company or the Company's transfer agent of
a certificate representing Conversion Shares or Warrant Shares, as the
case may be, issued with a restrictive legend (such third Trading Day,
the "Legend Removal Date"), deliver or cause to be delivered to such
Non-Affiliated Buyer a certificate representing such shares that is
free from all restrictive and other legends. The Company may not make
any notation on its records or give instructions to any transfer agent
of the Company that enlarge the restrictions on transfer set forth in
this Section. Each Buyer acknowledges that the Company's agreement
hereunder to remove all legends from Conversion Shares or Warrant
Shares is not an affirmative statement or representation that such
Conversion Shares or Warrant Shares are freely tradable. Each Buyer,
severally and not jointly with the other Buyers, agrees that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 3(g) is predicated upon the
Company's reliance that the buyer will sell any Securities pursuant to
either the registration requirements of the Securities Act, including
any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration
Statement, they will be sold in compliance with the plan of
distribution set forth therein.
(h) Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance
with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(i) Receipt of Documents. Each Buyer and his or its counsel has received
and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein and the
Transaction Documents (as defined herein); (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 fiscal year ended December 31, 2005; (iv) the
Company's Form 10-QSB for the fiscal quarter ended September 30, 2006
and (v) answers to all questions each Buyer submitted to the Company
regarding an investment in the Company; and each Buyer has relied on
the information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
(j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is a
corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not
been organized for the specific purpose of purchasing the Securities
and is not prohibited from doing so.
(k) No Legal Advice From the Company. Each Buyer acknowledges, that it had
the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and
investment and tax advisors. Each Buyer is relying solely on such
counsel and advisors and not on any statements or representations of
the Company or any of its representatives or agents for legal, tax or
investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth under the corresponding section of the Disclosure
Schedules which Disclosure Schedules shall be deemed a part hereof and to
qualify any representation or warranty otherwise made herein to the extent of
such disclosure, the Company hereby makes the representations and warranties set
forth below to each Buyer:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
subsidiary free and clear of any liens, and all the issued and
outstanding shares of capital stock of each subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.
(b) Organization and Qualification. The Company and its subsidiaries are
corporations duly organized and validly existing in good standing
under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to
carry on their business as now being conducted. Each of the Company
and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or
be in good standing would not have or reasonably be expected to result
in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business or condition
(financial or otherwise) of the Company and the subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company's ability
to perform in any material respect on a timely basis its obligations
under any Transaction Document (any of (i), (ii) or (iii), a "Material
Adverse Effect") and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification..
(c) Authorization, Enforcement, Compliance with Other Instruments. (i) The
Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, the Convertible
Debentures, the Warrants, the Security Documents, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions, and
each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement
(collectively the "Transaction Documents") and to issue the Securities
in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the
Securities, the reservation for issuance and the issuance of the
Conversion Shares, and the reservation for issuance and the issuance
of the Warrant Shares, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, (iii) the
Transaction Documents have been duly executed and delivered by the
Company, (iv) the Transaction Documents constitute the valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors'
rights and remedies. The authorized officer of the Company executing
the Transaction Documents knows of no reason why the Company cannot
file the Registration Statement as required under the Registration
Rights Agreement or perform any of the Company's other obligations
under the Transaction Documents.
(d) Capitalization. The authorized capital stock of the Company consists
of 2,500,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, par value $0.001 ("Preferred Stock") of which about
150,000,000 shares of Common Stock and 100,000 shares of Preferred
Stock are issued and outstanding. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued
in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except as disclosed in Schedule 3(d): (i)
none of the Company's capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by the Company; (ii) 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, or exercisable or exchangeable for, any 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 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, or
exercisable or exchangeable for, any capital stock of the Company or
any of its subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other
agreements, documents or instruments evidencing indebtedness of the
Company or any of its subsidiaries or by which the Company or any of
its subsidiaries is or may become bound; (iv) there are no financing
statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company or any of
its subsidiaries; (v) there are no outstanding securities or
instruments of the Company or any of its subsidiaries which contain
any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or
any of its subsidiaries is or may become bound to redeem a security of
the Company or any of its subsidiaries; (vi) there are no securities
or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities; (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans
or agreements or any similar plan or agreement; and (viii) the Company
and its subsidiaries have no liabilities or obligations required to be
disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses and which,
individually or in the aggregate, do not or would not have a Material
Adverse Effect. The Company has furnished to the Buyers true, correct
and complete 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 Bylaws, as amended and as in effect
on the date hereof (the "Bylaws"), and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common
Stock and the material rights of the holders thereof in respect
thereto. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the
issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect
to the Company's capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company's
stockholders.
(e) Issuance of Securities. The issuance of the Convertible Debentures and
the Warrants is duly authorized and free from all taxes, liens and
charges with respect to the issue thereof. Upon conversion in
accordance with the terms of the Convertible Debentures or exercise in
accordance with the Warrants, as the case may be, the Conversion
Shares and Warrant Shares, respectively, when issued will be validly
issued, fully paid and nonassessable, free from all taxes, liens and
charges with respect to the issue thereof. The Company has reserved
from its duly authorized capital stock the appropriate number of
shares of Common Stock as set forth in this Agreement.
(f) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Convertible
Debentures and the Warrants, and reservation for issuance and issuance
of the Conversion Shares and the Warrant Shares) will not (i) result
in a violation of any certificate of incorporation, certificate of
formation, any certificate of designations or other constituent
documents of the Company or any of its subsidiaries, any capital stock
of the Company or any of its subsidiaries or bylaws of the Company or
any of its subsidiaries or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) in any respect 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 (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including foreign,
federal and state securities laws and regulations and the rules and
regulations of the National Association of Securities Dealers Inc.'s
OTC Bulletin Board) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected; except in the case of each
of clauses (ii) and (iii), such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect. The business of the Company and its subsidiaries is
not being conducted, and shall not be conducted in violation of any
material law, ordinance, or regulation of any governmental entity.
Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the
Registration Rights Agreement in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the
date hereof. The Company and its subsidiaries are unaware of any facts
or circumstance, which might give rise to any of the foregoing.
(g) SEC Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to
be filed by it with the SEC under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), for the two years preceding the sate
hereof (or such shorter period as the Company was required by law or
regulation to file such material) (all of the foregoing filed prior to
the date hereof or amended after the date hereof and all exhibits
included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter
referred to as the "SEC Documents") on timely basis or has received a
valid extension of such time of filing and has filed any such SEC
Document prior to the expiration of any such extension. The Company
has delivered to the Buyers or their 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 SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none
of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates,
the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
No other information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(i) of this Agreement,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made and
not misleading.
(h) 10(b)-5. The SEC Documents do not include any untrue statements of
material fact, nor do they omit to state any material fact required to
be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
(i) Absence of Litigation. 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.
(j) Acknowledgment Regarding Buyer's Purchase of the Convertible
Debentures. The Company acknowledges and agrees that each Buyer is
acting solely in the capacity of an arm's length purchaser with
respect to this Agreement and the transactions contemplated hereby.
The Company further acknowledges that each Buyer is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by each Buyer or any of their
respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to
each Buyer that the Company's decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and
its representatives.
(k) 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 Securities.
(l) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Securities under the Securities Act or cause this
offering of the Securities to be integrated with prior offerings by
the Company for purposes of the Securities Act.
(m) Employee Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute or, 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.
(n) Intellectual Property Rights. The Company and its subsidiaries own or
possess adequate rights or licenses to use all 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.
(o) Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval.
(p) Title. All 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.
(q) Insurance. The Company and each of its subsidiaries is 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.
(r) 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.
(s) Internal Accounting Controls. The Company and each of its subsidiaries
maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, and (iii) the
recorded amounts for assets are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(t) No Material Adverse Breaches, etc. 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. 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.
(u) Tax Status. The Company and each of its subsidiaries has made and
filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject
and (unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) has paid all taxes
and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set
aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim.
(v) Certain Transactions. Except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third
parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company
(other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
(w) 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.
(x) Investment Company. The Company is not, and is not an affiliate of,
and immediately after receipt of payment for the Securities, will not
be or be an affiliate of, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become subject to
the Investment Company Act.
(y) Registration Rights. Other than each of the Buyers, no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company. There are no
outstanding registration statements not yet declared effective and
there are no outstanding comment letters from the SEC or any other
regulatory agency.
(z) Private Placement. Assuming the accuracy of the Buyers'
representations and warranties set forth in Section 2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Buyers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Trading Market.
(aa) Listing and Maintenance Requirements. The Company's Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
the Company has taken no action designed to terminate, or which to its
knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the
Company received any notification that the SEC is contemplating
terminating such registration. The Company has not, in the twelve (12)
months preceding the date hereof, received notice from any Primary
Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or
maintenance requirements of such Primary Market. The Company is, and
has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(bb) Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any
of the Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities
of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company's placement agent in connection with
the placement of the Securities.
(cc) Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the
Convertible Debentures and the Warrant Shares issuable upon exercise
of the Warrants will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Convertible Debentures in accordance with this
Agreement and the Convertible Debentures and its obligation to issue
the Warrant Shares upon exercise of the Warrants in accordance with
this Agreement and the Warrants, in each case, is absolute and
unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the Company.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
(b) Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall,
on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities, or obtain
an exemption for the Securities for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States, and shall provide evidence of
any such action so taken to the Buyers on or prior to the Closing
Date.
(c) Reporting Status. Until the earlier of (i) the date as of which the
Buyer(s) may sell all of the Securities without restriction pursuant
to Rule 144(k) promulgated under the Securities Act (or successor
thereto), or (ii) the date on which (A) the Buyers shall have sold all
the Securities and (B) none of the Convertible Debentures or Warrants
are outstanding (the "Registration Period"), the Company shall file in
a timely manner all reports required to be filed with the SEC pursuant
to the Exchange Act and the regulations of the SEC thereunder, and the
Company shall not terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules
and regulations thereunder would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale of
the Convertible Debentures for general corporate and working capital
purposes.
(e) Reservation of Shares. On the date hereof, the Company shall reserve
for issuance to the Buyers 125,000,000 shares of Common Stock for
issuance to the Buyer (the "Share Reserve"). The Company represents
that it has sufficient authorized and unissued shares of Common Stock
available to create the Share Reserve after considering all other
commitments that may require the issuance of Common Stock. The Company
shall take all action reasonably necessary to at all times have
authorized, and reserved for the purpose of issuance, such number of
shares of Common Stock as shall be necessary to effect the full
conversion of the Convertible Debentures and other convertible
debentures held by the Buyers and the full exercise of all outstanding
warrants held by the Buyers. If at any time the Share Reserve is
insufficient to effect the full conversion of the Convertible
Debentures and all other convertible debentures held by the Buyers or
the full exercise of all outstanding warrants held by the Buyers, the
Company shall increase the Share Reserve accordingly. If the Company
does not have sufficient authorized and unissued shares of Common
Stock available to increase the Share Reserve, the Company shall call
and hold a special meeting of the shareholders within thirty (30) days
of such occurrence, for the sole purpose of increasing the number of
shares authorized. The Company's management shall recommend to the
shareholders to vote in favor of increasing the number of shares of
Common Stock authorized. Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common
Stock.
(f) Listings or Quotation. The Company's Common Stock shall be listed or
quoted for trading on any of (a) the American Stock Exchange, (b) New
York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq
Capital Market, or (e) the Nasdaq OTC Bulletin Board ("OTCBB") (each,
a "Primary Market"). The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed
(subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under
the terms of the Transaction Documents.
(g) Fees and Expenses.
(i) Each of the Company and the Buyer(s) shall pay all costs and
expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery
of the Transaction Documents. The Company shall pay Yorkville
Advisors LLC a fee equal to ten percent (10%) of the Purchase
Price which shall be paid pro rata directly from the gross
proceeds of each Closing.
(ii) The Company shall pay a structuring fee to Yorkville Advisors,
LLC of Ten Thousand Dollars ($10,000), which shall be paid
directly from the proceeds of the Closing.
(iii) The Company shall pay Yorkville Advisors, LLC a non-refundable
due diligence fee of Two Thousand Five Hundred Dollars ($2,500)
which shall be paid directly from the proceeds of the Closing.
(h) Corporate Existence. So long as any of the Convertible Debentures
remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, reverse stock
split consolidation, sale of all or substantially all of the Company's
assets or any similar transaction or related transactions (each such
transaction, an "Organizational Change") unless, prior to the
consummation an Organizational Change, the Company obtains the written
consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders' rights and
interests to insure that the provisions of this Section 4(h) will
thereafter be applicable to the Convertible Debentures.
(i) Transactions With Affiliates. So long as any Convertible Debentures
are outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or
any subsidiary's officers, directors, person who were officers or
directors at any time during the previous two (2) years, stockholders
who beneficially own five percent (5%) or more of the Common Stock, or
Affiliates (as defined below) or with any individual related by blood,
marriage, or adoption to any such individual or with any entity in
which any such entity or individual owns a five percent (5%) or more
beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b)
any investment in an Affiliate of the Company, (c) any agreement,
transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable
from a person other than such Related Party, (d) any agreement,
transaction, commitment, or arrangement which is approved by a
majority of the disinterested directors of the Company; for purposes
hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with
respect to any such agreement, transaction, commitment, or
arrangement. "Affiliate" for purposes hereof means, with respect to
any person or entity, another person or entity that, directly or
indirectly, (i) has a ten percent (10%) or more equity interest in
that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity.
"Control" or "controls" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
(j) Transfer Agent. The Company covenants and agrees that, in the event
that the Company's agency relationship with the transfer agent should
be terminated for any reason prior to a date which is two (2) years
after the Closing Date, the Company shall immediately appoint a new
transfer agent and shall require that the new transfer agent execute
and agree to be bound by the terms of the Irrevocable Transfer Agent
Instructions (as defined herein).
(k) Restriction on Issuance of the Capital Stock. So long as any
Convertible Debentures are outstanding, the Company shall not, without
the prior written consent of the Buyer(s), (i) issue or sell shares of
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 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 less than such
Common Stock's Bid Price determined immediately prior to it's
issuance, (iii) enter into any security instrument granting the holder
a security interest in any and all assets of the Company, or (iv) file
any registration statement on Form S-8.
(l) Neither the Buyer(s) nor any of its affiliates have an open short
position in the Common Stock of the Company, and the Buyer(s) agrees
that it shall not, and that it will cause its affiliates not to,
engage in any short sales of or hedging transactions with respect to
the Common Stock as long as any Convertible Debentures shall remain
outstanding.
(m) Rights of First Refusal. So long as any portion of Convertible
Debentures are outstanding, if the Company intends to raise additional
capital by the issuance or sale of capital stock of the Company,
including without limitation shares of any class of common stock, any
class of preferred stock, options, warrants or any other securities
convertible or exercisable into shares of common stock (whether the
offering is conducted by the Company, underwriter, placement agent or
any third party) the Company shall be obligated to offer to the Buyers
such issuance or sale of capital stock, by providing in writing the
principal amount of capital it intends to raise and outline of the
material terms of such capital raise, prior to the offering such
issuance or sale of capital stock to any third parties including, but
not limited to, current or former officers or directors, current or
former shareholders and/or investors of the obligor, underwriters,
brokers, agents or other third parties. The Buyers shall have ten (10)
business days from receipt of such notice of the sale or issuance of
capital stock to accept or reject all or a portion of such capital
raising offer.
(n) Lock Up Agreements. On the date hereof, the Company shall obtain from
each officer and director a lock up agreement in the form attached
hereto as Exhibit C.
(o) Additional Registration Statements. Until the effective date of the
initial Registration Statement, the Company will not file a
registration statement under the Securities Act relating to securities
that are not the Securities.
(p) Review of Public Disclosures. All SEC filings (including, without
limitation, all filings required under the Exchange Act, which include
Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other public
disclosures made by the Company, including, without limitation, all
press releases, investor relations materials, and scripts of analysts
meetings and calls, shall be reviewed and approved for release by the
Company's attorneys and, if containing financial information, the
Company's independent certified public accountants.
(q) Disclosure of Transaction. Within four Business Day following the date
of this Agreement, the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the Exchange Act and
attaching the material Transaction Documents (including, without
limitation, this Agreement, the form of the Convertible Debenture, the
form of Warrant and the form of the Registration Rights Agreement) as
exhibits to such filing.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall issue the Irrevocable Transfer Agent Instructions to
its transfer agent, and any subsequent transfer agent, irrevocably
appointing Xxxxx Xxxxxxxx, Esq. as the Company's agent for purpose
instructing its transfer agent to issue certificates or credit shares
to the applicable balance accounts at The Deposity Trust Company
("DTC"), registered in the name of each Buyer or its respective
nominee(s), for the Conversion Shares and the Warrant Shares issued
upon conversion of the Convertible Debentures or exercise of the
Warrants as specified from time to time by each Buyer to the Company
upon conversion of the Convertible Debentures or exercise of the
Warrants. The Company shall not change its transfer agent without the
express written consent of the Buyers, which may be withheld by the
Buyers in their sole discretion. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, and stop transfer instructions to give
effect to Section 2(g) hereof (in the case of the Conversion Shares or
Warrant Shares prior to registration of such shares under the
Securities Act) will be given by the Company to its transfer agent,
and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement and the other Transaction Documents. If a Buyer effects a
sale, assignment or transfer of the Securities in accordance with
Section 2(f), the Company shall promptly instruct its transfer agent
to issue one or more certificates or credit shares to the applicable
balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment
and, with respect to any transfer, shall permit the transfer. In the
event that such sale, assignment or transfer involves Conversion
Shares or Warrant Shares sold, assigned or transferred pursuant to an
effective registration statement or pursuant to Rule 144, the transfer
agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend.
Nothing in this Section 5 shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities
laws upon resale of Conversion Shares. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm
to the Buyer by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5
will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5, that the
Buyer(s) shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Convertible
Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or
before the Closing Dates, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Each Buyer shall have executed the Transaction Documents and delivered
them to the Company.
(b) The Buyer(s) shall have delivered to the Company the Purchase Price
for the Convertible Debentures and Warrants in the respective amounts
as set forth next to each Buyer as set forth on Schedule I attached
hereto, minus any fees to be paid directly from the proceeds the
Closings as set forth herein, by wire transfer of immediately
available U.S. funds pursuant to the wire instructions provided by the
Company.
(c) The representations and warranties of the Buyer(s) shall be true and
correct in all material respects as of the date when made and as of
the Closing Dates as though made at that time (except for
representations and warranties that speak as of a specific date), and
the Buyer(s) shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by the Buyer(s) at or prior to the Closing Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
(a) The obligation of the Buyer(s) hereunder to purchase the Convertible
Debentures at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions:
(i) The Company shall have executed the Transaction Documents and
delivered the same to the Buyers.
(ii) The Common Stock shall be authorized for quotation or trading on
the Primary Market, trading in the Common Stock shall not have
been suspended for any reason, and all the Conversion Shares
issuable upon the conversion of the Convertible Debentures shall
be approved for listing or trading on the Primary Market.
(iii) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified
as to materiality in Section 3 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date
(iv) The Company shall have executed and delivered to the Buyer(s) the
Convertible Debentures and Warrants in the respective amounts set
forth opposite each Buyer's name on Schedule I attached hereto.
(v) The Buyers shall have received an opinion of counsel from counsel
to the Company in a form satisfactory to the Buyers.
(vi) The Company shall have provided to the Buyers a true copy of a
certificate of good standing evidencing the formation and good
standing of the Company from the secretary of state (or
comparable office) from the jurisdiction in which the Company is
incorporated, as of a date within 10 days of the Closing Date.
(vii) The Company shall have delivered to the Buyers a certificate,
executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section
3(c) as adopted by the Company's Board of Directors in a form
reasonably acceptable to such Buyer, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the
Closing.
(viii) The Company shall have filed a form UCC-1 or such other forms
as may be required to perfect the Buyer's interest in the Pledged
Property as detailed in the Security Agreement dated the date
hereof and provided proof of such filing to the Buyer(s).
(ix) The Pledged Shares as well as executed and medallion guaranteed
stock powers as required pursuant to the Pledge Agreement shall
have been delivered to the Escrow Agent.
(x) The Company shall have provided to the Buyer an acknowledgement,
to the satisfaction of the Buyer, from the Company's independent
certified public accountants as to its ability to provide all
consents required in order to file a registration statement in
connection with this transaction.
(xi) The Company shall have created the Share Reserve.
(xii) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to
and acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Debentures and the Conversion
Shares hereunder, and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect,
indemnify and hold harmless the Buyer(s) and each other holder of the
Convertible Debentures and the Conversion Shares, and all of their
officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether
any such Buyer Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by the Buyer Indemnitees or any of them as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of
any representation or warranty made by the Company in this Agreement,
the Convertible Debentures or the other Transaction Documents 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 other Transaction
Documents 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 Buyer Indemnitee and arising out of
or resulting from the execution, delivery, performance or enforcement
of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the parties hereto, any transaction
financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Convertible
Debentures or the status of the Buyer or holder of the Convertible
Debentures the Conversion Shares, as a Buyer of Convertible Debentures
in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make
the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable
law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations
under this Agreement, the Buyer shall defend, protect, indemnify and
hold harmless the Company and all of its officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Company Indemnitees") from and against any and all
Indemnified Liabilities incurred by the Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by
the Buyer(s) in this Agreement, instrument or document contemplated
hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby executed by the
Buyer, or (c) any cause of action, suit or claim brought or made
against such Company Indemnitee based on material misrepresentations
or due to a material breach and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement, the
Transaction Documents or any other instrument, document or agreement
executed pursuant hereto by any of the parties hereto. To the extent
that the foregoing undertaking by each Buyer may be unenforceable for
any reason, each Buyer shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities, which
is permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a) 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 and the United States District
Court for the District of New Jersey sitting in Newark, New Jersey for
the adjudication of any civil action asserted pursuant to this
Paragraph.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. In the event
any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party
within five (5) days of the execution and delivery hereof.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of,
this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of
this Agreement in that jurisdiction or the validity or enforceability
of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyer(s), the Company,
their affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any
Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived
or amended other than by an instrument in writing signed by the party
to be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon confirmation of receipt,
when sent by facsimile; (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (iv) one (1) day after
deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company, to: GS Carbon Corp.
Xxx Xxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxx. Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Sonageri & Fallon
000 Xxxxxxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I, with
copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement
or any rights or obligations hereunder without the prior written
consent of the other party hereto.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival. Unless this Agreement is terminated under Section 9(l), the
representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4, 5 and 9, and the indemnification provisions set forth
in Section 8, shall survive the Closing for a period of two (2) years
following the date on which the Convertible Debentures are converted
in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by
any party; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer(s), to issue any press release
or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company
shall use its best efforts to consult the Buyer(s) in connection with
any such press release or other public disclosure prior to its release
and Buyer(s) shall be provided with a copy thereof upon release
thereof).
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(l) Termination. In the event that the Closing shall not have occurred
with respect to the Buyers on or before five (5) business days from
the date hereof due to the Company's or the Buyer's failure to satisfy
the conditions set forth in Sections 6 and 7 above (and the
non-breaching party's failure to waive such unsatisfied condition(s)),
the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated by the
Company pursuant to this Section 9(l), the Company shall remain
obligated to reimburse the Buyer(s) for the fees and expenses of
Yorkville Advisors LLC described in Section 4(g) above.
(m) Brokerage. The Company represents that no broker, agent, finder or
other party has been retained by it in connection with the
transactions contemplated hereby and that no other fee or commission
has been agreed by the Company to be paid for or on account of the
transactions contemplated hereby.
(n) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
COMPANY:
GS CARBON CORP.
By:
---------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
BUYERS:
CORNELL CAPITAL PARTNERS, L.P.
By: Yorkville Advisors, LLC
Its: Investment Manager
By:
--------------------------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
SCHEDULE I
SCHEDULE OF BUYERS
SCHEDULE I
SCHEDULE OF BUYERS
----------------------------- ------------- --------------- ----------- ---------------- ----- ----- -----------------------
(1) (2) (3) (4) (5) (6) (7) (8)
----------------------------- ------------- --------------- ----------- ---------------- ----- ----- ------------------------
Buyer Subscription Amount Number of Warrant Legal Representative's
Shares Address and Facsimile Number
----------------------------- ------------- --------------- ----------- ---------------- ----- ----- ------------------------
First Closing First Closing
----------------------------- ------------- --------------- ----------- ---------------- ----- ----- -------------------------
Cornell Capital Partners, LP $1,125,000 50,000,000 Xxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx, Xxxxx 0000
000 Xxxxxx Xxxxxx, Xxxxx 0000 Xxxxxx Xxxx, Xxx Xxxxxx 07302
Xxxxxx Xxxx, XX 00000 Telephone: (000) 000-0000
Attention: Xxxx Xxxxxx Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Residence: Delaware
DISCLOSURE SCHEDULE
EXHIBIT A
FORM OF CONVERTIBLE DEBENTURE
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
LOCK UP AGREEMENT
The undersigned hereby agrees that for a period commencing on February ___,
2007 and expiring on the date thirty (30) days after the date that all amounts
owed to Cornell Capital Partners, L.P. (the "Buyer"), under the Secured
Convertible Debentures issued to the Buyer pursuant to the Securities Purchase
Agreement between GS Carbon Corp. (the "Company") and the Buyer dated February
___, 2007 have been paid (the "Lock-up Period"), he, she or it will not,
directly or indirectly, without the prior written consent of the Buyer, 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 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") except in
accordance with the volume limitations set forth in Rule 144(e) of the General
Rules and Regulations under the Securities Act of 1933, as amended.
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: _______________, 2007
Signature
Name:
------------------------------------------
Address:
------------------------------------------
City, State, Zip Code:
------------------------------------------
Print Social Security Number
or Taxpayer I.D. Number
